Sony Group Corporation (6758) Earnings Call Transcript & Summary

[Interpreted] So now we'd like to begin IR Day 2021 of the Sony Group Corporation. My name is Matsuoka, the Senior Vice President, in-charge of Corporate Planning and Control, Finance and IR. As is already indicated, for this year's IR Day, we plan to have 2-day sessions, today and tomorrow, and you can see the schedule as is shown here. First of all, we'd like to show you a video for the purpose of Sony and businesses based on it. [Presentation]

[Interpreted] Next, I would like to introduce the members who will appear in each session. The first members who join us today: Mr. Jim Ryan, President and CEO, Sony Interactive Entertainment, LLC; Mr. Rob Stringer, Chairman of Sony Music Group, CEO and -- the CEO of Sony Music Entertainment; and Mr. Shunsuke Muramatsu, President, Representative Director of the Board and CEO of Sony Music Entertainment, Inc.; and Mr. Tony Vinciquerra, Chairman and CEO of Sony Pictures Entertainment Inc. And for tomorrow, Mr. Kimio Maki, the Representative Director, President and CEO of Sony Corporation; and Mr. Terushi Shimizu, Representative Director, President and CEO of Sony Semiconductor Solutions Corporation; and Mr. Masashi Oka, President and CEO Representative Director, Sony Financial Holdings, Inc. And after this, I will move on to the presentation of each segment. During each session, after the presentation of segment leader, we'll receive the questions from those who are preregistered for question and answer from the investors and analysts. And members of the media -- the members of the investors and analysts who have preregistered for questions, please call the number you were given before. When you ask questions, please choose the language that you preregistered, and there is a chance that the interpreter will come in, so please understand it. And those who have not been preregistered, you can listen to the question-and-answer through web streaming. And I hope you wait a few minutes until the opening of the session for Game & Network Service. We will first start the session of Game & Network.

[Interpreted] Good morning. We would now like to start the session on Game & Network Service. I will be the -- Hayakawa, the IR, in-charge of Finance. The first speaker is President and CEO of the Sony Interactive Entertainment, Mr. Jim Ryan.

Hello. My name is Jim Ryan, and I'm President and CEO of Sony Interactive Entertainment. It's my pleasure today to give you an update on what's been happening in the world of PlayStation and provide you with an insight into our plans for the future. These are the areas that I'll talk about today. We have 2 key tools at our disposal to allow us to plot the road to profitable growth of the MRP time frame, PS5 and PS4. I plan to spend the majority of my time telling you how we plan to make PS5 SIE's biggest ever platform, but will also share with you the ways in which we'll ensure that the PS4 cycle has our longest ever tail. We'll then touch on a number of new growth vectors that will radically transform our business before emphasizing the role that group collaboration has played in helping us get where we are. We'll share a number of our ESG initiatives and then finally to wrap our key KPIs. First, a quick recap on FY '20. Our strong financial performance is well documented. But the point that I want to emphasize here is that these numbers were delivered in a platform transition year. All our previous platform transitions have been marked by 2 characteristics: first, an operating loss; and second, a deterioration in financial performance compared with the previous year. Our record earnings in FY '20 bucked both these trends. And while it's certainly the case that the gaming industry benefited from stay-at-home tailwinds, it's also the case that our business structure right now is very strong, buoyed by a vibrant active community, a fast-growing PlayStation Plus business and a roster of great games. Moving now to today's main event, how we plan to turn PS5 into SIE's biggest ever platform. First, a quick recap of the launch. Notwithstanding the pressures imposed on a supply chain by the pandemic, we sold a record 7.8 million PS5s in our first fiscal year. By far, the standout feature of the launch, however, is the extraordinary demand that we've built for our latest console. Even now, more than 6 months after the launch, demand remains insatiable with inventories selling out within seconds have been placed on the market. I've been involved in every PlayStation launch, and I've never seen anything like this. Looking forward now, and as we build our plans for the future, we do so against the backdrop of gaming as the fastest-growing category of entertainment. Within this overall gaming industry growth, the console segment, with 7% CAGR, is forecast to deliver the biggest gains, while we believe that PS5 will be the standout performer of this current generation. This chart explains some of the reasons why we believe that this will be the case, and I'm going to spend a little time explaining it. The last 20 years have seen a number of very significant changes in the demographic makeup of the PlayStation audience, all of them favorable. The first one relates to age. We've been very successful in retaining the loyalty and interest of our fans over successive generations. As you can see on the left-hand side, our user base for the PS1 generation was a young one, with the number of older gamers tailing away quite dramatically. Many of those fans have stayed with us. And indeed, in many cases, their children now have PlayStations, with the result that our age demographic is now much more evenly balanced. This results in a growing of the top of the funnel of users and potential users of PS5. The second trend that we're tapping into is the growing female interest in PlayStation gaming. 20 years back, less than 1 in 5 of our audience was female. This ratio has more than doubled, assisted by the growing diversity in our industry's workforce and by a growing catalog of iconic female characters. The final trend is geography. We've worked hard over the years to develop our brand and our distribution reach over the network of countries that we consider to be opportunity markets. Currently, these markets represent just over 10% of our revenue base. But we believe that we're well placed now to leverage further growth in these markets over the years to come. I touched on our brand just now, and it's never been stronger. Virtually every global survey of the world's top brands sees PlayStation featured heavily. And as you can see, our brand strength within the platform category continues to grow. Ultimately, though, gaming platforms depend on great games to make them loved and successful, and PS5 is no different. The success of our launch came about as a result of the launch title lineup. This lineup was the strongest that we've ever had with any of our platforms with great support from our own PlayStation studios and our third-party partners. And that strength is poised to continue into 2021 and beyond as the benefits of our strategic investment over many years into PlayStation Studios and the aggressive building of long-term partnerships with our major publishers continues to bear fruit. Another area that we focused on is our console economics. I'm pleased to say that the PS5 standard edition will break even from next month's production. And from then on, we project that it will gradually become increasingly profitable. The right-hand chart is important, stressing that from the last generation to this, the importance of console economics to our overall business model has steadily diminished. At the start of the PS4 cycle, console represented nearly half of our total revenue base. Now it's only a fifth as our network service and digital distribution businesses have grown rapidly. It's common knowledge that the world is suffering an acute shortage of supply of semiconductors at the moment. Based on our visibility of our supply chain, we believe that we can achieve our aim of making FY '21 our strongest ever year too. Furthermore, we're planning the following year's production to ensure that FY '22 will represent the highest number of consoles that we've ever sold in any year in PlayStation history. But PlayStation stands for so much more than simply selling hardware. The number of users and the engagement of those users are a reflection of the attractiveness of our feature sets, the quality of the games available and the nature of the community experiences. This chart shows that we have more people active on PS5 than we did at the launch of PS4 and that the time that they're spending on the console is significantly higher. This in turn means that monetization on PS5 is meaningfully higher than we saw in PS4. Interestingly, the digital edition monetizes at a higher rate than the standard edition, reflecting the propensity of the digital gamer to consume add-on and digital download content at a considerable rate. Turning now to PS4. We anticipate that PS4 will have the longest tail with the deepest engagement of any of our platforms yet. There are a number of reasons why we believe that this will be the case. First, we anticipate that we will be able to retain many of the engagement gains that were made in 2020 due to COVID and work from home. Second, the lineup of new software for PS4 in FY '21 and FY '22 is extremely robust. Publishers understand the opportunity that the large and very engaged community offers and will exploit it keenly. Third, the explosive growth of the free-to-play category is perfectly timed for the late life cycle gamer. And finally, our PlayStation Plus subscription service provides us with an extremely efficient means of communicating with our large community. This chart summarizes the engagement gains during 2020 due to COVID and work from home and how we anticipate these being retained even as much of the world starts to open up again. To support that view, it's interesting to note that the seasonal drop in Germany is actually higher than in the U.S. despite the much higher vaccination rate, the lower COVID rate and the greater loosening of social restrictions in America. As I said earlier, great new PS4 releases as well as an incredible and extensive back catalog mean that we expect PS4 to account for 70% of next year's store spend despite the growing installed base of PS5. And this strong PS4 release schedule will be further supported by the ongoing growth and diversity of the free-to-play category, which now represents over 1/4 of PlayStation store revenues and attracts and retains late life cycle PS4 gamers in particular. One of our strongest areas of growth has been our PlayStation Plus subscription service. The increase in subscribers has surpassed our expectations, and we plan to continue to increase the subscriber base as we approach the 50 million paying subs landmark. User satisfaction with Plus is now very high, as you can see from the chart on the right-hand side and stems from consumer appreciation of a wide range of service features. Now I'm going to switch tack and talk about some of the vectors of growth for PlayStation in the future. We envision that these will radically transform SIE's business over the long term. I'll talk about 6 of them today: our launch in China, PlayStation Direct, new directions for PlayStation Studios, our cloud strategy, Next Gen VR and PlayStation beyond the console. We've just launched PS5 in China and market reaction is extremely positive. We're pivoting our approach to this huge but complicated market, and we'll put greater emphasis on local content and local partnerships than we have in the past as well as a significantly enhanced marketing budget. We see a strategic opportunity in growing our direct distribution channel for physical product, PlayStation Direct. PlayStation Direct has achieved significant revenue in the U.S. market within a little more than a year of starting operations. We plan for 300% further growth within this fiscal year, helped by our upcoming launch in Europe. Next, we have our PlayStation Studios. We're hugely proud of the unmatched strength of the franchises that we've built up over the years and are particularly delighted that our recent new IPs have continued to grow this stellar lineup. We will continue to invest further in our own powerhouse studios. And in addition, we will augment the existing studio network with new partnerships, 2 of which you see here that have been recently announced. This will further diversify our portfolio of PlayStation exclusive offerings, including the key areas of multiplayer and new original IP. We also plan on continuing to make our wonderful IP available to audiences beyond PlayStation consoles. 2020 saw our first successful venture into PC publishing with Horizon Zero Dawn, with more to follow in 2021 and beyond. 2021 will also see us take steps to bring PlayStation IP to mobile with the opportunity to dramatically increase audience sizes that this brings. Finally, we intend to build upon our growing experience and ambition in the Game as a Service space to complement our continued strength in the narrative-led titles that PlayStation fans know and love. Our cloud strategy continues to evolve as we build on the learnings provided by PlayStation Now. As the service continues to grow, we're focusing on both strength of content and improved streaming capabilities. Our recently announced commitment to a new generation of VR shows our focus on continuing to offer the very highest levels of immersion to the gamer. As well as simplifying the setup and the resolution of the headset, we will replicate and extend some of the amazing dual sense features that consumers have so appreciated. Finally, our vision of a long-term future, which could allow for a PlayStation social community in the many hundreds of millions. This would see us evolving from our current console-centric ecosystem to a world where large elements of the community lie beyond the console. As I move towards the end of my presentation, it's important for me to say that our success in 2020 would not have been possible without the support and partnership of our colleagues throughout Sony Group. The power of Sony's assets was fully deployed in the PS5 launch with support coming right across the group. The PlayStation production's pipeline is filling fast as we bring our iconic characters and storytelling to cinema and television. Sony's anime service, Funimation, featured prominently in our recent Play At Home initiative while we're currently running a trial showcasing Sony Pictures content for PlayStation Plus subscribers in Poland. Last but by no means least, we've been very proud to support Sony's strong stance on ESG across key areas such as the environment, our communities and a strong commitment to diversity and inclusion. Finally, our key KPIs. These are the key metrics that we use to monitor our business performance and to ensure that our goals for growth and profitability are realized. Thank you for your time. I look forward to the Q&A.

