PDF [4833KB] - Sony
PDF [4833KB] - Sony
PDF [4833KB] - Sony
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factor contributing to the improved operating<br />
results were lower advertising and promotion<br />
expenses. The above factors more than offset<br />
the negative effect of lower worldwide album<br />
sales. The savings realized from previously<br />
implemented restructuring initiatives, lower<br />
restructuring charges and the decrease in advertising<br />
and promotion expenses resulted in a<br />
decrease in selling, general and administrative<br />
expenses for the year and an improvement in<br />
the ratio of selling, general and administrative<br />
expenses to sales.<br />
Regarding the results of <strong>Sony</strong> Music Entertainment<br />
(Japan) Inc. (“SMEJ”), sales were flat<br />
compared with the previous year, despite the<br />
continued contraction of the music industry.<br />
Operating income increased 69 percent compared<br />
with the prior year due to a reduction in<br />
selling, general and administrative expenses,<br />
primarily advertising and promotion expenses,<br />
and strong sales of Japanese artists’ recordings.<br />
On a yen basis, 74 percent of the Music<br />
segment’s sales were generated by SMEI while<br />
26 percent were generated by SMEJ.<br />
In December 2003, <strong>Sony</strong> and Bertelsmann<br />
AG announced that they had signed a binding<br />
agreement to combine their recorded music<br />
businesses in a joint venture. The newly<br />
formed company, which will be known as<br />
<strong>Sony</strong> BMG, will be 50 percent owned by each<br />
parent company. It will not include SMEI’s music<br />
publishing, physical distribution and disc<br />
manufacturing business or SMEJ. The merger is<br />
subject to regulatory approvals in the U.S. and<br />
the European Union.<br />
Sales and operating income (loss) in the Music segment<br />
(Billion ¥) (Billion ¥)<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
3.7%<br />
–1.3%<br />
02 03 04<br />
Sales (left)<br />
Operating income (loss) (right)<br />
Operating margin<br />
* Year ended March 31<br />
3.4%<br />
300<br />
200<br />
100<br />
0<br />
–100<br />
PICTURES<br />
Sales for the fiscal year ended March 31, 2004<br />
decreased by 46.4 billion yen, or 5.8 percent,<br />
to 756.4 billion yen compared with the previous<br />
fiscal year. Operating income decreased by<br />
23.7 billion yen, or 40.3 percent, to 35.2 billion<br />
yen and the operating income margin decreased<br />
from 7.3 percent to 4.7 percent. The<br />
results in the Pictures segment consist of the<br />
results of <strong>Sony</strong> Pictures Entertainment (“SPE”),<br />
a U.S. based subsidiary.<br />
On a U.S dollar basis, sales for the fiscal<br />
year in the Pictures segment increased approximately<br />
2 percent and operating income<br />
decreased approximately 30 percent. The<br />
increase in sales was primarily due to higher<br />
television performance in the fiscal year.<br />
Television revenues increased significantly due<br />
to initial syndication sales of The King of<br />
Queens and third cycle syndication sales of<br />
Seinfeld, as well as the extension of a licensing<br />
agreement for Wheel of Fortune. This increase<br />
in sales was partially offset by lower theatrical<br />
and home entertainment revenues from the<br />
fiscal year release slate, which included such<br />
notable titles as Bad Boys II, S.W.A.T., Anger<br />
Management and Something’s Gotta Give,<br />
when compared to the prior fiscal year release<br />
slate, which included Spider-Man, the highest<br />
grossing film in SPE’s history, Men in Black II,<br />
xXx and Mr. Deeds. Sales for the fiscal year<br />
release slate decreased 359 million U.S. dollars<br />
as compared to the previous fiscal year.<br />
Operating income for the segment decreased<br />
significantly due to the absence of profits contributed<br />
by the record breaking performance<br />
of Spider-Man in the previous fiscal year and,<br />
to a lesser extent, the aggregate disappointing<br />
performance of several films from the fiscal<br />
year release slate including Gigli, Hollywood Homicide,<br />
The Missing and Charlie’s Angels: Full<br />
Throttle, resulting in a decrease in operating<br />
income of 412 million U.S. dollars from the<br />
prior fiscal year release slate. Additionally,<br />
operating income was also negatively impacted<br />
by a 38 million U.S. dollar increase in restructuring<br />
charges recorded in the fiscal year (refer<br />
to “Restructuring” above for details). Partially<br />
offsetting these decreases in operating income<br />
was the contribution from the syndication<br />
sales and extension of a licensing agreement<br />
noted above, DVD sales of television library<br />
product and an additional syndication sale of<br />
Dawson’s Creek, resulting in a 201 million U.S.<br />
dollar increase in operating income. Further<br />
improving operating income was the absence<br />
of the 66 million U.S. dollar provision recorded<br />
in the prior year with respect to previously recorded<br />
revenue from KirchMedia, a licensee in<br />
Germany of SPE’s feature film and television<br />
product, and related adjustments to ultimate<br />
film income.<br />
As of March 31, 2004, unrecognized<br />
license fee revenue at SPE was approximately<br />
1.2 billion U.S. dollars. SPE expects to record<br />
this amount in the future having entered into<br />
contracts with television broadcasters to<br />
provide those broadcasters with completed<br />
motion picture and television product. The<br />
license fee revenue will be recognized in the<br />
year that the product is available for broadcast.<br />
Sales and operating income in the Pictures segment<br />
(Billion ¥) (Billion ¥)<br />
1,200<br />
1,000<br />
800<br />
600<br />
400<br />
200<br />
0<br />
4.9%<br />
7.3%<br />
02 03 04<br />
Sales (left)<br />
Operating income (right)<br />
Operating margin<br />
* Year ended March 31<br />
4.7%<br />
300<br />
200<br />
100<br />
–100<br />
FINANCIAL SERVICES<br />
Financial Services revenue for the fiscal year<br />
ended March 31, 2004 increased by 56.3<br />
billion yen, or 10.5 percent, to 593.5 billion<br />
yen compared with the previous fiscal year.<br />
Operating income increased by 32.4 billion<br />
yen, or 142.4 percent, to 55.2 billion yen and<br />
the operating income margin increased to 9.3<br />
percent compared with the 4.2 percent of the<br />
previous fiscal year.<br />
At <strong>Sony</strong> Life, revenue increased by 46.4<br />
billion yen, or 9.9 percent, to 513.0 billion yen<br />
and operating income increased by 33.6 billion<br />
yen, or 113.3 percent, to 63.2 billion yen compared<br />
with the previous fiscal year. Revenue<br />
increased due to improvements in valuation<br />
gains and losses from investments in the sepa-<br />
0<br />
68