8. Sony Entertainment

Revenues 2014/2015: ¥ 2.830.000 billion (€ 20.169 billion)

Overview

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Sony is the only Japanese manufacturer of entertainment electronics that managed to establish itself on the global market through both the manufacturing and distribution of hardware and content. Japan is host to more than 40 Sony subsidiaries and the worldwide count of subsidiaries exceeds 900. Apart from the production of audio related products, video players, televisions, semiconductors, cameras, mobile phones, computers and gaming consoles, Sony offers insurance and finance services. The Sony Pictures Entertainment division stands for film, music and games production. One part of the company is Hollywood studio Columbia Pictures, which produced the ‘Spiderman’ films and distributes TV series such as ‘Seinfeld’ on the international market. Multimedia content is also a part of the Sony repertoire. Sony produces CGI-films, websites and webgames for stationary and mobile devices. Sony’s gaming console Playstation was introduced to the market by the end of 2006 in its latest version, the PS3.

General Information

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Headquarters:
1-7-1 Konan, Minato-ku, Tokyo 108-0075, Japan 
Telefon: 0081-3-6748-2111  
Internet: www.sony.net

Branches: Audio, video, television, video games and -hardware, film, finance, computer hardware, mobile devices. 
Legal form: Public Company (since 1958)
Finacial year:  4/1 - 3/31
Founding year: 1946

Table I: Economic Performance (JPY Bio.)

2014/152013/142012/132011/122010/112009/102008/092007/08
Revenues8,2167,7676,4986,4937,1817,2147,1108,871
Media revenues2,830³2,312³1,882³1,831²1,869¹2,110***2,310*2,525*
Profit (loss)(126)(128.4)230.1(67.3)199,82131.722(227,783)475.299


*Segments „Game“, „Pictures“, and „All Other“
¹Segments "Pictures", "Music", and sub-segment "Games" ("Networked Products & Services")
²Segments "Pictures", "Music", and sub-segment "Games" ("Consumer Products & Services").
³Segments "Pictures", "Music", and "Games".

Executives and Directors

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Management:

  • Kazuo Hirai, Chairman, CEO & President
  • Kenchiru Yoshida, Executive Vice President, CFO
  • Tomoyuki Suzuki, Executive Deputy President, R&D Plattform, Energy Business, and Storage Media Business
  • Shiro Kambe, Executive Vice President, Legal, Compliance, Corporate Communications, CSR and External Relations
  • Masashi Imamura, Executive Vice President, Manufacturing, Logistics, Procurement, Quality & Environment
  • Shigeki Ishizuka, Executive Vice President, Imaging Products and Solutions Business, President of Digital Imaging Group and Professional Solutions and Services Group
  • Andrew House, Executive Vice President, Game & Network Services Business, President and Global CEO, Sony Interactive Entertainment LLC
  • Michael Lynton, Executive Vice President, Pictures and Music Businesses, CEO, Sony Entertainment Inc., Chairman & CEO, Sony Pictures Entertainment Inc., CEO, Sony Corporation of America
  • Ichiro Takagi, Executive Vice President, Home Entertainment & Sound Business and Consumer AV Sales & Marketing, Representative Director and President, Sony Visual Products Inc., Representative Director and President, Sony Video & Sound Products Inc.
  • Hiroki Totoki, Executive Vice President, Mobile Communications Business, President & CEO, Sony Mobile Communications Inc., President and Representative Director, So-net Corporation

Board of Directors:

  • Kazuo Hirai, Sony
  • Kenichiro Yoshida, Sony
  • Kanemitsu Anraku, Mizuho Financial Group
  • Osamu Nagayama, Chugai Pharmaceutical Co. Ltd.
  • Takaaki Nimura, Sony
  • Eikoh Harada, McDonalds Holding Japan
  • Joichi Ito, Media Lab MIT
  • Tim Schaaff, Intertrust Technology
  • Kazuo Matsunaga, Hitotsubashi University
  • Koichi Miyata, Sumitomo Mitsui Financial Group
  • John V. Roos, Wilson Sonsini Goodrich & Rosati
  • Eriko Sakurai, Dow Corning Toray Co.

History

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Over the course of 40 years, Masaru Ibuka and Akio Morito - working from their adjacent head offices in Tokyo - created a global company and one of the world’s most famous brands. In 1946, 25-year old Morita, heir to a famous rice wine dynasty and Ibuka, who is 13 years older than Morita, founded the Tokyo Tshushin Kogyo (Tokyo Telecommunications Engineering). Despite facing difficult conditions when it came to the production process, the company succeeded in securing an important position within the emerging market of consumer electronics by means of products such as the first Japanese cassette recorder (1950) and the ‘TR-55’ transistor radio (1955). With an eye fixed on a potential international expansion, Morita decided to rename the company to ‘Sony’ in 1958 (from Latin ‘sonus’, the tone). The new name was not only comprehensible and pronounceable all over the world; it also concealed Sony’s origin. Back in the day, the West deemed Japanese products to be inferior.

