Sony Film Unit Loss Widens in Second Quarter, Cuts its Full-Year Forecast
Sony Pictures logs a $187 million loss and investors in Tokyo questioned its management as its films continue to struggle at the global box office.
Sony Corp. on Thursday reported improved financials for its fiscal second quarter, ending September 30, despite losses at its film unit. The conglomerate, led by CEO Kaz Hirai, said operating income was $733 million (¥88 billion), while sales were almost flat at $15.8 billion. Sony posted a loss in the same quarter last year.
Net income for Sony Corp. was $280 million (¥33.6 billion) compared to a net loss of ¥136 billion in the same period in 2014.
Film unit operating income fell into the red to the tune of $187 million (￥22.5 billion), compared to a small loss in July to September 2014.
The forecast for full-year sales at Sony Pictures was cut by 2 percent to $8.28 billion (￥1 trillion), and cuts its operating income prediction nearly in half, to $290 million (￥35 billion).
CFO Kenichiro Yoshida faced questions about the outlook for Sony Pictures and the responsibility of its L.A.-based executives from representatives of Japanese investment managers at the earnings press conference at its Tokyo headquarters.
"There are two reasons for the downward revision: one is that our forecasts were too optimistic. The other is that the strong franchises we planned on building haven't been built. Both Sony Pictures Entertainment and we at headquarters take this very seriously," said Yoshida. "Michael Lynton has appointed new management and we are working to combine creativity with financial discipline."
"The releases that we had hoped would become hits in the first half of this year didn't succeed, meaning that related earnings from home entertainment sales, games and other merchandising will be affected," Yoshida said in response to a question about the large cut in operating income forecast at the division.
The representative of another Japanese investment institution asked why Lynton was not personally being held responsible for the drop in performance at SPE.
"President Hirai and I as CFO are responsible, and Michael Lynton is responsible too. He's responsible for entertainment overall, but it is in movie production where we are struggling. We at headquarters are very concerned about that and Michael Lynton is taking action to improve performance," Yoshida said.
Film revenue decreased 1 percent compared with the year-ago period, or 14 percent on a constant currency basis, to $1.5 billion on a poor performance by the studio's theatrical releases. Pixels was Sony's biggest earner in the quarter, which took $240 million globally, but failed to match expectations, particularly domestically. Hotel Transylvania 2 beat that with a worldwide of around $320 million, though it was released right at the end of the quarter on Sept. 25.
Television licensing revenues also fell, with the same period last year boosted by sales of The Amazing Spider-Man 2 and Heaven is for Real.
The continuing strong performance of the PlayStation 4 console helped boost sales in the Game & Network Services division to a little more than $3 billion (¥360 billion) and push operating income up 10 percent to $199 million (¥23.9 billion).
Music was another ongoing bright spot for Sony, with sales up 15 percent, 4 percent on a constant currency basis, to $1.16 billion (¥138.7 billion) and operating income up 20 percent to $122 million (¥14.6 billion)
The conglomerate held its full-year forecast to March 2016 unchanged at sales of $65.4 billion (¥7.9 trillion) and a net profit of $1.16 billion (¥140 billion).
Sony stock was up 1.2 percent at ¥3,475 ($28.75) in Tokyo trading just before markets closed, ahead of the Nikkei 225 Index, which was almost flat.
Oct. 29. 1.20 a.m. Updated with details and comments from earnings press conference.