Support NeoGAF

[Roronoa Zoro]

They would all be trans is my guess.

Mean birthers

 

[Unknown Soldier]

Yes.

Problem is the profits arent growing despite top line sales doubling. Overall division profit margins have dropped from 13% to only 6% for two years in a row (is was about 13% for four years in a row before that). Somehow this division (despite having tons of first party sales, 30% digital cuts, a trend to more and more digital sales as every year passes, and around 40M PSN subscribers) has operational costs of 94%.

$300 million AAA budget games probably have something to do with that

 

[The Pleasure]

One girl is lesbian, other is trans.

Lesbian?

 

[yurinka]

Pretty much everything they own is sinking and their streaming service is big money loser.

No.

Paramount has been making $30B/yeaar in revenue during 7 years:

And a consistent $10B gross profit for like 25 years:

But since 2019 (when Viacom and CBS were merged into what was going to be Paramount Global) they had some operational cost that is eating that $10B/year of gross profit resulting in this operating profit/loss:

Which is pretty much their net profit/loss:

So if acquired, Sony should adress these operational costs. Pretty likely moving most of the Paramount Global stuff under Sony Pictures and Sony Music as restructured subsidiaries where Sony would cut all the things Sony already does for them so it would be redundant to also have it in Paramount redundantly.

Regarding the many services Paramount Global has, I'd address as explained below:

As per the article I posted (dated Feb 2024). If Sony and Apollo want in. Then they got multiple fronts which are doing lousy.

Paramount narrowed losses in its direct-to-consumer business by $85 million in the quarter, cutting shortfalls to $490 million from $575 million in the year-earlier period. The company said Paramount+ had 67.5 million by the end of the quarter, with 4.1 million net additions in the period.

But even as advertising and subscriptions rose at Paramount+ and other broadband venues, revenues fell at the company’s traditional businesses. Paramount’s TV networks saw advertising fall 15%, while affiliate fees dipped 1% and licensing was off 25%. The company noted that it is still working its way through declines in cable subscribers and “continued softness in the global advertising market.” Film revenues, meanwhile, were off 31%, due in part to a $19 million decline in revenue from current releases and a 32% tumble in revenue from content licensing and digital home viewing.

I posted their revenue and profit above for many years, which are more representative than a single quarter and include everything, not only a few things.

Regarding the many movies, tv series, animation/anime, tv channels paid/cable tv, music content and services that Paramount has, I'd merge them all, plus the ones that Sony has, into a single global and fully multiplatform service where you'd be able to buy, rent individually or get under a subscription (which would have different tiers, like one to get all movies, oher to get all music, other for the tv series, other for the tv, etc). Keeping some small part open for free -like free tv channels, the first few chapters of tv series, some old movies or music albums. And a bigger selection that would be included in PS Plus.

I'd migrate all the users they have in all their current Sony and Paramount services there, exchanging their remaining months/years of subscription or bought movies/etc. for the equivalent there in terms of catalog and money in terms of monhs/years of subscription.

Regarding to the licensing Paramount stuff to 3rd party streaming platforms, cinemas, tvs, radios, etc. I'd keep the existing ones deals, and would expand them to the extra channels and contacts Sony has.

 

[ResilientBanana]

Sony could cancel the series and finally achieve “Halo Killer” status.

I would be pleased if they not only did this, but erased the series from history. Its fucking awful.

 

[Fabieter]

Yes.

Problem is the profits arent growing despite top line sales doubling. Overall division profit margins have dropped from 13% to only 6% for two years in a row (is was about 13% for four years in a row before that). Somehow this division (despite having tons of first party sales, 30% digital cuts, a trend to more and more digital sales as every year passes, and around 40M PSN subscribers) has operational costs of 94%.

That's the bungie payment. It's gonna be back to normal next FY.

 

[AngelMuffin]

They would own the IPs of Transformers, Teenage Mutant Ninja Turtles, Star Trek, and South Park. It's definitely gaming related.

Hardly. Hasbro owns the Transformers IP and last licensed it to Activision.

 

[StreetsofBeige]

$300 million AAA budget games probably have something to do with that

Probably some part, but for margins to be cut in half from 13% to 6% at division sales of about $30 billion. A 7% gap is about $2B of mystery costs they did.

I think the divisions profits are still around $2B. If they maintained 13%, it should be about $4B.

 

[James Sawyer Ford]

Probably some part, but for margins to be cut in half from 13% to 6% at division sales of about $30 billion. A 7% gap is about $2B of mystery costs they did.

I think the divisions profits are still around $2B. If they maintained 13%, it should be about $4B.

It’s Bungie costs

 

[schaft0620]

If Sony bought them tomorrow, it would take 10 years for this to have any impact on games. To me, I read this and go, "oh boy CBS is going to lose the NFL with the next TV deal." If that IS the case, Paramount will never have more value than it has today and its value will only go down.

 

[Oddvintagechap]

If Sony bought them tomorrow, it would take 10 years for this to have any impact on games. To me, I read this and go, "oh boy CBS is going to lose the NFL with the next TV deal." If that IS the case, Paramount will never have more value than it has today and its value will only go down.

