Another day, another attack on traditional cable. This time it is courtesy of struggling electronics conglomerate Sony (NYSE:SNE) that's offering a cloud-based television service it calls PlayStation Vue. By partnering with six television groups, the service is able to offer roughly 75 channels of both live and on-demand television for those with a PlayStation 3 or PlayStation 4 gaming console.
Right now, Sony hasn't commented on the pricing of its Vue service, only stating its rate will be "fair and equitable"; media executives expect Vue will cost $60 per month. The service is slated for a multi-city rollout in early 2015 and plans to target 35 million Internet-enabled PlayStations. And while this is an aggressive move from Sony, pay-TV providers Comcast (NASDAQ:CMCSA) and Time Warner Cable (UNKNOWN:TWC.DL) probably don't have much to fear from this service, but that doesn't mean they should rest on their laurels either.
PlayStation Vue is essentially another cable bill, but could help the company
For the cord cutting and unbundling crowd, Sony's new service doesn't address the underlying problem they have with major pay-TV providers -- paying money for channels they don't consume. Matter of fact, Sony's PlayStation Vue is essentially just another cable provider. Yes, the package is smaller and, if the media executives are correct, less expensive than many traditional pay-TV packages, this does nothing to empower consumers with choice.
For Sony, this is a no-brainer, however. The company finds itself struggling to adjust to the new tech paradigm where mobile is increasingly important: After moderate success throughout the early 2000s, the company fell behind Apple and Samsung's smartphones and still hasn't recovered. Earlier this year, CEO Kazuo Hirai cut Sony's dividend payments and eliminated nearly 1,000 workers from its mobile communications division.
Sony was recently under pressure from activist investor Dan Loeb to make major changes -- creating tracking stock of Sony Pictures Entertainment and Sony Music, a first step toward spinning those businesses off, was among his requests. Loeb recently exited his position in Sony but other investors are still unhappy with the company's underperformance. The company is in desperate need of a growth driver and could use this to further monetize its popular PlayStation console.
Comcast and Time Warner Cable should start worrying
As previously stated, Comcast and Time Warner Cable shouldn't worry specifically about this service. In the end, Sony's PlayStation Vue is simply another pay-TV provider and probably won't become a major pay-TV provider overnight. That said, the trend for these mega pay-TV companies is particularly worrisome. And while many pay-TV analysts keep looking for one large "cable killer," the industry could end up dying a death from a thousand cuts.
The only thing missing from Sony's service that the unbundlers want is the ability for end users to make their own bundle. If Sony would offer that optionality the service could be the cable killer people have been looking forward to. In addition, if channels experience significant individual demand through a "make your own" bundle, or by going over-the-top, this could further hurt Comcast and Time Warner Cable during content fee negotiations.
One thing is for sure, cable is in a state of disruption. Led by streaming-based services like Hulu and Netflix, more channels are going over the top -- recently HBO, CBS, and Showtime decided to offer streaming-based services. And while one can argue the current form of Sony's PlayStation Vue offering is simply another cable company, this is the latest example that the days of huge, monopolistic cable providers are over and the industry will eventually die without significant changes.
Jamal Carnette has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.