Takes hit in 1st qtr. from film, TV charge
NEW YORK — New film accounting rules pushed Sony Corp. deeply into the red last quarter as the company took a whopping charge of $968 million in film and TV.
The electronics and media behemoth Wednesday posted a net loss of $841 million for the first quarter of its fiscal year, which started in April.
Among other stipulations, the new accounting rules call for advertising and marketing to be expensed as incurred and require the costs of abandoned development projects to be charged directly to expenses. Aside from the one-time charge, Sony predicted the accounting changes will cause net income to dip by $250 million-$280 million for the full fiscal year.
Without the charge, which Sony reps have stressed is a one-time, non-cash item, Sony’s net income fell 27% for the quarter to $127 million.
Revenue rose 5.4% to nearly $15 billion.
The brightest spot was provided by Sony’s biggest business, electronics, which saw revenue rise 12% to $11.2 billion and operating profit more than triple to $526 million. In a speech in Tokyo on Wednesday, Sony Corp. of America chairman Howard Stringer described Sony as an electronics, manufacturing and technology giant distinguished “from the pack” by its entertainment content.
Newly created Sony Broadband Entertainment in the U.S. will look to marry that content with developing broadband and digital technology. Sony also is seeking hardware and software alliances both inside and outside the company, he said.
Content, as represented by Sony Pictures, saw revenue rise 6.7% to $1 billion. The unit swung to an operating loss of $53 million from a profit the year earlier due to the accounting changes (which Sony said knocked $60 million off operating income) and to exchange rate issues that have tended to dampen results at all of Sony’s businesses in recent quarters.
In addition, motion pictures took losses on first-quarter releases including “I Dreamed of Africa” and “Running Free.”
Sony Pictures Entertainment “has not had its best year this year on the motion-picture side, (but) it has been a well-managed and strategic year,” Stringer said.
As sequels to “Men in Black” and Stuart Little” go into production, Stringer added, “We will soon begin to see the results of Sony Pictures’ strategy to create long-term franchises and appealing characters that can generate ancillary revenue.”
Stringer said the return of Mel Harris and a recent distribution deal with former Walt Disney Studio chief Joe Roth’s Revolution Studios “are real coups for Sony.”
“We are developing a new team at both music and pictures to advance our new media mission and have seasoned veterans — people like Mel, Joe, John Calley and Tommy Mottola — to lead them,” Stringer added.
Mottola runs Sony Music, which had a disappointing quarter, swinging to an operating loss of $47 million. Revenue fell 23% to $1.2 billion. Sony cited the timing of new releases and softness in a number of international markets. Parts of Europe and South America were down and Asia remained weak.
Top sellers during the period included Pearl Jam’s “Binaural,” Destiny’s Child’s “The Writing on the Wall” and Cypress Hill’s “Skull and Bones.” During the quarter, Sony said it was the first to make commercial downloads available over the Internet.