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Sony The beginning of 2022 is not smooth.
At CES at the beginning of the year, Sony showed its latest concept vehicle, VISION-S, a new SUV prototype vehicle (VISION-S02), and announced the establishment of a mobile travel company, officially entering the field of smart cars. However, some people questioned that the company "caught up with a late gathering".
This Tuesday, Microsoft Announced US $68.7 billion acquisition Kinescope blizzard 。 As Microsoft's rival in game consoles, Sony plunged 13% in the Japanese stock market that day.
"The wolf before the tiger", Sony seems to be in trouble, but in fact, the company's focus has already shifted. More and more investors believe that the Japanese enterprise with a market value of US $157 billion may soon achieve the ambition that they have been unable to achieve in the past decades: to become the most complete entertainment company in the world.
Department collaboration is getting smoother
Over the years, Sony has created or purchased a number of appropriate tools to achieve its goals: world-class singer works from Miles Davis to Mariah Carey, Hollywood film and television studios, and PlayStation, a leading game group. However, this Japanese business giant has not been able to coordinate the whole "orchestra" well, so that each "voice" can "play" harmoniously.
Today, although the entertainment industry is facing huge shocks, including music, film and TV streaming services, blockchain based games, and the potentially subversive metauniverse, Sony seems to have found a way to let its different entertainment groups work together.
Sony's film studio is producing Spider Man and other Marvel blockbusters, and its mature film and TV program library is filling the bottomless hole of streaming media content. The world's second largest music business is benefiting from the growth of Spotify and TikTok.
With PlayStation, Sony has decades of experience in gaming -- this is a Netflix 、 Apple 、 Amazon And other players who are rich and powerful are eager to enter the field. All these are related to cutting-edge hardware, including VR helmets and other equipment. In many people's eyes, these equipment will be the gateway to the meta universe. Pelham Smithers, an independent analyst who has focused on Sony's business for many years, said: "Sony's strategy puts them in a unique and powerful position. They have music, TV, movies, video games, which are things people want, but only Sony can use these content in a scale and joint way." He added: "In the future, in an era when entertainment will be consumed in a more immersive environment, no company will become the center of the metauniverse more obviously than it."
Investors seem to agree with this view. At present, Sony's share price is at the highest point in 20 years, and most analysts who pay attention to the stock rated it as "buy".
The "Mysterious Sea Area" series is the flagship work of two generations of PlayStation players, and also a good example of Sony Group's cooperation strategy. The release of this film is the result of the cooperation between Sony's game department and Sony Pictures. In the group's previous culture, such cooperation once seemed impossible.
In 2018, Kenichiro Yoshida became the CEO of Sony. The executive who has worked at Sony for 32 years said: "Cultural issues are very important." The Mysterious Sea project is an example of his hope to promote cultural change within Sony. He added: "I strongly recommend that Sony Pictures and the PlayStation team start working together."
It is no coincidence that Sony is so fond of the "Mysterious Sea" series. The treasure hunt process of the game depends on the combination of luck and judgment. Over the years, Sony has also been trying to balance the relationship between the two.
Tony Vinciquerra, chairman of Sony Pictures Entertainment, said: "Many companies under the group have been trying to do Mysterious Sea in the past 10 years. In 2017, when I first came here, I asked: 'Why can't we finish this work?'"
The project was launched after the discussion between Vincicla and Jim Ryan, president of Sony Interactive Entertainment. After the release of "Mysterious Sea Area", there are 10 projects between the game department and Sony Pictures that are about to enter the development stage. "What we need to do is to do things that are good for Sony Group as a whole," Vincicla said
San Francisco Co we Doug Creutz, an analyst at n&Co, said that the company had finally found the right combination. He said: "For a long time, they were a large enterprise group looking for directions. But now they have found the right entertainment focus. They have a strong position in music and video games, and are also attractive in television and movies, because they can sell their content to the highest bidder."
In the past 20 years, Sony's various investments are often seen as misjudgments. Many business lines of the company have been retained, and the reason given by the senior managers is "emotional reason", so Sony has become a misplaced group, which resists simplification and unification in the system.
Mio Kato, an analyst who published an article on Smartkarma, an independent investment research platform, said that Kenichiro Yoshida "implemented and promoted the progress of the project" after taking charge of Sony. He said: "I don't think people have seen how much competition gap exists between Sony and other companies in this field. Sony seems to have a better idea faster. They have recovered their innovation ability."
Fade out of the streaming media war
Nielsen's data shows that the most popular program in the United States is not the acclaimed original Netflix work, such as Squid Game or Stranger Things, but Seinfeld, an outdated sitcom that first appeared 33 years ago.
In 2019, Netflix signed a five-year agreement with Sony Pictures Entertainment, so Seinfeld is currently a Netflix exclusive show. Before the signing of the exclusive broadcasting contract, the competition between streaming media services for the play was very fierce. Finally, the copyright of the play was sold at a price of 500 million dollars.
Sony Pictures is far smaller than its competitors in Hollywood. Sony believes that the most intelligent strategy in the streaming media war is to completely withdraw. Instead of launching their own services, they embarked on what Sony executives call the "arms dealer" development model, selling film and television copyrights to the highest bidder.
Of course, the current market seems to be a seller's market, because Disney , Amazon, Apple warner Brothers and other companies are expected to spend billions of dollars on content to attract streaming media users. According to Morgan Stanley's estimate, the top eight media companies in the United States are expected to spend a total of about $140 billion on content in 2022, and the streaming media war will usher in a spending growth of more than 10% in the next few years.
