Howard Stringer Remarks Chairman and Chief Executive Officer, Sony Corporation of America
President, Sony Broadband Entertainment
“From Mass Media To Mini Media: Broadband’s Democratic Wave”
Distinguished Speakers Program
Federal Communications Commission
Washington, DC - October 17, 2002
MR. STRINGER
Good afternoon.
And thank you Chairman Powell, esteemed Commission members and staff for the opportunity – and the honor – of appearing before the Federal Communications Commission.
My relationship with the FCC is a long one. The FCC wields influence across a range of areas – from broadcast to broadband -- that affect Sony businesses. And before coming to Sony, I spent three decades at CBS, where your influence was even more direct.
My career at CBS spanned two completely different eras. In the beginning of my tenure, CBS was “the Tiffany Network.” And from a business standpoint, the Tiffany Network had something of a Midas touch. Our programming was golden – and so was the bottom line. Of course, the word “duopoly” comes to mind, with all its implicit inbred advantages. But by the time I left CBS in the mid- 90’s, the landscape had changed – and so had the relevant mythology. Midas had been transformed into Sisyphus.
Sisyphus, you’ll recall of course, pushed a rock up a hill only to have it roll down each time he neared the summit. In my last years at CBS, I spent each day rolling the network boulder uphill. And after work I’d come home to find yet another new cable network had sprouted on the dial. I felt like Indiana Jones running away from that tumbling boulder, which is, by the way, pretty good training for a consumer electronics manufacturer today, actually. Maybe the next boulder will be Chinese.
If the broadcast networks were like Sisyphus, the cable networks were more like Athena – always popping out of someone’s head and causing a nuisance. Meanwhile, I will be the first to admit that many network executives remained firmly committed to the status quo, even when the quo had lost all status. They would mutter helplessly, “If cable is the answer, what's the question?” Their rallying cry was simple: there's no need for more choice when the viewers are obviously happy.
Nevertheless, broadcast television did survive the onslaught. But the media terrain in which I had grown up was changed forever.
I started at CBS in 1965. My first job was answering viewers’ phone calls after “The Ed Sullivan Show.” It was my duty to listen attentively as viewers told me why they liked or didn’t like Barbra Streisand or why they were offended or enraptured by the Beatles. I used to in fact pretend, being of British origin, to be George Harrison on the phone calls, which was actually the nearest I’ve ever been to being a celebrity. It's amazing if you say, “Listen, do you want to know a secret?” And have deafening screams on the end of the phone and people fainting away. I haven't had that reaction since.
All those calls were guaranteed at the end of every program because a vast audience was guaranteed at the start of it. It seemed everyone – or very nearly everyone -- in America watched Ed Sullivan. It was a cultural landmark that attracted people from all over the country to an event at the same time, same place every Sunday. Not unlike a church service.
In the current age of micro-niche marketing, the notion of a variety show attempting to offer something for everyone sounds quaint. But in the age of Ed Sullivan, our differences – regional, racial, religious and otherwise – were in some ways even more pronounced than they are today. Broadcast television was that rare place where we really could come together and share a single experience. This dominance was underwritten by a simple formula: lack of choice. Viewers had precious few places to go.
Mass media was a source of coherence – or of conformity and complacency, depending upon your vantage point. Its power was such that, regardless of one’s particular views, mass media was almost certain to have been a significant force in shaping those views.
The documentaries we made at CBS News commanded a national stage unimaginable today. Even more unimaginable, they routinely ran in prime time. A compelling documentary on poverty, or a program on the war in Vietnam, could genuinely influence public opinion and the shape of national debate. When a broadcast network set out to make a statement, it often reverberated across the land. After my documentary "The Palestinians" aired, the Israelis showed the film at the U.N. to demonstrate the extent of Arafat’s burgeoning power. After "The Fire Next Door" documentary, New York City changed its housing regulations, and the Bronx stopped burning. After my last set of five documentaries, "The Defense of the United States," Washington began its debate on nuclear war. It may surprise you to know that the first two episodes achieved a 30 share in 1980. And the CBS Evening News, you will remember, was required viewing in this town. President Johnson and subsequent presidents were glued to the evening news. When I left the evening news, which I produced from 1981 to 1984, CBS Evening News broadcast share was 26. Last week it was 11.
