Entertainment Industry

Category: Sony Television

Sony posts $5.6-billion loss, 10% drop in sales

Sony Kazuo Hirai

Sony Corp. posted a record $5.6-billion annual loss Thursday, ending a fiscal year marred by global economic turmoil and the after-effects of last spring's earthquake and tsunami in Japan and last fall's floods in Thailand.

The consumer electronics and media giant, which is in the midst of a top-to-bottom reorganization, said revenue fell 9.6% to $79.2 billion in its fiscal year ended March 31, down from $87.8 billion last year. Sony lost $5.6 billion, or $5.55 a share, nearly double the prior year's loss of $3.2 billion.

About $3.2 billion of red ink recorded for the fiscal year just ended came from a paper loss it incurred by writing down deferred tax assets. Sony had warned investors in April of the expense hit, as well as the drop in sales.

Much of last year's revenue decline was due to a steep 18.5% drop in the sales of its LCD television sets, digital cameras, personal computers and PlayStation games businesses, which made up close to half of Sony's total revenue.

Its TV and games business suffered from severe competition from lower-cost rivals that forced the company to slash prices. Meanwhile, sales of digital cameras and PCs fell after an October flood in Thailand left factories idle for weeks. The company estimated that it lost sales of $170 million while its facilities were undergoing repairs that cost $160 million.

Sony's movie business blunted the losses in electronics, recording a $416-million operating profit on $8 billion in sales. A 9.6% uptick in revenue for Sony Pictures came from its television business as well as growth in video-on-demand sales and a sale of its share in the royalties from Spider-Man merchandise.

Its music business marked a 6% drop in sales to $5.4 billion from $5.7 billion a year earlier as CD sales continued to erode. Operating profits dipped 5.2% to $450 million, down from $475 million the year before.

Its new chief executive, Kazuo Hirai, has vowed to turn things around, telling investors that "Sony will change." Last month, the company said it would eliminate 10,000 jobs. The announcement followed a corporate realignment that demoted its once-sacred television business. Instead, the company would focus more on games, digital imaging and mobile products.

As a result, Sony forecast that it would grow revenue 14% in the current fiscal year with its factories humming again. It also projected a modest $366-million profit for the year, thanks to aggressive cost-cutting and a greater emphasis on higher-margin products such as medical imaging equipment.

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Photo: Kazuo Hirai, Sony's new chief executive, at the 2012 Consumer Electronics Show in Las Vegas. Credit: Ethan Miller / Getty Images

Sony posts $2-billion loss, 17% drop in sales

Kazuo Hirai Sony

Battered by a strong yen and floods in Thailand that hobbled several of its factories, Sony Corp. reported a $2-billion loss and a sharp decline in sales for its end-of-year quarter.

The Tokyo technology and entertainment giant Thursday said sales slid 17.4% to $23.4 billion in its third quarter ended Dec. 31. Its $2-billion net loss compared with a $950 million gain the same period a year earlier. 

The bulk of the losses stemmed from Sony's core consumer electronics business, where it was forced to cut the prices of its LCD television sets below production cost to compete with lower-cost rivals. Compounding the problem was a the high yen, which made its products more expensive outside of Japan.

Sony's PlayStation business also contributed to the decline. The unit racked up higher marketing costs in the quarter, with expenses to promote its PlayStation Network online entertainment services, while revenue suffered from a price reduction of its PlayStation 3 game console. 

Kazuo Hirai, Sony's newly appointed chief executive, last year said fixing its LCD television business would be the company's No. 1 priority this year.

Sony's film business exhibited a bright spot in an otherwise gloomy financial picture. Revenue from Sony Pictures Entertainment posted a 7.7% increase in revenue to $2.1 billion, ending the quarter with a $9-million profit. Sony attributed the gains to a higher number of box office releases in the quarter, which helped offset a decline in DVD and other home entertainment revenue.

Sony's music business saw both revenue and operating income decline, but remained profitable -- bolstered by continuing strong sales of Adele's "21" album as well as music from the "Glee" TV show. The group's sales fell 11.7% to $1.6 billion, while profits of $196 million were down 21.7% from a year earlier.

