索尼 (SONY) 2005 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to the Sony earnings call for the fiscal year ended March 2006. My name is Michelle and I will be your coordinator for today. [OPERATOR INSTRUCTIONS] I would now like to turn the presentation over to your host for today's call, Mr. Jonathan Bates with Sony Investor Relations in Tokyo. Please proceed, sir.

Thank you very much for that introduction, Michelle, and thank you all for joining us today, April 27th, 2006 for the discussion of Sony's results for the fiscal year ending March 31st, 2006. I'm Jonathan Bates with Sony Investor Relations in Tokyo. We're joined this evening by Takao Yuhara, Corporate Executive and SVP Investor Relations, Sony Corporation and by Robert Weisenthal, Group Executive in charge of Corporate Development and M&A, Sony Corporation, EVP and CFO, Sony Corporation of America. Thank you very much for joining us today, Mr. Yuhara and Mr. Weisenthal.

This is Yuhara. I'm very pleased to have a meeting with you [inaudible-highly accented language]. Thank you.

Hello. It's is Rob Weisenthal, and we look forward to talking to you about our results and our forecast.

Thank you again for joining us today, Mr. Yuhara and Mr. Weisenthal. In just a few moments, I'm going to give a brief summary of today's announcement. Then Mr. Yuhara and Mr. Weisenthal will be available to answer your questions. Please be aware that statements made during the following remarks and the Q&A session with respect to Sony's current plans, estimates, strategies, and release, and other statements that are not historical facts are forward-looking statements about the future performance of Sony. These statements are based upon management's assumptions in light of the information currently available to it. And therefore, we should not place undue reliance on them.

Sony cautions you that a number of important factors could cause actual results to differ materially from those disclosed in the forward-looking statements. For additional information as to risks and uncertainties, as well as other factors that could cause actual results to differ, please refer to today's press release which can be accessed by choosing Investor Relations at the bottom of the page at www.-- [technical difficulties] With that, I'm going to turn to today's announcements.

We are pleased to announce that since last reporting to you in January, our positive momentum has continued, and our actual results for fiscal year ended March 31st, 2006 have exceeded our January forecast. Consolidated sales for the year were 7.4754 trillion yen, an increase of 4.4% year-on-year, and consolidated operating income was 191.3 billion yen, an increase of 67.9% year-on-year. Income before income taxes increased 82.1% year-on-year to 286.3 billion yen. We recorded extraordinary gains from the listing of [technical difficulties] Communications Network Corporation from the sale of half of our stock in Monex Beans Holdings and from DNA.

Net income in equity affiliates decreased 54.6% year-on-year to 13.2 billion yen. While Sony Ericsson and Sony BMG made positive contributions, we incurred a loss from MGM and from SLCD. It should be noted, however, that SLCD was able to turn a profit in the second half of the fiscal year. Due to the drop in net income of equity affiliates and a higher than normal tax rate, resulting from the recording of additional valuation allowances on deferred tax assets, of certain entities and reserves taken for undistributed earnings at certain subsidiaries, net income decreased 24.5% to 123.6 billion yen.

In comparison to our January forecast, the 191.3 billion yen consolidated operating income figure was approximately 90 billion yen higher. All of our business segments outperformed expectations, except for game. Electronics and financial services exceeded expectations by approximately 60 billion yen and 50 billion yen respectively.

The improvement in electronics resulted from improved sales of LCD TVs and better yields and lower R&D expenses in semiconductors. The broadcast and professional equipment business also performed better than expectations. Financial services improved primarily because of higher valuation gains and gains from the sale of stock in the general account due to favorable stock market conditions. On the other hand, operating income for game was below forecast by approximately 20 billion yen, due to the recording of charges related to the preparation for the launch for PS3 incurred at fiscal year-end.

