Sony Group is contemplating a partial spin-off of its financial business, Sony Financial Group, which includes life insurance and banking operations. The conglomerate is seeking to double down on its entertainment and image sensor businesses and is considering a timeline of two to three years to spin off Sony Financial Group. The newly listed business will retain Sony branding, with the conglomerate retaining a stake of slightly under 20%. Sony Chief Financial Officer, Hiroki Totoki, stated that finding a balance between investment in financial business and other growth areas, such as entertainment and image sensors, is a challenge given the capital required by the finance business.
Synergies between business lines
Sony Group is pursuing synergies between its business lines, which include video games, music, and movies. The company has stated that the hit drama, The Last of Us, on HBO, drove uptake of the game franchise on which it is based and the music used. The conglomerate aims to become a more pure play entertainment company which the market generally likes, according to analyst Mio Kato of LightStream Research, who publishes on Smartkarma. The finance business reported a 5% decline in revenue to YEN 1.45 trillion (nearly Rs. 87,190 crore) in the year ended March. However, operating profit increased by 49% due to a one-off gain from a real estate sale. For the current financial year, Sony expects a 40% drop in revenue at the unit due to an accounting change, and a 20% drop in profit due to the absence of the previous year’s one-off gains.
Sony focuses on entertainment and image sensors
Sony Group is focusing on entertainment and image sensors and aims to sell 25 million PlayStation 5 consoles this financial year as supply chain snarls ease. Sony CEO, Kenichiro Yoshida, said he recently watched The Super Mario Bros. Movie in Tokyo and used to play Super Mario too. He stated that “lovable characters and intellectual property (IP) can live for 30, 50, or 100 years. That’s something we want to make investment in for sustainable growth.” Sony has forecasted a slide in first-party software sales, reflecting weakness in the games pipeline. A sequel to Sony’s hit Marvel’s Spider-Man is among the games set for release this year. Rival Nintendo, whose Switch console has an install base of over 125 million units, sold over 10 million copies of The Legend of Zelda: Tears of the Kingdom during the first three days from launch. It has also scored a monster hit with The Super Mario Bros. Movie.
Sony’s share price was up 6% in Tokyo trade, a day after the group announced that it would buy back up to 2.03% of its stock. A partial spin-off of Sony Financial Group, made possible by changes in tax rules, will allow Sony Group to focus on its core businesses and pursue sustainable growth.
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