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Amid Pandemic, Sony Music Sees Double Digit Revenue Drop

In the company's fiscal first quarter ended June 30, Sony's music operations showed the wear and tear of the economic downturn caused by the COVID-19 pandemic, with revenue declining 13.1%.

In the company’s fiscal first quarter ended June 30, Sony’s music operations showed the wear and tear of the economic downturn caused by the COVID-19 pandemic, with revenue declining 13.1% to ¥173.735 billion yen ($1.646 billion) from 2019’s first quarter revenue of ¥200.04 billion ($1.84 billion).

While operating profit was also down to ¥34.89 billion ($325.3 million), the decline on a percentage basis wasn’t as much, coming in 8.8% down from the ¥38.3 billion ($348 million) tallied in the year earlier first quarter period. Consequently, the company’s already healthy operating margin showed a slight improvement, consisting of 19.7% of revenue this year, versus 18.9% in 2019’s first quarter, which shows the company kept a tight rein on expenses.

During the quarter, Sony said its best sellers included Harry Styles’ Fine Line, Future’s High Off Life, Doja Cat’s Hot Pink, Travis Scott’s Astroworld, Polo G’s The Goat, Khalid’s Free Spirit, Pwofu’s Death Bed, and a pair of Luke Combs releases, What You See Is What You Get and This One’s For You. From Japan it cited Ju Ju’s Your Story, and Milet’s Eyes, among other releases.


But there is no escaping that the pandemic impacted music sales, merchandising and the company’s live concert operations on the recorded music side; and in synchronization and performance royalties in music publishing. However, streaming, now the preponderance of music industry revenue, remained strong, growing nearly 6% to ¥68.9 billion ($640.3 million) from the prior year’s total of ¥66.5 billion ($605 million), for recorded music; and to ¥13.91 billion ($129 million) from ¥13.41 billion ($122 million) for music publishing.

In its financials, Sony said, “Around the world, the release of new music is being delayed primarily due to some artists being unable to record songs and music videos. The impact on profitability from the delays in new music is limited at this time in the U.S. and other countries where the proportion of music that is streamed is high. However, in countries like Japan where the proportion of music that is streamed is relatively low, CDs and other packaged media sales are decreasing due to restrictions on going outside. Ticket and merchandising revenues are also decreasing, as concerts and other events are being postponed and cancelled in Japan and other areas. Due to a global reduction in advertising spending, revenue from advertising-supported streaming services and revenue from the licensing of music in TV commercials is decreasing. Additionally, delays in the production of motion pictures and TV shows are causing a decline in music licensing revenue.”

Within recorded music streaming, industry sources say that the ad-supported component of the sector — YouTube, Spotify’s free-tier — has suffered large declines. So, based on Sony’s overall streaming performance, that means that the company’s paid subscriber segment of streaming revenue turned in a healthy performance, probably posting double digit increases (10%-20%) in revenue.

Beyond its music operations, the pandemic also impacted revenue from Sony’s visual media/platform, which mainly includes mobile games but also some music revenue, with that segment posting an 8.7% decline to ¥44.53 billion ($413.88 million), versus ¥48.49 billion  ($443.9 million) in 2019’s first quarter.


Excluding that segment, Sony’s music operations—Sony Music Entertainment, Sony/ATV Music Publishing and Sony Music Japan, with its music publishing operation — generated ¥129.2 billion ($1.2 billion) in revenue, a 14.6% decline from the prior year when revenue totaled ¥141.25 billion ($1.38 billion).

Breaking that out, Sony’s recorded music operations tallied revenue of ¥98.1 billion ($911.6 million) a 12.4% decline from ¥111.96 billion  ($1.02 billion) accumulated in the first quarter of 2019. On a dollar basis, that’s a 10.5% decline.

Within recorded music, physical declined by more than 40% to ¥12.69 billion ($118 million) from ¥22 billion ($200 million), obviously due to government-mandated store closures around the globe.

Licensing, merchandising and concert staging, collectively referred to as “other” in the Sony financials, also had a 40% decline to ¥8.87 billion ($82.4 million) from the prior year’s first quarter total of ¥14.83 billion ($135 million).

On the other hand, download revenue’s ongoing decline decelerated in the first quarter to a 12.5% drop to ¥7.61 billion ($70.7 million) from 2019’s ¥8.7 billion ($79.1 million). That’s an improvement from the over 20% pace the format has declined over the last few years before the pandemic — likely due to the shelter in place mandates imposed by governments around the globe that forced consumer commerce online.


Moving over to music publishing, those operations suffered an even bigger decline than recorded music, falling 20.9%, to ¥31.1 billion ($289 million) from the corresponding year earlier period when publishing totaled ¥39.3 billion ($357.5 million). On a dollar basis, publishing revenue declined $68 million, or by 19.2%.

But like in recorded music, streaming remains the bright spot also for music publishing. For the first time, Sony broke out music publishing revenue into two segments, streaming and other, with the former comprising ¥13.9 billion ($129.3 million), a 3.7% increase over ¥13.41 billion ($122 million); and the latter — other — category consisting of ¥17.2 billion ($160 million), versus ¥25.88 billion ($235.5 million), a 33.6% decrease.

Sony also disclosed that in July 2020, it took on $2 billion in debt against the EMI Music Publishing assets it acquired in 2016, which already had $400 million in debt from that deal. Sony said it made the move to “enhance liquidity.” The loan was provided by the existing consortium of lenders, according to the company.

Looking ahead, Sony forecasts overall music operations at ¥790 billion ($7.34 million), based on a forecasted exchange rate of 107 yen to the U.S. dollar. (The rest of this story uses a fiscal first quarter conversion rate of 107.6 yen to the dollar, as quoted by Sony in its financials.) The company cited upcoming releases from Apache 207, Beyonce, Dominic Fike, Fantsy, G-Easy, Indochino, Jean-Baptiste Guegan, Julien Dore, Kang Daniel, Maluma, the Chicks, The Kid Laroi, and the Neighbourhood.