Square Enix, Matsushita Seek Convergence

Posted by jgaudiosi :: Digital Distribution | Emerging Business Models

FfJapanese game publisher Square Enix, best known for its "Final Fantasy" and "Disney's Kingdom Hearts" franchises, has entered into a partnership with Matsushita, best known in the U.S. for its Panasonic brand, to bring videogame graphics and networking technology to home entertainment and portable entertainment devices. By sharing technology that's used for online games like "Final Fantasy XI," future Panasonic devices like TVs, DVD recorders, portable music players and mobile phones will be able to share entertainment content like TV shows, movies, photos and videogames. The idea is to create a networked home that allows any form of entertainment to be shared seamlessly among portable and permanent home entertainment devices.

The advent of next generation consoles like Xbox 360, PlayStation 3 and Revolution will usher in a new digital distribution model for entertainment. Games will be the driving force, but movies, TV shows and music will also play a role in this shift. Over the life of the next generation consoles (and with Sony supporting PS2 for a full 10 years, I expect a decade of PS3), first gamers, and then consumers, will become used to downloading games, game content, movies, and TV shows straight to their hard drives on PS3 and Xbox 360. The consumers who now turn to digital distribution for music via the iPod will turn to Xbox 360, PS3 and even PSP for similar digitally distributed content.

The fact that Matsushita sees this, and sees Sony's place in the advent of this evolutionary shift from packaged to digitally distributed entertainment, shows that this will become a reality over the next decade. By working with Square Enix, which has had success with online gaming, the new hardware that will enter the market beginning in March 2007 will enable connected homes to stream entertainment from game console to DVD player to portable player. Matsushita calls this shift to digital distribution the "ubiquitous network society."

Matsushita will utilize Square Enix' middleware "SEAD Engine," which will allow the embedded consumer electronics devices to work as digital distribution devices. In essence, these new plasma TVs, DVD recorders and other devices will allow consumers without a PS3 or Xbox 360 to download content straight to the device and then share it among other devices on the home network. In theory, sharing between game consoles and these devices could also occur, although Sony is likely to be working on proprietary consumer electronics that would work directly with PS3 in the near future.

It's clear that Sony and Matsushita won't be the only players in this digital distribution shift. All of the big companies will need to come on board, because consumers will demand their entertainment be available any time they want it, anywhere they want it. iPod ushered in the digital distribution rush for music and TV content. Game consoles will further push this major shift. And now consumer electronics companies will offer alternatives to non-gamers, establishing digital distribution as one of the major ways consumers will access entertainment in the near future.

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