Sony takes $1billion writedown on movie business

Sony earnings

Sony Corp will write down the value of its movie business by nearly 112.1 billion yen ($976 million) in the third quarter, blaming weaker film profits as online streaming services sap demand for movie DVDs.

In a statement on Monday, the Japanese TV-to-gaming group said it had cut its outlook for earnings from DVD, blue-ray discs and other home entertainment in line with a market decline.

The announcement comes two weeks after Sony said the chief executive officer of Sony Entertainment, Michael Lynton, is stepping down after a 13-year run. The studio has struggled recently, including with last year’s Ghostbusters sequel and a movie based on the Angry Birds video game. Sony warned in June the division was at a risk of posting more losses

But the latest in a string of writedowns for the overall Sony group rattled its shares in Tokyo on Tuesday, sliding almost 4 percent before recovering to trade in line with the market.

The Tokyo-based company is increasingly relying on its video games business, which generated twice as much income in the last fiscal year as film. Sony’s PlayStation 4 console is outselling Xbox One, its closest rival from Microsoft Corp., by about two-to-one, according to industry website VGChartz.

Sony is increasingly leaning on China to offset the downturn. In September, Dalian Wanda Group Co., the world’s largest movie screen operator, agreed to invest in Sony Pictures productions in an open-ended partnership. But a slowdown in movie revenue on the Chinese mainland has raised doubts about how much the deal will bolster Sony’s performance.

M3 slipped 1.2 percent prior to the announcement on Monday and is up 17 percent over the past 12 months. M3 will continue to count Sony as its largest shareholder even after the deal, according to data compiled by Bloomberg. Prior to the deal, Sony held 39.3 percent of M3’s outstanding shares.

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