Sony Brings In Experts To Recommend $100 Million In Cuts

[Karloff]

Sony Brings In Experts To Recommend $100 Million In Cuts

Looks like it's time for some of the folks in Sony's Pictures Unit to start brushing up their CVs.

Sony's last financial statement was a mess [http://www.escapistmagazine.com/news/view/129193-Sony-Financials-Operating-Income-Sinks-By-51], thanks in no small part to box office flops from the folks in the Entertainment division. Kazuo Hirai has brought in troubleshooters from Bain & Co. to recommend $100 million worth of cuts, which will probably involve job losses. Hirai will host a conference on November 21st, to elaborate on his plans for the division.

There have been calls to sell it off, at least in part, but some analysts acknowledge that entertainment is still a growing market segment for Sony. "Improving the business cannot be all about just cutting costs," says Mitsushige Akino of Ichiyoshi Asset Management Co.

But something has to change. Sony might be the company behind Breaking Bad, but it also backed White House Down [http://www.escapistmagazine.com/videos/view/escape-to-the-movies/7394-After-Earth], two very expensive duds. Division earnings are down 32% on last year, a decline of approximately $52 million; it's no surprise Sony's looking for significant cost cuts. At the very least it needs to change how it picks movie scripts.

Does Sony have a strategy? Only Hirai knows for sure, and he's saying nothing till the 21st. In the meantime, at least the new console's doing well [http://www.escapistmagazine.com/news/view/129780-PS4-Supply-Will-be-Sufficient-For-The-Holidays-Says-Sony-Exec]; maybe Sony will get that visit from the Profits Santa it was hoping for.

Source: Bloomberg [http://www.bloomberg.com/news/2013-11-18/sony-pictures-said-hiring-bain-for-100-million-in-cuts.html]


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[EiMitch]

"Improving the business cannot be all about just cutting costs," says Mitsushige Akino of Ichiyoshi Asset Management Co.

In that case, Bain & Co. are probably not the right people to ask for help.

 

[shintakie10]

Im honestly not sure what Sony is goin to do here. Nearly every division is losin money in some form or another and they just keep throwin money at bad ideas hopin it'll save them.

The PS4 will, at the very least, not cost them money on sales but if they don't start movin games and peripherals like crazy the next couple quarters will hit their bottom line ridiculously hard.

Even if they cut off as much excess fat as possible, they're still likely to be in pretty bad financial shape.

The thing I'm curious to see if it survives without major cuts is the entertainment segment, specifically moves/television. Breaking Bad was a gigantic hit, but the movie side of things has been financial disaster after financial disaster. Its kind of hard to justify those costs when they don't deliver in the end.

 

[Jamash]

Is $100 million a lot in the grand scheme of Sony's finances?

Sony said they would lose $60 per PS4 sold, then celebrated selling 1 million PS4s on day 1, so that represents a $60 million loss right off the bat.

Earlier this year Sony sold a building in New York for $1.1 billion, then another on in Tokyo for $1.2 billion, so $100 million in cuts doesn't seem like a lot compared to acceptable losses on console sales and how much they make from selling buildings (irrespective of the reasons behind those sales).

 

[Aiddon_v1legacy]

so basically despite all that hype, the bigger picture is now setting in. It is kind of amazing at how a LOT of Sony's divisions have dropped off in terms of profit. Their TV division is a black hole for money, Blu-ray players have far better people behind them, and their film division is very iffy. It's not a pretty picture.

 

[RandV80]

I was wondering what Breaking Bad had to do with it before clicking the link, but I kind of feel like an Office Space picture would be more appropriate here.

 

[Racecarlock]

Can all of them be made to whoever made sonic '06? I never played it, but even from the footage I've seen it looks garbage.

 

[Strazdas]

Liely to cut the least profitable divisions first, which means PS4 is quite safe as thier videogames are kinda the only ones in green now (though small loss does not mean the division is acutally performing badly, just that it cant hodl the weight of a lot of static costs, which is what should be cost first if possible)