As the cultural consensus in America began to fracture in the late sixties and early seventies, however, it became increasingly apparent that three large networks – well endowed and well intentioned as they might be – were unable to straddle the widening fissures within American society.
Peaceniks who marched against the war began to doubt the networks’ intentions and credibility. Hard-hats who marched against the peaceniks found us equally suspect. And general interest shows like Ed Sullivan’s were no match for the divisions over race, feminism and other culture shocks. Ed Sullivan had once spoken to America, confident of his audience. His audience was fragmenting before his very eyes. America and the times were a-changing.
Obviously, it wasn’t long before technology, in the form of cable, VCR’s and satellites, led to a similar fracturing of the broadcast monolith. It wasn’t the end of mass media. But it was the beginning of the end of the age of mass media.
There are a few key points that I think are worth keeping in mind about the transition from mass media to what has been called the age of mini media.
First, contrary to the predictions of many, the broadcast networks survived -- and some have even prospered. Larry Tisch never believed that this was possible, which is why he sold CBS in 1995. Had he known you earlier Mr. Chairman, who knows, he might have tarried longer. It is the ultimate irony that Viacom was spun off from CBS in one regulatory environment, and has since acquired CBS in a different regulatory environment.
Second, distribution – whether over the air, through a cable or beamed off satellites – is an empty vessel without compelling content to give it character and value. For some time, many of us were concerned that all this fragmentation would result in a dilution of the creative talent pool available to programmers. Could they recreate “MASH,” “Mary Tyler Moore” or “Lucy”? Well, there is something to be said for competition after all. Success doesn’t come easily, it has to be earned. Is “The Sopranos” as good as “Lonesome Dove” or “Roots”? Are “Frasier” and “Friends” as good as “MASH” and “Happy Days”? I would say yes. I used to say to affiliates, “The more channels there are, the less is on them.” I was right in broad quantitative terms, but probably not qualitatively. In other words, there’s more gravel to sift through, but just as many diamonds.
And third, the evolution of television delivered through cable and satellite proved to be only a transitional phase in a more dramatic journey that is taking us all the way from mass media to mini media.
What exactly does this nascent age of mini media entail?
Some of us in the media business have crossed its threshold only to discover the floor is littered with more banana peels than a Three Stooges movie. I know countless media executives who now wish they’d followed mom’s advice and gone into their uncle’s widget business after all. That’s what they say. They don’t mean it.
But cross the threshold we must.
The past decade in the media business has been an era characterized by high-stakes bets. Billions have been wagered on the interactive future. Vast amounts of capital have been misdirected or lost in misplaced acquisitions or mistimed mergers. And both the patience of consumers and the confidence of investors have been sorely tried.
A decade ago, big promises were made about the broadband future: I know because in 1995 I staked my career on it, tying myself to a broadband upstart called Tele-TV along with those risk revelers, the baby bells. This venture was a joint venture of Bell Atlantic, NYNEX and Pac Tel to create new forms of interactive video entertainment and services.
But the infrastructure was not in place;
Business models were misconceived;
And we lacked a common vision of the future.
That was then.
Today, we truly are on the cusp of the new world:
The 500-channel universe has engulfed us and the surf is always up.
The Internet bubble has burst and the business models that survived the flameout are tempered by realism.
The core broadband infrastructure is now in place, enabling the delivery of digital and interactive applications.
Operators are still searching for the right mix of "must have" applications and acceptable pricing to drive demand for broadband.
And, at the same time, the world of mini media is beginning to flower – to become one where the consumer controls what, when, where, how, and on which device he/she watches. Simply put, the consumer is taking charge.
I'm going to ask a high-tech colleague of mine to come up and do a little demonstration.
Technician Matt enters stage with Sony digital camera in hand. A 40-inch WEGA TV is at center stage.
