Some recent Sony media moves [Archive]

patsu

18-Jun-2007, 01:01

Frankly I have no idea what they are up to, but unifying their music front would be a good start.

I expect them to offer a music download section on PSN since all those music has been digitized by Connect anyway. As long as they can distribute new and old music at a profit per piece, they should be able to explore further. They have captured audience in PSP and PS3. Sadly PS2 is being left out.

As for video, Harrison mentioned Grouper during the Home presentation. Home will go open beta next month. Coincidentally, WSJ said Grouper will relaunch next month with new look, new name, ... so I hope something is cooking there. Today we know these Grouper content can be accessed from Bravia Internet Video Link module. So again the "same" content can serve multiple devices. Then there's the P2P media sharing service @ Home too. Perhaps we can also route content to Grouper while we are at it ?

Finally, Sony hinted at video downloading by Fall this year. So there may be more to come from corporate Sony (a la HanaTV in Korea).

For now, I hope they improve DLNA just a wee bit more. It's very close now. And endorse one or two DLNA servers for ease of setup.

Sis

18-Jun-2007, 01:14

Are they basically giving up to iTunes, or will we see a version of the Playstation Store accessible generally, without the PS3, serving non-game content?If they are, it doesn't sound like a terribly good move; the iTunes service itself is either break-even or makes pennies per user, depending on who you ask. But neither situation implies one in which you'd base a business around. Apple has proven that the business value is in the hardware, not the software.

patsu

18-Jun-2007, 01:42

Sis... I don't fully trust Steve Jobs in his comments on iTunes. I know Stanford business professors mentioned that beyond N years (where N=5), iTunes is more important than iPod assuming iTunes can penetrate deep worldwide. There are associated values/things to sell with a trusted worldwide digital distribution infrastructure.

Don't ask me for the paper. I don't have a copy. I believe Apple now lumps their iTunes+iPod numbers together in their financial report. They used to itemize some of them, but I have not verified this myself.

ManuVlad3.0

18-Jun-2007, 02:53

With PS3, PSP, Sony Ericsson mobile phones and a PS Store version for PC maybe Sony could compete with iTunes/iPod.

patsu

18-Jun-2007, 03:08

:) Will take some time. Apple has a simple, efficient and unified platform that extends worldwide. Sony is just starting to consolidate its businesses and infrastructures, and its execs have corporate minefields to navigate.

archie4oz

18-Jun-2007, 03:45

Don't ask me for the paper. I don't have a copy. I believe Apple now lumps their iTunes+iPod numbers together in their financial report. They used to itemize some of them, but I have not verified this myself.

Well on average, an online music store typically needs to sell about 100 million tracks a year to break even on operational costs, and thats for a fairly lean operation. From what I've heard, iTunes runs on the rather expensive side operationally speaking. Of course Apple's sold over 2 billion songs. But there's other expenses (trailers, podcast feed aggregation, and of course exclusive deals). Judging from estimates of profit margins on iPods, I'd venture that iPods bring in mountains of more revenue than the store does. That's a significant reason why Sony got involved in starting Connect (and honestly the only other genuinely serious potential competitor at the time). Still, I'd say that iTunes is reasonably profitable.

Sis... I don't fully trust Steve Jobs in his comments on iTunes. I know Stanford business professors mentioned that beyond N years (where N=5), iTunes is more important than iPod assuming iTunes can penetrate deep worldwide. There are associated values/things to sell with a trusted worldwide digital distribution infrastructure.

Adding value. That's what it essentially is. Building the infrastructure isn't terribly difficult, there's little intrinsic value in itself. It's the value it adds to the products that use it, thus making those said products a better sell. But it's a double edged sword. Yes it can bring value, but if it doesn't profit, then it's just an added expense to the device.

patsu

18-Jun-2007, 04:00

I agree. But most of these analysis are based on Apple's current model. How will things change if:

* Apple allows licensed access to iTunes brand, library, infrastructure and userbase... essentially becoming a pure platform play. In past years, they did not issue any licenses perhaps to complete their iPhone development. In the next few years, it is not clear which would make more money: Selling proprietary hit products (with inherent risks) or certifying + selling platform licenses. Naturally, they are not mutually exclusive.

* Apple shares infrastructure cost with a large Internet company like Google. Someone mentioned in passing that a large part of Amazon's cost is in operation and contingency infrastructure. That's why they launched initiatives such as ECS, S3, ... to compensate for them.

I am not advocating any model... but having some estimated numbers would be rather telling.

