Kazuo Hirai‘s keynote presentation at the International CES started slow but finished with a passionate call to arms that should resonate loudest at his own company. The CEO acknowledged that Sony has had a string of technological misfires — including its Betamax video recorder — in addition to successes such as the Walkman, compact disc, and PlayStation game consoles. “In an enterprise that makes things, we first must make that connection with people,” he says. And while “we’ve started to deliver that ‘wow’ again,” he added that Sony and the consumer electronics industry “can and must do better” by eschewing “just good enough products…These products must be fantastic objects of engagement.” He touted the advent of 4K television sets, and audio devices that deliver more nuanced reproductions than people typically hear when they listen to MP3s. “An entire generation missed that experience of listening to uncompressed audio…what the artist intended,” he says. Hirai also likes his company’s new cameras. Sensors are so sensitive that users can change the focus and depth enhancement of a photograph after it’s taken. Medical professionals also can use the sensors to evaluate someone’s skin, or determine the amount of oxygen and sugar pulsing through a blood vessel.
UPDATED, 1:50 PM: “We do very much have the ambition about creating a bigger universe around Spider-Man. There are a number of scripts in the works” involving characters and villains in the series, Sony Pictures Entertainment chief Michael Lynton told analysts in a Q&A session wrapping up his operation’s first meeting with investors. But he didn’t offer details, except that Sony is “working closely with Marvel and Disney.” But lest fans of the Marvel world take that to mean that Spider-Man could finally join his buddies in an upcoming The Avengers or other Marvel/Disney film — think again. Sony’s longtime rights deal with Marvel for Spider-Man allows them to exploit any character within the superhero’s universe — including villains, girlfriends or even Aunt May. But Disney, which acquired Marvel in 2009, owns merchandising rights to Spider-Man and those related characters, so any further exploitation would have to involve Disney.
While Sony today promised to hold down costs, especially for films, Lynton says that “we have in no way shape or form lost our commitment to the movie business. The movie business sits at the heart and soul of the company.” And he wouldn’t feel constrained from approving a major project. “We never once found ourselves lacking for capital” when it comes to a needed investment including an acquisition. That also was true when Disney snagged Marvel. With theme parks and several cable channels, Disney has “a few more channels to exploit” the properties. “You have to measure it against that backdrop.”
CEO Kazuo Hirai just gave his movie, TV, and music enterprises a strong endorsement as he kicked off the company’s long-awaited investor briefing about the businesses. “I know that the whole of Sony is greater than the sum of its parts,” he says calling entertainment “a core part of Sony” that is “crucial to our future growth.” He says Sony has had 89 No. 1 movies since 2000, 38 TV series produced in the U.S. this year, 1,500 music artists, and is the No. 1 music publisher. But the picture segment generated a loss in the most recent quarter, and “some movies just didn’t perform as we had estimated” adding that the operation “must get better.” He said that the unit will become more profitable and will revamp the process of greenlighting films. Strategic priorities for entertainment include investing in “fast growing and high margin businesses,” building existing libraries, creating “compelling new franchises,” accelerating collaboration across all of Sony’s businesses, and “rigorous cost management.” Today’s meeting follows up on a promise that Hirai made to Third Point CEO Daniel Loeb: After rejecting the hedge fund owner’s proposal to create a new stock for entertainment and sell a minority stake to the public, Hirai said that he would ”increase disclosure regarding Sony’s entertainment businesses. We agree this can help market participants analyze their performance and monitor their success.” Loeb stung the company over the summer, charging that Sony “has plenty …
The President and CEO of Sony Corp has had a busy year, so he’s ringing in 2014 in Las Vegas — by delivering the opening speech at CES on January 7, that is. Kazuo Hirai has spoken recently about plans to revitalize his company’s electronics business, so he’ll have plenty to talk about at the annual consumer tech show. Expect to hear more about Sony’s new 4K Ultra HD video download service and its recent deal to carry Viacom’s channels on the Internet-based TV service the Japanese conglomerate is working on. Hirai will speak in the Venetian’s Palazzo Ballroom after Consumer Electronics Association CEO Gary Shapiro’s State of the Industry Address. International CES runs through January 10.
UPDATE: Third Point Responds Tonight After Sony Rejects Daniel Loeb’s Spinoff Proposal And Will Keep Entertainment Unit
UPDATE: The battling continues in this war of words. Daniel Loeb’s hedge fund Third Point tonight made clear it won’t stop destabilizing Sony and its entertainment division after the Japanese parent company rejected Daniel Loeb’s pressure to spinoff its showbiz unit. Third Point said it will “explore further options to create value for shareholders” and “welcomes Sony’s commitment to greater transparency and expects this will foster a culture of accountability. Sony has clearly recognized the performance issued we identified. In the new spirit of transparency, management should communicate more specific plans to improve entertainment results. A renewed focus on profitability and better margins should reduce bureaucracy and thus free up resources to invest in high quality motion pictures, filmed entertainment, networks and music, aligning shareholder interests, the creative community and consumers.”
