Sony 2015 Annual Report Download - page 14

financial instruments in increasingly competitive markets, Sony must attract and retain key personnel, including
its executive team, other management professionals, creative talent and skilled employees such as hardware and
software engineers. However, there is high demand for such skilled employees, and Sony may be unable to
attract or retain qualified employees to meet future business needs. In addition, business divestitures,
restructuring or other transformation initiatives may lead to an unintended loss of experienced human resources
or know-how. If this should happen, it may adversely affect Sony’s operating results and financial condition.
Sony may not be successful in integrating its business strategies and operations across different business units
to increase the competitiveness of hardware, software, entertainment content and network services.
Sony believes that integrating its hardware, software, entertainment content and network services is essential in
differentiating itself in the marketplace and in generating revenue growth and profitability. For example, in April
2016, Sony Computer Entertainment Inc. (“SCEI”) and Sony Network Entertainment International LLC (“SNEI”)
founded Sony Interactive Entertainment LLC, a new company that combined all the business units belonging to
SCEI and SNEI, including hardware, software, content and network services operations. However, this strategy
depends on the continuing development (both inside and outside of Sony) of network services technologies,
strategic and operational coordination and prioritization among Sony’s various business units and sales channels,
and the standardization of technological and interface specifications industry-wide and across Sony’s networked
products and business groups. Furthermore, in such a competitive business environment, which continuously
changes with new entrants, it is critical for Sony to continuously introduce enhanced and competitively priced
hardware that is seamlessly connected to network platforms, with user interfaces that are innovative and attractive to
consumers. Sony also believes that it is essential to provide competitive and differentiated content-based service
offerings that include Sony and third-party licensed audio, video and game content from major motion picture and
television studios, music labels and game publishers. If Sony is not successful in implementing this strategy, it may
adversely affect Sony’s reputation, competitiveness and profitability.
Sony’s online activities are subject to laws and regulations that can increase the costs of operations or limit its
activities.
Sony engages in a wide array of online activities, including the sale and marketing of electronics and
entertainment products, entertainment network services and financial services, as well as serving as an Internet
Services Provider (ISP), and is thus subject to a broad range of related laws and regulations including those
relating to privacy, consumer protection, critical infrastructure protection, breach disclosure, data retention and
data protection, trans-border data flows, content and broadcast regulation, defamation, age verification and other
online child protections, accessibility, installation of cookies or other software on the end-user’s computers or
other devices, pricing, advertising to both children and adults, taxation, copyright and trademark, promotions,
and billing. The application of such laws and regulations created to address online activities, or for other
purposes, including those passed prior to the popular use of the Internet that may be applied to online activities,
varies among jurisdictions, may be unclear or unsettled in many instances, and is subject to change. Sony may
incur substantial costs to comply with these laws and regulations and may incur substantial penalties, other
liabilities, or damage to its reputation if it fails to comply with them. Compliance with these laws and regulations
also may cause Sony to change or limit its online activities in a manner that may adversely affect operating
results. In addition, Sony’s failure to anticipate changes to relevant laws and regulations, changes in laws that
provide protections that Sony relies on in conducting its online activities, or judicial interpretations narrowing
such protections, may subject Sony to greater risk of liability, increase the costs of compliance, or limit Sony’s
ability to engage in certain online activities.
Sales of Sony’s consumer products including game hardware are particularly sensitive to the seasonality of
consumer demand.
Sony’s G&NS segment offers a relatively small range of hardware, including PlayStation®4, PlayStation®3
and PS Vita, and a significant portion of overall demand for these and other products is weighted towards the
year-end holiday season. Sony’s other consumer products are also dependent upon demand during the year-end
holiday season. As a result, changes in the competitive environment, changes in market conditions, delays in the
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