Before disclosing our forecast -- before discussing our forecast, please let me touch very briefly on the actual results for each segment. Sales in the electronics segment increased 2% year-on-year. On a local currency basis, sales were down 3%. Operating loss for the segment improved 3.3 billion yen to 30.9 billion yen. Operating income of our audio/video, televisions and information and communications categories increased 25.5 billion yen, as profit from camcorders, VAIO PCs and broadcast and professional equipment increased. Although LCD TV losses increased on a four-year basis, profitability of these TVs improved in Q3 and Q4. This occurred as a result of cost reductions, enhanced product appeal from the launch of BRAVIA and a shift to large-screen models.

Operating loss in our semiconductor and components categories expanded 26.3 billion, due to decreased profitability of image sensors, which experienced price declines, and decreased profitability of low-temperature LCD panels, which incurred start-up costs for a new manufacturing facility and decreased sales.

Sales in the game segment increased 31% year-on-year, due to the expansion of the PSP platform in all regions and the continued strength of PS2. As a result, operating income from these two businesses reached more than 60 billion yen, exceeding that of the previous year. However, due to the recording of more than 50 billion yen, in year-end, PS3-related expenses, operating income for the segment decreased 80% year-on-year to 8.7 billion yen. These expenses included one, a PS3 hardware-related reserve, two, accelerated R&D investments for the PS3 and three, PS3 development tool-related expenses.

Sales in the Pictures segment increased 2% year-on-year. On the U.S. dollar basis, sales were down 4%. U.S. dollar sales decreased as worldwide theatrical and home entertainment revenue declined, primarily due to a difficult comparison with the previous year, in which "Spider-Man 2" was released. The decrease in sales led to a decrease of 57% in operating income for the segment to 27.4 billion yen. Operating income in the financial services segment increased over three-fold to 188.3 billion yen, primarily due to significant valuation gains recorded on convertible bonds in the general account at Sony Life, due to the favorable Japanese stock market.

I will now turn to our forecast. In the fiscal year ending March 2007, we are expecting a significant improvement in the operating performance of the electronics segment. The operating income of the Pictures segment should also improve. Due to the recording of a loss in the game segment, however, and a decline in the operating income of the financial services segment, overall consolidated operating income is expected to decrease 48% year-on-year to 100 billion yen.

On the other hand, net income from equity affiliates is expected to improve significantly to 40 billion yen. Earnings performance at such equity affiliates as Sony Ericsson, Sony BMG, and SLCD all should experience an improvement. As a result, we expect to achieve an increase in net income despite lower operating income year-on-year.

In the forecast for each segment is as follows -- In the electronics segment, sales should increase more than 10% due to the strength of BRAVIA LCD TVs and sales of semiconductors, including those for use within the game segment. The operating income margin pre-restructuring expenses should be over 2%.

In the game segment, we view the fiscal year ending March 2007 as a time to invest in our new game platform. As a result, we expect to record a large operating loss associated with the launch of PS3. However, after launching PS3, we aim to expand sales as rapidly as possible, reduce manufacturing costs by reducing the number of hardware parts, and reduce the costs of semiconductors and other key components. By doing so, just as we are able to do with the PS2, we aim to bring the PS3 business to profitability at the earliest possible time.

In the Pictures segment, "The DaVinci Code," "Casino Royale," and "Open Season," our first full computer graphic animation feature film, should also help to increase sales and profit. In the financial services segment during the fiscal year ended March 2006, valuation gains on convertible bonds in the general account, resulting from the rise in the stock market, contributed approximately 85 billion yen to earnings. When making our forecasts, however, we never assume valuation gains or losses. And since we have been conservative in our estimates for proceeds from the sale of assets, sales and operating income as a segment are expected to decline.

Lastly, I would like to report to you that our restructuring efforts as outlined in the corporate strategy meeting in September of last year, are on track. For an update regarding these efforts, please refer to the Sony Investor Relations website. With that, I would like to turn things over to Yuhara-san and Rob for the QA.

Okay, thank you.