EDIT: This is all discussed within Apple's context. Sony or Microsoft will have different ways to get to similar goals.

cthellis42

18-Jun-2007, 07:37

If they are, it doesn't sound like a terribly good move; the iTunes service itself is either break-even or makes pennies per user, depending on who you ask. But neither situation implies one in which you'd base a business around. Apple has proven that the business value is in the hardware, not the software.
Apple doesn't own a big chuck of the music business, which is who they're giving the lion's share of music sales TO. More ways to point you in their direction and sell their content is a good thing for them, even if it doesn't sell hardware. Meanwhile, if they could FINALLY deliver something useful in the media-management end, or the extra things you could do WITH your music... It could actually help sell more of their players, too, (not to mention the PSP), as some of them are pretty nifty; they're just subsumed in the iPod War, and have nothing to brace themselves up.

Shifty Geezer

18-Jun-2007, 08:35

I wonder, though, what it means for their exposure in the PC space. And for their mp3 players? Are they basically giving up to iTunes, or will we see a version of the Playstation Store accessible generally, without the PS3, serving non-game content?
My guess is a unified content network that sells content, direct to PS devices, and also to non-PS devices. If you want to offer everything you have to PS customers and have a shop for them, it'd be a waste to have a duplicate shop for PC content. A single platform lets you concentrate all you efforts on making that the best possible instead of dividing efforts among multiple services. So I think they've been working on a single platform, and it'll roll out in a couple of months as Connect dies. It'd be stupid to pull the music service before there's a replacement, and lose those sales plus most importantly lose the customers to other services.

onanie

18-Jun-2007, 12:27

My guess is a unified content network that sells content, direct to PS devices, and also to non-PS devices. If you want to offer everything you have to PS customers and have a shop for them, it'd be a waste to have a duplicate shop for PC content. A single platform lets you concentrate all you efforts on making that the best possible instead of dividing efforts among multiple services. So I think they've been working on a single platform, and it'll roll out in a couple of months as Connect dies. It'd be stupid to pull the music service before there's a replacement, and lose those sales plus most importantly lose the customers to other services.

Indeed, each company is looking at what it has already, and synergising the strengths of its assets into a greater product. In Sony's case, it would be insane not to be offering their itune-like services, along with their considerable music and video assets, to the playstation audience. Both the service, and the playstation business, will benefit greatly from each other for obvious reasons.

Being primarily a web interface, they could easily cater to the PC space still.

wco81

18-Jun-2007, 15:13

The thing is, people don't fill up their iPods with iTunes content.

Yet recently, Apple claimed 300 million Windows downloads or users of iTunes. I guess if it was 300 million active users, that would be a big deal.

So maybe a lot of people get iPods because iTunes is available but they don't actually end up buying a lot of content.

Of course, now Apple is saying you have to have an iTunes store account to use the iPhone. Not just download and use iTunes but actually open an account with billing info.

That database is worth a lot.

Now will a content download service make people more likely to buy a PS3 or other Sony products over the competition? At this point, it's hard to see that. They would have to introduce a business model which destroys current models. Like maybe video rentals for a couple of dollars which last for a week or two, which kills off Blockbuster and also decimates Netflix.

I don't think the studios are going to cut their prices or help enable a rental model which would hurt DVD sales.

So whatever service Sony comes up with is likely to be another me-too offering at best.

Titanio

18-Jun-2007, 15:20

One thing about iTunes - I know a number of people who use it just to organise their music rather than actually buy anything from the store. So I'm sure there's many many people in a similar boat, and perhaps that's where the vast iTunes userbase comes from.

ManuVlad3.0

18-Jun-2007, 19:55

Would be a good idea a PC interface like iTunes with built-in emulator that allows users to download old PS games too (besides music, movie, tv shows)?

Shifty Geezer

18-Jun-2007, 20:05

I think that's what they're gunning for. Perhaps the client filters available content suited for the machine? Or maybe you can download any old thing and sort it out after you've got it? Either way I expect one portal for everything Sony sells online - music, movies, games. Indeed this has been my expectation for a couple of years now, as it's the most sensible solution and ties in with Sony comments on the matter.

ManuVlad3.0

18-Jun-2007, 20:14

I expect this too. Phil Harrison said something about Home running on cell phones and smart phones in the future. IIRC, Bravia TVs already has XMB interface. Would be great if you could access PS Store directly from the TV to streaming content.

slider

18-Jun-2007, 21:47

Not exactly directly relevant but...

I recently bought one of the new Sony music players (AW805 I think?).

(BTW, it's an excellent little machine: handles music, vids & photo & for once the softward is NOT buggy at all - in fact it's very efficient and slick!)

When you connect it to the PC the Walkman launcher fires up which has a big button marked "Download". It takes me to this...

http://www.sony.co.uk/view/ShowArticle.action?article=1172517871814&site=odw_en_GB (which isn't what we're waiting for!)

