In the technology industry's race to build an online version of pay television, Sony Corp. just took the lead.
The Japanese company has reached a preliminary deal with Viacom Inc. 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. and Google Inc., has reported such a major content deal.
The Sony service would offer consumers yet another alternative in an expanding array of video options that already include on-demand services like Netflix Inc. and Amazon.com Inc. The expansion has been driven in part by the popularity of watching TV on mobile devices like Apple Inc.'s iPad, through apps, as well as on gaming consoles like Microsoft Inc.'s MSFT 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 Disney Co., Time Warner Inc., owner of cable channels HBO, TNT and TBS, and CBS Corp., 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., 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 Amazon.com.
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 AMC and "Justified" for 21st Century Fox's 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.
Article by AMOL SHARMA And SHALINI RAMACHANDRAN
http://online.wsj.com/article/SB10001424127887324823804579014901418093422.html
