Creating ‘Value’ For Digital Content Ownership a ‘Challenge’—Sony
The growth of digital content delivery is opening up huge opportunities for Sony and other companies, but “we have to add value to ownership” of that content for consumers, Robert Wiesenthal, executive vice president and chief financial officer of Sony Corporation of America told the UBS investors conference in New York Tuesday. That’s “a challenge,” he said.
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Sony has experimented with early digital release windows for the movies Hancock and, more recently, Bad Teacher, Wiesenthal said. With Bad Teacher, consumers were able to buy an HD version of the movie for $17.99 or a standard-definition version of it at $14.99 ahead of its DVD and Blu-ray release, he said. Sony will do the same thing with Moneyball, making digital versions available Dec. 22 ahead of the movie’s Jan. 10 DVD and Blu-ray street date, he said.
There was significantly more demand for the digital version of Bad Teacher during the early release window than there was for Hancock during its digital early release window back in 2008, Wiesenthal told us after his presentation. That’s because there were so few connected devices available in 2008, he said. He didn’t specify how many units of Bad Teacher were sold digitally, but said revenue from the movie came in 25 percent greater than Sony had projected thanks in part to the experiment.
TVs became a “difficult, commoditized business” in which the relationship between Sony and the customer ended as soon as a purchase was made, Wiesenthal told the conference. “That has to end, and it’s starting to end” thanks in large part to the rise of digital services from Sony and other companies that deliver movies, music and videogames to TVs, he said. Sony is “on track” to achieve about $1 billion in revenue from digital content this year, he said.
Helping in the transition of the business has been growing demand for connected TVs and devices used in conjunction with and even apart from TVs, Wiesenthal said. He pointed to the availability of $99 Blu-ray players with Wi-Fi connectivity on Black Friday. “That’s incredible,” and “a huge opportunity for us,” he said. There’s “a lot of box exhaustion” now on the part of consumers, and connected TVs that enable people to access Wi-Fi services direct from their TVs should help ease that, he said. Also key is that tablets are being used in tandem with TVs to access content, he said. TVs have become “much more of a display” device exclusively again as a result, he said. Consumers can’t keep buying a new TV every year, and tablet purchases will occur more frequently, adding new functionality that enhances the TV experience, he said. More of the “innovation” can happen in the tablet than in the TV, he said.
On the music front, digital delivery has become the key business for selling content, Wiesenthal said. There’s “not a lot of places to buy music” in packaged form anymore aside from Amazon, he said. He challenged attendees to find a store to buy a CD in midtown Manhattan, apparently forgetting about Best Buy.
The tablet and smartphone business has become a two-horse race between iOS and Android, Wiesenthal said. As far as phones, tablets and connected TVs are concerned, Sony is committed to supporting Android, he said, calling it a “wonderful operating system."
The changes that Netflix made in its business this year were done “a little bit too fast,” and the company wound up becoming “kind of a Bank of America symbol,” Netflix CEO Reed Hastings told the conference. But he said company executives were “not losing too much sleep over it” because three to five years from now, people will view Netflix as a successful streaming company, which is its goal. He predicted Netflix will have significant subscriber growth next year. Hastings said he viewed HBO as his company’s main rival and expressed little concern with the challenge being posed by Amazon. Amazon, like other companies, isn’t making nearly the significant investment that’s needed to challenge Netflix or HBO in digital video delivery, he said. Hastings called the HBO Go application “impressive,” and predicted huge growth for smart TVs and a decline in traditional TV broadcasting. TV after TV is a smart model at Best Buy now, and about 33 percent of the TVs being sold are smart models, he said. It will create a “phenomenal revolution” in the coming years, he predicted. On the other hand, he said 3D TVs face challenges. Digital piracy remains a “very big problem” in some countries, he also said, saying he hoped that the House’s Stop Online Piracy Act will pass once civil liberties concerns are addressed.