Sony's current popularity hasn't been matched since its creation of the iconic Walkman.
Sony's current popularity hasn't been matched since its creation of the iconic Walkman.
Over the past two and a half decades, Sony, the 78-year-old firm that revolutionized the Walkman and PlayStation industries, has had a tough time. It overlooked the mobile phone boom and while the PlayStation stays profitable, the cost of manufacturing other electronics has risen alongside dwindling demand.
However, with streaming opportunities emerging, Sony is aiming to transition from a legacy consumer electronics company to an original content and entertainment firm. This shift is paying off: Within the past three years, Sony's stock (SONY) has climbed out of a decades-long slump, hitting a new high in Japan for the first time since March 2000, indicating investor confidence in its ability to reinvent its offerings and steer towards entertainment, as Damian Thong, a Macquarie research analyst, told CNN.
“If you went back 30 years ago, it was an electronics company, best known for selling hardware,” Thong said. “But today, the company is primarily generating profits off entertainment – games, music, and (TV and movies).”
Less hardware, more content
Sony Corporation, Japan's third-largest company, has turned its fortune around through game business innovation beyond consoles and strategic acquisitions to expand its intellectual property, Joost van Dreunen, an NYU Stern adjunct professor, told CNN.
In 2021, Sony procured Anime powerhouse Crunchyroll, and in 2022, it acquired American video game company Bungie for $3.6 billion.
Besides Sony Interactive Entertainment that produces the PlayStation, the Sony Group encompasses Sony Pictures, which produces Spider-Man series, and Sony Music, which includes Columbia Records.
Sony aims to harness synergy across its subsidiaries to create original entertainment content for consumers, van Dreunen said.
Sony's strategy of capitalizing on its IP became evident at the 2023 Emmy Awards, where the TV series “The Last of Us” won eight primetime awards, marking the first time a TV show based on a video game garnered major consideration at a Hollywood awards ceremony.
After missing out on streaming networks, licensing its intellectual property and original content is part of Sony's strategy to rival streaming giants like Netflix, Disney, and Amazon.
Sony Group's Chief Communications Officer, Robert Lawson, mentioned that since 2018, when the company acquired EMI publishing, Sony Music has become the world’s largest music publisher, having invested approximately 1.5 trillion yen into content IP across various entertainment businesses.
“Sony Group has changed its corporate strategies towards strengthening its creation and entertainment assets,” Lawson said, highlighting the company's focus on “new collaborations between Sony sister companies,” especially in the anime genre.
In the previous fiscal year, Sony's entertainment business, which includes music, movies, and games, contributed 60% of the total revenue. This is twice the contribution of a decade ago, when the entertainment business made up only 30% of the total revenue.
A long road to supremacy
Moving towards entertainment marks a departure from Sony's beginnings.
Before Sony existed, there was Tokyo Telecommunications Engineering Corporation, founded in 1946 by Akio Morita and Masaru Ibuka. The company introduced Japan's first-ever magnetic tape record in 1950. It became Sony Corporation in 1958, later establishing its U.S. business.
From the 60s to the 90s, Sony was a household name in consumer electronics, launching iconic devices like the Trinitron color TV in 1968, the Walkman cassette player in 1979, and the world's first CD player in 1982, in addition to numerous cameras and video recorders.
Sony has also been active in music since the 60s through a partnership with CBS that evolved into Sony Music Entertainment in 1991. However, it has primarily been known for its electronics.
The 90s marked Sony's rise in the gaming console sector with the PlayStation release in 1994, disrupting the arcade and gaming industry. Since then, Sony has consistently dominated the console market with iterations of the PlayStation. In 2020, it released the PlayStation 5, which has outperformed its main competitors like Microsoft's Xbox Series X and Nintendo's Switch, according to Ampere Analysis data.
Van Dreunen pointed out that Sony is also looking to evolve beyond its console positions, targeting new audiences and distribution channels for video games.
“We’re experiencing a softer period in gaming now, and so it places higher stakes for companies like, what comes next?” he said. “How do you, as the dominant console maker, continue to innovate and expand your business?”
Thong adds that Sony has been successful in becoming a profitable platform for third-party publishers to sell video games.
Sony has diversified its gaming strategy, including publishing video games like Helldivers 2 on PlayStation5 and PC, which became a hit for Sony, selling over 12 million copies in three months, according to Ampere Analytics' Anna Kerr.
The gaming industry is broadening its intellectual property (IP), as stated by NYU Stern's van Dreunen. This involves exploring new methods to connect with customers and expand their customer base.
In November, Sony reported a 69% surge in quarterly net profit, with its game segment playing a significant role. The company has been performing well financially this year, mainly due to profits from its gaming sector.
Reports suggest that Sony is in negotiations to purchase Kadokawa, a prominent Japanese videogame company known for producing the popular game "Elden Ring."
However, Sony has faced some setbacks. Its release of the "Concord" video game and the latest Spider-Man movie from Sony Pictures were not well-received by fans this year. Yet, van Dreunen considers these failures as learning experiences and reasonable investments, given that Sony has set aside 1.8 trillion yen ($11 billion) for acquisitions and stock buybacks till March 2027.
At its annual investor conference in May, Chief Executive Kenichiro Yoshida announced that Sony was adopting a "creative entertainment vision."
According to Thong, Sony's transformation into an entertainment company wasn't guaranteed in the past.
"Sony went through some rough years, I'd say," Thong mentioned. "But they did a commendable job of enduring and navigating through it."
Bringing Sony's gaming IP to the big screen
Van Dreunen pointed out that demand for game adaptations for movies and TV was not as high in the past. However, "The Last of Us" showed that Sony had a chance to display more of its gaming IP on the big screen.
Before "The Last of Us," Sony also attempted game adaptations with "Uncharted," a 2022 movie featuring Tom Holland, based on a video game series first launched by Sony in 2007.
Furthermore, Sony plans to adapt the "God of War" game series, which it launched in 2005, to the big screen next year, according to Kerr.
While Sony remains in the electronics business, producing high-end cameras and collaborating with companies like Apple through its image sensors business, it has distanced itself from being merely a mass consumer electronics company.
In 2025, Sony aims to spin off its online banking and insurance units, further emphasizing its focus on entertainment offerings.
Sony's stock has risen by almost 18% in the past month, surpassing entertainment giants like Disney and Netflix, and gaining momentum from investors pouring into the Nasdaq, which crossed 20,000 for the first time this week.
Sony's strategic acquisition of Bungie in 2022 for $3.6 billion highlights its shift towards focusing on content production, moving away from solely relying on hardware sales. The company's Game and Network Services division, which includes Sony Interactive Entertainment, Sony Pictures, and Sony Music, now generates the majority of its profits.
With the increasing popularity of streaming platforms, Sony is capitalizing on its intellectual property by licensing its content to rival streaming giants like Netflix, Disney, and Amazon. This strategy aims to position Sony as a competitive force in the streaming industry.