Operator, we are ready to start the question-and-answer session.

Thank you, sir. [OPERATOR INSTRUCTIONS] And our first question comes from the line of William Drewry of Credit Suisse First Boston. Please proceed.

Hi. Thank you very much. Just two questions. Wondering, first off, if you can just update us on -- on the number of units that you're projecting for -- for PS3, if you could just reconfirm your targets there? If you -- if you already mentioned that, I apologize, we dropped off for a moment, but if you could just talk about that. And than also, maybe Rob, if you could talk about trends in the film and entertainment business, any DVD trend that you care to update us on? And how the outlook for the film slate is for the fiscal '07? Thank you.

Yes, I'd answer the first question. Talking about the forecast of the PS, then at this point in time we just predicted the -- 6 million units of shipment by the end of March 2007 -- then I don't [inaudible-highly accented language] as you know the beginning of November, simultaneously in the worldwide market. So, so far, this plan is unchanged, and we are proceeding with the necessary preparations of launch coming in November.

Hi, Bill. With respect to Sony Pictures, we're very excited about the film slate for the upcoming year. Obviously it kicks off with -- in terms of large films of "The DaVinci Code" on May 19, "Click" with Adam Sandler, and then "Talladega Nights" in the summer, then our first major animated CG release, "Open Season," and then wrapping up the holidays with "Casino Royale" with Daniel Craig as the new James Bond installment, which was done in conjunction with MGM, "The Pursuit of Happyness" with Will Smith and "The Holiday" which is the new Nancy Meyers project. So, with respect to current film production, I think we've -- we are -- feel very good about it. It's a very strong slate.

With respect to the comments on the DVD market, the DVD market seems to be holding, obviously there's been significant pricing pressure with respect to catalog, and it's obviously very sensitive to new releases, and we all look forward to the upcoming introduction of Blu-ray to hopefully enjoy another cycle of the key titles in our library.

Thank you very much for that answer, Mr. Yuhara and Rob. Operator, with that we'd like to go to our next live question.

Thank you, sir, and our next question comes from the line of Daniel Ernst of Hudson Square Research. Please proceed, sir.

Thanks for taking my call. Two questions, if I might, looking actually at the TV division, in the quarter you just reported, you assigned 63 billion of the restructuring charges to the electronics group. Can you give me a sense of what percentage of that 63 billion yen, sorry, equates to the TV division?

And then second question, of your 6 million unit forecast for the LCD, for the next fiscal year, what percentage of that do you think you will be able to source from SLCD, and what do you have to go outside of SLCD, and then what is roughly the margin delta between the panels you're sourcing -- or TVs you're sourcing from panels inside of Samsung LCD versus the ones where you have to go outside? Thanks.

Okay. This 63 billion yen of restructuring in electronics in the Q4 is mainly the -- from the early retirement fees, during this time. And -- which is incurred in -- in the Japan, the Sony Corporation, and those were overseas, the service and marketing organization. So, therefore, this is not directly related to the percentage with the TV business.

Second question is you mentioned the LCD panels are over 6 million which is around 50,000 the panel is sourced from SLCD. The rest of the 50,000 would be supplied from the Samsung [second G – second] you know, the generation nine and those are other -- the suppliers. So, in this sense the -- when SLCD will supply the LCD panels, they will transfer to both Sony and Samsung, and cost base in some reasonable margins. So, therefore, the [while that] other supplier, we the -- supply this panel at the market price base. So, therefore, I assume that the SLCD panel would give us a better, [inaudible-highly accented language] price compared to the other supplier.

Thank you very much for that answer, Mr. Yuhara. Operator, we'd like to go to another live call, please.

Thank you, sir. And our next question comes from the line of Russell Robles-Thome of Walter Scott and Partners. Please proceed, sir.

Hello. I wonder if you could comment on the quarter four performance of the PSP shipments and the PS2 shipments. They do seem to me to be a little light.

