Sony and Its Blu-Ray Strategy

The Next Big Thing – Sony’s Blu-Ray DVD

Even though Sony helped bring about the digital revolution, the company has failed to adapt to it. The standardization required to manufacture consumer digital products undercut the value of Sony’s branded products. For example, the Chinese and other low-labor-cost manufacturers, using the same computer chips, could make the same DVD players and digital TV sets as Sony for a fraction of the cost. The result was a commoditized rat race that became unprofitable for Sony. When it became clear that Sony had to “revolutionize itself,” as Sony’s previous chairman Nobuyuki Idei termed it, the revolution involved transforming Sony from a company that had focused on engineering proprietary products, such as the Trinitron color television set, the Betamax VCR, and the Walkman, into one that could capitalize on—and protect from piracy—the streams of digital data that would include games, movies, music, and other intellectual property. When Sir Howard assumed the leadership of Sony this year, part of his mandate was to move the company, as he put it, “from an analog culture to a digital culture.”

The Blu-Ray DVD is a critical piece of this strategy. […] When I asked Sir Howard if there was concern that the Blu-Ray DVD would result in a further eroding of the world moviegoing audience, he answered that it was “a chicken-and-egg problem.” The “chicken” was theatrical movies; the “egg” the DVD (plus television and licensing rights). Sir Howard, who is also chairman of the American Film Institute, pointed out that it would be difficult to conceive of great movies, such as Lawrence of Arabia, being made without a movie theater audience to establish them; the dilemma is that it’s the “egg” not the “chicken” upon which the studios increasingly depend for their money.

So, even while trying to avoid fatally injuring the chicken–movies–Sir Howard said that studios are under increasing pressure to “optimize” their profits from the proverbial golden egg, the home audience. Indeed, the Blu-Ray DVD make this balancing act more difficult: With its interactive features, it appeals to the very teenage audiences on whom the multiplexes now so heavily depend. It’s also a vital part of Sony’s latest version of its PlayStation, due to be released next year. The prior versions of PlayStation have sold more than 100 million units and have provided the Sony Corporation with up to 40 percent of its profits.

Mislabeling in Music eTailing’s iTunes sold albums for 50 yen [pdf]

Apple Computer Inc. must be singing the blues after discovering its Japanese iTunes Web site sold albums last week for just 50 yen each.

The cost was a fraction of the intended 1,500-yen price, sources said.

[…] Although Apple apparently fixed the mistake, the damages could have been devastating.

“Unlike for ordinary merchandise sales, a music download service never runs out of stock,” journalist [Daisuke] Tsuda said. “If the recent incident was indeed a mistake, potential losses for the company selling the songs could expand without limit.”

CDT Broadcast Flag Recommendations

CDT‘s posting of their broadcast flag recommendations has gotten under Declan McCullagh’s skin.

Reading the recommendations, the CDT is clearly taking a lawyer’s position on the flag, indicating that there are procedural instruments that should be made a part of whatever enabling legislation that may emerge from Congress to satisfy the broadcast industry’s call for protection in the face of the “digital threat.” Moreover, the recommendations seem to want to have both strict definition of the scope and limitations of broadcast flag protections, and weak powers of technological specification for the FCC.

McCullagh seems to see a corporate conspiracy, arguing that the CDT gets corporate monies and is, thus, corrupted. That’s a sloppy argument; if so, then the entirety of the US policy and political establishment is already beyond reaching, which seems like overreaching to me.

What is unfortunate about the CDT paper is the implicit assumption that a broadcast flag is inevitable. Given the current legislative landscape, this is dangerous stuff.

Nobody should be talking about the broadcast flag without a concomitant relaxation or total elimination of the DMCA anti-circumvention provisions. Moreover, the CDT focus on procedural remedies depends heavily upon an informed electorate that can participate effectively in such processes and, increasingly, that’s the huge gap in this whole discussion — without an appreciation of what’s at stake, participation in a process is an empty opportunity.

Unless, of course, the CDT is assuming that the institution of such processes guarantees a role for them for all time — then at least one can understand what they’re trying to do.

Time to call my friends at CDT and find out what’s really going on. I have to assume that there’s a piece of legislation that’s getting circulated that is so terrifying that they felt they had to speak out, but I may be just naive.

OT: Give Gary Hart His Due

A powerful op-ed in the Post today: Who Will Say ‘No More’? [pdf]

History will deal with George W. Bush and the neoconservatives who misled a mighty nation into a flawed war that is draining the finest military in the world, diverting Guard and reserve forces that should be on the front line of homeland defense, shredding international alliances that prevailed in two world wars and the Cold War, accumulating staggering deficits, misdirecting revenue from education to rebuilding Iraqi buildings we’ve blown up, and weakening America’s national security.

But what will history say about an opposition party that stands silent while all this goes on? […]

[…] At stake is not just the leadership of the Democratic Party and the nation but our nation’s honor, our nobility and our principles. Franklin D. Roosevelt established a national community based on social justice. Harry Truman created international networks that repaired the damage of World War II and defeated communism. John F. Kennedy recaptured the ideal of the republic and the sense of civic duty. To expect to enter this pantheon, the next Democratic leader must now undertake all three tasks.

