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Sony Annual Profits Halved as Film Division Loses $719 Million

Japanese electronics and entertainment group Sony revealed net profits Friday of $660 million (JPY73.3 billion) for the 2016-2017 financial year, a 50% reduction from the previous year precipitated by heavy losses in its pictures division.

The division, which encompasses Sony Pictures Entertainment and other film and TV content operations, accounted for a loss of $719 million (JPY80.3 billion) for the financial year running from April 2016 to March 2017.

The results are in line with recent information put out by the company. Last week, Sony revised upwards its own forecast of the 2016-17 results. It left projected revenues unchanged at JPY7.6 trillion, but increased its estimate of net profits to JPY73 billion. That was up from the previous profit forecast in February, which was for a net result of JPY26 billion, but still a decrease compared with the 2015-16 year, in which the company made JPY148 billion.

The group’s nine-month results, published in February, revealed a $913-million loss in the pictures division, most of which related to a massive $962-million write-down of goodwill. That pushed the nine-month group results to a $169-million loss. The write-down is again included in the full year figures.

Currency fluctuations also affected the results. Revenues in the pictures division decreased 4% year-on-year to JPY903 billion, but increased by 5% in dollar terms to $8.06 billion.

The increase in sales on a dollar basis was primarily due to higher sales for television productions and media networks, including higher subscription video-on-demand licensing revenues. The Sony Pictures Television unit had a strong year with a big syndication sale for its ABC comedy “The Goldbergs” and rapid growth in its U.K. and local-language production operations, particularly in Latin America.

The increase in sales for media networks was due to higher advertising and subscription revenues mainly in India, Latin America and the U.S.

“The operating results for the Pictures segment were also negatively impacted by higher programming and marketing expenses for Media Networks, as well as higher theatrical marketing expenses for motion pictures,” Sony said in a filing.

The fourth quarter (January to March 2017) was the pictures division’s best performance of the financial year. It enjoyed $2.66 billion of revenues and $298 million of operating profit.

For the pictures division, Sony is now forecasting a 13% revenue increase (in Japanese yen) to JPY1.02 trillion in the 2017-18 financial year. Without the weight of the write-down, the division’s operating profits are forecast to rebound to $350 million (JPY39 billion,) a figure almost identical to the 2015-16 financial year outcome.

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