Earnings increases in music did not offset declines in movies and TV and games from Japanese electronics and entertainment giant Sony Group. But, overall, the group was able to post a 9% increase in net profit for the three months to June.
In the period from April to June 2021, representing the first quarter of its 2021-2022 fiscal year, Sony Group achieved sales of 2.25 trillion yen ($20.5 billion, using a rate of US dollar to Japanese yen conversion of $1 = 109.5 JPY), a gain of 15%. Net profit rose from 194 billion yen to 212 billion yen ($1.93 billion). Earnings per share rose 8.9% to 169.22 JPY.
The music segment saw profits jump from 35.6 billion yen ($325 million) to 55.4 billion yen ($506 million) on revenue that rose from 177 billion yen to 255 billion yen ($2.32 billion).
The pictures division (which covers cinema, network television and television production) posted profits of 25.4 billion yen, compared with 27.0 billion yen in the equivalent quarter last year. The company also reported US dollar operating profit of $232 million on revenue of $1.87 billion, compared to a previous operating profit of $251 million on revenue of $1.63 billion. dollars.
Games and network services saw higher quarterly sales but lower profits. Revenue was 616 billion yen ($5.62 billion), down from 606 billion yen. Operating profit was 83.3 billion yen ($759 million), down from 124 billion yen.
In notes accompanying the financial statements, Sony said the music division saw stronger sales for recorded music and music publishing, driven by gains from paid subscription streaming services, ad-supported music streaming and to a physical media rebound. The segment also includes Sony’s Japanese anime business, which was boosted by physical media revenue from the blockbuster movie “Demon Slayer The Movie: Mugen Train.”
The result of splitting the footage was mixed. It benefited from higher sales for media networks due to higher advertising and subscription revenue, higher theatrical film sales and an increase in television licensing revenue. But these were offset by lower sales to home entertainment due to limited theatrical releases from the previous year and lower revenues from television productions.
During the quarter, SPE recorded $169 million in box office gross worldwide, from three films: “The Unholy”, “Here Today” and “Peter Rabbit 2: The Runaway”.
For the full year, the group revised upwards its profit forecast for the images division, and shaded its forecast for the division’s turnover.
Click here to sign up for Variety’s free Media Earnings newsletter
The all-important games division benefited from an increase in hardware and peripherals sales and benefited from a useful exchange rate gain. But it suffered from a drop in sales of non-proprietary titles, including add-on content. It also suffered a weakening in its strategic pricing for hardware and sold the PlayStation5 console below its manufacturing cost. Despite these setbacks, Sony has not changed its sales or revenue forecasts for the games division’s annual results.
Sony shares fell 3.5% on the Tokyo Stock Exchange on Wednesday, ahead of the earnings announcement. At the halt of trading, they were valued at 11,050 JPY each. This reduced the year-to-date gain to less than 6%. YoY, shares traded in Tokyo are up 27%.
The past year of media consolidation and the rise of direct-to-consumer streaming operations by the group’s Hollywood rivals have raised many questions about Sony’s strategy in the streaming business and, again, the direction of the whole group.
The group fought back with a pair of smart rights deals that make Sony Pictures Entertainment a key content provider for Netflix and Disney Plus, and with a defiant stance reiterated during their Investor Day presentations in May.
Sony Pictures Entertainment’s film and television operations are not for sale or about to be separated, Sony Group CEO Yoshida Kenichiro said during May presentations. He sees the film and television studio as central to the group’s mission to “fill the world with Kando (the Japanese word for ’emotion’) through the power of creativity and technology”.
Yoshida said that while Sony isn’t launching a mass streaming business, it isn’t turning its back on D2C. “Sony plans to strengthen its initiatives in the service, mobile and social spaces to further expand these communities, and seeks to increase the number of people around the world directly connected to the Sony Group because of their desire to consume entertainment from the current number of around 160 million to 1 billion people,” he said according to notes.
In its May strategy notes, Yoshida said that over the three years to March 2024, Sony plans to allocate 2 trillion yen ($18.4 billion) to “strategic investments and investments in the growth of the IP and DTC businesses; Technology; and share buybacks.
It also plans to “strengthen the PlayStation Now cloud game streaming service and…invest in or partner with external studios.” In late 2020, Sony agreed to acquire anime streaming company Crunchyroll, although the deal remains under review by US regulators.