Business segments of Sony Corporation

  • Post author:
  • Post last modified:February 1, 2021

About Sony’s Business: An Introduction

SONY is a Japanese electronics brand that makes and sells a diverse portfolio of products throughout the world. Famous worldwide for having created several leading products and technologies, the company is headquartered in Tokyo, Japan. 

Masaru Ibuka founded the company in 1946. It was known as the Tokyo Telecommunication Engineering Corporation at the time of its foundation. It started with a small capital of just 190,000 Yen and only 20 people. 

Today, it is among the leading electronics brands in the world and has diversified its product portfolio a lot. While the company is already a leader in consumer electronics and gaming consoles, it is also focusing on the latest technologies to open new channels of growth. The company has divided its business into five main segments which we will discuss in this article.

As the COVID-19 pandemic spread throughout the world, SONY’s business was also impacted. The pandemic disrupted supply chains throughout the world and as a result it adversely affected the production of gaming consoles as well as other SONY products like electronics. Apart from its music and pictures segments, the sales of SONY electronics products were also down due to store closures during the pandemic. The negative impact must reduce as the spread of the pandemic eases and vaccinations help bring life back to normal in the various parts of the world.

SONY’s revenue for fiscal 2019 (ending March 30, 2020) fell compared to the previous fiscal. The company is facing increasingly intense competition that is causing price pressure and margins to fall. The consumer electronics segment of SONY is particularly facing heavy competition from companies based in China and South Korea. Maintaining its market leadership is growing more difficult for SONY because of the heavy price pressure. 

SONY’s net sales for fiscal 2019 remained 8259.9 billion Yen compared to 8665.7 billion Yen in the previous fiscal. The net income of the company also fell drastically compared to the previous fiscal. 2019 net income of the company was 582.2 billion yen compared to 916.3 billion yen in fiscal 2018.

To maintain its growth momentum and market leadership, SONY also invests in research and development. The market dynamics and consumer preferences are changing faster and SONY has to remain ready to cater to its customers’ evolving needs and preferences with higher efficiency.

Geographically, Japan is the largest market for SONY products followed by the United States, Europe and China. 

Business Segments of SONY Corporation:

In fiscal 2019, the company made several modifications to its existing organizational structure and brought changes across certain business segments in order to manage its business more efficiently and bring higher agility organization wide. The company realigned two of its existing business segments into one. It realigned the former Home Entertainment & Sound, Imaging Products & Solutions and Mobile Communications segments into one segment called Electronics Products and Solutions segment.

SONY corporation has divided its business operations into five main segments including : Game & Network Services (G&NS), Music, Pictures, Electronics Products & Solutions, Imaging and sensing solutions. Apart from these, there is a sixth segment called the financial solutions. All the rest sources of revenue are included under a seventh segment called “All Other”. 

Game & Network Services (G&NS):

This segment of Sony’s business is run by the SOny INteractive Entertainment LLC which is headquartered in San Mateo, California. Its president & CEO is Jim Ryan. SIE carries out the research, development and sales of PlayStation hardware, software, content and network services.

The G&NS segment of SONY  includes the Digital Software and Add-on Content, Network Services and Hardware and Others categories. Digital Software and Add-on Content includes distribution of software titles and add-on content through digital networks by Sony Interactive Entertainment; Network Services includes game related network services, video and music content; and Hardware and Others includes home and portable game consoles, packaged software and peripheral devices. 

Performance in fiscal 2019:

SONY’s G&NS segment experienced a sales decline in fiscal 2019. Net revenue declined by 333.3 billion Yen compared to the previous fiscal year. The G&NS segment’s net revenue declined to 1,977.5 billion in 2019 compared to 2310.9 billion in fiscal 2018. The decline in the net revenue of the G&NS segment was mainly due to the decline in PS4 hardware sales and game software sales, and the negative impact of foreign exchange rates offset to some extent by the increase in sales of Play Station plus.

How many Playstations did SONY sell in fiscal 2019 (ending 31st March, 2020)?

