Sony Pictures

Sony Pictures EntertainmentSony Pictures Entertainment

For over 60 years, Sony has transformed the world of entertainmentFor over 60 years, Sony has transformed the world of entertainment..

““in a sprawling market where controlling a in a sprawling market where controlling a broad portfolio of businesses is crucial, broad portfolio of businesses is crucial, nobody is positioned better than sony…”nobody is positioned better than sony…”

Games EntertainmentMusic Networking& Financial ServicesElectronics

Sony Pictures Entertainment -Movies( 75% of sales ) -Television( 25% of sales ) -Animation -Home Entertainment -Digital Entertainment

Figure 1 Figure 1 Source: Source: SPIT Corporate OverviewSPIT Corporate Overview

•In 1989, Sony acquired the Columbia In 1989, Sony acquired the Columbia Pictures Entertainment Inc. (Columbia Pictures Entertainment Inc. (Columbia Pictures, TriStar Pictures, etc.) from The Pictures, TriStar Pictures, etc.) from The Coca-Cola Company for $3.4 billion. Coca-Cola Company for $3.4 billion.

• The company renamed Sony Pictures The company renamed Sony Pictures Entertainment in 1991.Entertainment in 1991.

• Expanding its growth on April 8, 2005, Expanding its growth on April 8, 2005, when it acquired the legendary when it acquired the legendary Hollywood studio Metro-Goldwyn-Mayer Hollywood studio Metro-Goldwyn-Mayer Studios, Inc. in a deal worth nearly $5 Studios, Inc. in a deal worth nearly $5 billion.billion.

1.1 History of SPE1.1 History of SPE

Columbia TriStar Motion Picture Group

A World-Class Hollywood Library

-more than 3500 feature films

-over 35000 television episodes

-some key franchiese such as Spider-man, Spider-man, Da Vinci Code, Zorro, Men in Black, Charlie’s Da Vinci Code, Zorro, Men in Black, Charlie’s Angels, Stuart Little.Angels, Stuart Little.

11 Academy Award for Best Picture 11 Academy Award for Best Picture winners winners

The Group releases about 22 films per year in US and owns studio facilities in US, Hong Kong, Madrid, Mexico, the United Kingdom, Brazil and Japan.

1.2 Movies:1.2 Movies:

-SPE is the current market share leader among the Hollywood studios at the U.S. box office. So far in 2006, SPE has had 12 movies that opened at #1

-has already amassed US$2.1 billion in worldwide ticket sales this year.

-has grossed over US$1 billion at the U.S. Box Office for each of the last five years

-has grossed over US$1 billion at the international box office for five of the last seven years.

-began local film production in Asia in 1998, SPE has produced or co-produced 19 Asian feature films. Two of these productions have made over $100 million worldwide such as Kung Fu Hustle and Crouching Tiger, Hidden Dragon.

SPE has set box office records worldwideSPE has set box office records worldwide

Sony Pictures Television InternationalSony Pictures Television International

DistributionDistribution

program distribution and licensing of Sony Pictures Entertainment feature films and TV products as well as custom mobile products to TV and mobile outlets around the world.

International NetworksInternational Networks

over 40 networks worldwide

Local Production original local language productions and both fiction and non-fiction format adaptations.

Three Lines of BusinessThree Lines of Business

1.3 Television:1.3 Television:

Figure 2Figure 2 Source SPIT Corporate Overview

SPT contains a library that includes more than 35,000 episodes of more than 270 television series and 22,000 game show episodes under the Columbia TriStar Television brand, and the television rights to the Embassy Pictures library and also the owner of the television brand "Embassy Television"--among most recent notable shows in this library are Seinfeld, King of Queens, Seinfeld, King of Queens, Days of Our Lives Days of Our Lives and The Young The Young and the Restless.and the Restless.

Television: Television: SPTISPTI

3 highly successful channel brands 3 highly successful channel brands

benefiting from a global infrastructure benefiting from a global infrastructure

Asian AnimeAsian Anime

High EnergyHigh EnergyEntertainmentEntertainment

Light GeneralLight GeneralEntertainmentEntertainment

19 Languages19 Languages

100 countires100 countires

40 channels40 channels

200M+ Homes200M+ Homes

Figure 3Figure 3 Source SPIT Corporate Overview

AXN MobileAXN Mobile

AXN Mobile portal both inform and drive viewers to channelsAXN Mobile portal both inform and drive viewers to channels

1.4 1.4 Animation•A division of SPE, founded in 2002, which produces computer-animated films.

•Their first feature film Open SeasonOpen Season, was released on September 29, 2006. They have also announced their next film, called Surf's Up.

•For the future of Sony Pictures Animation they have planned Cloudy With a Chance of Meatballs and Hotel Transylvania. Open Season 2 may also be a possibility if the first one does well enough.

1.5 Home Entertainment1.5 Home Entertainment

It is responsible for the It is responsible for the distribution of the Sony distribution of the Sony Pictures library for home Pictures library for home entertainment. entertainment.

They are also responsible for They are also responsible for their television shows from their television shows from the Sony Pictures Television the Sony Pictures Television library library

Sony Pictures Home Entertainment is the home video, DVD, Sony Pictures Home Entertainment is the home video, DVD,

and UMD distribution arm of Sony Pictures Entertainment.and UMD distribution arm of Sony Pictures Entertainment.

