Sony movies takes $1bn write down in its third quarter

Tokyo — Sony will take a ¥112bn ($1bn) write down in its movie business after reviewing the future profitability of its operations.

The company said on Monday that it would book the charge in the financial third quarter and was examining how that would 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 Japanese unit, in a deal worth about ¥37bn.
The announcement comes two weeks after Sony said the CEO of Sony Entertainment, Michael Lynton, was 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.
"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 on their plan for the coming fiscal year."
Sony shares closed little changed in Tokyo. Shares listed in Germany fell 1.9% in light-volume trading.
"The decline in the DVD and Blue-ray market was faster than we anticipated," Takashi Iida, a Sony spokesperson said by phone.
The Tokyo-based company is increasingly relying on its video games business, which generated twice as much income in the last financial year as film.
Sony’s PlayStation 4 console is outselling Xbox One, its closest rival from Microsoft, by about 2:1, according to industry website VGChartz.
Lypton’s departure capped a tumultuous two years for the division since a cyberattack blamed on North Korea paralysed the studio.
The hacking led to private messages leaking onto the internet and the departure of film-division chief Amy Pascal.

Sony CEO Kazuo Hirai has temporarily relocated to California for six months to oversee a review of the division and look for a replacement, the company said earlier in January.
In June, Sony lowered its projection for film revenue in financial 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.
Sony is increasingly leaning on China to offset the downturn. In September, Dalian Wanda, the world’s largest movie screen operator, agreed to invest in Sony Pictures productions in an open-ended partnership. But a slowdown in movie revenue on the Chinese mainland has raised doubts about how much the deal will bolster Sony’s performance.

M3 slipped 1.2% and is up 17% over the past 12 months. M3 will continue to count Sony as its largest shareholder even after the deal, according to data compiled by Bloomberg. Prior to the deal, Sony held 39.3% of M3’s outstanding shares.
Bloomberg