Sony issued a clearer statement of intent this week than it ever has since the Sony ‘shock’ saw it in a steep profit crash in 2003. The climb back to strength has been a long and fraught one and it’s certainly not over yet, but the growing confidence of UK born and US trained, Sony CEO, Howard Stringer is clear in the messages, with multiple bold targets.
The Vaio PC business, Sony’s Blu-ray Disc-related products and its component semiconductor businesses mostly driven by CCDs for Cameras and LCDs for TV sets are each set to become ‘trillion yen businesses.’ Already Sony gets that much from LCD TVs, digital imaging (digital cameras and camcorders), games and mobile phones. Given that ‘1 trillion is the equivalent of $9.43 billion, that means that Sony core revenue from these groups will be over $70 billion (no change there, since it has been for the past five years apart from some currency fluctuation ‘ last year’s revenues are the equivalent to $88 billion). This would be with revenues which are largely profitable or likely to become profitable.
Stringer set a minimum margin of 5%, and a return on investment of 10%, and said that he would spend a further ‘1.8 trillion getting there ($17 billion) and that within a year games and TVs would be profitable. That 5% margin would imply operating income of $3.5 billion, an achievement which it managed comfortably this year, and which in truth it is likely to shatter next year if both aims of a profitable TV group and Games are achieved.
In its games business last year Sony sales included almost no drop in PS2 hardware sales, down 1 million units to 13.7 million; with 13.9 million PlayStation Portable units sold, a total increase of 4.36 million devices and 9.24 million PS3s, more than double the previous year. Although games for the PS2 went down rapidly, this was more than outweighed by PS3 games, so that total games rose slightly in unit number to 257 million across all devices.
Now the main push for Sony games is to get its non-games content act together starting with the US PS3 network where it should soon begin selling video and music. Stringer also wants to make sure that virtually every device that Sony sells is networked and entirely gets the modern idea that web or network services is what the new world order is all about.
We have already seen Sony Ericsson targeting a resurgence of its PlayNow portal, but we’d like to highlight one initiative in the US which will have a profound effect on the Sony brand name. The company plans to offer its new lead Summer film ‘Hancock’ direct to every internet connection Bravia TV set, bypassing cable, pay per view and IPTV operators and making the offer direct through on its TV screens. This will happen after the theatrical release, but before it goes to DVD.
No doubt if this is a success, Sony will take up the idea we threw out n an article a few weeks back, to copy the Nokia ‘Comes with Music’ concept for phones, and offer ‘Comes with Video’ for its Bravia TV sets and other devices. Such a move offering recent motion pictures to the home might rocket the Sony Bravia past Samsung into the number one US spot for LCD TVs. This can only mean that Sony’s $300 Bravia Internet Video Link will be the route to market for many of its films.
So Sony has finally got the idea of getting its divisions to work together. The Games business risked its health to breathe life into Blu-ray, and now Sony Pictures will give up some of its guaranteed DVD revenues to drive a US push for Bravia TV sets. If Sony ever behaved like a single company, then it would be as scary as Apple, if not scarier, because of its scale and established brands.
“We are very pleased with the cross-divisional cooperation that led the success of the Blu-ray format,” Sony chairman and CEO Howard Stringer said on a conference call this morning. He estimated that 15 million Blu-ray players and PlayStation 3 game consoles, which include the players, have been sold worldwide. “Blu-ray Disc has positive implications for our hardware, software and game business.”
Other Game initiatives include expanding content over networks; building the PS3 customer base; offering more PS3 game exclusives and driving down the cost of making the thing.
Another target that Stringer set for the company is to double revenue in the BRIC (Brazil, Russia, India, China) countries to ‘2 trillion ($18.8 billion) by 2010 with Electronics segment sales alone expected to grow from ‘600 billion to ‘1.2 trillion during this period ($11.32 billion).
Blu-ray sales should reach more $1 billion this year and The Entertainment Merchants Association said this week that Blu-ray revenue would surge to about $9.5 billion by 2012 but of course that may not be all for Sony.