I can't wait to see what a unified service will look like and how the integration to the PS line will work. The only everyday activity that I do that I don't use my PS3 for is browsing the web. On an SDTV it looks like... well y'know what it looks like.

archie4oz

19-Jun-2007, 00:43

Ah yeah the Dober device... :) Not it's not bad, but it's EU/Canada only... :( Also it lacks the bitchin' integrated noise cancelling of the Beta series devices (S700 models).

ban25

19-Jun-2007, 19:04

I actually like Connect, and will be disappointed to see it go. Unlike iTunes, Connect lets you re-download songs you've already purchased -- and you can burn CDs on Vista x64.

slider

19-Jun-2007, 21:36

Ah yeah the Dober device... :) Not it's not bad, but it's EU/Canada only... :( Also it lacks the bitchin' integrated noise cancelling of the Beta series devices (S700 models).

Hold on a second, I had an S700i - never realised it had such a refined playback capability. (The S700 I'm talking about was a phone though... hope I'm not getting confused here...?)

cthellis42

20-Jun-2007, 04:40

You can re-download music from iTunes, just not automatically. I know a number of people who've managed to go through Apple support lines and get media that came through damaged (but "downloaded successfully"), or got them to reactivate their media following a complete hard drive failure.

Certainly they are not OBLIGED to, and have the legal wording to go "poo poo on you!" if they want to, but with a modicum of politeness and some patience, they're usually willing to oblige.

That being said, iTunes really needs a once per year "re-download your media" option in the same manner than you can occasionally reset all your "permitted computers." At the VERY least. That way you have SOME ability to recover your purchased media, but they don't have to worry about people soaking their bandwidth willy-nilly.

Titanio

20-Jun-2007, 23:09

This article (http://www.physorg.com/news101537588.html) suggests that they're not quite abandoning Connect - but they are refocussing on Playstation.

(AP) -- Internet music retailer Sony Connect Inc. is eliminating some positions as part of a restructuring plan to shift resources to other online services, but it intends to continue operating, the company said Tuesday.

The company denied a report that suggested the job cuts are a prelude to shutting down its music service in a matter of weeks.

Sony Connect is shifting emphasis to other network services, specifically one for users of the PlayStation game console, the company said.

patsu

20-Jun-2007, 23:26

The music files and the infrastructure are still good to go. The customer support (if any left) may have to be retrained. There were pretty bad comments about their attitude in this forum.

A few posts up, there are talks about renaming and relaunching Grouper next month. If so, they may rename Sony Connect too.

DemoCoder

21-Jun-2007, 01:32

Well on average, an online music store typically needs to sell about 100 million tracks a year to break even on operational costs, and thats for a fairly lean operation.

This frankly sounds ridiculous. So you're claiming a "lean" online store requires $100 million per year in operating costs to run (99 cent songs)? What do they do, hire union workers who individually go to a warehouse, pick up a USB stick with the AAC file, and ferry it to the Web server when you click "buy"? Amazon's operating expenses are about $700 million, and this is for a heterogenious online store with physical warehouses, delivery, huge customer support, auctions, substores, web site hosting, etc

A music store is a glorified download service. The only difference between a pirate site hosting forums, ratings, mp3s, etc is and iTunes is the checkout operation, and customer support.

A "lean" music store should be able to run on a shoestring budget. The bandwidth consumed by 100M song tracks downloaded is trivial, it wouldn't even cost 1 cent to download a file on existing co-los. Once the software for the store was developed, scaling is simpler a matter of scaling the hosting, and scaling customer support.

I guarantee you with 3 months of development time, and <20 PHP/Ruby-on-Rails developers, plus a garden variety hosting service, I could duplicate iTunes's service AND be able to scale to 100m downloads per year, and not spend more than $5 million. And frankly, I'd outsource customer support to India or the Czech Republic, and I bet total expenses per year would not exceed $20million, counting marketing.

The only reason big company stores are so expensive is because corporations are top heavy with loads of employees, managers, and support staff. They invariably end up with too much labor, and the middle management incentive is not to decrease labor. A Sony or Apple store will cost 10x to run than a place like ZipZoomFly or allmp3 because of the corporate inertia of those relatively old companies.

But these costs to run these stores are by no means "fundamental" costs. That's why tones of Web 2.0 startup companies handle millions and millions of user transactions with a handful of employees and hardly any startup funds. It's not rocket science.

cthellis42

21-Jun-2007, 10:03

Uh... you seem to think they keep all the revenue from the music sales, themselves? I'm not sure what the exact numbers are, but supposedly at least 2/3rd of the song sale immediately goes back to the publisher. That's just the normal per-track licensing, too, and doesn't count any special deals you work out, all the free stuff you offer to entice people TO your service (certainly I'm a net loss for Apple ;) ). Even something in the line of $30 million sounds high, but I'm pretty sure we have no idea what all the costs involved are.

