Sony Group Q3, 2024 Earnings Call Transcript (SONY)

Operator

Unidentified Company Representative

Thank you very much for taking time out of your busy schedules to join us today.

As it is a scheduled time to begin.

We will now start the Sony Group Corporation fiscal year 2024 third quarter earnings announcement.

I'll be serving as MC.

I'm EC from PR.

First, I'd like to introduce the speakers.

Representative, Corporate Executive Officer, Chairman and CEO who is to become Representative Corporate Executive Officer and Chairman effective April 1.

Kenichiro Yoshida, current Representative Corporate Executive Officer, President, COO and CFO to become Representative, Corporate Executive Officer, President and CEO on April 1.

Hiroki Totoki.

Senior Vice President, Corporate Planning and Control Lead of Group Diversity, Equity and Inclusion Support for Financial Services, Business and Entertainment area Naomi Matsuoka.

Senior Vice President in Charge of Finance and IR, Sadahiko Hayakawa.

Corporate Executive Officer and CFO, Sony Financial Group Kazuhiro Yamada.

First, Mr. Yoshida will say a few words, followed by an explanation of the earnings results for the third quarter of the fiscal year ending March 31, 2025 and the full year forecast by Mr. Totoki, Mr. Hayakawa, Ms. Matsuoka, Mr. Yamada.

And then we'll move on to the Q&A session.

After the QA session, there will be a photo session for the media with Mr. Yoshida and Mr. Totoki.

The entire event is scheduled to last about 80 minutes.

Mr. Yoshida, please.

Kenichiro Yoshida

Hello everyone.

We recently announced our new management structure effective April 1.

Hiroki Totoki will be appointed CEO of Sony Group Corporation.

Based on his achievements until now and from the perspective of future long-term growth, I'm convinced that Totoki is ideally equipped to be the next CEO and the board is in unanimous agreement.

Today, I wanted to take this opportunity to join you and share a few words.

Taking a brief look back.

Since returning to Sony from the ISP So-net.

Together with Totoki in December 2013, I served as CFO for four years and then CEO for seven years.

I would like to once again express my gratitude to you all for your feedback, including your encouragement and critical analysis throughout this period.

I believe that Sony was nurtured by the capital markets.

During my time as CFO, I often spoke within the company about moving from internal negotiation to external accountability.

The aim was to verify the effectiveness of our management initiatives by asking ourselves whether they are explainable.

There is a great deal that business leaders can learn from dialogue with the media analysts and investors and I myself have learned much.

If I were to mention one thing from my seven years as CEO, it would be our purpose that I defined in my first year.

The keyword within this is KANDO, inherited from my predecessor, Kazuo Hirai.

I think of our purpose as a promise.

It is a promise that we make to each and every employee.

It is based on the belief that you are the driving force behind KANDO.

I trust that most Sony Group employees think that it is not Yoshida who achieved something, but rather we are the ones that did it and we are the ones that will continue to do it.

I believe that this kind of intrinsic strength is vital for connecting our purpose to profit.

Going forward, I myself, alongside our employees, intend to be part of the driving force behind KANDO and offer my support to Totoki and the new management team.

That is all from myself.

With that, I would like to hand over to Totoki.

Hiroki Totoki

Thank you very much.

I am Totoki.

I am now assigned as the President, CEO.

And I look forward to taking over the company which Hirai and Yoshida have greatly added value to CEOs and to working to create new value by realizing our creative entertainment vision and driving Sony's evolution and further growth.

Now I will explain the contents shown here and then I will give a general summary at the end.

Our first speaker Hayakawa, please.

Thank you.

Sadahiko Hayakawa

The consolidated sales excluding the financial services segment for the quarter increased 7% compared to the same quarter of the previous fiscal year-on-year to ¥3,695.7 trillion and operating income increased 10% to ¥423 billion.

Consolidated sales, including the financial services segment, increased 18% year-on-year to ¥4,409.6 trillion.

Operating income increased 1% to ¥469.3 billion, a record high for the third quarter, and net income increased 3% to ¥373.7 billion.

The results by segment for the quarter are shown here.

Next, I will explain our consolidated results forecast for FY 2024.

Consolidated sales, including the financial services segment, have been upwardly revised slightly from the previous forecast to ¥11.900 trillion operating income has been upwardly revised 2% to ¥1.180 [ph] trillion and operating cash flow has been upwardly revised 50%, mainly due to improvements in working capital to ¥1.660 trillion.

