Sony Corporation of America

TOKYO, JAPAN - March 29, 2001 -- Sony Corporation today announced its intention to transform itself into a Personal Broadband Network Solutions Company for the coming broadband network society which is forecast to arrive around the year 2005. As an integrated entertainment company, Sony is making organizational changes aimed at deepening its interactive relationship with millions of customers worldwide, offering a variety of products and services optimized for the broadband society.

As the broadband network era approaches, Sony will capitalize on its unique combination of hardware and content assets. Sony has already moved positively in this direction with AV/IT convergence, the "4 network gateway" strategy, the strengthening of semiconductor/device development and the creation of a network compatible content business model. "Building on these achievements", said Nobuyuki Idei, Chairman and CEO, "Sony will continue to focus on and consolidate its unique resources in brand recognition, electronics hardware expertise, entertainment business knowhow and venture business development both within and outside the company. In enhancing group corporate value, we will pursue "soft alliances" with outside companies that will complement our existing internal resources, and accelerate the pace of change."

Sony's plans for change in the five pillars of its global business (electronics, entertainment, games, internet/communication services and financial services) are as follows:

1. New Group Headquarters to Function as Hub for Group Strategy
   HQ will now be reorganized around three major functions to effectively coordinate the main pillars of Sony's business. The new Global Hub (GH) will focus on overall management strategy and will provide a unified global vision.
2. Electronics Businesses Strengthened: Pursuing a Ubiquitous Value Network
   Sony intends to heighten the profitability of its electronics-related businesses by enhancing product development and expanding the network connectivity of its electronics devices. Management's intention is to create a powerful business model that links hardware, contents and services through the agency of the network. "This will be based on an ubiquitous value network that is always connected, on demand and interactive", said Kunitake Ando, President and COO, "It will be a strengthened form of our 4 network gateway strategy, integrating the electronics, games and internet/communications service businesses."
3. Network-Based Content Distribution: Key for Entertainment Business and Financial Services
   Sony will also energetically pursue a network-compatible business model for both its entertainment and financial services, largely focused on content distribution. Strategy formulation functions for the US-based entertainment business will now be integrated into the Global Hub, thus accelerating the pace of business development.