1.6 1.6 Digital Entertainment

•Known as the digital website interactive creator for SPE

•Designed websites for Sony Pictures, Screen Gems Network, SoapCity, Sony Pictures Imageworks, Game Show Network, among others for SPE.

•In 2005 the group's name was changed to Sony Pictures Digital Sales and Marketing and encompassed all areas of interactive media creation and marketing for SPE, including gaming, mobile, websites, design and sales.

2.1 Traditional Business2.1 Traditional Business

The effects of Sony Pictures Entertainment Inc. (SPE)’s new media The effects of Sony Pictures Entertainment Inc. (SPE)’s new media strategy rely heavily on the performance of its traditional businesses which strategy rely heavily on the performance of its traditional businesses which are known as film and television production and distribution. are known as film and television production and distribution.

2.1.1 Business Overview2.1.1 Business Overview

Figure 4Figure 4 Sales (Financial Services Revenue) and Operating Income (Loss) (Pie Sales (Financial Services Revenue) and Operating Income (Loss) (Pie charts indicate percentage of sales and operating revenue.)charts indicate percentage of sales and operating revenue.)

In the fiscal year of 2006, SPE’s business sales increased by 1.7% due to the In the fiscal year of 2006, SPE’s business sales increased by 1.7% due to the depreciation of the yen. On a U.S. dollar basis, however, it decreased by 4%.depreciation of the yen. On a U.S. dollar basis, however, it decreased by 4%.

2.1.2 Film2.1.2 FilmIn terms of film, SPE ended calendar year 2005 with over $1 billion in ticket sales in North America for the fourth year in a row, securing its position as the No.1 studio in U.S box office receipts over 2000-2005 period. This achievement lays a solid foundation for Sony’s significant role in the worldwide box office market of which U.S represents around 50%. As illustrated in Figure2, in the year of 2006, from January to November, SPE has released 25 movies with the total gross of $1,425.1 million, accounting for 17.9% of the total market share.

Figure 5Figure 5

2.1.3 Home Entertainment2.1.3 Home Entertainment

Home video sales are now 2.5 times the box office income from showing on theatre, so on the home entertainment front, Sony Pictures Home Entertainment (SPHE) has been an indispensable driver of growth for SPE’s motion picture and television business.

SPE continues to lead the way in digitizing its film and television library with more titles available for digital distribution than any other studio. SPHE launched its new digital sell-through distribution business in April 2006, making films available for sale via the Internet on sites including Movielink and CinemaNow.

2.1.4 TV2.1.4 TVDuring the fiscal year ended March 31, 2006, Sony Pictures Television (SPT) During the fiscal year ended March 31, 2006, Sony Pictures Television (SPT) continues its U.S. daytime drama television leadership with the No.1 and No.2 continues its U.S. daytime drama television leadership with the No.1 and No.2 shows (shows (The Yong and the RestlessThe Yong and the Restless and and Days of our livesDays of our lives) and its syndication ) and its syndication success with the No.1 and No.2 U.S. syndicated game shows (success with the No.1 and No.2 U.S. syndicated game shows (Wheel of FortuneWheel of Fortune and and Jeopardy!Jeopardy!), and the enormously popular ), and the enormously popular SeinfeldSeinfeld. SPT also produces . SPT also produces The The King of QueensKing of Queens, , Dragon TalesDragon Tales, , KidnappedKidnapped and and Til DeathTil Death. On cable, SPT . On cable, SPT remained the No.1 producer of original scripted series for U.S. basic cable during remained the No.1 producer of original scripted series for U.S. basic cable during fiscal year 2005 with more original dramas on the air than any other studio, fiscal year 2005 with more original dramas on the air than any other studio, including four of the top15 including four of the top15 (The Shield(The Shield, , Rescue MeRescue Me, , Stargate SG-1Stargate SG-1 and and Stargate Stargate AtlantisAtlantis). ).

In response to its great success in the U.S, Sony Pictures Television International In response to its great success in the U.S, Sony Pictures Television International (SPTI), the division of Sony Pictures Entertainment responsible for all television (SPTI), the division of Sony Pictures Entertainment responsible for all television business outside of the U.S., also solidify its position as the leading local business outside of the U.S., also solidify its position as the leading local language television producer among all Hollywood studios with hit original language television producer among all Hollywood studios with hit original scripted shows in such countries as Germany, Italy, Chile, Span and Russia. scripted shows in such countries as Germany, Italy, Chile, Span and Russia. SPIT’s production group generates over 9,000 hours of programming in 25 SPIT’s production group generates over 9,000 hours of programming in 25 countries.countries.

2.1.4 TV2.1.4 TV

2.2 Digital Business Model in SPE2.2 Digital Business Model in SPE

According to the statement of Ken Lo, the vice president of the business department of SPTI, Asia, SPE’s new media operation is simply a strategic try that yields revenue less than 5% of the total. So far it consists of five digital business models:

• Pay Per View• Download to PCs• E-Commerce Site• Mobile-related Service

At the current stage, SPE don’t expect much of it and plan to continuously invest in each model with equal emphasis for three-to-four years.

