Sony IR Day 2014
Entertainment
NOVEMBER 18, 2014
Non-U.S. GAAP Measures
Adjusted OIBDA:
Adjusted OIBDA = Operating income before “depreciation and amortization” and “restructuring charges.” Adjusted OIBDA is not a measure in accordance with U.S. GAAP. Sony does not believe that this measure is a substitute for operating income in accordance with U.S. GAAP. However, Sony does believe that this supplemental disclosure for the Pictures and Music segments may provide additional useful analytical information to investors. A reconciliation of Adjusted OIBDA to operating income in accordance with U.S. GAAP can be found in the appendix to this presentation.
* FYE = Fiscal Year Ended (e.g. FYE 2015 = Fiscal Year Ending March 2015)
Sony IR Day 2014
Sony Entertainment
Michael LyntonCEO, Sony Entertainment
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Recorded Music
Music Publishing
Visual Media and Platform
Motion Pictures
Television Productions
Media Networks
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Sony Pictures Entertainment
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Sony Pictures Entertainment - Financial Performance
2013 2014 2015 F
$563 $504 $535
Revenue($ Billions)
2013 2014 2015 F
$754 $749 $725
Adjusted OIBDA (1)
($ Millions)
2013 2014 2015 F
$8.8 $8.3 $8.1
Operating Income($ Millions)
Source:Internalfigures.(1)OperatingIncomebeforedepreciationandamortizationandrestructuringcharges.
FYE
CAGR: (4%)
CAGR: (2%)
CAGR: (3%)
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Promising Opportunities Ahead
Motion PicturesSONY PICTURES ENTERTAINMENT
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Recent Box Office Hits Ranging from Action to Drama to Comedy
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FYE15 and FYE16 Upcoming Film Slate - Select Titles
BOND 24
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• Distribution deal with new production company formed byJeff Robinov
• Focused primarily on big budget, tentpole films
• Managed by Tom Rothman
• Mid-budget titles for wide release
• Releasing first title in June 2015
Diversified Creative Talent and Risk Profile
Film Slate Financing
• As of April 2014, SPE entered into a three year co-financing agreement with LStar Capital, whereby LStar Capital will invest in a majority of SPE’s films
• In addition, Village Roadshow has agreed to finance a selection of SPE film titles
• Film financing partners partially finance the production of a film or slate of films in exchange for a financial interest
• Film financing deals provide additional capital and help manage risk
• SPE’s continued ability to secure film financing partners reinforces that our films offer an attractive financial opportunity
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Television Productions
SONY PICTURES ENTERTAINMENT
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Current Successes in Television Production
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New and Future Television Productions - Select Titles
BEYOND THE TANK
17
Growing Customer Base
Broadcast Digital Free-To-Air DigitalBasic / Premium CableBasic / Premium Cable
U.S.
Examples of Networks and Platforms
International
Over $2.4 Billion in Worldwide Distribution Revenue in FYE14
Media NetworksSONY PICTURES ENTERTAINMENT
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Maturing Networks Portfolio
356
4372
FYE15FYE18
Note:IncludesSPE’schannelportfolioasof9/30/14
7878
Media Networks Operating Margins %
Channel Count
5 Years Or Less
6 Years Or More
All Networks
FYE18
FYE15
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MSM India Networks Growth Strategy
• Invest in premium content to build advertising and distribution strength
• Expand national channel footprint to drive future growth
– Launch more regional language and niche genre channels
Recent Channel Launches
PAL MAX2 LIV Sports
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Recent Acquisition
• Acquired by SPE in August 2014
• The UK’s largest independent cable/satellite TV channel group
• Portfolio contains 16 channels across kids, music, movies and general entertainment genres
• Increases Media Networks scale in the UK and strengthens its position on key distribution platforms
• Immediately accretive to Operating Income
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Asia
FYE05 FYE14
Latin America
India
North America
Asia
Europe
Latin America
India
Revenue Breakdown by Geography - Media Networks
26%
Total Revenue$0.3 Billion
Total Revenue$1.6 Billion
43%
10%21% 37%
25%
14%
12%12%
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FYE05 FYE14(1)
Total Revenue$0.3 Billion
Total Revenue$1.6 Billion
Revenue Breakdown by Source – Media Networks
Advertising
Subscription & Other
Advertising
Subscription & Other
(1)DigitalGamesrepresentsrevenueassociatedwithGSN.
