TOKYO -- Sony shocked the market on April 4 by announcing it has sold some of its stakes in Spotify Technology, which had listed its shares on the New York Stock Exchange the day before.
The Japanese electronics maker owned a 5.7% stake in the world's largest music streaming company and will post a profit of about 105 billion yen ($983 million), including valuation profit.
Sony bought a stake in Spotify in 2008, just after the U.S. company had launched its music streaming service. At the time, consumers were beginning to switch from CDs to music streaming in the U.S. and Apple was rapidly catching up with retail giant Walmart in music software sales.
When Spotify went public, Sony's stake was valued at nearly $1.3 billion, based on Monday's closing price of $150.
Howard Stringer, Sony's chairman and CEO at the time of the investment, was instrumental in forging the partnership with Spotify. The Welshman's background was in entertainment, having served as president of CBS in the United States, and he sought to instill a "content-is-king" approach when he took the helm of the Japanese electronics giant.
During his time at Sony, he was unable to put the company's home appliance business back on track and earnings remained sluggish. It is only now that the full effect of his tenure is being felt.
"I never expected Stringer's legacy to contribute to earnings like this," said a representative of a Japanese investment trust company said he had.
Spotify's market capitalization is nearing $ 27 billion, due to growth expectations as the world's biggest music streaming platform. Sony's music business, by comparison, is valued at roughly $ 10 billion by sum-of-the-parts valuation.
Yet, music has been positioned as an engine for the entire group. As intellectual property, content does not rely on technology that could become obsolete in the same way as products like home appliances, and is thus more likely to generate stable profits.
In 2016, the company spent more than 80 billion yen to make its U.S. unit Sony/ATV Music Publishing, the world's largest music publishing company, a wholly owned subsidiary.
Profit from the music business appear to have topped 100 billion yen for the past fiscal year. Music is underpinning Sony's overall entertainment business, as movies, which posted a considerable goodwill impairment, are yet to recover.
The company's strength lies in producing rich content. With many famous artists on its books, it is also a big asset to music streaming platforms like Spotify.
The music business is led by Stringer's younger brother Rob, CEO of Sony Music Entertainment.
Sony will use the profits from the sale to pay for artists and other expenses. Rob Stringer has said the company will continue investing in content, through expanding music catalogs and finding independent artists.
Strong content gives Sony an advantage in negotiations with platforms like Spotify. Market attention will now be focused on the company's midterm management plan, which starts this fiscal year, and whether Rob Stringer can reap the rewards of what his brother started.
