Sony (NYSE:SNE) has had enough problems in the three years since Howard Stringer became CEO. The company’s PS3 has been a disappointment, regularly underselling the Microsoft (NASDAQ:MSF) Xbox 360 and Nintendo Wii. Prices for televisions screens and digital cameras have fallen, which has pressured the firm’s margins.
Sony’s studio business has done failure well, but its results were damaged recently by the slow death of the DVD market. Sony has no clear way to make up for the revenue, and so the filmmaking business may simply be less lucrative than it has been in the past. Sony will fire 450 people at its studio operations and cut 100 open positions.
The money from theater sales was up in 2009 to an all-time record. That was helped by blockbuster movies like “Avatar”, so a repeat of the results is not likely soon.
DVD sales have been battered by piracy, done mostly over the internet through file-sharing services, and consumer adoptions of video-on-demand and online streaming of feature-length video content. Piracy not only yields no profit; it cuts into potential sales. The revenue sharing arrangements for cable set-top box sales and internet streaming services are not as lucrative as DVDs.
The Sony news is likely to repeat itself at most of the other studios. The DVD business has caused a bumper crop of profits for the industry since the mid-1990s. High definition DVD sales were supposed to continue that success. Instead, the consumer has turned to stealing content and the use of new technology to move content from the provider to the home. The pricing power is no longer much in the hands of the producers.
Douglas A. McIntyre
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