Sony Grabs Lead in Race for Internet Pay TV, posing new competition for cable, satellite and phone companies which have long sold subscription TV services

Updated August 15, 2013, 7:42 p.m. ET

Sony Grabs Lead in Race for Internet Pay TV

Preliminary Deal to Carry Viacom Channels Is Content Coup for Planned Service


6758.TO -0.97% In the technology industry’s race to build an online version of pay television, Sony Corp. 6758.TO -0.97% just took the lead. The Japanese company has reached a preliminary deal with Viacom Inc.VIAB -1.75% to carry the media giant’s channels, such as MTV, Comedy Central and Nickelodeon, on its planned pay-TV service, people familiar with the matter said. None of the other companies vying to launch Internet-based pay TV, including Intel Corp.INTC -2.39% and Google Inc., GOOG -1.17% has reported such a major content deal. Like its technology rivals, Sony is planning to stream cable channels and on-demand programming over the Internet, posing new competition for cable, satellite and phone companies that sell subscription TV services.The Sony service would offer consumers yet another alternative in an expanding array of video options that already include on-demand services likeNetflix Inc. NFLX -3.21% Inc. AMZN -1.67% The expansion has been driven in part by the popularity of watching TV on mobile devices like Apple Inc.’s AAPL -0.12% iPad, through apps, as well as on gaming consoles likeMicrosoft Inc.’s MSFT -1.73% Xbox.

Sony would beam the service to Sony devices like its PlayStation gaming consoles and Sony TV sets, said a person familiar with the situation. It is hoping to launch the service early next year.

Spokesmen for Sony and Viacom each declined to comment.

Sony still has to nail down details of its deal with Viacom, people familiar with the matter said. It also has had discussions with other major entertainment companies, people familiar with the situation said, including ESPN’s majority owner Walt DisneyCo., DIS -2.47% Time Warner Inc., TWX -1.78% owner of cable channels HBO, TNT and TBS, and CBS Corp., CBS -1.96% which owns the CBS network and Showtime. The status of those talks isn’t clear.

While Sony would need to strike other programming deals to create a compelling alternative to conventional pay-TV services, even a single deal represents a big shift within the entertainment industry. Big channel owners have been reluctant to license their programs to Internet-TV services for fear of undercutting the lucrative arrangements they have with cable, satellite and phone companies.

Contracts with some pay-TV operators, most notably Time Warner Cable Inc.,TWC -2.27% also make it difficult for some programmers to license their channels to newcomers. But these contractual restrictions don’t cover every TV channel.

The Justice Department is examining the impact of such restrictions on the development of online services, people familiar with the matter said.

The department has been examining whether the nation’s biggest cable and satellite companies are acting improperly to stifle competition from online video, a probe The Wall Street Journal reported last year.

On Thursday, a Justice Department spokeswoman declined to comment.

Entertainment companies’ attitudes toward online services vary. Viacom, many of whose channels appeal to younger audiences, has been more aggressive than many other media companies in making programming available online through its own websites and through streaming-video outlets such as Netflix and

Sony’s service offers some appealing aspects for content companies, said people who have seen it demonstrated.

The service includes a feature that recommends TV shows for customers to watch. Content providers are allowed to supply some of those recommendations, so they can steer viewers who watch their shows to other programming on their channels, according to the people familiar with the matter. Sony will provide other content suggestions for viewers based on an algorithm.

Sony’s interface is highly graphic and easy to use, in contrast to the clunkier programming guides some conventional distributors offer, the people said.

Media executives also credit Intel, which plans to roll out its own online pay-TV service in some markets by the end of the year, for having a slick interface. Intel plans to offer a digital-video-recording system that records every piece of programming aired and stores it in the “cloud” for three days, so users don’t need to have a home DVR.

Sony has long been a film-and-television company: its TV studio produces popular shows including “Breaking Bad” for AMC Networks Inc.’s AMCX -2.71% AMC and “Justified” for 21st Century Fox‘s FOX -1.25% FX. But the online-video venture is being led by the part of the company responsible for the PlayStation console.

While the service is expected to be available initially via PlayStation, as well as the company’s Bravia high-definition TVs, Sony plans to extend it to other Sony devices, including tablets and smartphones, the person said.

