Sony warns investors to expect a poor financial year, much worse than expected. One of the primary reasons is that sales of DVD and Blu-ray movies are falling faster than expected. Sony no longer believes that physical media can grow.
Physical media is dying
Sony has been forced to cut their expectation for operating income from previously 80 billion yen (0.78$b USD) to 26 billion yen ($0.25b USD). There are two reasons for this; higher expenses from the PC exit; and falling sales from physical media.
DVD was a huge success for the industry and saw widespread adoption, but Blu-ray has never been a hit in the mainstream market. DVD sales have fallen for some time and the trend has accelerated in recent years, but instead of moving to Blu-ray consumers have embraced streaming services such as iTunes, Netflix and local online movie rental services. Sony writes; ”primarily due to demand for physical media contracting faster than anticipated, mainly in the European region".
Sony also writes that they no longer believe that the disc business will ”generate sufficient cash flow in the future to recover the carrying amount of long-lived assets ". Sony makes it clear that the future for optical discs is not looking bright, and they have been forced to take a 25 billion yen ($2.45b USD) impairment charge on the assets.
Blu-ray is the successor to DVD. After a short-lived format was with Toshiba’s HD DVD, Blu-ray won, but the format has never lived up the expectations of the industry, despite massive investments by Sony.