The company sold 13.6 million units of PS4 hardware compared to 17.8 million units in fiscal 2018.

The following table shows the financial performance of G&NS segment in fiscal 2019 and 2018.

 
  Fiscal 2018 Fiscal 2019 
  (Yen in millions)
Sales to external customers by product category  
Digital Software and Add-on Content  1,102,231   1,010,296 
Network Services  326,524   337,265 
Hardware & Others  795,867   572,199 
         
Sales to external customers  2,224,622   1,919,760 
Intersegment sales  86,250   57,791 
         
G&NS segment total sales  2,310,872   1,977,551 
         
G&NS segment operating income  311,092   238,400 
         
   

Music:

This segment of SONY’s business includes three units that include recorded music, music publishing and visual media  and platform. 

The recorded music section includes the revenue from the distribution of physical and digital recorded music as well as the revenue earned from artists’ live performances. It is run by the SONY Music Entertainment (SME) company and the SONY Music Entertainment Japan(SMEJ). 

The CEO of SONY Music Entertainment is Rob Stringer. SONY Music enetrtainment has its global headquarters at 25 Madison Avenue, NewYork. The company also has offices in more than 40 countries across the globe. 

SME focuses on the development, production, distribution and marketing of recorded music in all forms and genres in the world except Japan. SMEJ is engaged in the production and marketing of recorded music in Japan. It contracts with local music artists in Japan in all music genres.

The music publishing section is run by SONY/ATV and EMI, based in the United States. SONY/ATV music publishing is a leading music publisher that owns a diverse catalogue of songs written by legends like The Beatles and Michael Jasckson as well as contemporary superstars like Beyonce, Lady Gaga, Kanye Smith and Ed Sheeran. 

The music publishing business of SONY includes the management and licensing of the lyrics and music of songs. After acquiring rights to musical compositions, SONY/ATV and EMI exploit and market them to earn revenue from their royalties.

The visual media and platform section is run by SMEJ and includes the production and distribution of animation titles as well as games based on these titles, apart from various service offerings for music and visual products. 

SONY Music Financial Performance in fiscal 2019:

SONY’s music business experienced growth in net sales in fiscal 2019 compared to the previous fiscal. However, its net operating income decreased in 2019 compared to the previous fiscal. Compared to fiscal 2018, the music segment’s net sales increased by 42.4 billion yen in 2019. Net sales of Sony’s Music segment were 849.9 billion yen compared to 807.5 billion yen in 2018. While the net sales of SONY’s music segment increase in fiscal 2019, its net operating income declined by 90.1 billion Yen compared to the previous fiscal. The company’s net operating income declined to 142.3 billion Yen in 2019 from 232.5 billion Yen in 2018.

The following table shows the financial performance of the company in the fiscal year 2019 and 2018.

  20182019
  (Million Yen)
Sales to external customers by product category  
Recorded Music — Streaming  227,513 276,039
Recorded Music — Others  199,413 191,114
Music Publishing  106,666 157,478
Visual Media & Platform  261,433 213,961
Total Sales to external customers  795,025 838,592
Intersegment sales  12,464 11,317
Music segment total sales  807,489 849,909
Music segment operating income  232,487 142,345

Pictures :

The pictures business segment of SONY is divided into three sections that include motion pictures, television networks and media networks. 

Sony’s Motion pictures business includes the production, acquisition, and distribution of live-action movies and animated movies for theatrical release. Sony Pictures Entertainment operates it.  Tony Vinciquerra is the CEO of SONY Pictures Entertainment. The organizations that produce motion pictures for SPE include Columbia Pictures, Screen Gems, TriStar Pictures, 3000 Pictures, Sony Pictures Animation, Stage 6 Films, AFFIRM Films, and Sony Pictures Classics. Apart from these, SPE operates SONY Pictures Imageworks, a visual effect and animation unit, and the SONY Pictures Studios, which includes post-production facilities. 