Your question is about the shipments of PSP and PS2 for the fourth quarter, right?

Yep.

Okay.

Just a moment, Russell. I'm just checking that the quantities -- In the fourth quarter, the shipment of PSPs are around 2 million -- 2million units. And the shipment for the PS2s is 2.3 million units. So, that is the actual quantities. Is that all right, Russell?

Yeah, I managed the arithmetic. I just wondered if you could say whether you felt that those were on target or whether they were ahead of your expectations for the quarter? Or if they are a bit light, what might be causing them to be a little light?

Yes, although this fourth quarter is rather quiet - the quarter, then, as you know, we have announced that the -- the pricing direction on PS2 in North America. And also, we are just the -- release of the two basic models of PSP with EUR199. So those will give us a further increase of our sales. Although this is a -- the first quarter, particularly. So, we are planning to have a [inaudible-heavily accented language] the promotion to the increase our sales quantities of those two models.

Thank you very much, Mr. Yuhara. At the moment, I'd like to move to a couple of e-mail questions, if we may. The first question is about the platform -- actually, the online platform for the PS3. The question is how difficult do you expect new revenue streams to be to Sony's PlayStation business in the next platform cycle?

It's Rob Weisenthal. And I see we have a large amount of game analysts on the phone today. As many of you know, multiplayer online games is a very important part of the console game business, and it's something we take extremely seriously, so, it was very critical in the development of PS3, and early in the process of the development, there was a very strong collaboration between Sony Computer Entertainment and Sony Online Entertainment division of Sony Pictures. Sony Online Entertainment was a pioneer in the online game business.

Right now they have about 680,000 active accounts across a number of games such as EverQuest, Star Wars Galaxy, Planetside and very successful, and a company that's always been working very closely with SCE. So, I think that PlayStation 3, right at -- from launch, should have a fairly strong availability of online gaming capability and the kind of revenue streams that you're talking about that is in-game advertising, that's obviously going to play a role.

Thank you very much for that answer, Rob. With that, operator, we'd like to go to another live call, please.

And our next question comes from the line of Mark Stahlman of Caris and Company. Please proceed, sir.

Yes, hi, thanks. Two questions, actually. First, could you help me to understand the basic road map for semiconductor production in the PS3? I think the current Sony-Toshiba plant is at 90 nanometers, and there was some discussion on the Japanese call about 65-nanometer strength and then eventually a 40 or 45 nanometer strength. What's roughly the timing for that? And then second question is I'd like to understand how sort of R&D budgeting is handled within Sony. Is there any sort of centralization of that? Does anybody own the overall R&D budget? How are priorities set, and how would the rationalizations of R&D in Sony be going?

First, the concerning about semiconductors for the PlayStation 3s, as you know, although we have already, installed the 65-nanometers, the semiconductor line for this console. However, to start with, we are going to use this line at the 90-nanometer embodiment. And then, we like to make a -- shrink the designs for this semiconductor, and it is going to use this 60-nanometers embodiment as soon as possible.

For the next steps, talking about the 45 nanometers, and at we have just started R&D activities jointly with the other companies such as Toshiba and IBM, and at this moment, it is very -- too early to say when it's available for this line, for the mass production so far. Obviously 65 nanometer embodiment is very, very important and critical for the PlayStation 3. R&D is budgeting and as you know, we announce how much we spend on the R&D from time to time. And then, biggest part is electronic [inaudible-highly accented language] which is -- the centralized, under the one person, as a corporate R&D. And those are each -- the business group has R&D of the $0.06 for the immediate, -- the future products. So, those mixture is important.

Then eventually those -- the R&D activity -- the centralized to the [inaudible-highly accented language], as Ericsson's [CEO]. So that is what we are just the -- proceeding with this. As for the game business, as you know, this is independent and unique to the – under Sony Computer Entertainment. Both on the software development and on the hardware or semiconductor [inaudible-highly accented language] development [inaudible-highly accented language].

