PDF [4833KB] - Sony
PDF [4833KB] - Sony
PDF [4833KB] - Sony
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operating income, the positive impact of the<br />
depreciation of the yen against the euro exceeded<br />
the negative impact of the appreciation<br />
of the yen against the U.S. dollar, resulting in a<br />
52 percent decrease in operating income on a<br />
local currency basis.<br />
By region, sales decreased in Japan, the<br />
U.S. and Europe. In Japan, hardware sales<br />
declined due to a strategic price reduction of<br />
PlayStation 2 hardware, despite higher unit<br />
sales of PlayStation 2 hardware. Software sales<br />
in Japan also decreased due to lower unit<br />
sales. In the U.S., sales declined due to a de-<br />
In terms of profitability, operating income<br />
decreased compared with the previous fiscal<br />
year. This decrease was due to an increase in<br />
research and development costs for future<br />
businesses and a decrease in hardware sales.<br />
Research and development costs increased by<br />
21.9 billion yen to 83.4 billion yen compared<br />
with the previous fiscal year. Although research<br />
and development costs for software<br />
development increased only slightly, costs for<br />
the development of semiconductors and<br />
process technologies increased significantly.<br />
Cost of sales in the Game segment decreased<br />
due to the decrease in hardware unit sales and<br />
reductions in the cost of producing hardware.<br />
The cost of sales to sales ratio, however,<br />
remained unchanged as the cost of producing<br />
PlayStation 2 hardware decreased in line with<br />
the decrease in hardware sales. Selling, general<br />
and administrative expenses decreased as a<br />
result of a decline in advertising and promo-<br />
crease in unit sales of PlayStation 2 hardware,<br />
a strategic price reduction of PlayStation 2<br />
hardware and a decrease in software unit<br />
sales. In Europe, although hardware unit sales<br />
increased as the market penetration of<br />
PlayStation 2 hardware continued to expand,<br />
hardware sales declined due to a strategic<br />
price reduction of PlayStation 2 hardware.<br />
Software unit sales and software sales in<br />
Europe both increased.<br />
Total worldwide production shipments of<br />
hardware and software were as follows:<br />
tion expenses, reflecting the decrease in hardware<br />
units sold. However, the ratio of selling,<br />
general and administrative expenses to sales<br />
rose compared to the previous fiscal year as<br />
the ratio of personnel related costs and advertising<br />
and promotion expenses to sales rose<br />
compared with the previous fiscal year.<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
8.3%<br />
(Million units)<br />
Cumulative as<br />
Year ended March 31 of March 31,<br />
2003 2004 2004<br />
Total Production Shipments of Hardware<br />
PlayStation + PS one . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.78 3.31 99.72<br />
PlayStation 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.52 20.10 71.30<br />
Total Production Shipments of Software*<br />
PlayStation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.00 32.00 949.00<br />
PlayStation 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189.90 222.00 572.00<br />
* Including those both from <strong>Sony</strong> and third parties under <strong>Sony</strong> licenses.<br />
Sales and operating income in the Game segment<br />
(Billion ¥) (Billion ¥)<br />
11.8%<br />
02 03 04<br />
Sales (left)<br />
Operating income (right)<br />
Operating margin<br />
* Year ended March 31<br />
8.7%<br />
300<br />
200<br />
100<br />
0<br />
–100<br />
MUSIC<br />
Sales for the fiscal year ended March 31, 2004<br />
decreased by 37.6 billion yen, or 6.3 percent,<br />
to 559.9 billion yen compared with the previous<br />
fiscal year. Compared to an operating loss<br />
of 7.9 billion yen in the previous fiscal year,<br />
operating income of 19.0 billion yen was<br />
recorded this year.<br />
On a local currency basis, sales in the Music<br />
segment were flat while the Music segment<br />
recorded operating income as compared to an<br />
operating loss in the previous fiscal year.<br />
Sales at <strong>Sony</strong> Music Entertainment Inc.<br />
(“SMEI”), a U.S. based subsidiary, were flat on<br />
a U.S. dollar basis (refer to “Foreign Exchange<br />
Fluctuations and Risk Hedging” below). In<br />
terms of profitability, SMEI recorded operating<br />
income in the fiscal year as compared to an<br />
operating loss in the previous fiscal year. The<br />
appreciation of European currencies against<br />
the U.S. dollar contributed to higher sales outside<br />
of the U.S. which were offset by lower<br />
sales in the U.S. On a worldwide basis, total<br />
album sales at SMEI decreased due to the continued<br />
contraction of the global music industry<br />
and the lack of hit releases. Although unit<br />
sales in various markets such as the U.S. have<br />
begun to reverse their downward trend, the<br />
global music market has continued to experience<br />
an overall contraction primarily due to<br />
piracy (i.e. unauthorized file sharing and CD<br />
burning) and competition from other entertainment<br />
sectors.<br />
The increase in profitability resulted in operating<br />
income at SMEI, compared to an operating<br />
loss recorded in the previous fiscal year.<br />
The improvement in profitability primarily<br />
resulted from the benefits realized from the<br />
worldwide restructuring activities implemented<br />
over the past two years to reduce costs in response<br />
to the downward trend of the market.<br />
These activities included the rationalization of<br />
manufacturing, distribution and support<br />
functions including record label shared services<br />
through elimination of redundancy. Operating<br />
income also benefited from lower restructuring<br />
charges as compared to the prior year. The<br />
total cost of restructuring for the fiscal year<br />
ended March 31, 2004 was 95 million U.S.<br />
dollars or 10.7 billion yen, a decrease of 95<br />
million U.S. dollars from the prior year (refer to<br />
“Restructuring” above for details.) A third<br />
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