2.2.1 Pay Per View2.2.1 Pay Per View

SPHE entered into this field as of April 2006, making films available for SPHE entered into this field as of April 2006, making films available for sale via the internet on sites including the above-mentioned Movielink sale via the internet on sites including the above-mentioned Movielink and CinemaNow. In fact, Movielink is a joint venture of SPE with other big and CinemaNow. In fact, Movielink is a joint venture of SPE with other big studios like Metro-Goldwyn-Mayer Studios, Paramount Pictures, studios like Metro-Goldwyn-Mayer Studios, Paramount Pictures, Universal Studios and Warner Bros. Studios. Universal Studios and Warner Bros. Studios.

It is predicted that in the next coming years, download service will It is predicted that in the next coming years, download service will experience a continuously preeminent growth.experience a continuously preeminent growth.

2.2.2 Download to PCs2.2.2 Download to PCs SPHE has launched its digital sell-through business in April 2004. Teaming with SPHE has launched its digital sell-through business in April 2004. Teaming with Movielink and CinemaNow, the service will enable U.S. broadband internet users Movielink and CinemaNow, the service will enable U.S. broadband internet users to download-to-own a range of entertainment content from the Sony and MGM to download-to-own a range of entertainment content from the Sony and MGM collective libraries. It began with an initial slate of 75 titles that include the well-collective libraries. It began with an initial slate of 75 titles that include the well-known "Memoirs of a Geisha," "Spider- Man 2," "Taxi Driver," "Barbershop," and known "Memoirs of a Geisha," "Spider- Man 2," "Taxi Driver," "Barbershop," and "Hitch." "Hitch."

In addition to offering new release titles day-and-date with DVD, the company In addition to offering new release titles day-and-date with DVD, the company releases additional titles from Sony's and MGM's library monthly. The combined releases additional titles from Sony's and MGM's library monthly. The combined Sony Pictures and MGM libraries of more than 7,500 titles are believed to be the Sony Pictures and MGM libraries of more than 7,500 titles are believed to be the largest most digitized collection in the business. largest most digitized collection in the business.

2.2. Increasing rate of broadband penetration allows more users to access to it. Increasing rate of broadband penetration allows more users to access to it.

3.3. By contrast with pay per view, this service fulfils customers’ demands to ‘own’ By contrast with pay per view, this service fulfils customers’ demands to ‘own’ content.content.

4.4. With more flexibility, you may store your favorites downloaded in the With more flexibility, you may store your favorites downloaded in the computer or burn to a DVD/VCD.computer or burn to a DVD/VCD.

It is predicted that in the next coming years, download service will experience a It is predicted that in the next coming years, download service will experience a continuously preeminent growth because of the following reasons:continuously preeminent growth because of the following reasons:

2.2.2 Download to PCs2.2.2 Download to PCs

2.2.3 E-Commerce Site2.2.3 E-Commerce Site

SPE also works with portal sites and other third part e-commerce website to SPE also works with portal sites and other third part e-commerce website to sell its products online including Amazon, YesAsia in Hong Kong and CNAVE in sell its products online including Amazon, YesAsia in Hong Kong and CNAVE in China. China.

Compared with Movielink and CinemaNow, in those websites only physical Compared with Movielink and CinemaNow, in those websites only physical DVD or VCD will be shipped to customers through snail mail. DVD or VCD will be shipped to customers through snail mail.

2.2.3 E-Commerce Site2.2.3 E-Commerce Site

2.2.4 Mobile-related Service2.2.4 Mobile-related Service

Deliver Entertainment to Mobile Phone UsersDeliver Entertainment to Mobile Phone Users

Sony Picture Entertainment delivers movie and other entertainment contents to Sony Picture Entertainment delivers movie and other entertainment contents to consumers through mobile phones. This business is mainly for Japanese users consumers through mobile phones. This business is mainly for Japanese users of third-generation mobile phone services in which moving images and other of third-generation mobile phone services in which moving images and other large-volume data can be transmitted at high speed. The annual sales of it arrive large-volume data can be transmitted at high speed. The annual sales of it arrive at an estimated 10 billion yen.at an estimated 10 billion yen.

Mobile as a marketing toolMobile as a marketing tool

On the other hand, SPE regards mobile as the most powerful marketing tool for On the other hand, SPE regards mobile as the most powerful marketing tool for engaging with movie-goers and uses it to help promote its entertainment engaging with movie-goers and uses it to help promote its entertainment properties and build deeper customer relationships. The first mobile Internet site properties and build deeper customer relationships. The first mobile Internet site to be launched is to accompany the DVD release of Will Smith film Hitch. to be launched is to accompany the DVD release of Will Smith film Hitch.

Mobile Internet sites are launched for every major film release and the biggest of Mobile Internet sites are launched for every major film release and the biggest of SPE’s DVD releases. These sites are promoted on all marketing material such as SPE’s DVD releases. These sites are promoted on all marketing material such as press, online and outdoors. Content includes marketing material such as movie press, online and outdoors. Content includes marketing material such as movie trailers and premium content such as video interviews. The personal details trailers and premium content such as video interviews. The personal details collected will be used to build a wider mobile CRM strategy for Sony Pictures. collected will be used to build a wider mobile CRM strategy for Sony Pictures.

