Sony Won’t Sell Sony Pictures
First, they announced a nearly $1 billion write down due to lower projected profits from their home entertainment division.
Second, because in a joint statement CEO Kaz Hirai and outgoing Sony Pictures Entertainment (SPE) head Michael Lynton said that they were fully committed to the movie studio, signalling that it’s not up for sale.
There has been a lot of speculation in recent weeks (like this good piece by Ed Lee in Recode) saying that Sony was looking closely at unloading the studio that finished 5th out of 6 last year in terms of box office.
There have been rumors that Leslie Moonves of CBS (CBS) would love to buy it. And, if Dalian Wanda valued Paramount at $10 billion last year (allegedly), why wouldn’t be SPE be worth more considering its higher revenues and profits?
But I think such a deal is unlikely. SPE will probably just stay put.
We’re only a couple of years away from Kaz Hirai saying no thanks to Dan Loeb’s suggestion that Sony dump SPE for as much money as they could get (likely a lot lower than what someone would pay today). It would be very difficult for any CEO, let alone a Japanese CEO, to change face so quickly now and take the money and run.
Sony is a conglomerate. It always has been a conglomerate. It’s arguably trading at lower than its sum-of-the-parts (like most such companies). Selling SPE would be great for generating pre-tax cash but then what? It’s likely the large Sony board wouldn’t be engaged about having a few extra billion to shuffle around the divisions.
Going back to the original 1989 deal that allowed Sony to enter Hollywood by buying Columbia Pictures for $3.4 billion, the original vision by Sony co-founder Akio Morita was to fuse software and hardware. You would watch Columbia movies on your Sony TV and VCR.
30 years later, we are probably close to that vision finally being realized.
The PS4 is in a strong position in its niche. Vue just launched and will make a play to tie you into that console even more. Sony is starting to do a better job sharing movies with its games and vice-versa. If there was ever a time to fulfill the Morita vision for that deal, it’s in the next few years.
So don’t expect a sale.
And biting the bullet on the write-down at home entertainment is better now than later.
Sony will keep a discount, but still hope that discount moves up.