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EMERGING MARKETS. Draft as of. 22 . Sept 2010. Emerging markets are a key area of growth for Sony Pictures, as they will outpace growth in established markets. Anticipated media and entertainment spending CAGR (’10-’14).

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Presentation on theme: "September 30, 2010 SONY PICTURES ENTERTAINMENT"— Presentation transcript:


September 30, 2010



Draft as of


Sept 2010


Emerging markets are a key area of growth for Sony Pictures, as they will outpace growth in established markets

Anticipated media and entertainment spending CAGR (’10-’14)


Latin America 8.8% (Brazil: 8.7%)Asia Pacific 6.3% (China: 12.0%; India: 11.8%)

North America 3.9%Europe/Middle East 4.6% (Russia: 9.3%)SPE has an established presence in many of these markets

However, business conditions vary from market to market and thus, each territory requires a tailored approach



Source: 1 PricewaterhouseCoopers, Global entertainment and media outlook: 2010-2014


TV Networks

Overall Opportunity

Market Level Considerations

SPE Approach

Emerging markets are a key element to the growth of SPT's Networks business with existing operations in multiple emerging markets and further expansion plans

SPE has successfully established a presence in each of the following territories

India: Very strong presence with a suite of four channels and ownership of a major distribution operation;

SPE also holds rights to IPL,

the number one sports property in India

Latin America: SET and AXN Latin America were the two highest EBIT contributors to the SPT network portfolio in FY10

Central and Eastern Europe: Number one ad sales operation in Europe with particular success in

Poland, where AXN also recently

voted the number one channel in

the market

Korea: Animax is an established channel in the region and SPT will soon launch a new fully localized AXNRussia: Two channels launched in last 18 months

Continue expanding through startup operations or local acquisitions

Launch a Korean programming based service across Asia (SET One)

Further expand across India through regional channels

Move into the Turkish and Greek markets


TV Production

Overall Opportunity

Market Level Considerations

SPE Approach

While international expansion priority is

UK, emerging markets provide growth potential

UK is the leading

market for light entertainment format origination and internationally marketable scripted seriesUS and

major European markets

drive production business volume and


Emerging markets enhance growth rate and profitability

SPE has an established local TV production presence in each of the following countries/regions

Latin America: Leading independent producer

with highest market share; local production presence in Colombia and Brazil; regional format and completed program sales as well as original local language productions through operations in MiamiRussia: Leading local producer with Lean-M JV; local operations also distribute formats and completed programs in Russia, Ukraine and other CIS territories

Middle East: Local scripted and non-scripted production operations for pan-regional and local broadcasters in UAE, Lebanon and Egypt

China: Only western company with local production operations; Huaso JV produces original local language shows and remakes of US formats such as Dr. Oz; SPT format and program sales in China and Asia region through operations in Hong Kong

Pursue immediate expansion opportunities including:

Russia/CIS: Strengthen/expand genres in Russia and extend local productions to Ukraine

Poland: Build production presence through JVs with top local producers

India: Capitalize on strong market growth and leverage significant networks presence


Theatrical Releasing

Overall Opportunity

Market Level Considerations

SPE Approach

International box office is increasingly important, but not all emerging markets are financially attractive

Many U.S. titles travel well but certain genres, such as urban and domestic comedies, do not necessarily appeal to local audiences

Price points in emerging markets are a fraction of those in developed markets

Foreign titles often scheduled so they do not compete with local product; local titles are increasingly gaining favor with local audiences

Lack of automated and transparent tracking/reporting systems can result in fraud

Within BRIC, real challenges in Russia and China; India a price/volume trade-off

China: import quotas allow only 20 foreign films per year; local titles receive preferential treatment when competing for screens; retention rates are low (e.g., 2012 titles – 18%; Spider-Man 3 – 15%)

Russia: widespread under-reporting of box office figures with government considering automated system

India: average ticket price is $.50, but large/growing admissions make up for low price point

Constantly re-evaluating nature of presence in each market to determine whether scale justifies cost of overhead

Local presence in 22 branches, where investment in infrastructure yields returns

55 sub-distribution deals where the cost of building infrastructure outweighs the cost of being in business