[Interpreted] Thank you very much. Now we would like to entertain questions. Those of you who will be responding, will go first, is the SIE President and CEO, Mr. Jim Ryan. [Operator Instructions] So we'd now like to entertain questions. [Operator Instructions] So the first question, please, from Morgan Stanley USJ, Ms. Ono, please -- from Morgan Stanley.

[Interpreted] I'm Ono, Morgan Stanley. I have 2 parts of questions. First question is that the monthly active user, you already mentioned and showed us the slide, but if possible, for PS5 generation, to what extent do you intend to increase the number of these monthly users? And what are the specific measures to achieve this goal? We'd appreciate that you share those. And of course, my second question is that after the software, you have an in-house software ratio, maybe it's around 20%, I understand. However, if by expanding that in-house development, maybe game business profitability -- operating income might be improved and increased further because of your in-house development. The current 20% in-house development ratio, how do you evaluate that in PS5 generation? To what extent do you want to increase that in-house development ratio? Those are 2 parts of my questions.

Thank you. Can I just check that you can hear me? Can you hear me?

[Interpreted] Yes, I can.

Okay. Okay. Great. So the first question relates to [Foreign Language] monthly active users [Foreign Language]. You will have seen on one of the charts that the growth in monthly active users on PS5s -- sorry, there's something going on with the -- I'm getting same chat here that [Foreign Language]. I can certainly hear the translation.

Jim, please go ahead. Jim, please go ahead.

Okay. I will. So you will have seen on one of the charts that the rate of growth in PS5 monthly active users exceeds that which we achieved at the start of the PS4 cycle. This is ahead of our expectation, and we anticipate that we will continue to outperform PS4 in FY '21 and beyond. You asked what the reasons for this are. I think that there are a number of reasons. The first is that we believe that we have designed a console with excellent features that encourage consumer engagement to a degree that we've never had before. And we -- and the second factor would be the quality of the games that we have at launch. And again, as you heard in the presentation, we anticipate that the strength of the lineup of PS5 titles will continue into FY '21 and then into FY '22 and beyond. So we see no reason why these very encouraging trends in monthly active users should not continue. And then finally, the sheer number of consoles that we sell. And again, you saw that we exceeded in FY '20 what we managed in FY '13 with PS4. And again, we aim that we will continue that outperformance in FY '21 and again in FY '22. So we are very optimistic on the engagement front for PS5 and that typically leads to strong monetization. The second question related to the software market share ratio of 20%. Now this is a ratio that has been used over the past 20 years as an indicator of efficiency of the functioning of the first-party studios. I actually -- and I did speak about this at IR Day 2 years ago. Since then, one thing that we've seen has been the very, very rapid growth in the free-to-play category. And the significant amount of play time that, that now accounts for makes the historic measure of market share of PS4 games like-for-like. It makes it rather misleading and not terribly relevant. We prefer to focus on the absolute sales performance of our first-party titles. We prefer to focus on the critical reception of our first-party titles, and every metric that we look at for these games at the start of the PS5 cycle is very, very strong. Thank you for the question.

[Interpreted] We'll move to the next question. From Citigroup Securities, Ezawa-san, please.

[Interpreted] My name is Ezawa from Citigroup. Two questions. One, Page 26, beyond console platform beyond console, and the first-party title sales to those beyond console. During this mid-range plan, how much growth are you anticipating in this space? Slide -- Page #31, IT other than games -- content other than games on the PlayStation platform, the products other than the games for the sales of this, how much importance will they carry for Sony for the next 3 years? The sales of the content other than games, how much sales are you anticipating for the next 3 years?

