Sony Online Service: The Next iTunes Killer?


200710122204Sony announced last week that there are plans for a new online store for music, film, books and other digital content, set to be released next year. The announcement came at a management strategy meeting in Tokyo on 19th November and the new service, temporarily dubbed “Sony Online Service” is planning to take on Apple’s iTunes store (who presently dominates with over 70% of the global digital music market). The manner in which, Sony plans on undertake this is that the service plans to bridge premium content with social networking, allowing user generated content onto personal online accounts.

Having “digital lockers” and space to share videos and photos would bring a unique edge, and adding in the possibility of third-party apps in the mix it certainly would boost the opportunity for new mobile and camera products.

One thing to consider however is this isn’t the first time Sony has taken on iTunes. Sony’s first foray into digital content was the Sony Connect store, which was launched in 2005. The problem with Sony Connect was its creators assumed everyone would jump onto the closed system bandwagon. The system had the ATRAC DRM codec for its music content and we all know how that worked out. The store closed down after three years.

After that, there was the UMG-Sony collaboration of Total Music in 2007. Total Music was a subscription between device manufacturers and service providers (like Comes With Music), which users didn’t buy into and it shut down in February. The product manager of the project lamented at its closure, “What I truly believe is that the market needs an alternative to [MP3 search engines and YouTube music videos] that lets innovation be built quickly and painlessly upon open APIs – where people are paid, costs are covered, streaming is free and drm-free commerce is to be had”.

The problem is, it doesn’t look like Sony is attempting this even on its third shot, as one of the major reasons for creating the service is to support the hardware. A BusinessWeek article reported, “Analysts say that creating software to sell an array of online services and content is Sony’s best hope of improving its fortunes.”Sony has been too focused on hardware,” says Tokai Tokyo Research Center analyst Osamu Hirose. “It has to focus on networked products [and]delivering digital entertainment to consumers”.

According to the same article, executive vice-president for networked products and services Kazuo Hirai says the service would be based on Sony’s PlayStation Network, and hinted at the possibility of it starting off as a part of it; “There’s some debate as to whether all PlayStation Network users would migrate to the new service,” Hirai said. “We would target quite a few of them.”

Even though it seems like a logical next step as the PlayStation Network is quite a burgeoning service, PaidContent believes if the two hook up it wouldn’t be advantageous, “if it’s tied to the PSN initially, then the Sony Online Service won’t have nearly as much reach as Apple’s music platform. (The company says there are currently 31 million registered PSN accounts worldwide. In contrast, iTunes has a global install base of over 100 million)”.

With such a rapid refresh rate of digital store ideas, it seems a bit hard to believe that Sony has had the time to fully understand what went wrong and how to change it. It makes sense the service needs to support Sony’s weakening hardware division but if there is any type of DRM like with the previous incarnations, they might as well not bother. Including user generated content and digital storage would be a welcome change in usually restrictive online stores, but making a ‘YouTube meets iTunes’ portal is ambitious to say the least. It’s hard to gauge its success given the few details we have but Sony just needs to watch itself and make sure it can balance the need for a free, open service and one that will bring profitability to the company.

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Cassie is a recent graduate of music and media management, doing her dissertation on leading business models for the industry. Experiences includes a year long tour of duty at indie aggregator The Orchard as well as research and blog posts for music consulting firm MusicAlly. A Yankee born and bred, she came to London three years ago to learn about the digital music market and in that time has worked with leading digital music companies. Besides 'prog'ging it out and getting lost in between 1965-1973 her main prerogative is solving this whole digital debacle to get more hippie music into the world.