Vincicla said: "The streaming media war is a good thing for us. These streaming media services say that they can make profits in 2023 or 2024, and they are indeed likely to do so. But to achieve this goal, they need to invest a lot of money, which will be an investment worth billions of dollars. The way to realize these investments is to buy copyrights from us. "
Last year, Sony reached an agreement with Netflix and Disney+, two major streaming media companies, to allow them to provide Sony movies to users in streaming media service providers between 2022 and 2026. The total value of these transactions is estimated to be close to $3 billion.
Some analysts believe that Sony's "arms dealer" model now looks more sensible as the growth rate of users of services such as Netflix and Disney+slows down. The slowdown in the growth rate of streaming media services has led some investors to question whether this model can really bring enough returns. At present, the whole industry is looking forward to a period of integration between streaming media enterprises after the initial stage of "horse racing enclosure", and only a few services will remain.
For Sony's arms dealer strategy, this is a potential risk. In the future, the investment of streaming media enterprises in content will certainly decrease. After entering the integration period, the price of content copyright will also decrease. Doug Creutz said that Sony's arms dealer strategy "must be different from what others have done. Others want to become Netflix. At present, they are losing a lot of money to achieve this goal."
Cruz said that for Sony, the potential problem is that after the inevitable integration of the streaming media war, the number of companies that can buy content from Sony will also decrease, thus weakening its current price advantage. In order to offset this, Sony tried to establish a niche streaming media service, also known as "interest community" by Kenichiro Yoshida, to provide services for a small group of dedicated audiences, such as animation fans. Sony acquired Zee Entertainment last year, and then they set up an entertainment streaming service in India. Netflix and Disney+are also actively pursuing this market.
Another business that has improved for Sony is its film department. Under the leadership of Vincicola and Tom Rothman, who is in charge of Sony Pictures Entertainment Film Group, the group's profits have risen significantly. The success of the department is largely attributed to the Spider Man series movies, which helped Sony's film department achieve good results in 2021, although the global box office was once again frustrating under the interference of the epidemic.
Among the top ten films in the United States, Sony Pictures occupied three places, led by Spider Man: No Way Home. After its release in December last year, the film brought in more than 668 million dollars in revenue, and quickly became the sixth highest grossing film in American film history.
Sony executives also readily admit that compared with Disney, Warner Brothers and other Hollywood groups, Sony's film and television studios are smaller. However, Kenichiro Yoshida said that he would be committed to retaining the studio. Although Amazon bought MGM with 8.45 billion dollars last year, it can be seen that the industry has begun to enter the integration period.
"It's no secret that we are a very small player in the industry compared with our huge competitors. Our scale is not large, but we have three entertainment companies working together. You will find that we have a lot of assets and a lot of intellectual property rights, and we can compete in the fields we want to enter."
However, some major shareholders still believe that there will always be risks around the company. In the context of global investors being disappointed or dismissive of the profit and value creation ability of Japanese management, Sony is still a Japanese company in essence despite its globalization.
Since Kenichiro Yoshida took over Sony, the company's share price has soared by more than 180%. However, its market value is still about 20 times less than that of Apple. Smith said that although Sony performed better than most Japanese enterprises, because they paid more attention to the return on equity and made the company's capital play a huge role through buybacks and successful acquisitions, Sony's performance in the domestic stock market in Japan was poor, and this huge disconnect still existed.
Risks brought by incoming vehicle manufacturing
Damian Thong, a senior analyst at Macquarie in Tokyo and one of the few analysts with a "neutral" rating on Sony shares, said that there are many reasons to show that although Sony seems to have completed a huge transformation, investors still need to be cautious about them.
He pointed out that the company announced at the beginning of January that it would create a new subsidiary, namely Sony Chuxing, to explore entering the electric vehicle market, which particularly sounded the alarm for investors. The project emphasizes that cars in the future will become "entertainment centers on wheels", which means that Sony's cars will probably serve as stores for its content products more than they intend to cooperate with Tesla Or real automobile manufacturers such as Toyota.
Some observers said that the ambition and flaunt in the announcement made people see the shadow of "old" Sony and the historical tendency of losing focus at the wrong time. Saian said that, on the one hand, given the company's conservative practices in other fields, its ambition and willingness to take risks in electric vehicles are impressive. After all, the size of the auto market is up to $3 trillion. Such a large market has strong appeal, and investors' love for the subverters of the auto industry is also very obvious.
On the other hand, the possibility of Sony's success in the automotive field is not high, and investors should worry that comprehensively promoting the electric vehicle business will damage the company's value and bring years of losses. Although compared with the traditional car manufacturing business, the scale requirements of electric vehicles are lower, it is still difficult to expect Sony to obtain any form of profits through this venture before 2030.
Analysts pointed out that in the past seven years, Apple has also been developing its own automotive projects, and until now, this enterprise with the highest market value in the world has not yet achieved significant results.
As always, Sony's problem is that history shows that the company often has some unexpected results. The company's success in the consumer electronics field in the 1980s was achieved by the skepticism of American enterprises, although Nintendo He Shijia sniffs at him, but they still succeed in the game. Their efforts in mobile phones and personal computers once seemed likely to be successful, but the final result was unsatisfactory.
Now, there is a bigger puzzle around this company. Have investors really figured out how to evaluate this 76 year old technology and entertainment company? Does Sony really want to enter the field of electric vehicles? After all, in the eyes of some people, this is the performance of "doing nothing".
Most importantly, has this company finally regained its former glory?
