Sony puts a new spin on Net Appliances

Can Sony do the impossible? It's counting on its BeOS-run Net appliance to become an entertainment system for the home. Will consumers buy it?

Undaunted by recent flops in the Internet appliance market, Sony is readying the launch of eVilla, its Web-browsing tabletop device. But analysts say it'll be slow going for the electronics giant's new gizmo.

Sony Consumer Electronics will begin shipping the $500 Web devices to retail stores in early May, with pre-orders available a few weeks before through the Sony Style direct online ordering service.

The eVilla, a device with a 15-inch monitor and built-in speakers will allow people to browse the Web through a dial-up or broadband connection. First shown at the Consumer Electronics Show earlier this year, Sony (sne) is positioning eVilla as an entertainment portal for the home. Its simple interface includes seven content channels - news, finance, local, entertainment, shopping, lifestyle and sports-and tools such as audio and video players and a digital photo album. On top of the purchase price, consumers will need to pay $21.95 a month to subscribe to the service.

"A lot of people have opinions about the market, but we're really excited and committed," said James Neal, marketing manager for the eVilla. "We're looking to redefine the category and transform it into an entertainment venue."

Sony will promote the eVilla's rich multimedia capabilities, made possible by Be operating system, which the company says is easier to use and less glitch-prone than traditional PCs.

"Mainstream America hasn't yet figured out how to take advantage of streaming music or playing online games or downloading video clips," said Neal. "Because we're a multimedia company with a lot of content around music, pictures and games, we can bundle that and put it together in a package."

Neal acknowledges sluggish growth of the Internet appliance market, but said that Sony's entrance will create "a lot of buzz" based on brand recognition of the Sony name.

A national marketing campaign, possibly including TV ads, will kick off on May 1.

"None of the [competitors] have demonstrated more features beyond the Internet connection to really compel consumers at this point," said Neal.

Despite the company's optimism, Sony is entering the Internet appliance market in the wake of some notable failures.

Last week, 3Com announced that it was killing the five month-old Audrey, its Web-browsing device, along with disbanding the company's entire Internet appliance division. In late February, Gateway said it was backing off plans to roll out a high-priced wireless Web pad after sales of Touchpad, its AOL-backed Internet device, didn't live up to expectations. And Netpliance, which reported a loss of $144 million for fiscal 2000, yanked its affordable i-Opener Web terminal off stores shelves earlier this year.

Is the market there?
Neal won't say how many of the Web-browsing gizmos Sony needs to sell to turn a profit from the group, but analysts say the entire Internet appliance market will hover around 200,000 in 2001.

That's a far cry from projections from last spring calling for 500,000 Web-enable, non-PC devices to reach consumers' hands by the end of 2000. The market's not dead, but International Data Corp. expects a mere 5 million Internet devices to be sold by 2004.

"There's tremendous consumer confusion about Internet appliances," said Bryan Ma, analyst with International Data Corp. "They've always been compared to the PC and in functionality and price point, there's not a strong value proposition yet."

Indeed a low-cost PC can run about $700 compared to the $500 Web appliances.

"Consumers don't see the need [for a Web pad] when they can buy a low-end PC," said P.J. McNealy, analyst with GartnerGroup.

Recovering from PlayStation delays
Sony could use a hit with eVilla. The company's profits sagged in the holiday quarter of 2000, largely due to production delays in the PlayStation 2 game console.

But analysts believe Sony faces the same hurdles that tripped up Gateway and 3Com, specifically consumer resistance to the relatively high cost of the devices compounded by the inconvenience of adding yet another phone line for an Internet connection.

"The Sony eVilla is a very nice product, but it'll be slow to take off," said Jim Stroud, analyst and editor with market research firm The Carmel Group.

Most analysts and Internet appliance manufacturers like Gateway believe consumer demand will grow as more people get higher speed broadband connections.

"None of this makes any sense until the point at which homes are well-connected, [when] there's a lot of home networking and broadband," said Bob Burnett, chief technology officer at Gateway. "Then you'll start to see the opportunity for these things to take off."

Despite the fate of its wireless Web pad being up in the air, Burnett said Gateway was sticking with with the Touch Pad, which includes a subscription to AOL.

"Right now, we'll continue marketing it, although I don't know exactly where it's going to go in the next generation or if there is a next generation, in the short term," said Burnett. "Everything in this category has to be kind of experimental."


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