June 26, 2008
Sony Group Corporate Strategy Update FY2008—FY2010*
“To be the leading global provider of networked consumer electronics and entertainment”

Tokyo, Japan – Sony today presented a series of new initiatives designed to build on its previous
three-year revitalization plan and to position the company as the leading global provider of
networked consumer electronics and entertainment. In particular, the company will focus on
strengthening core businesses, enhancing network initiatives and leveraging international growth
opportunities to build for the future and drive further growth and profits. In addition, Sony
announced the following key mid-term goals:

Expand our PC, Blu-ray DiscTM-related products and component/semiconductor businesses
into “trillion yen businesses**,” joining LCD TVs, digital imaging (digital cameras and
camcorders), game and mobile phones and raising the total number of “trillion yen
businesses” to seven.
Ensure that 90% of our electronics product categories are network-enabled and
wireless-capable by the fiscal year ending March 31, 2011 (“FY2010”).
Roll out video services across key Sony products by FY2010, starting with the summer 2008
launch on the PLAYSTATION®Network.
Double annual revenue from BRIC (Brazil, Russia, India, China) countries to 2 trillion yen***
by FY2010.

* Three-year period ending March 31, 2011
** Businesses each generating 1 trillion yen or more of annual sales to outside customers, except for Blu-ray Disc
related business which includes intersegment sales
*** Includes Sony Ericsson Mobile Communications and SONY BMG MUSIC ENTERTAINMENT as allocated

Sony has identified a 5% operating margin as a baseline of profitability to generate cash to
continue to lead and innovate. Furthermore we will target an annual return on equity of 10% by
FY2010. Sony is also planning to allocate a total of 1.8 trillion yen to invest in and build key
businesses and technologies over the next three years.

Highlights are as follows:

Further Strengthen Our Core Businesses

Sony intends to maintain a leading position in its “trillion yen businesses” (LCD TVs, digital
imaging, game and mobile phones) and will focus on expanding its PC, Blu-ray Disc-related
products, and component/semiconductor businesses into “trillion yen businesses” by the end of
FY2010. At the same time, we expect to improve the operations of our TV business significantly
and implement a variety of cost reduction measures to restore that business to profitability in the
fiscal year ending March 31, 2009*, and strive for the global No. 1 position in LCD TVs by
FY2010. Of the planned 1.8 trillion yen investment over the next three years, approximately 900
billion yen will be allocated towards strengthening core focus areas within components and
semiconductors, such as image sensors, batteries, display devices and Blu-ray Disc-related
components.
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Sony is also promoting the concept of “open innovation”, whereby we are looking not only inside
the company, but outside for technologies that foster innovation. By combing Sony’s inherent
technological strengths with external expertise, we aim to accelerate R&D efficiency and enable
the company to effectively respond to rapidly changing customer needs and preferences in the
network era. Through the creation of new user experiences, strengthening core businesses,
driving innovation, and minimizing the environmental impact of its operations, Sony will strive to
achieve not only sales volume, but also sustainable and profitable growth.

In the Game segment, the two key drivers of new growth are non-game content and services in
tandem with enhanced network capability. Sony also expects to achieve profitability in this
segment in the fiscal year ending March 31, 2009*, a significant year-on-year improvement due
to hardware cost reductions and an enhanced line-up of software titles for PLAYSTATION®3
(“PS3”). Key Game initiatives are:

1. Expand content and services available on the network platform
2. Continue to expand the PS3 customer base through the strength of Blu-ray Disc
3. Accelerate PS3 sales through upcoming key franchise software titles
4. Continue PS3 cost reduction initiatives

* Forecast as of May 14, 2008

Network Initiatives

Sony will increase network and wireless connectivity across its family of devices and build a
service platform to provide a seamless user experience across our key hardware devices and
content. We are planning to expand services that will enable our customers to enjoy content such
as motion pictures and television programming through the network on a variety of Sony
products such as BRAVIATM LCD TVs, PS3, PSP® (PlayStation®Portable) and Walkman® video
music players.

Sony’s unique position in electronics and entertainment allows us to offer compelling network
services. As an example of our potential, this November, Sony Pictures Entertainment will offer
one of the most highly anticipated films of the summer, “Hancock”, exclusively to all internet
connected BRAVIA LCD TVs in the U.S. before it is available on DVD. This film will be
distributed to Sony customers directly to their televisions outside conventional distributors and
without the need for any set-top box. This is an industry first.

Capitalize on Growth in BRIC Countries and Other Emerging Markets

Because Sony believes that the largest growth opportunities exist outside its traditional markets
of Japan, North America and Europe, expanding Sony’s business into new markets is a key area
of focus. New markets in regions including the BRIC countries – Brazil, Russia, India and China
– are developing quickly, and Sony’s business in these countries is growing rapidly. Going
forward, Sony plans to accelerate business expansion through collaboration and integration, not
just within each of the Electronics, Game and Pictures segments, but across the entire Sony
Group.

Sony will target annual sales of 2 trillion yen in the BRIC countries (including revenues from Sony
Ericsson Mobile Communications and SONY BMG) by FY2010, doubling FY2007 sales with
annual Electronics segment sales alone slated to grow from 600 billion yen to 1.2 trillion yen
during this period.

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Environmental Initiatives - Green Management 2010

“Green Management 2010” is a series of mid-term environmental targets that are guiding the
Sony Group in its efforts to help prevent global warming, recycle resources, ensure appropriate
management of chemical substances and address a broad range of other environmental issues.
Through these initiatives, Sony is striving to achieve an absolute reduction in greenhouse gas
emissions, specifically a 7% or greater reduction in CO2 emissions by FY2010 compared to the
level of FY2000.