Thank you for your question. So we are beginning our journey to take PlayStation first-party IP off console. We started last year by publishing 2 of our games on PC, Horizon Zero Dawn and Predator and both were profitable and really had a very successful publishing debut. We will continue that in FY '21, and we will continue that beyond. In FY '21, we will begin to publish some of our iconic PlayStation IP on mobile. And we anticipate that in 2021, that will not provide a significant profit flow. But we do anticipate that as we learn from that experience, and as we increase the number of titles that we publish on mobile that the contribution from both PC and mobile will start to become steadily more important as time passes. Your second question relating to Chart 31. As regards the financial performance of SIE, we believe that the very great majority of our revenue and our profitability will come from gaming-related activity, but we do see the synergistic benefits. For example, our IP have been deployed in Sony Pictures television and movie products. And that, I think, is likely to see a much more meaningful financial contribution to the overall Sony result. Thank you for your question.

[Interpreted] Munakata-san of the Goldman Sachs Securities, please.

[Interpreted] I'm Munakata of Goldman Sachs. I have 2 request or questions. The first point is PlayStation Now, because competitor, Microsoft, now has Game Pass and then they are very active in Game Pass development. In case of PS platform, PlayStation Now, what PlayStation Now is positioned? Are you really targeting to match? Or are you focusing on more core users? So who are the targets? The second question is that in your presentation, you have shown us the standard edition versus the digital edition. When you compare that to the user quality or the types that are different, in case of full game, the expenditure might not be the major. But digital edition users, they spend more on the content -- spending on the content, very interesting. What's the background? So what kind of insight or the finding do you get from all the different behaviors of the users?

Thank you for the question. To the first question, I think when you compare our services with other services, it's important to look at the major components of the respective services. And they really are the provision of online multiplayer, the access to a range of games and other features, for example, cloud streaming. And we have configured our services in such a way as to focus principally on PlayStation Plus. And as you saw in the presentation, we now enjoy 48 million paying subscribers on PlayStation Plus, up from 41 million at the start of the fiscal year and up 30% over 2 years. PlayStation Now focuses on a slightly narrower gamer audience and gives them access to a large catalog of great games. So when you take the 2 together, our PlayStation first-party services have a paying subscriber base of in excess of 50 million subscribers, which we believe compares very favorably with anything that might be out there competitively. With regard to your second question, I agree that this is a very interesting data point. And clearly, the digital edition appeals to the very digitally savvy gamer and somebody who is very much at ease, very much used to downloading and purchasing digital content. I must say that this gap is slightly greater in favor of the digital edition than we had anticipated, and this is a very encouraging data point for us, in my opinion. Thank you for your question.

[Interpreted] We'll take the next question from Crédit Suisse Securities, Nishimura-san.

[Interpreted] First question. You just mentioned standard edition versus digital edition. Right now, what's the proportion of each in the PlayStation cycle? Now what would be the most reasonable proportion for each edition? Second question, VR. The new VR is being developed, I am sure. The Next Gen VR in the launch of the Next Gen -- sorry, what did you learn from the previous launch of the VR? And based on that, when the new VR comes online, what would be the opportunities, for example, expanding active users or capturing new users? What kind of opportunities do you foresee?

Thank you for your question. The answer to the first question, well, there are 2 parts to that, is that right now, the standard edition represents the very great majority of PlayStation 5 sales. We do not see that proportion changing greatly in FY '21. But we anticipate that as time passes, as we move further into the cycle of PS5 that there will be some slight increase in the ratio of the digital edition but not significant. Your second question related to VR. In terms of learnings, there were many. And we're very pleased to be able to put those learnings to practical use with our Next Generation VR product. And there are learnings in terms of the specification of the product. You will see when we unveil the physical product that the setup is much simpler in terms of the configuration of cables and connectors than we had with the first VR platform, and that was a piece of feedback that we received from gamers. And you will also see many learnings applied when it comes to the making of VR experiences. Game developers learned a lot over the course of the first PlayStation VR cycle, and we already start to see with the early work that's been done that those learnings have been put to very good use with our Next Generation PlayStation VR product. Thank you for your question.

[Interpreted] Well, time is running short. So let us entertain the last question. Nakane-san from Mizuho Securities, please.

[Interpreted] Nakane of the Mizuho, but you have given us a lot of hints, insightful presentation. I learned so much from you today. Anyway, I have some numbers as well. The first question. PS Plus or PS Now, the number of users. 50 million is the target for PS Plus. But currently, PS4 and PS5 install based members are about 40%. But during this cycle period, do you think they will be increased maybe more than like 50 million, 60 million are expected to achieve in those installations? Or it's too ambitious? If that is to increase, are you going to also encourage the women and other users to be more active to develop them? The average price might go down per unit. Is that the one thing that is likely to happen? The second question, during this period, what is the SG&A? So far, you spend so much money in SG&A. But is it likely that this might go down -- the SG&A expense will go down during this period?

Thank you for your questions. The first question, you're right that the ratio of PlayStation Plus subscribers to the combined base of PS4 and PS5 today is somewhat less than 50%. And I think while today, I'm making no forecasts on our commitments as to how high we might take that, when you look at the trends for engagement for the number of users, for the amount of time that they're spending on the platform and, indeed, the amount of money that they're spending on the platform, there has to be an opportunity first to leverage that and to encourage more of these people who are spending more time and more money on our platform to subscribe to PlayStation Plus. We see this as a meaningful business opportunity over the course of the medium term. The second question about SG&A. I would say -- and I must thank my CFO, Kaz Takeda, for this that we have a very vigorous culture now at SIE with regard to the control of SG&A. I'm very happy and very proud with the approach that we take to this. I would say, though, one big part of our strategy, and your heard this in the presentation, is to invest in the process of game development. So you will certainly see increases in the amount of money that we spend making PlayStation games at our PlayStation Studios. But we definitely view that as part of a process of investing, of building something big and good and powerful. And we view that as an entirely different business discipline from the day-to-day ongoing control of SG&A. Thank you for your question.

[Interpreted] Well, we have a little more time left. So Jim, is it all right to take the final question -- one more question?

Sure.

[Interpreted] And I would like to ask the next person to limit to one question only. SMBC Nikko Securities, Katsura-san, please.

[Interpreted] Slide 23 -- Page 23, China, challenge in China. In -- looking back at the history of PlayStation in 2003, there was a turning point. And then 2014, there's a reentry. And after that, on several occasions, streaming -- because of the streaming securities, they are closed in China. But this China challenge, going forward, how big of a size are you thinking about? I think it's about 10%. China is 10% of the Sony total. But how big do you think it will grow? And the risks as well -- risks associated with it. What is your take? And what is your view on these?

Yes. Thank you for your interesting question. We launched in China just one week ago with PlayStation 5, and there were some data points on the chart there. The market reception to PlayStation 5 was absolutely extraordinary, and it really gives us hope and optimism that we will do better this time. We have recognized that we need to adopt a very different strategy in China than the rest of the world. We've been very successful in over 100 countries in the world, basically taking the same approach. And we took that same approach to China, not fully recognizing or appreciating just how big and different the gaming market is there, specifically in terms of the free-to-play market, the mobile market, the huge amount of domestic content that is produced by the Chinese developers and publishers. So we are taking a very different strategic approach to China this time around. We will be much more focused on partnership on the provision of locally development content -- locally developed content as well as playing to our traditional strengths in brand marketing and the publishing of the games that we make ourselves. It is -- to your final point, it is a complicated and difficult market. There are any number of regulatory risks that exist -- there are risks that we've -- problems that we've experienced over the course of the last 4 or 5 years, which definitely could represent risk again. And there are almost certainly things that we haven't been exposed to yet but could come along and make things difficult for us. But that said, if we do this right, it could represent a really very meaningful business opportunity for Sony Interactive Entertainment and indeed for Sony Group. Thank you for your question.

