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Sony Says Entertainment Forecast Conservative Amid Cost Cut Push

Sony Corp. said growth projections for its film and television unit are “conservative” as it seeks to deepen cost reductions beyond the $250 million target released last week.

The company is promoting cost cuts and benefiting from investments in its television networks, Sony Pictures Entertainment Chief Financial Officer David Hendler said today in Tokyo. The company can beat its target for operating income at the film division to rise at as much as a “low double digit” pace in the four years through March 2017, he said.

Sony is reducing the number of movies from Columbia Pictures, shifting investment to television content production and media networks, and identifying more savings, it told investors and analysts today in Tokyo. The cost cuts are planned as Chief Executive Officer Kazuo Hirai attempts to boost profit after rejecting billionaire Daniel Loeb’s push for a partial sale of its entertainment assets.

“I am more confident that entertainment is not a problem for Sony at all,” said Damian Thong, a Tokyo-based analyst at Macquarie Group Ltd. “The message today was two things: film business is mature and needs to cut costs, TV business is growing and Sony is trying to grow margins.”

Sony briefed Japanese analysts today after making a similar presentation in Los Angeles on Nov. 21.

Shares of Sony fell 1.8 percent to 1,848 yen as of the close of trade in Tokyo, paring this year’s gain to 93 percent.

Quarterly Loss

Hirai is under pressure to prove his One Sony plan tying entertainment to electronics can work, following a disastrous second quarter that included a 17.8 billion yen ($175 million) operating loss at Sony Pictures Entertainment.

Six months after Loeb’s Third Point LLC disclosed it had bought a stake in Sony and called for a partial sale of the entertainment units, Hirai outlined priorities for cutting costs. He plans to invest in higher-growth areas, stressing ways entertainment can dovetail with electronics from the Tokyo-based company.

Sony rejected Loeb’s call for a sale in August.

The company’s forecasts through 2017 are “definitely conservative projections,” Hendler said today in Tokyo. “We have more cost savings that have not built into the forecasts yet.”

To improve profit margins, the company has identified $150 million of overhead and operational efficiencies, and $100 million in procurement savings, Hendler said today. The division is also working with consultants to find additional cuts, Michael Lynton, CEO of the entertainment unit, said today.

Sony is planning to boost the content it can deliver to consumers through its PlayStation network, Lynton said.

“What you can expect to see in short order is that studio will be producing premium contents for PS4 network,” he said.

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