Sony Needs No More Bad News
by Paul McGoldrick
Sony's adventure into copy protection with
rootkits loaded into unsuspecting customers' PCs has turned into a nightmare
for the BMG music side of their business. The company's offer to swap out
CDs is less than generous as they have left havoc in people's hard drives.
And at last count three states have started legal action against the company
with the Texas Attorney General particularly furious that his investigators
could still buy copies of the copy protection discs last weekend in Austin.
As some readers reminded me I should have pointed out in that Editorial that Philips own the CD architecture although Sony produced the first real commercial player. Philips have said that Sony cannot even call their products CDs because the XCP software is not in the CD standards.
Now Sony and a few other giants have given themselves another marketing headache. It has been disclosed that Sony, Panasonic, Philips, Hitachi and Sharp have developed a dual-channel distribution pricing. It works by offering mall and other retailers with a physical store presence a larger discount on their products compared to the price that is used for online retailers.
The theory is that the online guys do not have the overhead of a conventional store and do not have to "sell" the products using in-store associates. For the most part the latter is a rather questionable approach in value terms, because I have yet to meet an electronics store employee who could even explain the difference between Dolby Digital and THX…
The two selling models are hardly comparable, and supporting the existence of one over another seems to me to be incredibly unfair. The only reason why one operation should get better pricing that another should be based on volume. I see no case for pricing product based on the retailer's cost of doing business. That is the retailer's problem to control and if the stores were set up with real salespeople -- who could actually close deals -- their volumes would be inevitably higher and they would be able to take advantage of volume pricing, and still easily compete with online retailers.
The real reason for controlling pricing in the different channels is, undoubtedly, that many people will look at the equipment they are interested in at a retail store and will then go on line to buy it.
And with this dual-channel pricing, how does that even fairly apply to an operation that is both physically based on a street and has a web operation? Fry's Electronics, for example, is huge in physical presence and Fry's outpost.com is huge online. The same is the case with a retailer like Circuit City. What pricing do those operations get? I cannot believe that Sony could get away by telling Circuit City that they have to pay more for their online operation sales.
It seems like this dual channel pricing is just an attempt to force the
small guys out of business, and it smells of monopoly.
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