Sony Corporation of America
Howard Stringer Remarks
Chairman and Chief Executive Officer, Sony Corporation of America
President, Sony Broadband Entertainment
"The Future of TV -- U.K."
Royal Academy of TV -- London -- November 18, 2004
That’s the sort of introduction my mother loves to hear, and my father wouldn’t have believed. As Bill Clinton used to tell his interns.....you can never be too effusive.
I’m very happy to return to the Royal Television Society. It’s perhaps 15 years since I last spoke to you. In the meantime, I’ve experienced a bit of an identity crisis here in my homeland. Even though I oversee a film and television studio, Sony pictures -- and soon to be MGM, as well as Sony music -- now Sony-BMG, I find myself typecast as a kind of technocrat/technician in the UK. Do these hands look like they’ve ever held a wrench or a screwdriver? In fairness all of this may have actually started at CBS.
One summer weekend, I was minding my own business in the Hamptons on long island. At the time I was president of CBS and oversaw its television network. Anyway, the phone rang. It was a local mogul’s wife, whom I barely knew. "Excuse me", she said, "is this Howard Stringer". "Yes", said I, warily. "Ah, good. I’ve got a bit of a problem, Governor Bill Clinton.....you probably know he’s running for President.....is here with his young daughter. It’s raining, and she was hoping to watch a videotape. Unfortunately, my VCR is broken. Do you think you could fix it?"
I was taken aback. How had she found me? Was I perhaps listed in the yellow pages? TV repairman....President of CBS. Anyway I didn’t try to fix it, just gave her my own instead. Problem solved. And no......it didn’t earn me a night in the Lincoln bedroom at the White House. But I had become a technician.
Later, in the mid-90’s I ran a company called Tele-TV, designed to create broadband television on DSL lines for the phone companies. That cemented my reputation as a technocrat, even though it was an unqualified disaster, being at least ten years too early. AOL’s Steve Case and Hewlett Packard’s Carly Fiorino used to hang around my office wondering what I was doing. I should have hung around their office. I missed the it bubble entirely. So in 1997 I joined Sony, assuming the unlikely role of electronics chief.
For a while I did flirt with BBC headhunters, but was labeled by the press here as hopelessly unqualified....having no television experience worthy of the name apparently. Maybe a little harsh, the writer seemed to think I sold refrigerators. Hardly surprising, I came in eleventh in a field of ten.
If I sound a little defensive, I probably am. Times change however. You can go home again, and I do feel more at home. Why not? Remember when my friend Greg Dyke warned all of you about the dangers of American media executives with checkbooks poised to buy iTV......the barbarians were at traitor’s gate.
Not so fast, Greg. Let me draw your attention to what might be called British barbarians at America’s gate. On American TV screens today.....Fear Factor...which recently liquefied a dead rat and asked a contestant to drink it. Survivor. The Weakest Link. Nanny 911. Wife Swap. Jail Break and the biggest of them all...Pop Idol. What do you think American Idol charges for a 30 second commercial? $673,000! That’s the highest price on network television!
Oh and I almost forgot another classic...Richard Branson, the rebel billionaire....who offered, in the name of celebrity...to give up his day job. He shouldn’t have. He’s being hammered by Donald Trump. Anyway, when it comes to television, may I ask politely, "Who’s endangering whom?"
Certainly, the dynamics of British broadcasting are echoing those of Hollywood in other ways. You all have witnessed the biggest boardroom shakeout in years. In short order, Tony Ball engineered a lucrative exit from BSkyB, sweetly timed given the group’s subsequent subscriber numbers and capital investment requirements. Michael Green was jettisoned by iTV before even reaching the cockpit.
The Greg and Gavyn show came to an abrupt end at the BBC. Both were victims of Lord Hutton’s withering verdict on the corporation’s corporate governance and editorial standards...whether justified or not. That in turn, prompted musical chairs involving Mark Thompson leaving channel 4 for the BBC; Andy Duncan heading in the other direction.
Michael Grade assuming the chairman’s mantle at the BBC; five and four swapping executives; a further clear out at BSkyB; new management at Telewest; and further executive departures from the BBC.
Meanwhile in the U.S., the mouse sneezed and almost blew out Michael Eisner. Sumner Redstone of Viacom yanked the welcome mat out from under Mel Karmazin. ABC fired its top two programming executives, just weeks before the start of the season, and, as it happened, before two of their handpicked shows became enormous hits. Paramount and Miramax are both looking for new bosses and Pixar for a new home.
In a period of such intensive change, switching and swapping executives doesn’t guarantee the future, it blurs it. As George W. Bush memorably put it. "Our enemies are innovative and resourceful, and so are we. They never stop thinking about new ways to harm our country and our people. And neither do we!"