MATT
I have a digital still camera and as some of you might know, we actually went around this morning and took digital still pictures of folks in the building and placed them onto a digital media called Memory Stick. I'm able to view this personal content on a whole bunch of different devices, but for now we're going to show it on a television. We have a Memory Stick equipped television here. I'm going to put my Memory Stick directly into the TV and just touch a button on the remote control to bring the pictures to the screen.
MATT inserts Memory Stick into 40-inch WEGA TV. Images of FCC workers appear.
We're able to view the pictures here with no strings, no wires, and no fuss. Very quick and very easy. You'll see some of your co-workers. It's cool; you no longer are limited to watching on your digital camera, or bringing it to your computer. Viewing is as easy as taking it out of the camera and placing it into your television. I can also use things like a Sony CLIÉ PDA, and I can take the Memory Stick and put it into these devices and view pictures that way. So it's easy to share personal content on a variety of different devices.
Thank you.
MATT exits
MR. STRINGER
Sony and a few other companies are at the forefront of this transformation in which the concept of “media” is evolving from a top-down, centralized dictatorship of the networktariat to a democratic tool of the people -- characterized by interactive, on-demand, and personalized services. Our chairman, Mr. Idei, may not look like Vaclav Havel, but he’s helping to lead a people’s revolution just the same.
This revolution is resulting in a steady stream of new services and products that allow new forms of socializing and sharing emotions. For instance, Sony currently allows consumers to play video games across the network in real time with competitors or teammates located anywhere in the world. Our online multi-player video game, “EverQuest,” is a social experience that transcends geography and other boundaries. Players “live” in a virtual world, socializing and cooperating to achieve specific goals. It is so captivating that more than 430,000 subscribers spend an average of 20 hours per week engaged in play. Many of them, I’m sure, are in this very room. And this winter, we’ll be introducing our new “Star Wars Galaxies” online game. We have a short clip of the game that few people outside of Sony have seen…
Star Wars Galaxies video
Similarly, new services are starting to sprout up that allow consumers authorized access to music and movies for streaming and secure download. Consumers can easily access the entertainment they want comfortably from their homes whenever they want it. More significantly, they can “program” their own personal channels—to control what content they consume, and when. This kind of personalized and customized consumption is the hallmark of mini media. One example is the Sony/Universal pressplay music download service, which also goes one step further into this anywhere/anytime world, with secure download directly from pressplay to a NetMD portable MiniDisc player, as well as the ability to develop personal playlists.
We are also in the process of launching services to download movies on demand. The Movielink Internet video download service being launched together with other studios will be operational later this year. Again, this will give consumers access to a vast library of films on demand, without having to leave their living rooms.
Choice, flexibility and control…this is the consumer-friendly future in which content and the consumer are king and queen.
It is a world in which the television, PC and indeed all electronic devices in the home are seamlessly and securely connected to each other and to the broadband network, allowing easy access to virtually any type of content or service, anytime, anywhere. Where consumption was previously linked to the device itself — radio on radio networks, video on TV broadcast networks, and so on —consumption is now directly linked to the consumer. The choice of device and the method of transmission is secondary. The standardization of both hardware and network interfaces dramatically alters our notions of access and ownership.
Additionally, consumers will have the capacity to personalize media by creating content of their own. Here’s a video that we created using Screenblast, our online editing service from Sony Pictures Digital Entertainment, together with some clips that we recently discovered.
Chairman Powell in Screenblast “Charlie’s Angels”
As you can see, you will be able to produce and distribute your own movies. You won’t need a network to create and distribute programming. All that will be required is a broadband connection through which you can select from an array of always-available content assets, some easy-to-use consumer electronics equipment, a software tool such as Screenblast – and an imagination.
This democratic impulse in media will develop in ways large and small.
For example, a mother or father away on business may still be able to watch key moments of their daughter’s soccer game in real time – even while on the road. How? Through a personal broadcast. A relative or friend can record the game with a personal video camera and, through wireless broadband, send video in real time to the parent’s notebook computer or PDA in a faraway place. If the overworked parent still fails to watch that winning goal, he or she will have no one to blame for the ensuing years of child psychology bills.
