Sony Music Posts Another Quarter of Strong Results, Improving Margins and Growing Revenue

Vijat Mohindra


Sony Corp.'s music operations, which consists of Sony Music Entertainment, Sony Music Japan and Sony/ATV Music Publishing, reported 39.3 billion yen ($348.16 million) in operating income on revenues of 218.43 billion yen ($1.93 billion) in the company's fiscal third quarter ended Dec. 31, 2017.

Those results reflect increases of, respectively, 40.6 percent over the 27.98 billion yen ($256 million) in operating income in the year-earlier period; and 22.4 percent from the total revenue of 178.5 billion yen ($1.63 billion). Looking at it another way, the company's operating margin improved to 18 percent from 15.7 percent in the year earlier period. Billboard estimates the music operation's overall earnings before interest, taxes, depreciation and amortization at 45.38 billion ($401.6 million), versus the year earlier fiscal third quarter when it was 32.89 billion yen ($300.9 million).

Within its revenue total, recorded music accounted for 128.24 billion yen ($1.135 billion), while the visual media & platform segment (consisting largely of mobile video game app) generated 67.7 billion yen ($599.06 million) and music publishing totaled 18.33 billion yen ($162.2 million). For recorded music, that represented an increase of 11.7 percent from the 114.83 billion yen ($1.05 billion) it recorded in the fiscal quarter ended Dec. 31, 2016; while visual media & platform grew 58 percent from 42.84 billion yen ($391.9 million); and music publishing grew 17.9 percent from 15.55 billion ($142.3 million).

The company's big selling albums came from Khalid, Pentatonix, David Gilmour and Pink.

Breaking out recorded music, digital led the way at 68.3 billion yen ($604.3 million), an increase of 23.2 percent over the 55.39 billion yen ($506.76 million) the company generated in the third quarter of fiscal 2016. Within digital, streaming totaled 55.54 billion yen ($491.5 million), a 36.6 percent increase over the corresponding year-earlier period when streaming totaled 40.65 billion yen ($371.9 million); downloads totaled $68.3 billion yen ($112.85 million), or a 13.5 percent decrease from the 14.74 billion yen ($134.83 million) the format generated in the earlier period. 

Meanwhile, physical formats generated 43.66 billion yen ($386.41 million), a 2.9 percent decrease from the 44.97 billion yen ($411.39 million) tallied in fiscal 2016. Finally other, which includes synchronization, master recording performance revenues, and merchandise, totaled 16.3 billion yen ($144.13 million) up 12.5 percent from 14.48 billion yen ($132.47 million).

Breaking out revenue by percentage, physical totaled 34 percent, downloads 9.9 percent, streaming 43.3 percent and other 12.7 percent in the third quarter of fiscal 2017, while those percentages for the third quarter fiscal 2016 were physical 39 percent, downloads 12.8 percent, streaming 35.4 percent, and other 12.6 percent.

For this story for the third quarter, Billboard used exchange rates of 113 yen to the dollar for fiscal 2017 numbers and 109.3 yen to the dollar for fiscal 2016. For the nine-month period, Billboard used exchange rates of 111.8 yen to the dollar for fiscal 2017 and 106.6 yen to the dollar for fiscal 2016.

Moving over to the nine-month year-to-date numbers, the Sony music operations generated operating income of 96.88 billion yen ($866.9 million), a whopping 60.5 percent increase over the 60.37 billion yen ($566.35 million) the company tallied in the first nine-months of fiscal 2016; while revenue rose to 593.6 billion yen ($5.31billion), a 26.1 percent increase from the 470.6 billion yen ($4.41 billion). Looking at operating margin as a percentage of revenue, that rose to 16.3 percent from the 12.8 percent the music operations posted at the end of the nine-month period in 2016. Moreover, Billboard estimates that Sony music operations' EBITDA totaled $111.53 billion ($998 million), a 51.8 percent increase over the 73.47 billion yen ($672.2 million).

Within its music operations, Sony Music Entertainment and Sony Music Japan's recorded music operations generated 337.24 billion yen ($3.018 billion), a 14.6 percent increase over the 294.3 billion yen ($2.261 billion); while visual media & platform grew 62.4 percent to 190.25 billion yen ($1.7 billion) from 117.17 billion yen ($1.1 billion) in the corresponding year earlier period; and music publishing grew 16.9 percent to 54.7 billion yen ($489.4 million) from 46.8 billion yen ($438.94 million).

Within recorded music, digital was the dominant channel, generating 185 billion yen ($1.66 billion), a 25.1 percent increase over 147.85 billion yen ($1.387 billion). Breaking that out further, streaming generated 146.3 billion yen ($1.31 billion), a 42.3 percent increase over the year earlier corresponding period when streaming was 102.81 billion yen ($964.5 million); and downloads were 38 billion yen ($340 million), down 15.6 percent from the nine-month period in 2016 when they totaled 45.04 billion yen ($422.49 million). Meanwhile, physical totaled 104.81 billion yen ($938.83 million) a 0.3 percent increase over the 104.51 billion yen ($980.38 billion); and other product lines totaled 47.47 billion yen ($424.78 million), a 13.2 percent increase over the 41.94 billion yen ($422.49 million).

Looking at each as a percentage of recorded music revenue, in the current fiscal year, streaming accounted for 43.4 percent, physical 31.1 percent, downloads 11.3 percent and other 14.1 percent; while in the prior fiscal year those percentages were, respectively 34.9 percent for streaming, 35.5 percent physical, 15.3 percent downloads and 14.3 percent other. 

The company revised its forecasts so that it now projects music will have 110 billion yen in operating income ($984.2 million) on revenues of 780 billion yen ($6.98 billion).

Overall, Sony produced net income of 552.1 billion yen ($4.94 billion) on revenues of 6.593 trillion yen ($59 billion) for the nine month period. And in the biggest Sony news of the day, Kenichiro Hoshida has been named president and CEO effective April 1, replacing Kazuo Hirai, who will become chairman.


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