Kunitake Ando Excerpted Remarks
President and COO, Sony Corporation

“Shaping a World About ‘U’ For the Broadband Frontier”

Consumer Electronics Show
Las Vegas, NV – January 9, 2003

Opening video segment.

KUNITAKE ANDO

I hope you enjoyed our opening video. I wanted to show you how technology and content are now seamlessly connected to redefine entertainment. In fact, Sony is working really hard to integrate our technology and content assets because we believe that only by bringing them together can we create real value for consumers.

People everywhere enjoyed the Sony Pictures movie "Spider-Man" not only in theaters, but also with high quality home theater systems, breaking sales records both for box-office and packaged media.

In the opening video, we offered some scenes from Sony movies that are coming out this summer, including “Charlie’s Angels: Full Throttle.” To share insights on how technology and content are coming together in Hollywood to make great entertainment, I’ve invited a very special guest. She’s the producer, as well as one of the stars of “Charlie’s Angels: Full Throttle” – Drew Barrymore.

Barrymore enters. Interaction between Barrymore and Ando. Barrymore exits.

Hardware and content now completely depend on each other to bring new excitement to people’s lives. We are seeing how movies are being boosted by advances in home entertainment hardware. DVD media is leading the boom in home theater. Internet content is enhancing mobile phones, so they’re no longer used just for voice but also to access entertainment and information. And the next big wave is imaging coming to mobile hardware for sharing personal experiences anytime, anywhere.

On top of this, the broadband network age is really starting with the change in infrastructure from narrowband to broadband. This is happening fastest in East Asian countries, such as in Korea and Japan. Even here in the U.S., where I understand that penetration of true broadband to the home is still limited, wireless hotspots in public places everywhere are gaining in popularity.

Thanks to broadband, content and technology will integrate more closely than ever in a new age. This is creating a huge opportunity for new business. It’s a total wave, not only for hardware, but also for content and services.

Sony’s vision for this new era is, what I call, the Ubiquitous “Value” Network, a world where digital devices are seamlessly connected to each other, and broadband networks. People will be able to enjoy content and services anytime, anywhere on a global basis.

Sony’s focus is on how to realize value for users and that value is not productivity or efficiency alone, as in the narrowband age. With broadband, it’s the heart-touching, emotional value that brings new excitement and truly empowers people.

So, what makes this broadband network age so radically different from the past? I believe there are three key factors. First of all, in the narrowband age, the PC was the champion and practically the only gateway to the network. But now, television, the champion of the non-PC world, is about to be reborn as the center of broadband entertainment. Secondly, a true sense of open standards will emerge, connecting all digital devices with each other and with content. And third, in this new age, users will be the stars and will control their environment to maximize the value of the network. As a global technology and media company, Sony is committed to shape these changes.

Let me begin by explaining why television is playing such an important role. In George Gilder’s 1989 book, “Microcosm,” he asserted that TV was just a simple, analog dinosaur – primarily an analog broadcast receiver. While PCs were leading digitalization and networking, the television was dying.

But in my view, the first 50 years of color television were only the infancy stage. Now, we are promoting a revolution by digitalizing television and connecting it to broadband, and the home network. In this world, people are realizing they can control their own programming to their own tastes and are discovering the joys of creating their own content. The television is being reborn as an always-on, interactive device.

Content and services will be delivered, not just on television screens, but also on displays everywhere, including mobile devices; and ultimately, on high definition displays with incredible picture and sound quality.

To take advantage of the opportunities of the Broadband Age, we’re advocating a global open standard approach. The Consumer Electronics, Information Technology, Telecom and Content industries must work together in new ways, smashing the barriers between industries and cooperating to realize new value for users.

A few examples we’ll talk about today: our strong initiative to develop interoperability between PCs and AV devices for the home network; our plans for an advanced Linux platform for digital home electronic devices; our new Passage technology for set-top boxes to create an open market environment for the digital cable network here in the U.S.; and our development of media technologies based on standardized formats, such as the new JVT MPEG codec suitable for broadband networks.

However, a secure environment is critical. As a media and technology company, it is at the center of our management agenda. We’re working with industry partners to solve the global piracy problem in a way that satisfies both consumers and creators.

