Sony CEO Kazuo Hirai said that he is reconfiguring the company by spinning out less profitable businesses and focusing on the more profitable ones, according to statements he made last week.
Sony’s video (mainly TVs) and sound operations (speakers) will be put into a separate structure in October as will other unspecified business, probably mobile phones. A complete sale of the TV or mobile phones would be considered on its merit, Hirai said.
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The company will focus on image sensors and other technologies that mobile phone makers like Apple use in their products; gaming consoles (PlayStation) and the online network; movies, TV shows and OTT content (Sony Pictures) and music (Sony Music) because they “are the areas that will drive sales and profit growth,” Hirai said.
“Separating our business units will make cooperating with other companies, restructuring, acquisitions and attributing responsibility much easier,” Hirai said.
Despite the recent furor caused by hackers (which has had no real impact on the business), sales at Sony Pictures are expected to increase to between $10 billion and $11 billion in Sony’s fiscal 2017. Revenue at Sony Music, with the likes of One Direction, Kelly Clarkson and Bob Dylan in its catalog, is expected to be between $4.8 billion to $5.2 billion in the same period.
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Sony’s financial results are picking up. Earlier this month, Sony forecast an operating profit instead of a loss for its fiscal year that ends March 31. It’ll still lose money for the entire year but less that it had previously forecast.
Hirai said Sony wants to grow its PlayStation network by adding more users (a low-cost PlayStation-like streaming adapter would help) and focus on Internet opportunities such as streaming music. Sony has been a leader at producing original content for OTT services.
Sony’s TV Conundrum
It’s unlikely that any potential buyer of Sony’s TV and sound businesses would insist on using the Sony brand to sell TVs, at least for some period of time, so that brand will be a valuable asset in any acquisition. The question then is who might buy Sony’s TV business — certainly not any of the West’s other big four — Samsung, LG or Vizio, The brand would have an enormous value to any of the up and coming Chinese set makers but they certainly don’t need Sony’s TV manufacturing operations, at least in the longer term.
Sony TV’s best bet night be a consortium of several Japanese set makers such as Panasonic, Sharp and Toshiba, which might add their TV operations to a joint venture rather than separately facing the two South Korean giants and the hungry Chinese setmakers.
A few facts that’ll impact what Sony does with its TV operations:
– 4K is causing massive changes in the set-making industry.
– TV sets are lasting longer and longer so the time-between-replacement has lengthened, which reduces sales.
– The era of watching “TV” and other video entertainment on tablets and smartphones means less use of TV sets, especially by the young.
– Chinese setmakers are slowly and carefully getting ready for expanding in Western markets.
– Samsung and LG are far ahead of rivals in a) technology and b) owning their own facilities for developing technology and making important components.
What Sony has in its TV operation is some advanced technology, bloated manufacturing, a dynamite brand name in every part of the world and distribution. What it does not have is the ability to make large quantities of UHD TVs that it can sell at prices that compete in the mass market. Samsung has already captured the early lead in prices for UHD sets and LG and Vizio are keeping pace, leaving Sony behind. Sony’s strategy has been to make fewer high-quality UHD TV sets that sell for higher prices. Samsung, LG and, in the States, Vizio want to provide both high quality and mass market pricing. Samsung, for example, shaved a few dollars off its manufacturing costs by leaving 3D off of some of its UHD sets.
Companies that make only a few high-quality sets have not done well, except for Sharp but its market is now under attack. Sony knows that situation well.
What is certain is that the glory days of the Sony Walkman music player and Sony Trinitron TV have gone with the wind. Sony-made…
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