Kazuo Hirai

Sony is one of the most recognized brands in the world. Across decades, millions of consumers around the globe have associated Sony with high-quality TV sets, the Walkman, top-of-the-line cameras for professionals and amateurs, among many other products, and, of course, the PlayStation, which has provided video-gamers with countless hours of fun. Sony also manufactures the digital image sensors used in smartphones, and the sharpness of those sensors has helped fuel the selfie revolution.

Sony Corporation’s success has always centered on the nexus of technology and content. Under the leadership of its president and CEO, Kazuo Hirai, the company has been realigning its businesses. Today the businesses are organized under three pillars: Electronics, Entertainment and Financial Services. In the financial results for the fiscal year ending March 31, 2016, the total electronics business reported operating profit for the first time in five years, and net profit was positive for the first time in three years. Sony Corporation’s sales and operating revenues for the year amounted to ¥8.1 trillion ($71.7 billion).

The Entertainment division includes Sony Pictures Entertainment (SPE) and Sony Music Entertainment. SPE is home to motion-picture production, acquisition and distribution under labels such as Columbia Pictures, TriStar Pictures and Screen Gems. Upcoming releases include Passengers, Inferno and Billy Lynn’s Long Halftime Walk. Sony Pictures Television (SPT) produces and distributes a wide variety of shows across all platforms, including critically acclaimed dramas like Breaking Bad, Better Call Saul, House of Cards and The Blacklist; comedies like The Goldbergs and Kevin Can Wait; unscripted shows such as Shark Tank and daily dramas like The Young and the Restless. SPT has also formed or invested in international networks, with some 150 channel feeds in 178 countries, which include the brands AXN, Sony Channel and Animax. Most of these channels make an abundance of local productions. SPT also operates Crackle, an online service that offers TV shows and movies from the studio as well as original series such as The Art of More and StartUp. In addition, Sony operates buoyant video-game and apps businesses.

Fully aware that younger consumers are canceling pay-TV subscriptions, or never getting them to begin with, Sony has leveraged the huge popularity of the PlayStation by offering PlayStation Vue, a TV service that streams live TV, movies and sports on a variety of devices.

Hirai tells World Screen he is confident in Sony’s prospects for growth. The company continues to invest in innovation, develop new products, cut costs without compromising quality, and renew its focus on sales and marketing. And there are endless possibilities to distribute movies, television shows and digital content across a constantly growing number of platforms and devices, as Sony remains committed to the sweet spot where technology and content come together to provide consumers with enjoyable experiences in the home, in the theater or on the go.

WS: Over the last few years, Sony has been restructured through the establishment of independent business units. What has been the strategy behind the restructuring?
HIRAI: Establishing independent business units is meant to increase transparency, promote accountability, place an emphasis on sustainable profits and accelerate the decision-making process.

Some businesses within Sony Group, such as the motion pictures, music, game and mobile businesses, have been operating as separate entities for some time, while other business units, mainly in the electronics businesses, were operated as divisions of Sony Corporation headquarters.

We started to split out these electronics businesses in July 2014, starting with televisions. This was one of several factors that I credit with returning Sony’s television-manufacturing business to profit in the fiscal year that ended March 31, 2015, which I am very proud of.

Importantly, this effort to create independent business units also includes a system for closer cooperation between group companies, which we call One Sony.

WS: GE sold off NBCUniversal and is now a manufacturing company. Time Warner shed Time Warner Cable and other assets and is now a pure content company. Sony remains a hybrid. Why is it beneficial to have the three units—Electronics, Entertainment and Financial Services? What synergies do the three divisions have that allow Sony to operate as a single unit?
HIRAI: Electronics, Entertainment and Financial Services are the three pillars of Sony’s business, and we will continue to grow all three. With a range of businesses in our portfolio, what’s most important is to make sure we have a robust business model for each. That will give Sony Group a further reinforced revenue base, as well as a volatility-tolerant enterprise structure.

With the rapid advancement of technologies, Electronics and Entertainment are getting closer than ever—and so are Electronics and Financial Services. I see some great opportunities to create new innovations between them, and drive future growth for Sony.

WS: What are the benefits of keeping Sony Pictures Entertainment as part of the company, and why would it be detrimental to spin it off?
HIRAI: The studio is an important driver of future growth for Sony, and it has for years been the cornerstone of Sony’s value-chain strategy. Sony’s electronics divisions have collaborated with Sony Pictures to roll out new cinema cameras, new digital-projection systems, and new home-entertainment technologies, with great benefits to each.

Sony’s co-founder Akio Morita famously said that hardware and software go together like the wheels of a car. It’s hard to put a dollar figure on that kind of synergy, but it’s a huge part of who we are at Sony.

It’s also worth noting that each time one of our films, TV shows or television networks is watched or streamed, the audience is reminded that Sony is intimately involved in creating the very best entertainment experiences at every step of the way—from lens to theater to living room to mobile device.

The current environment creates the optimal circumstances for technology and content to truly come together in the minds—and living rooms—of consumers. By being on multiple sides of that equation, and by having multiple relationships with the consumer, Sony has a major competitive advantage.

