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Sony Pictures Reduces First Quarter Loss to $68 Million

Sony Pictures Entertainment made a slightly smaller loss of $68 million (JPY7.6 billion) in the three months between April and June this year, the first quarter of its financial year. Revenues dropped to $1.58 billion (JPY175 billion). In the same period last year, revenues were JPY206 billion, and net losses JPY9.5 billion.

The parent company, Japanese electronics and entertainment conglomerate Sony, earned profits of $2.08 billion on revenues of $17.9 billion in the April-to-June quarter.

In early May, for the financial year running from April 2017 to March 2018, Sony announced net profits of $3.42 billion (JPY379 billion) from revenues of $77.0 billion (JPY8.54 trillion).

Sony said the picture division’s $257 million drop in revenue in the April-to-June quarter – a 14% slide – reflected lower licensing revenues and lower advertising revenues at its channels business. The smaller loss than last year reflected decreased theatrical advertising costs and strong home entertainment performance of “Jumanji: Welcome to the Jungle.”

In the quarter, the studio released only two films theatrically: “Sicario: Day of the Soldado,” which earned $14 million in North America and $2 million overseas, and “Superfly,” which earned $18 million in North America. In the same quarter last year, it released three titles: “Smurfs: The Lost Village,” “Rough Night,” and “Baby Driver,” for combined gross revenues of $244 million.

On the back of the marginally better results, Sony said it was revising upwards its full-year forecast for the pictures division. For the 12 months from April 2018 to March 2019, it is forecasting revenues of JPY990 billion (3% up on its previous forecast, but fractionally lower than the 2017-18 result) and operating income of JPY44 billion (2% up on the previous forecast, and an improvement on the 2017-18 divisional operating profit of JPY41.1 billion).

Sony’s music division enjoyed an 8%, or JPY12.9 billion, improvement in revenue in the quarter, reflecting stronger visual media and platform sales, stronger recorded music sales thanks to streaming, and successful mobile game app “Fate/Grand Order.” Operating income rose by 28% from JPY25 billion to JPY32.1 billion in the quarter.

Games and network services was a star performer. Revenues in the quarter increased by 36% to JPY472 billion, reflecting strong PS4 software sales. Operating income leaped from JPY17.7 billion to JPY83.5 billion.

While many in Hollywood have pointed to tech-induced consolidation in the movie industry and suggested that Sony may be ready to sell off its film and TV businesses, Sony has denied that that is its plan. In May, new president and CEO, Kenichiro Yoshida did not hesitate to describe entertainment as one of Sony’s three core businesses – the other two being electronics and financial services.

The basic strategy for the pictures segment is to strengthen and leverage Sony’s IP while also expanding the Media Networks business, particularly in India, in order to enhance profitability, Yoshida said in May, while introducing the corporate strategic plan for the next three years. The revitalization of the “Jumanji” franchise, with “Jumanji: Welcome to the Jungle” grossing more than JPY100 billion at the box office, was cited as an example of the way forward for Sony Pictures Entertainment.

Yoshida said that the company wants a bigger piece of the global music business. He backed that up with the acquisition of a 60% stake in EMI Music Publishing, from Mubadala, in May, and then the Michael Jackson estate’s 25.1% stake in EMI last month. EMI is now a wholly owned Sony subsidiary.

In the games segment, Sony plans to build on its PlayStation Plus subscription-based service. That, Yoshida said, should introduce users to related products such as PS VR; its cloud gaming service PS Now; video services PS Vue and PS Video; and music service PS Music. The quarterly results data showed PlayStation Plus subscribers dropping to 33.9 million at the end of June, compared to 34.2 million at the end of March 2018. In March 2016 it counted 20.8 million, and 26.4 million in March 2017.

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