Sony is betting on a multibillion-dollar push into producing more original content, as part of a “creation shift” the Japanese tech giant hopes will win it a greater share of the $3tn entertainment industry.
In an interview with the Financial Times, chief executive Kenichiro Yoshida said that Sony needed to shift its focus from distribution to the creation of intellectual property, to cement a corporate transformation from a consumer electronics brand into a global entertainment company.
“We have the technology and creation is the area where we like and where we can contribute the most,” Yoshida said, adding that the group can still use its camera, sensor and other consumer electronics roots to produce live entertainment.
Under Yoshida, the group has spent $10bn over the past six years to build its vast portfolio of games, films and music — the three business segments that now account for 60 per cent of its annual revenue.
The transition puts Sony alongside the likes of Netflix, Apple and Amazon in a spending war for global content that is set to reach nearly $250bn this year, according to Ampere Analysis, a market researcher.
Until now, the Japanese group has taken a different approach. Instead of directly competing with streamers, Sony has sold its film and TV rights to them — a relationship the Japanese group wants to maintain as it involves itself more deeply in content production.
“By putting our efforts in creation, that also means that we will work with partners on the distribution side. So I think we have developed very good relationships with the so-called Big Tech players,” Yoshida said.
So far, Sony has leveraged its variety of media businesses to better profit from its acquired intellectual property, leading to hits in recent years including The Last of Us, which was converted from a PlayStation game into a hugely popular television series, and Uncharted, another video game adaptation for cinema.
Following the investment splurge, Sony’s top executives argue that the group needs to be more directly involved in creating content at an earlier stage to get higher returns.
“Whether it’s for games, films or anime, we don’t have that much IP that we fostered from the beginning,” said chief financial officer Hiroki Totoki, who is widely seen as Yoshida’s successor, in a separate interview.
“We’re lacking the early phase (of IP) and that’s an issue for us,” he added, noting that Sony has historically been better at finding a global audience for content that have already become popular in their home market.
Jefferies analyst Atul Goyal says the new focus is a natural part of Sony’s evolution into a fully integrated media company but investors have also called on Sony to present more concrete plans for it to deliver higher returns as its next phase of growth.
“One thing that you need is IP, that is step one. And if you don’t start creating or buying in those that do, then the risk is someone else will do it. So the risk is not doing anything,” Goyal said.
Chief financial officer Hiroki Totoki said: ‘Whether it’s for games, films or anime, we don’t have that many IP that we fostered from the beginning’ © Ko Sasaki/FT At the centre of the “creation shift” is how Sony can generate higher returns from one of the world’s largest portfolios of Japanese anime cartoons, which was bolstered by its $1.2bn purchase of AT&T’s anime streaming service Crunchyroll in 2021.
“It has become a movement. Some of our research shows that there are over 800mn anime fans globally, and there is going to be a billion over the next few years,” said Rahul Purini, president of Crunchyroll, which is releasing close to 200 titles a year, double what it was four years ago.
But Purini estimated that the average cost of producing anime had gone up between 40 and 60 per cent over the past few years, due to the increasing pricing power of creators in Japan as well as a limited supply of animators.
In response, Crunchyroll, which now has 15mn paid subscribers, and Sony are trying to co-produce shows. The companies are also working to train more animators, while making the creative process more efficient using digital tools and new software.
“Given the constraints within the ecosystem, there is opportunity for various companies, including Sony, to see if there is a way to add additional capacity, bring additional talent and potentially leverage digital technology in the creation process,”
Purini added. Recommended Stephen Bush Bad movies prove profit can be a force for good in film Totoki said Sony also wanted to use its knowhow from its PlayStation Network service including payments, security and data analysis to improve engagement with Crunchyroll subscribers, and expand business opportunity through joint promotions.
“About 30 per cent of PlayStation Network service customers watch anime, but only about 5 per cent have Crunchyroll accounts,” Totoki added. Still, executives admit that Sony’s deeper involvement in the production process will also put the group on the frontline of the heated battle with animators, games-makers and directors and those using artificial intelligence tools to generate new material. “It’s not going to be easy to balance . . . and it will be a continuous search for how we can use technology while protecting the rights of the creators,” Yoshida said.
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