2.2.4 Mobile-related Service2.2.4 Mobile-related Service

3. Operation3. Operation

3.1.Development & Preparation3.1.Development & Preparation

3.2.Pre-production3.2.Pre-production

3.3.Production3.3.Production

3.4.Post-production3.4.Post-production

3.5.Distribution3.5.Distribution

Story-Synopsis-Step outline-Treatment-Screenplay-Script Coverage-Assess-PitchStory-Synopsis-Step outline-Treatment-Screenplay-Script Coverage-Assess-Pitch

Production Office-Storyboarding-Budging-Scheduling-Crew

Principal photography-In camera special effects/Computer generated workingPrincipal photography-In camera special effects/Computer generated working

Film editing & effects (Visual/Musical/Sound)Final release print-PreviewedFeedbackfurther shooting or editing

Marketing (AD materials, PR, Website, Promotion, etc.)Marketing (AD materials, PR, Website, Promotion, etc.)Play in selected cinemaPlay in selected cinema

Digitalization/Conversation Digitalization/Conversation DVD/VHS/Internet players/Others DVD/VHS/Internet players/Others

DevelopingDeveloping

Post-ProductionPost-Production

Post-ProductionPost-Production

ProductionProduction


AA

EE

DD

CC

BB

Figure 5Figure 5

Sony Pictures MovieSony Pictures Movie

Illustration: OPEN SEASAONIllustration: OPEN SEASAON

Modifying the ScriptModifying the Script

DubbingDubbing

StoryboardingStoryboarding

CGI WorkingCGI Working

Editing & EffectingEditing & Effecting

Developing Role Developing Role

ImagesImages

ScriptScript

TeamTeam

Producer Producer DirectorDirector

ArtistArtist

CG AnimatorCG Animator

Cast (Voice)Cast (Voice)

WriterWriter

editoreditor

IdeaIdea

StoryStory

DraftDraft

MarketingMarketing

CinemaCinema

DVDDVD

Online Online PlayerPlayer

Other Other productionsproductions& services& services

SPASPA

Production Production CompanyCompany

DistributorsDistributors

Figure 6Figure 6

TV series idea

SPESPEPilot

a prototype first episode

““Run” of Episode Run” of Episode

CREWCREW


Post-productionPost-production Finished Finished ShowShow

•WriterWriter•Executive producerExecutive producer•CastCast•DirectorDirector•Photography directorPhotography director•EditorEditor

AffiliatesAffiliates

SPESPE

DevelopmentDevelopment

Distribution

Producing

Figure 7Figure 7

Sony Pictures Television Sony Pictures Television


NetworkNetwork Local Local ProductionProduction

SPTSPT Overseas TV products Local

Local TV products Overseas

Figure 8Figure 8

4. Technology

4.1 Video compression Video compression: Reducing video content’s quantity of data with little loss in quality.

MPEG: The Moving Picture Experts Group has standardized several compression formats and ancillary standards.

VCD MPEG-1 DVD and Pay-TV video MPEG-2 Digital TV: Digitized images MPEG-2 transmission

decompressed displaying Internet players can directly play the MPEG2 files.

• Blu-ray Disc: the next-generation optical disc format for high-definition video and high-capacity software applications

• Sony Pictures Home Entertainment released the first 20 titles on the Blu-ray Disc format in June 2006.

Specification

• High capacity: 9h of HD video can be stored on a 50 GB disc • User friendliness: menu navigation, new interactive capabilities • DRM feature: BD+, Mandatory Managed Copy system

4.2 Blu-ray Disc

Feature DVD HD-DVD Blu-ray

Disc capacity 4.7GB (single layer)8.5GB (dual layer)

15GB (single layer)30GB (dual layer)45GB (prototype triple layer)

25GB (single layer)50GB (dual layer)100GB (prototype quad layer)

Video capacity (per dual-layer disc)2 SD: approximately 3 hoursHD: n/a

SD: approximately 24 hoursHD: approximately 8 hours

SD: approximately 23 hoursHD: approximately 9 hours

Manufacturer support (home theater)4 All Toshiba, LG, Thomson/RCA Hitachi, Mitsubishi, LG, Sharp, Sony, Panasonic, Samsung, Philips, Thomson/RCA

Manufacturer support (PC storage)4 All Microsoft, Intel, HP, NEC, Toshiba

Apple, Dell, Benq, HP, LG, Panasonic, Philips, Pioneer, Samsung, Sony, TDK

Studio support4 All Paramount, Studio Canal, Universal, Warner, the Weinstein Company

Sony Pictures (including MGM/Columbia TriStar), Disney (including Touchstone, Miramax), Fox, Paramount, Warner, Lions Gate

Movie prices $6 and more (retail)

$20 to $28 (retail) $20 to $28 (retail)

Number of titles available by the end of 2006 50,000-plus Dozens to hundreds Dozens to hundreds

Comparison of DVD, HD-DVD, Blu-rayComparison of DVD, HD-DVD, Blu-ray

~~CNET News.comCNET News.com~~Figure 9Figure 9

http://reviews.cnet.com/#Slide 2




• Digital cinematography: It is the process of capturing motion pictures as digital images, rather than on film.

