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Sony, Yahoo Agree To Hold Hands

Sony and Yahoo take a major step toward creating a digital entertainment powerhouse.
In a counter to AOL Time Warner, Yahoo Inc. and Sony Corp. revealed Tuesday a wide-ranging relationship that combines Sony's electronic devices and entertainment content with Yahoo's vast online audience and array of services. The two companies will develop a co-branded Web site, called Sony on My Yahoo, as well as cross-sell and promote each other's content, products, and services. Yahoo also will provide consulting services on the development of the Sony U.S. Group Portal, a unified online gateway for Sony. Terms of the agreement were not divulged.

While the two companies are far from merging, the relationship bears a similarity to the merger of AOL and Time Warner, which brought together AOL's online audience and technical know-how and Time Warner's content and distribution network. Howard Stringer, chairman and CEO of Sony Corp. of America, says Sony will capitalize on the technical expertise Yahoo brings to the relationship to access previously unavailable digital distribution channels. The companies declined to speculate on whether their relationship could deepen, but Stringer made it sound as if the two are inextricably tied. "We've been dating a long time," he says. "If this isn't an absolute marriage, we're certainly holding hands. What we learn and where we go, it's too early to tell."

Yankee Group analyst Rob Lancaster says tapping into Sony's strength in both entertainment content and consumer electronic devices is a smart move for Yahoo and should help the popular Web portal move beyond the desktop by adopting an access-from-anywhere strategy not unlike that employed by rivals AOL Time Warner and Microsoft. Likewise, Lancaster says, it makes sense for Sony to tap into Yahoo's huge and devoted user base. "It's low-hanging fruit. The Yahoo customer base represents an easy target," he says. "It's all about distributing services over a number of platforms. The services will be Yahoo's and the platforms will be Sony's."

Lancaster also says the Sony on My Yahoo site and the Sony U.S. Group Portal will benefit from functionality similar to that of existing Yahoo properties. As a result, there should be limited usage barriers as the Yahoo interface is expected to lend familiarity to any co-developed sites.

Sony had agreed to become an affiliate of Pressplay, the online music subscription service being developed by Sony Music Entertainment and Universal Music Group. Sony and Yahoo execs didn't offer specifics on how Pressplay might fit into the agreement revealed Tuesday.