Sony Streamlines, Unifies U.S. Entertainment Assets

Sony Corp., the world’s second-largest maker of consumer electronics, is unifying its U.S. entertainment assets under a new banner to make it easier to form alliances, make acquisitions and broaden the distribution of its content on the Internet.

Expanding on existing e-commerce initiatives in Japan, the company also is forming an online bank with J.P. Morgan & Co. and Sakura Bank Ltd. that will target individual depositors and sell loans and other retail banking services to the Japanese public.

At the same time, Sony President and Chief Executive Nobuyuki Idei elevated several executives in what analysts say is the first signal of a succession plan.

The company moved into the No. 2 position Kunitake Ando, formerly president of Personal IT Network Co.

Idei discussed the company’s plans for the year 2000 at a news conference in Tokyo that marked the end of its fiscal year.

The moves come as Sony looks to position itself at the center of the Internet revolution as both a content supplier and electronics manufacturer. The centerpiece of that vision is Sony’s PlayStation video-game console, which it eventually plans to equip with a hard drive, modem and keyboard, allowing it to become the means through which many homes connect to the Internet.

The device would enable Sony to bypass “gatekeepers” such as cable operators that have deterred the company’s content distribution efforts in the U.S.

Sony said it expects to have shipped 1.4 million PlayStation 2s in Japan in the just-ending fiscal year, and 4 million in the new one. In the U.S. and Europe, where the device will be released later this year, Sony expects to ship 6 million units through March 2001.

Combining Sony Pictures Entertainment and Sony Music Entertainment under a new holding company called Sony Broadband Entertainment Inc. will streamline the businesses and enhance the distribution of content through various pipelines, including wireless devices, analysts said.

The group will be one of two units, along with Sony Electronics Inc., within Sony Corp. of America, the U.S. subsidiary that is run by Chairman and Chief Executive Howard Stringer, who will also head Sony Broadband.

The company said it may link the new unit with partners. Analysts said the move could also presage a long-anticipated spinoff of the entertainment assets by Sony. “You can’t just look at music or games or film really separately anymore. It’s content, and that all has to be adapted toward the broadband world,” said Barry Hyman, analyst at Ehrenkrantz King Nussbaum Inc. in New York.

Sony’s American depositary receipts leaped $13.06 to close $268.50 in New York Stock Exchange trading. Each ADR represents one ordinary share. In Tokyo, Sony shares rose 5.6% Thursday for a 10% gain in the last two days.

In online banking, Sony is betting it can use its widely known brand, together with the financial expertise of J.P. Morgan and Sakura, to expand into a new market. Sony said it expects the online bank to be profitable within three years.

The partners plan to apply for a banking license and to attract $10 billion in deposits in five years.

Sony also said it may sell shares in its Internet unit, Sony Communication Network Corp., to the public.

Earlier this month, Sony said its Internet unit would join with discount travel agency H.I.S. Co. in Japan to develop a Web site for buying airline tickets and booking vacations. The move underscored Sony’s efforts to expand its So-net Internet operations, an online service provider with 1.2 million subscribers.

The company also said it will join with Toyota Motor Corp., and Tokyu Corp. to develop a high-speed data network in Japan for electronic commerce and entertainment. That joint venture will launch a test service in May.