60%40%
46%46%
Digital Games
8%
Financial OverviewSONY PICTURES ENTERTAINMENT
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($Millions) FYE14 FYE15 FYE16
InitialCostSavingsSharedNov.2013 $135 $220 $250
AdditionalCostSavingsIdentified ‐ 40 50
Total $135 $260 $300
SPE is on target to achieve approximately $300 million of annual cost savings by FYE16
Cost Reductions
• Continued refinement of marketing and distribution infrastructure
• Restructuring, consolidation, streamlining of other Motion Pictures and Home Entertainment departments
• Overhead reductions in all corporate departments
• Shift towards shared service centers
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Pictures Segment Summary
Targets for FYE18
Sales 10~11 Billion USD
Operating Profit Margin 7~8 %
Adjusted OIBDA Margin 9~10 %
Sony Music
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Sony Music Segment - Historical Financial Performance
Note: HistoricalperformancebasedonSonyMusicEntertainmentandSony/ATVMusicPublishingconsolidatedUSDresultsandSony MusicEntertainmentJapanconsolidatedJPYresultstranslatedtoUSDattheaverageexchangeratesfortheperiods
(1) Operatingincomebeforedepreciation,amortizationandrestructuringcharges
Revenue($ Billions)
2013 2014 2015 F
$5.3$5.0 $4.8
CAGR: (5%)
Operating Income($ Millions)
2013 2014 2015 F
$448$500 $473
CAGR: +3%
Adjusted OIBDA (1)
($ Millions)
2013 2014 2015 F
$631 $649 $613
CAGR: (1%)
FYE
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Sony Music Segment - Commitment to Financial Discipline
• Streamlined worldwide Recorded Music operations
• Fully integrated EMI Music Publishing into Sony / ATV
• Ongoing focus on cost efficiencies as the industry evolves
IT Systems Integration
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Michael Jackson Miranda Lambert Chris Brown Kelly Clarkson One Direction Garth Brooks AC/DC
The Script Kenny Chesney MAGIC! Usher Carrie Underwood Pitbull Foo Fighters
Sia Pharrell Williams Kana Nishino Calvin Harris John Legend J. Cole Meghan Trainor
Jason Aldean Nogizaka46 Barbra Streisand Olly Murs A$AP Rocky L'Arc-en-Ciel Pink Floyd
Recorded Music - Current Year Bestsellers
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Recorded Music - Recent New and Developing Artist Success
MAGIC! Meghan Trainor Ella Henderson Pharrell Williams Mr Probz A Great Big World
Kid Ink Sia Rita Ora Hozier MKTO Pentatonix
Fifth Harmony Kongos Bobby Shmurda Future Tyler Farr George Ezra
Collabro Juicy J Becky G Tinashe Bleachers G-Eazy
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31.2%
16.7%10.9%
17.6%
5.2%
18.4%
Music Publishing - Competitive LandscapeStrong Roster of Recent Hits
Share of Top 100 Songs On U.S. RadioThird Quarter CY2014
Other
Note:Billboard,Nov.8201432
Music Publishing - New & Developed Writer Successes
Drake Calvin Harris Kanye West
Lady Gaga Luke Bryan Ed Sheeran
OneRepublic P!nk Lana Del Rey
Joel Little Hozier Usher
Taylor Swift Iggy Azalea Of Monsters And Men
Pitbull Miranda Lambert Pharrell
Kevin Kadish Sam Smith fun.