[Interpreted] Thank you very much. Now it's time to end this session on the Game & Network Service. Thank you very much for your attention. So next session is Sony Music Group, which is scheduled to start at 9:00 sharp. Thank you. [Break]

[Interpreted] We'll soon begin the session for Sony Music Group. Please wait until the opening. Now we would like to begin the session for the Sony Music Group. And first, we would like to show the presentation by Mr. Rob Stringer, the Chairman of Sony Music Group and CEO of Sony Music Entertainment.

Today, I'm going to begin by offering a brief summary of Sony Music Group's successful development over the past fiscal year, including an update on our record financial performance. Then I will provide an overview of the global music market and the evolving dynamics of our business. Finally, I will give you insight into Sony Music Group's growth strategies as we compete and enhance the value proposition of our company in this rapidly changing environment. In 2020, Sony Music Group continued to experience success with our global business in the face of unprecedented challenges posed by the COVID-19 pandemic and a very complex marketplace. I am pleased to report that the recently completed fiscal year ended March 31 marks an all-time high for Sony Music Group's revenue and our fourth consecutive year of record profit and record margin. Since fiscal 2016, our revenues have increased by nearly $2 billion and outpaced the overall industry. That equates to a CAGR of 12% or 8% if you adjust for the impact of the consolidation of EMI. Streaming revenue, the primary driver of our growth, has climbed at a CAGR of 29% or over 26% adjusting for EMI Publishing and now accounts for 68% of our total revenue. Operating income has gone up at an annual average rate of 27% or 19% if you adjust for EMI, and our margins are up over 7 points over the last 4 years. We've achieved this by aggressively investing in new talent and further advancing our business through strategic M&A, while rigorously managing our costs. Although we expect further margin pressure over the mid-range planning period due to rising artists and songwriter costs, our business approach will enable us to offset that impact. We will do this by continuing to drive top line revenues, taking a highly disciplined approach to cost management, leveraging our cost base as the business expands and improving A&R and marketing efficiency through data and analytics. This strategy will allow us to continue to generate margins that outperform those of our competitors moving forward. Our continuing creative success as a company is highlighted by the exceptional performance of our Recorded Music and Music Publishing divisions on the global chart. Our average weekly share of Spotify's worldwide top 100 tracks last fiscal year grew to 36%, up from 28% the year before. Sony Music also had the highest share of new Recorded Music artists entering the U.S. streaming chart for the first time last year at nearly 30%, which was best in the industry. As a result, in the global market outside of Japan, Sony Music was the only major music company to increase share last year according to the IFPI. In fact, our share was up in 8 of the top 10 markets, including Japan. This is in an industry that is now adding an astounding 60,000 tracks per day, up from 40,000 tracks just 2 years ago. Our publishing company had a 27% average weekly share of Spotify's worldwide top 100 in fiscal year '20, up from 24% the year before. In the most recent quarter, our share was up to 30%. Sony Music Publishing participated in an average of 58 of the weekly songs in the Spotify top 100. We remain the #1 publisher in the world and have been #1 since 2012. Underpinning the success is the enormous popularity of our artists and songwriters on global streaming platforms. These are just a few of the artists and songwriter highlights from this past year. Now let's take a look at the broader industry. The Recorded Music industry experienced its sixth consecutive year of growth in 2020, increasing 7.4% despite the global pandemic impact on physical and advertising supported businesses last year. Recorded Music streaming went up 19.9% last year and now accounts for more than 62% of the industry's global Recorded Music revenue. The number of users of paid music streaming services went up by almost 100 million in 2020 to 443 million globally. Many research analysts are projecting this figure to well exceed 1 billion by 2030. In the Music Publishing market, streaming is driving similar sustained growth. The publishing industry achieved its seventh straight year of consecutive expansion, rising 5.2% in 2020, with gains in streaming offsetting the pandemic's impact on sync licensing and public performance income. Looking forward, we expect streaming and the number of paid subscribers to continue developing at a healthy pace through the midrange planning period, driving mid- to high-single-digit annual growth rates for the overall market and accounting for around 75% of Recorded Music revenues by the end of the period. The positive outlook for the music market continues to create high levels of competition in the industry. In this lower interest rate environment, we are seeing a larger base of private equity, technology platforms, pension funds and others aggressively investing in music assets and funding disruptors and rights aggregators as they seek to capitalize on highly favorable market expectations and stable cash flows from music. With the increased availability of capital, M&A deal flow and catalog activity has accelerated, with deals being announced at high valuation multiples almost every week, if not more often. In just the first 4 months of this year, music-related M&A and catalog investment activity was over 7 billion, nearly equal to the total investment activity in the 12 months of 2020. In our own strategy, we will continue to be aggressive in targeting and evaluating all acquisition opportunities, focusing on transactions that provide the greatest strategic benefit, deliver accretive profitability and create incremental long-term shareholder value. To illustrate this calculated approach, during the past 6 months alone, we have invested in excess of 1.4 billion on a variety of deals, including: AWAL, an artist DIY and neighboring rights services company that strategically supplements The Orchard, our industry-leading label services company; Som Livre, the leading independent music label in Brazil, one of the most important high-potential growth markets in the world; recorded music and publishing catalog acquisitions, including rights from some of the most iconic artists and writers of all time, such as Paul Simon. Now let me show you how our investment approach fits into the expanding operating framework of the Sony Music Group and fuels our growth strategies. We have consistently been building a modern comprehensive suite of unparalleled choices for our artists and content providers. The greater multiple points of entry into the Sony Music ecosystem offers artists, songwriters and labels flexibility at every stage of their development and is a true point of competitive advantage for us. From our core labels and publishing company to The Orchard, and with the acquisition of AWAL, we are dramatically increasing the number of relationships with talent and the flow of our creative output. This includes the organic approach of aggressively building our global music roster of recording artists and songwriters around the world. In the past 3 years, our roster size has expanded by 40%. The Orchard represents over 17 million tracks from 26,000 independent labels, whose artists include YOASOBI, who in partnership with SMEJ, garnered t e fastest song to reach 1 billion streams in Japan. In partnership with Sony Music Publishing, The Orchard also now provides songwriters with a leading publishing administration solution. Building on our success with The Orchard, we are further enhancing our support for the independent community with our planned acquisition of AWAL, representing a catalog of nearly 0.5 million recordings. The addition of AWAL instantly scales our artist services division with nearly 1,000 artists as well as providing us with a leading platform with 14,000 artists in the rapidly advancing DIY segment. This investment allows us to deliver tremendous value to AWAL artists, who will be able to capitalize on The Orchard's and Sony Music's wider global distribution footprint. These segments, beyond our core labels and publishing businesses, are now generating in excess of $1 billion of revenue per year and will continue to be an important driver of market share as they outpace the overall market growth. With more points of entry and the associated consumption, we are generating massive amounts of data, upwards of 200 billion lines per month. As a result, data is integral to every function and decision that is made in the company. Our investment in technology and human talent to focus on building products and infrastructure as well as data science and analytics, is constantly increasing in order to improve our competitive positioning and efficiency. Through our real-time earnings application, we now pay our artists almost instantly when we get paid by the digital service providers and allow for access to financial advances too. Tools like real-time insights give our artist up-to-the-minute views of their digital consumption and social activity from platforms all around the world. Our approach to emerging markets has 4 key pillars as we capitalize on the increase of streaming penetration globally. We aggressively invest in local talent. We are expanding our global reach through partnerships with local companies such as media companies and DSPs. We keep building our local presence and capabilities to work closely with the creative community. And we leverage The Orchard network to work with greater numbers of local artists and labels as much as possible. This strategy enables us to attract leading artists and songwriter talent and drive new business in many of the fastest-growing music markets around the world. For example, in China, which has seen rapid development driven by streaming, we are boosting our presence in a highly fragmented and regulated market, and working with DSPs to get our music to wider audiences across the vast country. In India, we are improving our leadership position amongst majors, with an emphasis on artist acquisition alongside a successful soundtrack business as well as enhancing the breadth of our repertoire through the acquisition of local catalogs. Another key area of focus is in Latin America, which led the industry with 15.9% growth year-over-year and where Sony Music Group is the market leader, consistently holding over 35% recorded music market share. In March, we announced an agreement to acquire Som Livre, home to many of Brazil's most popular artists. Brazil is Latin America's largest recorded music market and one of the fastest developing music regions in the world. Som Livre will continue to operate as a stand-alone independent label through The Orchard, but with increased investment and support from our Latin regional hub. Another key aspect of our progress is tied to how we are opening up new revenue channels with new commercial partners. This has led to a meaningful increase of our partner base across a number of new segments, including social, gaming and fitness. Music plays a tremendous role in enriching the user experiences across these platforms, and we are working with these partners to ensure that we properly monetize the usage of our artists' and songwriters' recorded music and copyright anywhere music is used. During the past fiscal year, we generated nearly $400 million in these areas and expect this to become an even more material part of our revenue base over the midrange planning period. We are also committed to expanding through innovation and new business development with our own operations. By investing in new and enhanced capabilities, we are able to bolster our value proposition to the creative community. This includes scaling our global merchandising operation and extending our network of recording studios around the world. We are finding and creating new revenue opportunities for our artists and songwriters with the acquisition of Kobalt Neighboring Rights, and Sony Music Publishing's investment in BeatStars, an online marketplace for beats, as well as evaluating new business opportunities in emerging areas like NFTs and immersive entertainment. As the subscription model emerges in the podcasting industry, we are further strengthening our core creative team at Sony Music Entertainment that is focused on creating high-quality podcasts with strong IP potential. Sony Music Group's position within the wider Sony family makes SME and SMP attractive destinations for talent and provides a significant point of competitive differentiation for us and our sister Sony companies. A key recent example has been our multi-faceted support of the launch of the PS5. Travis Scott, one of the world's biggest artists on the Sony roster, served as a brand ambassador for the PlayStation 5 launch as part of a highly successful multi-month, multi-channel campaign that generated over 1 billion impressions. Several of our artists' music videos have also showcased the PS5 to build awareness and excitement for the launch. And there will be more to come from this ongoing creative and marketing partnership. Moving forward, we will also continue to create opportunities to pair our creators and content with Sony film projects, podcasts, soundtracks, games and electronics. Also importantly, underlying all of these strategic business initiatives are our core values of diversity, inclusion, respect, equality, philanthropy and social impact that align in partnership with our artists, songwriters and employees. They want to make an impact on social and racial justice issues, and with that comes a responsibility to support them. We are ambassadors for an art form that is empowering, inspiring and healing, and our content plays a vital role in shaping culture on all levels. To that end, with the support of Sony Corporation, we have been given significant financial resources necessary to build long-term relationships with organizations to address vital social issues. In conclusion, Sony Music Group's business strategies and futuristic approach to the marketplace, alongside our broad base of music rights and expanding unique servicing capabilities will differentiate the company in the music and wider entertainment industry. Sony Music Group is at the forefront of attracting and developing new creative talent, driving record revenue and profit metrics, capturing more share of the forecasted market trajectory, and creating incremental value over our midrange planning period and beyond. Thank you for your time and attention.