A major step was the acquisition of InterTrust, just this week, which we made together with Philips Electronics and another investor. By working to provide wider access to key DRM patents on a fair basis, we are committed to advancing the secure distribution of digital content.

The theme of my presentation today is how we’re “Shaping a World about U for the Broadband Frontier.” In this case, “U” stands for the user, the consumer, you. “U” also represents the new excitement and emotional value you’ll enjoy with the UVN vision.

We believe in a choice of devices for users to access content and services anytime, anywhere. And we’re creating devices that tailor themselves to your specific tastes, and are easy to use. We’ll also offer many ways to create and share your own content, so that you, the user, will really be the star.

At Sony, everything we do is based on our desire to enrich people’s lives. That’s what I mean when I refer to a World About U. Let’s take a look. Video segment.

I wanted to share these images from Sony commercials because I believe they illustrate our commitment to touch the lives of users in meaningful and positive ways.

WEGA televisions will be at the center of users’ broadband experience. And we have three ways to bring broadband to WEGA. VAIO PCs are now connected with WEGA. And of course, PlayStation2 is already connected to TV and now, with the network adaptor, also to broadband. We’re also bringing broadband to TV with a totally new category of broadband AV products, called Cocoon, which has been introduced with great success in Japan.

Sony is a leading display company and we built this position with breakthrough technologies, like Trinitron, and now, WEGA. We have always been guided by the aim to offer users the ultimate visual experience.

And since we’re talking about the evolution of television I’d like to ask Tim Baxter, head of marketing for our U.S. television business, to talk more about how we’re making this happen.

Baxter enters.

TIM BAXTER

This is an exciting opportunity to show how users will be able to enjoy the broadband experience. What we have here is a broad array of display technologies to suit users’ different needs: Plasma WEGA, LCD WEGA and the Grand WEGA LCD rear projection TV. All of the displays you see on stage are high definition-capable. Each display uses Sony’s unique WEGA Engine technology to offer a superior picture. The WEGA Engine is a full digital video processing technology that delivers superb picture quality from any video source. This is why all flat panel TVs are not created equal.

We’re also extremely excited about what’s coming in the future. This is a display technology we’re developing using organic electroluminescence. It’s called OEL for short. As you can see, this is incredibly thin. OEL technology is self-luminant with no backlight, so the display can be much thinner and lighter. And who knows? Eventually this could become a bendable display. It’s very bright, delivering realistic color with a wide viewing angle. But as you can see here, it’s not just for small sizes.

KUNITAKE ANDO

This Sony-developed display is a ground-breaking development. At 24 inches, it is one of the largest in the world. We’re not only developing new kinds of displays, but we’re also aggressively promoting digital television to offer users the best quality picture in an open environment.

Here in the U.S., more than 70% of households access programming through cable providers. We believe that an open platform is critical to stimulate choice of equipment and new services. In December, at the Broadband Plus show in California, we announced a break-through for the cable industry with our Passage technology.

TIM BAXTER

Our Passage technology is a simple, elegant solution that allows set-top equipment from multiple vendors to co-exist peacefully on legacy digital cable networks. With Passage, cable operators can introduce alternative conditional access systems, innovative set-top boxes, and head end equipment from multiple manufacturers as well as advanced subscriber services. This choice will drive competition to serve consumers in the U.S. in the best possible way.

Sony is working with leading companies in the cable industry. The initial response has been very positive.

KUNITAKE ANDO

I am very pleased to announce that Charter Communications was the very first cable MSO to sign the Passage License Agreement. To quote the Chief Technology Officer of Charter, Steve Silva, this begins “the process of opening up the cable industry infrastructure to more innovation and competition."

Another great supporter is the Chief Technology Officer of Comcast, David Fellows. To quote him, Passage "is a true example of the consumer electronics and cable industries aligning to ultimately benefit the consumer."

Both of them are in the audience today. Thank you for your great support, Steve and David.

We’re introducing a category of broadband AV products we’ve named Cocoon, which embodies the spirit of a World About U. Cocoon will transform television into an interactive, intelligent experience, changing people's lifestyles.