SONY’s television production business includes the production, acquisition, and distribution of programs for television and digital networks. These programs include scripted series, unscripted “reality” or “light entertainment,” daytime serials, game shows, animated series, made for television movies and miniseries, and other programs. SPE also produces programs in local languages outside the United States. It licenses SPE owned programs and formats around the world. 

The media networks business of SONY includes the operation of television and digital networks globally. The television network owned and operated by SPE includes the SONY Pictures Networks India Private Limited, which operated television networks in India, and the GameShow Network LLC. The Gameshow network LLC operates a US based television network delivered to audiences on cable, satellite and other distribition channels. It also operates an online games business. SPE’s digital betworks include SONYLIV in India as well as funimation that offers its content to audiences mainly in North America.

SONY Pictures Performance in fiscal 2019:

The net sales of the Pictures segment grew in 2019 compared to the previous fiscal. Its net revenue reached 1,011.9 billion Yen compared to 986.9 billion Yen in fiscal 2018. The total increase was of 3% (5% on a US dollar basis). The growth in revenue mainly resulted from the higher worldwide theatrical revenues. In fiscal 2019, SONY pictures benefitted from the strong performance of movies like “Spider-Man: Far From Home, Jumanji: The Next Level and Bad Boys for Life”. However, the decline in sales of media networks partially offset the profits. Operating income of the pictures segment grew by 13.6 billion Yen to 68.2 billion Yen in fiscal 2019. Higher profit margins on the Motion Pictures Catalog titles led to the surge in operating income of SONY from the pictures segment. Below is a break up of SONY Pictures net revenue by subsegment:

Sales to external customers by product category Fiscal 2018Fiscal 2019
Motion Pictures436,017475,061
Television Productions288,816301,224
Media Networks260,437234,429
  
Sales to external customers985,2701,010,714

The continued shift in the market to a non-linear, on-demand digital business model in which media distributors increasingly seek to own more of the content they broadcast reflected in Pictures segment’s operating performance in fiscal 2019.

During fiscal 2019 (ended March 31, 2020), Sony acquired AT&T Inc.’s minority stake in Game Show Network, LLC and acquired Silvergate Media Group. Through these moves, the company aims to cement its position as a leader in the US TV game shows business as well as strengthen its entry into the kids genre respectively. SONY also reviewed the channel portfolio of its Media networks subsegment in an effort to streamline and strengthen the media networks business.

Electronics Products and Solutions:

The electronics products and solutions business segment includes three sections: TV and Audio & video, still and video cameras and mobile communications.

TV and Audio & Video:

SONY Home Entertainment and Sound Pproducts Inc, abbreviated as SHES, operates the TV and audio & video business of SONY. SHES carries out the research and development as well as production, design, marketing, sales and  distribution of SONY televisions and other SONY audio and video products. 

Still & Video Cameras:

This segment of SONY’s business is run by mainly SONY imaging products and solutions Inc (SIPS). SIPS carries out the research and development, as well as design, manufacturing, marketing, sales, distribution and customer service for interchangeable lens cameras, compact digital cameras, consumer and professional video cameras as well as display products such as projectors and medical equipment.  Apart from that, SIPS also operates the broadcast/professional solutions business and the FeliCa contactless IC (integrated circuit) card technology business. 

In the same business segmment, SONY Olympus Medical Solutions (SOMED) develops comprehensive medical and imaging device solutions for operating rooms and other medical areas.

Mobile Communications:

The mobile phone business of SONY is run by Sony Mobile Communications Inc (SONY Mobile). SONY mobile carries out the research and development, design, production, marketing, sales, distribution, and customer service for the mobile products including smart phones, tablets and accessories.

In the same segment, the SONY Network Communications Inc. provides internet broadband network services to subscribers and also creates and distributes content through its portal services to various electronics product platforms like PCs and mobile phones.

EP&S Performance in fiscal 2019.

