Sony, continuing to come up short of its financial goals, now sees the Net as its savior. What Sony wants to do is use the Internet to deliver video and music entertainment plus applications to the home much as Apple has. Sony chairman and CEO Howard Stringer said, “Sony will have a one-to-one relationship with customers to offer subscription services, cloud storage of personal content, as well as unique entertainment.
The company intends to add its new Sony Online Service (SOS) internet connectivity and online services to its TV sets and other devices so they can download entertainment and third-party applications. It said it expects to sell 350 million devices with SOS embedded in them by 2012.
SOS will use the infrastructure the company built for its PlayStation Network. “The service will be launched economically and quickly by basing it on PlayStation Network,” said Kazuo Hirai, who runs the PlayStation division, Sony Computer Entertainment. It will have the same user interface on all Sony devices and users will have a single ID they can use on every Sony device they have. The company said SOS will be a value add that will entice consumers to buy more Sony hardware.
Products with SOS, the company said, will be HDTVs, Blu-ray players, the Sony eReader electronic books, laptops, Walkman MP3 players, the PlayStation 3 and PSP portable gaming devices. Users will also be able to upload personal content to personal online accounts.
Sony wants to leverage its wide range of CE gear and lock in users to Sony products. Creating a locker-like ID access system would allow users to purchase a piece of content that would play on multiple devices. A user who has a Sony ID for a Sony Blu-ray player, a PS3 and Bravia Net-connected TV set, could purchase a Blu-ray movie disk, put the disk in his Blu-ray player and verify it with a provided code, and then be able to watch the flick on any of his Sony devices. But, but! What happens if his Blu-ray player is made by a competitor like Samsung? Or, if he has an iPhone? Or an LG TV set? Lights out!
Sony said it already has 33 million users of its PlayStation Network. It also has a few who access online services on Internet-connected TV sets it began selling this year.
Sony says PlayStation Network users have downloaded 25 petabytes of content. About 2,400 movies, 15,000 TV shows and 650 PSP games are available on the Network. Hirai expects to sell $562 million worth of goods on the service for the current fiscal year that ends March 31, 2010, three times as much as the prior fiscal year.
The company expects the SOS service will produce revenues of $3.4 billion for its fiscal year that ends March 2013. The service will be free but consumers will have to pay rental or purchase fees. It expects SOS will break even in its fiscal year ending March 2011.
SOS is not available now as a service, except in its PlayStation Network guise, or as an embedded capability in any Sony devices. The company did not say when and in which countries SOS will be available or what entertainment it will debut with.
Sony has a long way to go because it has fallen so far behind its competitors. The PlayStation Network came to market months after Microsoft got its Xbox Live online service up and going. Despite several attempts, Sony also failed to make its Sony Connect online music service successful unlike Apple did with iTunes. Few of its Sony Ericsson handsets come with Wi-Fi, which would allow them to connect to the Net as iPhones do. Most of the TV sets it’s selling do not yet have Internet connectivity.
Rival TV set maker Vizio, which has zoomed past Sony to become the number one seller of LCD TV sets in the States (it has just been overtaken by Samsung), has, on paper at least, a superior built-in online capability. It might be less costly for Sony to buy Vizio than develop its own embedded online technology.
But Sony has something no other digital media company has. It has everything – movies and TV shows from its studios, gaming consoles and the games that go with them, smartphones, portable media players, music, eBook readers, TV sets, Blu-ray players (which can already use the Net to access specialized entertainment) and Blu-ray technology, digital cameras and surround sound systems that are essential for home entertainment.
The big question will be how far it can branch out beyond Sony-branded content. It’s not clear that with so many other online entertainment services on the market, whether Sony can get the other major studios and music labels on board. It did for its Blu-ray disks but that took a lot of money and several years. The other studios only had one other choice – HD DVD.
Sony is also far along in developing 3D technology, which many think will be the next big thing in home entertainment. Stringer said the company expects 3D products – cameras, theater projectors and TV sets – will produce revenue of more than $11 billion in annual sales by 2013. It reportedly already has orders for more than 10,000 3D projectors from US theaters, who are themselves suffering because of Internet-delivered entertainment and other Internet diversions like texting.
Sony and Panasonic have been the most aggressive publicly with 3D for theaters and TV sets. Both have said they’ll launch 3D televisions next year. Sony said it’ll begin offering 3D TVs, Blu-ray players and game consoles in its next fiscal year.
Last week Sony said it has put off achieving the financial goals it had originally set for 2008 to 2013. Of course, the recession affected results, but many other companies are reporting increased profits after slashing operating costs such as the number of employees. Sony has terminated about 20,000 employees so far, but the profits are still not showing up.
Sony is a participant in the Digital Entertainment Content Ecosystem (DECE) consortium which has goals readily aligned with a new digital storefront offering. Mitch Singer, CTO for Sony Pictures Entertainment, spoke at this year’s Telco TV about working within the DECE plan and tie-ins with Sony.
The main ideals that Sony and DECE share when looking at content offering are:
– A goal for ubiquity through cloud services, allowing users to acquire licensing for content and a seamless integration of digital and physical goods.
– Supplementing physical sales; Singer said, “I don’t think physical media is over for a long, long time.”
– The goal of one format for content – a user buys it and it works, bottom line, just like DVDs.
– Move past device-centered content and don’t limit users to a certain number of devices that can access their content lockers.
– An eventual goal is for a user to buy a new device in a store and then have the store add everything in their rights locker to the purchased device.
DECE will develop a product out of the “DECE Coordinator” which is the authentication service that authorizes delivery, but doesn’t send content. The big limit to the DECE’s offering appears to be penetration. CE must be in place for the service to truly work, and expanding an online store or software to TVs, Blu-ray players, game consoles and other devices is a great way to test both the idea and the penetration of the market.