Will Sony's New CEO Care About Hollywood?

Kazuo Hirai and Kenichiro Yoshida - One Time Use Only - Getty - H 2018
Kazuhiro Nogi/AFP/Getty Images

Despite a reputation for axing underperforming divisions, many Sony-watchers believe Kenichiro Yoshida is unlikely to unload entertainment assets (just yet).

Will Sony’s incoming CEO have Hollywood in mind?

On Feb. 1, the conglomerate said its top exec, Kaz Hirai, 57, would hand over the reins to chief financial officer Kenichiro Yoshida, 58, on April 1. The move ignited speculation that Sony’s entertainment assets could end up auctioned.

Hirai, who rose through the music and games divisions, has been a passionate advocate for Sony Pictures Entertainment (SPE), while Yoshida, a hard-nosed veteran of finance and corporate strategy, not so much. But despite a reputation for paring or axing underperforming divisions, many Sony-watchers believe Yoshida is unlikely to unload SPE.

Yoshida joined Sony in 1983, a year before Hirai. Moving through a range of divisions, including a four-year stint at Sony of America in the early 1990s, Yoshida become an executive at Sony Corp. in 2007. Made CFO by Hirai in 2014, Yoshida became his "valuable confidant and business partner" as they "took on the challenge of transforming Sony together."

The soft-spoken savvy of Yoshida and the eloquent, telegenic charm of Hirai seemed a perfect combination, one that led Sony from huge losses to forecasting a record $6.6 billion profit for the current year.

"I really like Yoshida. I credit him with a big part of the turnaround of the last few years and I expect it to continue," said Eric Jackson of EMJ Capital, which owns Sony stock. "He's really forced transparency on the different business units."

At the third-quarter earnings announcement on Feb. 2, immediately after his succession announcement, Yoshida identified movie production, along with semiconductors, as an area the company must be "very careful" with, due to the large investments required.

Damian Thong, Sony analyst at Macquarie Capital in Tokyo, noted "SPE is not a monolithic movie business," but includes a studio, postproduction facilities, film production, TV production and cable channels. "What Yoshida-san wants is the right mix of investment across that set of businesses," said Thong.

"One reason Sony has remained relevant is an understanding that electronics is linked to content and an understanding of how Hollywood works," added Thong, citing Sony's early advocacy of tech including HDR and 4K.

Rather than disposing of SPE, EMJ Capital's Jackson thinks it should consider expanding its entertainment assets, perhaps by acquiring Lionsgate or MGM. "I would guess it's more likely they sell their mobile phone and financial services units rather than their Pictures unit. They have more IP to mine, like Jumanji," said Jackson, referencing the current box-office overperformer, which has so far brought in $858 million worldwide.

Yoshida is said to be an advocate of leveraging IP across Sony's business divisions and was reportedly unhappy with the decision to give up Spider-Man merchandising rights to Marvel in 2011.

"There will be more focus on IP, but you can see that from the movie lineup this year already," said a Sony analyst at a global financial institution in Tokyo, who asked not to be identified. "They have to do something in the movie business, but I can't see any dramatic change over the next two to three years. If they can form some kind of alliance, and sell maybe 30 to 40 percent of SPE, then that is a possibility."

The analyst expects Hirai, whose family has remained based in California during his CEO tenure, to stay involved in the U.S. entertainment division, "Going forward, Hirai-san will be kind of a bridge between Tokyo and Culver City, but not involved in the real management decisions."

Final say will now rest with Hirai's successor, though Macquarie's Thong thinks the decision on SPE's future has an obvious answer: "Yoshida-san must understand that giving up its position in Hollywood would significantly reduce Sony's global relevance and standing in the electronics business."  

A version of this story first appeared in the Feb. 7 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.