Consolidated sales, including the financial services segment have been upwardly revised 4% from the previous forecast to ¥13.200 trillion.

Operating income has been upwardly revised 2% to ¥335 billion and net income has been upwardly revised 10% to ¥1.80 trillion.

The full year forecast by segment is shown here.

Now I will move on to an explanation of the state of each business.

The first is games and network services.

Sales for the quarter increased 16% year-on-year to ¥1,682.3 billion, primarily due to the increased sales of hardware and third party software.

Although we had the big hit of Marvel's Spider Man 2 in the same quarter of the previous fiscal year, operating income increased 37% year-on-year to ¥118.1 billion a record high for the third quarter in the segment, primarily due to the impact of higher revenue from network services and third party software as well as improved profitability of hardware.

Promotion expenses per unit of PlayStation 5 on which the promotion was implemented in the current quarter decreased approximately 20% year-on-year, and we think that we are implementing an optimal sales program given the market environment.

We are managing PS5 inventory at an appropriate level, with inventory at the end of December decreasing 46% compared to the same month of the previous year, significantly contributing to an improvement in cash flow.

Taking into account the result of the quarter, we have revised upward our full year forecast for sales by 3% to ¥4.610 trillion and operating income by 7% to ¥380 billion compared with our previous forecast.

The number of monthly active users MAUs across PlayStation platforms in December increased 5% compared to the same month of the previous year, reaching 129 million accounts, the highest number in PS history.

Total playtime also increased 2% year-on-year, marking the seventh consecutive quarter year-on-year growth.

More than 40% of users who purchased a PS5 during the quarter were new users.

Combined with a moderation in the decrease in the number of PS4 active users, this has contributed substantially to the increase of MAUs.

Cumulative unit sales of PS5 from launch until the end of December are essentially the same level as the cumulative unit sales of PS4 for the same period of time since launch, even though PS5 had a higher price.

Furthermore, MAUs after the same amount of time has passed since launch have increased significantly by approximately 1.4 times.

This shows that the used base for the PS platform has significantly expanded from PS4 generation due to the PS5's backward compatibility in various user engagement initiatives.

As for PlayStation plus, revenue in the quarter increased 20% year-on-year on a U.S. dollar basis, primarily due to an increase in average revenue per user APRU, mainly due to a shift to higher tiers of service and the impact of price revisions.

In this way, the momentum of the platform business is currently strong and we expect to see stable earnings growth going forward.

Last November, we released a beta version of a cloud streaming feature on the PS Portal Remote Player.

This means that PS Plus Premium subscribers can now play over 120 PS5 game titles on the PS Portal stream directly from cloud servers without going through a PS5 console.

By leveraging the lessons from the beta test, we aim to further improve the streaming and gaming user experience so users can enjoy PS games anytime, anywhere and even more easily.

At the Game Awards 2024 held on December 13, 2024 our first party title, Astro Bot, won four categories including game of the year and best family game, the most of any title.

In addition, the live service game Helldivers 2, released in February last year, won the best ongoing game and best multiplayer game awards.

The fact that titles in general we are aiming to expand in the future, including titles for families in live service games have received these awards is a major stride towards our building a broader title portfolio.

In addition to the awards it received, Helldivers 2 large update Omens of Tyranny, released in December 2024, has been well received and user engagement has once again increased significantly.

Next fiscal year we plan to release games such as the major title Ghost of Yōtei and the sequel to the popular title Death Stranding, and we expect even further expansion in earnings from first party software.

Next is the Music segment.

Sales for the quarter increased 14% year-on-year to ¥481.7 billion, primarily due to higher streaming revenue and the impact of the consolidation of eplusinc.in Visual Media & Platform.

Operating income increased 28% year-on-year to ¥97.4 billion, mainly due to the impact of the increased sales.

On a U.S. dollar basis, streaming revenues for the quarter increased 9% year-on-year, including a onetime factor in recorded music and 8% year-on-year in music publishing.

We have revised upward our full year forecast for sales by 3% to ¥1.790 trillion and operating income by 3% to ¥340 billion.

During the quarter new albums from artists such as Tyler the Creator and became hits.

Recently, Bad Bunny's new album, released from Rimas Entertainment on January 5, 2025, has become a huge hit, capturing number one on the Billboard 200 and making him the fastest male artist to reach 1 billion streams on Spotify.

