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Sony and Viacom Ink Landmark Deal: Part I

By Jacob Reiser

Last week, Viacom announced it had reached an agreement with Sony to stream at least 22 of Viacom's networks on Sony's forthcoming web-based TV service, which Sony expects to roll out sometime this year. The agreement amounts to the first shot fired against the traditional cable model and could mark the beginning of a new era in television.

Viacom is a programming giant whose network offerings include such popular networks as Comedy Central, MTV and Nickelodeon. The agreement immediately lends credibility to Sony's new service and demonstrates that major content providers view web-based TV as a legitimate new distribution platform and a viable alternative to cable TV.
Web-based TV is aimed at so called "cord cutters", or those unwilling to pay for Cable TV. According to a source quoted by the New York Times (NYT), this year marked the fourth consecutive year in which the number of viewers cancelling their cable subscription rose. According to the NYT article, this trend is pronounced in 25 to 34 year olds, the demographic most coveted by television advertisers. Increasingly, Millennials are simply unwilling to pay upwards of $80 a month for cable subscription when so many low cost alternatives are available, such as Netflix and Hulu. (http://www.nytimes.com/2014/09/11)

Although much about Sony's anticipated new service is still unknown, it will likely cost significantly less than cable. According to the same NYT article, one television executive estimated that the service will be priced somewhere between $15 and $30 dollars a month. Like Netflix and Hulu, Sony's web-based service will provide video-on-demand programming; but in contrast to those companies, Sony's service will also provide live original programming, which until now was only available on network or cable TV.

Cable companies are not oblivious to the new trend among viewers and are also scrambling to position themselves for the future. Dish Network, DirecTV and Verizon have all announced plans to create new web-based TV services. Yet Sony is the first to strike a deal with a major content provider of Viacom's stature. By securing a deal with Viacom, Sony is positioning itself to hit the market with the most attractive content.

Sony may have another advantage over those cable companies -- it also sells consumer electronics. In its press release announcing the Viacom deal, Sony announced its plan to offer its service to owners of PlayStation game consoles and Sony internet-enabled devices, such as smart TV's and Blu-ray players. According to Sony, over 75,000 people already own a Sony internet-enabled device, thereby presenting a captive audience to whom Sony can market its new service. Additionally, Sony's distribution platform is a huge incentive for content providers to join with Sony, because the young demographic that providers covet is precisely the one that owns PlayStation consoles. Viacom currently enjoys a 25.9% viewership share among young people aged two to 34 years.

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This page contains a single entry from the blog posted on September 20, 2014 7:55 AM.

The previous post in this blog was An Examination of the Legal Issues Surrounding Ray Rice's Indefinite Suspension and Contract Termination.

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