Sony Music Revenue, Operating Income Up Double Digits In First Quarter

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A sign advertises a Sony store in Manhattan on Nov. 1, 2016 in New York City.

Streaming and physical sales rise, digital downloads fall and Harry Styles' debut album leads the way in the company's fiscal Q1 report

Sony’s music operation got off to a good start in the first quarter of its fiscal year ended June 30, with its operations reporting $225.22 million in income (25.022 billion yen) on revenues of $1.52 billion (168.6 billion yen). That represents an increase of 57.6 percent on the operating income of the corresponding period last year -- $146.9 million (15.9 billion yen) -- while revenue grew 18.8 percent from the $1.31 billion (141.9 billion yen) garnered in Q1 2016.

Sony’s music operation consists of Sony Music Entertainment, Sony Japan, Sony/ATV Music Publishing and 39.8 percent of EMI Music Publishing’s net income, as well as its growing Visual and Media platform, which consists of revenue from the production and distribution of animation titles (including game applications based on the animation titles) and various service offerings for music and visual products.

With the exception of the first quarter of 2015, when the music operation saw an extraordinary gain due to a re-measurement of Sony Music Entertainment's equity interest in the Orchard as it acquired the other half of the company, this quarter represents the overall music operation’s best first fiscal quarter since 2009. (Prior to that, its music results were presented in a different reporting structure.)

The company attributed the increase in operating income and revenue to higher sales in recorded music and from its visual media and platform operation, which included strong performances of its Fate/Grand Order mobile game.

Music Operation Revenues

-- The recorded music operations of Sony Music Entertainment and Sony Music Japan saw revenue grow 11.3 percent to $898.5 million (99.822 billion yen) from the prior year’s first quarter total of $829.84 million (89.71 billion yen).

-- Music publishing, which consists of Sony/ATV, Sony Japan publishing and its percentage of EMI Music Publishing, produced revenues of $151.7 million (16.86 billion yen), a 7.7 percent increase from last year's corresponding period, when revenue totaled $144.8 million (15.65 billion yen). The company said its music catalog between Sony/ATV and EMI had grown to 4.49 million songs, versus 4.21 million songs by the end of its prior fiscal year.

-- Visual and Media, which houses its mobile game apps, saw revenue increase to $435.6 million (48.4 billion yen), up 46.4 percent from the first quarter of 2016 when revenue totaled $305.8 million (33.05 billion yen).

Recorded Music Revenues

-- Within Sony's recorded music operations, streaming led the way, generating $346 million (38.44 billion yen), an increase of 25.4 percent from last year's corresponding period when streaming totaled $283.7 million (30.7 billion yen).

-- Physical sales remained strong for recorded music, growing to $301.8 million (33.53 billion yen), up 16.2 percent from the corresponding period last year, when it totaled $267 million (28.9 billion yen).

-- Digital download revenue, meanwhile, fell 22.1 percent to $116.5 million (12.94 billion yen), down from the $153.66 million (16.6 billion yen) tallied in the first quarter of 2016.

-- Streaming and downloads combined (total digital) produced $462.5 million (51.4 billion yen), up 8.7 percent from the $437.4 million (47.3 billion yen) garnered in the first quarter of 2016.

-- Finally, other music revenue -- including synchronization, merchandising and live music promotions -- totaled $134 million (14.88 billion yen), a 15.1 percent increase the the year prior when other totaled $125.5 million (13.6 billion yen).

Percentage of Recorded Music Revenues By Format

-- In total, Digital accounted for 51.5 percent, down slightly from 52.7 percent of revenue in the fiscal first quarter of 2016.

-- Of that, streaming was 38.5 percent of total revenue (up from 34.2 percent); while downloads were 13 percent (down from 18.5 percent).

-- Physical’s growth meant that it increased to 33.6 percent of all recorded music revenue, up from 32.2 percent of revenue.

-- Other revenue was down slightly to 14.9 percent of revenue (down from 15.1 percent).

Meanwhile, Billboard calculates the overall music operations earnings before interest, taxes depreciation and amortization at $262.6 million (29.17 billion yen) a 48.3 percent increase over the prior year’s first quarter EBITDA of $182 million (19.7 billion yen).

Best-Selling Albums of Fiscal Q1 2017

Harry Styles, Harry Styles 
The ChainsmokersMemories... Do Not Open
Nogizaka46, umaretekara hajimete mita yume
DJ KhaledGrateful
Rag ’n’ Bone ManHuman
FutureFuture
Roger Waters, Is This The Life We Really Want 
KhalidAmerican Teen 
Calvin Harris, Funk Wav Bounces Vol. 1
Shakira, El Dorado

The company said noteworthy projects to watch during the summer are include Arcade Fire’s Everything NowFoo FightersConcrete and GoldFoster the People’s Sacred Hearts ClubFrench Montana’s Jungle RulesKesha’s Rainbow, LCD Soundsystem’s American DreamOld Dominion’s Happy Endings, Laurent Voulzy’s Belem and albums from David Gilmour and Indochine.

Looking ahead, Sony Corp. forecasts that its overall music operations will produce an operating income of 75 billion yen on total revenue of 630 billion yen in its current fiscal year, ended March 31, 2018.

Company-wide, Sony Corp. reported net income of $722 million (809 billion yen) on sales of $16.59 billion (1.86 trillion yen). That is a significant improvement from 2016’s fiscal first quarter, when the company produced net income of $196 million (21.2 billion yen) on revenues of or $14.9 billion (1.613 trillion yen). That represents a 15.2 percent increase in revenue -- which the company said primarily came from increases in its financial services and semiconductors segments -- and a 282 percent increase in net income.