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Sony IR Day 2016 Sony Corporation Game & Network Services (G&NS) 2 Pictures 19 Music 50 Mobile Communications (MC) 65 Imaging Products & Solutions (IP&S) 81 Home Entertainment & Sound (HE&S) 96 Semiconductor Solutions 113 Sony IR Day 2016 Game & Network Services Segment Jun 29, 2016 Andrew House Executive Vice President Officer in charge of Game & Network Services Business Sony Corporation President and Global CEO Sony Interactive Entertainment LLC Agenda Game & Network Services Segment 1. FY2015 Review 2. Establishment of Sony Interactive Entertainment 3. FY2016 Strategy *FY2015 = Fiscal year ended on March 31, 2016 Sony IR Day 2016 3 Game & Network Services Segment 1. FY2015 Review Sony IR Day 2016 4 FY2015 Key Achievements Game & Network Services Segment 1 Solid expansion of PlayStation®4 (PS4™) installed base -Achieved 40Mil units, maintains fastest penetration in PlayStation® History Continued substantial growth of N/W business 2 - N/W total net sales: +51% vs FY14 - Continuous growth of PlayStation®Plus (PS Plus) paid subscribers 3 Investment for the future - PlayStation™Vue (PS Vue) / PlayStation®VR (PS VR) / Partnership with Kojima Productions Sony IR Day 2016 5 FY2015 O.P. Variation from FY2014 Game & Network Services Segment (Billion yen) Net Sales 1,388.0 1,551.9 ③ ① Solid expansion of PS4™ platform ② ④ ⑤ ② Continued substantial growth in network services 88.7 ③ Decrease of PlayStation®3 (PS3™) platform sales ① 48.1 ④ FY2014 Temporary cost and SGA etc. ⑤ Unfavorable impact of exchange rates*1 FY2014 FY2015 Act Act *1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2015 and comparing them with the previous fiscal year Sony IR Day 2016 6 Game & Network Services Segment 2. Establishment of Sony Interactive Entertainment Sony IR Day 2016 7 Establishment of Sony Interactive Entertainment Game & Network Services Segment Single Seamless Accelerated Focused 8 Sony IR Day 2016 8 Establishment of Sony Interactive Entertainment Game & Network Services Segment More joy through “play” Sony IR Day 2016 9 Game & Network Services Segment 3. FY2016 Strategy Sony IR Day 2016 10 FY2016: No Change in Mid-range Core Strategy Game & Network Services Segment Sony IR Day 2016 11 FY16 Key Strategy Summary Game & Network Services Segment Capitalize on opportunities enabled by digital growth 1 - Business model From package to recurring model - Content Game + VR / non-game services Continue investment for future growth 2 - Non-game VR Expand PS VR ecosystem to non-game business - PS Vue Offer the best personalized TV viewing experience - Original Content Strengthen PlayStation as a content brand Sony IR Day 2016 12 Business Model: From Package to Recurring Model Enabled by Digital Growth PlayStation® Plus 1 - FY2015/E 20.8Mil paid subscribers - Broaden audience beyond organic growth “Game as a service” as an industry trend Recurring 2 - Revenue opportunity for SIE as a platform holder Package Leverage both package and NW download 3 distribution channels to reach broadest user base Sony IR Day 2016 13 PlayStation®VR Brand New Game Experience and Beyond Game & Network Services Segment Expand PS VR ecosystem to Launch successfully as game platform non-game applications and services • PS4™ unified architecture and stable quality • Affordable HW pricing enabled by PlayStation® total ecosystem • VR enterprise solutions on various interactive technologies • A lot of playable opportunities: “Playing is believing” `` Sony IR Day 2016 14 PlayStation™Vue: Accelerate growth Game & Network Services Segment Build a scalable business that offers the best personalized TV viewing experience `` with compelling features, content and channels Sony IR Day 2016 15 PlayStation® Original Contents: Continued Investment for TV Series •Broaden PlayStation® platform appeal •Differentiate PlayStation® platform outside games •Strengthen PlayStation® as a content brand Sony IR Day 2016 16 FY2016 O.P. Variation from FY2015 Game & Network Services Segment (Billion yen) Net Sales 1,551.9 1,680.0 ② ① Further growth of PS4™ and N/W business (Including PS VR) ① ③ 135.0 ④ ② Decrease of PS3™ platform sales 88.7 ③ Increase in SGA for overall sales growth etc. ④ Favorable impact of exchange rates*1 FY2015 FY2016 Act May Fct *1: Impact of foreign exchange fluctuations is calculated using the sales and costs denominated in each currency in FY2016 and comparing them with the previous fiscal year Sony IR Day 2016 17 FY2017 Revised Financial Targets Game & Network Services Segment (Billion yen) 20,000 Sales 1,800~1,900 20.0% O.P. % 18,000 18.0% 1,680.0 1,400~1,600 16,000 1,551.9 16.0% 1,388.0 14,000 14.0% 12,000 12.0% 8%~10% 10,000 10.0% 8.0% 8,000 5%~6% 8.0% 5.7% 6,000 6.0% 3.5% 4,000 4.0% 2,000 