Sony's different in that they don't have to lose as much per track, since they ARE the publisher for many songs. Heck, they can lean on their own content more heavily if they want, or even alone (only reason there are still UMD's floating about), until they have a handle on things. Lets them tinker without worrying about flak from other publishers.

Now if only the DO put some effort into it, because Connect has been pretty shruggable thus far, and last time I tried SonicStage (in the v3's somewhere) it blew massive chunks. Honestly, I don't know how Napster is still around either, as their connection/download software made me absolutely cringe to use.

DemoCoder

21-Jun-2007, 10:57

Regardless of how you slice it, an online store which offers nothing more than a catalog of all digital products to download does not inherently have a high cost overhead. Stores which deliver physical products? Yes. They have to have a supply chain, warehouses, people to work those warehouses, huge customer supply for inevitable misdeliveries and returns and shipping issues, etc. Still, even online e-tailers have less costs than brick-and-mortar retailers.

Apple will ultimately make higher margins selling content than selling iPods, even if that means laying off 90% of the workforce that developed iTunes and iTMS, and offshoring maintainence of the code base.

Apple has no inherent long term advantage manufacturing commodity music playback devices, that's a razor-thin margin game they will ultimately loose. What they would have to their benefit is a large entrenched margin, a built in path dependency, ecosystem, and community of people. And it is there where they will eventually make money once their iPod business saturates.

Which is exactly why we are seeing the iPhone, because Apple can't maintain iPod sales growth at its current rate, otherwise, all six billion people on the planet would have to own one, meanwhile, they will be eroded by cheap knockoff devices. Thus, they are trying to change the game, but eventually, iPhone-like devices will be commodified, and they'll have to try something else. On and on it goes. The one constant is software and services: OSX, iTMS, etc. It's harder to commodify OSes and online community services, which is why MS, Google, eBay, etc has been so successful.

cthellis42

21-Jun-2007, 12:19

Just the fact that you're saying eventually mean you're basically lending credence to the idea that, while a service is being established, and trying to build and grow, their costs are quite large indeed.

If the iTMS barely pulls in profits--certainly no good reflection to the billions of songs they've already sold--just what is that going to say about any service actively trying to compete with them for mindshare?

Certainly a service doesn't HAVE to, but then they're basically establishing a limit on how much market penetration they're likely to get.

Obviously the iTunes store runs hotter and heavier than the others, because it's determined to stay ahead, and they're pulling their profits from other revenue streams, but it forces competitors to keep up as much as they can, while they are NOT pulling in other sources of profit.

DemoCoder

21-Jun-2007, 21:39

Just the fact that you're saying eventually mean you're basically lending credence to the idea that, while a service is being established, and trying to build and grow, their costs are quite large indeed.

Software has a fixed development cost, and marginal maintainance cost if done correctly. For small companies, the reverse is true. Costs in the beginning end up being low, and once the company makes it big, costs tend to skyrocket as the company goes on a hiring binge, seeks acquisitions, etc. This usually happens when some MBA is installed by investors in place of the founders, who tries to use traditional techniques to grow the company.

I'm telling you that doing a download service is trivial and that even $10 million is too high a cost. Today, such services are built in garages on shoestring budgets, or in startup incubators like Y-Combinator. VCs don't even get involved unless they've already got revenue and a huge userbase these days, so the era of someone dropping $40 million on a startup for a whiteboard idea is over.

You've got Russian outfits already duplicating iTMS download services for virtually nothing, and they don't even have deals with the music industry to get the content, they've got to rip it from CDs into MP3s which is laborious.

As I said, if Apple's costs for iTMS arre high, it's because of corporate bloat and has zero to do with the difficulty of running an online store for digital downloads.

slider

10-Jul-2007, 09:12

http://www.gamesindustry.biz/content_page.php?aid=26534

Relevant or not? You decide.

EDIT: Consider me chastised.

The gamesindustry link isn't that useful (so, yeah I get why Stefan was p*****!) but the original Newsweek article, I think, is the first semi-official statement we've had about Sony's download plans. I may be wrong on that though.

Interesting at least to me for these reasons:
a) to see what plans they do reveal at E3
b) which media companies they're partnering with (will it mirror Blu ray? no reason it should...)
c) spooky how close a path MS & Sony are treading! C'mon MS, release a version of Home...

And no, posting this didn't kill me! :)