To meet your changing needs and desires, Cocoon is very flexible and supported by the open development community. That’s why we based Cocoon on the Linux operating system. We will encourage broad use of the source code throughout the entire industry with the support of a multi-company Forum Group.

TIM BAXTER

The Cocoon series creates an entirely new style of entertainment by taking advantage of broadband, hard disc drive, and other core AV technologies. You can personalize Cocoon products to match your tastes, in a way never experienced before in an AV product. It does this by connecting to network services.

This broadband connectivity offers a much richer experience than with current digital video recorders. Cocoon will adapt to the developing world of broadband and digital broadcast services by updating automatically and upgrading itself easily over the network. In addition, it can be controlled through the network, using a PC or a mobile phone.

KUNITAKE ANDO

We’ve already introduced the first Cocoon product in Japan and based on the enthusiastic reception by early adopters, we’re planning to launch Cocoon products and services around the world.

TIM BAXTER

To make Cocoon easy to use, like a typical AV product, we developed the “MyCast” graphical user interface. You can intuitively navigate across available broadcast content or go to a broadband service to access a movie or music video, securely over the network. With so much choice, an intuitive user interface and a simple remote commander is vital to the user experience.

Let’s take a look at what Cocoon has to offer. For the purposes of this demonstration, I will simply scroll through titles in the unit's hard-drive, and let's select one of my favorites, "Vertical Limit."

Video segment.

The next sample was encoded using a new codec, soon to be standardized by the Joint Video Team or JVT. This codec is ideal for broadband content services. We're planning to use this for a secure distribution service in Japan beginning the second half of this year.

So, why don’t we take a look at a music video? It’s from the pop gospel duo - Mary Mary.

Video segment.

KUNITAKE ANDO

And now, as a special surprise, I'd like to welcome Grammy Award-winning Sony Music artists, Mary Mary.

Mary Mary enters. Interaction between Ando and Mary Mary artists Tina Atkins-Campbell and Erica Atkins-Campbell.

We were just showing the audience Mary Mary’s great new music video, "In the Morning." It's such a positive and uplifting song. And, we were explaining our Cocoon products, isn’t that right Tim?

TIM BAXTER

Yes, Cocoon is like a networked music, movie and TV jukebox.

KUNITAKE ANDO

Cocoon stands for Connected Community on Network, because, we want to help people come together in new communities through broadband. For people to create and access communities through broadband, ease-of-use will be critical. This has always been a priority for us. Tim will now show us another new user interface that controls content on different devices in the home network.

TIM BAXTER

To make this user interface really easy to use, we developed technology to use it on a touch panel portable display, like this AirBoard currently available from Sony in Japan. By moving my finger on this panel from side to side, I can select the content I want. This display is wirelessly connected to a home network. By moving my finger from the bottom of the screen to the top, I can now watch this on another display such as my big screen WEGA. You see how easy it is to use. I just select what I want to watch and then, with a simple V motion, I can switch between displays.

KUNITAKE ANDO

We’re thinking about this type of portable display, not only as the future user interface to control content on various devices, but also as a terminal for enjoying content.

Mary Mary exits.

To make the concept of a home network a reality, we’ve connected the personal computer with AV products, putting the television at the center of the home network. In this way, we’re taking initiative to ensure interoperability and offer users the freedom of a single, seamlessly connected platform.

In the six years since we introduced the VAIO computer in the U.S., we’ve created an industry trend by advocating the concept of an entertainment PC. VAIO has been connected to many digital devices: digital still cameras, camcorders and Net MD, offering many new ways for users to enjoy the PC. We also offered many new styles of PCs to match users’ unique lifestyles, such as a pen tablet function, an integrated PC camera for visual communication, an ultra compact, and a wide-screen version.

Our next step is to enable VAIO to function as a home server, connected to the TV.

TIM BAXTER

To enjoy the content stored in your PC, you can use the WEGA TV, for instance, for a better quality viewing and listening experience. To do just that, we’ve introduced a product we call RoomLink. By wirelessly connecting a VAIO PC to a WEGA TV as part of a home network, we’ve transformed VAIO into an entertainment server.

