Sony Warns of $962 Million Goodwill Loss, Says Studio Is Not for Sale – Variety
Sony Corp. has revealed that its Pictures Division will take an â€œimpairment lossâ€ of $962 million (JPY112.1 billion) in the three months to December, the third quarter of its financial year. But the Japanese giant insistedÂ that its movie business is not for sale.
â€œMake no mistake. Sony Corp.â€™s commitment to SPE remains unchanged.Â The value of high-quality content continues to rise. As we have stated on many occasions, including at SPEâ€™s All Hands meeting at the end of last year, Sony Corp. sees SPE as a very important part of Sony group, and will continue to invest to achieve long-term growth and increased profits in this space,â€ Sony group chief Kazuo Hirai and Michael Lynton, Sony Pictures Entertainmentâ€™s departing CEO, said in a joint statement accompanying the financial announcement.
The company described the write-down asÂ a â€œnon-cash loss.â€ It said the loss was due to a number of factors past and present, including the purchase of the studio almost 30 years ago and the â€œdramatic shifts in the home entertainment space.â€
The write-down will be recorded as an operating loss in the companyâ€™s quarterly and current-year financial figures. Sony is to release its third-quarter figures Thursday â€“ which also happens to be Lyntonâ€™s final day in the CEOâ€™s office at SPE. He announced earlier this month that he would be leaving SPE to concentrate on his duties as chairman of Snap, owner of social-media platform Snapchat.
Sonyâ€™s disclosure Monday of the nearly $1-billion write-down comes three years after Hirai made clear that improving SPEâ€™s results was an urgent priority.Â But the studio has continued to struggle with management woes and flops at the box office, prompting speculation that a major reorganization could be on the cards.
Regarding the write-down, Sony Corp. said in a filing that â€œaÂ majority of the goodwill that was impaired was originally recorded at the time of the acquisition of Columbia Pictures Entertainment, Inc. in 1989. The impairment charge resulted from a downward revision in the future profitability projection for the Motion Pictures business within the Pictures segment.
â€œThe downward revision was primarily due toÂ a lowering of previous expectations regarding the home entertainment business, mainly driven by an acceleration of market decline. Underlying profitability projections of film performance were also reduced, but the adverse impact of that reduction is expected to be largely mitigated by measures that have been identified to improve the profitability of the Motion Pictures business.â€
Sony said that profit in the Pictures segment overall is expected to grow because of measures currently underway to improve the profitability of the Motion Pictures business and further expansion of the Television Productions and Media Networks businesses. Over the past five years, TV has risen in relation to movies as a share of Sonyâ€™s revenues. Its recent hits include â€œThe Crown,â€ airing on Netflix.
In their statement, Hirai and Lynton talked up the prospects for SPE and the movie business, despite recent box-office disappointments such as the â€œGhostbustersâ€ reboot and â€œBilly Lynnâ€™s Long Halftime Walk,â€ Ang Leeâ€™s most recent film.
â€œAs we announced recently, we will be spending more time on the studio lot over the next several weeks, focused on two main priorities: (1) naming and transitioning to a new CEO of Sony Pictures, and (2) building on the turnaround efforts currently underway at the studio, particularly in motion pictures,â€ Hirai and Lyntonâ€™s statement said.
â€œThose efforts to date â€“ including expanding the studioâ€™s global reach, growing and leveraging SPEâ€™s existing IP and realizing a culture of financial responsibility â€“ have laid the groundwork for real reform, and we are confident they will lead to an increase the profitability of our motion pictures business moving forward.â€
They also attempted to put the film studioâ€™s current state of flux into context within the Japanese electronics group. Even after exiting from several business sectors which has interests that still stretch from making TV sets through to games.
â€œOne of Sonyâ€™s great strengths is the diversity of its business portfolio and unifying power of the â€˜Sonyâ€™ brand. Each business must be autonomous, self-sustaining, but at the same time they work cooperatively under the common identity of â€˜Sony,â€™ aiming to enhance the total corporate value of Sony group.Â It is important to keep in mind that there was a time when some businesses were facing tough challenges; other businesses helped us to improve and sustain the profitability of the entire Sony Group,â€ the pair wrote.
â€œFiscal year 2017, which begins in April, is the final year under our second mid-range plan. We look forward to working together to achieve our consolidated financial targets of more than 10% in return on equity and JPY500 billion in operating income, and to make a Sony that always brings inspiration and emotional engagement (Kando) to our customers.â€
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