Tokyo – Sony said it will take a $1 billion writedown in
its movie business after reviewing the future profitability of its operations.
The company said it would book the charge in the fiscal
third quarter and is examining how that will affect its forecasts. To offset
part of the loss, the company also said it would sell shares in the medical web
service M3 to Goldman Sachs Group’s Japan unit, in a deal worth about 37
billion yen.
The announcement comes two weeks after Sony said the
chief executive officer of Sony Entertainment, Michael Lynton, is stepping down
after a 13-year run. The studio has struggled recently, including with last
year’s Ghostbusters sequel and a movie based on the Angry Birds video game.
Sony warned in June the division was at a risk of posting more losses.
“There has been a suspicion in the market that Sony
doesn’t have a firm grip on the movie business, but still the amount is a
surprise,” said Kazunori Ito, an analyst at Morningstar Investment Services.
“That said, with Lynton’s departure and this writedown, all the bad news is out
and the attention can turn on their plan for the coming fiscal year.”
Sony shares closed little changed in Tokyo. Shares listed
in Germany fell 1.9 percent in light-volume trading.
“The decline in the DVD and Blue-ray market was faster
than we anticipated,” Takashi Iida, a Sony spokesman said by phone.
Read also: Resurgent games division lifts Sony
The Tokyo-based company is increasingly relying on its
video games business, which generated twice as much income in the last fiscal
year as film. Sony’s PlayStation 4 console is outselling Xbox One, its closest
rival from Microsoft Corp., by about two-to-one, according to industry website
VGChartz.
Lypton’s departure capped a tumultuous two years for the
division since a cyberattack blamed on North Korea paralyzed the studio. The
hacking led to private messages leaking onto the internet and the departure of
film-division head chief Amy Pascal. Sony’s CEO Kazuo Hirai has temporarily
relocated to California for six-months to oversee a review of the division and
look for a replacement, the company said this month.
In June, Sony lowered its projection for film revenue in
fiscal year 2018 by $500 million to a range of $9.5 to $10.5 billion. It also
lowered its operating profit margin to a range of 6 to 7 percent, from 7 to 8
percent. Sony’s Iida said the division’s television broadcasting unit, which
generates the majority of revenue, is unaffected and continues to do well.
Sony is increasingly leaning on China to offset the
downturn. In September, Dalian Wanda Group, the world’s largest movie screen
operator, agreed to invest in Sony Pictures productions in an open-ended
partnership. But a slowdown in movie revenue on the Chinese mainland has raised
doubts about how much the deal will bolster Sony’s performance.
M3 slipped 1.2 percent and is up 17 percent over the past
12 months. M3 will continue to count Sony as its largest shareholder even after
the deal, according to data compiled by Bloomberg. Prior to the deal, Sony held
39.3 percent of M3’s outstanding shares.
BLOOMBERG