If you had to guess where most of Sony’s profits over the last decade have come from, what would you say? Would you say electronics, even knowing how the giant has struggled in that area. Perhaps you would guess music and movies, as they have had some great successes in both areas. Chances are you would NOT have guessed Insurance or Financial Services!
But according to an article at the New York Times, Insurance and Financial Services are EXACTLY what Sony should be doing if it wants to maximize profitability.
Over the last decade:
– Life insurance has been its biggest moneymaker over the last decade, earning the company 933 billion yen ($9.07 billion) in operating profit
– Sony’s film and music divisions have contributed $7 billion to the company’s bottom line over the last decade
– Sony’s electronics arm LOST $8.5 billion during that same time
One analyst was quite blunt, noting:
“We believe its #2 position in Insurance and Content creates all the value there is, with Electronics its Achilles heel and worth zero, barring the sale of brands like Playstation,” said Goyal. “In our view, it needs to exit most [electronics] markets.”
Of course, Sony’s board of directors has been very clear that they intend to rebuild their electronics division into profitability. Some analysts see this as a negative – focusing on a losing property rather than maximizing a winning business.
Rebuilding electronics into a profit center will be no small challenge: the PS3 blew a seemingly assured ‘console generation victory’ from the PS2 and has been the 3rd place console for most of the world; the PSP and now PS Vita have barely registered against the Nintendo DS – the PSP started strong and has sold millions, but the Vita has ceded more than 85% market share to the Nintendo 3DS; the company’s Android tablets have had a weak response, and the same it true for its Android ‘gaming’ phones. Even Blu-Ray as a technology has been under constant assault (and losing) to digital streaming and downloads. There is hardly an area where competitors haven’t bested Sony.
But this insistence on electronics should make for an intriguing 2013 – with the E3 gaming expo fast approaching we will see what they have planned for the PS4, how the Vita will tie in, and hopefully we will learn more about whatever strategy they have to tie together all of their mobile electronics in a way that makes someone want to buy them.
What do you think – should Sony double-down on electronics, or just sell it off piece-meal and stick to the entertainment and finance areas that are making them money?