At the 67th Grammy Awards held on February 2, 2025, Beyoncé's Cowboy Carter won the award for Album of the Year.

Beyoncé who has been nominated for 99 Grammys over the course of her career, the most of any artist, was nominated in 11 categories this time and she won three categories including album of the year.

The rise of streaming is creating more opportunities for music from local artists to become global hits.

The Sony Music Group is working to enhance local repertoire by discovering and nurturing artists and songwriters at its locations in emerging markets, as well as by building and strengthening relationships with independent labels and artists in various regions through the Orchard and AWAL.

In addition, in rapidly growing Latin America and India, we have further solidified our leading positions through strategic investments in leading labels and music catalogs in each region, such as Som Livre in Brazil, Rimas in Puerto Rico and Eros in India.

Furthermore, in countries and territories that are expected to grow over the midterm, we have acquired leading local labels in Greece and in the Czech Republic, and Sony Music Publishing has established a base in Thailand.

Next is the Pictures segment.

Sales for the quarter increased 9% year-on-year to ¥398.2 billion, primarily due to higher revenue from theatrical releases such as Venom

Operator

Now we'd like to entertain questions from the media and then followed by the Q&A by the analysts and investors and 20 minutes for each the Q&A session.

There are some people who registered online to ask questions.

[Operator Instructions].

First we'd like to entertain questions from the media members.

Some people are participating online.

Please click button for a hand raising on the WebEx screen.

Those in the hall who would like to ask a question, please raise your hand and then of course the person in charge of microphone bring that to you.

And we'd like to ask kindly that you would ask only two questions per capita.

So now the floor is open to entertain questions.

The person in the front row of the central block, please start asking the question.

Unidentified Analyst

I'm Satoizaishinbu [ph].

I have two questions.

First question is about the fact that is one for Yoshida, the other for Totoki.

Yoshida has assumed the position of CEO seven years ago and many M&As were implemented by Mr. Yoshida and financial service was decided to be split to a certain extent.

So how do you evaluate the progress state of this business portfolio structure?

And the second one is the future for Yoshida and Totoki each.

As a Chairman that in Sony what kind of role we like to play within Sony and maybe your future career plan or ideas in the future?

To Totoki, I have a sort of abstract question that is to say as a CEO of the company, what do you like to achieve in the mid-range plan?

There are the numbers of targets but beyond that what kind of Company that you would like to nurture the Sony to become?

So your ambition sort of about the future of Sony.

Kenichiro Yoshida

Thank you for your two parts of questions.

As to the first part of a question, of course you told us about the portfolio.

How specifically I evaluate and assess it.

Thanks for the question.

As to the portfolio management, well, 2021, the Sony Group company, it was launched and then.

So that was a key point and there are two purposes for that.

One is group synergy has to be promoted further.

And second purpose is that portfolio management should be done more carefully and perfectly and well thought and there's a progress achieved.

But Totoki will play the central role including other members, the leaders to consider and polish this further.

My future role as a chairperson, of course that I would like to support the Totoki-san's team.

That's all from me.

Thank you.

My future aim and ambition in the future.

Yes, this is about the entertainment division.

I already told you about this.

But the way the ideal state that we like to achieve 10 years from now, that is ideal state we like to achieve against the vision, to what extent can we make progress?

And that's a challenging thing that I would like to aim at to get as close as possible to the vision.

What are the most important driver?

Of course the human resource diversity we have and business diversity we have.

We have diverse human resources and human business sectors and then by merging that we can create something brand new.

I believe in that and I would like to really try that and then achieve this vision.

So that is strongest wish I would like to achieve.

Thank you.

Operator

Let's move on to the next question.

The first row in this block Hayato from Toyo Keizai.

Hayato Umegaki

I have two questions as well.

So based on Totoki's answer.

Well, there's some overlap with that.

But in 2018 when you assumed the post in Yoshida we have diverse people and diverse business and you said the issue is can you make best use of that.

So selection and focus is something that many companies have pursued.

But in management aiming for diversity, what does that mean?

What's the significance of that and significance of what you have achieved?

That's my first question.

So second question goes to Mr. Totoki.

So President, CEO and CFO to President -- President CEO, CFO to President CEO.

So now I think you are moving from execution to management.

What do you think is going to be the difference in your role, change in your role?

And you have now the business CEO or Chief Officer.

What's the significance of that new post that you're going to establish?