ACTION PLAN FOR FY 2001

1. New Group Headquarters to Function as Hub for Group Strategy
   1. Global Hub (GH) as Sony Group HQ
      The new Global Hub (GH) will be led by Sony's top management team consisting of Nobuyuki Idei, Kunitake Ando and Teruhisa Tokunaka (Executive Deputy President and CFO). The GH will work to enhance Sony's total corporate value by strategically unifying the Group's resources and activities for the five key business pillars. In creating value for the entire group, the GH will manage strategic proposals and far-reaching "think tank" initiatives. This will include the newly created Strategy Platform and its Strategy Institute (headed by Corporate Senior Executive Vice President Akiyoshi Kawashima). The strategic functions for Sony's financial service business as well as its US entertainment business (directed by Howard Stringer, Chairman and CEO of Sony Corporation of America) will be key parts of the GH.
   2. Management Platform for Global Staff Support
      The new Management Platform is a horizontal organization consisting of critical corporate staff functions including accounting, finance, legal, intellectual copyright, human resources, information systems, public relations, external affairs, design etc. This platform will offer consistent support services throughout the Sony Group. The intention is to utilize information technology and new work processes to help the Group realize "speedy management" on a global scale. A new position of Chief Administration Officer (CAO) will be created in the GH to lead this activity (Corporate Senior Executive Vice President, Akira Kondoh).
   3. Electronics HQ for Related Businesses
      Sony's core electronics business has made rapid progress in the area of AV/IT convergence and in developing network-compatible products. In order to advance this trend for the broadband era, Sony will now unify all of its electronics-related business under the new Electronics HQ. Headed by Kunitake Ando, the following initiatives are announced:
      • Integrating electronics, games, internet/communication services
        Sony anticipates that game and internet/communication services will be deeply integrated with electronics hardware business in the broadband era. Thus, all three of these business sectors will come under Mr. Ando's supervision.
      • Reorganizing Network Companies (NCs) for the broadband era
        The five present NCs, currently organized along product categories will be restructured into seven "solution-oriented" NCs. Resources will thus be directed into growth areas and authority further devolved to companies within the NCs in accordance with the "integrated, decentralized" management system.
      • Introducing horizontal platform concept
        Sony's NC system will be horizontally supported by three newly established Technology Centers, the Engineering, Manufacturing and Customer Services (EMCS) Platform, and a Sales Platform (comprising regional sales companies and region by region-based net direct marketing). The result will be enhanced total competitiveness and speedier, more efficient business practice.
2. Electronics Businesses Strengthened: Pursuing a Ubiquitous Value Network
   Through its "4 network gateway" strategy, Sony has already laid the foundations for connecting its electronics hardware to the network. For Sony, the key broadband gateways will include Digital TVs and Set-Top Boxes, mobile phones and PDAs, advanced VAIO PCs and PlayStation. The next goal is to realize hardware which will exploit the benefits of a ubiquitous network which is constantly connected, on-demand with interactive communication. The aim is to have an array of electronics devices which are seamlessly connected to each other and the network. Sony believes this will be the engine for further profitability in the electronics business. By integrating hardware further with content and services, adding Sony's unique value and creating a ubiquitous value network, appealing entertainment can be delivered to our customers.
   1. Developing Hardware for the Ubiquitous Value Network
      • Creating user-friendly hardware which fuses AV/IT and communications technology
        Moving forward, Sony will focus on developing mobile devices and home network products that add communications technology to existing AV/IT convergence technology so customers can easily access and enjoy the services available over the broadband network. For mobile products, PCs will be made wireless compatible, PDAs will be upgraded and the connectivity of electronics products enhanced. For home products, Information Technology will be applied to promote broadband network gateways centering on TVs. By energetically introducing IPv6 technology into hardware products, an almost limitless number of network addresses can be created, and we will work toward the creation of a new business model based on this.
      • Strengthening the device business to develop semiconductor, display hardware
        Since semiconductors increasingly determine not only the functionality and quality of hardware but the competitiveness of an entire business model, Sony will strengthen its capacities for System LSI development. The S&S Architecture Center will facilitate this activity. Superior display technology is vital in creating user-friendly interfaces and Sony will work aggressively in this field, integrating its existing CRT business with the creation of flat panel displays such as organic EL displays.
   2. Constructing a Network Platform
      • Establishing a center to promote a common network platform for the entire group
        Sony Finance International in Japan currently operates the network settlement system Direct e-SCOTT which is speedy, secure and highly reliable. It is now intended to standardize the network platform elements of billing, settlement, authentication and copyright protection on a global basis. This will heighten customer convenience, facilitate tieups with related businesses and assist with the creation of an integrated business model within the Ubiquitous Value Network. The section responsible for promoting this activity (the Broadband Network Center) will be one of the Group's key Technology Centers.
   3. Strengthening Internet/Communication Services
      • Accelerating network services
        Sony Communication Network Corporation (SCN) started Sony's internet service provider business, So-net in 1996. So-net currently has over 1.6 million subscribers and has developed a unique range of services and content while solidifying the Sony group's network platform business. SCN will continue to enhance its content and services for the broadband era, connecting to Sony's network-compatible hardware.
        
        In October 2000, Sony launched its corporate broadband communications service "bit-drive". This wireless communication service targets companies developing business on the net and provides a range of application services.
        
