Sony 2001 Annual Report Download - page 16

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Sony Corporation Annual Report 2001
14
HOWARD STRINGER
Director (Chairman
and Chief Executive
Officer of Sony
Corporation of
America)
global system; and conducting supply chain management that involves marketing units and retail stores.
Focusing intently on the cost of capital, inventory control is essential to the more efficient use of capital
and improved cash flows. During the year, although there was an excessive level of inventories at the end of
the third quarter, by reducing factory output we drastically reduced our inventories in the fourth quarter to
an appropriate level. Going forward, we are going to continue strengthening our supply chain management
and work to better manage inventory levels.
LEVERAGING SONY’S ADVANTAGE AS A SUPPLIER OF ENTERTAINMENT CONTENT IN THE
BROADBAND ERA
When it comes to content, Sony has two overwhelming advantages. In addition to its extensive holdings of
entertainment content, Sony, as a group, is able to add new value to these content assets. For many years,
Sony has sought to derive synergies from its manufacturing
and entertainment businesses. Now, in an era when networks
allow an increase in these synergies between hardware and
entertainment content, more than ever our assets are uniquely
suited to creating new value.
The April 2000 establishment in the United States of Sony
Broadband Entertainment, Inc. represents this potential. The
company is studying the types of digital assets that Sony
should own and how best to link that content with hardware and networks. At Sony Pictures Entertainment, a
new division called Sony Pictures Digital Entertainment (SPDE) was formed to bring together digital movie
production services and the production of digital content such as games played over networks. One of
SPDE’s initiatives is “EverQuest”, a game played over the internet by more than 360,000 registered sub-
scribers. In addition, we are working to build other new business models such as an electronic movie
distribution service.
MANAGING WITH THE COST OF CAPITAL IN MIND
We are now examining new methods of managing Sony’s entertainment business. We are studying new ways
of realizing value from existing content assets. Also, we are taking a closer look at ongoing businesses from
the standpoint of using capital more efficiently. Thus, we aim to deliver more shareholder value. The March
2001 closing of our U.S. music cassette tape manufacturing facility was one result of this process. And from
April 2001, we are introducing EVA® to such areas as funding film production costs and production methods.
By placing more emphasis on the cost of capital, we seek to bring about dramatic change in Sony’s enter-
tainment business.