From 1960 onwards, Sony launched a massive push onto the US-American market, where the company would soon sell half of their total productions. The launch of the Trinitron television in 1968 was followed by a decade of extensive growth by the end of which stood the traumatic defeat in the battle of leading video formats. The qualitatively superior Sony Betamax standard lost out to the cheaper VHS-System by Mathsushita subsidiary JVC. Sony fell victim to its own expensive edge in development. Morita propagated the diversification of a company that would move on to produce on the international stage and reek in high profits thanks to innovations in consumer and entertainment electronics such as the Walkman in 1979 or the development of CD technology (1982, together with Philips). Subsequently, the company also got in on software production, particularly because the Betamax standard had failed due to the fact that Sony could not offer attractive videos.

Sony acquired CBS Records for two billion Dollars in 1988, the largest record company in the world. Soon, the company considered buying a Hollywood studio to enforce a strategy that would seek to assert their position on the global market of realizable, US-focused popular content. By means of ‘Superagent’ Michal Ovitz’s mediation, former CEO of the CAA talent agency, the year 1989 saw the first takeover of a traditional major through the Japanese company. Sony bought film company Columbia for approx. 5 billion Dollars from Coca Cola. Sony and Sony Pictures have been part of the big five in the film industry ever since.

However, the first years in Hollywood turned out to be quite the fiasco. Peter Guber and Jon Peters, more or less second-class producers whose portfolio only sported one successful film so far (‘Batman’) were made the heads of the Columbia/TriStar studio. But Guber and Peters distinguished themselves in a predominately negative fashion through confusing personnel politics, nepotism and the misappropriation of Sony’s million fors private extravagancies. The transfer fees and settlements caused by the constantly changing personnel ranks alone cost Sony at least two million Dollars. The mismanagement was reflected in the unsuccessful efforts at the box office. Columbia and TriStar released one expensive turkey after the other. In 1994, Sony suffered one of the biggest losses in the history of the Japanese company with 3 billion Dollars, which prompted some malicious tongues to speak of a ‘Rectification for Pearl Harbour’.

By mid-December 2007, Sony announced a change in strategy. In the future, the company would cease to rely primarily on hardware products, but rather set their sights on software that would lead them into a competitive race with Microsoft and Apple. Sony went on to rise up into the league of large software developers and take advantage of the available business synergies. Products from the computer and entertainment-electronics divisions were supposed to interlink with software and applications. Stringer saw good potential for a successful development of the company in the conjunction of software with the existing production of electronics: “If we succeed in joining up the relevant points of reference, we will end up with an advantage over competing manufacturers of electronic products as well as over Apple and Microsoft.”

In February 2008, the winner coming out of the competition that was to designate the successor of the DVD format turned out to be the Blu-Ray format that was developed by Sony. The tip on the scale that ensured the Sony victory over Japanese company Toshiba Corp., manufacturer of the competing HD DVD format, was the announcement of Warner Bros. Entertainment, which holds one of Hollywood’s largest film archives, to release exclusively on the Blu-Ray format. Other companies to pledge the same distribution philosophy were the Sony Film studios, Walt Disney and 20th Century Fox. After the Warner decision, the Blue Ray format hit the critical mass that would establish it as the superior format in the fight over the DVD succession. In March 2008, the production of HD DVD devices and DVDs at Toshiba was discontinued.

Management

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After suffering a stroke, the 73-old Morita withdrew from the company business in 1994. Norio Ohga became the successor and new CEO while Nobuyuki was made the new Sony president. The latter first and foremost took care of the film division. He let go off hapless manager of Sony Pictures Entertainment and made the experienced John Calley the new CEO of Sony Studios in November 1996. Soon after, Sony was back in black.

In June 1999, Nobuyuki Idei moved up to become the head of Sony. He reformed the company structure in order to prepare Sony for the looming digital age. “Ibuka was a transistor kid”, explains Idei, and “Morita a Walkman and Ohga a CD-Kid. We will be Digital Dream Kids.” The move to make Sir Howard Stringer the CEO of the entire Sony group in March 2005 equalled an internal Sony revolution. For the first time ever, a non-Japanese person and someone who did not specialise in technology headed the giant company. Yet, the vision of Stringer’s predecessor Nobuyuki Idei, to create a ‘Multimedia entertainment company based on digital technology’ never lived to see the day. The strategy was supposed to bring in a profit margin of 10 percent by 2007 but settled for a meagre 1.5 percent in 2004.

Stringer on the other hand could boast with successes. As the head of the Sony Corporation of America, he managed to convert the volatile film division into a reliable revenue generator. When it came to the redevelopment of the cinema division, Stinger’s ‘Low-Key Management Style’ (Economist) and his knowledge of the entertainment business were the key factors on which his success was based. The native of Wales had been working for CBS for 30 years, where he filled the position of head of programming from 1988 to 1995 and later became the president. Sir Howard was responsible for one of the biggest coups in the history of US-Television when he brought David Letterman’s Late Night Show to CBS. Another reason for Stringer’s ascent to success were his thorough personnel politics. He fired the extravagant US music CEO Tommy Mottolo and replaced him with cost-efficiency specialist Andrew Lack who prepared the division for the fusion with BMG. His successor in the cinema division, Michael Lynton is also considered a reliable position.