2.0% - 0.0% FY2014 FY2015 FY2016 Revised IR Day 2014 FY2017 Sony IR Day 2016 18 Sony IR Day 2016 Pictures Segment Jun 29, 2016 Michael Lynton Tom Rothman Executive Vice President Chairman, Sony Pictures Motion Picture Group Officer in charge of Pictures and Music Businesses Sony Corporation CEO, Sony Entertainment Inc. Chairman & CEO, Sony Pictures Entertainment Inc. CEO, Sony Corporation of America SPE FYE16 Review ($ in millions) Factors impacting performance: FLAT Sales $7,910 $7,875 Decrease in Motion Pictures sales due to lower home entertainment revenues, as the prior year 1 benefitted from strong titles; underperformance of certain FYE16 titles $500 1 3 4 Higher SVOD revenues for Breaking Bad, The 2 Blacklist and Better Call Saul, partially offset 5 2 by higher production and marketing expenses $346 for U.S. TV network programming Year-on-year growth across the Media 3 Networks portfolio, particularly in India and Operating the U.K. Income 4 Unfavorable impact of foreign exchange rates FYE15 FYE16 Actual Actual 5 All other (includes higher cyberattack costs) Note: FYE = Fiscal Year Ended (e.g., FYE16 = Fiscal Year Ended March 2016) Source: Pictures Segment Supplemental Data, March 31, 2016 Sony IR Day 2016 | 20 PRODUCTION BUSINESSES NETWORKS Sony IR Day 2016 | 21 Motion Picture Group Sony IR Day 2016 | 22 Global box office growth driven by international markets Industry Global Box Office ($ in billions) $52.3 $49.4 $46.6 $43.8 $40.7 $37.7 $35.9 $34.7 $35.4 $31.7 $33.1 $40.7 $37.9 $35.2 $32.5 $29.5 $26.6 $23.8 $24.5 $25.5 $21.1 $22.8 $10.6 $10.3 $10.9 $10.9 $10.4 $11.1 $11.2 $11.3 $11.4 $11.5 $11.6 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E North America International Source: IHS Note: “E” = Estimate (e.g., 2016E = Calendar Year 2016 Estimate) Sony IR Day 2016 | 23 The Meteoric Rise of China North America China Box Office ($ in billions) $16.2 $14.4 $12.8 $11.1 $11.2 $11.3 $11.2 $11.4 $11.5 $11.6 $10.6 $10.3 $10.9 $10.9 $10.4 $9.2 $7.1 $4.8 $2.7 $3.5 $1.5 $2.0 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Number of Screens (in thousands) 55.8 58.9 52.0 43.7 46.9 43.9 44.1 44.3 42.4 42.4 42.6 43.1 43.1 43.3 43.5 40.3 31.6 23.5 18.1 14.5 7.8 10.7 2010 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E Source: IHS Note: “E” = Estimate (e.g., 2016E = Calendar Year 2016 Estimate) Sony IR Day 2016 | 24 For successful films, there is more upside than ever Number of Films Grossing Over $1 Billion of Worldwide Box Office 6* 5 4 3 2 2 2 films have already crossed $1 billion this year – Captain 1 11 1 America: Civil War and Zootopia 0 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Prior to 2010, no more than Since then, $1+ billion WWBO films have one film per year had grossed become a more frequent occurrence over $1 billion at the WWBO Source: boxofficemojo.com * Internal estimate Sony IR Day 2016 | 25 The Importance of Branded IP Top 50 Global Grossing Live-Action Films of the Last 5 Years Original Remake 8% 2% Comic 10% Book 12% 68% Sequel Source: OpusData and boxofficemojo.com Sony IR Day 2016 | 26 Growing international television sales generating more distribution opportunities for motion pictures More types of domestic and Significant growth in the number international content buyers of television buyers worldwide Broadcast / Free-to-Air Premium Basic Pay Cable Content OTT Ad- OTT Supported Subscription 1990s 2000s Today MORE COMPETITION IN THE MARKETPLACE Sony IR Day 2016 | 27 Motion Pictures’ growth strategy is built on three pillars 1. Global Reach 2. IP Focus 3. Financial Discipline Globally-appealing titles Rebuild our own IP Smarter, more efficient spend Local language production Develop new IP Improved risk management Worldwide rights retention Third-party film equity Sony IR Day 2016 | 28 Global Reach More globally-appealing titles Investing in local language films to capture in our upcoming slate growing local film markets Help, I Shrunk The Mermaid My Teacher Retaining global rights to strengthen our Leadership with global experience international distribution structure Sony IR Day 2016 | 29 IP Focus Moving forward with new films Developing opportunities in existing IP with franchise potential Building on the current momentum in animation Increasing control of rights in key brands Sony IR Day 2016 | 30 Financial Discipline “Be financially prudent so you can be creatively ambitious” Sony IR Day 2016 | 31 Financial Discipline Reducing average production costs across all titles Limiting talent shares on the back end Scrutinizing marketing spend Aligning development spend closely with production targets Employing equity financing for the slate Sony IR Day 2016 | 32 Redirecting the business is a multi-year process FYE16 FYE17 FYE18 FYE19 Near-term challenges