Anyway, I don’t think American checkbooks are poised at all, particularly with a new media and communications regulator, Offcom installed, uncertainty over the BBC charter renewal, funding problems at channel 4 and a volatile advertising market. These are not easy times. But then as one baseball manager so succinctly put it, "half this game is ninety percent mental". I’m sure you all agree. Or as former Vice President Al Gore observed, "If we don’t succeed, we run the risk of failure."
I’m not here to harp on the decline of western civilization -- or at least that part which is televised. First, because much new TV programming is superior to anything produced in the so-called golden age of television. Second, because at least since Gibbon, we’ve maintained an abundant supply of critics to bemoan a seemingly perpetual decline and fall.
I’ve come across the ocean not to bury television but to praise it. Or at least to praise its enormous potential -- for both art and commerce -- in the digital age. We are in the midst of an evolutionary free-for-all, with the drama unfolding not over millions of years but over perhaps a dozen.
Evolution, however, is not only an elegant theory, it is also a great story. And the story of who wins and who loses, who adapts and who gets left behind in the primordial media ooze, promises to be a compelling tale for the digital age.
It’s still too soon to tell who the hero will be, but here are some observations which may prove useful:
* First: I’m happy to say that content nicely fills the role of the once and future king....as long as the king stamps out the menace of pirates.
* Second: Distribution is not the force it used to be. The gatekeepers are under enormous pressure as many forms of distribution are increasingly commoditized, which of course makes content even more powerful.
* Third: Technology eagerly plays the fool...a merry prankster subverting the best laid plans of dynasties and tycoons.
Television is now a truly worldwide business -- a business that is becoming more competitive, more consolidated, more local in focus even as it grows more global in scope. We all know how intense competition has become for Britain’s 25 million television households.
Project that feverish competition a few years into the future and place it in the chaotic, burgeoning context of China and India, whose combined populations, with their rapidly expanding consumer appetites, exceed 2 billion.
Sony has a major stake in virtually every corner and byway of the global television marketplace. This is not a marketplace that rewards passivity. That is why in the U.S., Europe and around the world we have moved strategically to create and acquire content, and to develop new, unique and value-added devices to enable consumers to experience it.
Our most dramatic effort in recent months was the move to acquire MGM -- a high-wire financial act that required months of planning and negotiation.
The MGM film library, which includes classics like Rocky and the Pink Panther along with the James Bond franchise, is by any measure a princely asset. It would take 250 years to produce a similar catalog today -- presuming one could recreate the quantity and quality of MGM’s library. And if the governance gods grant their blessings, Sony’s home video division will be able to mine not one but two libraries -- with nearly 8,000 titles.
MGM’s content, which we hope to showcase on new television channels created with our partner, Comcast, was well worth the gamble. It speaks volumes about Sony’s absolute commitment to content -- which was also the driving force behind our other big announcement this year -- the merger of Sony music with BMG.
But we are not just a content company. In television, Sony has developed three mutually supportive lines of business:
* Program distribution and licensing of feature films and television;
* Local language TV production;
* And our own international television channels.
With an eye toward global distribution and local relevance, we have developed or invested in 35 international channels reaching more than 240 million viewers in more than 100 countries around the world. We have two Hindi-language networks in India; Animax, an animation network in Japan, Taiwan and Hong Kong; AXN, an action adventure channel that operates in more than 40 countries from Asia to South America.
Sony pictures television also produces programming for worldwide markets. From China to Chile, we produce more than 2,500 hours of local programming with full-scale production on five continents.
We produce programs in a number of European markets, including eleven locally-produced programs on German television alone. The next time someone tries to convince you that comedy doesn’t travel well, tell them that Tokyo-based Sony is the number one independent producer of comedy in Germany. We do let the locals write their own jokes.
One byproduct of global presence is the recognition that, across continents and seas, there is truly no place to hide from the grinding competition of our age. We all know the pressures. But for the sake of the masochists in the audience, let’s just review a few:
* There is competition from new delivery systems -- not least of which is broadband. The capacity to download video programming is exploding -- along with alternatives to watching television. Sony Ericsson phones now sport a screen good enough to view movies on. And our new portable PlayStation, the PSP, will go on sale before Christmas in Japan, and later in the spring for the rest of the world. Obviously it plays games, but will also play videos and pre-recorded music. Ultimately the PSP will function as a kind of mobile --networked-- set top box.
* There is strong competition from new forms of entertainment. Internet usage has cut into television viewing time and now threatens advertising revenue. Meanwhile, video games increasingly distract an audience that might otherwise be watching the latest reality TV show. The games market has grown so rapidly that games revenues now exceed movie ticket sales worldwide.
* The cost of content production continues to escalate; creating ever greater incentives for programming that is not only cheap to produce but often cheap in every other sense, as well.
