TOKYO: Following Sony’s seven-fold increase in profits year on year, the Japanese consumer electronics giant has signalled a new direction with its acquisition of EMI Music Publishing.
Known for its televisions, sound systems, and the wildly popular PlayStation gaming console, Sony on Tuesday unveiled its three year strategy to refocus the company on profitability by pursuing subscription models, the Financial Times reported, rather than its previous consumer product strategy which had been based on driving one-time purchases.
As services such as Amazon Prime and Netflix have shown in video, and Spotify in audio, subscriptions provide an ongoing source of stable revenue for businesses. And at a behavioural level, subscriptions solve problems for consumers by providing a default and removing the need for difficult thought.
This insight has not been lost on the Sony leadership, whose ambition is to find sustainable future profit. “Over the next three years, I’d like to focus on enhancing the quality of profits by increasing recurring business rather than expanding profits,” CEO Kenichiro Yoshida told a news conference.
Such a strategy has seen the company avoid setting an operating profit target, which spooked investors to the tune of a 3.7% share decline on the news. Instead, Yoshida told investors and reporters that Sony would aim for ¥2tn (US$18bn) of cash flow over the next three years.
“In the entertainment space, we are focusing on building a strong IP [intellectual property] portfolio, and I believe this acquisition [EMI Music Publishing] will be a particularly significant milestone for our long-term growth,” Yoshida added.
This new direction is, in part, the result of work undertaken by the previous CEO, Kazuo Hirai, under whose leadership Sony jettisoned a struggling PC business and launched the PlayStation 4. During that time, Yoshida served as CFO and was a key lieutenant in pulling the company out of deep financial troubles.
With the acquisition of EMI Music Publishing, Sony shores up its position as the largest music publisher in the world, while also re-imagining what being a technology company involves.
“We are a technology firm, but the technology means not only electronics but also entertainment and content-creation,” Yoshida said.
Sourced from The Financial Times, The Guardian; additional content by WARC staff