Sony Corp. Shops for IP and DTC Assets With Kando Spirit

For more than 30 years, Sony Corp. has faced speculation about its long-term commitment to entertainment.

But under the leadership of chief executive Kenichiro Yoshida, the company has been in entertainment-acquisition mode, notably with its $1.2 billion purchase of anime streaming platform Crunchyroll in August and the takeover of India’s Zee Entertainment last month. The hunt for assets to build up Sony’s IP vault, content production capabilities and niche direct-to-consumer offerings will only continue.

“Entertainment is Sony’s DNA,” Yoshida told Variety in a lengthy virtual interview in mid-December from Sony’s headquarters as he sat in front of a large framed poster for “Spider-Man: No Way Home,” the Sony Pictures title that enjoyed a massive worldwide box office debut a few days later. Yoshida is set to detail Sony Corp.’s long-term vision and technology priorities Tuesday night at the company’s annual presentation held at the Consumer Electronics Show conference, which kicked off Tuesday in Las Vegas.

At a feverish moment for media M&A, Yoshida makes it clear that Sony is a buyer, not a seller. And he flatly disputes the notion that Sony doesn’t have enough heft to compete on a global scale, given the parent company’s resources and the increasing ties between Sony Pictures Entertainment and its corporate siblings.

“We have more room to captivate through cooperation,” Yoshida said.

The executive points to Sony Pictures’ partnership with PlayStation on the upcoming Tom Holland-starrer “Uncharted,” adapted from a video game franchise, as an early example of the company’s drive for more collaborations among its content and direct-to-consumer platforms. Last year, Sony Music teamed with Sony Pictures to produce the musical film “Cinderella,” starring Sony Music artist Camila Cabello, for Amazon Prime Video.

“If you look at Sony’s entire entertainment business, including games and music, it is approximately a $45 billion revenue company. It’s not huge, but it’s not subscale,” Yoshida said.

In Yoshida’s view, everything Sony Corp. does is connected in some way to entertainment, whether it be through Sony Pictures, Sony Music Group, Sony PlayStation or the tools and experiences delivered through its consumer electronics unit. Sony’s hardware strategy has shifted over the past decade to focus on the high-end market for TV sets, cameras, video recorders and professional-grade film and TV production equipment.

The company’s overriding mission is to produce products that generate a strong emotional response in consumers, a spark that is known in Japanese culture as “kando.” Yoshida, who served as chief strategy officer and chief financial officer before taking the CEO reins from Kazuo Hirai in April 2018, sees Sony’s corporate purpose as nothing less than bringing kando to the world. That work can take the form of a showrunner creating a compelling series for Sony Pictures Television, or it can come in a technological innovation that makes for better pictures, videos or sound recordings.

“Within Sony, we strive to evolve our kando value chain. We engage with creators to generate emotionally impactful kando content and deliver it to users,” Yoshida said. “Sony is a company with origins in electronics, especially electronics dedicated to creating and delivering entertainment content.”

Yoshida’s vision of Sony’s future is demonstrated by shifts in its bottom line. In fiscal year 2020, which ended in March, Sony’s entertainment divisions — Sony Interactive Entertainment, Sony Pictures Entertainment and Sony Music Group — accounted for 63% of the company’s total profit of $8.9 billion. That’s up from 47% of total Sony profit in fiscal year 2018.

Sony Pictures Entertainment profit alone perked up in fiscal 2020 to $762 million, up from $376 million in fiscal 2017. That latter year was the same one the company took a $1 billion write-down on the value of Sony Pictures Entertainment in a nod to the uncertain outlook for the studio’s traditional earnings drivers of box office and TV syndication.

Five years later, the picture is much brighter. Yoshida credits Sony Pictures Entertainment CEO Tony Vinciquerra, who came on board in mid 2017, for streamlining operations and greatly improving the studio’s “quality of profit,” he said.

Asked specifically whether Sony would be game for a big-ticket purchase of an established Hollywood studio, should one come on the market, Yoshida was noncommittal.

“I am interested in any opportunity to enhance our IP capability as well as our DTC capability,” he said. “I don’t know if a current or incumbent studio is the right target. That is Tony’s call. But I really want to enhance our IP power as well as DTC power in the area of communities of interest.”

Anime is a big area of focus for Sony’s niche direct-to-consumer strategies. So is the booming entertainment marketplace in India.

Over the long term, Yoshida sees big growth potential for entertainment in what he calls the “mobility space” created by self-driving cars. Sony will continue to plow resources into cutting-edge technologies, with emphasis on the needs of virtual production that have become so crucial in pandemic times. He also noted the early promise of forward-looking technologies that can enhance sports telecasts with real-time data and other enhancements.

Indeed, Yoshida sees the focus on quality and the differentiators that Sony brings to the table — namely the marriage of gaming, music and the studio — as the future for Sony’s workforce, which stands at 110,000 employees around the world. The CEO’s belief in the power of kando to animate the enterprise is palpable.

“In the past two challenging years I think people really felt the need for entertainment. During the pandemic, our traffic at PlayStation Network was tremendous. Consumption of video was tremendous. People need entertainment,” Yoshida said. “Sony’s people need purpose — to fill the world with emotion. I believe during the pandemic our people really felt that. We are providing emotional content to the world.”

Source: Read Full Article