Image: Sony

They may be each other’s respective home electronics nemeses – but, for Sony’s digital content offerings, Apple’s iOS is actually the Japanese giant’s fourth most important platform.

Already available on Sony and Android devices, the Sony Music Unlimited subscription service – part of the cloud-based Sony Entertainment Network alongside PlayStation Network and Video Unlimited – launched on iOS in May and has a million active monthly users. After making some changes this week, Michael Aragon, VP and GM of Sony’s global digital video and music services, tells paidContent:

“It would be irresponsible for us not to address the fact that we have a lot of loyal Sony users who love iPhone; it would be punishing them. Android and iOS make it easier for us to reach the masses.”

If it succeeds, Sony Entertainment Network could realise Sony’s long-held dreams of uniting content and hardware under one roof. But the reality is that Sony now lags rivals in key product categories like mobile and tablet. Going over the top of those devices is, therefore, crucial. But that doesn’t necessarily mean Sony will distribute its content over any future Apple TV, Aragon tells me:

“We watch what everybody’s doing. There are a lot of very formidable competitors out there, not just Apple.

“It’s still such an early market, we have a few things in the works that are just focused on what we do well; I can’t disclose any of that.

“How we differentiate is, Sony has a global presence in these services.  We’re definitely the only company that has devices in homes or on the go that cover the things you would do in your everyday life. How do we think of them as one service rather than three services?”

Sounds like Sony could a single super-subscription to Sony Entertainment Network’s game, music and video trinity, rather than the current, distinct trio. Could the network also add other content categories, like e-books?

“Bundling, from a product persecutive and from a consumer perspective, are definitely things we are excited about,” Aragon replies.

“We’re evaluating – do we create an API for an app platform? Game, video and music are the big ones, but there are certainly opportunities.”

Building Sony’s digital content ambitions has not been an easy task. Aragon has had to coalesce disparate business units in to a coherent consumer offering, but PSN suffered a debilitating hack attack and the whole kaboodle was last year rebranded from the confusing “Qriocity” name after just a year.

“We have over 100 million accounts globally right now. We’ll be close to a billion-dollar business very soon,” Aragon says.

“We’re the first substantial subscription music service in Japan – we beat Spotify and others to market, which is quite an important thing for us.”

Aragon’s determination not to let the big boys of subscription digital content, like Netflix and Spotify, get their way was borne out by tweaking the Sony Music Unlimited offering this week. The free-trial window has been doubled to 60 days, and a new half-price tier of £4.99-per-month introduced for customers who want their music only on PS3 and PC. That shows Aragon needs to work harder to convince more people to test the offering.

“It’s probably the longest trial on the market,” he says. “This service is very new. Data is proving what we thought – it takes people a little while to figure out the whole on-demand subscription thing.

“We don’t want an extremely long conversion time, because this is not a ‘free’ service – but we need to give enough time so people understand a lot of the benefits. They’re so conditioned to syncing their music from device to device.”

Neither Sony nor its rivals will get to succeed with over-the-top connected TV content if actual consumer connection rates are low, as many analysts say.

Aragon says Sony is giving its new TV buyers around $50 worth in internet video content when they open the box, conditioning them to go online with their television.

“In Europe, especially, we’ve seen quite a bit of uptake in connected TVs – a little bit more than the U.S., which is surprising in some respects.

“In Europe, we have better connect rates and usage than other countries.”

A quick but important preface: This story isn’t based on any rumors, and it’s definitely not meant to start one. To be honest, I don’t think Netflix is in the market of buying up companies like Spotify, especially after last year’s Quickster debacle. Netflix’s stock currently trades at $66.73, down from a high of $304.79 last summer. Endeavoring on an online music adventure would be suicide at this point.

The soundtrack to your favorite movie

Instead, this story is purely meant as an academic exercise, albeit prompted by real-world conversations. A few weeks ago, I met with Michael Aragon, Vice President & General Manager, Global Digital Video and Music Services at Sony, who showed me some of the things his company has been doing in the music subscription space. One of the things that particularly caught my interest was that Sony is going to put a bigger emphasis on the possible synergy effects between its music service, its transactional VOD offering and its gaming business.

One example Aragon ran by me went something like this: Imagine you’re watching a movie, and your music subscription service automatically compiles a playlist with all the songs that are part of the soundtrack. Sony could obviously take this even further by adding games to the mix, but there’s also plenty of potential for synergy just between a music and a video service. Which made me think: Maybe there are actually some very good reasons for a company like Netflix to hook up with a company like Spotify. Reasons like these:

• Media recommendations. Subscription businesses like Netflix and Spotify generate tons of data. Combine them, and you’re likely to get even better recommendations. Some of these use cases are pretty straightforward: Viewers of Glee may want to be reminded of all the original songs that were covered in the latest episode they watched. Other linkages may be much more subtle – but if Netflix has shown anything, then it’s that it is very good at making sense of lots and lots of data.
• Device footprint. Spotify’s biggest asset in its quest to convert free users to paying customers are its mobile and connected device apps. However, the company hasn’t exactly been quick to expand in this realm. We waited forever for its iPad app, and the number of connected devices with Spotify on board can still be counted on one hand. Netflix on the other hand is now available on over 800 different devices, including virtually any connected TV and Blu-ray player. Tapping into that expertise could help Spotify to get a lot more paying users.
• International expansion. Netflix has halted its international expansion until its return to global profitability, and its foray into South America has been below expectations. Spotify on the other hand has been adding new markets at breathless pace. Seems like Netflix could actually learn something from the smaller company here – and of course use some of its office space around the world as it resumes its own expansion plans.
• Business models. Netflix is on the road to recovery, but there is no profitability in sight for Spotify. Some even claim that the company will never be profitable – at least not as long as record companies, who are also shareholders, dictate huge licensing fees. If Netflix has shown anything, it’s that it can get deals with media companies done, and Spotify could use some of that expertise to figure out deals that work for both sides.
• Network infrastructure. Netflix recently unveiled its own CDN, and it only makes only to use that kind of infrastructure for other services as well. Spotify on the other hand has been using P2P to offload some of its network costs, which could be an interesting model for Netflix, if only as a threat in its talks with operators that complain about too much traffic coming from Netflix’s network.

As I said, this is really just a thought experiment, but I think it’s an interesting one. Media subscription businesses have a lot of similarities. In theory, it makes a lot of sense for companies like Netflix and Spotify to join forces. Of course, both businesses also come with huge risks – and combining risks those might be more than either can stomach.

“These guys have the pipe and the bandwidth,” Ars Technica reported Aragon as saying. “If they start capping things, it gets difficult.”

At issue isn’t just the 250 GB monthly cap that Comcast has imposed on its residential broadband customers, but the fact that it’s making exceptions to that cap. Content streamed to Comcast’s Xfinity app in the Xbox is off the meter, while content coming from other providers is counted against that monthly allotment. While Netflix , Sony and other over-the-top video providers aren’t happy with the situation, my colleague Stacey Higginbotham writes that Comcast may be well within its rights, since it’s using its own infrastructure to deliver the Xfinity service and can therefore treat it as a special case.

However, as my colleague Daniel Frankel at paidContent proposes, Comcast may be biting the hand that feeds it. Providing broadband services, which in turn bring third-party content into the home, is turning out to be a much better business model for cable operators than providing that content on their own. Cable providers are losing video customers and finding their programming margins squeezed, but those same customers remain willing to pay big bucks for raw broadband access.

Picture courtesy of Flickr user brizzlebornandbred.