Hiroki Totoki

So making use of diversity.

Well, in the 20th century already we think that we have generated two major businesses that we capitalize on diversity.

One is PlayStation game business.

So music and electronics synergy was what led to that.

And then the other one, Anime in the middle of 1990s, the current Aniplex.

So Sony Pictures Japan and Sony Music, there was a synergy between those two that led to that.

And so under Totoki's leaders, Anime and games, I mean they're very close.

So that will be the engagement platform.

So the diversity that we have, we're going to try to convert that more to value.

That's the action that he's taking.

That's how I see it.

So for myself, so to become CEO, my thoughts on that.

So I'm going to be the Chief Executive Officer.

So person responsible of management of the company.

So I feel that big responsibility.

[Indiscernible] and Mr. Yoshida, they have created this value.

I want to further expand on that, make it bigger.

So I have that strong determination to achieve that.

That's what I'd like to tell you.

And the significance of having Chief Officer.

So at the head office as much as possible, we want to simplify the layers.

So we want to do delayering.

So we have a transparent and open and efficient and lean head office.

So that's what we intend.

And so for that, we did this reorganization.

And also, one more thing about the name.

Well, as much as possible, we wanted something that is easy to understand, not just in Japan, but globally because we have a lot of business overseas as much -- it's larger than Japan.

So we wanted a title that's easy to understand globally.

And so that's why we changed the name.

And in terms of business yield, the current business, what drives that is CEO and each business segment.

And so -- for the business segments, we wanted to show the respect and support from head office and we wanted to show how we're going to provide that support and how we're going to behave.

So that is why we established this business to you.

Unidentified Company Representative

So now we would like to move on to the next question.

So in the middle, the white jacket, the person in white jacket, please?

Unidentified Analyst

[Indiscernible] from NHK.

And my question is -- two questions to Totoki-san from April.

You will become CEO and under such instances, your company has grown significantly over the last years.

But what do you think is a challenge still ahead of you and how you would like to take that challenge?

And so in MLP, ¥1.8 trillion for the gross -- the investment.

So as a CEO, what is your policy for investment to the extent that you can disclose to us?

Thank you.

Hiroki Totoki

So let me answer two questions.

What is still lacking -- what is the challenge?

There are many, as a matter of fact.

And of course, there is no company organization where there is no challenge.

And -- but roughly speaking, on our part, we have play the game globally.

That is the nature of our company.

It's for the compared to top-notch player globally in terms of scale or in terms of profitability, we have not reached the top level yet.

And therefore, whether we are in a top position globally.

There are still many things, which need to be improved.

Our headquarters in Japan, and there are many Japanese in headquarters.

And so in order to get a truly global, I believe that it's very important for us to the change.

And the second point is with regard to the strategic investment during the midrange plan and how we should proceed with that.

And the policy of investment has not -- will not be significantly different from what we have had.

And for the company, for asset, whether we have a capability to boost the value.

And of course, we have the great companies or we have a great asset.

And it is important, the strategy to acquire them.

But the point is whether we are able to further add value through those acquisitions.

And the second point is whether we are able to set the price properly and whether we have capability to evaluate the capability and set the price based on that.

I think those are very important two points.

Unidentified Company Representative

We'd like to entertain next question.

Central Block in the second row and the person wearing a brown jacket, please.

Thank you.

Unidentified Analyst

Ishida [ph], the freelance reporter.

I have two questions.

First point that the question and request to Mr. Yoshida.

So far, your investment plan was presented and Totoki-san also covered that too.

As a CEO of the company, you have prepared the investment plan.

Which one do you evaluate high?

And then the second question is to Mr. Totoki.

As of now, that in your management portfolio, there are some things which are going well, but some things were negative areas.

In some cases, some you must decide to divest or you might make a big change of restructuring, you might have to make that difficult decision as well.

But by when do you make such a bold decision?

And in which way you intend to do that?

At present, I'd like to hear what you think about those.

Thank you.

Kenichiro Yoshida

Thank you for your question.

About the investment plan, I highly appreciate the certain area.

Well, the most impressive investment for me was for me or for Sony's management is that was in 2018, EMI Music Publishing, the acquisition.

That acquisition was most impressive to me.

$4 billion investment was made.

But anyway, the negotiation was mostly done by Mr. Totoki personally.

The music, of course, is the original starting point for Sony Company.

