Sony Bets Big on Video Downloads

It’s an understatement to say the commercial viability of paid video downloads is a crapshoot, but that doesn’t stop new entrants from placing expensive bets, hoping that they will hit the jackpot. Apple (AAPL), Vuze, BitTorrent, Blockbuster, Amazon (AMZN), Microsoft (MSFT) — these are some of the existing players that Sony (SNE), the newest entrant, will have to contend with in the near future.

Undaunted, Sony, under the aegis of its CEO & Chairman Howard Stringer, has developed a new strategy to revive its rapidly declining fortunes. The Wall Street Journal reports (citing unnamed sources) that the new video download strategy revolves around PlayStation, PlayStation Portable and other Sony brands, such as Bravia televisions. The news of such service had first surfaced in December 2006.

Given the mixed fortunes of the PlayStation 3 gaming console, it seems like a wishful thinking. Nevertheless, the company seems to be hopeful about its chances, thanks to new products like devices that allow users to download content to their Sony televisions. It also recently announced DVR functionality for its PS3 devices.

Sony’s new strategy is inspired by the Japanese giant’s fear of Apple, the company that has used the iPod to become the premier consumer electronics company, making Sony seem like a hausfrau. According to the BusinessWeek Top 100 Global Brands Survey, Apple is within striking distance of Sony, despite having a limited array of offerings. Both companies trail newer rivals like Samsung.

The Journal report doesn’t outline the intricacies of Sony’s strategy, though it seems the company is going to use a single DRM solution, possibly Windows Media. While that is a good move, it also leaves Sony playing in a highly commoditized market, and its best bet to make money from video downloading is by selling hardware. The recent fracas between NBC and Apple revealed how little money is there to be made in the video download business, especially if the seller doesn’t own the content.

Here Sony, which owns Hollywood studios, does have an advantage, but will that be enough? The big money, as Apple has shown, is in selling hardware. Sony finally announced last week it would start selling its first video Walkmans.

Despite its history of being a successful CE company, Sony will have to focus on making its products simpler for the new digital generation. Will it be able to? One thing is clear: Sony has its work cut out if it wants to make an impact in the business where no one, not even Apple, has any meaningful traction.

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