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Sony preps video store to fill hole in PSP film revenues

What took it so long?

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While we agree that portability is a premium, in films, where you may watch the content on a smaller device than a TV, it makes little sense to charge more than a DVD. The more important premium is rapid availability, so the ability to download these films and see them quickly. The other premium is the one that Apple is investing in, and that’s making it possible, with a single click, to watch them on a TV.

What’s happened is that the pre-loaded UMB format, as a retail proposition, was supposed to give Sony an edge in this market, but at $30 a film, the kids market, so rife with piracy, that was never going to be biting. Which is perhaps why the company has experienced weakness in the PSP, cited in its recent figures, out in October, when lower than expected profits from its PlayStation Portable was one of its reasons for overall weakness.

The problem has been going on since February, when although the revenues from PSP sales and from game sales were strong, the anticipated demand in the UMD delivered content was seen to be weak with Paramount, Warner and even Sony itself dropping some of their UMD releases.

Some titles were managing 100,000 units, but most UMD titles were reaching just 50,000 units and saturating.

By the March annual Sony figures it was able to report that its PlayStation Portable had brought in more revenue at $1.6 billion, during 2005 than the both Xbox 360 and the Nintendo DS combined.

But then it said that in order to stimulate demand it was cutting the price by $50. Sony wouldn’t cut the price of things which are going well, and the complete absence of UMD sales is what this online delay was all about. It was obvious that customers would go straight for the online content and ignore UMDs if the service launched, so it has been fighting a rearguard action, terrified of losing UMD revenues and in the process killing what chances it had to dominate online film delivery.

Sony has now leaked the fact that the online service will move from Japan to the US and although no-one from Sony was talking, coverage suggests that it will be through a rental, as well as download to own model. The story broke in both the Wall Street Journal and in European newspapers and in fanzine web sites this week.

Sony will be in a very strong position to get the other major studios to put their films in the pot, and has VoD joint ventures around the world with Disney. It was known to already have other studios on board when it was planning an early launch of an unbranded services, so apart from the digitization effort of putting back catalog into digital format, the service should come pretty well populated. All Sony has to do now is avoid the trap of only pushing its major new titles and at least make these offerings in parallel with older, long tail content, and then it may have a chance at rectifying the huge delay.

The report said Sony executives plan to widen movie selections to offerings from other studios as well.

Sony is also known to be harnessing the service to work with Grouper, the social networking site that it bought a few months back, to offer a User Generated Content offering, also on the PSP.

Sony is more or less on track with PSP shipments, with over 20 million shipped globally. This makes it the mostly widely distributed portable video enabled device outside the cellular handset, as there are less than 20 million iPods that can handle video and Nintendo DS devices are hardly ever used for video.

The idea that Sony would be talking to Amazon, Movielink and CinemaNow for content was also raised in the US stories, and although this makes very little sense at all, it is feasible that Sony can get other studios films through such a license, in bulk, but we doubt it. Why not go straight to source. The service will be launched in Q1 say reports alongside a new 4 Gb Sony Memory Stick flash card that should store up to 10 feature films. Let’s see if it has the political will to actually launch it this time.

Copyright © 2006, Faultline

Faultline is published by Rethink Research, a London-based publishing and consulting firm. This weekly newsletter is an assessment of the impact of the week's events in the world of digital media. Faultline is where media meets technology. Subscription details here.

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