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Analyst - Time for Sony to break up, SCE to turn into media division.

zomgbbqftw

Banned
Jan 21, 2011
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http://www.bloomberg.com/news/2014-05-18/sony-breakup-would-be-better-late-than-never-real-m-a.html

"“Last year there was some hope, and now we’re seeing a capitulation of that hope,” Daniel Ernst, an analyst at Hudson Square Research Inc. in New York, said in a phone interview. “The worse the electronics part of the company does, the more pressure there will be to look at” Loeb’s suggestion."

"A breakup is “long overdue,” Chris Konstantinos, [...] said in a phone interview. “You could almost do what I would term a ‘good bank/bad bank’ type of scenario.”

"A breakup would make it easier for investors to assess the disparate units, said Konstantinos of RiverFront. One way of doing that would be to put higher-growth divisions, including PlayStation and entertainment, in one business and more commoditized operations, like TV, in a “cash cow” business focused on buybacks and dividends, he said."

"“For the first time over the last four or five months, I am seeing real signs that the company is doing all the right things,” Anvarzadeh said by phone. “You could argue that it’s come too late, but we are where we are and the question is, ‘How would you restructure this business at this stage?’”

Severing ties between the electronics and entertainment operations now would be a mistake, he said.

“For Sony to give up its best businesses, its highest cash-flow generating businesses, when it needs it the most, doesn’t makes any sense,” Anvarzadeh said."

A couple of opposing views there. I wrote a lengthy post the other day on why I believe their media divisions need to be either reformed or freed from the dead hands of Sony management. I'll dig it up in a minute and post it under here. They are not part of the article, and represent my views alone.

I read that Loeb wants to try again, but if anything Sony needs to rid itself of legacy businesses and transform itself into a proper media company and transition PlayStation from an electronics division into a media division. The fact is that the PS4 is likely to be the last Sony home console, PS Now is their future, and that means SCE becomes a content division like SPE and SME. Pooling resources and IP is the key to making Columbia Pictures/SPE successful again. The biggest problem for SPE is that they have very poor ROI, a couple of years back people raved that they had the biggest box office takings in the US of all the major studios, but for FY12 SPE made just $500m globally. A pittance compared to Disney, WB and Fox.

Dan Loeb has the right diagnosis of SPE, but he has the wrong solution. Sony needs to realign the studio to make it more efficient and to push for higher quality. ASM2 is a classic example. While I enjoyed it, I also admit it is a poorly written film with flimsy plot points and unnecessary scenes. The first one had a better written plot that hung together more easily but the villain was poor and it redid the origin story. Instead of keeping Steve Kloves who did a decent job they hired "AAA" writers Orci and Kurtzmann who are known for horribly low brow scripts, proper "popcorn movies". While globally ASM2 will outperform Cap 2 because Spider-Man is a much more popular super hero, in the US ASM2 won't reach anywhere near what Cap will do because the story is too contrived and it treats viewers like idiots. The only saving grace is the chemistry between the leads. The other issue I have with Sony's mishandling of SM is that they spend around $350m per film on production and advertising which means they need to do around $750m BO to break even. ASM just about made the grade and they probably made some level of profit after home video revenues, ASM2 will do slightly better because of strong RoW revenues and the expansion of western cinema in Asia, but it will also barely beat the break even point. The goal of SM movies shouldn't be to barely break even. They should be looking for at least 10-15% RoI from BO receipts for SM movies (if not closer to 25%) otherwise it is not worth risking $350-375m every single time unless they take in between $850m and $1bn BO globally. SM movies should be the centrepiece of the profit plan to allow the studio to try their hand at riskier projects elsewhere. But they don't, SPE management seem to content breaking even on them.