Now we would like to begin the question-and-answer session. And we have Mr. Rob Stringer, who is the Chairman of Sony Music Group and Sony -- the CEO of Sony Music Entertainment to answer your questions. So now we'd like to begin question-and-answer. [Operator Instructions] So JPMorgan, Mr. Ayada, please.

I'm Ayada from JPMorgan. I have two questions. And first question is that in the music business, there are many -- the stakeholders, and there must be allocation of profits among the stakeholders. For instance, OPT distributors and artists and songwriters. And so how you allocate the profits? And is there any discussion about percentage of profit allocation? And over the last few years, was there any higher pressure or has been stable recently? So chronologically, over the time, how it develops, I would like to know. And second question is last year, Fortnite, over Fortnite, Travis Scott virtual -- the concert. That was successful. How you evaluate this at this moment? And social and music integration and virtual community integration, do you think that will grow further to a bigger business? And how it impacts the profit potential of music business? Those are the two questions I would like to ask you.

Okay. I hope you can all hear me. The first question, yes, there is pressure now that we do pay more money to artists and songwriters at any point in recorded music history. We have that accounted for in our profit forecast, in our revenue forecast. We are aware now that it is, as you said, more competitive than ever and there are multiple entry points for music into our system, so we have a way more sophisticated system of paying artists, keeping artist informed of the process of how we receive the money. And quite honestly, we are more transparent than ever before. So we are -- we believe that we provide a much better service now for our artists and our songwriters and a clearer understanding of how they get paid. I hope that answers the question. Thank you. And the second question, yes, we were very excited by the Travis Scott Fortnite appearance, the same as we were excited by Lil Nas X on Roblox. Every idea has to be different. We want to be innovative, and the more innovative we are with the platforms on gaming, on social networking, on fitness and whatever the platforms may be, the more chance we have of being successful profit-wise. For example, the Travis Scott streams went up by around about 400% post-Fortnite. But the key to that environment is the same as the key to any creative development, it's innovation. And we have to be ahead of the game innovation-wise, not only with our partners like the gaming companies, including PlayStation, but also we are looking at immersive entertainment of our own to bolster our office content. Thank you.

We'd now like to entertain the second question from Macquarie Capital, Thong-san, please. Thong-san, please.

Hello, can you hear me?

Yes.

Yes. Okay.

Congratulations. I think you had a great success in the last few years, specially on streaming. I just wanted to -- my first question is, clearly, I think there is a significant opportunity on the table, especially ad-supported services. I do believe that they still probably pay relatively small or much less, obviously, to the content providers compared to detailed subscription services. How do you see that revenue opportunity developing over your midterm plan in the long term? And second of all, second question is with the rapid development of your business around The Orchard and now AWAL, could you give a sense of the growth rate you would have with areas of business such as artist management and also in terms of, for instance, the new growth areas, as you mentioned just now, such as NFTs and other forms of, I would say, expansion of artist revenue opportunities going forward?

Okay. The first question, yes, we are understanding of the balance between paid subscription and ad-supported services. In some of the emerging markets, we realize that, that payment will be ad-supported in a powerful way, particularly in the new emerging markets. It's a balance. We believe in better monetization. Our monetization is also coming from the social networks. We are adding new social networks virtually every month that enable us to monetize our content. Same with fitness, same with games. The previous question, we obviously monetize our content and we also do licensing deals with -- it's beyond the range now of whatever we could have possibly imagined even 2, 3 years ago. So we understand the balance, and we're prepared for that balance as long as we understand the revenue growth and we understand the monetization of that process. And the second -- could you repeat the second question, please, Thong? Just because that was quite a long question, the second question.