Media executives said that the PlayStation line gives Sony an advantage over competing services, because the gaming device has a large installed base of users, including many younger consumers that TV networks are eager to target.

Sony has sold more than 24.4 million PlayStation 3 consoles in the U.S. alone, according to NPD Group Inc., and many households own other Internet-connected Sony electronics.

Sony offers “a degree of access and connection” with customers that may not be paying for traditional television, one entertainment executive said.

Still, the economics of a new pay-TV service are difficult.

Media companies typically charge higher prices to new entrants than they do to established distributors. TV channels typically get paid on a per-subscriber basis, but media executives say they would be likely to seek a minimum revenue guarantee in online TV deals in case Sony or Intel don’t build a large subscriber base.


August 15, 2013, 3:47 PM

Sony’s Streaming Cable TV Deal: First of its Kind, But Not the Last

By Tom Gara

Big news today in the world of media and Internet:

Sony Corp.6758.TO -1.02% has reached a preliminary agreement withViacom Inc.VIAB -1.75% to carry the media company’s cable channels on its planned Internet-based TV service, a person familiar with the matter said, a significant boost for the Japanese company as it races to secure content rights against technology firms vying to offer similar services.

Sony plans to stream traditional cable channels, as well as on-demand content, over the Internet, posing new competition for cable, satellite and phone companies which have long sold subscription TV services.

Internet television is on the rise and cable TV cord cutting has been happening at an increasing rate, as we reported earlier this month:


That might seem light a lot, but considering the roughly 100 million U.S. households paying for cable, it’s small fry — once all the cable providers, including closely-held ones, are taken into account, somewhere between 0.2% and 0.4% of them cut the cord in the most recent quarter.

Customers are sticking around because cable providers remain the only way to access most cable TV channels — even the channels with online streaming options require a old-fashioned cable account before you can watch them via the internet. So while some internet-savvy customers at the margins are quitting the industry, the bulk aren’t moving until the web-based option is much more compelling.

What would that more compelling deal look like? The cord-cutting Holy Grail is still not here, but we all know roughly how it would shape up: The ability to watch all your favorite TV channels and shows online, ideally without having to pay for all the ones you don’t want.

Even some in the industry are willing to admit this is where the market is heading. “The handwriting is on the wall, particularly when you look at young customers,” Cablevision CEO James Dolan told the WSJ earlier this month.

The biggest obstacle to the Holy Grail becoming reality is that the people who own cable channels and the ones who run pay-TV services have a mutually beneficial and very profitable relationship. Neither side is particularly keen to see that shaken up, and that’s why of all the streaming services — including ones with users in the many millions — none have managed to do deals to carry cable channels.

And it’s not for lack of trying. Some of the tech industry’s biggest players have been working to do TV deals, as a quick dig in the WSJ archive shows.

Google Pitches Online TV Service to Media Companies:

GoogleGOOG -1.17% has recently approached media companies about licensing their content for an Internet TV service that would stream traditional TV programming, people familiar with the matter say. […]

Google has made overtures to some programmers in recent months about the initiative, people familiar with the situation said. In at least one case, Google has provided a demonstration of the product, according to a person who saw the demonstration. Google didn’t immediately have a comment.

Apple’s New Front in Battle for TV:

Apple Inc.AAPL -0.12% is in talks with some of the biggest U.S. cable operators about letting consumers use an Apple device as a set-top box for live television and other content, according to people familiar with the matter.

The talks represent Apple’s most ambitious crack at infiltrating the living room after years of trying.

The New Cable-TV Guy: IntelINTC -2.39%:

Intel has for several months been pitching media companies on a plan to create a “virtual cable operator” that would offer U.S. TV channels nationwide over the Internet in a bundle similar to subscriptions sold by cable- and satellite-TV operators, according to people familiar with the effort. Intel wouldn’t provide Internet access, which subscribers would obtain separately.

It looks like Sony could be the first among them to successfully announce a deal. But it will not be the last.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

One Response to Sony Grabs Lead in Race for Internet Pay TV, posing new competition for cable, satellite and phone companies which have long sold subscription TV services

  1. Alyson says:

    So, this is going to make SONY products cheaper or expensive? any body knows?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: