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Sony in $1 billion deal for TV set-top boxes

The electronics giant is muscling its way into cable services with a $1 billion deal to supply new TV set-top boxes to Cablevision, a move that could vastly alter the industry's landscape.

Sony is muscling its way into the burgeoning market for advanced cable services with a $1 billion deal to supply new television set-top boxes to Cablevision Systems, a move that could vastly alter the industry's landscape.

The New York cable company and Sony announced today that the Japanese consumer electronics giant will build at least 3 million digital boxes that will be available to consumers next summer. Sony said it also will install the networking equipment and software needed to offer services that the two companies are developing, which will push the total value of the deal beyond the $1 billion estimate.

The deal marks the first time Sony will supply equipment used for delivering advanced digital services such as Internet access to cable operators. Sony has manufactured set-top boxes for satellite services such as DirecTV, but not cable lines.

The news follows Motorola's announcement yesterday that it plans to acquire General Instrument, the largest set-top box maker in the United States.

Motorola and Sony, as well as a wealth of other companies, want to become major players in a market that is now simmering but is expected to soon reach a boil. Cable operators are expected to sell 1.7 million digital cable boxes this year, and by 2003 that number is expected to jump to more than 5 million, according to estimates from Cahners-InStat.

With about 3.4 million customers, Cablevision is the nation's sixth-largest cable operator. Although services that run on the Sony boxes will be available in the New York area, the deal could be the wedge that Sony has been seeking to pry its way into the worldwide cable market.

Connecting what are essentially stripped-down computers to TVs will result in additional revenue for cable companies offering enhanced services such as video on demand. In addition, the companies also could draw more revenue from interactive advertising and Internet access.

For Sony, the arrangement is a chance to link a number of in-house hardware technologies that use content from its other businesses, such as Sony Music and its Columbia TriStar movie and TV unit.

Cablevision will offer two Sony set-top boxes, including one that uses Sony's Aperios operating system, an IEEE 1394 high-speed port (also known as Firewire), and software for networking digital camcorders and other devices.

"This is clearly another step in realizing Sony's vision of the networked home," said Howard Stringer, chairman and CEO of Sony Corporation of America, in a conference call.

"Being a technology and content provider gives us the opportunity to design something together [with Cablevision] rather than using a third party with [specifications] that get confused by intergalactic phone calls," Stringer said, before hurriedly leaving the New York conference center to escape Hurricane Floyd's path.