Apollo would probably get CBS. Or Sony would sell it to a different streamer. Like Amazon. Since foreign companies can’t own a broadcaster.

 

[yurinka]

$300 million AAA budget games probably have something to do with that

Probably some part, but for margins to be cut in half from 13% to 6% at division sales of about $30 billion. A 7% gap is about $2B of mystery costs they did.

I think the divisions profits are still around $2B. If they maintained 13%, it should be about $4B.

It’s Bungie costs

We saw in the Sony leaks that Sony AAA games now will have $300-$400M budgets. We know they are working in around 30 first party titles. If all would be of these size, let's say $350, having 30 titles would be $10.5B. Considering nowadays AAA take 5-9 years to be made, let's assume an average of 7 years. That would be an average of around $1.5B/year. Add there mobile games + PC ports + 3rd party deals + PS Plus deals. They may be spending up to $2-3B in getting games, maybe around a 10% of their yearly revenue, not much.

In any case, SIE's profit has been increasing over years during the Jimbo era, until the post covid days. According to Totoki the main reasons of the profitability decrease was that they were still paying cost related to the (many) acquisitions they did in recent years, something that will ease out in the fiscal year that just started, and that unlike in previous generations the costs related to produce PS5 hardware increased over time instead of decreasing (due to big inflation+covid+rise of the AI and electric car markets).

He mentioned they'll aggresively tackle the profitability (as we saw firing around 1K people, shutting down Pixel Opus, London Studios and some games under development) also with doubling down on PC because it has a great ROI for them (we knew they'll continue porting old games and that had several GaaS titles announced to be released day one on PC).

 

[schaft0620]

Apollo would probably get CBS. Or Sony would sell it to a different streamer. Like Amazon. Since foreign companies can’t own a broadcaster.

I work in broadcasting and I have never heard of that, if its true they would just do it out of Sony pictures which is an American company.

You may be right I have no idea (I just never heard of that). I don't understand what would stop them from doing the same thing they do with SIE, which is an American company.

 

[BlazinAm]

I work in broadcasting and I have never heard of that, if its true they would just do it out of Sony pictures which is an American company.

You may be right I have no idea (I just never heard of that). I don't understand what would stop them from doing the same thing they do with SIE, which is an American company.

Rupert Murdoch has to give up his Australian citizenship in order to own TV stations.
FOX is both national and local broadcasting and a lot of those stations are owned by Fox Television Stations under FOX Corp, which is international but based in the US. I think that FCC relaxed the rules but this could be an issue with the current US administration. Sony TV is very much a US run operation and I don't see how this merger wouldn't change that.

 

[Neff]

They would own the IPs of Transformers, Teenage Mutant Ninja Turtles, Star Trek, and South Park. It's definitely gaming related.

The only one of those owned by Paramount is Star Trek.

 

[zedinen]

Sony really hates to invest in playstation like in their other devisions.

Game and ET&S are Sony Group's smallest segments by assets, and yet, G&NS accounts for 70% of Sony Group's free cash flow (FY22 reflects a temporary increase in working capital to ramp up PS5 production + acquisition of Bungie)

Yoshida and Totoki have created an internal capital market that punishes success (G&NS), rewards failure (weaker segments get subsidized by stronger ones), financial engineering, and diverts ever-increasing amounts of cash from productive investments which ultimately impairs Sony Group's ability to generate free cash flow.

FY20 ¥608.1 bn

FY21 ¥102.1 bn

FY22 -¥616.6 bn


Yoshida and Totoki are taking on debt (¥375 bn) to finance buybacks (¥199 bn) and dividends (¥98 bn).

Sony's stock lost ¥2 trillion in value after Totoki tried to avoid accountability by throwing SIE under the bus.

Totoki needs G&NS's free cash flows to save his own ass. Fortunately for him, Jim Ryan knew how to run G&NS.

Yes.

Problem is the profits arent growing despite top line sales doubling. Overall division profit margins have dropped from 13% to only 6% for two years in a row

Better find a new narrative.


Q4 Operating Income Forecast (before Helldivers II success)

G&NS ¥86 bn

Nintendo ¥46 bn


G&NS has low profit margins and high capital turnover because that is the fundamental essence of its long-term competitive advantage.

Probably some part, but for margins to be cut in half from 13% to 6% at division sales of about $30 billion. A 7% gap is about $2B of mystery costs they did.

There is no mystery.

FY22
19.1m PS5s sold at a loss
R&D ¥271 bn
D&A ¥87 bn
Retention incentives (Bungie) ¥54 bn

FY21
11.5m PS5 sold at a loss
R&D ¥175 bn
D&A ¥61 bn

It’s Bungie costs

SIE completed its purchase of Bungie for ¥347 bn in FY22.

Bungie didn't affect Sony's income statement, only its balance sheet and cash flow statement.

However, Sony allocated ¥162 bn to deferred payments to employee shareholders that are conditional upon their continuos employment. The deferred payments and other retention incentives (¥162 bn) will be expensed in FY22, FY23, FY24 ...

 

[Mr Moose]

https://www.wsj.com/business/deals/sony-apollo-make-26-billion-all-cash-offer-for-paramount-ade26ca4