News

Sony Writesoff $1bn in Film, But Broader Movie Biz Solid

By Robert Marich
   Jan. 30, 2017-Sony Corp. is taking a $1 billion writeoff on its movie studio operation (formerly Columbia Pictures—one of six “majors” today in Hollywood), but I don’t think this indicates any doom for movies.
   Sony cites a more-rapid-than-anticipated decline in physical video DVDs and its variant Blu-ray. Well, we all know that was baked into the business. There are several reasons that are peculiar to Sony.
   The $1 billion financial loss isn’t a sudden cash deficit but non-cash pain from accumulated underperformance. It also reflects expectations about future revenue generation. The Sony Pictures/Columbia movie releases recently suffered a lot of duds (the all-girl Ghostbuster bomb comes to mind) that were offset but few hits. The movie studio was also roiled by the 2015 email hacking scandal, which injured talent relations when frank messages of studio executives were revealed. In the aftermath of finger-pointing from the hack and chronically poor results from new film releases, Sony Pictures experienced high turnover of executive staff, which has been destabilizing.
   Finally, keep in mind that while the $1bn number is startling, Sony actually views its movie/TV program/music operations as strong businesses, versus its larger consumer electronics operation that faces cutthroat competition in segments like TV sets. Indeed, Sony said that it remains committed to entertainment in announcing the writedown.
   The Sony Hollywood writeoff is also an accounting ploy that wipes its financial books of expenses that thus won’t reduce profits in the future. It is a legitimate way to clears Sony’s financial books to report stronger financial results in future earnings reports.
   What’s the outlook for movies in general?
   I’d say cautiously optimistic. The threats are piracy and consumer tastes shifting to the tsunami of video produced online. But domestic
cinema boxoffice rose 2.2% in 2016, which I think is excellent since online movie options proliferate and the cinema-to-video window narrows. (Movie values in downstream TV and online are growing too.)
   The digital revolution does impact traditional linear movies. There seems to be a tendency to bigger hits and more bombs in cinemas. So it’s feast-or-famine for film companies. But I think that audiences will continue to consume movies because it is “sit back” experience. The demands of interactive content get exhausting after a while so viewing a passively-consumed movie is a relaxing alternative.
   As the off-her-rocker Gloria Swanson character says in the 1950 classic movie Sunset Boulevard, “You see, this is my life! It always will be! Nothing else. Just us, the cameras, and those wonderful people out there in the dark! All right, Mr. DeMille, I’m ready for my close-up.”
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