But this cannot be done while the water is rising in the Big Muddy of the Middle East. No Democrat, especially one now silent, should expect election by default. The public trust must be earned, and speaking clearly, candidly and forcefully now about the mess in Iraq is the place to begin.

Related: Democrats Split Over Position on Iraq War

Hollywood Boxoffice Article That *Doesn’t* Cite “Piracy”

Summer Fading, Hollywood Sees Fizzle

Marc Shmuger, vice chairman of Universal, said Hollywood has been too focused on short-term box office payoff and not focused enough on what he called “the most elemental factor of all” – the satisfaction of the moviegoing experience.

“It wasn’t like the last crop of summer movies were that much better than this summer,” said Mr. Shmuger, whose studio’s recent releases included the success “The 40-Year-Old Virgin” and several disappointments, including “Cinderella Man,” “The Perfect Man” and “Kicking and Screaming.” “This summer has been as deadening as it has been exciting, and there’s a cumulative wearing down effect. We’re beginning to witness the results of that. People are just beginning to wake up that what used to pass as summer excitement isn’t that exciting, or that entertaining. This is vividly clear in terms of the other choices that consumers have.”

[…] [T]he concern is palpable – and understandable, not only because of the performance of this summer’s movies, but also because a decline is discernible over time: overall movie attendance, a figure not affected by inflation, has slid to below where it stood in mid-August 2001. DVD sales, while still robust, are no longer rising exponentially, and some analysts say that a poor box office performance this summer will lead to poor DVD sales this winter.

[…] Warren Lieberfarb, a former Warner Brothers executive who was a main advocate of the DVD in the early 90’s, warned that going to the movies had become too expensive over all, given the excellent quality of home theater. “It’s not just the DVD. It’s not just the DVD window,” he said. “It’s the flat-panel television and the sound system, with the DVD option, that has radically changed the quality of the in-home experience. The home theater has arrived.” As a result, he said, “you have to change the business model of the movie business.”

Related: Extinction Long Seen, Video Stores Hang On

But one obstacle lies in the path of movies on demand, and that is the Hollywood studios. Unwilling to sacrifice the cash cow of home video sales, the studios have shown no desire to close the “window” – or the time lag of about 45 days – between releasing movies on DVD and making them available to the cable operators. Currently, the studios get about 60 percent of the list price of new DVD’s, bringing in about $17 each. For each movie ordered by remote control, the studios get about $2.

And without the newest movies – the ones most popular with video renters – video on demand will be hard pressed to make a significant dent.

“Short term, I don’t really see as much of a doomsday effect as other people do,” said Ken Papagan, a vice president for Rentrak, an entertainment industry information service. “Because behaviors don’t die easily.”

Later: Slashdot – Piracy Not To Blame In Decline of Moviegoers

Even later: Also Playing: Cries & Whispers, Shouts & Backtalk [pdf]

Digital Culture

Hear What I’m Saying? [pdf]

Amazing Scene One: A businessman e-mailing from a table isn’t even worth a second glance these days. But how about a businessman spotted, as one recently was, typing on his BlackBerry while using a public urinal? That’s good for hours of water cooler conversation.

Amazing Scene Two: This past Wednesday, a man was fatally stabbed in front of a New York restaurant. A witness who saw the blood-soaked victim lying on the sidewalk was quoted as saying, “People were just walking by with their iPod headphones on. That was tripping me out, that they kept on walking.”

[…] It’s one thing to tut-tut about these situations. But the fact is, all of us who own a cell phone, PDA or digital music player swore we’d never use it in certain ways — and sooner or later, we’ve caught ourselves doing just that. […]

[…] [E]very time you interrupt “real life” to attend to a device, you’re short-changing a relationship — but you’re also feeding one, with the person on the other side of that electronic impulse. Cell phone and PDA users are constantly balancing the rights and expectations of those in their “real” reality with the rights and expectations of their virtual relationships — a relatively new situation for humankind. With this double community now a 24-hour-a-day thing, we’re still trying to figure out how to deal with it politely. And we don’t always get it right.

[…] In 2000, a survey by the management consulting and technology services company Accenture found that, of American workers who had taken at least a week-long vacation that year, 83 percent said they had brought mobile technology along. Of those who used it to keep in contact with the office, more than half began the interaction themselves. (All these numbers would surely be higher now, since the post-PDA craze.)

When HR, the magazine of the Society for Human Resource Management (SHRM), explored why anyone would do such a thing, one of the answers that came back was: out of consideration for other workers. With many companies running whippet-thin, people are more conscious than ever that, while they’re away, someone else has to do their job. The vacationers want to help out. And they’re often expected to.

Sorry …

I know that it’s been a little quiet around here lately — too quiet, as the movie cliche goes. Sorry about that. I had a difficult talk to give yesterday (complex concepts, little time, important audience), and the school year is gearing up, with a few big projects still pending.

Anyway, I promise to do better, although it’s going to be a slow ramp up. However, since my teaching obligations haven’t gone anywhere, the weblog will get more attention soon.