Enrique Iglesias Avicii Shakira
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Catalog Representation:Top 20 Global Revenue Earning Songs
Song Title Artist Release Year
STAY RIHANNA 2013BLURRED LINES ROBIN THICKE FEAT. T.I. & PHARRELL 2013COUNTING STARS ONEREPUBLIC 2013FEEL THIS MOMENT PITBULL 2013DIAMONDS RIHANNA 2012LET HER GO PASSENGER 2012WHISTLE FLO RIDA 2012LITTLE TALKS OF MONSTERS AND MEN 2011CRIMINAL MINDS TV SERIES 2005NCIS TV SERIES 2003CSI TV SERIES 2000WE ARE THE CHAMPIONS QUEEN 1977WE WILL ROCK YOU QUEEN 1977COME TOGETHER THE BEATLES 1969HEY JUDE THE BEATLES 1968REVOLUTION THE BEATLES 1968ALL YOU NEED IS LOVE THE BEATLES 1967AIN'T NO MOUNTAIN HIGH ENOUGH MARVIN GAYE AND TAMMI TERRELL 1967STAND BY ME BEN E KING 1960OVER THE RAINBOW FILM - WIZARD OF OZ 1939
Note:TwelveMonthsEndedJune30,2014 34
Well-Positioned to Capitalize On Digital Market Trends
65%
6%4%
7%
18%22%
5%
13%
60%
Downloads
Ringtones/Other
DigitalRadio
Streaming/Subscriptions
Video
DownloadsStreaming/Subscriptions
Video
Digital Radio
2013 ACTUAL 2017 FORECAST
Source:IFPICY2013;excludesJapan.Forecastbasedoninternalprojections.
$5.7B $8.2B
Paid Streaming Services Provide the Highest Value to Recorded Music. Conversion from Free to Paid subscribers is key.
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Music Segment Summary
Sales 4.8~5.2 Billion USD
Operating Profit Margin 10.5~11.5 %
Adjusted OIBDA Margin 13.5~14.5 %
Targets for FYE18
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Conclusion
Creating, acquiring and distributing the best content
Investing for growth
Embracing new technologies
Committed to financial discipline
Dedicated to One Sony strategy
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Appendix
SonyPicturesSegmentReconciliationfromUSDtoYen
FYE13 FYE14 FYE15OctFCT
Revenue‐ inmillionsofUSD(1) $8,803 $8,255 $8,100
Averageexchangerate(1USD=)(2) ¥83.2 ¥100.5 ¥106.2
Revenue– inbillionsofYen(3) ¥732.7 ¥829.6 ¥860
Operatingincome– inmillionsofUSD(1) $563 $504 $535
Averageexchangerate(1USD=)(2) ¥84.9 ¥102.4 ¥108.4
Operatingincome– inbillionsofYen(3) ¥47.8 ¥51.6 ¥58
SPEisaU.S.‐basedoperationthataggregatestheresultsofitsworldwideoperationsonaU.S.dollarbasis.ThistablereconcilesSPE'srevenueandoperatingincomefromUSD(SPE'sreportingcurrency)totheYenresultsultimatelyincludedinSonyCorporation'sU.S.GAAPfinancialstatements.(1)RepresentstheannualrevenueandoperatingincomeofSonyPicturesEntertainmentonaUSdollarbasispriortotranslationintoyenforinclusionintheconsolidatedoperating
resultsofSonyCorporation.(2)SPE'smonthlyoperatingresultsaretranslatedfromUSD(SPE'sreportingcurrency)intoYen(SonyCorporation'sreportingcurrency) usingtheaverageexchangerateforthemonth.
TheaverageannualexchangeratereflectedinthetableaboveisderivedfromthecomparisonoftheaggregateamountofSPE's monthlyrevenueandoperatingincomeonaUSDbasistotheaggregateamountofthosesamefinanciallineitemsonaYenbasis.
(3)SPE'sannualrevenueandoperatingincomeinYenasreportedinSonyCorporation'sconsolidatedfinancialstatements.
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SonyPicturesSegmentReconciliationfromUSDtoYen– (Cont’d)
SPEisaU.S.‐basedoperationthataggregatestheresultsofitsworldwideoperationsonaU.S.dollarbasis.ThistablereconcilesSPE'sdepreciationandamortizationandrestructuringchargesfromUSD(SPE'sreportingcurrency)totheYenresultsultimatelyincludedinSonyCorporation'sU.S.GAAPfinancialstatements.(1)Representstheannualdepreciationandamortization,andrestructuringchargesofSonyPicturesEntertainmentonaUSdollar basispriortotranslationintoyenforinclusioninthe
consolidatedoperatingresultsofSonyCorporation.Depreciationandamortizationexcludesamortizationoffilmcosts.Depreciationandamortizationincludestheamortizationofinternal‐usesoftwareduetothechangeofthepresentationanddisclosurerelatedtointernal‐usesoftwareonMarch31,2014.Asaresult,depreciationandamortizationinFYE13wasreclassified.
