From The New York Times - June 30, 2008
By TIM ARANGO
The very future of how we consume media rests on the movie star shoulders of Will Smith. That is Hollywood hyperbole — but it contains a speck of truth.
In an industry first, Sony Pictures’ hoped-for blockbuster “Hancock,” starring Mr. Smith as a bungling superhero, hits theaters on Wednesday and will be available — after its theater run but before release on DVD — over the Internet, directly to viewers’ television sets. That is, if they own a Sony Bravia TV with a Web connection.
The announcement is significant in what it means for the future of movie watching, and for the future of Sony itself.
On Thursday in Tokyo, Howard Stringer, the chief executive of Sony, mentioned the “Hancock” experiment as he ticked off the company’s growth strategy for a roomful of analysts. In doing so, Mr. Stringer provided the movie-watching public with a rudimentary glimpse of the future: movies streamed over the Internet directly to televisions, bypassing the longtime purveyors of content to the living room, cable and satellite companies.
His presentation also provided a vivid example of how the vision of Sony’s founder, Akio Morita, of content and hardware co-mingling in profitable ways is possible, despite many past failures.
“In some ways, it vanishes the memory of the failures of the Sony Walkman,” Mr. Stringer said in a telephone interview on Thursday.
Since he ascended to his job in 2005, Mr. Stringer has focused on bringing together Sony’s disparate business units. “This is something that would have been unheard of five to six years ago,” he said of cooperation by Sony’s movie studio and its electronics division on “Hancock.”
Sony lost a first battle to Apple and its iPod in the drive to create a digital music device for the masses, despite the predigital age dominance of the Walkman and Sony’s ownership of one of the largest music companies in the world.
With its Internet-connected televisions and content from its Hollywood studio, Sony is aiming to avenge its loss to Apple in music by being a dominant player in home entertainment of the future. (Apple, incidentally, also has designs on home entertainment with its Apple TV device.)“One of the most interesting things about this is putting the television front and center in the living room,” Mr. Stringer said, as opposed to having a computer or a hand-held device as the center for watching streamed video.
Robert S. Wiesenthal, who is executive vice president and chief financial officer for the Sony Corporation of America and oversees corporate development for Sony, put it this way: “The Internet is not only a great place to reach Web sites, but it’s also a great way to deliver conventional content. And at the end of the day, it’s about getting entertainment back into the living room.”
Now, consumers can download movies to their computers — an often cumbersome process but one that should improve as broadband speeds increase — and to Sony PlayStations; the “Hancock” deal with televisions is a starting point to a future in which these all work together seamlessly in a home entertainment network.
“Ultimately, when all these devices are connected, you’ll be able to quite easily manage how you watch movies,” Mr. Stringer said.
Sony executives are adamant that the “Hancock” experiment is just that — an experiment that is as much about showcasing the potential of Sony’s Internet-enabled Bravia television sets as it is about the future possibilities of movie watching. It is not, they said, a push to change Hollywood’s carefully calibrated windows for the various outlets in which a film is released: theater, DVD and pay television.
In November, after “Hancock” has had its run in theaters, it will be available for a fee with the click of a remote control for consumers who own Internet-equipped Sony Bravia televisions. The Bravia Internet link adds $299 to the cost of the television.
In a research note last week, a Pali research analyst, Richard Greenfield, wrote, “While the content offered is only from Sony today, we expect other studios to follow if consumer interest becomes apparent.”
The experiment with “Hancock” suggests an obvious threat to the cable industry’s offerings, such as video on demand. But cable companies, far from blind to the possibility of other media companies’ leapfrogging them and serving consumers directly, are working on their own devices that will allow Internet video to be streamed to televisions.
In May, for instance, Glenn A. Britt, the chief executive of Time Warner Cable, said at an industry conference that his company was close to offering equipment that would allow consumers to receive Web content on their televisions through cable boxes.
The cable industry still has plenty of growth from its on-demand and cable services, said D’Arcy F. Rudnay, senior vice president for Comcast.
“Comcast and much of the cable industry began providing movies and TV programming on demand years ago, because consumers want to watch movies and TV programming when and where they want it,” she said.
And Michael Lynton, the chairman of Sony Pictures, assured the studio’s distribution and retail partners — cable companies like Comcast and Wal-Mart, which wants to protect its dominance over home entertainment in the DVD format — that they need not fear the experiment.
“More than anything else, what this demonstrates is how the electronics company and the movie studio are working together in the ways they were meant to,” Mr. Lynton said.
Sony recently came out the winner of Hollywood’s war over the format for high-definition DVD, as its Blu-ray became the standard. Studios have long relied on DVD sales as an important profit engine, and the sale of Blu-ray discs is still an early, unproven business. So the challenge every studio faces is how to be innovative without killing off existing businesses, and for Hollywood that means DVD sales.
“I think you have to chalk everything studios are doing right now with digital delivery to be experimentation,” said Stephen Prough, a founder of Salem Partners, a Los Angeles-based investment bank with a focus on entertainment. “No one knows what the business model will be.
“You do have to start with the premise that studios make the most money in the DVD window. And if they get enhanced pricing with Blu-ray, they will make even more money.”
Mr. Stringer said that Sony is careful to evaluate whether the digital delivery of content will have an impact on DVD sales.
“We don’t do anything without understanding the consequences for that,” Mr. Stringer said. “We don’t want to do anything to hinder Blu-ray.”
But controlling the march of technology has often proved elusive for media executives. (See: music industry, 1999 to present.)
“Mostly,” Mr. Stringer said, “this is us saying we want to be ahead of the curve rather than behind the curve.”
It will be interesting to see if Sony offers movies in HD format.