• Digital distribution: Movies shot digitally may be released to theatres by satallight and leased line, or in forms of VHS or DVD. It saves 85% distribution cost compared with traditional way of distribution.

• Digital projection: In 2000s, some cinemas start to use digital projectors to put on digital films. Digital projectors deliver clearer and sharper images. Video files can show on the screen several times without lost on quality.

Digital Cinema Initiative was formed in 2002 by the 7 major Hollywood studios, including SPE, to tackle standards for digital cinema. They released the third version of their Digital Cinema System Specification standards in December 2003.

4.3 Digitalization

DirectorDirector

ActorActor

AnimatorAnimator

SPESPE

Film DistributorFilm Distributor Theatre VisitorsTheatre Visitors

Home Video Home Video DistributorDistributor

E-CommerceE-Commerce Home UsersHome Users(buy DVD)

HBO HBO MSOMSO(Provide VOD)

Home UserHome User

(Cable TV)

Online Film Online Film Download SitesDownload Sites

Home User(PC/TV)

Theatre/CinemaTheatre/Cinema

Movie TrailerMovie Trailer Wireless UsersWireless Users

Content Content OriginationOrigination

ContentContentProductionProduction

DistributionDistributionSyndicationSyndication

Content Content ConsumptionConsumption

• BT is a P2P file distribution protocol. BT websites allows distributing digital files without the permission of the copyright holder. The infringementthreathens copyright holders’ profit.

• According to Ken Lo, vice-president of Business Department of Sony Pictures Television International, Asia, beside sending legal threats, SPE is also considering cooperating with P2P websites. He hopes the P2P technology can be combined with DRM (Digital Rights Management) feature to build a platform for people to seek and watch copyrighted movies more conveniently.

6. Intellectual Property

6.1 BT

http://www.btbbt.com/

From 1997 to October 2003, at least 300 million pirate disks were confiscated by customs and frontier inspection stations all over the country.


6.2 Pirated disks Ken Lo hopes the customs and police exert more efforts against piracy. He also forecast that along with the raising of consumption level, Chinese people would prefer better experience provided by legal versions.

~Beijing Review~

• Video sharing websites are becoming popular in the past two years. Copyright problem also rises. a large amount of infringing content continues to be uploaded.

• Instead of launching court battles, SPE is actively seeking for cooperation with video sites while protecting its copyrighted

contents.


6.3 Video sharing websites

http://video.google.com/

Case I

On November 9, Grouper.com, acquired last August by SPE, is offering snippets from 100 Sony films and TV shows for users to integrate into blogs and on social networking sites such as MySpace.

To avoid court battles, some video sites are trying to strike content-sharing deals with studios and music labels. By offering famous scenes from hit films for free, Sony is hoping fans will be prompted to buy the full-length movie.



Case 2

Mainland video sharing site www.bbvod.net (九州梦网 ) announced this November that it plans to shell out several million US dollars every year to buy copyrighted video programs mainly from SPE. bbvod.net is mainland’s first website introducing Hollywood movie copyright, aiming to build itself into a broadband entertainment website with most copyrighted videos in China.



http://www.bbvod.net/

http://www.bbvod.net/index.aspx

7.1 5 Forces Analysis 7.1 5 Forces Analysis

Suppliers Buyers

PotentialEntrants

Substitutes

Entry Threat

BargainingPower

BargainingPower

SubstitutionEffect

IndustryCompetitors

Rivalry AmongExisting Firms

Figure 11Figure 11

Competitors:Competitors: • DisneyDisney• Warner Bros.Warner Bros.• Universal StudiosUniversal Studios• ParamountParamount• FOXFOX

7.1.1 Rivalry in the industry7.1.1 Rivalry in the industry

Industry OverviewIndustry Overview

Competitors: DisneyCompetitors: Disney

Warner Bros.Warner Bros.

Universal StudiosUniversal Studios

ParamountParamount

FOXFOX Small amount of playersSmall amount of players Similar market shareSimilar market share High concentration ratioHigh concentration ratio

Sony’s PositionSony’s Position

•In motion picturesIn motion pictures• Box OfficeBox Office-The studio had box office success both in the United States and overseas.-The studio had box office success both in the United States and overseas.

-SPE ended calendar year 2005 with over $1 billion in ticket sales in North America-SPE ended calendar year 2005 with over $1 billion in ticket sales in North America

for the fourth year in a row.for the fourth year in a row.

-The studio had five films open at No.1 in the U.S. in the first four months of 2006.-The studio had five films open at No.1 in the U.S. in the first four months of 2006.

-After 2001, SPE’s box office share went up quickly. -After 2001, SPE’s box office share went up quickly.

2001(6th), 2002(1st), 2003(2nd), 2004(1st), 2005(5th)2001(6th), 2002(1st), 2003(2nd), 2004(1st), 2005(5th)

• Film OutputFilm Output

Mr. Ken Lo, the vice president of Sony Picture Television International(SPIT), Mr. Ken Lo, the vice president of Sony Picture Television International(SPIT),

said: “Sony picture produced about 40 films a year, the output of which is thesaid: “Sony picture produced about 40 films a year, the output of which is the

NO.1 in the industry every year.NO.1 in the industry every year.” ”

• In televisionIn television

• 40 international networks, which are available in more than 100 40 international networks, which are available in more than 100

countries. countries.

