Sony Pictures’ $913-Million Loss Cuts Group Profits – Variety
Sonyâ€™s Pictures division posted a $913-million loss in the quarter ending Dec. 31, 2016, fueled by a massive write-down that senior executives revealed earlier this week.
The heavy loss dragged down Sony Corp.â€™sÂ profits to $169 million (JPY19.6 billion) for October through December, the third quarter of the electronics giantâ€™s 2016-17 financial year.Â Overall, the group saw revenues decline by 7% to $20.7 billion, according to figures released Thursday.
The pictures divisionâ€™s net loss of $913 million includes a $962-million write-down disclosed Monday, which means that the division would have achieved a quarterly profit of $49 million without the write-down. But even that would have been a steep drop compared to the operating profit of $168 million in the same quarter a year earlier.
Sony said the pictures division suffered from â€œsignificantly lower theatrical revenues,â€ but recorded â€œsignificantly higher sales of television productions.â€ These included higher subscription video-on-demand licensing revenues. The divisionâ€™s sales and operating income showed a 5% drop from $2.16 billion to $2.06 billion in dollar terms and a 14% decrease reported in Japanese yen.
The four movies released by the pictures division during the quarter â€“ â€œInferno,â€ â€œArrival,â€ â€œBilly Lynnâ€™s Long Halftime Walk,â€ and â€œPassengersâ€ â€“ grossed only $363 million worldwide. That is barely a third of the $1.04 billion generated during the same period the year before, fueled by James Bond title â€œSpectre.â€
The write-down was unveiled by Sony earlier this week and described as a â€œnon-cash loss.â€ Most of itÂ was due to a reduction in the value of goodwill carried in the accounts since the 1989 acquisition of Columbia Pictures.
The pictures divisionâ€™s loss will have an adverse impact onÂ the groupâ€™s overall results for the full year to March. Sony issued a new forecast of its 2016-17 results showing sales and operating revenue growing by 7% to JPY76 trillion but net income dropping to just JPY26 billion. That is a 55% reduction from its November forecast and an even bigger tumble from the JPY148 billion in net income that it reported for 2015-16.
Sony Entertainment chief Michael Lynton is scheduled to step down Thursday, though he will stay on as co-CEO for the next six months alongside Sony group CEO Kazuo Hirai. Despite Lyntonâ€™s departure on a loss-makingÂ note and the changed estimates of the pictures divisionâ€™s profit prospects, Sony was adamant that the movie studio is not for sale and and that it will remain an integral part of the group.
In an earnings call with investment analysts after the new figures were released, Sony executives said they â€œtake very seriouslyâ€ the issue of the write-down and the pictures divisionâ€™s â€œsignificant under-performanceâ€ over several years compared with the groupâ€™s mid-range profit forecasts. They said that in the longer term they see production and ownership of premium content as being increasingly valuable in an era of fragmenting distribution, and that â€œcreating content is a core business.â€
Measures to turn around the fortunes of the pictures division are already underway, they said, and will not await the appointmentÂ of Lyntonâ€™s successor as CEO, a process that Sony has said could take up to six months. Measures already in handÂ under film chairman Tom Rothman include greaterÂ financial discipline, creation of new intellectual property (Stephen Kingâ€™s â€œThe Dark Towerâ€ was cited as an example), and the leveraging of film and TV content from Sonyâ€™s game properties.
Executives also hinted at expansion of the TV channels business, which also falls under the pictures division.Â Target areas could include India, and could be achieved through acquisition, they suggested.
The group said that SPE has 14 titles on its 2017 release schedule â€“ including â€œResident Evil: The Final Chapter,â€ â€œSpider-Man: Homecomingâ€ (July), â€œFlatlinersâ€ (September), and â€œJumanjiâ€ (December) â€“ plus 11 titles already announced for 2018.
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