Sony Facing Major Hurdles, TV, Camera, Audio & PlayStation Businesses Hit
Sony is facing several hurdles with the Japanese Company confirming a major slump in revenues and profits, as they struggle to manufacture TV’s, audio products while also suffering from a lack of audience in cinema’s for their movies, PlayStation sales are down 42% while gaming subscriptions are up.
The Company said that their EP&S business which is responsible for their headphones, speakers and TV’s has been “impacted the most from the coronavirus” with their factories “unable to meet demand” due to closures.
At this stage, the Company is reporting that profits could fall 30% or more in the current fiscal year in the last quarter ending in March profits fell 57% from the same period a year earlier.
Revenue also fell, to 1.75 trillion yen. Sony declined to provide a specific forecast for the current fiscal year for the first time since 2016 when the Kumamoto earthquake disrupted its operations.
They said that retail sales globally including Australia have “decreased significantly”. In a report to the Tokyo stock exchange the Company said that the severity of the impact on a geographical basis is changing frequently, but deterioration of market conditions in Europe is currently the most severe.The biggest impacts are to their television business, “Sales of digital cameras are being significantly impacted by a substantial slowdown in demand around the world. We are concerned that this might continue for a long time” the Company said.
Chief Executive Officer Kenichiro Yoshida has overhauled the technology icon in recent years to focus on franchises such as sensors for smartphone cameras and the PlayStation games business, yet many of its operations remain vulnerable to people getting stuck at home.
Consumers can’t go out to buy phones or electronics or watch Sony movies in the cinema, while factories that make its products are struggling to return to full capacity.
“We will hold off on making additional capital investments on our sensor factories as long as we can so that we can gather more information and make the most-informed decisions,” said Hiroki Totoki, chief financial officer, on a conference call after the results.
With their Playstation 5 launch still on schedule for a late 2020 launch the Company has warned that there will be limited supply initially which is not good news for Australian CE retailers.
While Television sales have slumped the Company also said that PlayStation 4 console sales decline 42% to just 1.5 million units in the quarter, partially because of the widely anticipated launch of the successor PlayStation 5.
The good news is that subscribers to Sony’s PlayStation Plus service, surged to 41.5 million, showing one positive impact for the company from the millions of people stuck at home in search of entertainment.
Sony said production of the PlayStation 4 game console has been hit by the Covid-19 pandemic to some extent, but the output is sufficient to cover the current demand for the console and sales are stable. Meanwhile, the PlayStation 5 remains on track for a release at the end of this year. Software for the new console is also on schedule, the company said, as it hasn’t seen any major impact on games development.
“We may beef up PlayStation’s network services because of a potential increase in demand from Covid-19,” said the CFO, adding he couldn’t comment on the likely demand for the new game console.
Sony is also finding it difficult to make movies and music, essential parts of its entertainment portfolio.
The company is not certain whether consumer behaviour will change over the long term, with for example a new reluctance to gather in large groups at movie theatres or concert halls.
“Covid-19 may have a lasting impact on markets because it could decrease demand for consumer electronics, movie theatres and music concerts,” said Bloomberg Intelligence analyst Masahiro Wakasugi.
Sony said the virus hasn’t had a large impact on its manufacture of image sensors, which are incorporated into many of the world’s leading smartphones, including Apple Inc.’s iPhones. But the company is uncertain whether Apple and other phone makers can keep up their production — or whether consumers will keep buying. Smartphone shipments fell in the first three months of the year by the fastest rate on record because of constraints on supply and demand.
” While we expect demand for our image sensors would continue to grow in the mid- to long-term, we see a risk that revenue from the business this fiscal year would be flat from the year-earlier period,” Totoki said.