• The global leader in local language production, with more than The global leader in local language production, with more than

9,000 episodes produced in over 30 countries.9,000 episodes produced in over 30 countries.

• SPIT is the No. 1 independent comedy producer in Germany.SPIT is the No. 1 independent comedy producer in Germany.

• SPIT produces more original programming in Russia than any other SPIT produces more original programming in Russia than any other

major Hollywood studio. major Hollywood studio.

• In 2004, SPIT formed the first fully government-approved television In 2004, SPIT formed the first fully government-approved television

production joint venture in the People’s Republic of China.production joint venture in the People’s Republic of China.

• U.S. daytime drama television leadership.U.S. daytime drama television leadership.

• The No.1 producer of original scripted series for U.S. basic cable The No.1 producer of original scripted series for U.S. basic cable

during fiscal year 2005.during fiscal year 2005.


Suppliers Buyers

PotentialEntrants

Substitutes

Entry Threat

BargainingPower

BargainingPower

SubstitutionEffect

IndustryCompetitors


Figure 11Figure 11

Substitutes:Substitutes:• BookBook• MusicMusic

7.1.2 Treat of substitutes7.1.2 Treat of substitutes

BookBook

MusicMusic

In Porter’s model, substitute products refer to products in other industries.

To the economist, a threat of substitutes exists when a product’s demand is affected by the price change of a substitute product.


Suppliers Buyers

PotentialEntrants

Substitutes

Entry Threat

BargainingPower

BargainingPower

SubstitutionEffect

IndustryCompetitors


Figure 11Figure 11

Buyers:Buyers:• Video ChannelsVideo Channels• Cable/DBSCable/DBS• CinemasCinemas• VCD/DVD buyersVCD/DVD buyers• Telecom Service Telecom Service ProviderProvider• Internet content Internet content aggregatoraggregator• Mobile Phone userMobile Phone user• IPTVIPTV

7.1.3 Bargaining power of buyers7.1.3 Bargaining power of buyers

The buyersThe buyers

Traditional buyers:Traditional buyers: New buyers:New buyers:

• Video ChannelsVideo Channels• Cable/DBSCable/DBS• CinemasCinemas• VCD/DVD buyersVCD/DVD buyers

• Telecom Service ProviderTelecom Service Provider• Internet content aggregator Internet content aggregator • Mobile phone user Mobile phone user • IPTV IPTV

The bargaining power of buyers is weak.The bargaining power of buyers is weak.


Suppliers Buyers

PotentialEntrants

Substitutes

Entry Threat

BargainingPower

BargainingPower

SubstitutionEffect

IndustryCompetitors


Figure 11Figure 11

Suppliers:Suppliers:• Sony ElectronicSony Electronic• Sony Picture StudiosSony Picture Studios

7.1.4 Bargaining power of suppliers7.1.4 Bargaining power of suppliers

The suppliersThe suppliers

• Sony ElectronicSony Electronic

• Sony Picture StudiosSony Picture Studios

Sony Pictures Studios Post Production Facilities Sony Pictures Studios Post Production Facilities DVD Authoring CenterDVD Authoring Center Worldwide Product Fulfillment Worldwide Product Fulfillment


Suppliers Buyers

PotentialEntrants

Substitutes

Entry Threat

BargainingPower

BargainingPower

SubstitutionEffect

IndustryCompetitors


Figure 11Figure 11

Potential Entrants:Potential Entrants: Not foundNot found

7.1.5 Threat of new entrants7.1.5 Threat of new entrants

The characters of film/television production andThe characters of film/television production anddistribution industry:distribution industry:• high start up costhigh start up cost• high technology requiredhigh technology required

So the entry barrier is high.So the entry barrier is high.

Copyright (BT Pirated DVD)Copyright (BT Pirated DVD) Apple VideoApple Video

Few Franchise moviesFew Franchise movies Few Low-cost moviesFew Low-cost movies Minor Television syndicationMinor Television syndication Poor Television network in ChinaPoor Television network in China

ThreatsThreatsWeaknessesWeaknesses

Internet-based video distributionInternet-based video distribution Digital Online EntertainmentDigital Online Entertainment Digital Cinema DistributionDigital Cinema Distribution The Attraction of the Chinese MarketThe Attraction of the Chinese Market

Large film and Television libraryLarge film and Television library Blu-Blu-ray Technologiesray Technologies Market leading positionsMarket leading positions Strong Brand nameStrong Brand name Good Customer Relationship in AsiaGood Customer Relationship in Asia Quality Local Language ProductionQuality Local Language Production Advanced Digital Rights Management Advanced Digital Rights Management

(DRM)(DRM)

OpportunitiesOpportunitiesStrengthsStrengths

ExternalExternalInternalInternal

7.2 SWOT Analysis 7.2 SWOT Analysis

7.2.1 Strengths7.2.1 Strengths

1.Large Film and Television Library”1.Large Film and Television Library”With ore than 4,000 films, 270 Television series and 22,000 game shows,SPE can gain competitive advantages in anytime even though the film Industry is not as prosperous as before.

