SONY MUSIC SALES DECLINE

A decline in music sales added to Sony's declining financial outlook as the Japanese conglomerate cut its fiscal 2001 profit forecast in half and posted a sharp 23% drop in fiscal third-quarter earnings, the company said Thursday (1/25).

While the company's PlayStation 2 is reportedly wreaking havoc on its overall financial position, the company reported that music sales for the fiscal third quarter, which ended Dec. 31, 2000, decreased 11.6% to $1.7 billion, while operating income increased 9% to $203 million. Even so, Sony said it expects to meet its full-year financial projections in music due to the strength of its scheduled fourth-quarter releases.

The company said U.S. operations posted declines in revenues and operating income, even though figures for the division were not disclosed. Sony blamed the drop on soft market conditions in international territories, the delayed release of certain new albums, increased spending on digital media and unfavorable currency exchange rates. Sony Music Japan also reported a decrease in third-quarter sales and an increase in operating income due to reduced advertising expenses.

For the nine months ended Dec. 31, Sony's combined music operations posted a 17.2% drop in overall sales and a 47.5% decline in operating income, according to figures released Thursday.

During the third quarter, music sales fell nearly 12% to $1.6 billion. The company said continued soft sales throughout Asia and in parts of Latin America and Europe and increased costs at its digital media, coupled with the aforementioned delays in album releases, were largely responsible for the dip.

Sony said, however, its numbers could have been worse if not for the success of such albums as Sade's "Lovers Rock," which has sold 1.9 million units; Ricky Martin's "Sound Loaded," with 1.2 million units sold; and the Offspring's "Conspiracy of One," hitting 800,000 units sold.

Even with revenue gains at the company's consumer electronics business and the box office success of "Charlie's Angels" and "Vertical Limit," Sony said its overall profit during the three months fell to 72.2 billion ($628 million) from last year's 93.6 billion. Revenue for the quarter rose 10% to 2.1 trillion ($18 billion), a surge the company said was fueled by strong demand for consumer electronics items—notably digital cameras, personal computers, televisions and semiconductors.

Due to its games unit, the company will have a bigger-than-expected full-year operating loss. As a result, Sony anticipates an annual profit of 5 billion ($40 million) instead of the 10 billion it projected earlier. The company also cut its fiscal 2001-shipment target for PlayStation 2 consoles to 9 million from 10 million.

In somewhat related news, Sony said it would not attend the upcoming NARM convention, marking the second year in a row that the major will not be present at the event. The company did not attend last year's confab in reaction to an unfair competition lawsuit filed against it by NARM. Both sides still await a decision in the case.