Earlier today, Sony told Third Point CEO Daniel Loeb today it is rejecting his proposal to create a stock for its entertainment assets and then sell up to a 20% stake to the public. The board has “unanimously concluded that continuing to own 100% of our entertainment business is the best path forward and is integral to Sony’s strategy,” CEO Kazuo Hirai says in a letter to the hedge fund manager. “We do, however, expect to increase disclosure regarding Sony’s entertainment businesses.” Hirai adds that he’s “very focused on increasing margins at [Sony] Pictures.” That’s a particular sore point for Loeb, especially following the box office results for After Earth and White House Down, which he said last week “bombed spectacularly.” In response, actor George Clooney told my colleague Mike Fleming Jr. that Loeb is “a carpet bagger…who is trying to spread a climate of fear that pushes studios to want to make only tent poles.” Hirai says that he’ll cut costs while also “aggressively investing in our global television production business” and “building upon our diversified film slate strategy.” He notes that Sony has “instituted an even more exacting ‘green light’ process for film production, focusing more intensively on overall slate profitability as well as per film returns-on-investment.” Sony’s decisions were based on its belief that demand for premium content will grow “at unprecedented levels” as broadband and mobile devices become nearly ubiquitous. Shareholders “will benefit from owning all, rather than a part, of these valuable [content] assets.” Loeb is an investor in Variety with Deadline’s parent company, PMC.
The letter follows below:
“It’s premature at this point in time to speculate one way or the other,” Sony president and CEO Kazuo Hirai told CNBC today when asked whether an investor proposal to sell off portions of the company’s entertainment assets will succeed. The Sony chief made his comments as the company hired Morgan Stanley and Citi to review the proposal from shareholder Daniel Loeb’s hedge fund Third Point. “The process really is, as was described earlier, a discussion that needs happen really at the board level of the organization and we want to make sure that we have a through discussion of the merits of the proposal before we come to any conclusion,” he told the business network. Any discussion of Third Point’s proposal will have to wait until the new Sony board is elected later this month.
It’s a big day in music publishing with the closing of the $2.2B cash and debt deal by a consortium led by Sony/ATV — Sony’s partnership with Michael Jackson’s estate — for one of the industry’s crown jewels: EMI Music Publishing. The pact gives Sony/ATV about 1.3M additional titles to administer including pop classics “My Girl,” “Bohemian Rhapsody,” “Every Breath You Take,” “You’ve Got A Friend,” “New York, New York,” “Over The Rainbow” and “Have Yourself A Merry Little Christmas.” Sony/ATV, which already had about 750,000 titles — including The Beatles’ catalog — paid $320M in cash for 40% of the property. Others backing the EMI publishing acquisition include David Geffen, Mubadala Development Company PJSC, Jynwel Capital, and the Blackstone Group’s GSO Capital Partners. ”Music publishing, along with the rest of our entertainment companies, has been a bright spot in our business portfolio, and we expect that trend to continue with this important acquisition,” Sony CEO Kazuo Hirai says. The Sony/ATV-led group bought the EMI collection from Citigroup. The bank took control of EMI last year after its previous owner, Guy Hands’ leveraged buyout firm Terra Firma, was unable to make payments on the debt he took on to buy the music company in 2007 at the height of the private equity bubble. The FTC approved the Sony/ATV deal last week but has yet to rule on Citigroup’s agreement to sell EMI’s music production operation to Vivendi’s Universal Music for $1.9B.
CEO Kazuo Hirai says his effort will result in major changes in the television and mobile businesses — and confirmed his plan to slash about 10,000 jobs this year, equal to 6% of Sony’s employees worldwide. But he adds that it will also enable Sony to generate $104.9B in revenue with at least a 5% operating margin and 10% return on equity in the fiscal year that ends next March. Digital imaging, gaming and mobile will be the “three main focus areas” of the electronics business.
Sony says gaming should deliver $12.4B in revenues and an operating margin of 8% in the fiscal year that ends in 2014, with sales boosted by growth in the number of downloadable titles for its PlayStation and an expansion of the the number of devices that will work with the console. For mobile, the company is consolidating its smartphone, tablet, and VAIO computer businesses to “quickly develop and deliver compelling products” — including some built around rich content such as music and games. Hirai may face his toughest challenge in turning around Sony’s TV set business. He plans to reduce costs with a 40% cut in the number of models the company sells. Meanwhile Sony will integrate sets with mobile products, provide more movies and music for them, and concentrate on “next-generation display technologies” such as OLED and Crystal LED Display.
