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Back to the future; (Non-device) entertainment returns to the fore for Sony

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by Tim Mulligan

Today, (May 14th) Sony Group published its results for the Fiscal Year ended March 31, 2024. Group revenues were up 19% to 13 trillion yen which amounts to USD 86 billion (in USD, this makes a more modest revenue growth of 14% for the previous 12 months). While Sony’s earnings performance benefited significantly from repatriating overseas foreign currency revenue back into yen, it is also a direct result of its over-performing entertainment divisions. (Note: Sony has an Entertainment, Technology & Services segment, which covers its TV and audio devices businesses. MIDiA excludes this from our analysis of Sony’s entertainment divisions, which are content and intellectual property (IP) focused. However, it is also important to note that Sony’s Game & Network Services segment includes its game console business units.)

Non-device entertainment revenue share was 49% of group revenues in the previous 12 months to March 31st, 2024. Over the previous year, Game & Network Services revenue grew 1.0% in USD terms ($28 billion) but grew 18% in actual yen revenue growth, reflecting the massive devaluation between Q1 23 (Y 133.2 to the USD and Q1 24 Y151 to the USD). Music was another big winner with a 17% net revenue growth in yen ($11 billion) as was Pictures, which grew 9% in yen terms ($10 billion),

Sony increased its overall profitability by 57%, with Game & Network Services as the standout performer (increasing profitability by 173% over the previous 12 months). Drivers behind this explosion in Games revenue include the strong performance of Helldivers 2, which was released in February of this year. With 12 million unit sales, Helldivers 2 is now PlayStation's most successful live-service and PC game to date and has allowed Sony to successfully drive games revenue into a new vertical.

Pictures came a close second, nearly doubling profitability with a 97% increase. This underlines the success of Sony’s investment in cross-entertainment content, such as Spider-Man: Across the Spider-Verse ($690 million in box office revenue ) and Gran Turismo live action feature film ($122 million in box office revenue. Music also increased profitability by 18%, reflecting the ongoing success of the Sony artist roster.

Overall, non-device entertainment profitability for the period grew by 52% in the trailing 12 months. 6 months ago MIDiA identified that Sony was finally tapping its core media fusion opportunity. Fast forward to now and we can clearly see the fruit of this strategy. Particularly impressive from a cross-entertainment perspective was the rise of inter-segment revenue synergies (in Game & Network Services this means network services relating to game, video, and music content while in Music, Visual Media and Platform includes the production and distribution of animation titles and game applications)  with these synergies driving increased cross-entertainment revenue and reducing inter-segment costs by 45%. 

Sony’s bid for Paramount is further evidence of the importance the diversified conglomerate now places on its media assets. It’s also further evidence of its enviable ability to translate established IP into revenue generating cross-entertainment experiences pushed out across its ecosystem and through its diversified distribution partners. Acquiring Paramount will provide Sony with one the two most valuable independently owned IP banks in the media space (Warner Bros. Discovery being the other). It will also offer additional inter segment synergies via Paramount+ and Pluto TV. (As outlined in our Paramount+ Q4 2023 consumer deep dive, Paramount+ weekly active users are more than twice as likely as the consumer average to spend  $20+ on in games purchases for example-source MIDiA Research.)

Expect this wave of cross-entertainment synergies to accelerate if Sony is successful in its bid for Paramount.

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