Anyway, I think SM is a microcosm of what is going wrong at SPE in terms of movie making, they seem to be too happy with hitting the break even mark and too happy with making poorly reviewed movies. They need a big rethink for the third one before they begin production. In Andrew Garfield they have a truly talented actor and great SM, I just hope they don't waste their final movie with him. The story is still recoverable and they have all the right elements in place for a solid third entry if they can get good script writers involved who want to make a decent movie rather than a piece of crap with a few big set pieces to "wow" the audience. Out of the dead hand's of Sony management SPE could actually be very successful, but this desire to create "popular" movies rather than good ones means they will never have real success. Their TV management is excellent though, they really seem interested in funding and creating great TV shows rather than aiming for mindless popular crap. Audiences have responded, 5 seasons of BB, 5 seasons of Community, The Blacklist got renewed, plus a whole bunch of other shows and they have a decent pipeline AIUI. If only the Pictures side would learn from that and realise quality and success go hand-in-hand.

I would like to add that the $500m global operating profit was boosted by strong performance in their TV division and asset disposals, it is actually highly likely that in the year that SPE topped the BO charts in the US they made an operating loss overall. That situation has repeated itself this year, though there have been some restructuring costs and a couple of outright bombs to deal with like After Earth and White House Down. Excluding the bombs it's possible that SPE had some kind of operating profit.

The reason Dan Loeb is even bothering with his line of attack at Sony is because of this situation, how can the studio that owns Spider-Man and has the ongoing distribution and most of the production rights to James Bond not be making money overall. It is horribly mismanaged, and if Sony were forced to sell 49% of it to the market for $7-8bn it would force them to open up their books so investors could see exactly where the money is being wasted and exactly where savings can be made.

What's worse for SPE is that until around 2012 they had it easy, movies were internally financed because Sony had so much cash on hand, now with costs elsewhere weighing down their balance sheet and operating losses in their core electronics divisions sucking up resources, SPE has had to go for external finance. That raises their operating cost to a level that may be unsustainable with their current model of being happy breaking even on large projects.
 
Apr 7, 2014
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Can someone please explain to me why it's "smart" to spin off one of your successful divisions when the company is struggling? Maybe I'm just as bad as the mom from Tangled, but if I were Sony I'd like to keep my lifelines close to my chest, thanks.

 

zomgbbqftw

Banned
Jan 21, 2011
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The idea would be to free up the media divisions so the cash generated by them in operating income could either be re-invested for higher growth or returned to shareholders. Right now their media division profits all go towards propping up their failing electronics businesses like TVs and until recently PCs.
 

Kallor

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Jan 25, 2013
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Just sell Spiderman to Disney for a few billion and you'll be okay for a couple more weeks, Sony.
 
Nov 20, 2010
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Can someone please explain to me why it's "smart" to spin off one of your successful divisions when the company is struggling? Maybe I'm just as bad as the mom from Tangled, but if I were Sony I'd like to keep my lifelines close to my chest, thanks.


The opposing way to look at it is splitting off the struggling business, which is an equally valid viewpoint. I mean, yes, maybe the "Sony" name sticks with the electronics, but that doesn't mean you do. And, particularly, it doesn't mean investors do. As it stands, perhaps the electronics piece is just destined to go belly up, and it's better if it goes down by itself.
 

rob305

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Aug 1, 2013
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And now, it's time to call the next analyst out, make jokes about analysts in general and keep telling ourselves that everyone is wrong about sony other than the gaming community
 

TechnicPuppet

Nothing! I said nothing!
May 14, 2013
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Would maybe be better if it was spin off. That would be Sony then. The other part would just be broken up and sold I imagine.
 

Jinko

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Aug 12, 2007
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Yea a lot of people have been saying this for a while now though, chances are Sony won't do it though and the electronics division will take the company down with it.
 

Megadragon15

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Jul 12, 2009
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Just sell Spiderman to Disney for a few billion and you'll be okay for a couple more weeks, Sony.

Why would Disney spend a "few billion" for a character that they already own and will probably get the movie rights back if more Spider-Man films bomb like The Amazing Spider-Man 2?
 

postcyberpunk

Banned
Mar 23, 2014
1,700
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The fact is that the PS4 is likely to be the last Sony home console, PS Now is their future,

Does this make sense? I see the validity of it-- no more R&D for consoles, just servers (?), but would this allow for continued Playstation growth?
 

