Japanese electronics and entertainment conglomerate, Sony Group saw revenues rise in its music, games and pictures units in the second quarter of its current financial year. But group profits were halved from JPY459 billion to JPY283 billion ($2.50 billion at current exchange rates).
The company reported its figures for the three months from July to September on Thursday afternoon local time. Group sales increased by 13% to JPY2.37 trillion. Income before taxes dropped 54% and earnings per share fell to JPY170.26, compared with JPY367.08 in the equivalent quarter last year.
Sony’s ‘pictures division,’ which straddles feature film, television production and channel operations, saw revenues increase by 35% from $1.76 billion in the second quarter of last year, to $2.37 billion in the three months to Sept. 2021. Operating profits fell 7% from $309 million to $288 million.
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Games and network services enjoyed a sales gain of 29% with the most recent quarter delivering JPY654 billion, compared with JPY507 billion. The segment’s operating income went the opposite direction, falling 21% to JPY82.7 billion, compared with JPY105 billion.
Music followed the same pattern. Quarterly revenues increased by 18% from JPY231 billion to JPY272 billion. But the segment’s operating income fell by 7% from JPY54.3 billion to JPY506 billion.
Despite the lower profitability of all three entertainment divisions in the most recent quarter, Sony increased its guidance for the full year in both music and pictures units. It now forecasts net year-on-year profit improvements in pictures and music.
Sony left its forecast for games unchanged. It is indicating a 5% year-on-year profits decline, but that still leaves the games unit as the group’s most profitable division.
In the July-September quarter games and network services revenue was helped by increases in hardware sales, favorable foreign exchange rates and increases in third-party games titles and add-ons. Operating profits in the games sector were hindered by slowing sales of the old PlayStation 4 console, manufacturing costs of the new PS5 which are higher than the console’s market price, and reduced business on Sony’s first-party titles.
Music sales in the most recent quarter were lifted by recorded music and music publishing: greater revenues from ad-supported and subscription streaming services, offset by lower physical music sales. The group’s three largest recorded music contributors were Doja Cat’s “Planet Her,” The Kid Laroi’s “F*ck Love,” and Lil Nas X’s “Montero.”
Theatrical revenues were up, but still scarred by the global restrictions on cinema operations. They rose from $13 million in the second quarter of last year to $66 million in July to September, 2021. only three films were released in North America in the most recent quarter: “Escape Room: Tournament of Champions,” “Don’t Breathe 2,” and “Show Me the Father.”
The current October to December quarter will see a far more robust releasing program, including “Venom: Let There Be Carnage,” already released on Oct. 10, 2021; “A Mouthful of Air,” releasing on Oct. 29; “Ghostbusters: Afterlife,” releasing on Nov. 19; “Resident Evil: Welcome to Raccoon City,” releasing on Nov. 24; “A Journal for Jordan,” on Dec. 10; and “Spider-Man: No Way Home” on Dec. 17.
Television production revenues leaped from $480 million to $790 million. Media network revenues increased from $470 million to $695 million.
On a conference call with media and financial analysts following the group’s regulatory filings, Sony’s management repeatedly referred to an ambition to spend JPY2 trillion ($17.7 billion) on strategic investments. These will be spread between acquisitions, capital expenditure, share buybacks and other returns to shareholders.
In recent months, Sony has completed its acquisition of specialty anime streamer Crunchyroll and announced the proposed purchase of Firesprite. It also recently announced plans to sell GSN Games, a casual mobile games house, to Scopely for $1 billion, a move which it said would generate a gain that the group would likely show as operating profit.
In September, Sony said that it would merge its Indian TV business with Zee Entertainment Enterprises. Parts of the deal, notably the choices of the merged group’s senior management, are being contested in court by minority investors.
Prior to the results on the group’s Tokyo-traded shares had come off their recent highs to finish 1% lower at JPY12,970 on Thursday. In New York, the group’s ADR shares had fallen 3.3% on Wednesday to $113.23.
