With operating income growing faster than revenue that means the company is turning in improved margins and achieving nice economies of scale. For example, this year, its second quarter operating margin (operating income/revenue) was 15.9 percent versus 11 percent in the second quarter of 2016.
(For this story, an exchange rate of 111 yen per dollar was used for the second quarter of 2017 while 102.4 yen per dollar was used for the second quarter of 2016, as cited as the average rates for both periods in the company's financials. For the six-month period, the conversion rate respectively used were 111.1 yen per dollar and 105.3 yen per dollar.)
When depreciation, amortization and charges are added back on top of operating income, Sony's music operations generated $333.12 million in earnings before interest, taxes, depreciation and amortization in the quarter just completed versus EBITDA of $204.2 million in the corresponding year earlier period.
Sony's Visual Media & Platform segment, which is described in its results as including the production and distribution of animation titles, including game applications based on those titles, and various service offerings for music and visual products, turned in the best results. This segment revenue grew nearly 80 percent to 74.16 billion yen ($688.1 million) versus the 41.28 billion yen ($403.13 million) it turned for the second fiscal quarter of 2016. The segment's “Fate/Order” game application for mobile devices was cited as especially driving its growth.
But the company's traditional music operations also turned in numbers showing strong growth as well. For example, recorded music posted a 21.6 percent increase to 109.18 billion yen ($983.6 million) from 89.76 billion yen ($876.5 million) in 2016's second quarter. Meanwhile, music publishing grew to 19.5 billion yen ($175.7 million), a 25.1 percent increase from the 15.6 billion yen ($152.3 million) turned in for the corresponding year earlier period.
Within recorded music, streaming generated 53 billion yen ($477.5 million), up 68.3 percent from the 31.5 billion yen ($307.62 million) garnered in the corresponding year earlier period; while physical music fell 10.1 percent to 27.6 billion yen ($248.6 million) from 30.7 billion yen ($299.7 million) and digital downloads fell similarly down 10.2 percent to 12.3 billion yen ($110.8 million) from 13.7 billion yen ($133.7 million); and other revenue grew to 16.3 billion yen ($146.9 million) from 13.9 billion yen ($135.7 million).
As percentages, that breaks out to 48.5 percent streaming, 25.3 percent physical, 14.9 percent other, and 11.3 percent downloads for the current second quarter versus 35.1 percent streaming, 34.2 percent phySical, 15.5 percent other and 15.3 percent downloads in the second quarter of 2016.
Moving over to half-year numbers, Sony's overall music operation turned in 57.54 billion yen ($517.9 million) in operating income on revenues of 375.14 billion yen ($3.38 billion), for the six month period ended Sept. 30, which is an improvement over the 32.4 billion in operating income on revenues on 292.12 billion yen ($2.77 billion) tallied in the year-earlier corresponding period.
Within that, recorded music garnered 209 billion yen ($1.88 billion), a 16.5 percent increase over the 179.5 billion yen ($1.7 billion) generated in the first half of 2016, while music publishing totaled 36.4 billion yen ($327.3 million), up from 31.24 billion yen ($296.7 million). And rounding out music operations, its visual media + platform's revenue totaled 122.6 billion yen ($1.1 billion), a 65 percent increase over the 74.3 billion yen($705.9 million) it produced in the year-earlier corresponding period.
Within recorded music, streaming totaled 91.4 billion yen ($823 million) up 47.1 percent from the 62.2 billion yen (590.3 million) tallied in the year earlier period; physical was 61.15 billion yen ($550.4 million), up 2.7 percent from the 59.54 billion yen ($565.5 million); downloads totaled 25.24 billion yen ($227.2 million) down 16.7 percent from the 30.3 billion yen ($287.75 million) accumulated in the first half of 2016; and other tallied 36.36 billion yen ($327.3 million), up 16.4 percent from the 31.24 billion yen ($296.7 million).
As a percentage of revenue, streaming is at 43.7 percent, physical 29.3 percent, other 14.9 percent and downloads 12.1 percent in the first half of 2017; and respectively for the first half of 2016, the corresponding respective percentages were 34.6 percent, 33.2 percent, 15.3 percent and 16.9 percent.
So while streaming continues to achieve accelerated growth, the declines in digital downloads and physical are slowing, which overall is proving to be a boon to Sony.
Based on its current growth pace, the company revised its overall music operation estimated annual revenue upward to 730 billion ($6.57 billion) for 2017 and operating income to 94 billion yen ($847 million).The company also said it expects to accrue 15 billion yen in restructuring charges in its current fiscal year, as compared with 60.2 billion yen in the prior year.
Parent Sony Corp.'s overall reported net income of 130.9 trillion yen ($1.16 billion), or 101.35 yen (90 cents) per diluted share, on revenues of 2.063 trillion ($18.25 billion) for the quarter ended Sept. 30. That represented a 22 percent increase over the 1.69 trillion in revenue in the previous quarter when net income was only 4.8 billion yen (48 million), or 3.76 yen (4 cents) per diluted share.
For the six month period, Sony Corp. reported net income of 211.7 billion yen ($1.9 billion) or 167.61 yen ($1.51) per diluted share on revenues of 3.29 trillion yen ($29.64 billion) versus the first half of 2016 when net income was 26 billion yen ($247 million), or 20.2 yen (19 cents) per diluted share on revenues of 2.774 trillion yen ($26.35 billion).