Sure. I guess maybe the simplest way to express it is The Orchard has grown strongly in the last several years, and now AWAL has been added to that. Clearly, you're doing very well with artist management and also in providing new opportunities for emerging artists to penetrate new markets. Maybe the simplest way to express that is like how fast -- how much growth do you see in The Orchard over the next several years? And how much of that will be driven by, say, NFTs and emerging lines of, I guess, content and engagement?

Well, I think the way we see it is it's -- we're building a giant ecosystem. What The Orchard, they will do for us is at the very beginning, they're an entry point. When you have 27,000 labels at The Orchard, we see that the ability for that information and data to be in our system enables us to spread the potential for vertical use for, like you said, NFTs, for management opportunities, for merchandising. And we understand that particularly with The Orchard, which is the growth has been, frankly, astonishing when you consider what we bought that company for, what we bought the first 50% for, what we bought the second 50% for, and the fact is our market share is going up in The Orchard, that is an incredible entry point for content, artists, songwriters into our ecosystem. And that kind of double-digit growth we have can only lead to greater opportunity across all the verticals we have, all the media platforms we're involved in. And as you can tell, hopefully, from our presentation, we're incredibly optimistic about where that process will take us, particularly, as you say, because we just bought AWAL as well, and AWAL has an incredible number of artists and tracks already as well as an opportunity for new businesses with Neighboring Rights and the process of being able to get in early on DIY to bring even more content into our system. So I have to say we have our challenges, but we're remarkably optimistic.

So we would like to move on to the next question. From Citigroup, Mr. Ezawa-san, please.

My name is Ezawa from Citi, the securities. I have two questions. And first question is that in your revenue, what is your prospect for your revenue going forward? For the streaming revenue, the percentage, the 75% within 3 years in the market that you mentioned in your presentation. And so gradually, the percentage of streaming revenue will increase, and that will be somehow saturated. So SME's -- the revenue growth. Do you think that will slow down because of saturation of the market for that area? And second question is your direction for the future M&A. Regionally, which region business that is lacking for you, and whether the catalog or distributor, the platform, the system, the object of your acquisition? Those are the questions I would like to ask you.

Okay. On the first point, we think there's a lot of growth left, clearly. It's a balancing act. We are well aware of all the figures on the growth forecast by 2030. I think the presentation made it clear that we're particularly looking at emerging markets, where the streaming penetration is not dramatic yet where we think it will be. We see absolutely no issue in our revenue climbing substantially as the streaming penetration around the world gets bigger. But as I explained, we're aware of the hotspots. Latin America, which was the biggest streaming growth in 2020, we are the market leader with 35 -- 37%. So we're well aware of what we can do in Latin America. China is the fastest-growing subscribing market in the world, and we have to be represented strongly in China. So we're sort of -- we're aware of all that process. But also it's -- we're aware of every metric, potentially, from CAGR to margin, to profit, to revenue. We think they will all be going in the right direction, and we're super positive about that. And if anything, the emerging markets give us the opportunity to really grow our business in a different direction by 2030. And the second question, would you mind repeating it? Because I'm sorry, I -- once I've answered the first one, I can't remember the second one, sorry.

Yes. So it's about direction of merger and acquisition. In which region you are trying to conduct M&A? And which area -- whether you want to acquire catalog-related businesses or distribution platform that -- namely the system-related acquisition. Which is the case?

Everything and anywhere. We have shown -- hopefully, in the presentation, we've shown that we just bought a label in Brazil. AWAL is based in the U.K., but we think there is enormous opportunity for AWAL in new areas of expansion. For example, in DIY, we see that being an emerging market phenomenon. We have bought catalogs not only in the major Western markets, but we've recently bought catalogs in China and India. We have bought merchandising companies in every market in the world. We have bought management companies recently in Germany and Mexico. So I mean, our eyes' on the world. We see our M&A opportunities anywhere and everywhere where our content is valuable. And from that process, we truly are in 65 markets and growing in the world. And anywhere where we think there is a deal that enhances our ecosystem, we will be there. Thank you.

So we'd like to entertain the next question. Ms. Nakane of Mizuho.

I'm Nakane of Mizuho Securities. Thank you for your wonderful presentation. Two questions. The first question is a direct-to-consumer philosophy, DTC. The PS platform is now the streaming videos now more. But you might use that streaming, is that the one area to utilize? Or do you intend to acquire to have your own platform as well? So could you please give us a hint at which direction you are going to explore? The second question. To acquire more artists against the competitors, what is your differentiating strength? On behalf of Sony Group, you have group assets which might be quite effective to acquire good talents, artists. But the like films and movies and games and VR as well as the Sony Electronics audio technology, you have all the strength in different fields. In terms of artists, do you get the feedback from artists especially to acquire artists? Which areas are the most effective for you to acquire the good -- the artists specifically? Do you get feedback and opinions from the artist directly as to why they are attracted by Sony?

Okay. The first question is I don't perceive us as having our own D2C platform. We do have, as you mentioned, PlayStation. We have far more synergy at any point in PlayStation history with how our content is aggregated by PlayStation. So we feel very positive about that process. I think the -- a direct D2C platform is something that we constantly discuss. But as yet, we want to be on all platforms. And I think we should be very, very careful that we don't interrupt the landscape by suffering, by having our own platform and being penalized by the multitude of DSPs and various platforms around the world. We have a more diverse platform marketplace in the world now than any point. So we welcome that. The more competitors we have for our content, the better. And I think that's where we stand today. I would say that I -- there is constant dialogue at Sony about how we make our content available across the Sony sister companies, and we are pretty positive about that approach, too. As to the second question about more artists, we want to have more artists and we've doubled our roster nearly in 2 years of artists. But the fact is that, as I mentioned in my presentation, there are 60,000 tracks being downloaded and streamed a day and uploaded to the DSPs. So we cannot sit still and say, okay, our roster size is flat. The good news is, as I mentioned, in emerging markets, we are finding more and more repertoire from new places around the world that suddenly have a global footprint than any point in history. So we -- I am as aware of the charts for streaming in Mexico as I am in Russia, as I am in Indonesia, as I am in traditional markets like the U.S. I imagine that our roster size will continue increasing at a rapid rate. We find artists through a much more sophisticated data and analysis system because that's what we have. We have more tools for finding artists earlier. And with the addition and the growth of The Orchard and AWAL, we cast our net deeper and deeper and deeper to find content. And that's what we do. And that comes -- that brings content, artists, songwriters, opportunities of a vertical growth into our system. And so we see no reason that will slow down, and we'll -- we see our roster size increasing, increasing as the years go by. Thank you.

Since time is very limited, the next question will be the last question. [Operator Instructions] So SMBC Nikko Securities, Mr. Katsura-san, please.

I have just one question. For global top 3, how you differentiate yourself over the top 3? What is your strength? Warner Music and Universal Music will be listed very soon and going public. And from Rob, investor community vis-a-vis investor community, how you appeal strength and differentiation of your company over your peers? And what is your view? And you say that on Page 3, your growth will be more than market. And for the KPI, I believe that you want to pay attention to those KPIs. Or in other than those listed KPIs, if there is anything that the investors wish to pay attention, in your view?

