Sony Pictures Quarterly Profit Rises to $230 Million

Kenichiro Yoshida - Getty - H 2019
Drew Angerer/Getty Images

Theatrical revenue fell to $6 million amid the coronavirus pandemic, but home entertainment revenue surged 60 percent to $319 million.

Sony Corp. on Tuesday Tokyo time reported that Sony Pictures grew its operating earnings to $230 million in the fiscal first quarter from a year-ago profit of $3 million despite nearly no theatrical revenue due to cinemas being closed amid the coronavirus pandemic.

Studios, however, have also seen lower advertising and marketing expenses due the pandemic, as showcased in NBCUniversal's latest figures last week. 

That and growth in home entertainment and TV production helped Sony continue a trend of improved results for its studio arm for the first quarter. "This is the first profit in the [first fiscal] quarter in five years," Sony CFO Hiroki Totoki had told investors at the company's headquarters in Tokyo about the same period last year, which tends to feature few new releases for the studio. In the same period, which runs from April through June, in 2018, Sony had reported a $69 million film unit loss.

Film unit revenue in the latest quarter fell, as expected, amid the novel coronavirus pandemic given that cinemas were closed for the quarter in many countries, and the TV networks included in the unit have been hit by advertising declines. In the year-ago quarter, the underperforming Men in Black: International was the biggest release.

Revenue at Sony Pictures for the latest quarter reached $1.63 billion, down 4 percent from nearly $1.70 billion the year prior. Theatrical revenue fell 96 percent from $164 million to $6 million, but home entertainment surged 60 percent, from $200 million to $319 million. The studio's TV production business was another area of strength, with revenue rising 44 percent from $422 million to $597 million.

In the TV networks segment, meanwhile, revenue fell 21 percent to $419 million, and TV distribution posted an 18 percent drop to $258 million.

For the full fiscal year, Sony said it expects a film unit profit decline though to 41.0 billion yen ($387 million when using Tuesday's exchange rates) from 68.2 billion yen ($643 million) in the most recent year.

Sony on Tuesday also updated its "current view regarding the impact on the business" from the spread of COVID-19. "Although some movie theaters are reopening around the world, a large number are still closed or must limit the
number of patrons, leading to box office revenue being impacted," it said. "For this reason, Sony generally has not been
able to release its already completed films in theaters."

It continued: "Due to restrictions on people’s movement, the production schedules of new motion pictures and television shows by Sony are significantly delayed around the world, especially in the U.S. As a result, in Motion Pictures, theatrical revenues and revenues generated after theatrical release, including home entertainment and television licensing sales, are expected to decrease. On the other hand, digital rental and sell-through revenues for films, which Sony released theatrically prior to the spread of COVID-19, have been strong."

In the television production business, revenues is "beginning to be impacted by delays in the delivery of shows to TV networks and digital distribution services," Sony added. "Due to a global reduction in advertising spending, advertising revenue in media networks is decreasing significantly, especially in India."

Sony's video gaming unit on Tuesday reported revenue and operating income gains of 32 and 68 percent, respectively, driven by growth in "digital software and add-on content." 

"Although production of PlayStation 4 hardware was slightly impacted due to issues in the component supply
chain, these issues have now been addressed," the company said. "Sales of game software that is downloaded from the network, as well as PlayStation Plus and PlayStation Now subscriber numbers have significantly increased."

Sony said its scheduled launch of the PlayStation 5 console during the year-end holiday shopping season remained on track. "Although factors, such as constraints due to employees working from home and restrictions on international travel, remain, necessary measures are being taken and preparations are underway with the launch of the console scheduled for the 2020 holiday season."

Sony, led by CEO Kenichiro Yoshida, in early July made a $250 million investment to acquire a minority stake in Epic Games, the developer of Fortnite and the Unreal Engine used increasingly in Hollywood production.

Sony's music division posted a revenue decline of 12 percent, with operating income falling 9 percent. Improved streaming results were more than offset by declines in other areas. 

"Around the world, the release of new music is being delayed primarily due to some artists being unable to record songs and music videos," Sony said. "The impact on profitability from the delays in new music is limited at this time in the
U.S. and other countries where the proportion of music that is streamed is high. However, in countries like Japan
where the proportion of music that is streamed is relatively low, CDs and other packaged media sales are decreasing due to restrictions on going outside."

Ticket and merchandising revenues are also decreasing as concerts have been postponed or canceled. "Additionally, delays in the production of motion pictures and TV shows are causing a decline in music licensing revenue," the company said.

For the whole company, Sony on Tuesday posted a earnings of 233 billion yen ($2.19 billion), up 53 percent. Revenue climbed 2 percent to 1.97 trillion yen ($18.59 billion).