Financial Strategies for the Mid-Term

In order to generate funds to continue to grow and innovate, Sony has identified a 5 percent
operating margin as a baseline of profitability. Sony is also establishing return on investment
capital as a fundamental framework for evaluating capital investments and potential acquisitions
across the Sony Group to ensure the optimum use of resources. Our targeted investment (an
aggregate of 1.8 trillion yen by the end of FY2010) will put Sony in a position to drive further
growth and innovation over the next three years and beyond. Sony will also target an annual
return on equity of 10% by FY2010. Going forward, we will work to deliver a stable, high level of
profitability while enhancing shareholder value.

The business environment in which Sony operates is changing rapidly and, with the advance in
digital technology and broadband networks, technological innovation is moving at a pace never
experienced before. In order to be a leading company in the digital age, Sony aims to leverage its
unique advantage of producing both hardware and content, continuing to offer cutting-edge
products together with superior content and services to meet the needs and expectations of our
customers.

[Sony and Impress]

What the guild's asking for with online or mobile distribution is 2.5 percent of the "distributors' gross revenue." Apparently this is tricky for distributors because it's difficult to tell what percentage of the online audience is new to a show or old hands simply shifting to a different medium—I'm guessing this is a problem for the issue at hand because producers don't want to pay writers twice for the same audience.

But, it seems unfair to only compensate writers for content explicitly purchased by viewers (like on iTunes), particularly as more and more content shifts online supported by ads, even if that ad revenue is nowhere near what is for broadcast for the time being. It's only going to get bigger, so they should get a hold of what they can, while they can, lest they feel screwed once again in a few years. [WSJ]

It's a funny little system, consisting of a video-capable USB flash drive, a dock with S-video, AV composite connectors and a power cord, and a remote that the flash drive can hug when not in use. You dock the USB drive to a Windows PC to load videos from the Fanfare service, but you can also dock it in any computer, Mac or PC, and load DivX, xVid and MPEG-4 videos onto it as a mass storage drive.Fanfare setup is extremely straightforward: you sign up for a free Fanfare account, download the Windows-only client software, browse the collections from CBS, Showtime and others (slated for heavy growth in the content-partner area, says SanDisk), and click the "plus" sign when you see something you like. If the TakeTV is plugged in, the video will begin loading. If not, you will be prompted to insert it.At the moment you can't download to hard drive, and need a TakeTV. In the future, SanDisk promises that other flash devices using the TrustedFlash DRM technology would be compatible with Fanfare downloads.

Downloads are encoded in DivX, and an hour of programming takes up just under 1GB of memory. Download time can be slow if your connection isn't up to it, but the experience wasn't unusually sluggish. A 4GB TakeTV can hold up to 5 hours of 720x480 programming.

Once your TakeTV is filled with good stuff—for now, most of it is free—you take it to your TV (like the name implies) and place it in the dock, which you connect to your TV via S-Video or composite, plus stereo audio.Immediately a rudimentary menu pops up, and shows you your content:You select a video and after a potentially long "loading..." period, it starts to play. I'm not going to lie, the video doesn't look great on a big 1080p TV. I know that's being harsh, since it's just 480i, but the Vudu box with 480p upscaled content looked damn fine, and SanDisk's Fanfare content is nowhere near that quality. Shows look blurry (as you can plainly see in the shot below), though the sound (128 Kbps) is just fine.
I had a bit of trouble with a few of the videos downloaded, but let me say that since this is a beta, I'm willing to let that slide. Of course the content on the site was sparse, and I'm willing to let that go for now, too, because I fully expect SanDisk to keep its promise of expanding options.

The beef I have now is with the hardware: the remote sucked—it was non-responsive and not terribly intuitive, and fastforwarding and rewinding were exercises in frustration. While I like the simple USB-drive technique for loading video, either with Fanfare or on your own, I think that the collection of pieces is a bit of a mess: despite the fact that the drive fits snugly in both the dock and the remote, there's no real clear way to hold all of it together in a tidy package. And if you lose the remote or leave the dock at home when you're at a friend's, you are screwed.

I branded this with a "wait and see" verdict because there's so much promise, but not enough delivered yet for a full-on gavel-banging judgment. My advice to you is to join Fanfare as a lurker, before you buy the TakeTV. If you start seeing content you want, you may consider TakeTV as it is currently the only way to make use of Fanfare video. Also, if you have loads of DivX vids and are constantly yearning for a way to shuttle them to your living room, here's your chance. But my early sense is, you'll have to put up with some growing pains before TakeTV is a mature, worthwhile product. [SanDisk's TakeTV Site]

The shaky manifesto wavers a bit into believability, however, when he says that the current geek-heaviness owes to "the average consumer still being confused about different video formats and DRM rights, getting downloaded video onto the TV, and premium content being slow to arrive to the digital market." On that much, he's right.

But is that enough to reason to think paid downloads are doomed to imminent oblivion in the wake of say, Joost? Or a subscription service attached to your 360 or Apple TV? As Ars points out, people occasionally do like to own the content they watch. You know, sometimes. And the market's still in its relative infancy, with potentially lots of room to grow into the proper niches to fit users' tastes.

Have guys paid for a video download? From who? – Matt Buchanan

Forrester: Paid video downloads, Apple TV a "dead end" [Ars Technica]
Image via Flickr