First, I access the RoomLink menu, and select Video. RoomLink is now wirelessly accessing a VAIO that could be anywhere in the house. Whenever they want, users can enjoy content that’s stored on their VAIOs on a large screen TV. Also, it’s very easy to run a slide show on your TV using the photos stored on your VAIO or as you will see, you can access and enjoy your home movies. Let's look at one.

Video segment.

Again, we’re focused on making it very easy to use. It’s all controlled with an intuitive, AV-like user interface through this simple remote commander. I hope I’ve been able to show you how we’ve seamlessly connected VAIO with WEGA.

Baxter exits.

KUNITAKE ANDO

We’re about to start on the next big challenge in the evolution of VAIO to enhance users' lives in the Broadband era. We want to use its tremendous processing power and storage capacity to support users in totally new, more personal ways. After all, the “P” in “PC” does stand for “personal.”

Let me show you one of our latest innovations, the kind of thing that happens when Sony’s DNA meets our UVN vision. This “Sensing Computer,” the VAIO EQ, is intended to support you by integrating your daily life with the world of information. It could accompany you wherever you go. It captures your preferences and learns what you like and don’t like, so it can function as your personal adviser.

One of the more interesting applications could be facial recognition. So if you were at a cocktail party and a familiar face began walking your way, you could ask the VAIO EQ, “Who is that?” and expect it to provide you with an answer.

Now that we’ve talked about Cocoon and VAIO, let’s move on to another gateway and show you how PlayStation2 is bringing the broadband experience to the television.

Online gaming is one of the killer applications for networks and we’re already seeing this not only in the U.S., but also in Asia, in Korea and Hong Kong. It’s also starting to take-off in Japan. Until now though, online gaming was mainly a PC phenomenon. But, by connecting a PlayStation2 to broadband using a network adaptor, TV can finally offer users the full visual and large screen excitement of gaming. And online games, including America's most popular, EverQuest, with over 430,000 subscribers, are now making that transition from the PC to PlayStation2.

To tell us about this, I’ve asked Scott McDaniel from Sony Online Entertainment to join us.

McDaniel enters.

SCOTT MCDANIEL

Thanks for the opportunity to show how we're creating online communities with the PS2 and online games. Today, millions of people play games online, mostly on the PC. Now, we can bring online gaming and community to the living room.

EverQuest Online Adventures is the first Massively Multiplayer Online Role-Playing game available in the U.S. for the PS2 and it will allow thousands of players to interact together in a fantasy world. The game fosters teamwork and social interaction. Ultimately, EverQuest is a huge online community.

What we'd like to show you now is how the collaboration between hardware and content can create truly rich and enlivening experiences. Today we have a group of players connected through the Internet and ready to adventure together. These players could be anywhere in the U.S., and they are logged into our servers in San Diego, California.

Ben Bell, the producer of the game, and our demo driver, has asked them to join him online.

Interaction between Bell and online gamers.

As you can see there are quite a few different looks the characters can assume. Here we have warriors, wizards, barbarians, and more. It is extremely important that people have the opportunity to create their own, customized persona in the game. Here, our group of adventurers has encountered a hostile computer-controlled dragon. As you can see this group works together as a team in defeating the monster. And they are victorious.

I hope we were able to share with you the excitement the world of online gaming can bring to living rooms everywhere.

McDaniel exits.

KUNITAKE ANDO

This demonstration only begins to show the potential of using broadband AV products to bring people together to create new communities. I believe that this has many other applications as well; not only for games, but also for education, sports and hobbies.

One of the biggest growth areas is people using digital devices to create and share their own content. To assist in demonstrating this, I’ve asked Rosemary Flynn, who supports our Digital Imaging group, to join us.

Flynn enters.

ROSEMARY FLYNN

Earlier you talked about the huge DVD trend. What I want to show you today is how easy we’re making it to create your own DVD. For example, we could take some footage that we shot with this DV Handycam. Or, why don’t we use the video from Drew? Video segment featuring behind-the-scenes footage from “Charlie’s Angels: Full Throttle.”

