Sony to take $1bn hit on movie arm

Sony has said it will take a $1bn (€935,000) writedown in its movie business after reviewing the future profitability of its operations.

The company said it would book the charge in the fiscal third quarter and is examining how that will affect its forecasts.

To offset part of the loss, the company also said it would sell shares in the medical web service M3 to Goldman Sachs’s Japan unit, in a deal worth about $300m.

The announcement comes two weeks after it was announced that the chief executive of Sony Entertainment, Michael Lynton, is stepping down after a 13-year run.

The studio has struggled recently, including with last year’s Ghostbusters sequel and a movie based on the Angry Birds video game.

Sony warned in June the division was at a risk of posting more losses.

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“There has been a suspicion in the market that Sony doesn’t have a firm grip on the movie business, but still the amount is a surprise,” said Kazunori Ito, an analyst at Morningstar Investment Services.

“That said, with Lynton’s departure and this write-down, all the bad news is out and the attention can turn to their plan for the coming fiscal year,” he said.

Sony shares closed little changed in Tokyo prior to the announcement.

Shares listed in Germany fell 2.6% in light-volume trading after the statement was published.

“The decline in the DVD and Blue-ray market was faster than we anticipated,” said Takashi Iida, a Sony spokesman.

The company is increasingly relying on its video games business, which generated twice as much income in the last fiscal year as film.

Sony’s PlayStation 4 console is outselling Xbox One, its closest rival from Microsoft, by about two-to-one, according to industry website VGChartz.

Lynton’s departure capped a tumultuous two years for the division since a cyber-attack, blamed on North Korea, paralysed the studio.

The hacking led to private messages leaking onto the internet and the departure of film-division head chief Amy Pascal.

Sony’s CEO Kazuo Hirai has temporarily relocated to California for six months to oversee a review of the division and look for a replacement for Lynton, the company said.

In June, Sony lowered its projection for film revenue in fiscal year 2018 by $500m to a range of $9.5bn to $10.5bn.

It also lowered its operating profit margin to a range of 6% to 7%, from 7% to 8%.

Sony’s Iida said the division’s television broadcasting unit, which generates the majority of revenue, is unaffected and continues to do well. n Bloomberg