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Sony Plants Flag in Living Room: Aims for Lead in Connected Electronics

playtvA week ago, at Sony’s annual meeting, Howard Stringer said the company’s top priority was “to restore profitability in [the] television and game businesses;” both of which lost money during the last fiscal year.  Thursday, Sony began to publicly outline their blueprint for making that happen.  At the center of it, a keystone they say, will be networking – connected entertainment appliances.

Sony is planning to spend $16.7b (1.8 trillion Yen) over three years (through March 2011).  The aim will be to become “the leading global provider of networking consumer electronics,” Stringer says.  By the end of the process 90% of Sony’s product categories will have networking and wireless capabilities. 

Financially Sony will look to return 10% on equity by 2011.  They’ll also aim to keep operating profit margins upwards of 5% through fiscal 2010.

Host to a BluRay DVD player, hard drive storage and an onboard Internet connection in its present incarnation, the Playstation 3 console will feature prominently; even lead the way, in Sony’s initial push.  

Later this summer, the company will officially launch an on-demand movie store that promises to stream on-demand feature films (and presumably shorter form content) to the console.  

Come fall, Internet connected Bravia TV’s will also feature connected services and streaming video reception. The plan, which hasn’t been described in detail will eventually include phones, the PSP portable and other devices too.

Upgrades may be in the works as well.  Last year, in August 2007, Sony showcased its ambition to be the hub in the wheel of connected entertainment with the release of a PS3 DVR accessory called Play TV.  That Digital Video Recorder release was limited to the European market (presumably because of broadcast standards) but showcased some of the potential embedded in the gaming platform.  Not only was it capable of playing BluRay DVDs, playing games, or providing over-internet download services, but with the Play TV unit it was also capable of recording a TV show and then letting the viewer move it to their portable PSP for mobile viewing.

David Reeves, president of Sony Computer Entertainment Europe made no secret of the company’s ambition when introducing the product.  He said, "The PS3 already provides High Definition gaming, Blu-ray Disc movies, music, video, photo album, web browsing and Playstation Network support. With the introduction of PlayTV’s state of the art TV tuner and PVR functionality, PS3 is now the best choice of home entertainment hub for the whole family."

No matter how you characterize it, one thing is clear:  Sony’s plan is to charge full ahead into the battle for control of the living room’s electronics.  The gauntlet is thrown down.   They’re willing to spend. Sony is not going to sit back and let Apple, Microsoft, TiVo, Netflix or any of the hundreds of other companies that have thrown their hats in grab the prize without contest.

If Sony has any advantage it may come from the fact that they are the sole entrant with internal business lines deeply entrenched in both the content and technology sides of the equation.  Unlike competitors Sony owns their own movie studios, they own a share of their own record label (50% of Sony BMG) and then there’s the electronics business.

On the other hand, all those units have created a complex, often competitive management structure that can struggle to work effectively across product lines and divisions.  “Silos” they’ve sometimes been called. 

Because of the struggles to link groups internally and work together, Sony has been known to falter.  Sony’s first efforts at MP3 players is a glaring case study example:  In 1997 Sony aimed to take the original Walkman into the new world with a digital MP3 version.  The MP3 market was still young and the opportunity, all rightly presumed, was going to be big.   To capture it, together with IBM, Sony built a service for distributing the music.  The mistake was that the system was closed.  It was awkward to use and it required a customer stay within Sony’s proprietary boundaries.

Looking back on that failure from before his time, CEO Howard Stringer knowingly told CEO Exchange, “if we just let it open to the world, Apple wouldn’t have had a foothold.”   Of course, that’s not what Sony did.  Because of the mistake, Apple got far more than just a foothold, they got a path straight to the top. Insult to injury, years later, when Sony tried again with the Sony Connect Music Service they largely perpetuated many of the same mistakes.  Sony Connect failed too.

Howard Stringer has acknowledged more than once that Sony’s history of closed proprietary systems has caused troubles.  He’s advocated management changes that allow more open dialogue between business groups and more transparent disclosure to customers. Above all, he’s been clear that success will require an end product that is both easy to use and easy to connect/integrate into the household.

Can Sony pull it off?  Or will we again be saying, “Dear Howard, what about the customers?”

As covered in a past article on Metue that looked at PC-TV convergence, “The bridge connecting the PC to TV is still under construction.  Existing services remain novelties.  They’re fun for the early adopters, they give media writers something to rant about and Wall Street likes the forward thinking…but today, they remain far from capturing an audience on Main Street.”

Digital Rights Management (how to protect content), bandwidth, net neutrality issues, and industry accepted standards are just a few of the problems not yet fully solved.

Undaunted, Sony’s hoping they’ll be able to build the bridge; that the depth of their assets will make it possible. 

Will Smith’s action movie “Hancock” will be the first movie offered through the download service.  Bypassing traditional release windows, Sony Pictures will make it available on-demand through the PS3 ahead of the DVD release.

Further details on exactly how Sony’s future download store will operate will be reported once announced. For now, the plan remains a sketch.


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