THE NEW YORK TIMES September 15, 2004 Sony Set to Exert Influence on Discs By KEN BELSON and ANDREW ROSS SORKIN The purchase of Metro-Goldwyn-Mayer by a group led by Sony will not only give the company an enormous film library but also considerable power in its fight to set the format for the next generation of digital video discs. The transition to the new discs, which are not expected to be widely available until next year at the earliest, could generate billions of dollars in royalties to the developers of the technology that runs them. Sony, as part of the Blu-ray Disc Association, a consortium of major electronics makers, is at the forefront of efforts to develop the new technological standard. As a major consumer electronics company, Sony could also reap the benefits of selling the new generation of disc players the new format would require. Sony's success in the standards battle is far from certain, because the rival HD DVD group, led by Toshiba and NEC, is championing its own format. By buying MGM's studio and its library of movies, industry experts say, Sony is trying to tilt the long fight over the new DVD format in its direction. Both consortiums say their new discs will hold four to five times more digital video and audio data than the DVD currently on the market, enough to store the high-definition programs and films that are slowly making their way to the consumer market. The HD DVD group, which is showing off its technology to Hollywood studios this week, contends that its new discs are cheaper to make and more compatible with existing DVD technology. The Blu-ray group, which includes Panasonic, Philips and Samsung, however, says that its discs have the advantage because they offer superior images, among other benefits. The key to resolving the tug of war between the two groups, experts say, will depend on the Hollywood studios because they provide most of the content that will go on the discs. The studios also have a huge stake in the change to the new technology because they now make more money from DVD sales than from box office sales. They also lose millions of dollars a year from pirated DVD's. But with the exception of Sony's movie division, which includes the Columbia and TriStar studios, that naturally backs the Blu-ray format, the movie studios have so far avoided backing one standard despite intense lobbying by both the Blu-ray and HD DVD groups. By buying MGM, Sony will be adding another studio to the list of Blu-ray backers, and a catalog of 4,000 movies that could be issued exclusively in the Blu-ray format. "It further tips scales that were already tipped toward Blu-ray," said Ross Rubin, a consumer electronics analyst at the NPD Group. Executives close to Sony said that bolstering its position in the battle of DVD formats was one of several important factors in its decision to pursue MGM. Indeed, the management of Sony of America helped sell the idea of bidding for MGM to its Japanese parent in some early internal meetings by promoting "the Blu-ray angle," the executives said. Still, the executives noted that the Blu-ray format was "only one reason" for pursuing a bid for MGM. The executives cited a litany of other financial and strategic reasons for the deal, including being able to exploit MGM's films on Sony's other platforms like its PlayStation game consoles and even its cellphones, which it makes through a joint venture with Ericsson . A spokeswoman for Sony declined to comment. Sony, though, faces several risks in buying MGM. By building a large film library, which makes up an estimated 17 percent of available film titles, Sony could end up threatening the same studios it is trying to win over to the Blu-ray group. Sony, intentionally or not, may give the appearance that it is willing to start producing Blu-ray discs on its own, regardless of what the HD DVD group does, or what the studios want. The studios and retailers do not want two formats because that would confuse consumers, and may mean having to produce two sets of DVD's for each film release. Sony "can pose a more credible threat to launch on their own," said Tom Adams, the president of Adams Media Research in Carmel, Calif. "On the other hand, Sony of all companies has been badly burned by having new technologies launched in two formats." Sony was the big loser in the battle over the video cassette format, with VHS becoming the dominant format over Sony's Betamax. Indeed, if the studios sense that Sony and the Blu-ray group is pushing its format too hard, it may benefit the HD DVD group. The other studios could try to counter what they see as Sony's growing influence by backing the opposing format, industry analysts say. A Toshiba spokesman, Keisuke Oomori, said Sony's acquisition of MGM would not affect the plans of the HD DVD group. The HD DVD group, he said, has made "substantial progress standardizing our formats" and is "gaining positive understanding for our format from the Hollywood studios." ************************************************************************************ Distributed through Cyber-Society-Live [CSL]: CSL is a moderated discussion list made up of people who are interested in the interdisciplinary academic study of Cyber Society in all its manifestations.To join the list please visit: http://www.jiscmail.ac.uk/lists/cyber-society-live.html *************************************************************************************