By Eric Pfanner And Takashi Mochizuki
TOKYO--After 10 years and more than $7 billion in losses, Sony
Corp.'s television unit is poised to again post an annual profit.
But the question remains: Is the once-proud business really worth
keeping?
Masashi Imamura, who oversees the TV division, says there is
still value in it for Japan's most famous consumer-electronics
company, even at a time when traditional television viewing is
losing out to other kinds of digital content, and low-cost upstarts
like Vizio Inc. of the U.S. and Hisense Co. of China have undercut
established TV manufacturers.
"Without a TV, Sony can't deliver the emotional experiences to
customers that we're committed to doing," the Sony veteran said, in
one of his first interviews since the TV business became a
separate, wholly owned unit this summer.
But the Sony TV operation that is emerging from a decade of
market missteps--it lagged in the shift to plasma screens and
liquid crystal displays--is much more modest than the one
responsible for the Trinitron cathode-ray tube TVs that ruled
living rooms from the 1970s to the early 2000s.
In the third quarter of this year, Sony had an 8% share of TV
revenue world-wide, well behind Samsung Electronics Co. at 27% and
LG Electronics Inc., another South Korean manufacturer, at 15%,
according to research firm DisplaySearch. Sony predicts sales in
its home entertainment and sound segment, which includes TVs as
well as hi-fi systems, DVD players and other audiovisual devices,
will shrink to around Yen1.1 trillion in its fiscal year ending in
March 2018. For the current year, the company is expecting segment
sales to rise slightly to Yen1.2 trillion.
The TV unit will post a slim operating profit for this year,
with the margin rising to between 2% and 4% by fiscal 2018, Sony
forecasts.
Some analysts say that short of a 5% margin, it makes little
sense for Sony to keep making TVs, and that the company should
focus instead on its more promising operations, including
PlayStation videogames, smartphone camera sensors, movies and
television programming.
"If the segment can't lay out a realistic blueprint for growth,
it should be a candidate for spinoff," said Eiichi Katayama, head
of Japan research at Bank of America Merrill Lynch.
Sony Chief Executive Kazuo Hirai has said the company would
consider entering a TV-making partnership. And Mr. Imamura didn't
rule out a sale if the business falters again. He said "many
plans," including a further paring-back of the division, are being
considered "at various levels" if consistent profits remain out of
reach. "Keeping the TV business is important, but sustaining Sony's
business management as a whole is more essential."
Even if its TV unit returns to the black, Sony faces difficult
choices as it tries to navigate what is an increasingly tough,
low-margin business.
During the long slump, Sony concentrated on price and design by
introducing entry models or thin-bezel lineups in order to stay
competitive in TVs, but the latest sets build on its traditional
strengths in picture and sound quality, Mr. Imamura said.
"The difference is clear, especially when watching DVD or
Blu-ray anime movies," said Junpei Irie, a 34-year-old auto-parts
engineer in Kyoto, Japan, who last month spent nearly $2,000 on a
Sony 4K TV.
Mr. Irie said the TV was also easy to use because the user
interface reminded him of his PlayStation videogame console, of
which he is fan.
Mr. Imamura said that instead of chasing market share, Sony will
focus on high-end TVs, including so-called 4K sets, which offer
four times the resolution of conventional high-definition TVs.
Sales of 4K sets have driven the company's TV revenue growth since
2012. The goal, he said, was to ensure profitability even if sales
fall by 20% to 30%--the same objective Sony has set out for its
struggling smartphone unit.
"Our commitment is we will be profitable, no matter what happens
to the industry," said Mr. Imamura, who has been leading the TV
turnaround effort since 2011. The 57-year-old Sony executive
previously made the company's digital-camera business a smashing
success.
DisplaySearch projects that 4K TVs overall will account for 19%
of industry revenue world-wide this year, despite representing only
8% of sets sold, with the portions rising to 45% and 27%,
respectively, by 2017. In the third quarter, Sony captured 19% of
4K revenue in North America, where the company otherwise struggles,
though its share paled compared to Samsung's 52%, according to
DisplaySearch.
In the era of so-called smart, Internet-connected TVs, Mr.
Imamura said he wants to improve software interfaces to make it
easier to access cloud-based content so that users have to push
fewer buttons on their remote controls.
Mr. Imamura said his team was working closely with engineers in
the PlayStation division and in Sony's Xperia smartphone unit, in
order to streamline connections with the Internet-based devices. As
boundaries between digital media continue to blur, Sony recently
disclosed plans for a service called PlayStation Vue, which will
provide television content to U.S. viewers via PlayStation
consoles.
"The TV should really be easy and stress-free, because people
watch it while leaning back," Mr. Imamura said. "That's our
definition of smart TV."
Masahiro Ono, an analyst at Morgan Stanley MUFG Securities, said
there is no urgency to sell the TV business as long as it is
profitable.
"They should try to remain profitable and make further efforts
to slim down the organization so that the financial burden would be
light even if Sony decides to sell the business," Mr. Ono said.
Write to Eric Pfanner at eric.pfanner@wsj.com and Takashi
Mochizuki at takashi.mochizuki@wsj.com
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