WS: The gaming division drove much of the recently posted profits. Tell us about the genesis of the division, which you spearheaded in the ’90s. What was your vision for the gaming business, and how has it developed?
HIRAI: The PlayStation business started as a joint venture between Sony Corporation and Sony Music Entertainment. What was then called Sony Computer Entertainment (now known as Sony Interactive Entertainment) was established in 1993, just one year before the original PlayStation game console was introduced in Japan.

The combination of a hardware company with expertise in technology and a software company with deep knowledge in entertainment and software was really key to the success of PlayStation. Compared to traditional players in the game industry, we had a unique and better business model, more support from content creators—including third-party game developers—and therefore a platform that had the greatest games with the greatest variety.

In the years between the original PlayStation and the PlayStation 4, Sony has always been at the forefront of digital entertainment for gaming fans worldwide, consistently building the latest technologies into each version of PlayStation.

WS: Tell us about the PlayStation Network and PlayStation Vue. In an age of increasing numbers of cord-cutters and cord-nevers, what options do they offer consumers? Why is it important for Sony to develop these offerings?
HIRAI: PlayStation Vue offers consumers an intuitive, immediate, dynamic and personalized TV-viewing experience. It’s a cloud-based TV service, now available across the entire United States, with more than 100 top live sports, movie and TV channels, and a lot of other unique features.

For instance, with a cloud DVR, users can record hundreds of shows at once. Thousands of hours of content can be stored on PlayStation Vue’s cloud DVR, which is ten times more storage than any DVR on the market.

With a single PlayStation Vue subscription, users can stream content simultaneously across different devices, and the interface seamlessly blends live and on-demand content and puts top programming front and center. It also has powerful search and discovery tools, as well as the ability to “catch up” on popular programming in the three days after a show’s first live airing.

From Sony’s standpoint, by offering a TV-viewing experience in addition to gaming, we can make PlayStation even more attractive, and we can expand the customer base from hard-core gamers to a broader audience.

WS: As more and more consumers opt to watch content on portable devices and small screens, how do you see the future of big screens—movie theaters, home entertainment and wide-screen TVs? Do you think content will continue to be viewed on large screens?
HIRAI: Consumers want to be able to watch content across all screens, and they want the experience to be seamless. At Sony, we are dedicated to creating the best possible experience for our audiences, no matter where they wish to watch, but I do think there will always be a special place for the theatrical experience, and also one for the big screen at home.

Watching on a small mobile screen is great and certainly convenient for many situations, but it can never match the fun and camaraderie of watching a sporting event with friends in your living room, or movie night with the family, or taking your partner to the theater.

WS: Some studios are focusing much of their output on movies with more special effects and action and less dialogue to entice viewers outside English-language territories, particularly in China and Russia. Is Sony Pictures Entertainment also following this trend?
HIRAI: I think SPE’s motion-picture group is doing an excellent job at building the studio’s new film slate with a focus on properties that have global appeal. From Spider-Man to Passengers to Inferno, these films have strong potential in every corner of the world.

At the same time, if you look at a lot of countries, many of the top films in any given year are not Hollywood imports but local content, so SPE has also ramped up local-language productions around the world. From China to Russia to Latin America, Sony Pictures is working with the best filmmakers in each market to create local stories that are locally appealing. This year alone, we have released local-language films in more than ten countries.

WS: Do you plan on keeping the label structure at SPE: TriStar, Columbia, Sony Pictures Classics, Screen Gems and Sony Pictures Animation? What type of products will they be producing?
HIRAI: Columbia releases major franchise movies like Spider-Man and Passengers. TriStar has a literary focus and is more filmmaker-driven, with movies like Ang Lee’s Billy Lynn’s Long Halftime Walk and Danny Boyle’s Trainspotting 2. Screen Gems is one of the best horror and comedy genre labels in the business, with huge hits like Resident Evil, or Biohazard as it’s known in Japan. Sony Classics is a U.S. label that distributes art-house films like documentaries and foreign-language [titles]. The label strategy works because each group has its own expertise and focus.

WS: What challenges and opportunities for the entertainment and gaming industries do you see in the Chinese market?
HIRAI: China is an enormous opportunity for the entertainment industry and Sony in particular. Not only are we working on getting more of our Hollywood films into the Chinese market, but we are working with local partners in both film and TV to make Chinese content as well. For example, we produce a very successful Mandarin-language adaptation of the U.S. series Mad About You. Beyond film and television, there are amusement parks and branded consumer products, as well as a huge enthusiasm for VR. I’ve read some estimates that the market for VR in China alone is expected to grow to over $8.5 billion in the next four years.

WS: Much of SPE’s television output has been critically acclaimed and the offerings are diverse, ranging from dramas and comedies to reality and game shows to soap operas. What has been driving the division’s success?
HIRAI: I attribute their success to several things, among them their relationships with talent and their innovative business approach in an evolving marketplace. On the business side, their flexibility to create new models where all parties benefit has allowed them to be early movers on new opportunities. With regard to talent, they have made a name for themselves in the creative community for being very supportive of both the process and the success of their shows.