Name Sony came from the Latin world, Sonas featuring sound and tape recorder and Walkman and CD, those were the products we developed.

Sound was a basis origin to deliver sound.

That's how we developed the products.

On the other hand, CVS Sony created in 1968.

And then that is where we got closer to artists, how to get closer to artists.

And we learned that.

In 2018, EMI Music Publishing, the acquisition, and that was like M&A based upon our origin.

And then from then on, of course, for creation shift or entertainment focused activity was developed and we made a big bold decision from that time on, I think.

And to respond to your second question, how do I evaluate the current portfolio?

Well, for me, for some time, when I look at the portfolio, it's not static, it's more dynamic.

That's how I perceive the portfolio structure.

It's not something you implement something suddenly on one day.

It's a continuous effort, continuously monitor.

So for the entire portfolio.

Some area might not be doing well in certain segment, you might need to make a bold change.

Then without hesitation, I implement that change.

But as to the bold restructure portfolio in October, we make a decision on the spin-off of financial segment.

And when we announced that thing on financial sector, I explained the person who will be spin off or who would spin off, both sides understand that it's necessary spin-off for the future growth.

As to the portfolio, as to the major restructuring might be the basic criteria for decision-making.

In other words, if we should keep holding that, that nurture more growth or maybe the other people should manage and then that segment might grow better, then we have to revise drastically.

So to that kind of goals or criteria, if we do nothing, investors might scrutinize and they might come to some critical comments as well if we do nothing.

So if possible, we ourselves, of course, would like to make decision.

And to take action in advance and take a proactive action, which is more ideal.

So that kind of revision restructuring continues to be considered and implemented.

Unidentified Company Representative

Next question.

To the far right, second from the front, the person in black, please?

Thank you.

Unidentified Analyst

[Indiscernible] from Bloomberg.

Question to Totoki-san.

Two questions.

So about responding to additional tariffs, you said you have strategic inventory that you're building up any other measures.

In November, you talked about how to do the shipment, you might change where things are produced and you might have a price pass-through, you have to organize those ideas you said.

Any parts where you actually implemented those ideas?

That's one question.

Then the other.

So this is something I wanted to ask based on what you said.

So in order to compete globally, headquarter shifted to some place sales other than Japan, do you have such an idea.

Kenichiro Yoshida

So first question, in terms of responding to tariffs, as I said the other day.

So I think we have those choices that I explained.

So we are making preparations.

We haven't made drastic changes in terms of how we respond.

Second, about placing the headquarters outside of Japan, that possibility is new.

We have no such idea.

Tokyo is a really nice place.

So we don't feel any inconvenience.

So I think it will stay the same.

Unidentified Company Representative

Time becomes short.

So the next question will be the last question.

The person in gray suit, please.

Unidentified Analyst

Tanaka [ph] from Asahi.

And my question is to Yoshida-san, two questions.

And Mr. Yoshida, in 2013, when you return from So-net to Sony, and when you return to Sony, there was a deficit and the management was not necessarily very healthy.

And so as a CFO, for instance, the sale of bio and you have to reduce number of employees.

I think you were involved in restructuring of Sony then.

And as at that point, what was your thought to make those decisions?

And the restructuring I'm sure that, that has led to the current growth phase.

So when you look back at the situation then.

How do you reflect your action of restructuring them?

And the second is, when you are CEO, you try to put emphasis on entertainment area.

So looking from outside, Sony has changed significantly.

So as CEO, what is your impression about what you have achieved?

Kenichiro Yoshida

Thank you.

Since I'm appointed.

Let me answer.

When I returned from So-net, it was December 2013, I returned to Sony with Totoki-san in early phase after I return, I decided to withdraw from PC via and also decided to spin off TV the separate business of TV, and I made a proposal to bode together with Totoki-san.

And I think it is common between us that the basic mindset then was that.

And we are not happy to be made by Sony, but of course, the Sony took care of us.

So we wanted to contribute to Sony.

We indebted to Sony very much.

So after impreatment, there was a lot of efforts for that.

And so the Totoki-san was in charge of mobile business, he was involved in restructuring.

And that -- the improvement has led to the current growth.

When I was CEO, of course, entertainment was emphasized and Sony has changed.

Thank you very much for your comment.

And the focusing on entertainment itself is related to KANDO that was he put forth by the Hirai, so my predecessors in 2012.

And I fully agree with him.

It was old story, 2005.

When I became the President of So-net.

