Sony’s Next-Gen ‘Trojan Horse’ Is Hobbling

Sony's trying to dominate the living room yet again via the PlayStation 4 and 4K TVs, but 4K content is proving problematic

   

Sony (NYSE:SNE) is pinning much of its recovery hopes on two primary areas: the PlayStation 4 gaming console and its expanded line of 4K Ultra HD televisions.

The pair represent Sony’s best shot at remaining a force in the living room — and being able to do so without the discounting that led to a decade of crippling TV division loses.

Ideally, the two would work together, with the PS4 acting as a Trojan horse that helps to push the new video format into living rooms, making those 4K TVs a must-have. Sony has used this tactic in the past with considerable success:

  • The PlayStation 2 included a built-in DVD player which helped drive the success of DVDs over VHS tapes for movies.
  • The PS3’s Blu-ray drive was critical in the battle of introducing high definition video content to homes (in turn spurring HDTV sales), as well as vanquishing the rival HD DVD format — which was championed by game console competitor Microsoft (NASDAQ:MSFT), among others.

There’s a problem with the next frontier, however. With current technology, 4K movie files are huge, far exceeding the capacity of a Blu-ray disc. So how do you release 4K titles?

Without 4K content, the TVs lose much of their appeal, and it gets really tough to convince consumers to drop $25k on one. Sony was reduced to including an external hard drive preloaded with a handful of 4K movies with the Ultra HD TV it was selling last year, which is a Band-Aid solution at best. The hard drive cuts into profits and makes things too complicated … and once customers have watched The Amazing Spider-Man and Total Recall 2012, where are they supposed to turn for 4K content?

A new video compression codec called H.265 could be the answer to delivering 4K Ultra HD content in manageable file sizes — perhaps even compact enough to fit on a Blu-ray disc — but requires significant computing horsepower to crunch the files. And it’s not compatible with existing Blu-ray players, which use the H.264 codec. So, there’s a bit of a chicken and egg thing going on here.

Circling back to the PS4: When Sony unveiled its next generation game console (or didn’t, since the actual console itself was conspicuously absent) in New York a few weeks ago, 4K support was left up in the air. Would Sony be including support for the just finalized H.265 codec? Did it have something else up its sleeve that tied the PS4 into its previously announced 4K download service?

It wasn’t until a follow-up interview with a Sony exec by The Verge that the picture became any clearer, but based on what Sony Electronics President and COO Phil Molyneux said, I’m not sure Sony can pull this off.

According to The Verge, Sony’s 4K download service will indeed tie in with the PS4, but that still will mean movie files in the 100GB range. When questioned about the massive files that consumers would need to download — in comparison, a 1080p movie downloaded from Apple’s (NASDAQ:AAPL) iTunes Store is typically under 5GB — Molyneux said file size and bandwidth are “challenges we have to work through … we’ve got some very good ideas that will make that a comfortable consumer experience.”

So … if you’re a homeowner with an Internet broadband connection, how many 4K movies can you download at 100GB a pop before you hit your cap? Two, three, maybe half a dozen if you’re lucky? You’d have to plan ahead, too — 100GB takes a long time to download. When questioned about this at CES, Sony CEO Kaz Hirai called adapting to the wait “a journey” for consumers.

On top of the download caps and waits, there’s the issue of storage. We don’t know how big the PS4’s hard drive will be, but you can bet it won’t hold more than a handful of 4K movies, making multiple rentals in a session or buying Ultra HD movies problematic.

If the PS4 doesn’t incorporate something more than a stopgap solution to delivering Ultra HD video content, then it loses much of the appeal that helped drive PS2 and PS3 sales. And Sony’s job of selling those premium, high-margin 4K TVs isn’t going to get any easier.

We haven’t seen final specs for the PS4 yet, so it’s possible Sony is holding its cards extremely close to its chest and still plans to make the next-generation PlayStation that Trojan horse device — the Blu-ray player than supports H.265 (physical discs, as a download file, or both). But I have my doubts.

Time isn’t on Sony’s side if the PS4 launches this holiday season as expected. Blu-ray drives with the horsepower and compatibility to support H.265 (and backward compatibility for existing libraries) would need to be developed, marketed and incorporated into the PS4. Then studios have to release films that support the standard.

That’s a lot to expect in eight months.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/2013/03/sonys-next-gen-trojan-horse-is-hobbling/.

©2014 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.