Sony Pictures Profits Climb 56% to $281 Million, Lifting Group Income in Third Quarter

Operating income at the ‘Pictures Division’ of Sony Group Corporation climbed by 56% to hit $281 million in the October to December 2023 quarter, the Japanese company reported on Wednesday. Sales increased from $2.35 billion to $2.47 billion in the latest period.

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The division spans movie production and distribution, television networks and TV content production. The operating income figure compares with $179 million in the same quarter of 2022.

The Pictures Division result is also a quarter-on-quarter improvement. In the July to September 2023 period, sales revenues were $2.77 billion, with operating income at $204 million.

At the group level, Sony reported a 22% surge in quarterly sales for the October to December period – the third quarter in its ongoing financial year. Sales hit JPY32.8 trillion ($21.8 billion), with net after tax profits increasing by 13% to JPY364 ($2.42 billion).

The corporation said that the better figures from the Pictures Division reflected increases in television and digital streaming licensing revenues and home entertainment sales, mainly due to contribution of earlier theatrical releases, plus an increase in revenues at Crunchyroll, its anime streaming business. Theatrical revenues in the quarter dropped. The group left its full year forecast for the division’s profits unchanged.

Management said that the screenwriters and actors strikes in Hollywood of 2023 continue to negatively affect film and TV development schedules and release patterns. Indeed, the peak financial impact may be recorded in the next financial year (which runs April 2024-March 2025).

Four theatrical titles were released during the period: “Journey to Bethlehem,” which had worldwide grosses of $8 million; “Thanksgiving” with $45 million; “Napoleon” with $208 million; and “Anyone But You” with $31 million.

Sony reported increases in both sales and operating income at its music division. Revenues hit JPY422 billion ($2.81 billion), up from JPY364 billion in the equivalent quarter of the previous financial year. Operating income climbed from JPY63 billion to JPY76 billion ($507 million).

Music revenues were buoyed by higher sales for recorded music and music publishing from paid subscription streaming services; higher revenues for merchandise, license and other sales in recorded music; and the impact of the weakening Japanese Yen against the US dollar.

The recorded music segment stars were: SZA with “SOS” Travis Scott with “Utopia”; Rod Wave with “Nostalgia”; and Doja Cat with “Scarlet.” Management gave shout outs to Grammy winners Miley Cyrus and Victoria Monet and to the evergreen Mariah Carey.

Sony’s massive games and network services division saw sales increase in the quarter, but profitability decline. Sales revenues increased by 16% in local currency terms to JPY1.44 trillion ($9.63 billion). Operating income slipped by 26% from JPY116 billion to JPY86 billion ($573 million). The profits decline reflected increased losses from hardware, mainly due to promotions, decreasing sales of Sony’s own games titles, and the increase in sales of third-party titles.

Management said that PlayStation 5 console sales, at 8.2 million, were below target. But it drew comfort from the scale of the installed base which has driven up user accounts to 120 million and game play time increased by 13% year-on-year. It also said that “Marvel’s Spider Man” game was another blockbuster, with over 50 million units sold. This followed another big hit, “God of War: Ragnarok” last year.

In a highly dramatic turn of events last month, Sony walked away from a proposed $5 billion merger of its Indian TV and streaming businesses with rival Zee Entertainment Enterprises, despite more than two years of negotiations and regulatory clearances. The collapse of the deal appeared to reflect an impasse over management of the enlarged business and a collapse in the valuation of the Zee businesses during the prolonged discussion process.

The two conglomerates have both said that they will seek financial compensation for the collapsed deal and may go to arbitration or litigation if the matter cannot be solved.

At the time of its January deal cancelation announcement Sony said that the strategic setback was unlikely to have any material impact on its third quarter financial results. There was no mention of the Indian issue in management’s prepared remarks, but the company bosses got into it in a later question and answer session with media.

“The negotiations with Zee are not progressing. But we continue to see India as having great long term growth potential. It’s a very appealing market,” said Sony Group Corp. president, COO and CFO Totoki Hiroki. “Therefore, we will try to seek various opportunities and, if we, can find another opportunity. But at the moment we don’t have any concrete plans. And we will also continue to seek organic growth.”

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