Being an independent studio provides some significant advantages for talent, not the least of which is [the ability] to develop projects for multiple networks and platforms, and our team has a wonderful track record of keeping those shows in production. As a result, they have a roster of impressive talent, several of whom have created multiple hits for the studio.

WS: SPE does not own a broadcast network in the U.S. As broadcast and cable networks in the U.S. increasingly take shows from their sister studios, do you see this as a problem down the road? Will this limit SPE’s ability to get shows on the air?
HIRAI: In the U.S., we do operate some great networks: GSN, getTV, Sony Movie Channel, Cine Sony and our streaming digital network, Crackle. Each of these networks caters to specific audiences.

Being independent from a major broadcast network, our TV production group can take their work to any network on any platform and find the place where it has the best chance to succeed.

Looking back, I think it has helped shape an organization that is more creative, nimble and hardworking, because they have to make content that they’re confident will find a buyer and work more closely with their distribution colleagues. It has also made SPT pioneers in new media, and now our TV group is a top producer for streaming networks.

WS: SPE’s Indian channel business marked its 20th anniversary last year. What’s driving the continued success of the Sony portfolio in India? Are you eyeing further expansion into the regional channels space in this territory?
HIRAI: Within our TV network business, properties like Sony Channel, AXN and Animax operate around the world, but India is one of our most important markets.

We were both wise and lucky to get into the Indian TV business when we did. Our networks have grown tremendously over the past 20 years, both organically and through acquisitions and investment, and the demographic trends in India continue to be very favorable.

Our success in the market has been driven by strong local and original content, including sports, movies and TV shows, and we will certainly continue to invest significantly in our Indian TV business.

Over the last year, we have expanded our bouquet of channels and added new brands. We also continue to increase our investments in digital and on-demand offerings, and we have expanded into new sports like NBA basketball, soccer and wrestling, which are fast gaining popularity alongside cricket, with which we have seen so much success over the years.

WS: In what other geographic areas do you see the most potential for growth in the channel business?
HIRAI: Latin America and Asia continue to be very strong growth markets, and we are expanding both our digital and linear channels there, as well as in Europe.

This summer, we reached an agreement to substantially expand our Indian business through the acquisition of TEN Sports. India has been a significant driver of growth for many years, and sports has played a vital role in our success there.

In Latin America, we’ve seen a lot of success with original programming like Shark Tank México, which is produced by SPT and based on an original Japanese format.

In Asia, our Animax brand is particularly strong. It’s the number one pay-TV channel in Japan and is now available in dozens of countries worldwide. Animax recently launched a new streaming service on PlayStation in Japan and has also expanded into concerts. Thousands of fans attend Animax Musix events throughout Asia.

We also recently launched two new pan-Asian networks. GEM, with our longtime partner Nippon TV, broadcasts Japanese shows and music programs, leveraging many of the hits made by our own Sony Music Japan. ONE, in partnership with Seoul Broadcasting System, is more focused on popular Korean entertainment.

Our channels business also continues to grow in Europe. We recently acquired a bouquet of channels in Turkey—a new growth market for us—and our acquisition of a channel group in the U.K. has proven very successful. Sony now has several of the most popular kids’ channels in the U.K., and we are looking at options to grow that business in other markets.

WS: SPE owns a stake in HOOQ in Asia and has been expanding the reach of Crackle. How do you see Sony’s OTT business, and what opportunities are there for expansion? Are there opportunities to increase awareness of these platforms via synergies with your smart-TV and mobile businesses?
HIRAI: With a vast install base, PlayStation is a powerful gateway to the living room and a tremendous asset for every part of Sony. It streams not only games but our networks like Crackle, Animax and AXN, and it showcases our movies and music as well.

Also, Sony Pictures and Sony Mobile have a very collaborative relationship. In the last year, they worked together on a number of promotions, including digital movies bundled with VR apps.

Crackle has been available on PlayStation for years and has steadily expanded both the markets it serves and the content it provides. It’s now available in 21 countries on every screen, including BRAVIA TV and PlayStation, of course. By investing more in original content, Crackle has attracted a large number of new viewers. With The Art of More, for example, we found that over half of the show’s viewers were new to the service, proving that strong original content is key to drawing audiences to OTT networks.

WS: Tell us about the investments Sony is making in virtual reality.
HIRAI: With PlayStation VR (PS VR), a virtual reality system for PS4, set to go on sale in October of this year, the first order of business right now for VR is to make sure that we have a successful launch of this system.

We are exploring how to develop VR as an entirely new creative and business opportunity across Sony. The content will predominantly be games during the initial stage, but we continue to have many discussions internally about other applications for VR.

Together with Sony Interactive Entertainment, we are looking at the entire value chain of what VR means to Sony. Once we have a successful launch of PS VR, what’s going to follow is a series of non-game content that can be produced by Sony Pictures, Sony Music and also Sony Music Japan. This will be followed by a number of value-chain products that actually create VR images, from capturing to editing to delivery.