Stringer might not speak Japanese but sports communicative talent. As such, he keeps emphasising his willingness to learn from the Japanese and refuses to introduce American customs in Sony’s corporate culture. The 65-year old who lives and works in New York, London and Tokyo is famous for his friendly and open demeanour. In order to get to know Sony-president Ryoji Chubachi, he invited him for a bath in one of the hottest springs in the Japanese resort at Mount Fuji. Sometimes there is a tangible tension between Stringer and top engineer Chubachi, who form Sony’s dual leadership. Chubachi, who was unhappy with the company’s direction under Stringer, demanded more time and no further cuts. 

Business Fields

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The following business fields are not congruent with the business units/Profit Centers/subsidiaries of Sony. Every business field handles various Sony subsidiaries.

Game Business Group (Sony Computer Entertainment)
The core of this group is the Sony gaming console Playstation (PS). The division encompasses Playstation hardware and processor chip development, the Playstation Portable product group (PSP) as well as game development. The Sony Computer Entertainment Inc. profit center is responsible for the gaming division.
Just one year after the launch of Microsoft competitor Xbox 360 and one week after Nintendo’s Wii (in the USA) hit the market, Sony finally released the PS3, in limited circulation and only in Japan and the USA for the time being. After the PS3 launch kept being postponed despite its initially planned launch in spring 2006, the PS3 finally made it to Japanese stores by the end of November. All of the 100.000 gaming consoles available in Japan were sold out within a few hours. The majority of the consoles had been supplied to the Christmas-dominating US-market, where the console was available for approx. 600 Dollars. In order to avoid alienating the customers, the price kept being reduced due to the continuous delay of the release. Also, the sale of games and bundles is where the real business supposedly lies. So far, the games – unlike video or DVD recorders – are not compatible with all consoles. According to analysts, each sold console results in a minus of 200 $ for Sony. The success of the PS3 is of the highest strategic importance for the company, but not because of the direct revenue generated by the sales of the hardware but the lucrative business with the games. Apart from the profit generated by the sale of in-house titles, Sony also benefits from the license for each game that is sold for the console. On top of that, the PS3 will be used as a decisive factor in the raging war of future data storage formats. All consoles are shipped with Blu-Ray drives, which is supported by Sony. The fast-increasing fundament of consoles in circulation functions as an argument to convince the producers of content to ship their products in Blu-Ray only and thereby cut out the competing HD-DVD format by Toshiba and Microsoft.

The Sony gaming division merely contributes 12 percent of the total revenue with 8,5 billion US-Dollars, but it was responsible for up to 60 % of profits over the years. A much higher return than those generated by televisions, DVD-players, music or film. The production of a PS3 costs between 800 and 850 US-Dollars, depending on the model, while at the same time, the retail price lies at 500 to 600 US-Dollars. The fact that the unavoidable losses are not the easiest to compensate constitutes an imminent danger to the company. As early as 2008, Sony and its Playstation 3 suffered losses totalling at 3,3 billion US-Dollars, a circumstance that was described by Sony CEO Howard Stringer as reasonably catastrophic. Microsoft endured losses of over 7 billion US-Dollars since the launch of the Xbox in 2002 (and 2007 respectively), yet the company generates most of its intake through the software business and as such is not as dependent on its console’s success as Sony. Another notch in the wood was the hacker attack on the Playstation network in April 2011, causing a considerable damage for its reputation. Hackers managed to illegally procure customer details (including credit card numbers) of more than 77 million registered Playstation users.
Entertainment Business Group

Film and Television
Sony Pictures Entertainment Inc. and its subsidiaries are present in more than 67 countries worldwide. The division produces films for the cinema, television and other formats and also distributes the products on the global market. The TV production division produces approximately 60 TV formats. Particularly successful TV productions by Sony are ‘The Young and the Restless’ and ‘Day of our Lives’. The company enjoyed global success in the past with game shows such as ‘Jeopardy’, which aired in Germany from 1990 to 1993 under the name ‘Riskant!’ and ‘Wheel of Fortune’. Sony managed to spread the distribution of the ‘Wheel of Fortune’ format even further last year, which resulted in a profit increase of the television segment. The revenue was also boosted by an increase in advertising and subscription takings.

Sony Music Entertainment
The second largest music label in the world had been operating as a joint venture with Bertelsmann from 2004 to 2008 (Sony BMG) up to the point when Sony took over BMG Music as a whole for the price of 600 million Euros. Sony Music unites labels such as Arista, Columbia Records, Epic Records, Jive and RCA. The musical spectrum ranges from Hip Hop, Country, Classic, Rock and Pop. Sony BMG is home to German and international stars including Beyoncé, Justin Timberlake, Christina Aguilera or Bob Dylan. The company is based in New York.

Content

Institute of Media and Communications Policy

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Media Pluralism in Europe

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Partners

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Mediadb.eu is funded by medienboard Berlin-Brandenburg,

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the Open Society Foundations' Media Program,

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Germany's Federal Agency for Civic Education,

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the Rudolf Augstein Foundation,

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the city of Cologne, Germany,

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and the State of Thuringia, Department of Commerce.