Can Sony click with download store?

By stumbling to get content to the PSP, the electronics giant now has to play catch-up to Apple.

Planes, trains and automobiles are where digital video wants to do some boredom busting.

Scores of companies are betting there's gold in helping go-go commuters and road warriors catch the latest episodes of 24 and Grey's Antatomy. Apple downloads movies to iPods. Cell phone carriers stream TV shows to handsets. Sling Media's Slingbox connects users to their home TVs from any Web-enabled handheld.

But a company uniquely positioned just a few years ago to be among the front-runners in the nascent mobile-video category is conspicuously missing, said James McQuivey, a Forrester Research analyst. Sounding a little like Marlon Brando, McQuivey argues that Sony, with the PlayStation Portable (PSP), should have been a contender. He notes that Apple's iTunes has sold 50 million TV shows, seized a huge market lead and proven people will watch video on small screens.

"This problem of Sony's goes back to the Betamax. They don't just want to make the device that everybody wants. They want to own the entire the format."
--James McQuivey
Forrester Research analyst

"The thing is, Sony could have been all this," McQuivey said. "The Sony PSP is one of the best portable entertainment media devices that anyone has come up with in years. It has a relatively big screen, plays video beautifully, has good storage and audio. It could have been the first big mobile carrier for TV shows and movies."

Instead, the mobile-video play of one of the world's largest electronics companies is straggling behind Apple, has shaken the confidence of supporters--especially in Hollywood--and added to the woes of CEO Howard Stringer.

The PSP is a handheld device that plays video games, music and videos, and also displays photos. As of March, Sony has sold 7.2 million of the devices in the U.S., according to NPD Group. The PSP was supposed to be a total-entertainment media device, yet two years after launching the PSP in North America, Sony by some accounts is retrofitting its video plans.

The Financial Times, for instance, reported last December that Sony planned to launch a PSP download store early this year. But as April heads into May, still no store. A Sony spokesman declined to discuss the issue.

To some observers, a PSP video store is an admission by Sony that the company's Universal Media Discs (UMDs), the mini DVDs that play only on PSPs, are a bust.

The media began kicking dirt over UMD a year ago when consumers largely ignored the format. From the Calgary Sun came the subtle headline "Bombs away; UMD sales are zilch with consumers." The Hollywood Reporter published a story in March 2006 about Universal Studios and Paramount Pictures ending production of movies for the PSP. Variety chronicled the handheld's sagging sales in July with a story headlined "PSP loses support; Wal-Mart, studios pull back."

Format envy
The source of the problem is easy to pinpoint, say critics: Sony's UMD was another attempt by the company to force a proprietary format down consumers' throats.

"Sony hasn't won a format war ever," McQuivey said. "Sony can't get over the idea of controlling the media format. This problem of Sony's goes back to the Betamax. They don't just want to make the device that everybody wants. They want to own the entire the format."

Some observers said that by offering a disc that would play only on a Sony device, the company was thwarting piracy. Others accused Sony of creating the UMD to force PSP users to pay twice for films. Since the company offered no way to connect the handheld to a television--the same way iPods link to TVs--a UMD movie can't be enjoyed on a larger screen.

Sony traces some of UMD's early problems to Hollywood. When the PSP first launched, the studios "threw all of their content against the wall to see what stuck," said John Koller, Sony's senior marketing manager for PSP. The strategy needed to be more targeted to the PSP's core audience, he asserted.

Of course sales of romantic comedies from the 1970s were going to collect dust, he said. The typical PSP owner is a 17-year-old male who wants car chases and Borat.

In the past year, price reductions have helped UMD gain a fair amount of traction, according to Koller. He noted that Target Brands, which stopped selling UMDs last summer, brought them back in the fall and that executives at the retailer are "extremely happy with sales."

"I think the UMD is an evolving story," Koller said. "We're still seeing studios release UMDs, maybe not as much as they used to, but they are much more targeted. I think to say the UMD is dead is premature because it's a format that we will continue to support."

Will compatibility prevail?
If Sony is working on a download store, the company must at least crack the door open for nonproprietary formats if it hopes to challenge Apple, McQuivey said. While Apple may sell music wrapped in proprietary antipiracy software, the iPod still plays unprotected MP3s. So does Microsoft's digital music player, Zune.

With Sony "you got a company here that's pushing its own approach on every level, and as a result nobody is using its memory stick or video format," McQuivey said. "So you don't have the same robust market that you could have had if you said, 'We're going to open this up. You can put your Windows Media files on here. You can put your QuickTime files on here.'"

PSP fans agree. Jason Fields, a product evangelist for search engine Snap.com, bought his PSP two days after the March 2005 launch. He said he's hoping that if Sony does launch a video download store, he'll be able to transfer some of the video files from his iPod onto his PSP. He knows that even if the files are on an open format, Sony would still be confronted by challenges concerning aspect ratios, codecs (converters for analog-digital format translations) and other technological hurdles.

"It would be brilliant if the PSP supported the iPod," Fields said. "I'm sure even if they don't, someone could come up with a product or hack that could do it. If they did I would use it and abuse it."

PSP owners and Hollywood studios are hoping that Sony hasn't scrapped plans for the download store.

One studio executive, who wished to comment anonymously because she is not authorized to speak for Sony, said that the movie industry was pulling for the PSP to emerge as a competitor to the iPod. Steve Jobs won big concessions from the music industry after running away with the digital music market. The film industry didn't want to be thrust into the same position.

"But Sony has been so dysfunctional and clueless when it comes to the Internet," said the executive. "We keep hoping they pull themselves together...with the PSP video, we're hoping they create a forward-thinking strategy and stick to it."

Close
Drag
Autoplay: ON Autoplay: OFF