Sony Studio Executes Job Cuts to Meet Cost Reduction Goals
Sony Corp.’s (NYSE:SNE) CEO Kazuo Hirai is making good on his expense reductions promised to activist investors this fall by carrying out job cuts and streamlining the company’s technologies division. According to Bloomberg, Sony’s Hollywood film studio has begun its pledged layoffs, and the first to go was Chris Cookson, president of Sony Picture Technologies. It is still unclear how many jobs Hirai is planning to cut, but insider sources say that many employees have already been laid off at Sony’s home entertainment unit, along with its technologies division, and Mitch Singer, Sony’s chief digital strategy officer who led the industry’s development of the UltraViolet film storage system, was among those let go.
The reduced number of available Sony jobs comes from the pressure the company felt last year when billionaire investor Daniel Loeb pushed for a partial sale of Sony’s movie, TV, and music businesses. Loeb’s Third Point LLC pushed for a partial sale of the entertainment assets after buying a stake in Sony, but Hirai rejected the move in August, and instead made promises to realize $250 million in expense reductions. Since last year, Sony has moved forward with its plans to cut costs, and is now in the process of incorporating its technologies functions into its business groups, hence the job cuts. Cookson and Singer were once two crucial pieces of Sony’s technology puzzle, but pressure from Loeb to condense Hirai’s company led to their removal.
Charles Sipkins, a spokesperson for the studio, explained that, “As part of the company’s previously announced efforts to evolve its operations, Sony Pictures Entertainment is absorbing the functions of Sony Pictures Technologies into various core businesses.”
In addition to the cuts, in order to meet Hirai’s $250-million goal, the chief executive has reduced the number of films set from Columbia Pictures, and has focused its investment on television production and media networks. Investors learned of Sony’s plans in November, and Loeb has since said that Sony is doing the things the investor wanted. Bloomberg reports that Loeb has said that Third Point has “high hopes” for Hirai, and they are confident that the executive can make difficult decisions in order to identify more savings, boost earnings, and realize goals.
Hirai has also stood by his assertion that he made to Loeb in August that 100 percent ownership of Sony’s entertainment assets is paramount to the company’s success. Although some of its movie division’s films tanked in 2013, including After Earth and White House Down, the studio still has shown its ability for continued success with certain blockbusters like American Hustle and Captain Phillips. According to analyst estimates highlighted by Bloomberg, the studio business will probably earn $22.8 million in the third-quarter, compared to $25.3 million a year earlier, and that is something that should continue to please investors.
Sony also still has the popularity of its new game console, Playstation 4, to be proud of, and the device’s sales during the lucrative holiday shopping season gave the company a boost that Hirai needed.