Sony IR Day 2018
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Sony IR Day 2018 May 22, 2018 Sony Corporation Game & Network Services(G&NS) 3 Music(SME) 20 Music(SMEJ) 31 Pictures 48 Imaging Products & Solutions(IP&S) 68 Mobile Communication(MC) Operation & Sales Platform 98 Home Entertainment & Sound(HE&S) Semiconductors 115 Sony IR Day 2018 Game & Network Services Segment May 22, 2018 John (Tsuyoshi) Kodera Business Executive, Sony Corporation President & CEO, Sony Interactive Entertainment Agenda Game & Network Services Segment 1. FY2017 Review 2. Strategy from FY2018 Sony IR Day 2018 3 Game & Network Services Segment 1. FY2017 Review Sony IR Day 2018 4 FY2017 Key Achievements Game & Network Services Segment Further expand Enhance game line-up Grow PlayStation®Plus PlayStation® user base paid subscribers PlayStation®Plus paid subscribers 34.2M 26.4M PlayStation®4 20.8M 79M units cumulative sales as of Mar 31 2018 PlayStation™Network 80M+ MAU As of Mar 31 2018 PS4 Game Play 246M games sold E/FY15 E/FY16 E/FY17 800M hrs+/week FY2017 PS4 software unit sales As of final week of Dec 2017 Sony IR Day 2018 5 Challenges and improvements Game & Network Services Segment PlayStation®VR PlayStation™Vue ForwardWorks VR market growth Market & future business Delays in title development below expectation model remains uncertain Still in investment phase Improvements required in spite of steady growth Utilizing these businesses to strengthen user engagement is key Sony IR Day 2018 6 FY2017 Operating Profit Variation from FY2016 Game & Network Services Segment (Bil yen) Sales revenue +18% 1,649.8 1,943.8 ① Profit improvement from hardware cost down etc. 177.5 ② Profit growth from software sales and add-on contents Operating income including network 135.6 ③ ④ ⑤ ① ② ③ Network services growth mainly with PS Plus paid subscribers ④ Increase in SGA to support network sales growth and R&D ⑤ Impact of exchange rates*1 FY2016 FY2017 Act Act *1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2017 and comparing them with the previous fiscal year Sony IR Day 2018 7 Game & Network Services Segment 2. Strategy from FY2018 Sony IR Day 2018 8 Strategy from FY2018 Game & Network Services Segment Enrich and utilize Leverage install base Grow and improve exclusive titles and active user recurring revenue PS4 cumulative install base FY13 FY14 FY15 FY16 FY17 Sony IR Day 2018 9 Strengthen user engagement Game & Network Services Segment User engagement Balanced game portfolio eSports F2P Variety of game models Improve PS VR user experience Enhance data analytics IP Franchise PS Vue Sony IR Day 2018 10 The virtuous cycle of PlayStation Game & Network Services Segment Strengthen IP リカーリング収益の更 Exclusivity OUTCOMEなる成長と進化 Utilize catalog MAU Platform of PS Plus Retention Choice Enrich membership Rich features Grow revenue Attractive services Cash Conversion Cycle Cash Flow Improve Ecosystem 25 Expand user base Increase playtime Sony IR Day 2018 11 Mitigate the impact of platform lifecycle Game & Network Services Segment (Bil yen) 190 • Aim to mitigate the impact of O.P. trend platform lifecycle compared to the (FY1993〜2018) past cycle and stabilize profit structure. • Generate cash flow by effectively utilizing 1 trillion yen network business. 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Free Cash flow trend (FY2013〜2017) 5 years cumulative 700 Bil-yen+ PlayStation® PlayStation®2 PlayStation®4 launch launch launch PlayStation®3 launch Sony IR Day 2018 12 FY2018 Operating Profit Variation from FY2017 Game & Network Services Segment (Bil yen) Sales revenue 1,943.8 1,900 ① Hardware unit sales decline and cost increase Operating income 190 ② Profit growth from game software sales and add-on 177.5 contents growth including network ③ ④ ⑤ ③ Network services growth mainly with PS Plus paid subscribers ① ② ④ Increase in R&D and SGA etc. ⑤ Impact of exchange rates*1 FY2017 FY2018 Act Apr Fct *1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2018 and comparing them with the previous fiscal year. Sony IR Day 2018 13 FY2020 Target Game & Network Services Segment Sales revenue (For Reference) 1,800 Bil-yen Operating Profit 130〜170 Bil-yen O.P trend (FY1993〜2018, FY2020 Target) (Bil-yen) 190 170 130 Sony IR Day 2018 14 1994 We were aiming 1M units. From now We are aiming 100M MAU. Sony IR Day 2018 Sony IR Day 2018 Music Segment May 22, 2018 Sony Music Business Overview Music Segment (Equity Method) Sony Music Sony Music Sony/ATV EMI Music Publishing (“EMI”) Entertainment (“SME”) Entertainment Japan (“SMEJ”) Music Publishing (“S/ATV”) Outside Sales (FYE18 ACT) Visual Media & Platform: 34% SMEJ: Recorded Music: 57% SME: SME: Music Publishing: 9% SMEJ: Sony IR Day 2018 17 FYE21 Financial Target Music Segment Operating Income: 110~130 billion yen ※ Sales Amount (For Reference): 800 billion yen Sony IR Day 2018 18 Sony IR Day 2018 Music Segment (SME) May 22, 2018 Business Executive Sony Corporation Chief Executive Officer Chief Operating Officer Sony Music