* Piracy, aided by our court jester, technology, has, descended on the music industry like a plague of locusts. The 10 billion dollars stolen from the music companies over the last five years make the great train robbers look truly amateur. It shows every intention of stripping the profits off film and video content as well if it goes unchecked. And digital pirates rarely seem to go to jail. It’s a battle we need to win. The alternative is bankruptcy.
* The fracturing of mass media and ever intensifying competition for news has contributed to lower standards in general, and scandal at BBC news and CBS news in the same year. It’s doubtful television news will ever recover the authority it once possessed, unless news organizations rediscover their enthusiasm for worldwide reporting rather than cheaper commentary and vitriolic talk shows.
* New technologies, with the digital video recorder leading the way, promise to eliminate the very notion of program scheduling.
* Cable and satellite competition continues to usurp broadcasting share with revenues, not surprisingly, following suit. Cable ad revenue in the U.S. Will soon eclipse broadcast revenue.
You might ask then how I can be optimistic about the future of television in general and of television in the U.K. In particular, At the risk of seeming trite, it’s because i still believe -- fervently -- in the power of a good story.
In recent years, use of that word -- "story" -- has grown commonplace in the business world. It’s said that promising companies with bright futures have a "good story" to tell investors. That’s only a partial definition of what I mean.
After all, new technologies may be disruptive, but they also open new revenue streams for those who move boldly. Who knew the DVD would one day become such a cash cow. Like the producers of "Sex in the City" and "Friends," Sony this week begins selling what we hope will be millions of Seinfeld DVD’s. Who would have thought that something called a ring tone on a cell phone would become a 2.5 billion dollar business
But what happens when good technology is deployed with murderous intent? I’m speaking, of course, of the digital video recorder, the alleged slayer of the 30-second television commercial.
Just a few years ago we were informed that Tivo would obliterate television advertising and thus the networks that depend on it. Is anyone shocked to find Tivo itself now eagerly soliciting advertisers for its service?
Television advertising is not yet an endangered species. But the nature of the beast is evolving. In the U.S., "American idol" contestants sing along in a ford SUV while viewers with AT&T text messaging get a leg up in voting for their favorite talent. For such happy coincidences, ford and AT&T pay dearly.
In the future, we may look back on this sort of product integration and sponsorship as the crude beginnings of a new model.
Convergence, much-debated, long-awaited convergence, is real. In the U.K., where more than half of homes receive digital service, the government has combined a successful expansion of broadband with a new regulatory regime under Ofcom that clearly recognizes the convergence of TV and telecom.
After years of technological limbo, true convergence will set many companies free. It certainly will free Sony.
Sony is unique in being at once a major content provider and a major innovator, designer and manufacturer of consumer electronics and technology products to display and enjoy that content.
In effect, Sony is convergence, incorporated.
The relationship between entertainment and devices that deliver it to consumers is inexorable. In a converged world, the value of content increases as the means of accessing it through devices expand. Similarly, the value of devices increase as more content becomes more accessible -- especially through direct broadband connections that bypass traditional distribution channels and gatekeepers.
Channels will be increasingly non linear creating an opportunity to shape programs for a different screen size and a different attention span.
We are actively developing a broadband array of technologies and devices to make television and video a richer, more rewarding, more mobile experience.
Our location-free TV allows you to watch TV anywhere in your house on a portable monitor wirelessly connected to a base station. If you want to watch TV in the garden, just carry it with you. If you’re traveling in Paris or Berlin, you can watch "Ab Fab" or Manchester United by connecting to the base station in your home via broadband internet.
We’re working with Toshiba and IBM on a new chip inside the TV that will give television viewers the kind of control you’ve come to expect from a PlayStation or a set top box. If the only thing that interests you in a football match is learning how to bend it like Beckham, you’ll be able to zoom in on Beckham for the entire match and watch his every move.
New computers feature monitors with the picture quality of LCD television sets -- so watching TV on your computer no longer feels like you’re watching TV on your computer.
Digital media is highly personal media. Consumers choose what they want, when they want it, where they want it. And given the costs of video production with a digital camera and distribution via broadband internet, virtually anyone can afford to be a producer and director, as well. If you don’t like the shows on TV, create and distribute your own.
If that sounds glib, you probably weren’t watching this year’s U.S. election on the web, where voters fed up with slick political ads produced and distributed a bounty of their own, along with an avalanche of political satire, animation and video polemic -- some of it superb.
With production equipment and distribution accessible to all, there has never been a better time to be an independent producer. Last month a small movie called ‘prime’, about two fellows who build a time machine, opened to critical acclaim and a grand jury prize at Sundance. Shot digitally at a cost of seven thousand dollars, it speaks to new opportunities for creative souls with energy and a story to tell. In Hollywood, seven thousand dollars wouldn’t even cover the cost of a jet plane to get a star to the set.
