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Sony Video Download Store Coming Soon?

video futureIs Sony giving up on digital music and instead throwing its significant resources into digital video technology and video downloading services?   They have just shut down their music store; they are revealing video playing MP3 players.  Could it be?  Are they going to create a video store?

An article in the Wall Street Journal is indirectly suggesting as much.  They say CEO Howard Stringer is quietly preparing for a big move.  They hint at news to come.  A competitor to Apple’s iTunes… From Sony? One wonders.

The Journal’s story is big on speculation (fueled by potentially compromised “people close to the situation”) and light on facts.   Still,  there are more than enough  bits of innuendo and circumstantial evidence floating around to suggest the article may not be off the mark even if support is lacking.

Here is a look at a few of the reasons, arguments, and the circumstantial evidence:

i.    For starters, there are words from Sony’s CEO Howard Stringer himself that have proved to be more than just idle chatter.  Back in March, speaking on the PBS program CEO Exchange, he spoke of how sophisticated a platform the PS3 is.  He noted rather explicitly  “[it] can become a computer, can become a home server, can be a set top box…”   At the time, that sounded like little more than off-the-cuff musings.  But was it more?

Less than two week ago, a funny thing happened -  the PS3 shape-shifted into all three of those things Sir Howard was talking about.  Late August, in Europe, Sony revealed a peripheral that makes the PS3 function as a Digital Video Recorder, a TV tuner and a hub for distributing video content (including to their portable units like the PSP or new video Walkmen). (And the PS3 already acts as a computer for projects like Stanford’s Folding at Home cancer research effort)    David Reeves, president of Sony Computer Entertainment Europe boldly called the expanded product  “the best choice of home entertainment hub for the whole family.”  (more on the PS3 peripheral from Metue can be found here)

It’s not new for Sony to use a gaming platform as a loss leader for promoting technology. The Play Station platform was used in the past to spur DVD sales.    The same strategy is in use with the PS3 for BluRay.   But could bigger hard drive models of the PS3’s due in the fall also be designed to act as a spark for a broader video platform, something like Microsoft’s Xbox Live movie rental service but for the PS3s wider demographic?  Certainly could be. 

ii.    A second bit of innuendo ties back to history, a blown opportunity and current corrections.  Rewind to the mid 90s and Sony was at work on their own MP3 player.  Years before the iPod and iTunes, they were trying to build the same thing.  IBM was a partner.   But as history has shown, they failed.   Sony, despite the strength of its Walkman brand, missed the opportunity to carry it forward from cassette and CD to MP3.  The reason? Again, in the words of Stringer, management “couldn’t get the company to understand that software was about cooperation.”  The company was tightly vertically integrated but it couldn’t work horizontally.  Success required the software but the corporate culture got in the way.

Stringer, who some have described as Churchill like in his leadership abilities,  has been working to change that culture.  He’s even said his first job was to “reach out and find ways to get these people to collaborate with each other.”  Arguably, it’s been his biggest management challenge and largest single focus. 

In two critical areas, gaming and electronics, he’s expanded leadership or put in new people schooled in his cooperative, more inter-connected style of organization.    That means, executives overseeing the two product lines (PS3 and Bravia TVs) most likely to be the gateway to video distribution are in his camp.

iii.    Making the market case for video: Sony missed their opportunity on digital music, and while they will have to keep representative products in the space, playing catch up and coming from behind isn’t a sound strategy for a company with a tradition and desire to be a high quality innovator (and its not where they’re spending their money. Their bigger spending is on video, on things like their prototype bendable screens and advances for their flat panel TVs).  

The video industry, as compared to music, is something different.  The revenue potential is obvious and well documented, but more importantly, Internet video while hotly competitive, is still an infantile business.   There is no established leader.  There is room for innovation.   Instead of coming from behind, Sony  has a chance to lead.

Video also has another advantage ideal for Sony.   Unlike music, which has been available DRM-Free offline (via CDs), and had a paradoxical strategy with online distribution as a result, videos have long been copy protected in all formats.  That means there’s little conflict in practice to implement and enforce DRM technologies online. That’s something big brands like.  It’s something that will make the movie division at Sony more likely to cooperate.  It’s a trump card that didn’t exist for music.

What does all this mean? Play Station Live? Sony S-Tunes? Something else? Maybe nothing?  None of it adds up to a video store in Sony’s future. None of it says with anything resembling certainty that Sony is shifting towards video in their future plans.  But I’m inclined to believe they are (store or not).  The opportunity is too big. The scars from past failures too prominent.  Sony is looking for a victory and a solid position with Internet video would be a major trophy.

PS3, Bravia, internet video – they’re all coming together.  That’s what Sir Howard wants, a company aligned with a common cause, that and greater than 5% margins.  Video, more than anything else, is a glue that could link the different factions of the company; glue that could unify them.  It doesn’t hurt, that as former a journalist and president of CBS, video is something Stringer himself knows intimately.

I’ll be waiting for real facts but if and when Sony reveals a big move (even if its not before the PS4 or PS5 find their way to market) only the details should be a surprise.

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