SONY’s EP&S segment experienced a decline in net sales and revenue in fiscal 2019 compared to the previous year. The net sales decreased by 329.4 billion Yen in 2019 compared to the previous year. In 2019, the EP&S segment had net sales of 1991.3 billion compared to 2,303.2 billion in fiscal 2018. The decrease in sales of smartphones and televisions as well as fluctuation in foreign exchange rates caused the decline in net revenue of the EP&S segment.

How many televisions, digital cameras and smartphones did SONY sell in fiscal 2019?

SONY sold only 9.3 million units of televisions in fiscal 2019 compared to 11.3 million units in fiscal 2018. Sales of digital cameras declined to 2.9 million units in 2019 compared to 3.6 million units in fiscal 2018. The sales of SONY smartphones also dropped to less than half of the previous fiscal in 2019. SONY sold only 3.2 million smartphones in fiscal 2019 compared to 6.5 million units in fiscal 2018.

Despite the decline in net sales, the EP&S segment experienced a growth in operating income mainly due to the reduced operating costs within the mobile communications subsegment. The EP&S segment’s net operating income grew to 87.3 billion Yen in fiscal 2019 from 76.5 billion Yen in the fiscal 2018. The market for SONY digital cameras, televisions and smartphones has been shrinking which reflected in the financial performance of the EP&S segment during fiscal 2019.

 Fiscal 2018Fiscal 2019
 (Yen in millions)
Sales to external customers by product category 
TVs788,423 646,513
Audio & Video362,580346,060 
Still and Video Cameras421,506384,142 
Mobile Communications487,330 362,144
Other243,328 231,021
Sales to external customers2,303,167 1,969,880
Intersegment sales17,461 21,388
EP&S segment total sales2,320,628 1,991,268
EP&S segment operating income76,508 87,276

Imaging and sensing solutions:

Sony Semiconductor solutiosn corporation and its su bsidiary SONY & semiconductors manufacturing corporation are responsible for carryign out the research and developpment, design, manufacturing, marketing, sales, distribution and customer services for complementary metal oxide semiconductor (“CMOS”) image sensors, charge-coupled devices (“CCDs”), large-scale integration systems (“LSIs”) and other semiconductors.

According to SONY’s website,

“The Imaging and Sensing Solutions business creates transcendent imaging and sensing technologies that push the boundaries of image quality and cognition to bring inspiring, intelligent, and reassuring solutions in both personal and professional settings. The CMOS image-sensor is a key device for smartphones used by people around the world to share emotions. In the sensing area, Sony will contribute to streamline workflow in places such as storefronts or factories with the intelligent vision sensor equipped with AI processing functionality, while also aiming to contribute to automobile safety and a better future for mobility with its sensing technologies.” 

https://www.sony.net/SonyInfo/products/

I&SS Segment Performance in fiscal 2019.

SONY’s imaging and sensing solutions segment experienced a growth in net sales during the fiscal 2019 compared to the previous fiscal. In fiscal 2019, the I&SS segment had net sales worth 1070.6 billion Yen, year on year growth of 191.2 billion. During the fiscal 2018, the I&SS segment had net sales worth 879.3 billion. I&SS segment also experienced a sharp growth in operating income of around 91.7 billion Yen compared to the previous fiscal. The segment’s net operating income grew to 235.6 billion yen in fiscal 2019 from 143.9 billion Yen in fiscal 2018. The demand for image sensors for mobile products has continued to rise which showed in the performance of the I&SS segment in fiscal 2019. The image sensors for mobile products are currently a very important market for SONY. The growth was mainly a result of higher demand from the smartphone makers for high value-added products such as multi-sensor cameras and larger-sized sensors.

The following table shows the financial performance of Imaging and Sensing Solutions in fiscal 2019 and 2018.

 (Yen in millions) – 2018. 2019.

Sales to external customers   – 770,622    985,259

Intersegment sales   – 108,708    85,317        

I&SS segment total sales  – 879,330   1,070,576         

I&SS segment operating income –  143,874    235,584          

Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since 2016. He graduated with a Hons. in English literature from BRABU and an MBA from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and share his knowledge and research in business management, marketing, literature and other areas with his readers.