Sony Communication Network was original name, but I changed it to So-net Entertainment.

And my thinking then was in 21st century that was the era of entertainment.

And the major bear of that trend is networks network.

So I took challenge together with Totoki-san for that purpose.

So the focus on entertainment, I fully agree with Hirai-san and then that was up ground.

With I have fully achieved my purpose.

Of course, there are still challenges, and we have to continue to take.

So I would like to continue to support Totoki-san, who will take leadership in doing so.

Unidentified Company Representative

So we would like to end this part of this Q&A session by media.

Thank you.

Unidentified Company Representative

We would like to entertain questions from the analysts and investors.

I would like to serve as the MCM KANDO of IR Group.

Thank you very much in advance.

[Operator Instructions] To the right-hand side, second row, please, the person is now designated.

Junya Ayada

Junya Ayada of JPMorgan.

I have two parts of questions.

I have a question about the financial results in the third quarter, the game and network businesses and the like upon that.

Of course, active users made a record high increase marked in this quarter.

What's the driving force for such an increase of these users?

Hardware console is selling well and third-party software titles are selling well.

And add on also increasing.

So everything is growing.

But especially in this fourth quarter, what was the major driving force?

And is this a sustainable growth?

What do you think of that?

That's my first part of the question.

My second part of the question is to Mr. Yoshida.

Now Sony, management, human capital, human resources is my question in the last decade.

You have went through the major reform.

Mr. Hirai, Mr. Yoshida, Mr. Totoki each play the role and maybe they reflected business environment in era as well.

But the three of you played a certain role.

But in one word, what was the role will each top management.

In the capital market in the future, in 10 years from now on that in order to create a further better Sony, those three have CEOs have maybe nurtured and develop the future generation of the management human resources.

What do you think of that have you developed and trained the future CEOs.

Kenichiro Yoshida

I'd like to answer the first question first.

That is as to the third quarter, as you're aware that there's a seasonality influence so that the figure should go up most of the season.

So at that timing, we are fortunate that the consoles really sold well.

There was a major interest of good sales of consoles more than we had expected.

Much stronger momentum was felt.

In addition to that good news, high-quality third-party software titles were available launched during the third quarter.

There was a synergy in MAU was achieved the highest in record.

So there's a seasonal fluctuation.

So in the fourth quarter, it might come down again.

But still, overall speaking, it's a continuous growth that is an idea of state of growth.

So we'd like to continue this momentum.

As to the hardware, we have achieved a high level of penetration.

For the next fiscal year, there are very strong.

The titles, including first-party and third-party titles are likely to launch.

So the better momentum could be created for us to boost our sales for the next fiscal term.

Thank you.

So let me respond.

In the last 10 years through the major reform, Mr. Hirai, myself and Totoki-san have played a certain role for during each time?

Of course, Mr. Hirai launched the world, KANDO, that is entertainment forecast approach, I think.

And I worked together with Mr. Totoki.

So in the last seven years, especially the creation shift was focused on mine, we should shift to creation.

Content creation is one area.

However, hardware-wise, camera, the capturing should be also focused and also component and parts, battery where it is where we exited already, but semiconductor is related to capture and creation.

So we should focus on semiconductor as well.

So we shifted to creation.

And there's a committee of interest used that internal.

We'd like to close get closer to the certain motivation of the users, the core gamers, we should get closer to them in Anime, we should focus on Anime as well.

And that, I think, was a focus of this present management.

But for the about the future, there are many ways to describe it.

Mr. Totoki, last year in May, we presented accretive entertainment vision was launched by him last year in May, which exemplifies that technology should be continuously treasured, especially computing and sensing should be emphasized -- continue to be emphasize.

So I expect that to be the focus.

As to the human resource training as Mr. Hirai and Totoki, we had lots of experiences in Sony.

One point I'd like to raise an example.

I personally as the Play Station in the -- it linked the 20th century -- 21st century of Sony.

In other words, it was a packet measure of the last century, but now it shifted to a self-transform to this network.

So I often say internally that how did you achieve themself to change?

That is network was split.

Sony Network Entertainment was created in 2010, and networks is separated.

And then again, in 2016, again, they were remerged integrated.

Then Sony Computer Entertainment, became Sony Interactive Entertainment.

So the name was changed.

So people are now connected by networking.

And in addition, people in the earlier organization, the three people, Kodera, Nishino and these three, and Ito, these three people are the members.