Naturally, all these new technologies have the potential to disrupt established distribution channels. But they are also paving the way for new businesses, new revenues, new ways of entertaining and informing.
It is our responsibility to embrace this next generation of content creators, because if we do not the consumer will find them by other means. The breadth and depth of distribution will be directly related to whether or not the content is actually worth seeing or experiencing.
We cannot secure this future, however, without first winning the battle against piracy. We cannot expect creators to release their work into the media either without safeguarding rights to their intellectual property.
From Los Angeles to shanghai, to Moscow and Berlin, this is a significant global issue. And it demands a coordinated global response. In the form of digital rights management.
DRM allows us to tailor our copy protection to individual media, individual content, and different types of devices. It allows content companies to create new business models and allows consumers to choose the terms of usage -- whether based on time, copying rights, type of media or other variables of consumption. It should be easy for consumers to understand. And easy for them to use.
That said, let me now explain why I think we are at a pivotal -- and potentially profitable --moment for the television industry in the U.K.
If you were to assemble a list of assets that would prove useful in this new world of convergence, what would you select?
* Well, English language for starters. It’s not exactly Esperanto, but it’s as close to a universal business language as we’ve got.
* Next, you’d want one of the world’s most lively, polyglot, pluralistic, cosmopolitan centers -- one that attracts artists and creators and business people from all over the world . . . A place where creativity, and, not incidentally, multicultural creativity, can stew and bubble and ferment before being packaged and sent out across the seas.
* You’d want global reach -- a vast network of contacts, associations and relationships around the world.
* You’d want a credible reputation as your global calling card -- something along the lines of the BBC, which has established an enviable reputation in many corners of the world on both the content and technology fronts.
* You’d want ready access to Europe and the United States in search of both markets and partners.
* You’d want to sustain the idea of public broadcasting -- not the U.S. Model - to set but also to defend broadcasting’s reputation for integrity and versatility, offering quality and choice in all genres, entertainment and of course fully resourced independent news.
* You’d want a large production infrastructure already in place. One reason, by the way, I’ve always thought taking away the license of Thames Television....a company that made competitive programming....was the destructive act of bungling bureaucrats.
* You’d want a home market where digital penetration is high, affording you the opportunity for interactive trial and error at home before you take your shows on the road.
* You’d want the kind of political environment that supports creative freedom.
Does anyone know of a place like that?
Because to succeed in the age of digital television, you would really want to work from a place with all these attributes -- and, ideally, one more, as well.
The purpose of media -- analog and digital -- past, present and future -- is to allow us to share our stories in new and more meaningful ways.
So to succeed in this new age, it will help to be -- quite literally -- a good storyteller, whether the story is fact or fiction.
Writing in 1987, before the fall of the Berlin wall, Vaclav Havel remarked that totalitarianism had "gradually expelled from history the very thing that gives human life, time and thus history itself a structure: the story."
But we know that even in rigidly totalitarian societies, the story proved too powerful; it could not be extinguished.
And that, i believe, is perhaps the ultimate British ace in the digital hole. Not only because British society is culturally dynamic, possessing what Havel called "the mysterious, vital polarity of the continuous and the changing, the regular and the random, the foreseen and the unexpected. . . ," but for another very distinct reason: English literature.
Other cultures have excelled at music or sculpture or dance. British culture has excelled at literature. The British, tell good stories. Their dramas are dramatic. Their comedies are comedic. Their Shakespeare is uniquely, quintessentially, undeniably Shakespearean.
In the wildly competitive world of global television, such a powerful advantage should scarcely be overlooked.
Despite an ever greater supply of content streaming through an ever increasing number of distribution channels, the world will always make room for a tale well told. And continued downward pressure on content will never suppress the ingenious, the spirited, the hilarious. I know, some of you see that as the greatest leap of faith since Noah invited two wood worm into his ark.
With the television landscape in a state of constant upheaval, will tomorrow’s programming be televised reality freak shows updated for the 21st century? Or post-modern masterpieces? In a 300-, 400-, 500-channel universe, both seem not only plausible but likely.
But does anyone doubt that quality will somehow rise to the top if given half a chance? All that need happen is for programmers not to substitute cynicism for creativity. Reality isn’t the only British export. "the office" has dazzled Americans.
The world well knows the treasures British culture has produced in the past. I am confident that today’s more diverse, more dynamic, more digital British television industry has the ability not only to meet the expectations of a global market for new digital content. I believe with its access to global markets and global content, and with its own brand of crisp news and documentaries, compelling dramas, uniquely British humor and, yes, even formatted reality television shows, this industry has the capacity to elevate those expectations.
And wouldn’t that be a very satisfying story indeed? And may i close by saying my company is ready to help.
Thank you.
