Sony Reports Drop In 1st-qtr. Revenue

Sony Corp. reports that slower sales of new releases and soft market conditions in a number of international regions caused a 23% drop in first-quarter music revenue, before accounting for unfavorable yen exchange rates. Operating income for music declined by more than $85 million.

During the three months that ended June 30, music sales decreased to 130.7 billion yen ($1.2 billion) from 170.2 billion yen ($1.6 billion) in the same period a year ago. On a local currency basis, music revenue fell approximately 16%. The division posted an operating loss of 5 billion yen ($47 million), compared with a profit of 4.6 billion yen ($44 million) in the first quarter of the previous year.

No specific numbers were reported for the individual music segments—Sony Music Entertainment (SME), the U.S.-based operation, and Sony Music Entertainment (Japan) (SMEJ). However, Sony said that SME, which recently announced plans to lay off 500 staffers worldwide, reported decreased sales and an operating loss. SMEJ experienced declines in sales and profits.

Best sellers during the first quarter included Pearl Jam's "Binaural," Destiny's Child's "The Writing's On The Wall," and Cypress Hill's "Skull & Bones."

In a statement announcing the first-quarter numbers, Sony Corp. of America president/CEO Howard Stringer said that he expects the company and its music operations to greatly benefit from the shift to broadband entertainment. "Convergence offers SME tremendous opportunities to expand its business," he said.

During the quarter, SME became the first major music company to make available to consumers commercial digital downloads, working with more than 35 of Alliance Entertainment's online retailing customers, including Penny Lane Records, Peaches Music, and National Record Mart. SME is also working with Tower Records and has announced plans to work with Hastings Entertainment to make downloads available.

New releases are expected in the upcoming quarter from Jon Secada, Wheatus, Wyclef Jean, Barbra Streisand, and Pearl Jam.