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Direct approach

Business | Sony takes on its own retailers with opening of new stores

Issue: "2004 Election: Clinch time," Oct. 30, 2004

Selling direct to customers isn't a new concept, but in the crowded consumer-electronics field it means competing against the very retailers you depend on for sales.

Can that be good business? Sony Electronics is about to find out. In the past year, Sony has opened 10 retail stores across the country and hopes to have 30 such "Sony Style" stores operating by 2006. That has long-time retailers of Sony products concerned.

"The manufacturer is becoming a potential competitor," said Tom Campbell, vice president of Ken Cranes Home Electronics Inc., a chain of eight stores in Southern California.

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But that isn't the whole story. The Sony stores don't offer large discounts, and they feature a smaller selection of Sony products than the choices available at Best Buy or Circuit City. Instead, the company is using the stores to market itself to a new audience: women.

Sony Style stores are located in upscale malls, next to stores like Tiffany, Gucci, and others that appeal specifically to women. Each store has a "concierge desk" that greets shoppers and a rule against showing the "big game" on its televisions. Still, it feels a lot like competition for nearby Sony retailers.

"I haven't gotten any complaint letters," said Sony's Mike Fasulo. "But I haven't gotten any thank-you letters either."

Video battle

Consumers could be the only winners in the current battle for the online DVD rental market-at least in the short term.

Just one day after Netflix announced that it was cutting the price of its monthly subscription from $21.99 to $17.99 on Nov. 1, Blockbuster dropped its fee to $17.49 for customers who keep up to three DVDs out at a time. Netflix CEO Reed Hastings, who raised rental fees earlier this year, said the decision to cut prices was based on reports that was planning to start an online DVD rental service.

Blockbuster CEO John Antioco said he was simply responding to Netflix's price cut. Blockbuster, which began offering its service two months ago for $19.99 a month, is hoping that lower prices will draw away some of the 2.2 million customers Netflix reported in September.

But that isn't necessarily the feeling of analysts or investors. Stock prices plunged for both companies after last week's price-cut announcements. Netflix shares dropped 41 percent, while Blockbuster shares are down 61 percent in the past year.

"I don't think any of these businesses can survive at $17 a month," said Harry Katica, an analyst with Apherion Group LLC.

Balance Sheet

•With strong sales of its laptop computers and iPod music players, Apple Computer Inc. recorded its highest fourth-quarter revenue in nine years. Apple sold more than 2 million iPods in the past three months, accounting for nearly a quarter of the company's earnings.

•For the second time in five months, the head of Rolls-Royce has resigned for personal reasons. But the departures might also have to do with lagging sales. In the first nine months of 2004, just 485 Rolls-Royce cars were sold, less than half of the company's goal to sell 1,000 of the ultra-luxury cars each year.

•Despite threats to the contrary, Mel Gibson's star status increased after making The Passion of the Christ, according to Entertainment Weekly. Mr. Gibson is featured on the cover of the magazine's 15th annual power rankings with The Passion generating $610 million in global sales after Mr. Gibson spent $25 million of his own money to make the film.

•The U.S. House of Representatives amended several securities laws dating back to the 1930s to allow church pension programs to pool their assets with private and government pension plans. The bill would enable thousands of church plans to benefit from collective buying power.


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