Entertainment Sony Music Entertainment Rob Stringer Kevin Kelleher Sony Music FYE18 Achievements and Highlights Strong Financial Year over Year Operating Cash Operating Revenue Results increases in: Income Flow Margin A Global Leader 25.1% #2 Market Share Global Music Company Stronger Growth Streaming Global Market Digital Video Total Market (ex Japan) +44% +42% +10.5% Sony IR Day 2018 20 Strong Repertoire Performance Beautiful Trauma Something Just Like This P!nk Chainsmokers 21 Savage Camila Cabello Human Closer Rag’n’Bone Man Chainsmokers Childish Gambino Kane Brown Harry Styles I’m The One Harry Styles DJ Khaled Maluma Khalid Sony IR Day 2018 21 Evolution of Streaming Landscape Strategies: 1 Drive Paid Subscription Around the World 2 Increase Revenue Per User Transition Established and Healthy Competition and Modernize Product and Open Developing Markets to Consumer Choice Plan Offerings Paid Subscription Established Create greater differentiation between paid and free tiers Construct new product SELL configurations and content to up- unlimited sell subscribers Developing Expand the use of voice, a driver of music consumption in the home and soon in the car Launch pre-pay subscription options for developing markets CURRENT FOCUS LONG-TERM FOCUS Sony IR Day 2018 22 Strategic Investment In The Orchard MUSIC VIDEO TECH DISTRIBUTION Sony IR Day 2018 23 World Class Analytics Capabilities Talent Discovery Targeted Breaking Hits Marketing and Analytics in Promotion the Creative Digging Predictive Process Deeper To Analytics = Find Talent Measured Earlier Risk Taking Optimizing Revenue Strengthening Artist Relationships Marketing ROI Increasingly Transparency Measurable Advanced in Payments Real Time Partner Sales Analytics Reporting Sony IR Day 2018 24 Creative, Artist-Centric Approach Increase Creative Workforce Creativity Streaming Artist & Genre Relationships Musical Focus Instinct Creative & Business Services Sony IR Day 2018 25 Human Resources Focus Sony IR Day 2018 26 Recorded Music Market Profile ($ in billions; excludes Japan) Three years of solid market growth Expect market growth in 2018 Streaming Streaming growth more than offsetting declines in physical and download markets Streaming represents 45% of total market: Continued rapid growth of streaming, reaching Other Digital 54% of total market - Paid subscription revenue up 50% year over year Greater download and physical declines Physical - 176 million premium paid subscribers Public Performance / Sync +10.5% +4.1% $15.1 +9.1% $14.5 -2.6% +4.0% -35% $13.2 Downloads $11.6 $12.1 $1.9 $2.7 $4.5 $6.5 $8.2 +29% 16% of 45% of Audio Streaming Total 23% of 34% of 54% of Total Total Market Total Total Market Market Market Market $3.9 $3.6 +15% $3.2 $2.7 Video $2.1 $4.0 $3.8 $3.4 $3.2 $2.6 $1.8 $2.0 $2.1 $2.1 $2.2 CY14A CY15A CY16A CY17A CY18 Est Healthy industry performance overall supports SME growth Source: IFPI Sony IR Day 2018 27 Note: Digital Figures Include Digital Radio (SoundExchange) Sony Music Operating Income: FYE17 Act FYE18 Act (US Dollars) 2 3 1 Physical & Download 2 Streaming 3 All Other (Investments, SG&A) 1 FYE17 Act FYE18 Act Sony IR Day 2018 28 Sony Music Operating Income: FYE18 Act FYE19 Forecast (US Dollars) Physical & Download 2 3 1 2 Streaming 1 3 FX / All Other (Investments, SG&A) FYE18 Act FYE19 Forecast Sony IR Day 2018 29 Sony IR Day 2018 Music Segment (SMEJ) May 22, 2018 Business Executive Sony Corporation Representative Director Director of Board Chief Executive Officer CFO, Corporate EVP Sony Music Entertainment (Japan) Inc. Sony Music Entertainment (Japan) Inc. Michinori Mizuno Toshihiro Konno Agenda Music Segment (SMEJ) 1.Business Outline 2.Mid-Term Vision 3.FY17 Results / FY18 Forecast Sony IR Day 2018 31 1. Business Outline Sony Corporation InvestorSony IR RelationsDay 2018 3232 Company Profile Music Segment (SMEJ) Name: Sony Music Entertainment (Japan) Inc. Established: March, 1968 Location: 4-5 Rokubancho, Chiyoda-ku, Tokyo Representative Director: Michinori Mizuno Number of Subsidiaries: Approximately 20 Revenue Breakdown Music Other Physical Digital Artist Management FY17 Music Publishing Anime Mobile Game Sony IR Day 2018 33 50 Year Journey 〜 Business Diversity Starting from CBS/Sony 〜 Music Segment (SMEJ) Strengthen Music Business by Vertical Integration Diversify Business by Horizontal Expansion 1968 Est. CBS/Sony Records Inc. ʼ97 began consignment sales for other companies Began publishing business Began music distribution business Music Biz ʼ75 began record warehouse Built record / logistics business ʼ87 in-house jacket design factory ʼ78 built recording studios Began Zepp operations ʼ17 first overseas Zepp Package Solution Biz Live Solutions Biz Artist / Talent management Managed comedian talent Voice actor management Talent Managem ent Biz ʻ97 est. SPE VISUAL WORKS Began distribution of Fate/Grand Order Anime Biz Production Studio Mobile ʼ03 changed name App to Aniplex, increased Game investment Global Biz Distributi ʻ78 est.