KUNITAKE ANDO

Drew, are you still here? Can you join us onstage?

Barrymore enters.

DREW BARRYMORE

Hi again, Mr. Ando. Hi Rosemary.

KUNITAKE ANDO

Drew, we’re just showing how easy it is to create your own DVDs. I thought you might be interested.

Interaction between Ando and Barrymore.

ROSEMARY FLYNN

Sony has made it easy to create, edit and burn home movies to DVD. With this iLink digital cable, I just connect the camcorder to our VAIO computer, and I'm on the way to burning a DVD. As you can see, the VAIO “Click to DVD” software recognizes the camcorder instantly. Then, with just one click of a button and we can create a DVD. It’s that easy.

Here is a DVD copy of the tape that Drew gave you earlier. Let’s play it back without the audio.

Video segment.

You can play it back on a variety of devices, such as this newly announced DVD plus, minus RW recorder, which supports both format variations on a single deck. Or on a VAIO computer. Sony supports both DVD plus and minus RW formats to ensure high compatibility across a variety of DVD players and PCs. As a result, users can easily share information and content, kind of like an off-line network.

Let me show you this too. This is Sony’s first DVD camcorder that records directly onto DVD, and then plays back on most current PCs and DVD players. Let’s check out the video just shot with the DVD Handycam.

Video segment.

KUNITAKE ANDO

Thanks for all your help Drew. Let's hope your movie is an even bigger hit than "Spider-Man" last year.

Barrymore exits.

In another example of offline networking, Sony and SanDisk have taken Memory Stick flash media to the next level for the broadband era.

ROSEMARY FLYNN

This new generation of Memory Stick media is called Memory Stick PRO. It has an incredible one Gigabyte of capacity. And this is a prototype of a high quality video recorder/ player that can use Memory Stick as its primary media. Let’s play the video again on this Memory Stick device.

Video segment.

As you can see, the picture quality is the same as that of a DVD.

Flynn exits.

KUNITAKE ANDO

A key to experience the excitement of a World About U, will be mobile products such as the CLIE handheld. We’ve now added wireless networking and advanced digital imaging technology. This is transforming the CLIE into a personal broadband terminal for enhanced communication and entertainment. To explain more, I’ve asked David Yang, who supports our CLIE marketing group, to join us.

Yang enters.

DAVID YANG

Today, I want to demonstrate how imaging and networking capabilities enable users to share personal content and to communicate in new ways, on the go. I’ve brought the latest version of the CLIE handheld, which can connect to the Internet wirelessly, using Wi-Fi, or Bluetooth. It runs on a 200 MHz processor and supports the Palm OS version 5. And we’ve expanded the imaging capability. It's the first with a two-megapixel CCD camera and flash.

Let me take your picture.

Yang takes Ando’s picture.

What I'm doing right now is viewing the image I just took of you, and if need be, I can edit it slightly. With the Wi-Fi Hotspot here onstage, I can use the wireless connection to upload the image directly to your personal photo album on Sony’s ImageStation.

Here, users can share photos with friends and family, join an online photo community, and even order prints. Online services like this will play an even larger role in sharing images across various devices to realize the true value of personally created content.

Using this VAIO, let's take a look online. With a few clicks, the image has been uploaded.

Yang exits after reviewing images on the computer.

KUNITAKE ANDO

In addition to the CLIE, we are also introducing a camera into Sony Ericsson mobile phones, like this one, and also VAIO PCs and WEGA TVs. And we’re developing a completely new type of interface - that will revolutionize the relationship between people, hardware and content. In a World About U, you’ll soon be in touch with your family and friends in many different ways.

Video segment.

This new style of communication and entertainment will come to life with high quality picture and sound. And the ultimate in quality is represented by two letters- HD. High definition delivers the visual and audio excitement of real-life experiences. We’re leading the way in developing high definition from content creation with our CineAlta 24P system to the user experience with our wide variety of high definition-capable televisions.

One of the greatest supporters is George Lucas. Last April at the NAB show here in Las Vegas, I declared that with the premiere of "Star Wars Episode II," the year 2002 would be the year of digital cinematography. George Lucas used a CineAlta HD cam like this one, to create an exceptional looking movie - not to mention one that was produced at a lower cost.