(2)SPE'smonthlyoperatingresultsaretranslatedfromUSD(SPE'sreportingcurrency)intoYen(SonyCorporation'sreporting currency)usingtheaverageexchangerateforthemonth.TheaverageannualexchangeratereflectedinthetableaboveisderivedfromthecomparisonoftheaggregateamountofSPE'smonthlydepreciationandamortization,andrestructuringchargesonaUSDbasistotheaggregateamountofthosesamefinanciallineitemsonaYenbasis.
(3)SPE'sannualdepreciationandamortization,andrestructuringchargesinYenasreportedinSonyCorporation'sconsolidatedfinancialstatements.
FYE13 FYE14
Depreciationandamortization‐ inmillions ofUSD(1) $179 $179
Averageexchangerate(1USD=)(2) ¥86.4 ¥101.0
Depreciationandamortization– inbillions ofYen(3) ¥15.4 ¥18.1
Restructuringcharges‐ inmillionsofUSD(1) $12 $66
Averageexchangerate(1USD=)(2) ¥90.4 ¥102.0
Restructuringcharges– inbillionsofYen(3) ¥1.1 ¥6.7
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SonyPicturesSegmentReconciliationfromOperatingIncometoAdjustedOIBDA
(1)Depreciationandamortizationexcludesamortizationoffilmcosts.Depreciationandamortizationincludestheamortizationofinternal‐usesoftwareduetothechangeofthepresentationanddisclosurerelatedtointernal‐usesoftwareonMarch31,2014.Asaresult,depreciationandamortizationinFYE13wasreclassified.
AdjustedOIBDAisnotameasureinaccordancewithU.S.GAAP. SonydoesnotbelievethatthismeasureisasubstituteforoperatingincomeinaccordancewithU.S.GAAP. HoweverwebelievethatthissupplementaldisclosureforthePicturesandMusicsegmentsmayprovideadditionalusefulanalyticalinformationto investors.
(inmillionsofUSD) FYE13 FYE14
Operatingincome $563 $504
Add:Depreciationandamortization(1) 179 179
Add:Restructuringcharges 12 66
Operatingincomebeforedepreciation,amortizationandrestructuringcharges("AdjustedOIBDA") $754 $749
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SonyMusicSegmentReconciliationfromYentoUSD
FYE13 FYE14 FYE15OctFCT
Revenue– inbillionsofYen ¥441.7 ¥503.3 ¥510
WeightedaverageeffectiveUSDtoYenrevenueexchangerate ¥82.6 ¥100.3 ¥106.2
Revenue‐ inmillionsofUSD(1) $5,346 $5,016 $4,803
Operatingincome– inbillionsofYen ¥37.2 ¥50.2 ¥50
WeightedaverageeffectiveUSDtoYenoperatingincomeexchangerate ¥83.0 ¥100.4 ¥105.7
Operatingincome– inmillionsofUSD(1) $448 $500 $473
(1)HistoricalperformancebasedonSonyMusicEntertainmentandSony/ATVMusicPublishingconsolidatedUSDresultsandSonyMusicEntertainmentJapanconsolidatedJPYresultstranslatedtoUSDattheaverageexchangeratesfortheperiods
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SonyMusicSegmentReconciliationfromYentoUSD– (Cont’d)
FYE13 FYE14
Deprecationandamortization– inbillions ofYen ¥13.2 ¥14.4
WeightedaverageeffectiveUSDtoYendepreciationandamortizationexchangerate ¥84.0 ¥100.3
Depreciationandamortization‐ inmillionsofUSD(1) $157 $144
Restructuringcharges– inbillionsofYen ¥2.3 ¥0.6
WeightedaverageeffectiveUSDtoYenrestructuringchargesexchangerate ¥89.8 ¥101.8
Restructuringcharges– inmillionsofUSD(1) $26 $6
(1)HistoricalperformancebasedonSonyMusicEntertainmentandSony/ATVMusicPublishingconsolidatedUSDresultsandSonyMusicEntertainmentJapanconsolidatedJPYresultstranslatedtoUSDattheaverageexchangeratesfortheperiods
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SonyMusicSegmentReconciliationfromOperatingIncometoAdjustedOIBDA
(1)Depreciationandamortizationincludestheamortizationofinternal‐usesoftwareduetothechangeofthepresentationanddisclosurerelatedtointernal‐usesoftwareonMarch31,2014.Asaresult,depreciationandamortizationinFYE13wasreclassified.
