Sony Cuts Outlook on Film Unit Writedown and Profit Decline

Sony’s struggling movie division is weighing on the rest of the company, even as the PlayStation is booming and semiconductors show signs of a rebound, according to Bloomberg. The electronics and entertainment company cut its full-year profit forecast a second time in three months after posting quarterly earnings that missed estimates, following a 112 billion yen ($1 billion) charge against its film business that was unveiled last week.

Net income will be 26 billion yen in the 12 months ending March, a steep cut from an already-reduced outlook for 60 billion yen, the Tokyo-based company said in a statement. Still, solid performance by the games and chips businesses were bright spots, helping the company’s shares pare losses in European trading. The stock was down less than 1 percent in Germany, from an earlier drop of as much as 3.6 percent.

Sony has been seeking to recover from setbacks last year, when component production was halted due to earthquakes and a loss on the sale of its battery division. In the entertainment division, the lack of box-office hits and the increasing popularity of streaming services has eroded the profitability of the business. The unit has relied on its television and media operations to make up for the shortfall in films, which suffered a paralyzing cyberattack two years ago.

Operating profit for the quarter ended in December was 92.4 billion yen, compared with the 154 billion yen average of estimates compiled by Bloomberg. Sales fell 7.1 percent from a year earlier to 2.4 trillion yen, below analyst expectations for 2.49 trillion yen. The loss in films “is being taken extremely seriously by management,“ CEO Kenichiro Yoshida said at a briefing. “There are various issues piled up at our film studios. Our intellectual property is insufficient, our catalog is insufficient. We have no choice but to grind our way through these things.“

The results got a boost from the PlayStation 4, which had its best quarter to date as price discounts and new titles such as Final Fantasy XV buoyed demand over the critical holiday season. The device sold 9.7 million units in the latest quarter, up from 8.4 million during the same period in 2015, said Sony. The company kept its forecast for 20 million unit sales for the fiscal year. Besides games, Sony also showed signs of recovery in semiconductors as the company upgraded its full-year operating profit outlook at the division by 34 billion yen, the biggest upward revision among all of it units.