Sony also revised its forecast for its full fiscal year, saying the deteriorating economies in Europe and elsewhere will result in lower demand for its products. Sales for the year ending March 31 is now expected to be $83.1 billion, down 1.5% from its November forecast and down 10% from a year earlier.

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Photo: Kazuo Hirai, Sony's new chief executive, at the 2012 Consumer Electronics Show in Las Vegas. Credit: Ethan Miller / Getty Images

Sony offers free flights on Pan Am via iTunes

Pan Am is going to be free on iTunes

Sony Pictures Television is offering free flights on Pan Am.

The first nine episodes of the ABC drama "Pan Am," which Sony produces for the network, are being made available free on Apple's iTunes starting Tuesday.

The unusual move to give the show away is part of Sony's efforts to generate some heat for the struggling "Pan Am" at a time when most of the networks are in rerun mode. "Pan Am," which stars Christina Ricci and Margot Robbie, is described by the studio as being about four stewardesses who "traverse the globe encountering romance, intrigue and adventure every time their cutting-edge 707 hits the tarmac." Critics were mixed on the show with many saying it lacked depth.

"Pan Am" had a strong opening for ABC in the Sunday 10 p.m. slot, but then its ratings have taken a large fallfell. ABC took the show off the schedule in early December but is bringing it back Jan. 8 with a run of five more episodes, which may be its last chance to prove the show is safe for air travel.

“We’re confident that this promotion will generate enthusiasm for the show’s return," Sony Pictures Television Senior Vice President of Marketing Chris Van Amburg said.

After "Pan Am" finishes its run in February, ABC will debut "GCB," a new drama about high society women in Dallas.

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-- Joe Flint

Photo: Christina Ricci, left, and Margot Robbie costar on "Pan Am." Credit: Sony Pictures Television

 

Fading TV sales pushes Sony into the red

Smurfs
Sony Corp. swung to a $350 million loss its second quarter as sales of LCD televisions and other products in its flagship consumer electronics business deteriorated worldwide.

Hampered by an appreciating yen that made its products more expensive outside of Sony's home country of Japan, revenue dropped 9% to $20.5 billion in the quarter ended Sept. 30 compared to the prior year. Its losses reversed a year-ago profit of $398.5 million, Sony announced Wednesday.

The red ink is expected to bleed into Sony's full fiscal year ending in March, resulting in a $1.2 billion loss. It previously had projected a $769 million gain.

Kazuo Hirai, a senior Sony executive who is widely expected to succeed Howard Stringer as the company's next chief executive, vowed to stanch the losses, particularly in the consumer electronics division, and bring Sony's finances back to health.

"I promise to lead the turnaround plan to get us out of the red," said Hirai, who was also tapped earlier this year to be the company's corporate face during another crisis when its computers were hacked, compromising millions of customer profiles.

Much of the losses stemmed from Sony's consumer electronics business, which posted a $449 million loss on $10.1 billion in sales, down 12.3% from a year ago. Sales of LCD TVs was particularly hard hit as competition from rivals such as Samsung, Vizio, Panasonic, Sharp and others drove down prices and as shoppers curbed their purchases in the face of a global economic slump.

Sony released a "TV Business Profitability Improvement Plan" that would slash the number of LCD TV sets the company produces a year to 20 million, down from the 40 million it had earlier projected.

Sony Pictures was the sole division to report a gain, but one that was primarily driven by a one-time sale of its Spider-Man merchandising rights for $278 million. The studio recorded a $268 million operating profit on $2.2 billion in revenue, up 17% from a year ago. Without the sale of Spider-Man, the division's financial results were essentially flat.

Strong showing of "The Smurfs" in theaters as well as higher sales of DVDs and made-for-cable TV shows helped to offset an overall decline in box office revenue, the company said.

Sony's music business got a lift from Adele's "21" album, but not enough to counter lower album sales outside the U.S. and the negative impact of an appreciating yen. As a result, sales fell 6.6% at Sony Music to $1.3 billion. The division posted $82 million in operating profit, down 22% from last year.

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Photo: The Smurfs. Credit: Sony Pictures.