        For the CATV broadband infrastructure, AII Inc. was formed by Sony Corporation, Tokyu Corporation, Kansai Electric Power and Itochu Corporation. This company commenced digital video distribution in January 2001 for the Japanese market. At present this service is handled by 33 cable stations and reaches 200, 000 households. Through fiscal 2001, it is planned to increase these figures to 100 stations and one million households. Sony continues to explore various business opportunities with regard to Fiber To The Home (FTTH).
      • Enhancing broadcast media businesses
        Sony Broadcast Media Co., Ltd. will manage Sony's CS 110 satellite broadcasting business in Japan which is due to start next Spring. A decision has been reached to invest in 10 companies including InteracTV Co., Ltd. For CS 110 broadcasting as well, Sony will concentrate on interactive services which highlight close communication with the user. Not only entertainment content but financial service content will be included in the provision of new services.
   4. Creating New Forms of Entertainment to Integrate Hardware, Content and Services
      • Accelerating the development of a new integrated business model
        Sony has already developed a range of network services which augment the attractiveness of hardware. These include PercasTV in Japan, which relays live broadcasts over the Internet - the images are taken by a video camera embedded in the notebook PC VAIO-GT. In Japan and the USA, Sony has worked with partner companies to develop the new Image Station service. This provides new ways on the Internet to enjoy still images and video taken by digital still cameras and camcorders. And in Japan, a Personal IT TV called Airboard allows supremely easy access to the net in a "home mobile" environment. Sony will continue to integrate hardware, contents and services in a new business model to create new forms of entertainment and convenience.
      • Providing hardware, content and services over the Internet
        With the introduction of Sony Style.com Japan Inc. and PlayStation.com, Sony has already expanded its direct sales offerings in Japan. In the U.S. and Europe, Sony Style.com and Sony Style.com Europe were also launched in 2000, with significant growth expected in the year ahead.
      • Developing a PlayStation Network
        Sony Computer Entertainment (SCE) has moved decisively to create new forms of computer entertainment through the development of network business. An agreement with NTT DoCoMo in Japan will link PlayStation with the i-mode mobile phone and this summer a broadband-compatible HDD unit will be introduced. SCE is also giving strong support to software creators in order to develop attractive content for the broadband era. As part of this effort, PS.com, SFI and SCN are cooperating to provide solutions for network business.
3. Network-Based Content Distribution: Key for Entertainment Business and Financial Services
   While retaining their existing strengths, Sony's entertainment and financial service businesses will be developed in a network compatible manner with electronic content distribution.
   1. Broadband Entertainment Content
      Music and film video content will be digitally distributed over the broadband network in addition to the more conventional forms of distribution (e.g. location based movie theaters or packaged media such as CD/DVD etc.) In constructing this distribution business model, Sony has asserted that the copyrights of content owners and artists will be fully protected.
      • Digital distribution of films
        In the U.S. Sony Pictures Entertainment (SPE) is already testing a system for the future distribution of digital film contents. It is planned to launch this business later this year in cooperation with other content providers. SPE's on-line game division is also working on joint projects within the film business. In Japan, the AII Inc. platform is being developed for digital film distribution.
      • Digital distribution of music
        In May 2000, Sony Music Entertainment Inc. reached an agreement with Universal Music, a division of Vivendi in France, to establish a joint venture company dedicated to the digital distribution of music. Work is continuing on the development of a business model. In Japan, Sony Music Entertainment (Japan) has established bitmusic, where customers can pay for music downloads (over 500 songs now available). In April 2000, SCN set up LabelGate, a music distribution platform with joint investments from Japan's leading music companies. LabelGate's music distribution is now being conducted on a wide scale.
   2. Development of Network Compatible Financial Services
      Sony is developing one-to-one personalized financial services for its customers as exemplified by the "Life Planner" Consultant system of Sony Life Insurance in Japan. With the coming of the broadband network era, Sony Assurance has started direct sales through the internet. And Sony's net bank in Japan, Sony Bank Inc is scheduled to start in June 2001. In addition to these core financial services, Sony aims to establish network settlement systems globally which utilize its non-contact IC card technology.
      • Establishing a net bank
        On March 23, 2001, Sony was granted a provisional license for its planned internet bank in Japan which is targeted at personal customers. It is planned to establish Sony Bank Inc on April 2, 2001 with a view to obtaining a full banking license and starting operations in June 2001.
      • Electronic money service
        In cooperation with SFI, NTT DoCoMo, Toyota Motor Corporation, Sakura Bank and others Sony has established "bitwallet Inc." This company will utilize Sony's non-contact IC card technology called FeliCa, which guarantees high levels of security and high-speed data transmission to provide the prepaid electronic money service "Edy". Full service in Japan will start from October 2001.