Those three had that kind of the experience and they became a supporter of the team, Totoki.

They are the major members supporting Mr. Totoki.

So it's one of the good examples I could quote.

Unidentified Company Representative

Moving on to the next question.

From the stage to the left, third row from the front, wearing a black jacket, please.

Yasuo Nakane

Nakane from Mizuho Securities.

Sorry for my voice.

So question -- same question to Yoshida-san and Totoki-san.

So before I became the group, you had split TV subsidiary.

So between group headquarters and the business you have separated.

So I think that's been your management style.

So in terms of business management and decision-making, your involvement in each of the business?

What would that be?

So Director of the business and as a shareholder as a group CEO, I mean, you have various positions.

And so there is centrifugal and centripetal power.

So how do you strike a balance between the two?

I mean, done.

So inclusive of the message to the future, what were the difficulties that you had, what thought process went through?

So sorry for the abstract question.

So Totoki-san, you worked on and you went into the businesses.

I think you that type of management, but now your group CEO and so how to engage in each businesses.

How is that going to be different from Yoshida-san's?

Is there going to be a difference?

Please tell me.

Hiroki Totoki

So first question.

Let me talk about that.

So in terms of group management, as you rightly pointed out.

So I think you need both the centrifugal fund centripetal force you need both.

And I think the crux of that both of -- for both is purpose, I think.

So it's not -- I said that it's not that Yoshida is something.

I want the employees to think that we did it, and they actually feel that way.

And of course, management responsibility is to connect the purpose to profit.

But in doing that, I think that is quite important.

And so there's a purpose, which is our promise.

And so centrifugal, centripetal force striking a balance between the two is what I have been working on.

So maybe a little bit abstract response.

But even now, myself as an individual, I enjoy working on business hands-on even if it's difficult, I enjoy that process.

So in more cases, I recall those hands-on experiences.

But having experienced both what I feel is that, I mean, we're going to have to decide how and what we support in the businesses.

So some things that you have to do and some things unnecessary things you not do both are important.

And so that is all about creating the balance between centrifugal and Centripetal power.

And so I want to provide this thorough gear from the management.

So I want think what is the best way to do that?

So when things are going well, I try not to interfere.

That is the side I would like to adopt.

Unidentified Company Representative

So now we'd like to move on to the next question.

SMBC Nikko Katsura-san, who joined online, please?

Ryosuke Katsura

Katsura from SMBC Securities.

I have two questions.

And the first is the business related.

And the G&NS and I&SS have made a very good start this fiscal year.

And on the other hand, at the market, we are worried about sustainability.

So the many -- the response is what will happen to the net fiscal year.

So since this fiscal year is very good, there will be dip next year, that is a concern.

So you said the many things about upside.

But G&NS and I&SS are the FY that 2025 what our upside and the downside?

And the second, the question is to leave the mid to long range, the plan.

So for the new organization, we have already shared that with us.

With regard to the personnel, you have already covered it.

And you mentioned the diversity and relating to the younger generation.

And so next generation, the talents to take care of the management, what is your expectation to them?

And at the very beginning, Yoshida-san said that Sony has been nurtured by capital market.

And what is your expectation towards vis-a-vis capital market, if there are any, please share them with us?

Thank you.

Kenichiro Yoshida

So answering your first question.

Let me answer your first question.

So you talked about sustainability of the profit for the game and I&SS and what will happen to the next fiscal year.

And as for game area, rather than a sell-through of console now the MAU has been accumulated network service plays the main role.

So even though there is a higher profit, there will not be the rapid dip.

And as for the next fiscal year, first party, third party, we expect very good titles coming out.

So that is a good year.

So we have a high expectation for the performance of the next fiscal year.

So we would like to take advantage of those opportunities without missing them.

And as for I&SS, through the larger size, the sensor, we will continue to have the higher sales.

And by the end of this fiscal year, we will solve the issues related to yield.

So there will not be the major concerns for the next fiscal year.

But smartphone, the market itself, what will evolve in that market.

So that is a market which has been reaching maturity, but there is AI, a feature newly incorporated and whether that will vitalize the smartphone market.

I think that is a very important point affecting our business.

That's all.

Thank you.

So the new management team under the leadership of Totoki-san, I expect a great deal.

And what we expect vis-a-vis the capital market?

That was your question.

So I have had opportunities, the stakeholders, the clients, partners, shareholders, clients.