Elisabeth Murdoch makes $214 million on Shine sale

Rupert Murdoch's daughter Elisabeth Murdoch collected $214 million from the sale of her British TV production company, Shine Group, to her father's media company earlier this year.

In April, News Corp. paid $675 million to buy Elisabeth Murdoch's 10-year-old company Shine, which produces such TV programs as "The Biggest Loser" and "MasterChef." Of that amount, approximately $480 million was earmarked for Shine's equity partners, News Corp. said in its annual report filed Monday with the Securities and Exchange Commission.

ElisabethMurdoch Until now, it was unclear exactly how much Elisabeth Murdoch made on the sale. 

Elisabeth Murdoch was the majority shareholder, owning 53% of Shine, a company that she steadily built by acquiring small TV production companies in various countries. In 2008 she bought U.S.-based Reveille, which produces "The Office" for NBC.

Sony Pictures Entertainment owned a 20% interest in Shine.

News Corp. said $135 million of the purchase price went to retire Shine's debt and pay other liabilities. Another $60 million, part of the $480 million attributed to equity, has been set aside in escrow to "satisfy any indemnification obligations," the company said. Elisabeth Murdoch, the document said, "is entitled to her proportionate share of amounts that are released from escrow," meaning she will likely receive more than the initial $214-million payment.

The purchase of Shine by News Corp. quickly became controversial, triggering shareholder lawsuits. In one, a New York bank representing several investment funds alleged that Rupert Murdoch operates News Corp. as a "family candy store" to pursue pet projects and reward his children and other family members. That suit, filed in a Delaware court, contends that Shine was worth far less than the $675 million that News Corp. paid.

When News Corp. announced in March that it was buying Shine, Rupert Murdoch said that Elisabeth Murdoch, 42, would be joining him and her two brothers -- Lachlan and James -- on the News Corp. board.

However, earlier this month, following the filing of the shareholder lawsuits and a phone-hacking scandal that has roiled the company and the British political establishment, News Corp. said that Elisabeth Murdoch had decided to delay her appointment to the board. 

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AMC and Sony reach new deal for 'Breaking Bad'

Breakingbad 
After almost losing one of its signature shows, cable network AMC has signed a new deal for 16 episodes to keep its critically acclaimed "Breaking Bad." 

For weeks, AMC and Sony Television, the studio behind the drama about an ailing high school teacher who turns to selling crystal meth to make ends meet, had been bickering over a new deal for a fifth and final season of the show. Talks got so bad that Sony actually shopped the show to other cable networks including News Corp.'s FX.

One of the issues over the show was costs and how many episodes would be produced for the final season. Sony wanted 13 episodes, whereas AMC was hoping to order just half a dozen or so in a cost-saving move.

Although AMC has ordered 16 episodes, it is not likely it will air the episodes as one season. Instead, the cable channel is expected to space the episodes out over the next few years. AMC said production on the last 16 would start next year but declined to comment on when they would air. The fourth season is currently underway.

It is not out of the realm of possibility that "Breaking Bad" will not air on AMC at all in 2012 and instead will return in 2013 and wrap up in 2014. AMC did not bring "Mad Men" back this year, choosing instead to start the next season in early 2012.

Part of the reason a network would do that is that typically the cost of producing the show does not have to be accounted for on the books until the episodes are run. AMC premiered the new series "The Killing" this year and brought back "Breaking Bad." Keeping "Mad Men" off this year, even though production has just started on the new season, will mean lower programming expenses, according to an executive at a rival cable network that carries a heavy load of original programming, who did not want to comment publicly about a competitor.

The difficulty in sealing a deal on "Breaking Bad" coupled with budget cuts on AMC's biggest hit "The Walking Dead" -- which also led to the departure of that drama's showrunner Frank Darabont -- has been the subject of much talk in Hollywood. AMC executives have denied that its lucrative deal for "Mad Men" showrunner Matt Weiner to stay on that show for a few more seasons is the cause of the financial issues at the other shows. However, AMC, a unit of AMC Networks, has declined to elaborate on why Darabont left "The Walking Dead" or what the issues were in cutting a new deal for "Breaking Bad."

