Sony Mobile: Rave Reviews for XZ3 Display Show Continuing Innovation; Profitability Still a Concern

Equity Analyst, LightStream Research

Farha Sabri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Superhero movie franchises and reboots are an immense revenue generator for Hollywood: Superhero movie franchises have been doing very well in Hollywood over the last decade or so. While there has been some competition between Marvel and DC to bring the highest grossing movies to market, Marvel has clearly taken the lead in this area. However, most Marvel franchises are owned by Disney while only Spider-Man and the Hulk are owned by Sony and Universal respectively. The franchises owned by Fox will come under Disney’s wing when the acquisition is finalised in 2019. Similarly, reboots of older franchises (such as Jumanji and Jurassic World) have also garnered decent revenue despite not being able to match up with Marvel releases.
The Spider-Man franchise and Jumanji reboot has boosted Sony Pictures’ profitability: A successful franchise makes 4x the revenue of an original movie and for Sony, the small number of successful franchises the studio has put together over the years have played a major role in keeping the segment afloat. The segment’s profit has spiked historically when the studio releases a Spider-Man movie.
Sony to expand Spider-Verse and make Jumanji sequel: Expecting a similar performance to that in the past, Sony has decided to expand the Spider-Verse and make a Jumanji sequel. Venom is set to release in October of this year. Sony also has an animated movie set to release in December titled Spider-Man: Into the Spider-Verse. Following this, Sony has plans to release movies for the characters Black Cat, Silver Sable, and Morbius. Sony’s plan is to build its own Marvel Universe and the studio may just pull it off if the popularity of b-list and c-list superhero movies such as Doctor Strange and Black Panther are any indication. In addition, Sony also has another Jumanji planned for release next year.
Tom Holland’s Spider-Man not appearing in Sony’s Spider-Verse could be an issue: While Sony still has ownership over Spidey’s universe, Disney is also involved in the making of these films with ultimate distribution carried out by Sony. This poses a slight problem for Sony’s planned line up of Marvel movies. The studio has planned a line-up of movies related to characters appearing in the Spider Verse. However, for now, based on the agreement Sony has with Marvel Studios, the Peter Parker we have been seeing on screens over the last couple of years will not be appearing in these movies. Meanwhile, Venom, which is scheduled to be released in October will be set in a different universe to that of the Marvel Cinematic Universe (MCU).
We expect Sony to beat its own 2021 target for the Pictures segment based on the planned line up of Spider-Verse movies and Jumanji sequel: For FY03/19, we expect segmental revenue to fall slightly by approximately 1% YoY. Our forecast is still slightly more optimistic than the company’s own forecast for the segment (JPY990bn). We expect OPM to improve to around 5% compared to company expectations of 4.4%. In the following year (FY03/20), we expect revenue growth of approximately 12% YoY with OPM improving to around 6.5%-7% as we expect strong box office performance from both Spiderman: Homecoming and Jumanji. When looking at the company’s 2021 forecast, which calls for revenue of JPY1,050bn and OPM within the range of 5.5%-6.5%, our expectations are that Sony Pictures will achieve this target before 2021.

Superhero movie franchises and reboots are an immense revenue generator for Hollywood: Superhero movie franchises have been doing very well in Hollywood over the last decade or so. While there has been some competition between Marvel and DC to bring the highest grossing movies to market, Marvel has clearly taken the lead in this area. However, most Marvel franchises are owned by Disney while only Spider-Man and the Hulk are owned by Sony and Universal respectively. The franchises owned by Fox will come under Disney’s wing when the acquisition is finalised in 2019. Similarly, reboots of older franchises (such as Jumanji and Jurassic World) have also garnered decent revenue despite not being able to match up with Marvel releases.
The Spider-Man franchise and Jumanji reboot has boosted Sony Pictures’ profitability: A successful franchise makes 4x the revenue of an original movie and for Sony, the small number of successful franchises the studio has put together over the years have played a major role in keeping the segment afloat. The segment’s profit has spiked historically when the studio releases a Spider-Man movie.
Sony to expand Spider-Verse and make Jumanji sequel: Expecting a similar performance to that in the past, Sony has decided to expand the Spider-Verse and make a Jumanji sequel. Venom is set to release in October of this year. Sony also has an animated movie set to release in December titled Spider-Man: Into the Spider-Verse. Following this, Sony has plans to release movies for the characters Black Cat, Silver Sable, and Morbius. Sony’s plan is to build its own Marvel Universe and the studio may just pull it off if the popularity of b-list and c-list superhero movies such as Doctor Strange and Black Panther are any indication. In addition, Sony also has another Jumanji planned for release next year.
Tom Holland’s Spider-Man not appearing in Sony’s Spider-Verse could be an issue: While Sony still has ownership over Spidey’s universe, Disney is also involved in the making of these films with ultimate distribution carried out by Sony. This poses a slight problem for Sony’s planned line up of Marvel movies. The studio has planned a line-up of movies related to characters appearing in the Spider Verse. However, for now, based on the agreement Sony has with Marvel Studios, the Peter Parker we have been seeing on screens over the last couple of years will not be appearing in these movies. Meanwhile, Venom, which is scheduled to be released in October will be set in a different universe to that of the Marvel Cinematic Universe (MCU).
We expect Sony to beat its own 2021 target for the Pictures segment based on the planned line up of Spider-Verse movies and Jumanji sequel: For FY03/19, we expect segmental revenue to fall slightly by approximately 1% YoY. Our forecast is still slightly more optimistic than the company’s own forecast for the segment (JPY990bn). We expect OPM to improve to around 5% compared to company expectations of 4.4%. In the following year (FY03/20), we expect revenue growth of approximately 12% YoY with OPM improving to around 6.5%-7% as we expect strong box office performance from both Spiderman: Homecoming and Jumanji. When looking at the company’s 2021 forecast, which calls for revenue of JPY1,050bn and OPM within the range of 5.5%-6.5%, our expectations are that Sony Pictures will achieve this target before 2021.

Spider-Man and Jumanji Franchises to Boost Sony Pictures’ Performance

Sony Corp

Spider-Man and Jumanji Franchises to Boost Sony Pictures’ Performance