Thank you very much for that answer Mr. Yuhara. And thank you very much for your questions today, Mark, as well. With that, we'd like to go to another live call. Operator?

And our next question comes from the line of Evan Wilson of Pacific Crest. Please proceed, sir.

Hi there, good morning. Thanks for taking the question. Two quick ones, and then a follow-up. First. Could you give us some detail on the improvement in the margins for the TV business, especially relative to LCD TVs, and where you would expect margin to finish this current fiscal year? Secondly, when would you expect to have stand-alone Blu-ray hardware in the market? And would that be followed on with the content of MGM and Sony Pictures at the same time? Just a little detail on the rollout plans there.

And then finally, on the PSP, the forecast for the fiscal year of 12 million units, was that lower than you originally forecast? It's your first game business to have a decline in terms of unit sales in the second full year of release? I think it's different than a number of people's expectations. So, if you could address that please, thanks.

I would answer -- The LCD TV for -- this year, I mean, are you talking about the fiscal year 2006 or the last year?

This -- the current year, fiscal 2006.

2006. As you know, the 2005 LCD TV was the increase in sales, but, the currently they are an operating loss. And then, in the 2006, we planned to make operating profit in the second half of fiscal year 2006 by increasing the number of -- the quantities,- [inaudible-highly accented language] -- or cost down [inaudible-highly accented language]. And also, we make it, the ideal size of LCD TVs in this product mix. So, therefore although [the price is eroded], 20 or 30,000 on the LCD TVs, and still we are confident to make the full operating profit in particularly second half of 2006.

With respect to Blu-ray, there's a target of July 2006 for the first stand-alone Blu-ray DVD players at a price of $999 has been announced. There would also be concurrently a VAIO with the Blu-ray drive about roughly the same price range. With respect to content, we expect about -- probably about 20 titles available launch, and each month there will be some incremental titles, and that will be accelerated, obviously, and we, obviously, hope and expect that the pricing of those discs will enjoy strength in the marketplace as they add significant value to the consumer beyond what is available to current standard definition.

And you should also expect a lot of coordination with respect to other partners, retail partners in the mass market, to really make for an effective launch, and we're also going to be exploring a lot of synergy opportunities with PlayStation 3, with respect to bundling and -- on the electronic side, in terms of the pure play players, as well, leveraging both the content and the hardware. So, it's a very exciting time for us.

Okay. The last question from you about PSP, the forecast quantity of 12 million this year. As you know, the -- [inaudible-highly accented language] -- we just -- the start-up of PSP quantity at 12 million and eventually we have shipped more than 14 -- 14 million units for last year. So as fiscal year '05 we just, set the forecast of this 12 million, same quantity as last year. It could be maybe conservative. We tried to achieve more than 12 million the unit of sales, for this PSP in this year, as well.

Thank you very much for your call today. Next, we'd like to go to another live question, operator.

And our next question comes from the line of Jason Mauricio of Arete. Please proceed, sir.

[inaudible-background noise] Hello? Two quick questions, please. First, have you disclosed yet percent of --

Operator, we seem to be having trouble with the connection right now. Can you hear us?

Hello? Can you hear me better now?

Mr. Bates, I am able to hear you, sir.

Hello?

Okay, with that, we'd like to go to an e-mail question. The next e-mail question is about the impact on sales of the PSP and PS2 following the recent price cuts in North America.

Okay. Yes, that's right. We did announce that price cut of PS2, $20 or around 13% deduction, price deduction in the North America, but this will be effective from this week in April. So, therefore, so far we don't get information. I hope this will be very, very positive news both in the U.S the software company as well as the distributions -- dealers, if you like. As for the PSP, we have announced to release the base model at the $199 or euro, both in the United States and Europe. This was effective from the end of March -- actually last month. And I have heard that this was well accepted, and our selling quantity increased from both regions.

Thank you very much for that answer, Mr. Yuhara. Operator?

