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Monday, November 07, 2005
An Interview With Sony's Boss


Howard Stringer is preparing to do battle with upstart rivals using an arsenal of new Blu-ray-enabled, high-definition portable and interactive devices and a marketing blitz designed to reinforce Sony's position in the next-generation media marketplace.

In an interview with The Hollywood Reporter, Stringer said that Sony is banking on its much-anticipated PlayStation 3 to be the digital Trojan horse that will allow the company to triumph in the emerging world of personalized, interactive, multimedia products and services.

Stringer has already scored a victory in making its Blu-ray Disc next-generation DVD technology the de facto industry standard by enlisting the support of five of Hollywood's six major studios. The ultrafast super CELL microprocessor Sony helped create also will drive a spectrum of HD products -- from cutting-edge LCD television sets to HD camcorders and musical cell phones to the relaunched Walkman -- that are Sony's most potent weapons.

"We have an HD value chain that no one else in the business has," Stringer reflected during his first extensive sit-down interview since announcing Sony's restructuring in late September.

The company soon will unveil a line of compact, portable video devices to fill the time gap before PlayStation 3 launches in Japan in March and in the U.S. a year from now.

Unlike the PlayStation Portable, which has been elevated to a benchmark multimedia player with numerous upgrades since its launch eight months ago, these new, smaller devices will focus primarily on video and transferring user-selected content from digital video recorders and other devices using Sony Memory Sticks, direct downloads and preloaded fare. Sony's plans are still being developed under tight secrecy, but it is clear that the company's hope is to remind consumers that Sony already is active in the spaces where Apple wants to go with the video iPod.

Sony's array of hardware and software products is creating a new "high-definition value chain that starts with cameras and goes through projectors and television sets and ends up with the PS3. You can see an HD necklace with all the pearls connected," Stringer said.

The company is also in talks with major players including Comcast Corp. (an equity investor in Sony's recent acquisition of MGM), Yahoo!, Google and others about alliances involving services such as search, content licensing and the creation of niche content platforms.

PS3 Strengthens Blu-Ray's position

An early strategic victory in Stringer's tenure has been winning support from Warner Bros. and Paramount Pictures for Sony's campaign to make Blu-ray the standard for next-generation DVD production despite those studios' initial backing of the rival HD-DVD format, backed by Toshiba.

"Our alternative format ... is based on the premise that if you are going to take the DVD to the next generation, the customer experience better be more exotic. So, Blu-ray offers far more capacity and the potential for 3G (third-generation wireless technology) and interactivity. The Blu-ray package has greater selling power than transitional technology. But our studio's support for it, with so much of (the studio's) content digitized, was a selling point," Stringer said.

Although no money has changed hands and no major concessions were made, sources say that Sony has provided caps on Blu-ray disc manufacturing costs and timetable guarantees.

And it didn't hurt that Sony planned on making its own Blu-ray splash next year with the powerful PS3, with or without the support of other studios. As such, it will be a critical springboard for Sony to advance its product line, consumer relationships and balance sheet.

Stinger believes that Blu-ray's higher capacity and improved quality next-generation DVDs will help stimulate consumer interest in advanced high-definition devices such as DVD players, televisions and hand-held units to provide continuity of the new experience. Such consumer upgrades would boost Sony's entire HD value chain of products -- from the Sony Panasonic Genesis camera used by film studios, 4K digital theater projectors, HD camcorder and the Bravia and SXRD rear projector screen televisions.

"The reason Sony has suddenly gained support for Blu-ray is simple," said a high-level studio executive close to the discussions. "PS3 is a subsidized Blu-ray play that will sell 20 million units. The first HD player will be on the market for $1,000. PS3 could be at $300 or $400. Sony will be selling them at a loss the first six months to a year just to get Blu-ray players out in the market. So studios realize they need to have their content on it."


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