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 The company last week announced a $2.3 billion deal for EMI
Music Publishing, and CEO Kenichiro Yoshida said he would focus
on collecting stable profits from existing music, movies and
other intellectual property.
The deal made Sony the world's largest music publisher in an
industry that has found new life on the back of streaming
services such as Spotify <SPOT.N>.
But for now, Sony is doing little to step up its game in
Hollywood, where it is lagging behind bigger studios and where
Apple, Amazon.com <AMZN.O> and Netflix are battling to become
dominant streaming platforms.
"I don't think we should aim to build platforms of their level
or compete with them," he told reporters last week. "A key
pillar of our strategy is, how can we survive, how can we
actually shift the turf."
His strategy is good news for longtime investors, who have
watched Sony extract itself from loss-making projects in the
past few years. In 2017, Sony wrote nearly $1 billion off the
value of its movie business.
Trying to find safer ground to fight on is an extension of
Yoshida's numbers-focused approach. As former chief financial
officer, he is credited with turning around the consumer
electronics giant using cost cuts and a focus on seemingly bland
but highly profitable sensors.
Sony also recently took a 39 percent stake in Peanuts Holdings,
of Snoopy fame, for $185 million. In movies and TV, the company
wants to further leverage film rights to its old franchises
rather than investing in new star-studded movies and TV shows.
Examples would fall along the lines of last year's "Jumanji:
Welcome to the Jungle," which unexpectedly grossed more than
$900 million. The studio plans to release another film based on
the 1995 classic "Jumanji" in late 2019.
Macquarie Capital Securities analyst Damian Thong said the new
strategy meant "lower cost, faster decision-making, greater
synergies, and a potential turning point in theatrical film
margins."
THE RIGHT NOTES
Yoshida has said that rather than trying to make all of Sony's
divisions complement each other, it was important for each to be
profitable on its own.
Investors have also speculated that he may be less averse to the
idea of putting the movie studio up for sale than his
predecessor, Kazuo Hirai, who fought off activist shareholder
Daniel Loeb's recommendation to partially spin off the
entertainment division.
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Yoshida has not suggested a sale, but he made no secret that Sony's
new emphasis on intellectual property favors music over movies.
Consumers listen to songs more than once but don't often watch the
same movie twice. Similarly, they demand larger song libraries while
being satisfied with just a few shows on a platform such as Netflix,
he said.
One decision he may have to make is what to do with the company's
struggling internet TV service PlayStation Vue, which is struggling
to gain subscribers after launching in the United States in 2015.
With the exception of the PlayStation video game console, Sony has
had little success at offering an entertainment platform since
losing out to Apple's iPod and iTunes music store a decade ago.
Walt Disney and cable operator Comcast, meanwhile, are battling for
21st Century Fox Inc's entertainment assets, while AT&T is trying to
persuade the U.S. Justice Department to allow it to buy Time Warner
Inc.
Sony's Hollywood studio, which lags behind Buena Vista, 20th Century
Fox and Warner Bros, could become an even smaller player ahead
thanks to the rapid rise of Netflix as a content provider.
"The movie industry requires scale to some extent, so perhaps it
isn't absolutely necessary for Sony to remain independent there,"
said Atsushi Osanai, a former Sony official who is now a professor
at Japan's Waseda University Business School.
Anthony Vinciquerra, CEO of Sony Pictures Entertainment, said the
company was happy to sit out the current round of mergers.
"In the longer term, as these companies begin to consolidate and
form their ecosystems, we will be developing alliances somewhere
along the way. We don't know with whom yet, because we don't know
what the landscape is going to look like. But we are very
confident," he told investors last week.
($1 = 109.1600 yen)
(Reporting by Makiko Yamazaki; Writing by Ritsuko Ando; Editing by
Gerry Doyle)
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