Jonnax

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Jun 23, 2013
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zomgbbqftw

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Jan 21, 2011
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Does this make sense? I see the validity of it-- no more R&D for consoles, just servers (?), but would this allow for continued Playstation growth?

Netflix grows just fine. Where does Sony go with PS hardware after the PS4? Slightly prettier graphics, a bit better framerate, bundling VR? These are not additions or upgrades that will get people to part with $399 all over again. If PlayStation is going to make it to 2020 intact then it must transition into an on demand service, and PS Now is the basis for that transition. PlayStation games are going to be made available on non-PS and non-Sony hardware. How much of a leap is it to assume that once rolled out new servers could be added to allow for PS4 level fidelity and PS4 games could be streamed as well? To me it's not that huge. Seven years is a long time in the world of internet infrastructure, what is not possible today, could well be possible in seven years time. Sony is a company that has hung on too long to traditional business models, SCE seems to be the one electronics division that is ahead of the curve, lets see if they stay there...
 

Saint Gregory

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Jan 4, 2006
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I don't fully understand how they transition away from hardware to only PSNow. That sounds as if it would require a lot of exclusive content and I don't think that they could generate enough internally and I don't see 3rd party developers lining up to have their content on someone else's subscription service. There's a big difference between putting your old games up on PS+ and launching new content on PSNow.

I'm sure at some point in the future it would make sense to go that route but would the market be ready by the time the PS4's lifespan is up?
 

Cyborg

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Aug 21, 2009
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Why would Disney spend a "few billion" for a character that they already own and will probably get the movie rights back if more Spider-Man films bomb like The Amazing Spider-Man 2?

Dont talk trash.......$633,169,864 is a fair ammount of succes. I found it a great movie
 

coldfoot

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Sep 14, 2010
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Netflix grows just fine. Where does Sony go with PS hardware after the PS4? Slightly prettier graphics, a bit better framerate, bundling VR? These are not additions or upgrades that will get people to part with $399 all over again. If PlayStation is going to make it to 2020 intact then it must transition into an on demand service, and PS Now is the basis for that transition. PlayStation games are going to be made available on non-PS and non-Sony hardware. How much of a leap is it to assume that once rolled out new servers could be added to allow for PS4 level fidelity and PS4 games could be streamed as well? To me it's not that huge. Seven years is a long time in the world of internet infrastructure, what is not possible today, could well be possible in seven years time. Sony is a company that has hung on too long to traditional business models, SCE seems to be the one electronics division that is ahead of the curve, lets see if they stay there...
Streaming will never be an acceptable solution for gaming until the internet develops such that all connections are 1ms.
 

massivekettle

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Jun 2, 2013
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The new trilogy (w/ 3D tax) is not able to outgross the original trilogy (7-12 years old). That's pretty bad.

Also, budget costs exclude marketing, which is an additional $100-200m. Also, Sony doesn't get 100% of the movie's gross, but much less (higher take in US/Canada than in developing countries like China for instance).
 

thuway

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Feb 25, 2008
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A few personal thoughts:

Bravia needs to go. Television as a business is a Dinosaur waiting to collapse. Low margins, high investments, and little ROI. No one is immune. Samsung / LG will both face Chinese companies with little to no overhead in the coming years. Get out.

Streamline all divisions into three products. That's it. Three. No more. I'll make it simple: E line (for economy), M line (for midrange), and XBR (for cost no object performance). You like Walkman? Instead of making a 500 dollar device no one will ever recognize, release the Walkman E, M, and XBR. Done.

Bring Xperia to the USA. Stop wasting time and staggering releases. The Xperia line is already wrought with stupid naming conventions. Just get the three naming scheme in, release timely to the US, and get it into the hands of consumers.

Finally, usher in the philosophy of value. PS4 represents the pinnacle of value in the console space, and the reception was better than anyone could have predicted. Either you adopt this philosophy and foster it into CE, television, and camera divisions - OR - you live and breathe like a hulking corpse.