Yes, sir. And our next question --

Operator, we'd like to go to another live question, but I think we're still having a bit of difficulty with the connection here in Tokyo.

Are you able to hear me, Mr. Bates?

Can you hear us?

Yes, sir. Sir, are you able to hear me?

We can hear you now. That's great.

Great, sir. The next question comes from the line of [Taizo Ushida] of Wellington Management. Please proceed.

Hello, Yuhara-san.

Yes. How are you?

Pretty good. The question is about semiconductor revenue forecast for next year, actually this year, looks like a huge increase from 490 billion to 790 billion. The 300 billion, incremental revenue growth. Where does the growth come from? All from PS3 [inaudible-highly accented language] or anything else?

Yes the majority, most majorities are coming from the new demand, which is the PS3 chipset. Of course Sony is not only making the [sale] chipset and also, the other – the semiconductor for PS3 and second reason is, as you know, we are increasing capacity of imaging device, primarily the CMOS, and those [inaudible-highly accented language] the services increase. You know, the main cause of this increase is PS3 directed semiconductor sales.

Okay. Another question on the PSP. It looks like a lot of people are pointing out, a little light so, what was the management expectation in Q4?

Q4?

Right, or the annual -- it came at 14 million units for the year and expecting 12 million next year, right?

Right.

So, I was thinking more like 15 or maybe close to maybe 20? So, just looking at the trend, is it sort of the good news or bad news?

Well, you know, the -- this -- I also had a discussion with Sony Computer Entertainment people on this quantity. As I mentioned, that previous questions and [inaudible-highly accented language] on the conservative side of the [inaudible-highly accented language] and then they are definitely looking at to increase the [actual] shipment quantity more than the [inaudible-highly accented language] So, at this point in time, it's very difficult to say for next 12 months, but please look at this as a rather conservative quantity as a forecast.

Okay, thank you very much.

Thank you very much. Operator?

And our next question, sir, comes from the line of Greg Norton-Kidd of Omega Advisors. Please proceed.

Good evening. My question is about the profitability of the game division as we go through the transition from PS2 to PS3. Normally this results in quite large losses. I'm just wondering if you can describe as best you can how you expect the -- both the size of these losses and also the duration of these losses to compare to the previous cycle. To give you some context, I don't have the numbers in front of me, but if I recall correctly with the PS2 transition, in total, the game division I think lost money for about a year and a half, and over that period, the total cumulative losses were roughly 200 billion yen.

Yes, on this PS3, we are considering the year 2006 is our investment period for PS2 -- PS3 to develop their platform as quickly as possible. Then start with, as you know, that there are -- they put a lot of new technology and particularly new devices. And so therefore, at this point in time, there is a negative – the margins under the current -- of our forecast condition. Then thing is, this is the same business model as the PS2, and then we are going to make every effort to reduce the manufacturing cost with those quantities, and then we are just aiming the same length of quarters for PS3 to make positive margins as PS3 whole business.

Thank you very much, Yuhara-san.

Sorry, could -- could I just ask some follow-up questions? I don't think that actually answered my question at all.

Just one more follow-up question if that's okay.

So, could you -- specifically, would you expect the PS3-related start-up losses to be more or less than the 200 billion yen for PS2 and secondly, the duration of the losses of approximately 18 months last time, would you expect that to be more or less this time around, and also, last time I do not recall you taking up-front losses as you've done this quarter, nine months ahead of the launch of the new platform. Is that a -- something of a -- accounting front-loading of costs?

Well, you know, the -- on this the start-up loss are concerning -- concerned and I -- I'm not discussing so much the detail by platform, but in the total as, a game segment for fiscal year 2006, we are anticipating the more than $100 billion under the current conditions. And then for this PS3, as I mentioned that, we are just aiming the same trend of recovery as we did at the PS2 year 2000 -- 2001. What is your last question?

Greg, would you mind repeating your last question, please?