Okay. Well, hopefully, in our presentation, we spelled out that our metrics, we think are, if anything, going in the right direction, more positive than our competitors. We understand and respect our competitors. There have been 3 big companies for a long time, so we know the process by how we all work. I think our earliest point of differentiation going into the new chapter streaming growth was that we did purchase The Orchard at the right time. That is a market leader. That is how we are able to stop the dilution of music through the number of songs and tracks going into Spotify. Our market share is going up. That is hard to do. So we think that is a market differentiation to our competitors. We think that there are, obviously, nuances. We have caught up very quickly in the challenges we may have faced talking to you even just 2 years ago. So we are -- we think we're on a more rapid growth curve than our competitors. Obviously, they -- both our competitors are in an IPO situation. We'll learn from that. We'll understand that in a different way. They may do things differently because of the IPO. But in terms of our short, mid- and long-range plan, we are very clear cut on the rapid growth we need to have, obviously, feeding off streaming growth first of all. But as I explained in my presentation, in every level of the company, we think we are different. And of course, Sony is a brand that is trusted and liked by the artistic community. And I have been in the company for 35 years and the level of cooperation between the Sony companies is the best it's ever been. We highlighted examples in our presentation. I'm sure that Jim will highlight the presentation in his PlayStation presentation about the synergy, and I'm sure Tony and the electronics team will as well. But we know that our community likes the brand, and we will continue to differentiate ourselves. We are not owned by the same company as our competitors. We are owned by a company with an extremely positive global brand. And we will obviously focus on that when we deal with an artist. There is not an artist in our system who doesn't like Sony.

So now the time is up. So we would like to conclude the session for the Sony Music Group. Thank you so much for your attention.

Thank you.

Next session will begin from 9:10. So please wait for a while. [Break]

We are about to start the session of Sony Music Entertainment. You're kindly requested to wait for while.

It's time to start the session on music -- Sony Music Entertainment, Inc. Please watch the presentation by Shunsuke Muramatsu, President and Representative Director of the Board, CEO of Sony Music Entertainment Japan.

Hello, everyone. I'm Shunsuke Muramatsu from Sony Music Entertainment Japan. I am delighted to have the opportunity to introduce our business and explain our strategy today. This is today's agenda. First, I will provide you a corporate overview touching on our history and management policy. Second, I will review the previous fiscal year, highlighting same -- some of the major achievements so that you will better understand our strengths. And last, I will explain our mid- to long-term business strategy. Let's start with the corporate overview. Sony Music Entertainment Japan, Inc. started in March 1968 as CBS Sony Records, a joint venture between Colombia Broadcasting System, Inc. and Sony Corporation. It was the very first joint venture company, following capital liberalization measures in Japan. And for Sony, a very first entry into the software business. A diverse set of individuals sharing a desire to venture into the recorded music business with a brand-new approach joined by company and through the active exchange of ideas and various struggles along the way, our unique culture of entrepreneurship took shape. As a result, in 1978, 10 short years after our founding, we achieved the goal we set for ourselves at the time of our founding, which was to become #1 recorded music company in Japan. This DNA continues to live on at Sony Music. We have grown our business by continuing to develop new businesses without being tied to industry norms. From the start of our business through the 1980s, our goal was to build and strengthen our music business from scratch. In addition to strengthening recorded music, we work to enhance our financial underpinnings through vertical integration, launching CD manufacturing and distribution businesses, while also starting artist management and new artist development businesses. Following the success of these efforts to strengthen our music business, we set out to diversify our business horizontally. We launched a capital licensing business in the 1970s and aggressively entered the anime business in the 1990s. The anime business has now become one of the key pillars of SMEJ. Since the 1990s, we have been focused on diversifying our solution business to expand the manner in which we deliver content to users, including the creation of a venue business, a live event merchandising business, and a music-oriented media business. This has enabled our entertainment solution business to support both the artist and music and the visual and character businesses. Our history is one of strengthening and expanding the scope of our business fueled by our entrepreneurial spirit, and I have no doubt that we will continue to do the same thing going forward. We started with the music business, but we have expanded beyond it to encompass a variety of businesses related to entertainment. We have expanded our reach for more than 50 years to the point where we are a comprehensive entertainment company with a portfolio of 3 business segments: artist and music, visual and character and entertainment solution. This slide shows the management policy I introduced when I became CEO of Sony Music. One is born from zero through the breath pangs of artists, creators and staff. Then one becomes infinity, thanks to the various functions of our company. Through repeated success, we strive to contribute to creators, fans and society. This is our corporate mission. Diversity and entrepreneurship create new tastes, and these new tastes lead to the birth of new hits and new businesses. Our tireless effort to continue this cycle is the core competence of our company. Now I would like to discuss some of our achievements from last fiscal year. Last fiscal year, COVID-19 stalled economic and creative activities and created a very difficult social and economic environment. Still, I'm very pleased to say that we were able to deliver numerous hits. In music, Kenshi Yonezu's latest album, Stray Sheep, became a million seller, with more than 1.8 million copies sold. LiSA enjoyed huge success with her Demon Slayer theme songs, namely Gurenge and Homura. And new artist, NiziU and YOASOBI had exceptional breakthroughs during the year. In anime, the film Demon Slayer made history by recording the highest box office revenue ever in Japan and helped make hits out of its soundtrack and merchandise, all of which combined to create a social phenomenon. The film has been well received overseas where we have released it theatrically and through digital distribution. In mobile games, Disney Twisted-Wonderland became our latest success. In the character licensing space, Peanuts continues to receive strong support from customers, and so does our new Snoopy Museum in the Tokyo suburban area. And as a means for artists to distribute their work during the COVID-19 era, we successfully launched from scratch, a live streaming platform called Stagecrowd. From these projects, I will share 3 in detail as examples of our diversity and entrepreneurial spirit. The first is YOASOBI. This music unit was born from an online site for the sharing of novels that was launched as a new business initiative. YOASOBI was a project that involved all the various resources of the group. We combined our music production capability with a new music duo discovered by our development team to create songs from an original novel that have been posted to our monogatary.com website within our incubation business. We then distributed those songs around the world through our collaboration with The Orchard. The first single, Yoru ni Kakeru, was released in November 2019 and exceeded 300 million streams becoming the #1 song in Billboard Japan's Hot 100 during FY 2020. We are constantly trying new things such as this as we engage in our incubation efforts. One of our company's strengths is that we can generate new hits when the right chemistry is found through these efforts. Demon Slayer was the biggest standard success of last fiscal year, but it is also an example of our company's diversification. Ever since the launch of our anime business, we have established strong relationships with third-party partners through our planning and production of numerous releases. In addition, we have strengthened our licensing department while expanding and diversifying our sales and distribution channels, so our customers and fans can enjoy our IP to the fullest. I believe the enormous success of Demon Slayer is the culmination of the efforts we have made in our anime business over the last 20 years. Our partnership with a highly acclaimed production studio made the visual expression of the TV series true to the ambience of the original story, and that made it a hit. The talent of LiSA, one of our recorded music artists, led to the amazing theme song being sung in a manner reminiscent of the series that the anime fans loved. And our collaboration with capable partners enabled us to offer a full suite of related products and digital distribution. The quality of the anime series and our touch points with the customers combined made this IP a huge success. Furthermore, we are hard at work extending the reach of the film outside of Japan by marketing it through our local subsidiaries, working with our sister company, Funimation, to distribute it digitally and releasing it into theaters outside of Japan. We are also working on a new broadcast TV series and a game based on the anime. We plan to create additional works that meet the expectations of fans. The role of our entertainment solution business is to deliver entertainment to customers either directly or indirectly. Our business encompasses a wide variety of services, including manufacturing and distribution related to physical versions of music and video product, event management, fan club management, and merchandising development. We also handle product for third-party clients. We are the pinnacle of diversity. Our entertainment solution business has expanded its scope because it has earned an excellent reputation from its wealth of experience in the physical space, including packaged media and merchandise. Going forward, we intend to grow our digital services offering with the goal of establishing a one-stop solution for clients in the entertainment space. One example of our emphasis on digital services is the launch of our live streaming platform, Stagecrowd. Last June, when it became difficult to hold live events due to COVID-19, we successfully launched Stagecrowd from scratch to support artists and fans as well as to protect entertainment market. Its success came about due to the daily efforts of our solution business, which is constantly on the lookout for problems facing the industry. Thanks to the support of many parties, we are receiving positive feedback as to the quality of the sound and video on Stagecrowd. In addition, our entertainment solution business leverages the new technology to offer brand-new entertainment experiences and to create new emotionally-impactful experiences for fans. From here, I would like to explain about our mid- to long-term business strategy. In the Recorded Music business, we intend to strengthen our artist development capability to nurture numerous artists who can generate major hits on a consistent basis. To respond to growth in the digital entertainment space, we will expand the breadth and depth of our artist discovery and promotion activities to increase our hit potential. The important metrics we use to monitor this business are market share of new releases and breakthrough rate of new artists on streaming services. In the anime production business, we will continue our efforts to deliver a wide variety of titles and to expand the reach of those titles to the utmost. And we will attempt to further diversify our product offering by expanding our target audience to include young children and by keeping a good balance between acquired and original titles. Our development capability will be strengthened by expanding our monetization channels beyond TV and film to include mobile games, licensing and international distribution. The things we emphasize the most in this business are the quality of our products and the diversity of the channels we use to distribute our content. In the Entertainment Solution business, we aim to maximize the value of IP by expanding digital service offerings that deliver content to as many customers as possible. Going forward, we will offer new services and collaborate with even more partners. Hits are made when communities of fans connect to each other. Our final goal is to create and maximize fan engagement by pursuing a business strategy in the 3 areas shown here. One of the most effective tools for achieving that goal is technology. Technology enables us to enhance our content creation capability and digitize distribution. As a result, IP content with completely new added value comes to life and can travel around the world through digital. In other words, our chances of creating content with global appeal increase. Also, technology will lead to innovation in the viewing environment in the future and will facilitate new ways of enjoying entertainment never before imagined. We have begun to integrate technology to start new services in collaboration with Sony's engineers. These include volumetric capture, a new way of displaying live concerts; event production that uses VR technology; and forTUNE meets, a service that connects artists and fans online. All these newly introduced services have been well received by both creators and fans. By continuing these efforts, we aim to deliver IP content with a view to global distribution, and we aim to deliver intense, emotionally-impactful experiences never seen before. To wrap up, I want to recognize that the impact of COVID-19 on the entertainment industry has been significant, and it has forced us to make several changes. We are no longer able to deliver content by drawing people to designated locations like live shows, events or museums, and the biggest change has been the shift to a new style of delivering content directly to users through digital social media. The process of extending one into infinity by delivering content to our customers and generating hits, in other words, the pathway to hits, has completely changed. To adapt to this change, we will react flexibly by strengthening our digital capabilities. At the same time, one thing remains unchanged. That is people's craving for the excitement and emotions engendered by entertainment or the creation of 1 from 0 through the power of hits. The significant change in our business environment has reminded me of the unchanging power of hits and the unique strengths our company has. We will aggressively promote even more than before the creation of hit content going forward. We, at Sony Music Japan, will innovate around our access of diversity, fearless of the changes occurring around us, to deliver emotionally-impactful experiences to people connected around the world through entertainment. We hope to contribute to the growth of the Sony Group through this continuous focus on innovation. Thank you for your attention.

