Sony 2010 Annual Report Download - page 24

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Music
Financial Services
All Other consists of various operating activities, including mobile phone third-party original equipment
manufacturing (OEM) business activities in Japan and So-net Entertainment Corporation, an Internet-related
service business subsidiary operating mainly in Japan.
Sales in All Other declined 17.8% year-on-year, to ¥261.9 billion.
The decrease in sales was attributable mainly to deteriorating sales of mobile phones in the Japanese market in Sony
EMCS Corporation’s OEM business. This decline was partially offset by a significant increase in sales at So-net.
Operating loss in All Other worsened by ¥0.6 billion year-on-year, to ¥4.8 billion.
The deterioration of the operating loss was due primarily to Sony’s withdrawal from the business of property management
for an entertainment complex in Tokyo’s Odaiba district, which offset the positive impact of a substantial increase in
operating income in Sony EMCS’ OEM business.
Sony Ericsson Mobile Communications AB (Sony Ericsson) undertakes the product design, development,
production and sales for mobile phones.
Sony recorded equity in net loss of Sony Ericsson of ¥34.5 billion for the current fiscal year, compared to a loss
of ¥30.3 billion in the prior fiscal year.
(For reference)
Sony Ericsson reported a 37.2% decline in sales year-on-year, to €6,457 million.
A significant decline in units shipped, a consequence of persistently challenging operating conditions in all regions, caused
sales to decline by €3,821 million, or 37.2%.
Sony Ericsson’s loss before taxes worsened by €21 million year-on-year, to €654 million.
Despite significantly lower sales, Sony Ericsson’s loss before taxes widened only slightly, owing largely to declines in
research and development expenses and selling and administrative expenses.
Sony’s Music segment is primarily comprised of the music recording businesses of U.S.-based Sony Music
Entertainment (SME) and Sony Music Entertainment (Japan) Inc. (SMEJ).
Sales in the Music segment rose 35.0% year-on-year, to ¥522.6 billion.
The increase in segment sales was due to the inclusion of the full year results for SME, which was consolidated as a
wholly-owned subsidiary beginning October 1, 2008.
On a pro forma basis, had SME been fully consolidated in the previous fiscal year, sales in the Music segment would
have declined 5%, owing to the appreciation of the yen against the U.S. dollar and the continued contraction of the
physical music market.
Releases contributing to sales in the period included Susan Boyle’s I Dreamed a Dream, the soundtrack of Michael
Jackson’s THIS IS IT and ikimono-gakari’s HAJIMARI NO UTA.
Operating income rose 31.1% year-on-year, to ¥36.5 billion.
Had SME been fully consolidated in the previous fiscal year, operating income in the Music segment would have increased
72.0%.
This increase in operating income was primarily due to improved results at SME and SMEJ, which reflected contributions
from hit products including Michael Jackson catalog product, as well as a decline in restructuring expenses from the
previous fiscal year.
The Financial Services segment consists of the financial services businesses of Sony Financial Holdings
Inc. (SFH) and its consolidated subsidiaries, including Sony Life Insurance Co., Ltd. (Sony Life), Sony
Assurance Inc. and Sony Bank Inc., as well as Sony Finance International Inc.
Financial Services revenue increased 58.2% year-on-year, to ¥851.4 billion.
The increase in segment revenue was due to higher revenue at Sony Life.
Revenue at Sony Life increased significantly, mainly due to an improvement in net gains on investments in the separate
account, and improvement in net valuation gains from investments in convertible bonds in the general account and a
significant decrease in impairment losses on equity securities in the general account. These improvements reflected a
significant rise in the Japanese stock market, as compared with a significant decline following the global financial crisis
in the previous fiscal year.
Sony Life also reported higher revenue from insurance premiums, owing to a steady increase in policy amount in force.
Operating income amounted to ¥162.5 billion, an improvement of ¥193.7 billion year-on-year.
The overall increase in operating income was primarily due to an improvement in the performance of Sony Life.
The significant improvement at Sony Life was due mainly to the improvement in net valuation gains from investments in
convertible bonds in the general account, a decline in the provision of policy reserves because of the revision of the future
investment yield of variable life insurance products in the separate account and a marked decrease in impairment losses
on equity securities in the general account, all as a result of the rise in the Japanese stock market.
387.1
522.6
27.8
(Yen in billions)
36.5
2009 2010
Sales Operating income
851.4
538.2
(31.2)
(Yen in billions)
162.5
2009 2010
Revenue Operating income (loss)
All Other
318.4
261.9
(4.2)
(Yen in billions)
(4.8)
2009 2010
Sales Operating loss
Sony Ericsson
(Yen in billions)
2009 2010
(30.3) (34.5)
Equity in net loss
5. Sony realigned its reportable segments from the first quarter of the fiscal year ended March 31, 2010 to reflect its reorganization as of April 1, 2009, primarily repositioning operations previously reported within the Electronics
and Game segments and establishing the Consumer Products & Devices (“CPD”), Networked Products & Services (“NPS”) and B2B & Disc Manufacturing (“B2B & Disc”) segments. Additionally, Music is a new reportable
segment. The equity earnings from Sony Ericsson Mobile Communications AB—a mobile phone business joint venture—are presented as a separate segment. In connection with this realignment, segment results for 2008
have been restated to conform to the new classification.
Sony Ericsson’s operating results are accounted for under the equity method and are not consolidated in Sony’s consolidated financial statements, as Sony Corporation’s
ownership percentage of Sony Ericsson is 50%. Sony Ericsson aggregates the results of its worldwide subsidiaries on a euro basis. However, Sony believes that the
following disclosure provides additional useful analytical information to investors regarding Sony’s operating performance.