And sir, his line has currently went on mute. Would you like to take the next audio question?

Yes, and I think we'd like to make the next question our last question today, if that's okay.

Okay, great, sir. And the next question comes from the line of Luc Mouzon of BNP. Please proceed.

Hi, good morning -- or let's say good afternoon on my side. Could you please just come back on this target you got for the 4% operating margin in electronics in general. Could you be maybe more precise about this schedule, and will you try to get that target reached by next year, I will say? And do you expect further losses coming from the restructuring of year two operation and what could be the duration for the completion for the termination of [this year's] operation? Is that, again, one year or two years ahead of us?

On this target, the operating margin for 4% in the fiscal year 2007. Before that, as you know, this year, we are anticipating the electronic business [gross] margin will be over 2%. So, the 4% I will say this [inaudible-highly accented language] recovery toward the 4% for the year 2007 is on track. So, because of the good contribution [and recovery] from TV business and those, the semiconductor business, which we invested, the big amount of money for this, So...

I think you've seen in the materials that have been provided, the structural reform progress report and the tracking that states the goals and also states our reduction year by year and quarter by quarter and we're on track to the original plan. Okay.

Thank you very much.

Thank you very much. Operator, I think we have one last caller on the line.

Thank you, sir. And our last audio question comes from the line of Jason Mauricio of Arete. Please proceed, sir.

Operator --

And our last audio question, sir, comes from the line of Jason Mauricio of Arete. Please proceed sir.

Can you hear me now?

Yes, we can hear you.

Great. Two quick questions, one, have you disclosed a percent of internal parts for the PlayStation 3 as it comes out, at least on launch? And second, maybe one for Rob on the media industry as a whole. There's plenty of opportunities coming for you to maximize revenue in your back catalog, whether it's IPTV or video-on-demand, Blu-ray, mobile video, location-free TV. Can you maybe talk through some of the priorities, and help maybe some of the trends might happen throughout the course of '06?

Okay, first one, first question, Jason, unfortunately I cannot disclose how many percentage internal parts for PS3, but as you know, the key device made internally [inaudible-background noise] and also the [RA6], which is the graphic end-processor, and Blu-ray [blue razor] and also Blu-ray disc and those in the [technical difficulties] and those are the main device for this PlayStation 3. You know, of course, Blu-ray disc is also provided by our own facilities.

Great. Thank you, Mr. Yuhara.

With respect to new opportunities on Pictures side, obviously our focus on priority right now is on the launch of Blu-ray, which we all believe will reinvigorate catalog sales and provide increased growth and margin for the Pictures Studio, but electronic distribution is extremely important. We have video-on-demand deals with Comcast along with our affiliate, MGM, and partners such as Movie Link and others, and I think you'll be seeing from Sony Pictures an increased focus on electronic distribution.

They've been very active in mobile memory cards. "Spider-Man," for instance in Europe, has been a very big seller on memory cards that are used in cell phones for people to enjoy film content, at a very healthy margin. And mobile distribution in general is just going to be an increasing part. And that goes for Pictures and for music that now has very strong growth in electronic distribution, in our music content where they currently enjoy close to 50% margins. So, it's a focus for all of our content companies.

Great, thank you for taking my call.

Thank you very much for your call today, Jason. Unfortunately we're out of time today, and I would like to conclude today's call by reminding all our participants that you can contact our Tokyo Investor Relations office at -- [technical difficulties] -- 5448-2180. In New York, Justin Hill and Micky Imura can be reached at (212)813-6722. In London, Chris Homan and Chinji Tomita are available at 44-207-444-9713. Again, thank you very much for joining us today, and thank you to Mr. Yuhara and to Rob Weisenthal for participating in today's call. That concludes today's call. Thank you very much.

Thank you very much, everybody.

Ladies and gentlemen, thank you for your participation in today's conference call. This does conclude your presentation, and you may now disconnect. Have a great day.