Tuesday, June 3, 2008

How Can Sony Compete?

It seems like it was a very long time ago when Sony was the king of consumer electronics. Their TVs were second to none and hey, they invented the Walkman for cryin' out loud! How did they fall into such irrelevance in the gadget space? Arrogance played a role, no doubt. After all, the same narrow (proprietary) thinking that caused VHS to beat out the technically superior Beta platform also led to such boneheaded solutions as the Memory Stick. Yeah, I want to buy a device that locks me into one vendor for memory expansion. Uh huh.

So now we have the Sony Reader. A nice device, but why would you buy one of these over a Kindle? At first the device price differential seemed to give Sony a decent advantage, but now that the Kindle is down to $359 and the Sony Reader is $299, well, is $60 enough of a price savings to walk away from the Kindle's richer feature set?

Even if you can convince yourself that the $60 device savings is worth it, how about the price of the e-books? Look up and down the Kindle's bestseller list and you generally see mostly $9.99 and below. The Sony Reader's list? The top 10 average is between $13 and $14 right now, or about 30-40% above the typical high-end price on the Kindle. On average, you'd still be spending less with a Sony until you got to the 17th book ($60 device savings divided by approximately $3.50 per e-book higher price on Sony equals about 17 books to break even). From the 18th one on you're spending more, on average.

Sony does have the benefit of selling their devices in a brick-and-mortar outlet (Borders) whereas Amazon is strictly online. I'd still give the advantage to the Kindle though.

What's Sony to do? At this point, I think they need to cut their device price, well below $200, to $99 if they can. Come up with a better content model, one that perhaps ties customers into a minimum number of book purchases over the next 2 years (similar to the cellphone world). Introduce a new, deluxe, high-end model, one that's priced where their current model sits but hopefully leapfrogs Amazon in terms of features and functionality.

It's no small task, I know. But what's the alternative?


Anonymous said...

Beta is used by the professionals
Blueray is the market choice
Memory stick is THE mobile phone storage in Japan
The Sony Reader is managing RTF, LRF, soon ePub, and displays beautiful pictures...
To mention just a few...

Joe Wikert said...

Thanks, Mr./Ms. Anonymous, but I was focusing mostly on the e-reader. Will any of your points help them compete against Amazon's Kindle? Also, do you suppose Sony considered it a victory that pros use Beta while the mass market used VHS when tapes were popular? And although the memory stick might just be the biggest thing to hit Japan, do you suppose Sony feels great about the worldwide performance of this storage system? After all, I'm sure just about every consumer product is the leader in some neck of the woods, right? My point is that they used to be the king of mass market success and they've definitely lost that position on many fronts.