Traditionally known for supplying its film and television rights to streaming companies like Netflix, the Japanese electronics and entertainment giant Sony Group (SONY) has now pivoted towards producing original content on a massive scale. This strategic move marks a significant shift for the company in its quest to capture a larger share of the $3 trillion global entertainment industry, having invested $10 billion in the past six years to solidify its position across games, films, and music – three core segments contributing to 60% of its annual revenue.
Sony’s foray into original content creation places it at the forefront of a burgeoning global content spending war projected to hit almost $250 billion this year, as estimated by market research firm Ampere Analysis.
Sony’s Evolution into a Media Powerhouse
This evolution towards a fully-integrated media company seems like a natural progression for Sony. Leveraging its diverse portfolio of media assets, the company has successfully monetized the intellectual property (IP) obtained through its strategic investments. Noteworthy successes include transforming the popular PlayStation game, The Last of Us, into a highly acclaimed television series captivated by a dystopian narrative set in a world plagued by pandemic-induced societal collapse.
Another potential blockbuster in the making is the successful Black Myth: Wukong game, rich in Chinese mythological lore. The game’s meteoric success with 10 million copies sold within three days hints at its potential for a future movie or TV series adaptation.
This entertainment landscape is also reshaping sales expectations for Sony’s PlayStation 5 console, with record-breaking sales attributed to the synchronized release of hit games.
Sony’s Strategic Embrace of Anime
Expanding beyond video games, Sony is poised to reap significant profits from its expansive catalog of anime content. With anime emerging as a red-hot growth segment in the entertainment industry, Sony stands as a key beneficiary of the rising global demand for anime series outside Japan.
Solidifying its foothold in the anime space, Sony’s acquisition of AT&T’s anime streaming service, Crunchyroll, for $1.2 billion in 2021 bolstered its already significant anime portfolio. With 15 million paid subscribers and a global reach across 200 countries, Crunchyroll is a major player in the anime market, reflecting the surging popularity of anime outside Japan.
The profitability of anime is evident in Sony’s financial reports, with its music division emerging as a primary profit driver. Sony Music’s standing as the world’s second-largest music company underscores its robust performance, with anime content contributing significantly to overall profit growth.
The vast potential for anime’s growth is underscored by Crunchyroll President Rahul Purini’s projection of a billion anime fans globally in the coming years, indicating substantial room for expansion beyond its current subscriber base.
The Investment Proposition
With a promising earnings outlook in the pipeline, Sony is positioned for sustained growth driven by its expanding IP sales in gaming, movies, music, and anime realms. The semiconductor business also stands to benefit from image sensor restocking by phone OEMs, adding to Sony’s revenue streams.
Further boosting prospects is the expected margin expansion from the monetization of Sony’s entertainment IPs and gaming platform, along with the forthcoming partial spinoff and listing of its financial group by October 2025. This move promises to reduce Sony’s stake to below 20%, mitigating overall earnings volatility.
Looking ahead, Sony’s stock presents a compelling investment opportunity, especially below the $95 mark, indicating favorable prospects for investors eyeing a stake in the company’s dynamic evolution.
For more insights on the stock market, stay informed with the latest Stock Market News from Barchart.
