Sony is flexing its vertically integrated muscle with news today that it’s going to begin providing first access to its blockbuster movies to users of their consumer electronic devices. Playstation 3 and Sony Bravia TVs will be the first products to receive downloaded video capabilities. The idea of downloading movies to game consoles and televisions is nothing new. But Sony is raising the ante significantly by giving their devices first access to Sony produced movies – ahead of DVD, VOD, and cable, DBS, and IPTV distribution. Sony announced the movie Hancock, starring Will Smith, will be the first movie to get this early release treatment.
The move is indicative of the fast moving digital media ecosystem and its impact on the competitive landscape. By being both a producer of content and of consumer electronic devices, Sony is exploring cutting out the distribution middle man with this strategy. They have their devices in millions of homes throughout the world. As those devices become Internet enabled, Sony has the ability to reach their customers directly, build a more robust relationship with them, and conceivably, extract more revenue from them. From a broadband carrier’s point of view, this move should be of interest on a couple fronts. Broadband carriers are increasingly distributors of digital media, and certainly don’t appreciate being bypassed. Additionally, the broadband carrier’s network is what allows companies like Sony to reach customers directly through the Internet. If this bypass trend builds enough momentum to have a material impact on a broadband carrier’s ability to grow their own revenue through the distribution of content, something will have to give. Call it net neutrality or something else, but I don’t see broadband carriers just sitting idly by, while their content distribution business dies on the vine. They control the pipes into the home. To some extent, that gives them a trump card. This issue will be one to watch.
