Sony, Microsoft Make Moves To Boost Broadband Media


Sony Corp. and Microsoft Corp. are jumping through new
hoops to position themselves for the anticipated boom in broadband media, further
scrambling perspectives on where they fit in the mix of cable allies and competitors.

Sony, building on its interactive-media-development project
with Cablevision Systems Corp., has launched Broadband Services Co., with Emily Susskind,
senior vice president of interactive services at Sony Corp. of America, serving as

The new company was formed to pull together resources from
Sony Corp. of America and Sony Electronics Inc. in an effort to expand the market base for
its broadband platform beyond Cablevision, officials said.

At the same time, Microsoft said it was getting into the
game-console business with production of what it is calling the "X Box" starting
next year.

While the new terminal is meant to create a universal
video-game platform that will give developers using Microsoft authoring tools a broader
base to work with than they have with the proprietary consoles of Sony, Sega of America
and Nintendo of America Inc., it, like these other terminals, will be equipped with
high-speed modem ports that will link TV sets to Web-based games and Web-based content in

As for what this means with respect to Microsoft's
set-top and Web-to-TV initiatives in cable, officials wouldn't say. But they made it
clear that the online aspects of the terminal were key to their strategy.

"We believe that with our built-in
100-megabit-per-second Ethernet connection, we have a great deal of flexibility when it
comes to our broadband options, and we are excited about the partnership
opportunities," said Kevin Bachus, manager of third-party relations for the X-Box.

Sony, too, was reticent about how its set-top and
broadband-media initiative under Broadband Services meshes with its "PlayStation
2" game-terminal strategy, which some have labeled a "Trojan horse" entry
into the set-top arena. "That's being done under a completely separate division
[Sony Computer Entertainment Corp.], and it is unrelated to our efforts," said a Sony
source, asking not to be named.

"Obviously, we're all working toward similar
goals, and it's possible that the two efforts might complement each other down the
road," the official said.

Further confusing the picture at the company, Sony Pictures
Entertainment said last week that it was "taking a further step into the digital
future" by creating a new business unit that aligns its computer-generated imaging
capabilities, film and TV libraries and existing online assets in an effort to deliver
next-generation broadband entertainment.

The new unit, Sony Pictures Digital Entertainment, will be
headed by senior SPE executive Yair Landau, reporting directly to top executives of SPE,
who, in turn, report to Howard Stringer, chairman and CEO of Sony Corp. of America, who is
also chairman of Sony Electronics.

Officials at New York-based Broadband Services saw the
digital-entertainment initiative as a service-oriented component of what they are bringing
to the broadband marketplace. But the Hollywood-oriented digital-entertainment group said
its mandate was to make content available on as wide a scale as possible over whatever
broadband platforms are out there.

"Broadband Services Co. is what I'd call a
virtual company, managing and implementing digital-cable services with Sony Electronics
doing the systems integration," said an official with SPE, speaking on background.
"Ours is a unit with a president and over 300 people creating product for the entire
broadband marketplace."

Broadband Services officials refused to discuss any details
of what they are planning, either from a services or technology-integration standpoint.
"Everything we're doing with Cablevision is under nondisclosure, so we really
can't discuss what we'll be offering on a broader basis until they go public
with what they're doing," one Broadband Services official said.

Sources close to the Cablevision effort said the company
was preparing to launch a major trial, possibly as early as the second quarter, although
publicly, executives have suggested that this fall would be the likely trial time frame.
"They're going to be ready to go a lot sooner than that," said an executive
at one of the companies involved in the project, asking not to be named.

This source said Cablevision was close to naming SeaChange
International Inc. as its video-on-demand platform supplier, with Cisco Systems Inc.
supplying two-way communications technology. Cablevision officials declined to comment.

Whatever the near-term strategies might be for Sony's
and Microsoft's cable set-top-box initiatives, their commitments to next-generation
game terminals appeared likely to quickly raise the bar on the interactive-media
capabilities that will be available in the mass market a year or so from now.

Sony's PlayStation 2 -- which just went on the market
in Japan with a sticker price equivalent to $360 -- will be coming to the United States
this fall, equipped with broadband-online connectivity next year.

The PlayStation employs the 128-bit "Emotion
Engine" computer processor built from the ground up by a unit of Toshiba Corp.,
marking a leap beyond the 64-bit next-generation machines recently introduced by Sega and
others. The processor has a clock speed of 295 megahertz with main memory capacity of 32

Microsoft, slated to deliver the X-Box by fall 2001, seeks
to trump Sony by using Intel Corp.'s "Pentium III" engine in combination
with an 8-gigabyte hard drive.

With electronic-game-terminal and content sales hitting
$6.9 billion last year, according to industry statistics, both companies have an
opportunity to tap into an existing market that dwarfs the current potential of
cable's digital-TV market base to drive volume sales of advanced terminals.