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Photo: Aaron Paul, Jonathan Banks, and Bryan Cranston in "Breaking Bad." Credit: Ursula Coyote / AMC

AMC's recent austerity moves have Hollywood nervous

DEAD

Usually, when a show becomes a hit in its first season, the last thing the producers need to worry about is having to watch their dollars and cents.

But that’s not the case for AMC’s zombie smash “The Walking Dead,” which not only became the cable channel's most-watched original series ever but even set records for all cable networks for viewership among the coveted adults 18-49 demographic.

Its reward from AMC: A per-episode budget cut of more than six figures for its second season, according to people with knowledge of the situation.

“The Walking Dead” isn’t the only AMC show that the network brass wants to give a haircut. Sony Television, the producer of “Breaking Bad,” is in tense negotiations with AMC over terms for a fifth and likely final season of the show.

The financial restraint is causing a rift between New York-based AMC and the creative community. The cuts being pushed for on “The Walking Dead” and “Breaking Bad” come only a few months after the network shelled out big bucks on a new deal that would keep Matt Weiner, creator of AMC’s signature drama “Mad Men,” on board for at least the next two seasons.

Sony got so irked at the terms AMC offered for a fifth season of “Breaking Bad,” which included making only six or eight episodes instead of the usual 13, that last week it approached other cable networks, including FX, about buying the program.

Cooler heads have since prevailed and AMC and Sony are trying to hammer out a new deal that will likely see the last season of "Breaking Bad" spread out over at least two years. Going that route would likely allow AMC to ease the financial pain of another season of "Breaking Bad" over a longer period of time, much the way keeping "Mad Men" off its network in 2011 also provided short-term relief to the network's bottom line.

In the case of “The Walking Dead,” not only is the budget being slashed but Frank Darabont, the show's well-regarded executive producer, was also replaced last week, just days after he appeared at the Comic-Con convention to greet the show’s fan base and promote upcoming episodes.

AMC President Charlie Collier strongly denied that the cost of keeping “Mad Men” is in any way hampering the network’s programming strategy.

“We're investing more than we ever have before,” Collier said in an interview. “The fact that future seasons of ‘Mad Men’ were going to be expensive is not a surprise to us.”

He was also quick to defend the network against complaints about its recent dealings with producers. “We've taken some of the most expensive, riskiest shows around and nurtured them and managed to grow our network.”

Until recently, AMC was a unit of New York-based cable operator Cablevision Systems Corp. In July, it along with sister cable channels Sundance, IFC and WE were spun off into AMC Networks Inc., a stand-alone public company. That will mean greater scrutiny of the company’s spending by Wall Street.

“As a public company, the financials of AMC are gradually going to become much more apparent to investors,” said Barclays Capital analyst Anthony DiClemente. “There will be many more questions about programming expenses and margins.”

Collier stands by AMC's track record and management strategy. “Are there bumps along the road? Sure, but the net results have turned out pretty well.”

-- Joe Flint

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Photo: AMC's "The Walking Dead." Credit: AMC. 

Tense talks between AMC and Sony over 'Breaking Bad'

BREAKBAD

Tense negotiations are underway between the cable network AMC and Sony Television, producer of "Breaking Bad," over a deal for a fifth and probably final season of the critically acclaimed drama.

 Talks seemed to reach an impasse last week when Sony sent feelers to at least three other cable networks about taking "Breaking Bad" should an agreement with AMC fall through, said two people with knowledge of the matter who requested anonymity because of the sensitive nature of the talks.

To be sure, negotiations between networks and producers are often contentious. As shows age, they become more expensive as actors' and producers' paychecks get bigger with success. Both sides have in dictated that they hope to reach a pact that will keep "Breaking Bad" on AMC.

Discussions grew heated when AMC tried to convince the makers of of the show that its fifth season run only six to eight episodes instead of the typical 13. That was rejected by the creative forces behind the show, which led them to approach other outlets.

"Breaking Bad" is not the only show AMC is looking to trim costs on. "The Walking Dead," which became a big hit for the network, is having its per-episode budget cut by about $250,000. Last week the show's executive producer Frank Darabont left, and there is speculation that the budget cuts were the reason. People close to AMC deny that was the case.

