Music contributes to Sony Corp’s 38.8% profit rise

Sony Corp's music division Sony Music Entertainment (SME) contributed US $256 million to the Tokyo-based electronics giant’s 38.8% profit rise in Q1 15.

Music jumped 173% year-on-year but Sony Corp’s post-restructure resurgence was fuelled mostly by video games and sensors.

In the three months ending June 30, Sony Corp posted a net profit of 82.4 billion yen while operating profit rose nearly 39%. It lost US$1.1 billion in its previous fiscal year.

Operating income increased ¥27.1 billion year-on-year, to ¥96.9 billion, which the company attributed to an increase in operating income for its music and devices. But overall sales were flat, edging down 0.1% to 1.8 trillion yen.

Best-selling music titles for SME included Meghan Trainor’s Title, Japanese singer songwriter – and former Aido member – Shogo Hamada’s Journey Of A Songwriter and French guitarist and composer Francis Cabrel’s In Extremis.

SME’s operating income increased 58.2%, from ¥20.1 billion year-on-year to ¥31.8 billion. The rise was largely down to the ¥18.1 billion gain on the re-measurement to fair value of SME’s 51% equity interest in The Orchard (previously accounted for under the equity method), as a result of SME increasing its ownership interest to 100%, as well as the positive impact of foreign exchange rates.

For the first time, Sony included its disc manufacturing business as part of its music financials.

Analysts said Sony Corp was making a steady recovery after a painful corporate restructure which included layoffs and sales of assets following one of its worst years.

Video games enjoyed a 350% jump in operating profit to US$157 million as demand for its games and consoles soared. "This significant increase was primarily due to PS4 hardware cost reductions," Sony said. The devices division had a 163.8% jump to US $244 million mostly attributed to strong demand for image sensors used in smartphones and digital cameras.

But there was a continued weakening in demand for mid-range LCD televisions and home audio (with fierce competition from lower-cost rivals from South Korea and Taiwan), as Sony increasingly eyes the higher-end TVs market. Sony Pictures posted a US $94 million loss. Its mobile division lost US $184 million as sales slumped 16% year-on-year, which it attributed to a “strategic decision not to pursue scale in order to improve profitability.”

Sony Corp said it was still on track for a 140 billion yen net profit and operating income of 320 billion yen on sales of 7.9 trillion yen in the fiscal year to March 2016. Among new businesses it is entering is a drone company that captures data for enterprises.