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Sunday, May 25, 2014

Sony Cuts Earnings Forecast After Disappointing Drop in Blu-ray Sales


Is the Blu-ray format dead? While no one is nailing the coffin on discs just yet, Sony's latest numbers are certainly helping to fuel rumors that physical media will soon go the way of the dinosaur.

Sony just announced plans to cut its latest profit forecast, with some of the blame due to a disappointing drop in Blu-ray sales. According to The Verge, the company had projected an operating income of $782 million over the financial year, which ended on March 31, 2014. Sony just announced adjusted figures, which include a massive drop. The new magic number is now $254 million.

The company, who spearheaded the Blu-ray movement back in the mid-2000s, now says that increasing use of streaming services and digital downloads are putting a damper on physical media. Of course, those numbers didn't get any help from Sony's February news about exiting the PC business.

"Sony expects to record approximately 30 billion yen [$293 million] in additional expenses in the fiscal year ended March 31, 2014 related to exiting the PC business," states Sony's report.

Sony expects to record an additional $245 million in "impairment" charges "due to demand for physical media contracting faster than anticipated," mainly in Europe.

"Consequently, Sony has determined that it does not expect to generate sufficient cash flow in the future to recover the carrying amount of long-lived assets, resulting in an expected impairment charge," the report continues. "Primarily due to the reason mentioned above, the fair value of the entire disc manufacturing business also has decreased, resulting in an expected impairment of goodwill."

Just a few years ago, the Digital Entertainment Group (DEG) was singing the praises of Blu-ray, saying that the format saw a 68 percent increase in 2010, raking in $1.8 billion. What a difference a few years makes.

Blu-ray was first introduced back in 2006, despite there being a competing HD DVD format. Dubbed as the next coming of Beta versus VHS, Blu-ray went on to dominate the market, thanks to several studio partnerships and the inclusion of a Blu-ray player in the PlayStation 3 gaming console. Since then, we've seen iTunes, Amazon, Netflix, Hulu, and a slew of other streaming and download services compete for your entertainment dollars.

Although we don't see DVD and Blu-ray dying off anytime soon, this is certainly not a good sign. Sony plans to release its actual consolidated results for the fiscal year, which ended on March 31, 2014, as well as the consolidated results forecast for the fiscal year ending March 31, 2015, on May 14, 2014.

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