Network a lucrative platform for distribution

Sony’s PlayStation 3 hasn’t moved as many Blu-rays as Hollywood had hoped it would, but the videogame console has clearly established itself as a lucrative platform studios can use to distribute their films and TV shows.

A year after launching its PlayStation Network, Sony has digitally delivered more than 500 million pieces of content to owners of its PS3 console and PSP handheld device.

That includes sales and rentals of movies, TV shows and original video programming.

Altogether, the video delivery service, available through the PlayStation Store, has registered more than 25 million users since launching on July 15, 2008. It saw a surge of subscribers around E3 in June.

The PlayStation Network initially bowed with 300 movies and 1,200 TV episodes. At the time, it had signed up most of the major studios, including Sony, Warner Bros., Fox, Disney, Paramount, MGM and Lionsgate.

It now has all of the majors onboard and boasts more than 2,000 movies and over 10,200 TV show episodes, both new releases and library fare, from 38 different content partners. An estimated 35% of the movies on the network are in HD.

The numbers are notable at a time when studios are keen on creating ways to generate revenues from homevideo now that DVDs have reached their earnings peak.

Just how much coin is being collected by the studios from Sony’s service has yet to be revealed.

One reason: Each studio comes up with a different pricepoint for its programming.

For sales, a movie can cost anywhere from $10 to $20, while a TV show ranges from $3 to $6 per episode. Rentals average around $3 per film. High-definition content typically costs more.

Helping to put financials in perspective are recent reports from analysts that suggest digital downloads are starting to appeal to mainstream audiences.

The sale of online videos is expected to generate $3.8 billion this year, according to digital media analysts at Strategy Analytics. That would surpass the $3.5 billion that ad-based videos are expected to earn this year.

Digital distribution is up 21% during the first half of the year, according to the Digital Entertainment Group, generating revenue of $968 million. That compares with $407 million for Blu-ray sales.

Who is doing the downloading from Sony will be key in helping to determine just how lucrative videogame consoles will become as a future revenue stream.

While males 18-34, the traditional game-playing demo, unsurprisingly comprise a majority of its user base, Sony said it’s been happy to see that more women are embracing the service and influencing which movies and TV shows are downloaded, broadening the reach of the console.

The trend of moving from early adopters into the mainstream fits in well with Sony’s efforts to promote the PS3 as not just a game system but an entertainment hub in consumers’ living rooms.

Getting there wasn’t necessarily easy. It took time to develop the network — but then it also took some time educating Hollywood on the benefits.

Having Sony Pictures as the initial partner helped sell the service, but studios “had to be convinced that it was a good place to be and that their content was safe and secure,” said Eric Lempel, director of operations for the PlayStation Network. “There were lots of discussions, a lot of roadshows, a lot of technical and business evaluations,” he said.

That process also involved coming up with a proper release window for programming.

Movies are released through the video-on-demand window, which is typically a month after pics bow on DVD. The films remain available for up to two months. Studios are increasingly releasing films day and date on DVD and VOD, however.

Sony is hardly the only player in the vidgame space to offer digital downloads. Rival Microsoft has also scored well with movie and TV shows offered to its Xbox Live account holders.

To date, Xbox Live has 30 million subscribers who can digitally access movies via Netflix and other video downloads, using their Xbox 360s.

Going forward, Sony plans to add more original programming to its network. That kind of fare will either be picked up from outside producers or produced inhouse through teams in Los Angeles and Foster City, Calif.

“Original programming is big for us,” Lempel said.

It also expects the service to grow further after Sony starts selling its PSPgo, which exclusively plays digital content, in October.

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