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Sony Consumer Business Under Pressure, Big Restructure Tipped

Sony’s future as a consumer electronics Company is being questioned, with the Company desperately looking to restructure their business as they fail to deliver a hit new product similar to what they did with the Walkman, shortly they will have a crack at trying to get consumers to upgrade to a new Sony PlayStation 5 gaming console with speculation mounting that this could also be in short supply.

In Australia the Japanese Company is having a lot of success via their relationship with Melbourne based Company Audio Active who have the rights to sell Sony premium TV’s and projectors into the custom install and Pro AV markets but little success in the consumer market especially during COVID-19 due to major supply issues.

One rumour doing the rounds is that Audio Active which is owned by the original owners of JB Hi Fi could get the rights to sell Sony consumer TV’s in Australia.

Another distributor who on sells Sony products is Melbourne based Directed Electronics.

Sony Australia is currently  not performing well, with the local operation slipping into the red after posting an after-tax loss of A$367,000, and expects further difficulties in the next year on the back of the continuing pandemic. Due to Covid-19, Sony said it has experienced year-on-year gross revenue declines in the months since March 31.

“The Covid-19 pandemic has resulted in an adverse impact and increased pressure on the company’s operating results, cash flows, and financial position, as a result of government restrictions in movement of individuals and an overall decrease in consumer sentiments,” the company said.

However despite the uncertainty for the next 12 months, Sony Australia said Covid-19 did not impact its earnings for the full year ended March 2020, nor the supply chain of its key products and services.

For the year, the company’s revenue increased by almost 6 percent year-on-year to AU$564 million – comprising around AU$555 million in sales of goods and A$8.5 million in services.

In October, Sony will merge its consumer and corporate display businesses, ending the current practice of producing and marketing TVs for consumers and projectors and big monitor screens for corporate users the big question according to sources in Sony Singapore is whether the local subsidiary will move to change their distributor model in Australia.

During the past year Sony has expanded its share of the TV market but are still way behind brands such as Samsung, Hisense, and LG, where they are struggling is in the corporate sector where Samsung and LG are strong.

The integration of the two divisions will make it possible to develop new products by sharing image-processing engines as well as to use each other’s marketing outlets.

Currently the consumer division in Australia is struggling with retailers having difficulty getting stock of Sony TV’s and audio products, it’s also tipped that their new gaming console could be in short supply when it’s launched in the last quarter.

The struggling Sony consumer division in forecast to incur a 30% decline in operating profit to 60 billion yen (US$564.65 million) in fiscal 2020 from the previous year.

In prospective this is less than 10% of total operating profit. This is a sharp contrast to the 60% generated about 20 years ago.

In Australia, the consumer division has faced several scandals over the years having been fined millions on several occasions for tax avoidance and dodgy consumer claims.

These problems saw the sacking of the local CEO and Finance Director.

Earlier this year a court ruled that a unit of Japan’s Sony Corp broke the consumer law by denying customers refunds for faulty PlayStation games and ordered the company to pay a $3.5 million fine, Australia’s consumer watchdog said.

The Australian Competition and Consumer Commission (ACCC) had filed a lawsuit against Sony Interactive Entertainment Network Europe Ltd in May last year for telling four customers it did not have to provide refunds for faulty games after they had been downloaded, or more than 14 days since purchase.

Recently, the division’s presence in the wider corporate group has diminished due to the sharp ascent of others such as video games and their development of proprietary technology.

The COVID-19 pandemic has weighed on Sony’s group earnings, but it is maintaining its overall performance thanks to video games and other recurring-fee businesses.

Globally Sony’s smartphone business is expected to climb into the black in the current fiscal year ending March 31, 2021 despite their exit in Australia.

“We have been disproportionately spending our development resources on electronics technology,” a Sony executive said, indicating that the business could soon be relegated to the role of supporting movies, music, and other operations.

Recently the Company released the Vlogcam ZV-1 that Sony is banking on to lift consumer sales in their digital camera division.

“Vlog” is a coined word to represent a form of blog for which the media is video.

While conventional digital cameras are designed to focus on human faces, Sony’s new camera can also focus on objects and pets.

The Nikki Asia Review said recently that a single hit product is hardly enough to lead Sony’s overall growth next year and beyond.

The reality is that the electronics segment at present lacks a product with the kind of huge impact the Walkman had.

Sony, in a bid to ride out the pandemic, has changed the keyword for its research and development program from “Two Rs” to “Three Rs.” the newspaper claimed.

At an online briefing in May, Sony President and CEO Kenichiro Yoshida said, “We want to make live events, suspended due to the coronavirus, available on a remote basis.”

The word “remote” has thus been added to Sony’s R&D themes symbolized by the word’s “reality” and “real time.” The addition means that Sony’s electronics business is about to undergo a significant change.

What’s not known is how Sony intends to make money from this technology.

Sony cofounder Akio Morita, credited with developing many iconic products, shows off Walkman cassette players in 1989.

“We used to be an archive company,” a Sony executive said, noting that its business was geared to developing portable devices such as tape recorders and the Walkman’s to store music.

But now amid the pandemic, consumers face different needs. Trends toward connecting homes to offices and other remote places on a real-time basis and reproducing content as close to reality as possible are gathering steam around the world and Sony is looking to commercialise this business.

The future for Sony appears to be in the commercial market not consumer claims analysts.

The Nikki reported that In early August, Sony Japan used dozens of video cameras in a studio to livestream a concert by Ikimonogakari, a popular Japanese pop rock band. The number of cameras deployed was incomparably larger than for a conventional concert.

Images taken were converted into three-dimensional data and connected to each other to stream a 360-degree show enabling viewers to see it from any angle. By even offering views from places where the installation of cameras is physically impossible, the program achieved Sony’s “Three Rs” in a way seemingly more realistic than reality.

In the U.S., it has a virtual studio where computers generate each scene in which actors perform so that assembling actual movie sets becomes unnecessary.

Sony established a similar studio in its video production unit, Sony PCL, in Tokyo in August for use by video makers and the marketing divisions of big companies in return for fees.

The service is a “unique approach made possible by Sony having both (electronics) technology and video production capacity,” said Shigeki Ishizuka, president and CEO of Sony Electronics, which was created in April to integrate the group’s home electronics operations to make them more competitive.

Next April, the company will be renamed, out is Sony Corp and Sony Electronics, the new name will be Sony Group.

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