Bloomberg News

Sony Plans Internet-Based Television Service in U.S. This Year

January 07, 2014

Sony Computer Entertainment CEO Andrew House

Andrew House, president and group chief executive officer of Sony Computer Entertainment Inc., speaks during a news conference at the 2014 Consumer Electronics Show (CES) in Las Vegas on Jan. 7, 2014. Photographer: Patrick T. Fallon/Bloomberg

Sony Corp. (6758) will begin testing an Internet-based pay-television service in the U.S. this year, bringing live and on-demand programming to TVs and its PlayStation game consoles.

The product will make it easy for consumers to switch between live and Web-based programs, Andrew House, chief executive officer of Sony Computer Entertainment, said yesterday at the International Consumer Electronics Show in Las Vegas. The Tokyo-based company will also test a video-game streaming service for the PlayStation, smartphones and TVs.

Chief Executive Officer Kazuo Hirai is banking on Sony’s engineering prowess, entertainment assets and products ranging from cameras to phones to rally the company and reach young consumers who want flexible access to content. In a CES keynote, he doubled down on his One Sony vision, two months after slashing the company’s earnings forecast because of stalling demand for TVs, cameras and Hollywood films.

“Sometimes at Sony we zigzag our way to great innovation and sometimes we fail,” Hirai said, projecting images of failed products on the screen behind him. “It’s the reason we keep trying.”

A TV service may put Sony into competition with incumbent cable and satellite providers such as Comcast Corp. (CMCSA:US) and DirecTV. (DTV:US) One hurdle that slowed Intel Corp. (INTC:US), which developed a similar Web-based technology, was the cost of the content.

Sony has held talks with media companies including CBS Corp. (CBS:US), Comcast’s NBCUniversal, 21st Century Fox Inc. (FOXA:US)’s Fox Networks and its own Sony film and TV studios for content rights, according to people with knowledge of the situation, who asked not to be identified because negotiations are private.

One Sony

Dan Race, a spokesman for Sony, declined to comment. Sony reached a preliminary accord to stream pay-TV programming from Viacom Inc. (VIAB:US) over the Web, a person said in August.

With One Sony, Hirai is trying to reinvigorate innovation at the Tokyo-based company, which fell behind more nimble competitors Apple Inc. (AAPL:US) and Google Inc.

“We don’t consider any product a success unless we have delivered that ‘Wow,’” Hirai said. “The mission of Sony is to inspire and fulfill people’s curiosity around the world.”

For the Web-based TV service, Sony will combine the live programming available on conventional TV with on-demand content offered by newer digital services, House said.

Personal Menus

It will feature personalized menus for individual family members, user recommendations and the ability to start watching a program on one device, such as a PlayStation console, and resume on a different one, such as an Apple Inc. iPad, House said.

The company will rely on an installed base of more than 70 million Web-enabled Sony devices that are already in U.S. living rooms, including 25 million PlayStation 3s, House said. The service will start with the PlayStation, the most-used networked device used for watching Netflix (NFLX:US) subscription-based video streaming.

“We’ll use our unique combination of network services, innovative devices, content properties and network partnerships to usher in a new era of home entertainment,” House said.

Since becoming CEO in April 2012, Hirai has increased collaboration at the company’s disparate units, for example sending camera engineers to the company’s phone division to give the Xperia Z handset advanced photography capabilities.

No Commodity

Sony’s electronics and entertainment teams created the Ultra HD Media Player in eight months, helping the company take an early lead in a new generation of so-called 4K televisions.

“It’s time to move beyond the just-good-enough era,” Hirai said. “No more commodity products. We must and can do better.”

The game service, called PlayStation Now, will offer a subscription option and titles to rent, House said yesterday. The company is demonstrating it this week at CES on its Bravia TV sets and the PS Vita handheld device, and plans to begin testing in the U.S. at the end of this month. Full introduction is expected mid-year, House said.

PlayStation Now will deliver a variety of popular PlayStation 3 game titles, first on the new PlayStation 4 console and PS3 game system and then on the PlayStation Vita.

Sony American depositary receipts rose 0.1 percent to $17.32 yesterday in New York. Yesterday in Tokyo, the shares closed little changed at 1,800 yen. They advanced 91 percent in 2013. GameStop Corp. (GME:US), the largest video-game specialty retailer, fell 8.4 percent to $44.14 as investors reacted to potential competitive threat of Sony’s service.

Entertainment Loss

Hirai stumbled in October when Sony reported a $180 million quarterly loss at Sony Pictures Entertainment, giving credence to calls made last year by billionaire hedge-fund investor Daniel Loeb, who urged the company to sell as much as 20 percent of the film and TV production and music businesses in an initial public offering.

Since then, Sony has scored a hit with the PlayStation 4, introduced starting on Nov. 15, which has taken the lead over Microsoft Corp. (MSFT:US)’s Xbox One.

Sony sold 4.2 million PlayStation One units through Dec. 28, House said yesterday, exceeding analysts’ estimates.

“It’s surprising,” said Michael Pachter, an analyst with Wedbush Securities in Los Angeles. “I did not think they could make that many. It shows a lot of confidence by management that this device is going to do really well.”

Microsoft, based in Redmond, Washington, said this week consumers bought more than 3 million Xbox One players in 2013.

Rights Challenge

Sony sees Web-delivered content from its TV, movie and music units as crucial to turning around the struggling television manufacturing unit, which hasn’t made a profit in nine years and ranks fourth globally in revenue, according to Statista, a research service.

Obtaining rights to films and TV shows may be difficult and expensive, said Craig Moffett, senior research analyst at MoffettNathanson LLC in New York.

“The digital rights issues are incredibly complicated,” Moffett said in an e-mail. “Sony might therefore be required to get the rights not only for the networks, but also for the individual shows. And in many cases, those rights simply aren’t available. They have already been sold to companies like Netflix.”

To contact the reporter on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net


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