Releasing a $1000 HMD vanity project will more than likely win zero customers.
Releasing a $15k projector because no one can compete does you no favours either. The window for good will is collapsing.


People appreciate premium, but no one in this day and age wants to pay for it. Take a cue from Vizio. Sony, as an electronics company needs to do something far more important than making good products. It needs to do what PlayStation has done. It needs to think about the consumers wallet.
 

darkside31337

Tomodachi wa Mahou
May 31, 2011
34,803
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Why would Disney spend a "few billion" for a character that they already own and will probably get the movie rights back if more Spider-Man films bomb like The Amazing Spider-Man 2?

Disappointing both critically and financially for Sony but bomb it did not. It'll still outgross Captain America but it didn't grow the way Sony was hoping.

Rather than spinning off the electronics part, why wouldn't they just continue killing it? They did the right thing by killing off their laptop division, televisions should have been killed off like a decade ago at this point.
 

Galvanise_

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Jan 2, 2009
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Britania rules the waves.
If I were Sony I'd solely focus on:

Sony Finance (Life insurance etc)
PlayStation
Xperia
Music
Aggressively sorting out SPE. Cut the dead wood and go lower budget until the bleeding stops.
Cameras
Medical

Jettison everything else. Everything.
 

Sho_Nuff82

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Jan 2, 2007
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By what metric did the film bomb?
This site:
http://www.boxofficemojo.com/movies/?id=amazingspiderman2.htm
Says they the total box office was:
$633,169,864

With a budget of:
$200–255 million

Is there something I'm missing?

Every Spider-Man film since the original has grossed less than the previous, and ASM 2 is tracking behind ASM's ho-hum $750 million pace. The fact that it's definitely finishing behind Cap 2 in the US and may, at best, tie it WW, is an astounding failure on Sony's end, given the nature of the two franchises 5 years ago. And Cap cost about 20% less to produce.

They're now planning a series of spinoffs (Venom, Sinister Six), even as the main franchise is hemorrhaging fans. That's not a good look.
 

vinnygambini

Why are strippers at the U.N. bad when they're great at strip clubs???
Aug 7, 2013
8,549
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Just sell Spiderman to Disney for a few billion and you'll be okay for a couple more weeks, Sony.

Disney would not spend billions on the Spiderman property as they already have the most valuable asset pertaining to that property, merchandising. A transaction that Disney achieved by providing a cheque of less than 350 million to Sony.

Disney is laughing.
 

Freeman

Banned
Aug 23, 2013
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Sony Pictures is a complete mess and very unstable and disorganized, its a maze of subdivisions and redundancy. They have pretty much the best comic book IP (yet have been left in the dust by competition and failed to cut a deal with Marvel that is mutually beneficial), they have 007, they produced great shows like Breaking Bad and Community, they have Crackle, Animax, Sony Pictures Animation and much more, yet they are not the ones setting the trends.

Its a miracle how SCE managed to find it current shape and how absurd some of their mistakes were with PS3m they were completely clueless. We still constantly see the problems in coordination when it comes to SCEA, SCEE, SCEJ and SOE specifically in situations on how they handled the Vita, localization, indie support or their software lineup for new hardware.

They have all the tools to be extremely successful if they had a vision and managed to leverage the fact that they are present at pretty much any segment and stage of mainstream entertainment. They need to slim down on the hardware segments that are making them bleed and rethink their overall strategy and stop putting the whole company at risk to chase the dream of becoming Apple again.

edit:Maybe its time for Japanese companies to start merging to save their asses.
 

Oriel

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Dec 30, 2013
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Just sell Spiderman to Disney for a few billion and you'll be okay for a couple more weeks, Sony.

Doesn't Disney already own then rights? Presumably they are biding their time until the rights expire and they can bring Spiderman in house to Marvel Studios.
 

QaaQer

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Jun 13, 2012
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What would they do with all the employees? You can't fire them, you have to pay them off and have them agree to go. The hiving of the PC business cost maybe 1.5 billion USD. Getting rid of TV would cost 5 times that, possibly more.