So with those contracts, that has made me think that for our customers and employees, they have focused on the certain area as their expectations for employees, though, of course, they would like to improve the careers and compensation.

And when you face the capital market, I feel strongly the wide of dynamic range of the expectation.

You talked about the diversity, but, of course, investors have different time frame.

And so whether they wish to focus or they accept the portfolio offered by management, there is a difference.

So there is a wide dynamic range of the requests and expectations of the market that we can learn from them.

So may I answer that question?

The next generation, the management, in terms of talent that I expect from them.

So we have come to Internet native generation gradually.

And so they have been exposed to the Internet since their younger days.

So they will be the main -- the people to support Sony's management.

So the sense of the speed and the capability to find something new and limited and very little the resistance to technology.

I believe those mindset and attitude will generate something new.

AI will be widely penetrated.

And the next generation is able to handle them very easily.

And I have very high expectation not only the service and products, the way of the working and the management style will change.

And that is how I sense the sign of change.

And I would like to support and I would like to support those changes actively.

Thank you.

Unidentified Company Representative

Time is running short.

So we'd like to ask just 1 question per person from now on.

Thank you for your kind understanding.

[Operator Instructions] Online participants from Citigroup, the securities, Ezawa-san, please?

Kota Ezawa

I'm Ezawa of Citigroup.

I have just one question.

As Totoki-san mentioned about the midrange plan and then 10% profit increase is planned in the scenario in the last nine months, the growth rate you super achieved overachieved like 23% increase of profit achieved already.

So you overachieved.

So after revised annual plan, in the fourth quarter, there might be some expense to be like 10% increase might be in the scenario.

But clearly, you are overachieving the original target.

10% growth scenario versus now you might have maybe a different actual performance than the original plan.

Is that something that just happened incidentally?

Or you already knew and expected that you overachieved that's why you may come up -- we might have come up with a more conservative forecast or outlook.

Could you at least reflect upon that?

And if the current growth was not coincidence, there was continuous sustainable growth, high growth that you really continuously achieving.

Then your mid-range plan needs to be maybe updated more frequently or quickly.

What do you think of that?

Thank you.

Kenichiro Yoshida

Thank you for your question.

As you're aware, the -- it's a midrange business plan, the span is three years.

So this is just the first year.

And so updating or maybe it's premature in terms of timing to opportunity.

Premier scrutineers outside the environment, there are lots of factors of uncertainty.

So in three years, we would like to achieve something we had promised to do.

Every year, there is a maybe fluctuation, maybe the speed of implementation might be expedited or slowed down.

It's inevitable, because Forex is also one impact.

So tailwind is something we have to make use of.

Against the risks we should be sensitively and quickly cope with.

So as much as possible, we would like to achieve a stable growth.

Thank you.

Unidentified Company Representative

This will be the final question.

Third row from the front, from the stage to the left-hand side, person with a beige jacket, please.

Unidentified Analyst

Thank you for this opportunity.

[Indiscernible] And one question from Securities.

When you talked about competing on the global stage.

That's what you want to do, and you're going to make an effort for that.

And so going forward, what about M&A?

So is it going to be bigger than before?

Are you going to be more aggressive than before about M&A?

And also internally, you said that there are various issues.

So to resolve those issues, and to enhance profitability in each business.

What potential do you have for growth and are you seeing the progress?

Kenichiro Yoshida

Well, to compete at the global level, well, it doesn't lead to bigger M&A.

It's not synonymous.

So we have to find the appropriate opportunity.

And as I said, it has to meet our criteria.

If there are those that meet our criteria, we'd like to study them and act on them.

And in terms of solving internal issues, how much room do you have for those based on solving those issues.

What my focus in management would be, how much growth and profitability can we expect in each business?

And so in terms of our competitive positioning, the trends of the competitors and market growth.

So based on that, we can set a goal of this is how far we should be able to go.

And if we show if you fall short of that, we should discuss what is it that's lagging?

We should find that out and then try to bring reality closer to Ideal.

I think, and it's just an iterative process of that.

So for all of the segments, there's not going to be uniform profitability or growth expectations for each business is an ideal situation, and we all the thing together how we can approach that come closer to that.

That's all.

Unidentified Company Representative

With that, I would like to close Sony Group Corporation consolidated financial results presentation.

And the photo session to follow will be for the media.

So investors, analysts please leave the room.

Thank you so much for joining us today.