The deal would make some of Viacom's cable channels available as part of a pay-TV service for owners of Sony products such as the upcoming PlayStation 4. Not only would Viacom's lineup strengthen the service against cable companies and Netflix (NASDAQ:NFLX), it could also spell trouble for Microsoft's (NASDAQ: MSFT) competing Xbox One console.
When rumors first flew about the deal, it sounded like things were ready to move forward at any time. Not much has come forward since then, so it's safe to assume that Sony is not announcing anything until it's good and ready. This likely won't be until around Nov. 15 at the earliest, to go along with the PlayStation 4 release.
So just how much of an impact will Sony's service really have? While it will definitely benefit Sony and may potentially open up Viacom's programming to those without cable, it likely won't be the television revolution that some expect. Of course, the potential impact of the service could drop if its release is delayed.
The Sony/Viacom deal
Looking at the specifics of the tentative Sony/Viacom deal, it's easy to see why some people were excited. According to the Wall Street Journal, it was supposed to be the largest content deal for a streaming service to date, including several if not all of Viacom's channels. Given that Viacom owns MTV, BET, Comedy Central, Nickelodeon, and several other popular channels, it's easy to see why Sony wants the company's content.
The deal comes at a good time for Viacom, as it is currently engaged in a legal battle with Cablevision over channel bundling practices. The lawsuit concerns Viacom's requirement that less-popular channels be purchased to avoid paying more for its popular content. A licensing agreement with Sony would likely take some pressure off of Viacom, giving it a much more willing partner while it battles it out with Cablevision in court.
Taking on Netflix
Moving into the streaming space would appear to put Sony directly at odds with Netflix, the current leader in online streaming. That's why deals such as the one with Viacom are so important. The deal would give Sony access to popular programs that Netflix doesn't have and provide faster access to episodes that Netflix can only update once per season.
Content is what makes or breaks a streaming service. Despite its shortcomings, Netflix does offer more content than most of its competitors. Licensing deals sometimes delay new seasons, however, and in some cases Netflix actually finds itself without new episodes for an extended period of time. If Sony can get preferential treatment for its service and provide more popular programming than Netflix, it could pose a genuine threat to the market leader.
Victory over the Xbox One
When the PlayStation 4 launches in November, it will be competing head-to-head with Microsoft's Xbox One in a war to conquer the living room. Pre-holiday polls show the PlayStation 4 as the more popular console based on price, exclusive games, and bad press that has surrounded Microsoft's console. Things may change once the consoles are released, however.
While Microsoft is launching television content for the Xbox One as well, its main attraction is original content such as a Stephen Spielberg-produced "Halo" series. A Sony deal with Viacom likely prevents a similar deal for Microsoft, causing the Xbox One to suffer that much more from the lack of in-demand content.
A threat from Intel?
Sony isn't the only company seeking to make a splash in online streaming. Intel (NASDAQ:INTC) also has plans to launch a service that will compete with Sony and existing streaming services. Intel's service, OnCue, was announced earlier this year and was originally planned for launch in late 2013. Delays have pushed the release back to the first quarter of 2014, however.
OnCue is designed to let viewers watch live content on both TVs and mobile devices while also offering on-demand content. Intel's problem has been actually securing that content, as pressure from cable companies has made many networks reluctant to make deals with streaming services. While Intel turns to other companies with established streaming services such as Amazon for help, Sony has a window of opportunity to get to the market first with a strong service backed by well-known content partners.
The streaming services from Sony and Intel aren't likely to be complete game-changers, but they are significant. If viewers are able to watch live TV and access additional on-demand content, they could bring unique experiences to the streaming market.
Investors could benefit as well, though Sony would be the better bet as it hasn't had Intel's problems and is also looking at a potentially lucrative holiday season. It's a bit early to bet everything on Sony's streaming service, however, since we don't know yet just what content will be available when it launches.
John Casteele owns shares of Microsoft. The Motley Fool recommends Netflix. The Motley Fool owns shares of Microsoft and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.