2.Blu-Ray Technologies 2.Blu-Ray Technologies This successful launch of Blu-Ray provides the potential to benefit Sony’s manufacturing business as well as its games (PS3) and movie businesses.

3.Market Leading Position3.Market Leading Position SPE’s box office share went up quickly.2003(2nd), 2004(1st), 2005(5th)

Although SPE’s box office share has experienced considerable volatility because of the release schedule of its key franchises, it has already gained the leading position in the film industry; in return, this will be translated into significant results in the home entertainment market.

January 1- November 16, 2006 Box OfficeJanuary 1- November 16, 2006 Box Office

19$790.410.1%Warner Bros.

5

16$835.010.7%Paramount

4

24$1,130.4

14.4%20th Century

Fox

3

23$1,339.9

17.1%Buena Vista

2

28$1,377.0

17.6%Sony/Columbia

1

Movies Tracked

Total Gross

Market Share

Distributor

Rank

Figure 12Figure 12 Source: Source: www.boxoficemojo.comwww.boxoficemojo.com

http://www.boxoficemojo.com/

4. Strong Brand Name:4. Strong Brand Name:

Sony Pictures acquired the legendary Hollywood studio in a deal finalized on April 8, 2005, worth nearly $5 billion with 20% ownership.

Step by step, SPE has built up its strong brand name under those prestigious film making studios. And the customers will be more reliable on Sony Pictures. .

Figure 13Figure 13 Sony Pictures Brand Sony Pictures Brand

http://en.wikipedia.org/wiki/April_8

http://en.wikipedia.org/wiki/2005

5. Good Customer Relationship in Asia5. Good Customer Relationship in Asia

“20th Century Fox’s Asia headquarter is located in Australia Not very convenient to communicate with its Asia customers.” ------Ken Lo VP SPIT

“Compared with 20th Century Fox which only makes a business trip to Korea or China 2-3 times per year, we can do this more often and easily. We know more about Asian market than any other film companies because we have an Asian blood” ------Ken Lo VP SPIT

Hong Kong (Asia Headquarter)Hong Kong (Asia Headquarter)

ChinaHong KongTaiwanKoreaSingapore……

6. Qualified Local Language Production6. Qualified Local Language Production

Figure 14Figure 14 Source: SPIT Corporate Overview Source: SPIT Corporate Overview

Today, SPIT is the global leader in local language production, with more than 9,000 episodes produced in over 30 countries

1. Few Franchises Movies:1. Few Franchises Movies: Sony’s strong “franchise” movies are fewer in number than Warner Bros, for example, which has considerable consistency in its margin history (Harry Potter series, Ring series, and Matrix series).

2. Few Low-cost Movies:2. Few Low-cost Movies: One of the factors supporting the strong margin performance of Fox is the development of low cost movies, which have achieved high relative returns. Sony’s slate has not been particularly strong in this regard.

3. Minor Television Syndication:3. Minor Television Syndication: The two top-performing studios in terms of operating margin (Warner and Fox) have both developed strong television syndication pipelines, which tend to support operating margins.

Sony’s television activities are now relatively minor, with production focused on cable network production, daytime drama, and game shows, none of which provides significant syndication opportunities.

7.2.2 Weaknesses7.2.2 Weaknesses

4.4. Poor Television network in China:Poor Television network in China:

“We just have 3 channels in China’s restaurants and we are lack of television network experience compared with 20th Century Fox which is the member of News Corp. owned by Murdoch a legendary figure in the media industry.” ---Ken Lo VP of SPIT

7.2.3 Opportunities:7.2.3 Opportunities:

1. Internet-based video distribution1. Internet-based video distribution

The current media value chain The new video content value chain

Figure 15Figure 15 Source: Forrester Research

In a summary, after the reconstruction of the video content value chain and the changing viewing habit of the customer, a new video content value chain though still in the fist stage has formed an outline: the content creators, Internet platform operators, technical providers, distribution channels, advertisers and users.

And the reinforcement of this value chain needs all participants’ co-operation and as a result, every participant will find their profits in this value chain.

Figure 16Figure 16 Source: iResearch.com.cn

2. Digital Cinema Distribution2. Digital Cinema Distribution

Digital Cinema Initiatives (DCI) was formed in March 2002 as a joint projectof the motion picture studios (Disney, Fox, MGM, Paramount, Sony PicturesEntertainment, Universal and Warner Bros. Studios) to develop a system specification for digital cinema.

The adoption of DCI can save money in production and distribution

With several hundred movies distributed every year, industry savings could potentially reach $1 Billion or more.

3.3. The Attraction of the Chinese Market:The Attraction of the Chinese Market:

According to the Chinese Television and Broadcasting Department, China, as the most potential film market, contains a market of 15-20 billion RMB, and in ten years later, this number will go up to 50 billion RMB.

And with the more opening of this market and loosening regulations, more foreign films could be brought to China.