He also sees a big opportunity to develop high-end and professional products that use 4K technologies, which offer …
The company’s U.S. shares are down nearly 8% in pre-market trading after it said that it lost about $6.4B in the fiscal year that ended in March — up from the $2.7B loss it projected in February. The difference is due to a $3.7B tax charge which Sony says is “primarily due to the establishment of valuation allowances against certain deferred tax assets, predominantly in the U.S.” Sony’s new CEO Kazuo Hirai told analysts that “while the Pictures and Music businesses based in the U.S. have a stable business foundation and are strong from a profitability perspective, Sony’s electronics business in the U.S. is not as profitable.” Today’s report offers some hope for investors who are counting on Hirai to turn around the struggling consumer electronics and entertainment giant: The company says it expects to end its four year losing streak and “return to positive operating results” for the fiscal year that just began, with consolidated income projected to hit $2.2B. Hirai will discuss his strategic plans on Thursday. Sony will release its full results for the year that ended in March on May 10.
The total represents about 6% of its workforce, according to multiple reports apparently beginning with Japan’s Nikkei. About half of the layoffs will come from Sony’s chemicals and its flat-panel businesses. Development Bank of Japan has already agreed to buy Sony’s chemical products business. In addition a new government supported operation, Japan Display Inc, is picking up Sony’s unit that makes small- to medium-sized liquid crystal displays. Sony’s new CEO, Kazuo Hirai, who just replaced Howard Stringer, had warned that he would have to take “painful” measures to turn around the consumer electronics giant, which said it would end its fiscal year with a loss.
Kazuo Hirai officially replaces Howard Stringer as Sony’s CEO next week. But today he signalled his determination to revitalize Sony’s struggling electronics operations — and potentially take on its more glamorous rival, Apple – by unveiling a wide-ranging reorg. The new plan eliminates the company’s consumer products and services group, which Hirai had led, and the business-oriented professional device and solutions group. Hirai will personally run a new Home Entertainment Business that will include TV sets, arguably Sony’s most important product right now. But the company says that it is “positioning digital imaging, game and mobile as the three core pillars of its electronics business, and going forward aims to concentrate its resources in these areas to further reinforce the businesses.” Here’s the company’s announcement:
Now we know why Sony wanted to announce yesterday that Kazuo Hirai will replace Howard Stringer as CEO in April. U.S. shares are down about 5.4% in pre-market trading after the electronics and entertainment giant released a fiscal 3Q report filled with tales of woe — including in its filmed entertainment and music businesses. In the last three months of 2011, the company generated a net loss of $2B, down from a profit in the period last year, on revenues of $23.4B, down 17.4%. What’s more, Sony lowered its forecast for the fiscal year ending in March: It now expects to wind up with a $1.2B operating profit, which is 10.2% lower than it predicted in November. Sony’s biggest problem is the declining sales of LCD television sets in Japan, Europe, and North America. Revenues for Consumer Products and Services fell 24.4% to $12.8B in the quarter. Revenues grew for filmed entertainment, by 7.7% to $2.1B, but due to high marketing costs and the disappointing performance of Arthur Christmas the unit’s operating profit fell 84.8% to $9M. The Music operation also struggled with sales down 11.7% to $1.6B, and a 21.7% decrease in operating income to $196M. Bestselling titles included Adele’s 21 and music from the TV show Glee.
Sony Corp has announced the ascension of Kazuo Hirai to the role of president and CEO, with current chief Howard Stringer to become chairman of the board of directors. The moves were expected as Sony last year expanded Hirai’s duties to oversee all of its all-important consumer products and services business. The Sony press release is below:
TOKYO, Japan – Sony Corporation (“Sony”) today announced that Kazuo Hirai has been appointed as President and Chief Executive Officer, effective April 1, 2012. Sir Howard Stringer, currently Chairman, CEO and President, will become Chairman of the Board of Directors in June, 2012.
Mr. Stringer recommended to the Sony Board of Directors that Mr. Hirai, currently Executive Deputy President, be his successor as President and CEO. Mr. Stringer will continue as Chairman of Sony Corporation until his ascension to the Board Chairmanship, which will become effective upon Board approval following the annual meeting of shareholders in June, when the current Chairman, Yotaro Kobayashi, will retire. Mr. Hirai is also expected to be appointed to the Board at the June shareholders meeting.