Yahoo News Pictures Division Decreases Weigh on Sony Group’s Quarterly Results
Significant decreases in profits at the pictures division and financial services led Japanese electronics and entertainment conglomerate Sony Group Corporation to reveal corporate-wide revenues that increased by a third, but net profits that slipped by 17%, in the first quarter of its financial year.
In the April to June period group revenues weighed in at JPY2.23 trillion (up 33% year on year) or $21.6 billion at current rates of exchange. Net income of JPY218 billion (or $1.59 billion) in the latest quarter compared with JPY261 billion ($2.02 billion) in the comparable first period of last year.
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The pictures division, which spans feature film, TV production and TV networks, reported revenues of $2.33 billion (compared with $2.64 billion in the same quarter last year) and operating profits of $115 million, compared with profits of $394 million.
Sony made no effort to quantify the impact of the twin strikes by actors and screenwriters in Hollywood. “We aim to work with the Alliance of Motion Picture and Television Producers to see a resolution with the unions as soon as possible so that we can restore to normal production activity,” Sony Group COO and CFO Totoki Hiroki said on a conference call following the corporation’s regulatory filing.
Executives on the call warned that there may be delays to production and therefore a negative impact on program sales and licensing revenue in the current year. But they did not divulge a figure and said that the impact is expected to be “relatively limited,” due to the sector’s long business cycle.
The group said that during the first quarter the fall in the pictures division’s revenues reflected reduced deliveries of U.S. TV series and lower licensing revenues, though these were partially offset by higher theatrical revenues. The lower TV sales coupled with higher marketing costs in support of a greater number of theatrical releases were responsible for pushing operating income down so sharply.
Between April and June, Sony released six theatrical films (compared with just two last year) with only “The Pope’s Exorcist” (gross worldwide revenues of $75 million) and “Spider-Man: Across the Spider-Verse” (gross box office of $591 million) making much of an impact.
Films scheduled to be released in the current quarter to September include “Insidious: Inside the Red Door,” “Gran Turismo: Based on a True Story,” “The Equalizer 3” and “Dumb Money.”
For the full financial year, running to March 2024, Sony has reduced its sales forecast for the pictures division by 3%, but kept its guidance for the division’s net profit unchanged at JPY165 billion ($1.20 billion), barely changed from the JPY168 billion actually reported for 2022-23.
Music delivered a brighter note during the first quarter and Sony increased its full-year forecast for the division by 6%. Between April and June, sector revenues increased by 16% in terms of Japanese Yen, though a third of the increase reflected the weakening Japanese currency when expressed in dollars. Sales were reported as JPY358 billion ($2.61 billion), compared with JPY308 billion. Operating income rose to JPY73.4 billion ($536 million) compared with JPY61 billion. Guidance for the unit’s full-year operating income is now JPY335 billion ($2.45 billion).
The music division’s performance was led by SZA with “SOS,” Miley Cyrus with “Endless Summer Vacation” and Harry Styles with “Harry’s House.” Music projects releasing in the next six months include those by Hozier, Travis Scott and Madison Beer.
The games and network services division recorded a 28% increase in sales in the quarter. There reached JPY771 billion ($5.62 billion), compared with JPY604 billion. Operating income, however, dropped from JPY52.8 billion to JPY49.2 billion ($359 million).
The revenue numbers were propelled by higher sales of third-party games software, better PlayStation console numbers and helpful foreign exchange. Operating income for the year was maintained unchanged at JPY270 billion ($1.98 billion).
Sony reported that 3.3 million PS5 consoles were delivered in the April-June quarter (compared with 2.4 million). In the quarter, PlayStation Network enjoyed an average of 108 million monthly average users (compared with 103 million).
During the group’s May strategic presentations, senior management underlined their embrace of the vertical integration model that stretches from electronic components through to film and TV production and avoids operating a generalist streaming platform that would compete with those of the tech giants and Netflix. (Sony’s activities in streaming are limited to Crunchyroll, the specialist anime streaming service that it rolled into its own Funimation platform two years ago for a combined 12 million paying subscribers, and the PlayStation Network which is an extension of its games console business).
On Wednesday’s conference call with financial journalists and media analysts, Sony executives said that they expect the group’s entertainment activities to become an ever-larger part of the business mix in the medium term.
In May, the corporation also said it was placing big bets on India as a large, demographically-favorable entertainment market that is still developing and growing. However, on Wednesday’s call there was no mention of India or the group’s impending, but stalled, acquisition there.
Sony has still not yet been able to close a deal to merge its own Indian broadcast TV operations with those of Zee Entertainment Enterprises, first announced in September 2021 and made formal in December that year.
Regulatory scrutiny of the deal has taken more than 18 months. And concerns about the likelihood of it being completed can only have increased after India’s financial markets regulator in June barred Zee chairman emeritus Subhash Chandra and MD-CEO Punit Goenka from holding office at any listed company. In an interim report, the Securities and Exchange Board made multiple references to the pair “siphoning off funds” and described ZEEL as being used “like a piggy bank” by the two company directors.
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