AMC's push to lower costs on "Breaking Bad" and "The Walking Dead" comes as the price of its signature hit "Mad Men" is expected to go up: "Mad Men" creator Matt Weiner landed a lucrative new deal to stay with the program for at least two new seasons.

In the unlikely event that "Breaking Bad" does move to another channel, the producers would probably have to agree to make additional seasons. It would be highly unusual for a network to commit to just one season of a show it acquires from another network.

AMC is a unit of AMC Networks, which went public earlier this summer.

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Netflix users see Starz over disappearance of Sony movies

SocialNetwork
As editor of a blog that recommends what to watch on Netflix, Taylor Nikolai is used to seeing movies come and go from the online streaming service. But even he was surprised last Friday when more than 250 films from Sony Pictures were suddenly no longer available.

“It’s the first time I can remember a huge bulk of movies disappearing without advance warning,” the Minnesota resident said.

Customers upset that their Netflix Instant queue unexpectedly lost some of its highest-profile titles, like “The Social Network,” “Salt” and “Grown Ups,” might be frustrated with Netflix and Sony. In reality, the catalyst is a pay cable network whose fate is tied to Netflix: Starz.

As part of its agreements to carry films from Sony and Walt Disney Studios on television, Starz, which is owned by Liberty Media Corp., also acquired the online rights to their movies. In 2008, Starz struck a four-year deal to distribute that content to Netflix that analysts estimate is worth $20 million to $30 million annually. According to IHS Screen Digest, the arrangement covers more than 1,000 movies a year.

The disappearance of Sony’s movies resulted from a clause in the Starz agreement. According to people familiar with the matter who spoke on condition of anonymity because contract terms are confidential, it includes an undisclosed cap, which has recently been exceeded, on the number of people who can watch Sony movies online.

To return Sony’s movies to Netflix, Starz needs to renegotiate the terms with the studio and is likely to seek higher payments from Netflix.

Starz saw the original Netflix deal as an easy way to spread its brand online and generate extra money. But Netflix has exploded in popularity over the last three years. It now has more than 23.6 million subscribers, many of whom watch movies online or on Internet-connected televisions. As a result Netflix has become a competitor to cable channels, putting Starz in the difficult position of charting its future while doing business with its fastest-growing rival.

“At the time the Netflix deal seemed like a good proposition to make money in a medium that wasn’t being used,” Janney Capital Markets analyst Tony Wible said. Starz now is “cannibalizing its own revenue … and potentially trading a dollar for a nickel.”

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News Corp. moves closer to purchase of Elisabeth Murdoch's TV company

Rupert Murdoch is getting to roll out the corporate welcome mat to his daughter, Elisabeth Murdoch.

EMURDOCH Murdoch's media conglomerate News Corp. is in the final stages of negotiating an arrangement to buy Elisabeth Murdoch's London-based television production company, Shine Group, for about $700 million, according to people familiar with the situation.

An announcement could come in the next couple of weeks.

The purchase is being driven, in large part, by Murdoch's desire to have his second-eldest daughter join the company in a high-level role. His youngest son, James, already has a key position, running News Corp.'s European and Asian operations.

Elisabeth Murdoch, 42, has spent the last decade building Shine into one of the U.K.'s most prominent and successful independent television studios. Shine produces such shows as "MasterChef" and "The Biggest Loser." News Corp. has international distribution channels, but it has limited production capabilities overseas.  That segment has become increasingly important as producers take their successful reality show formats and replicate them in countries around the globe.

Elisabeth Murdoch, who owns 53% of Shine, has several reasons for wanting to sell. Minority partner Sony Pictures Entertainment, which owns 20%, has been looking to cash out. What's more, the European production industry has been rapidly consolidating. Shine, which has considerable debt, doesn't have the financial resources to take the company to the next level and Murdoch doesn't want to bring on additional partners that would dilute her controlling interest.

Click here to read the full story in the Los Angeles Times.

-- Meg James

 Photo Elisabeth Murdoch. Credit: Tim Matthews / Allstar.

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