Media is one of the most twisted industries globally. Facts first.

• Sony is a large, if not the largest, content producer/owner in the world. From this perspective, Sony sits at the upstream of Netflix’ value chain as it is a major supplier to Netflix and it generates revenues by selling DVDs/Blu-rays to Netflix and getting rental license revenues.
• With the new deal that will allow Netflix to deliver movie streaming service to Sony TVs, Sony will effectively become a downstream partner of Netflix’ value chain. If not a customer, we can definitely identify Sony as a "distributor". Interesting and somewhat twisted business setting that we don’t see everyday.
• Sony is also a pioneer and the biggest player in the movie physical content medium industry, as it has lead before (video cassetttes, DVDs…) and it is leading now (Blu-Ray discs) the de-facto standards of the market. This adds another dimension to the Netflix-Sony relationship, as Netflix is in some ways providing substitutes to Sony’s offerings (by offering consumers dvd/blu-ray rentals and streaming services, Netflix certainly has some sizeable -negative- effect in the sales figures of these mediums).

Three different roles for Netflix from the perspective Sony’s corporate strategy team: a customer, a supplier, or a competitor?

When I read the NewTeeVee post on Sony-Netflix TV streaming deal, I instantly visualized the conference room of Sony, and the discussions of its fellow corporate strategists. The consumer electronics division (makers of TVs) would be pushing hard for the deal as they would be seeing themselves inferior to LG and Samsung’s Netflix offerings. On the other end should the boss of studios, stuck between threat on long-term physical medium sales and potential licensing revenue opportunity s/he would get if this streaming-to-TV model boosts up in the future. And there is the entertainment division (PS3) that would feel beaten by Xbox’s exclusive deal with Netflix and on the other hand, would be concerned for decaying support for Blu-ray when people use less physical medium and more on-demand entertainment.

From the face value, this deal deserves to be developed as a business school case, as we don’t see such intertwined objectives, incentives, and conflicts. As a corporate strategist, how would you handle this deal?