AdjustedOIBDAisnotameasureinaccordancewithU.S.GAAP. SonydoesnotbelievethatthismeasureisasubstituteforoperatingincomeinaccordancewithU.S.GAAP. HoweverwebelievethatthissupplementaldisclosureforthePicturesandMusicsegmentsmayprovideadditionalusefulanalyticalinformationto investors.
(inmillionsofUSD) FYE13 FYE14
OperatingIncome $448 $500
Add:Depreciationandamortization(1) 157 143
Add:Restructuringcharges 26 6
Operatingincomebeforedepreciation,amortizationandrestructuringcharges("AdjustedOIBDA") $631 $649
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Cautionary StatementStatements made in this presentation with respect to Sony’s current plans, estimates, strategies and beliefs and other statements that are not historical facts are forward-looking statements about the future performance of Sony. Forward-looking statements include, but are not limited to, those statements using words such as “believe,” “expect,” “plans,” “strategy,” “prospects,” “forecast,” “estimate,” “project,” “anticipate,” “aim,” “intend,” “seek,” “may,” “might,” “could” or “should,” and words of similar meaning in connection with a discussion of future operations, financial performance, events or conditions. From time to time, oral or written forward-looking statements may also be included in other materials released to the public. These statements are based on management’s assumptions, judgments and beliefs in light of the information currently available to it. Sony cautions investors that a number of important risks and uncertainties could cause actual results to differ materially from those discussed in the forward-looking statements, and therefore investors should not place undue reliance on them. Investors also should not rely on any obligation of Sony to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Sony disclaims any such obligation. Risks and uncertainties that might affect Sony include, but are not limited to:(i) the global economic environment in which Sony operates and the economic conditions in Sony’s markets, particularly levels of consumer spending;(ii) foreign exchange rates, particularly between the yen and the U.S. dollar, the euro and other currencies in which Sony makes significant sales and incurs production costs, or in
which Sony’s assets and liabilities are denominated;(iii) Sony’s ability to continue to design and develop and win acceptance of, as well as achieve sufficient cost reductions for, its products and services, including televisions, game
platforms and smartphones, which are offered in highly competitive markets characterized by severe price competition and continual new product and service introductions, rapid development in technology and subjective and changing consumer preferences;
(iv) Sony’s ability and timing to recoup large-scale investments required for technology development and production capacity;(v) Sony’s ability to implement successful business restructuring and transformation efforts under changing market conditions;(vi) Sony’s ability to implement successful hardware, software, and content integration strategies for all segments excluding the Financial Services segment, and to develop and
implement successful sales and distribution strategies in light of the Internet and other technological developments;(vii) Sony’s continued ability to devote sufficient resources to research and development and, with respect to capital expenditures, to prioritize investments correctly (particularly in
the electronics businesses);(viii) Sony’s ability to maintain product quality;(ix) the effectiveness of Sony’s strategies and their execution, including but not limited to the success of Sony’s acquisitions, joint ventures and other strategic investments;(x) significant volatility and disruption in the global financial markets or a ratings downgrade;(xi) Sony’s ability to forecast demands, manage timely procurement and control inventories;(xii) the outcome of pending and/or future legal and/or regulatory proceedings;(xiii) shifts in customer demand for financial services such as life insurance and Sony’s ability to conduct successful asset liability management in the Financial Services segment;(xiv) the impact of unfavorable conditions or developments (including market fluctuations or volatility) in the Japanese equity markets on the revenue and operating income of the
Financial Services segment; and(xv) risks related to catastrophic disasters or similar events.Risks and uncertainties also include the impact of any future events with material adverse impact.
45Sony Corporation Investor Relations