Is Sony’s Future Content, As Rumours Swirl Around Audio & TV Business
Is the scandal riddled Sony more a content Company today, than a TV and audio Company, and will this lead to a change in how they do business in Australia?
Or is it time for their audio and TV hardware business to be sold off along with the naming rights.
In 2020, Sony had the second-highest market share in recorded music and the highest market share in music publishing, they are also a major player in the creation of content spanning movies and games with speculation mounting that they are set to outsource parts of their consumer business spanning audio and TVs in Australia to distributors.
Despite the harassment scandal that plagued the Company last year in Australia and the sacking of the head of consumer business in Australia Abel Makhraz which led to the dumping of Directed Electronics Sony is reshaping their business away from hardware to content creation and content licensing.
They have already dumped their mobile division in Australia, with questions now being asked the future of their audio business.
During the past decade Sony has either created or bought the right to world-class music catalogues ranging from Miles Davis to Mariah Carey, they also own Hollywood film and television studios, plus the popular PlayStation, but their biggest problem was until now to get them to work together and play in harmony.
If Sony are not buying up content, they are making content with analysts questioning whether long term this the best direction for the Company is who is also hurting Microsoft and their Xbox with their popular PlayStation gaming console.
Sony’s PS5 became the fastest-selling PlayStation in its history when it was released in 2020 despite chip shortages and COVID with the Company selling vast quantities directly via their own web site.
To date the Company has sold 7.8m units of their new PlayStation 5.
Now, despite the seismic changes shaking all corners of the content and streaming world including streaming services for music, movies and TV, blockchain-based gaming and the disruptive promise of the metaverse — Sony appears to have finally found a way to make its distinct entertainment groups work together.
as for their audio and TV business that made the business famous these divisions now appear to not be a key part of the Companies future.
Today Sony shares are at a 20-year high, with many analysts covering the stock rating it as a “buy” due to the Companies change in direction.
They are also talking up a future in the electric car business which some analysts are not comfortable with.
Content and the making of content are where Sony is excelling today.
Over many years Sony has either created or bought the right instruments to achieve its goal: world-class music catalogues ranging from Miles Davis to Mariah Carey, Hollywood film and television studios, plus PlayStation, the leading games group.
But it could never quite make the orchestra play in harmony.
The Financial Times in the UK claims that despite the seismic changes shaking all corners of the entertainment world — including streaming services for music, movies and TV, blockchain-based gaming and the disruptive promise of the metaverse — Sony appears to have finally found a way to make its distinct entertainment groups work together.
Its movie studio is producing Spider-Man and other Marvel blockbusters, while a deep library of films and TV shows is helping to fill the bottomless appetite for streaming content.
A revived music business, the world’s second largest, is profiting from the growth of Spotify and TikTok. And with PlayStation, it has decades of experience in games — a sector that Netflix, Apple, Amazon and other deep-pocketed players are desperate to crack.
All this with cutting-edge hardware, including the VR headsets and other gear that many believe will be the gateway to the metaverse.
Missing is any mention of their TV and audio division that sells hardware to retailers.
During the past 20 years Sony has seriously wobbled with many questioning whether they will survive.
Investments often looked ill-judged. Business lines were retained for what former senior management now describe as “sentimental reasons”, leaving a misshapen conglomerate, institutionally resistant to streamlining or unity.
Then came a major management shakeup.
In 2018 Kenichiro Yoshida was appointed global CEO when he was appointed profits were climbing boosted by a partnership with the Marvel Comics Universe and Spider-Man.
“Culture issues are very important,” says Kenichiro Yoshida, a 32-year veteran of the company who became Sony chief executive in 2018. “It is very important for us to collaborate.” He claims that their recent Uncharted project is an example of the cultural change he wants to foster at Sony. “I strongly recommended” that the Sony Pictures and PlayStation teams begin working together, he adds.
Mio Kato, an analyst who publishes on the independent investment research platform Smartkarma, says Yoshida has “executed and pushed things through” since taking charge. “I don’t think people see how big a competitive gap there is between Sony and others in this space. Sony just seems to have better ideas faster. They have recaptured their powers of innovation,” Kato says.
It’s all about content and not “poor margin” hardware.
One of the most streamed programmes in the USA week after week is not an acclaimed original Netflix production such as Squid Game or Stranger Things, but Seinfeld, a dated sitcom that debuted 33 years ago, according to Nielsen data.
The comedy series is streamed exclusively on Netflix thanks to a five-year deal agreed in 2019 with Sony Pictures Entertainment, which holds the rights. The bidding between the streaming services was intense, and in the end, the rights sold for $500m.
During the next few years Disney, Amazon, Apple, Warner Bros and locally Foxtel are expected to spend billions on content in pursuit of streaming subscribers.
The top eight US media companies are forecast to spend about $140bn on content in 2022, with the streaming wars fuelling double-digit spending increases for the next few years, according to estimates by Morgan Stanley.
“The streaming wars are good for us, “claims Sony executives.
Last year Sony made deals with the top two streamers — Netflix and Disney+ — to give them streaming rights to its theatrical releases between 2022 and 2026. Together, the deals are estimated to be worth close to $3bn.
One problem that Sony is facing is consolidation with the expectation that there will be fewer companies for Sony to sell its content to after the inevitable consolidation that will follow the streaming wars, eroding the price advantage it has now.
To hedge against this, Sony is betting on niche streaming services, or what Yoshida calls “communities of interest”, to serve small groups of dedicated viewers in areas ranging from anime to a faith-based service.
Sony is also building a general entertainment streaming service in India following the acquisition of Zee Entertainment last year — a market also being pursued aggressively by Netflix and Disney+.
The other plank of the turnround of Sony’s entertainment businesses has been improvement in the motion picture division. Profits at the group have risen dramatically under Vinciquerra and Tom Rothman, who runs Sony Pictures Entertainment Motion Picture Group.
Much of the division’s success is down to the Spider-Man franchise, which helped it prosper in 2021 — despite another dismal, Covid-racked year for the global box office.
Sony Pictures had three of the top 10 films in the US, led by Spider-Man: No Way Home, which brought in more than $668m after its December release and quickly became the sixth biggest grossing picture in US cinema history. The group is expected to report record profits of $950m in 2021 — up 150 per cent from 2017.
The question now is which distributors will end up with the Sony Audio and TV business or will this division be sold off along with the naming rights.