TOKYO--A top Sony Corp. executive said Tuesday that the company
is re-evaluating its support for free, advertiser-supported online
music after U.S. pop star Taylor Swift pulled her music from
Spotify, the popular digital streaming service.
"Actually, a lot of conversation has taken place over the last
week in the light of that," said Kevin Kelleher, chief financial
officer of Sony Music. "What it all really comes down to is how
much value are the music company and the artist getting from the
different consumption methods."
Ms. Swift's decision this month to leave Spotify, which shares
with artists a portion of the proceeds from ad sales and from fees
for its paid, ad-free premium version, sent shock waves through the
music business. With sales of CDs in a long-term slump and digital
downloads beginning to decline, the industry has been looking to
streaming as its brightest hope.
Despite Ms. Swift's thumbs-down to Spotify, Mr. Kelleher said
Sony remained "very encouraged" by the growth of subscription-based
streaming services, which let users skip ads in exchange for
monthly fees. The company said Tuesday, at a briefing for analysts
and investors, that it expected revenue in the music division to
rise to a range of $4.8 billion to $5.2 billion in the fiscal year
ending in March 2018, from $4.8 billion in the year ending next
March.
"The key question is, are the free, ad-supported services taking
away from how quickly and to what extent we can grow those paid
services?" Mr. Kelleher said. "That's something we're paying
attention to as content owners who license our content to the
different platforms. It's an area that's gotten everyone's
attention."
Mr. Kelleher's comments came at the first of two briefings that
Sony has scheduled to provide updates on the progress of its
restructuring. Tuesday's session focused on the entertainment arm,
including music and the Hollywood studio division, while a meeting
next week is devoted to the electronics business. Sony Chief
Financial Officer Kenichiro Yoshida, smartphone chief Hiroki Totoki
and the PlayStation videogame head Andrew House are all slated to
take the stage on the second day.
While its electronics operation remains challenged, with
smartphone sales falling short of expectations, Sony has moved to
cut losses in businesses like making televisions. Fixing the Xperia
phone business is an urgent task for Sony, Chief Executive Kazuo
Hirai said. Mr. Totoki is expected to brief with details on how he
will rebuild the arm, efforts expected to go into the next fiscal
year.
Its entertainment arm, meanwhile, continues to deliver steady
earnings.
"Some say the entertainment unit is just a side business to
Sony, but it is an important pillar for us as it brings a steady
flow of profits," Mr. Hirai said.
Sony said it expected its Hollywood studio business, Sony
Pictures Entertainment, to generate revenue of $10 billion to $11
billion in the year ending March 2018, up from $8.1 billion in the
current financial year. Sony executives said the company planned to
invest in markets like India, where Sony has a growing slate of
television channels, as it contends with slowing growth
elsewhere.
Sony executives noted that the activist investor Daniel Loeb
recently dropped a campaign to get Sony to partially spin off its
entertainment arm, hoping to unlock what he described as hidden
value in that side of the company. Mr. Loeb said in October that
his hedge fund, Third Point LLC, had sold its Sony stake, acquired
in May 2013, making a 20% gain.
After Mr. Loeb became involved, Sony moved to increase
transparency around the entertainment arm's operations in an effort
to position it as central to the company's turnaround efforts.
Write to Eric Pfanner at eric.pfanner@wsj.com and Takashi
Mochizuki at takashi.mochizuki@wsj.com
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