SONY CEO: HOME DELIVERY WILL NOT REPLACE RETAILING

DAN ALAIMO

SAN FRANCISCO -- Electronic in-home delivery of entertainment products like video is coming, but it will not replace retailing, said Michael P. Schulhof, president and chief executive officer of Sony Corp. of America, New York.

"There is no substitute for the shopping experience," said Schulhof in the keynote address at the National Association of Recording Merchandisers convention here March 20. "Shopping satisfies basic human needs, needs that will never be completely satisfied by electronic browsing," he said.

"People can't function without shopping. It's a necessity of life," he said.

The new delivery technologies will "layer on top of" entertainment software retailing and boost customer awareness of the products, he said. "Electronic delivery will effectively address the latest releases in music or video that are of interest to a smaller but important segment of the audience. This market segmentation will bring more consumers into the marketplace, and once they're in the marketplace, they're more likely to become shoppers in your stores, if we work together," said Schulhof.

"Remember, television didn't cripple the motion picture business. Television stimulated sales and became a major source of revenue for Hollywood, as video has done in more recent years," he said. In addition to its electronics hardware business and music companies, Sony also owns the Columbia and TriStar movie studios and Columbia TriStar Home Video.

"If you think pay-per-view has killed the video business, look at Blockbuster or the thousands of other video outlets across the country. Despite pay-per-view there's still a very healthy video rental and sell-through market," he said.

Retailers can take a proactive stance toward the new technologies by expanding into new packaged media formats and by making their stores more entertaining, Schulhof said.

"The introduction of future optical disk-based formats for video will continue to drive the demand for packaged media video," he said.

"CD-ROM [compact disk-read only memory] is no longer a niche market," Schulhof said. Over five million CD-ROM drives are being manufactured every month in the United States. The installed base of CD-ROM drives is now 7 million households, and total retail sales may top $10 billion by 1995, he said.

"The CD-ROM business is a natural line extension that all of us should consider, whether it's interactive software, games or movies," said Schulhof.

Creating an entertaining environment is another key to retail survival, he said.