‘Spider-Man’ Isn’t Amazing Enough for Sony

No matter how well the superhero does, Sony's woes are far larger

   
‘Spider-Man’ Isn’t Amazing Enough for Sony

The Amazing Spider-Man may be able to spin a critically acclaimed summer blockbuster. Unfortunately, he isn’t much help to his corporate bosses at Sony (NYSE:SNE).

Though Spider-Man posted a strong opening six-day box-office take of $137 million, the film’s performance lagged others in the Spider-Man franchise and Transformers, which earned $155.4 million during same opening period in 2007, according to Box Office Mojo.

Spider-Man will turn a profit for Sony, though it won’t be enough to resolve the company’s financial woes, which at times seem to be endless. Whatever “good news” Spider-Man is bringing to Sony is likely already factored into the company’s stock, which has plunged nearly 30% this year as investors fretted about the company’s knack for being out of step with every technological innovation of the last two decades.

Earlier this year, Tokyo-based Sony reported a record annual loss of $5.7 billion, which it blamed on the disruption caused by the flooding in Thailand along with the Japanese earthquake and tsunami. New CEO Kaz Hirai recently unveiled his “One Sony” turnaround plan, which includes axing 10,000 workers and focusing on digital imaging, gaming and mobile for growth. Given those goals, it seems plausible that Hirai may try to sell or spin off some of Sony’s entertainment businesses.

Sony’s foray into Hollywood has never made much sense. In 1989 it acquired control of Columbia Pictures from Coca-Cola (NYSE:KO), whose foray into entertainment made even less sense. Its Sony Pictures Entertainment studio ranks second in the box office this year with a 14.8% share. Besides Spider-Man, the studio’s other recent hits include Men In Black 3 and 21 Jump Street. The business also produces venerable TV game shows Jeopardy and Wheel of Fortune.

Two years earlier, it bought CBS Records and now owns Sony Music Entertainment, the world’s second-largest recorded music company whose lineup of artists includes the late Michael Jackson, Paul Simon and Usher. According to Nielsen SoundScan. Sony is the second-largest distributor of albums and track-equivalent albums with 29.93% share versus Universal Music Group’s 30.15% share.

Both businesses have struggled this year. During the last quarter, revenue at Sony Pictures rose to $8.02 billion while operating income fell to $416 million. Revenue in the music business dropped to $5.4 billion as operating income slid to $450 million. Though Spider-Man will bolster Sony Pictures’ bottom line, the studio has had its share of bombs such as Adam Sandler’s That’s My Boy. Spider-Man reportedly cost about $215 million to produce, which it will easily be able to earn back. Sales of licensed merchandise will no doubt be substantial as well.

But even if Spider-Man earned an Avatar-size box office, it wouldn’t be enough to overcome investors’ unease about Sony. The company has many challenges ahead. For instance, Sony’s gaming push comes as consumer spending on games continues to drop. Sales of the Sony Tablet S, billed as the company’s answer to the Apple (NASDAQ:AAPL) iPad, have been lackluster.

Sony has learned the hard way that a company that tries to be the Jack-of-all-trades becomes the master of none.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @Jdberr.


Article printed from InvestorPlace Media, http://investorplace.com/2012/07/spider-man-isnt-amazing-enough-for-sony/.

©2014 InvestorPlace Media, LLC

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