Sony (SNE) has decided to use products including its Playstation3 and PSP as the target devices for a new set of video download businesses using content from the TV and movie industries. It is a nice idea, but hardly novel. Apple (AAPL) is already in the business with iTunes. But, it has alienated many of its content providers with pricing policies that they do not favor.
The Sony PS3 will play high definition material. As internet connection speeds improve HD content should download fast enough to build a commercial business.
Sony is making a big bet on a part of the entertainment business that is increasingly fragmented. Cable companies already offer video on demand. Phone companies are beginning the service over fiber. It could be a very big business. According to The Wall Street Journal: “Park Associates, a market-research and consulting firm, estimates that annual revenue from Internet video, including ad-based and user-paid services, could exceed $7 billion in the U.S. alone by 2010.” But, if there are a dozen viable competitors, it looks a little less enticing.
Sony needs a little something to show that it still has some zip. The PS3 has done badly against Microsoft’s (MSFT) Xbox 360 and the Nintendo Wii. The Sony movie studio business does fairly well, but its revenue is unpredictable. The Japanese company could use another growth engine.
But, the video download business is not new, and Sony hardly has a “first mover” advantage.
Douglas A. McIntyre