"Best Brand" In Trouble

Just a day after being named the country's “best brand” in a Harris Poll, The Sony Corp. (Tokyo) declared that profits plunged 98 percent in the quarter ending June 30, 2003, because of sliding revenue from the company's movies, games and television sets.

The grim numbers, on the back of Sony's surprisingly large loss from January to March, underscore the diverse troubles facing the company. Sony has already announced plans to overhaul its music and electronics divisions, which have been beset by growing competition from cheaper online offerings and Asian rivals. Its movie and game units, which lifted earnings last year, also performed poorly in the first quarter of Japan's fiscal year, which begins April 1.

Sony has had to battle falling demand for some household electronics as well as price wars, which have eroded its profitability. In recent months, company executives conceded that Sony's movie group would be unable to repeat its record run from 2002. A string of new releases, including “Charlie's Angels: Full Throttle,” has failed to match the popularity of movies released last year, like “Spider-Man” and “Men in Black II.”

Overall, Sony earned just 1.1 billion yen ($9 million) between April and June, 98 percent less than it booked in the same period last year. Sales fell 6.9 percent.

“In the third quarter of this fiscal year, we will begin implementation in earnest of the restructuring plan we outlined,” said chairman Nobuyuki Idei. Earlier this year, he had promised to generate stronger profit margins by 2006 by blending the company's electronics with its movies, music and other entertainment divisions. One of the cornerstone products of that strategy is the PlayStation game console, which has benefited from strong demand for Sony's consoles as well as video games.

The success of the game's second version, PlayStation2, through the beginning of this year helped keep Sony profitable in 2002. But sales fell in the April-to-June period, when the company shipped just 2.65 million game consoles, a 42 percent slide. The company said the decline was expected because of the large increase in production in the same period last year, when Sony cut the price of the consoles in the United States.