Video segment with footage from “Star Wars Episode II: Attack of the Clones.”

Another strong advocate has been director James Cameron.

Video segment featuring comments from James Cameron.

As James said, the world really is in the middle of a digital revolution, and this isn’t only in the creative process, but also in storage and displays. Welcome back Tim. Could you explain these high definition developments?

Baxter enters.

TIM BAXTER

One example we recently announced is our support of the Blu-ray disc format as part of a nine-company alliance. This disc can hold more than two-and-a-half hours of digital HDTV programming. We are also working to realize a high-definition packaged media solution. Let's take a look at the remarkable picture performance of the Blu-ray disc.

Video segment featuring scenes from “Spider-Man.”

Sony is also working on bringing high definition excitement and sensations to people’s living rooms. We are seeing sales of our big screen and flat panel high definition-capable displays take off. We are promoting high definition-capable TVs, like all of these on the stage, to deliver the true end-to-end HD experience.

Baxter exits.

KUNITAKE ANDO

Thanks Tim. The pieces are coming together for users to experience first-hand the superior picture and sound quality that content creators intended. We’re firmly committed to bringing the high definition transition to broadband. Advanced codec technologies will allow us to offer users the reality of high definition by feeding signals through broadband networks.

With the dominance of cable here in the U.S, I’m glad that the consumer electronics and cable industries have finally come to an agreement on plug-and-play compatibility - between HD televisions and digital cable systems.

Now, by working with the creative community to develop a secure environment, we can reach the stage where the transition really happens.

I hope you enjoyed all of our demonstrations showing how we’re making the Ubiquitous "Value" Network a reality. We’re using our unique position as a global media and technology company, to integrate content and networked hardware to realize new value, not just for early adopters but for everybody.

We’re doing this by promoting television, reborn, as the center of users’ broadband entertainment experience. And open standards will be critical. Our intent is to empower users offering new excitement and enjoyment.

With our UVN vision, we’re shaping a World About U for the broadband frontier. It's a frontier in the real sense. We're all going to have to adapt quickly to this dramatic paradigm change. Traditional competitors, like Sony and other Consumer Electronics companies, need to work together. Different industries have to cooperate whether it’s AV and IT, CE and Cable, or Technology and Content. If we don't, the Broadband Wave will wash over all of us. And I believe that this wave is coming very fast. Even by next year, it may be too late, if we don't get our act together.

So, my message is, as difficult as it may be, we need to collaborate now for our mutual success, in order to realize our Broadband Dreams and to deliver real value to our customers, our users.

At Sony, dreams are the driving force for new challenges. Around fifty years ago, a famous Japanese cartoonist dreamed of a robot, with a little boy’s mind living in harmony with people. He called this character “Astro Boy” and he was supposed to be born on April 7, 2003. So, this is the year.

I’m pleased to say that Sony has realized this dream utilizing innovations in electrical, mechanical, optical and sensing devices. Some of you may be familiar with our four-legged entertainment robot, AIBO, which means “pal” in Japanese. Well now, Sony has developed a new pal and I’ve brought him with me for his first visit to the United States. Please welcome our very special two-legged friend, called SDR, standing for Sony Dream Robot.

SDR

Konnichiwa, Mr. Ando.

KUNITAKE ANDO

Hello, SDR. I’m afraid he’s still taking English lessons. How are you enjoying them?

SDR

I like English.

KUNITAKE ANDO

That’s great. SDR is very talented and has also been taking dancing, singing and acting lessons from some of Sony’s artists.

SDR

I enjoy music and dancing.

KUNITAKE ANDO

In that case, I think we’ve got just the thing for you. Let's welcome back, Tina and Erica, the very talented singing duo “Mary Mary.”

SDR

Wow! Are you ready? It’s showtime!

Mary Mary performs the song “Incredible.”

KUNITAKE ANDO

Thank you, Tina and Erica for that great, uplifting song. And thank you, SDR, for that great dancing.

I'd also like to thank all of you for coming today to hear how Sony is shaping A World about "U."