Sony takes a broadband partner

Sony announced Friday that it has reached an agreement with Tokyu, one of Tokyo's major private railways, and Tokyu's 94-percent owned subsidiary, Tokyu Cable Television, to jointly develop a high-speed broadband network in Japan.

The deal allows the electronic-media giant to strengthen its lucrative content distribution and broadband network businesses on its own turf. The company wants to lure Japan's entertainment-savvy consumers in a cable-TV market that has become increasingly competitive.

The announcement came three days after AT&T's Liberty (LMGA) Media Group and Microsoft had unveiled a plan to merge their Japanese cable-TV concerns, Jupiter Telecommunications and Titus Communications, by September.

The agreement makes Sony the second-largest shareholder of Tokyu Cable Television; the company now owns 10 percent of Tokyu Cable's shares, at a value of 10 billion yen. At the press conference in Tokyo, Sony's Corporate Executive VP Sunobu Horigome emphasized Sony's "ongoing investment" in Tokyu, suggesting that Sony may increase its stake in the cable operator in the future.

Sony and Tokyu will jointly create a broadband Internet service business later this year, using Tokyu's existing infrastructure. More than 250,000 people subscribe to Tokyu's cable TV service, while more than 22,000 subscribe to its Internet connection service. The three companies also plan to form ties with other cable-TV companies in order to expand their geographical reach. Sony's spokesman said the companies had not yet discussed a detailed revenue model or the expected subscriber targets for the year ahead.

In addition to Jupiter-Titus group, Sony and Tokyu will be competing with Nippon Digital Haishin, a joint venture formed this year by Tokyo's six private railways - each of which owns a cable network. SpeedNet, which is jointly owned by Softbank, Microsoft and the Tokyo Electric Power Company, is another potential competitor, although that company has yet to launch its low-cost wireless Internet access service.

Historically, Japanese consumers have seemed content with regular television channels, and so the rate of cable-TV penetration here is still relatively low. The current rate is roughly 7 percent, while the US weighs in at 68 percent.

But the nation's appetite for diverse content has increased, especially among the young. SkyPerfectTV, Japan's popular digital satellite broadcasting service, reached 2 million subscribers in early June.

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