7.2.4 Threats7.2.4 Threats

1. Copyrights:1. Copyrights:

2. Apple Videos:2. Apple Videos:

On 14 October 2005, Apple began to distribute and sell video content with each episode of give popular TV shows over the Internet for $1.99.

What made us surprised is that Apple sold 1 million video in less that 20 days strongly suggests that there is a market for legal video downloads.

“What Apple's doing is laying the groundwork for the next frontier in home entertainment” said Gene Munster, of Piper Jaffray.

Higher Distribution Higher Distribution RequirementsRequirements

Sony PSP VideoSony PSP Video

W-T StrategiesW-T StrategiesS-T StrategiesS-T Strategies

ThreatsThreats

More Television Networks More Television Networks and Productions n Chinese and Productions n Chinese MarketMarket

More Low-Cost MoviesMore Low-Cost Movies

Acquisition of Online Acquisition of Online Video Share WebsiteVideo Share Website

Co-operation with the Co-operation with the Leading Internet Provider Leading Internet Provider of On-Demand Moviesof On-Demand Movies

Mobile Internet SiteMobile Internet Site Chinese Feature Film Chinese Feature Film


W-O StrategiesW-O StrategiesS-O StrategiesS-O Strategies

OpportunitiesOpportunities

WeaknessesWeaknessesStrengthsStrengths

7.3 SWOT Matrix7.3 SWOT Matrix

7.3.1 S-O Strategies:7.3.1 S-O Strategies:

1.1. The Acquisition of Online Video Share WebsiteThe Acquisition of Online Video Share Website

On 25 Aug, 2006, Sony acquires Groupers.com for $65 millions, the no. 8 UGC sites in the world.

This acquisition gives Sony a powerful Web 2.0 marketing and distribution platform for its media properties and offers Grouper’s consumer creators’ direct access to a major media distributor.

The acquisition of Grouper is a strategic initiativein the field of digital entertainment and consistent with Sony Pictures vision of making entertainment accessible to consumers whenever, wherever andhowever they want. Grouper gives SPE a strongplatform for growth. And this will bring more salesof the DVD for Sony Pictures as a return.

2. Co-operation with the Leading Internet Provider of On-Demand Movies2. Co-operation with the Leading Internet Provider of On-Demand Movies

On April 3rd, 2006, CinemaNow Inc., the leading Internet provider of premium on-demand movies, announced it has signed pioneering licensing agreements with Sony Pictures Home Entertainment to offermovies for download-to-own purchase through its Web site (www.cinemanow.com).

With the new download-to-own option, customers can purchase and download a legal,permanent copy of a Sony Pictures Home Entertainment movie for unlimited playback on the download device. All content will be copy protected by Microsoft’s Windows Digital Rights Management (DRM) software.

Together with CinemaNow, Sony Pictures are moving beyond traditional media to embrace the digital age as never before.

http://www.cinemanow.com/

3. Mobile Internet Site:3. Mobile Internet Site:

Sony Pictures has unveiled a pan-European mobile strategy that will see it creating a mobile Internet site for every major film and DVD release.

Content will include marketing material such as movie trailers and premium content such as video interviews. The personal details collected will be used to build a wider mobile CRM strategy for Sony Pictures.

4. Chinese Feature Film Production: 4. Chinese Feature Film Production:

SPE has a long history and abundant experience in Asian local film production and has achieved outstanding awards in this area, especially in the time when the Chinese film market is more open and attractive.

SPE will put much more efforts on the production on the Chinese feature film.

7.3.2 W-O Strategies:7.3.2 W-O Strategies:1. More Television Networks and Productions n Chinese Market:1. More Television Networks and Productions n Chinese Market:

Although SPIT has three channels in China but all in restaurants, the next stepis to try to extend its business to more fields.

2. More Low-Cost Movies:2. More Low-Cost Movies:

7.3.3 S-T Strategies:7.3.3 S-T Strategies:

1. Higher Distribution Requirements :1. Higher Distribution Requirements :

““We can do nothing regarding to the piratedWe can do nothing regarding to the piratedvideos in Chinese market though we’ve videos in Chinese market though we’ve

Presented any lawsuits to the governmentPresented any lawsuits to the government

---Ken Lo---Ken Lo

What we can do What we can do

Set higher distribution Set higher distribution Requirements for the Requirements for the

distributorsdistributors

2. Sony PSP Video: 2. Sony PSP Video:

The launch of Apple’s video content download to iPodThe launch of Apple’s video content download to iPodis a big threat to the major film studios; however, Sony is a big threat to the major film studios; however, Sony may not be influenced by this trend because it acquires may not be influenced by this trend because it acquires the inborn and special advantages to compete the inborn and special advantages to compete with Apple video.with Apple video.

Sony has already launched the free PSP video download Sony has already launched the free PSP video download in its UK website. I think the next step is to charge those in its UK website. I think the next step is to charge those PSP video contents by providing the high quality videos PSP video contents by providing the high quality videos to the customers. to the customers.

王颖王颖

谢菁炜谢菁炜

黄伟黄伟 Ken LoKen Lo 许晨彦许晨彦

陈桢陈桢

桑田桑田

17 Nov 2006 Sony Pictures 17 Nov 2006 Sony Pictures

Sony Pictures

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