I'm starting to think that the only way Sony is going to be able to transition their business is if they enter bankruptcy proceedings under the Civil Rehabilitation Law which would give them the ability to circumvent Japan labor law.
 

Aquamarine

Member
May 24, 2012
18,812
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By what metric did the film bomb?
This site:
http://www.boxofficemojo.com/movies/?id=amazingspiderman2.htm
Says they the total box office was:
$633,169,864

With a budget of:
$200–255 million

Is there something I'm missing?

Sony doesn't get all of that $633 million. Try cutting that number in half.


And that $200 - $255 million is just the production budget. Add a massive marketing budget on top of that....now all of a sudden The Amazing Spiderman 2 isn't super-profitable anymore.
 
Nov 4, 2013
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I don't get why they keep saying the X1 and PS4 will be the last home consoles... they don't honestly believe that tablets will suffice do they?
 

TheRealTalker

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Mar 29, 2013
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Some analyst are very short sighted and would rather want to gain quick bucks then actually try and find long term solutions for these companies

Taking these peoples ideas as solid advice lead to ruin! Either if its with Banks, Companies, investments, etc....


Then when a company ignores them and somehow becomes successful or avoids ruin, they pat themselves on the back as if it was them all along
 

jayu26

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Feb 24, 2013
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By what metric did the film bomb?
This site:
http://www.boxofficemojo.com/movies/?id=amazingspiderman2.htm
Says they the total box office was:
$633,169,864

With a budget of:
$200–255 million

Is there something I'm missing?

Every Spider-Man film since the original has grossed less than the previous, and ASM 2 is tracking behind ASM's ho-hum $750 million pace. The fact that it's definitely finishing behind Cap 2 in the US and may, at best, tie it WW, is an astounding failure on Sony's end, given the nature of the two franchises 5 years ago. And Cap cost about 20% less to produce.

They're now planning a series of spinoffs (Venom, Sinister Six), even as the main franchise is hemorrhaging fans. That's not a good look.
You are wrong Sho_Nuff82, it is not a failure just because it is going to make less money than Captain America.

The problem is...$200-$255 million budget plus another $150 million spent on marketing, when the whole reason to reboot was to bring the cost down! Sony does not get to see all the money from the ticket sales, they see about half. Which means that the movie would have to earn at least $750-$800 million at the box office to break even. Which, from the looks of it, it will not. Now it might break even after DVD/Blu-ray sales, but that is just breaking even. This is normally not a problem for other studios (like Warner Bros. and their equally bad handling of DC for example) because they have lucrative merchandising rights associated with their big movie franchise(s). That's right, Sony does not see any money from Spiderman merchandise. It all goes to Marvel (Disney). That is also the reason Disney is not in any hurry to buy this franchise from Sony, they are the once making money from it.
 

Freshmaker

I am Korean.
Jul 29, 2005
22,162
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In fairness, I don't think that is to say "that's the last sony console and end of consoles" but rather that consoles will be transitioning to something different. Sony will likely still be central to whatever that ends up being
That's assuming streaming actually becomes viable.

If you're paying $50 just for the rights to STREAM A GAME, the system is beyond busted.
 

Haunted

Member
Nov 16, 2006
78,220
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Break up Sony, sell of the xbox division, Nintendo to make mobile games.

If the manufacturers would actually move according to analysts, we wouldn't have much of an industry anymore!


General observations aside, Sony as a whole is due for a restructuring.
 

BeforeU

Oft hope is born when all is forlorn.
Mar 19, 2014
12,427
571
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Toronto, CA
Can someone please explain to me why it's "smart" to spin off one of your successful divisions when the company is struggling? Maybe I'm just as bad as the mom from Tangled, but if I were Sony I'd like to keep my lifelines close to my chest, thanks.


I think its like this. Suppose I really think PlayStation brand is doing awesome, and I want to invest in Sony and want to buy some stock, but at the same time I know their other business suck or doing alright. So that holds me back from not buying Sony stock.

