Sony plan for ¥112bn write­down shocker

‘But all the bad news are out’

The Star Early Edition - - BUSINESS REPORT - Yuji Naka­mura, Pavel Alpeyev and Takashi Amano

SONY Cor­po­ra­tion said it will take a ¥112 bil­lion (R13.06bn) write­down in its movie busi­ness af­ter re­view­ing the fu­ture prof­itabil­ity of its op­er­a­tions.

The com­pany said it would book the charge in the fis­cal third quar­ter and is ex­am­in­ing how that will af­fect its fore­casts.

To off­set part of the loss, the com­pany also said it would sell shares in the med­i­cal web ser­vice M3 to Gold­man Sachs Group’s Ja­pan unit, in a deal worth about ¥37bn.

The an­nounce­ment comes two weeks af­ter Sony said the chief ex­ec­u­tive of Sony En­ter­tain­ment, Michael Lyn­ton, is step­ping down af­ter a 13-year run.

The stu­dio has strug­gled re­cently, in­clud­ing with last year’s Ghost­busters se­quel and a movie based on the An­gry Birds video game. Sony warned in June the di­vi­sion was at a risk of post­ing more losses.

“There has been a sus­pi­cion in the mar­ket that Sony doesn’t have a firm grip on the movie busi­ness, but still the amount is a sur­prise,” said Kazunori Ito, an an­a­lyst at Morn­ingstar In­vest­ment Ser­vices.

“That said, with Lyn­ton’s de­par­ture and this write­down, all the bad news is out and the at­ten­tion can turn on their plan for the com­ing fis­cal year.”

Sony shares closed lit­tle changed in Tokyo. Shares listed in Ger­many fell 1.9 per­cent in light-volume trad­ing.

“The de­cline in the DVD and Blue-ray mar­ket was faster than we an­tic­i­pated,” Takashi Iida, a Sony spokesman said.

The Tokyo-based com­pany is in­creas­ingly re­ly­ing on its video games busi­ness, which gen­er­ated twice as much in­come in the last fis­cal year as film.

Sony’s PlayS­ta­tion 4 con­sole is out­selling Xbox One, its clos­est ri­val from Mi­crosoft, by about two-to-one, ac­cord­ing to in­dus­try web­site VGChartz.

Lyp­ton’s de­par­ture capped a tu­mul­tuous two years for the di­vi­sion since a cy­ber at­tack blamed on North Korea paral­ysed the stu­dio.

The hack­ing led to pri­vate mes­sages leak­ing on to the in­ter­net and the de­par­ture of film-di­vi­sion head chief Amy Pas­cal.

Sony’s chief ex­ec­u­tive Kazuo Hi­rai has tem­po­rar­ily re­lo­cated to Cal­i­for­nia for six­months to over­see a re­view of the di­vi­sion and look for a re­place­ment, the com­pany said this month.

In June, Sony low­ered its pro­jec­tion for film rev­enue in fis­cal year 2018 by $500 mil­lion (R6.72bn) to a range of $9.5 to $10.5bn.

It also low­ered its op­er­at­ing profit mar­gin to a range of 6 to 7 per­cent, from 7 to 8 per­cent.

Sony’s Iida said the di­vi­sion’s tele­vi­sion broad­cast­ing unit, which gen­er­ates the ma­jor­ity of rev­enue, is un­af­fected and con­tin­ues to do well.


Sony is in­creas­ingly lean­ing on China to off­set the down­turn. In Septem­ber, Dalian Wanda Group, the world’s largest movie screen op­er­a­tor, agreed to in­vest in Sony Pic­tures pro­duc­tions in an open-ended part­ner­ship.

But a slow­down in movie rev­enue on the Chi­nese main­land has raised doubts about how much the deal will bol­ster Sony’s per­for­mance.

M3 slipped 1.2 per­cent and is up 17 per­cent over the past 12 months.

M3 will con­tinue to count Sony as its largest share­holder even af­ter the deal, ac­cord­ing to data com­piled by Bloomberg.

Prior to the deal, Sony held 39.3 per­cent of M3’s out­stand­ing shares. – Bloomberg


Sony Cor­po­ra­tion head­quar­ters in Tokyo. Sony will sell shares in the med­i­cal web ser­vice M3 to Gold­man Sachs Ja­pan unit.

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