With new scrutiny from key shareholders, Sony Entertainment CEO Michael Lynton said that they are embarking on “a new era of transparency and accountability,” as Sony’s CEO Kazuo Hirai said that they would have “an intense focus on rigorous cost management across the board.”
He also signaled “a shift in emphasis from motion pictures to television production.”
Lynton and Hirai were expected to highlight the efficiencies and growth opportunities through the morning investor conference, held on a soundstage on the studio lot. Lynton talked of a “down payment” on future growth prospects with premium content for an array of platforms.
“Here is a guiding principle for us: No cost is too sacred to cut or too small to examine,” he said.
Lynton outlined prediction of $8.4 billion in revenue in fiscal 2015, with a 7.5 operating profit. He said that revenues through 2017 should grow at the low- to mid- single digits, and operating income at the high single- to low- double digit rates.
Meanwhile, starting next year, the Sony logo will be featured at the start of each release.
Earlier this week came reports, confirmed by Variety, that Sony was hiring Bain & Co. to help it identify cuts in its studio division, with estimates that $100 million or more would be targeted via overhead and potential layoffs. A spokesman for Sony Entertainment said that it was part of a four-year process of reviewing its business “to identify further efficiencies.”
Although the studio has seen success with the fall release “Captain Phillips,” it had a rough summer, with “White House Down” and “After Earth” proving disappointments. Sony Pictures recently reported a loss of an estimated $182 million in the second quarter ended Sept. 30, with sales revenues dropping by 13% in U.S. dollar terms. The company cited lower TV licensing, a weaker home entertainment business and smaller theatrical revenues, and specifically mentioned the poor performance of “White House Down.”
Hirai said that the operating profit in the pictures division was likely to be flat for the year.
In the quarter, revenue at Sony Music was essentially flat ($1.1 billion) but profits perked up ($99 million) thanks to currency exchange rates and solid sales for Justin Timberlake’s “The 20/20 Experience” and a handful of other releases.
In May, Third Point’s Daniel Loeb, a major shareholder with about 7% of the company, proposed the idea of spinning off those assets as a way of boosting transparency and accountability, criticizing the studio for lagging behind competitors in profitability. He struck a more conciliatory tone after the spin off offer was rejected but told Variety that he still expected “more disclosure and a more detailed plan for how they will improve profitability in their entertainment division, including specific profitability targets.”
But Hirai and Lynton talked of the fusion of software and hardware, including the development of 4K content and TV sets and exclusive film content for the Playstation.
“I know that the whole of Sony is greater than the sum of its parts,” Hirai said at the start of the conference.