Local Film Production

Market Level Considerations

SPE Approach

Industry-wide film production is growing in emerging markets based on strength of international box office, but profits have been limited and dependent on key market characteristics:

Availability of financingState of infrastructure for releasing

Government programs to limit (e.g., quotas) or give financial incentives (e.g., tax credits)

Necessity of local partnerships to gain access to markets or ensure content relevance

Russia and China present challenges

Russia: Productions decreased from 220 in 2008 to 101 in 2009 due to limited funding

China: Productions have grown from 91 in 2000 to 456 in 2009 but many going direct-to- video due to an insufficient number of modern screens

Brazil presents opportunities: productions increased from 35 in 2000 to 94 in 2009 due to favorable tax incentives and sector funds

Expect overall investment and growth in local language production to remain limited

Maintain local film production presence in existing international markets, both established and emerging

Currently have three productions in Germany and four in Russia

Have produced >20 films in Brazil since 2003 due to favorable tax incentives

Pursue co-productions in countries with high barriers to entry

Collaborate with local filmmakers where appropriate

Overall Opportunity


Home Entertainment

Overall Opportunity

Market Level Considerations

SPE Approach

Emerging markets represent a growth opportunity for Home Entertainment over the next three years but must be carefully managed given the challenges

Many emerging markets have both the greatest growth potential and the greatest risk from piracy

Coordinated cross-Sony approach is particularly important for Home Entertainment given the retail nature of the product

Within the BRIC nations, specifically:

Brazil and Russia are higher margin (driven by higher price points and


-ray appetite), and higher growth with historically heavy piracy now declining

India and China are lower margin, lower growth territories and have retail infrastructure challenges; however, greater digital opportunities exist

BRIC is not the only growth opportunity; SPHE leverages licensees in 30+ countries for marketing and distribution

Coordinated cross-Sony approach

in BRIC countriesDevelop digital models for PSN/Qriocity

New retail marketing opportunities including bundles with Sony Electronics

Review joint Sony Music/DADC proposal to expand SPHE’s retail and physical footprint (China)

Explore opportunities to expand cross-Sony approach to other markets

Other collaboration opportunities with third parties


with a local distributor (China, Russia) and combine personnel (Russia)

JV with other studios for benefits of scale


Coordinated cross-Sony strategy in emerging markets

SPE collaborates with its sister companies in their respective territories; initiatives to date have been most compatible with home entertainment

Co-promotion:SPE content featured on SEL/SCE devices and packaging at retail locations and in advertising

SPE contests and give-aways (e.g., premiere tickets used to drive hardware sales)

Joint presence at local consumer electronics showsSony United loyalty program inserting coupons for Sony content in hardware packaging and vice-versaProduct bundling: Home entertainment products (e.g., BDs and 3D BDs) bundled with electronics and PS3sLeveraging retail footprint: SPE content displayed outside and inside Sony storesSPE sees additional opportunities for collaboration with other Sony companies

Extend bundling initiatives to digital content (e.g., Sony MC or USB sold with special code for a digital movie download)

Potentially formalize the best-practice cross-Sony approaches taking place in key markets today (e.g., Russia and Brazil) and export it to additional key territories (e.g., Australia)




Importance of emerging markets varies by business line

TV networks have significant presence in emerging markets and are less exposed to piracy and regulatory challenges

TV production is similarly positioned with presence in multiple emerging marketsMotion picture releasing opportunities vary more market-to-market, depending on ticket prices, rentals, and the impact of piracy

Opportunities for local film production are more limited, particularly in countries with poor distribution infrastructure or lower demand for film contentHome entertainment has presence and opportunity in emerging markets, but must balance growth potential with the threat of piracy

Each territory also has nuances to navigateBrazil / Latin America : Growth for most SPE businesses with relatively high price pointsRussia: A growth market for home entertainment and TV, but theatrical market less attractive as local productions decrease and box office reporting remains unregulatedIndia: Opportunity for local TV production on the back of SPE’s existing TV networks; challenges with physical retail infrastructure suggests greater opportunity in digital home entertainment

China: Piracy, regulation and infrastructure severely limit western media and entertainment opportunities, although SPE has seen some success in it’s TV production JV



Notes: 1. Source: PwC Global Entertainment and Media Outlook 2010-2014

Includes box office and home entertainment revenues