Sony blamed the rise of online streaming for a $1 billion writedown at its Hollywood film studio, which forced it to halve its profit forecast for the financial year.
The Japanese electronics and entertainment group said that it expected a group net profit of 26 billion yen, or about £182 million, in the financial year to March, compared with an earlier forecast of 60 billion yen.
In the previous financial year, the company posted a profit of 147.8 billion yen, and appeared to be putting behind it a difficult few years in which its traditional household electronics businesses lost out to Korean competitors, such as Samsung and LG Electronics.
Revenue was also down, which the company attributed to unfavourable foreign-exchange rates. Like many Japanese manufacturers, Sony has been hurt by the strong yen, which adds to the cost of domestically manufactured products in overseas markets.
The bulk of the losses resulted from a sharp fall in the company’s valuation of its film business, Sony Pictures Entertainment. The $1 billion (£785 million) writedown followed months of disappointing box office returns, and a slump in sales of DVD and Blu-ray, in favour of streaming services such as Netflix.
“We as management take seriously that we had to book the significant impairment loss,” Kenichiro Yoshida, Sony’s chief financial officer, said today.
The film losses wiped out steady gains in Sony’s game business, where the success of the PlayStation 4 produced a 5 per cent rise in revenue.
Yasuo Imanaka, an analyst at Rakuten Securities, said: “Its game sector will remain a strong earnings driver, while the TV and camera businesses are steadily recovering. Sony still needs to make a crucial decision on whether to continue its mobile phone business, which heavily depends on domestic demand.”
Kiyoto Utsumi, of Tachibana Securities, said: “Entertainment is very important to Sony, so I want to see what kind of approach they take to turning it around. The loss in movies is already known, so rather than dwell on it we should begin to shift our gaze toward the next fiscal period.”