Imagine a family reunion or a child’s birthday with a live, interactive video conference, allowing faraway relatives to participate. Or being able to communicate through video with elderly relatives. It could open up new types of personal communication as this video demonstrates clearly.
“Is She or Isn’t She” video
The potential for entertainment through broadband is enormous. High-speed broadband would permit us to securely access a vast library of high-definition films at any time. And if you began the evening watching a movie in the living room you could finish by watching the film in bed, simply by punching the keys on your remote control. The film would be cued up and waiting for you when you plopped into bed.
In this home network environment, it’s easy to manage content in your home wirelessly. It works.
VAIO technician Matt enters stage and approaches the desktop PC. The portable notebook VAIO is also on stage, 20 feet away from the desktop PC.
MATT
Here we have a desktop computer. This could also be considered your home server – I store content on here, including what I captured with my digital camcorder. But in conjunction with this 5 GHZ wireless access point, I can easily stream that content from my desktop computer through the wireless access point to my notebook PC. For example, you could have friends or family that come over to see home video, and you don't want to squeeze them all into your home office to see your desktop. You want to show them your content somewhere else. So you simply bring your notebook PC out to the back deck, the living room or kitchen and play it there.
Matt walks 20 feet across the stage to the portable notebook VAIO.
The VAIO media software on this portable VAIO PC allows me to access the server in the desktop computer. I have some footage I will show you that is on the server. So I will select the video application, go into my cabinet on the laptop, and choose the specific video that I want to share, a video I named “Beach.” I took video at the beach with my video camera, brought it into the desktop PC, and added audio to it. I will play about 20 or 30 seconds on the portable PC over here. So again, this is all wireless streaming, and this signal can go through floors, doors, and walls, anywhere within your home. You can share your personal content wherever and on whatever device you would like. In fact, in Japan right now, there is a new product called Room Link, which I actually can hook up to my television and then use to stream the wireless signal directly to my TV from my desktop home server.
Matt exits.
MR. STRINGER
Thank you.
This is merely the first step. Fast-forward a few years. Even when away from home, you will be able to use a portable device like a notebook PC, PDA or cellphone to securely access your movies, music and photos, via a broadband connection from the server in your home. Home will travel with you, and you are never home alone. The implications of mini media, however, extend well beyond the personal. Mini is big – and promises powerful changes in both business and culture. New models of consumption will drive new economics, new business models, and a re-definition of what content aggregation means.
One of the most interesting questions confronting my former colleagues in the television business is this: what happens to the network business model when the individual viewer determines the television schedule – not the network?
After all, the business of the networks is to aggregate viewers and deliver them to an advertiser at a set moment in time. What happens when viewership is atomized and customized? When there is no schedule?
And what happens to advertisers and the networks that depend on them when devices allow viewers to skip the commercials altogether?
There are many reasons to presume the networks will continue to prosper, including the fact that broadband will offer opportunities for new revenue streams. But I am nonetheless grateful to be contemplating such questions from outside the network edifice.
Television, advertising, Hollywood, video rentals – all will be powerfully affected by broadband. All must adapt to the demands and opportunity of new technology. All will see their gatekeeping roles diminished unless they redefine those roles through increased personalization and on-demand, dynamic content delivery. All must surrender some power to consumers in this “democratization of content.”
However, history tells us that we are entitled to hope that broadband will affect more than business models and delivery systems. It should influence and enable new art forms, and new ways of reflecting and regarding the human condition.
Shakespeare never wrote a screenplay -- technology hadn't improved much beyond the quill pen. But he could have! New forms of communications technology inevitably give rise to new art forms that exploit them. Broadband promises a popularization of video not unlike the printing press’s popularization of text. There were writers before the printing press with no outlet for their work. How many filmmakers, freed of the exorbitant costs of analog movie production, might broadband similarly set free?
There are clear benefits to moving forward on broadband. But perhaps the most enticing of all is the burst of creativity it will generate. It will make our hearts soar and our minds reverberate. And the art carried through the pipeline will be truly the power of the pipeline.
