Sony’s proprietary pratfall

I had been planning to revisit my review of the PSP from last year, wherein I said the machine is way cool but limited by Sony’s love affair with proprietary formats (in this case the Memory Stick and UMD). Stories like this popped up last month, saying how many movie studios had signed on and how PSP owners were buying as many UMD movies as games. Maybe I was wrong; maybe the brilliant screen and markdowns sold people on the tiny discs.

On second thought, I’ll stand by that review after all. It seems the UMD movies aren’t catching on so much after all. Take it away, Variety: “With sales falling below expectations, Sony Pictures Home Entertainment, Paramount Home Entertainment and Warner Home Video are cutting back on movie releases for the PSP.” Read that again: Even Sony’s movie division is pulling back.

This is the real reason proprietary formats are so dangerous: they disrupt the economics of mass entertainment by adding an unnecessary cost — that of licensing or using the proprietary format — to the equation. The article notes that “Top PSP movie performers generally sell more than 100,000 units, though the average release posts sales closer to 40,000-50,000 units.” Considering UMD movies are essentially DVDs with different coding/formatting, movie companies’ costs of releasing UMDs should only be the packaging costs. (Marketing costs are limited since the UMD release would be part of a general marketing campaign — for example, including a tagline saying “get it today on DVD and UMD” rather than creating a whole new ad just for the UMD version.) With very low production costs, selling 40,000 copies of a slew of UMDs seems like a perfect new revenue stream for movie companies. It’s the beginnings of the long tail in action.

But that would be smart business. And Sony has proven many times that it prefers its proprietary technologies to smart business.

The problem is that low production costs become moot when Warner Home Video has to pay Sony to release a movie in the proprietary UMD format. I haven’t seen reports of how much the license fee is, but you can bet it’s high given the ridiculous list prices for UMDs. So the movie companies don’t just have to pay for packaging — they also have to pay for Sony’s stubbornness. And now Sony will pay too, as more and more studios cut back.

With an open format and a minimal license fee, everybody would win. PSP owners would get an endless lineup of cheap movies, movie studios would reap big sales (the long tail again), and Sony would reap the piling up of license fees from a mini long tail as well as the boost to PSP sales. Too bad, I guess. Anyway, Sony can make up for lost movie sales with all of its great PSP games. Oh, wait…

— February 18, 2006

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