October 28, 2014
Kazuro Hirai, Chief Executive Officer
Sony Corporation
1-7-1 Konan
Minato-ku, Tokyo 108-0075, Japan
Dear Mr. Hirai:
The Sony brand one of the most successful businesses in the world, standing for innovative technology and consumer satisfaction for decades. Since becoming Chief Executive Officer in 2012, you stated a true commitment to further revitalizing the Sony brand. While I support your statements that you are fully committed to transforming this company. I believe that in order for Sony to succeed, some changes must take place in order for Sony to maximize its overall success and realize better returns.
While many recognize Sony for its innovative technology in television sets and gaming consoles, most would be surprised to learn that while Sony experiences success in electronics, much of the company’s current value stems from a hidden gem—Sony’s Entertainment division, comprising over 40% of Sony’s enterprise value. While the Entertainment division is a top performer within the Sony brand, profit margins fall short compared to US-listed competitors, despite leading market positions. I believe this underperformance could be amended by a more disciplined management approach to Sony Entertainment.
With that said, I believe you should consider changing the structure of its ownership of Sony Entertainment. This will strengthen Sony by reducing the large burden of corporate debt while at the same time, providing additional resources and capital to focus on revitalizing Sony Electronics. For example, if you were to take a 15% public stake in Sony Entertainment, it would allow the division to thrive independently with the support of the Sony parent company. In turn, this would increase capital to revitalize the Sony Electronics brand.
Your lack of individual focus on the Sony Entertainment division has been a concern to stakeholders such as myself and many others. Sony’s Entertainment division is lacking in the discipline and accountability of many of its competitors. The Entertainment division would greatly benefit by the transparency that comes with public reporting as well as knowledgeable board with a common vision for the brand.
I believe that existing shareholders of Sony should be given priority to participate in the direct ownership of Sony’s Entertainment division. Instead of conducting a traditional IPO, Sony should offer subscription rights to current shareholders. This would ensure that the economic interests of current shareholders are protected, allowing us to benefit from the division’s value while providing Sony with a large infusion of capital.