I still vividly recall every single documentary I made at CBS News. In the end, it doesn’t matter how many affiliates you’ve got if you don’t have something compelling to say on their platform. It’s the content that matters.
Perhaps the greatest promise of broadband is the capacity for more people to say more things in more different ways than ever before. Much of the content that travels through the broadband pipeline will be nominal or worse. Some of it will be truly awful. But there will also be diamonds and rubies and pearls to discover and to marvel over.
Today, broadband content is limited; we are told, by the absence of a “killer app.” “Always-on” and “faster” are the selling points, but they’ve proven inadequate in motivating mainstream consumer demand at current prices (though we do note with interest the emergence of tiered broadband pricing). So we await the magic bullet. But there is unlikely to be a “killer app” until content providers can be sure that their hard work and ingenuity has adequate intellectual property protection.
When we produced programs at CBS in the mass media era, we did so confident that they were safe from unauthorized distribution. This is clearly not the case for content today. The piracy numbers are staggering. More than 5 billion unlicensed music files were downloaded in the U.S. in 2001. Users copied roughly 900 million files in one month in 2002 on Kazaa alone. Sony Music’s recent rock release, the “Untouchables” album by Korn, was up on the Internet almost three full months prior to its release, with an estimated 121 million unauthorized song downloads from the album prior to its June 2002 release date. This is copyrighted material -- reflecting a huge investment by Sony Music -- rampantly being distributed for free. With these numbers, there can be no doubt these millions of unauthorized transfers cut markedly into album sales. As kids keep saying, “Why pay?”
And now this epidemic of theft has spread to films. Three of Sony's recent hit movies – “Spider-Man,” “Men In Black II” and “Mr. Deeds” – all appeared on the Internet for free before their theatrical debuts. In fact, there were an estimated 1.3 million downloads of “Mr. Deeds" before its theatrical release. Nearly every release from every major film studio quickly becomes available for free download on the Internet.
The files first appear on what are referred to as “topsites,” a relatively small number of pirate squadron leaders, but very quickly multiply exponentially as they make their way through a series of layers of sites, to chat, relay, and p2p distribution, exposing the files to hundreds of millions of users. The research firm Viant estimated that more than 350,000 copies of films are illegally downloaded every day. The same problems exist for television programs. Almost any TV show with value in the syndication marketplace can now be downloaded illegally.
Digital copyright piracy will only grow unless it is addressed, and we hope the government will help do so with a high level of urgency. The relevant industries should be held accountable and encouraged to conclude their private, inter-industry negotiations. But some government action will be necessary. Private industry alone, no matter how well intentioned and diligent, cannot, on its own, implement all the necessary solutions to the digital copyright issues. Speeding this process is critical to advancing the cause of broadband development. Ultimately, content companies, technology makers and network providers need to understand that their interests are fundamentally aligned.
A recent commerce department study concluded that government will need to prosecute clear violations of the law and educate citizens about the importance of respecting intellectual property rights.
We endorse that conclusion. Because Sony is in both the content and technology fields, we are working hard to find ways to protect content from unauthorized distribution, while at the same time expanding the availability of content for personal use on devices within the home environment. We want to bring to market innovative products that enhance consumers’ ability to manage and experience content, and we also want to offer content that will finally establish the value of broadband access. We are more committed than anyone to addressing digital copyright piracy -- a solution will greatly benefit both the content and electronics businesses, and, most importantly, consumers.
It is critical that we achieve a swift agreement on intellectual property protection so that quality content can be made available without fear of unauthorized distribution.
Because content is still the key.
Sony can create the greatest devices in history – and, I hope we will. But if there is nothing to watch or listen to, there is no reason to use them.
In the broadband world, the mass media will continue to produce content. And economics dictate that large-scale production will still be the purview of a relative few. But mass media’s role will be greatly diminished as the importance of personal media creation, consumption, and distribution grows.
We are committed to inventing a future where choice, convenience and the realm of the possible are all vastly expanded. A future that beckons not just to the consumer, but also to the creative spirit within us. That’s a shared vision that the original founder of CBS, William Paley himself, would truly applaud.
