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Sony Pictures Profits Rise to $489 Million but Music Profits Tumble

Patrick Frater

Profits at Sony Pictures rose to $489 million for the financial year running to the end of March 2019. That compares with $376 million in the previous financial year.

The pictures division result was achieved despite a fall in revenue. That dropped from $9.13 billion in the preceding financial year to $8.87 billion in the year to March 2019. Analysis showed revenues fractionally down at motion pictures, media networks and television productions.

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The Japanese conglomerate, which stretches from electronics to music, film and games entertainment, reported its full-year financial data Friday. Group revenues hit $78.1 billion. Net profits hit $6.38 billion. In local currency terms, income increased by 86% from JPY379 billion to JPY707 billion.

For the current year, Sony is forecasting a further increase in pictures division profits. These are set to rise by 19%, to $580 million, boosted by a return to revenue growth.

In 2017-18, Sony’s music division (reported in Japanese yen) saw essentially flat sales of JPY807 billion ($7.20 billion). Profits almost doubled to JPY233 billion ($2.08 billion), reflecting the consolidation of EMI. For the current year, profits are forecast to tumble to JPY135 billion ($1.20 billion).

Games and network services (reported in yen) saw a 19% increase in sales from JPY1.94 trillion ($17.3 billion) to JPY2.31 trillion ($20.6 billion). Profits jumped even faster, rising from JPY178 billion ($1.59 billion) to JPY311 billion ($2.78 billion), reflecting increases in games software sales and revenue from PlayStation Plus. There was a decrease in sales of PlayStation4 hardware.

Sony recently teased news of a fifth generation of its PlayStation entertainment console. It is expected to include ray tracing technology and a solid state hard drive to allow games to load quicker. A commercial launch is not expected during this calendar year. For the current financial year, development costs of the new console and waning PS4 sales are forecast to shrink divisional profits back to JPY280 billion ($2.5 billion).

Earlier this month it was revealed that activist investor Dan Loeb of Third Point Capital had amassed a share stake, and may agitate for strategic change at the group. The size of the stake is not known.

Loeb made a similar attempt six years ago, arguing that the film business was “poorly managed” and pressing Sony to sell or spin off its entertainment businesses. Sony responded by insisting that owning 100% of its entertainment business is fundamental to its strategy.

In the intervening period, Sony has seen its film-business profitability improve, and it has expanded its music business through acquisition. Group profits hit a record in 2017-18 and again in 2018-19. And Sony’s top management has changed, with the former finance director Kenichiro Yoshida now group CEO.

Sony’s Tokyo-traded shares peaked at JPY6,996 at the end of September 2018. But they tumbled to JPY4,630 in March, just before Loeb’s return. Prior to Friday’s results announcement, made after the stock market close, Sony’s shares stood at JPY5,212.

Loeb’s name did not come up during the conference call between Sony management and financial analysts that followed the earnings announcement.

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