Sony chief pressed to boost film earnings
SONY's rejection of billionaire Daniel Loeb's push to sell part of its entertainment assets puts more pressure on chief executive officer Kazuo Hirai to revive the company's sagging film and electronics businesses.
Sony directors turned down a proposal by Mr Loeb's Third Point hedge fund to sell as much as 20 per cent of those assets in an initial public offering.
Full ownership of the movie, TV-production and music units is integral to Sony's strategy for revival, the board said in a letter to Mr Loeb.
The billionaire said he was "disappointed" with the decision.
Mr Hirai, who is also president of Sony Corp, on the job for 16 months, is pushing his "One Sony" vision to unite mobile devices and TV sets with games, music and film content.
After posting a profit in smartphones and television sets, he has committed to rejuvenating a film unit that slumped to No. 6 at the United States box office this year, after being No. 1 last year.
Mr Masamitsu Ohki, a fund manager at Stats Investment Management in Tokyo, said: "Sony's management will probably add more resources in the entertainment area and may get more outside experts to strengthen the entertainment operation."
Funds controlled by New York-based Third Point built a 6.9 per cent stake in Sony and, beginning with a May 14 letter, pushed the board to raise cash through an IPO, and then use the money to help "revitalise" its consumer-electronics units.
Mr Loeb will meet Mr Hirai in coming months, and Third Point expects significant progress in results by May next year, said a source, who asked not to be identified.
Third Point said Sony management should communicate more specific plans for improving the results of its entertainment units.
Box-office duds White House Down and After Earth prompted Mr Loeb to say in a newsletter last Monday that Sony's entertainment profit margins lagged behind those of peers, and the unit needs closer supervision amid a lack of franchises and bloated costs.
Sony produces TV shows Breaking Bad and Jeopardy! while also owning such international channels as AXN and Sony Movie Channel.
Revenue from Sony's television networks was US$1.5 billion (S$1.9 billion) in the 12 months ended in March, compared with US$600 million five years earlier, Mr Hirai said.
Sony's margin from motion pictures, which measures operating income as a proportion of sales, was 6.5 per cent last fiscal year, according to data compiled by Bloomberg.
That compares with more than 15 per cent for the film entertainment unit of 21st Century Fox and 12.4 per cent for the studio entertainment unit of Walt Disney.