I think same could be said about Take Two, I actually bought their stocks during GTA 5 release thinking it will go high, but that didn't happen despite GTA 5 sold millions of copies. I am not expert in this but I just don't understand why Take Two stocks didn't go up.

So I believe its something similar in Sony's case. Despite all the great PS4 sale, Sony stocks aren't doing that great. May be investors wants to split so they have better idea how to invest in which part of the company. I see this as a good thing, if PlayStation brand was a separate, more people will invest because we know it will succeed and PlayStation as whole can do lot more. Right now the poor divisions are probably holding some of the stuff back.
 

Cynar

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Sep 18, 2007
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I don't get why they keep saying the X1 and PS4 will be the last home consoles... they don't honestly believe that tablets will suffice do they?
They do but they are not gamers or understand the gaming market. They also want short term gains and do not care about the overall health of the company.
 

Rebel Leader

THE POWER OF BUTTERSCOTCH BOTTOMS
Jan 21, 2007
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That's assuming streaming actually becomes viable.

If you're paying $50 just for the rights to STREAM A GAME, the system is beyond busted.

and before you know it. BOOM ISP charges you for going over your bandwidth
 

jayu26

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Feb 24, 2013
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Break up Sony, sell of the xbox division, Nintendo to make mobile games.

If the manufacturers would actually move according to analysts, we wouldn't have much of an industry anymore!


General observations aside, Sony as a whole is due for a restructuring.

Breaking up Sony and selling Xbox might actually be better for the industry...depending on what follows of course (who buys Xbox, how is Sony broken up, etc).
 

Guevara

Member
Jul 27, 2009
24,808
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Analysts fucked up.

They bought stock when the company still had room to fall. Now they either admit their mistake (sell at a loss) or they try to get Sony to do something stupid in order for short term gains. You can guess which they'd rather do.
 

geordiemp

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Netflix grows just fine. Where does Sony go with PS hardware after the PS4? Slightly prettier graphics, a bit better framerate, bundling VR? These are not additions or upgrades that will get people to part with $399 all over again. If PlayStation is going to make it to 2020 intact then it must transition into an on demand service, and PS Now is the basis for that transition. .

Just goes to show some people know nothing about the console business - online streaming gaming will never replace a console unless we can all have a server located down our street...

Rubbish
 

Ninja Scooter

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Jun 7, 2004
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Doesn't Disney already own then rights? Presumably they are biding their time until the rights expire and they can bring Spiderman in house to Marvel Studios.

The rights don't ever expire. All Sony has to do is have a Spider-man movie in production every like 7 years or some shit and they keep the rights.
 

Nzyme32

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May 23, 2013
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That's assuming streaming actually becomes viable.

If you're paying $50 just for the rights to STREAM A GAME, the system is beyond busted.

I'm not sure streaming a game like onlive or ps now (is that what it's called?) would be the end result. Local streaming via some kind of server to multiple screens/devices/clients maybe more likely. I don't think streaming like onlive or ps now would will every be able to support the large amounts of people that would demand it and the ever increasing bandwidth
 

Syphon Filter

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Aug 18, 2010
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Netflix grows just fine. Where does Sony go with PS hardware after the PS4? Slightly prettier graphics, a bit better framerate, bundling VR? These are not additions or upgrades that will get people to part with $399 all over again. If PlayStation is going to make it to 2020 intact then it must transition into an on demand service, and PS Now is the basis for that transition. PlayStation games are going to be made available on non-PS and non-Sony hardware. How much of a leap is it to assume that once rolled out new servers could be added to allow for PS4 level fidelity and PS4 games could be streamed as well? To me it's not that huge. Seven years is a long time in the world of internet infrastructure, what is not possible today, could well be possible in seven years time. Sony is a company that has hung on too long to traditional business models, SCE seems to be the one electronics division that is ahead of the curve, lets see if they stay there...

What makes it different now than the past? Wasn't each system always the same case with better hardware? How come you think it cant continue that way?