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New 'Spider-Man' shows how far Sony has come from Walkman

Entertainment generates nearly 70% of profit at group facing calls for breakup

Sony's "Spider-Man: Far From Home" grossed well over $100 million on its opening weekend in mainland China, Japan and Hong Kong.   © Reuters

TOKYO -- The new Spider-Man film from Sony that swung into U.S. theaters Tuesday is the latest installment in a money-spinning franchise that illustrates how entertainment has become central to the group's performance.

The superhero's exploits not only sell movie tickets but also help drive other Sony businesses, such as video games.

The sequel comes as the company faces pressure from shareholders, notably Daniel Loeb's hedge fund Third Point, to spin off semiconductors and other businesses from an entertainment-centered core.

"Spider-Man: Far From Home" debuted last Friday in mainland China, Hong Kong and Japan, grossing a total of $111 million on its opening weekend, according to U.S. online magazine Deadline.

The movie, a sequel to 2017's "Spider-Man: Homecoming," took just three days to break 1 billion yen ($9.25 million) in box office revenue in Japan, seen as the threshold for a hit. "It was fun. I want to watch it again," said a Tokyo moviegoer.

Once known for electronics like the Walkman, which turns 40 this year, Sony is now arguably an entertainment company. Games, music and film, which together generated less than 30% of its sales in fiscal 2009, grew to account for nearly half of revenue and two-thirds of operating profit in fiscal 2018.

Spider-Man is among its most lucrative film properties. The six Spider-Man movies released between 2002 and 2017 brought in over $300 million each on average, more than six times the average for all Sony films, data from Box Office Mojo shows.

High expectations for the latest installment lie behind Sony's forecast of a roughly 20% rise in operating profit in its pictures segment for the fiscal year ending next March.

The superhero has been a breakout success for Sony's gaming business as well.

"Marvel's Spider-Man" for PlayStation 4 sold 9 million copies worldwide in less than three months after its September 2018 release. By comparison, the best-selling game in Japan last fiscal year was Nintendo's "Super Smash Bros. Ultimate" at 2.99 million units, according to gaming magazine Famitsu. Sony can further capitalize on this success with cartoons and merchandise.

Sony has not given up on electronics. Image sensors are a lucrative manufacturing line, and the company has set up a fund to invest in information technology startups.

But the continued ability of Sony' entertainment business to thrive depends on cultivating more franchises like Spider-Man that can succeed across different media.

Adapting successful games into movies is one option. Sony is working on a film based on the popular "Uncharted" series, featuring Spider-Man star Tom Holland as the protagonist, treasure hunter Nathan Drake.

Sony is also working to expand its intellectual property portfolio. Sony Music Entertainment (Japan) last year purchased a substantial stake in Peanuts Holdings, the company behind the Peanuts comic strip and the popular Snoopy character, which are especially big in Japan.

Yet despite Sony's increasing focus on entertainment, it remains a collection of diverse businesses, including banking, insurance, medical equipment, and broadband internet service.

Some of these parts have little synergy with each other, leaving Sony's stock price susceptible to the so-called conglomerate discount -- investors' tendency to dislike overly diversified groups. Shares are down 20% from their most recent peak last year.

This has spurred U.S. hedge fund Third Point to urge the company to spin off its semiconductor businesses and divest from its finance unit in order to unlock more value for shareholders.

But the conglomerate discount does not hit every company with a broad business portfolio. A representative from a Japanese brokerage argued that if other shareholders are swayed by Third Point's demands, it may be "simply because Sony's stock is in a slump" rather than because of any inherent merit in the proposal.

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