Let's start the Q&A session. From Sony Music Entertainment, Japan, Inc., we have President and Representative Director of the Board, CEO, Shunsuke Muramatsu; and Director of the Board, CFO, CIO, Satoshi Senoo, are here to answer your questions. Let's start the Q&A session. [Operator Instructions] From Nomura Securities, Okazaki-san, please.

My name is Okazaki from Nomura Securities. Can you hear me?

Yes, we can hear you.

First question, about DTC. Your idea on DTC as a group. DTC is something that Sony is focusing on as a distribution platform being acquired, that's the direction Sony's heading for. Through this, the existing anime business model, how is it affected by this? Because DTC, within DTC, there are certain areas that you would like to encircle. But at the same time, Sony, you would like to collaborate with as many partners as possible. So please tell us about your idea on this. Second, IP investment, your idea on IP investments. Just like before, to grow IPs, I think you're focusing on nurturing and developing. But in the entertainment areas, purchasing powerful IPs from outside, do you think that will be your option going forward?

Thank you very much. About your first question, about direct-to-consumer, DTC. To be sure, Funimation is one example, the quality anime content for animation tries to -- we try to deliver this not only in Japanese market, but outside Japan as well. So DTC is a very important marketing partner, one of the important marketing partners. So the first-party platform, of course, with a high priority, we'll keep this first-party platform. The title has its own power, and we try to maximize their value to the users and fans. So on a title-by-title basis, we try to come up with the strategy to deploy them. In the North America Funimation, the Demon Slayer are being distributed by Funimation. And in the theaters, there was a great success at theaters. So together with the partners, we continue our collaboration. A good example is the Demon Slayer at this time. Thank you. And then your second question about the investment in IP. Earlier in the video presentation, I mentioned this, creating 1 from 0. That's an investment needed there, and we are going to powerfully promote this within company, be it music, anime or games or solutions. There are various businesses we have. And from 0 to 1 is something that we try to uphold. Development, nurturing; that's the portion as an investment area that we would like to focus on and strengthen. Several years ago, we purchased the rights of Peanut and Snoopy just like that. Evergreen. About evergreen titles, we try to grow and nurture we -- not only the organic growth, those from outside can be one example of 0 to 1. Thank you.

So now I would like to move on to the next question. From Goldman Sachs, the Securities, Mr. Munakata, please.

I'm Munakata from Goldman Sachs Securities. I have two questions. And first question is within domestic market, you have been growing. And against that backdrop, you said, for instance, YOASOBI, that is a new digital hit. And from Sony Music, those hit, the titles have emerged one after the other. And that, the success is not by accident, but it is continuing the process. In other words, your organic -- the organizational strength to discover the artist. And so please tell us the strengths in it. And the next question is about Aniplex and for Demon Slayer, as you said, made a big hit. And so rather than using the traditional approach, I think the number of stakeholders is limited and small. And so what is the strength of Aniplex? So from upstream to downstream, in the whole process of the IP, how the partners evaluate you highly with regard to Aniplex? So those are the two questions.

[Interpreted] Thank you very much. First, answering your first question about the new artists like the YOASOBI digital artists and their contributions to our business. And so in terms of our organization to discover new artists, and we have some development SD department and ever since CBS Sony era that has been existing. And so it has a history of 50 years, so that is capable. It has the capability not much for others for the discovery of artists. Demonstration tapes, for instance, recently, we did have a digital approach by the artists, and so that department has been checking all different sources of the music over the last 50 years. So that manpower that has been contributing to the development of new artists. And so based on that, the past know-hows and skills, for instance, in the area of digital music, the marketing department has been making lot of efforts in order to meet the needs of the users, in order to promote the recorded music and the management of artists. So marketing department has been developing the rights pertaining to artists. So I believe that, that is the very strength of our company. And regarding Aniplex, and your question pertains the strengths of Aniplex. And on this matter, even located within the Sony music, 30 years ago, decided to launch the anime business. And the founding members have remained unchanged and has the same level of passion. And I think that is the very strength of Aniplex. And the world view of anime and also to meet expectation of the fans, by so doing produced titles. And also, that is asset we have accumulated over the history, including the promotion method and our relations with media and for creators and producers, the relations with them. And so because of the great passion over the history, I believe that our passion is differentiated over our competitors. And so last year, the last year that was culminated in the Demon Slayer over the past years. Efforts have been culminated there.

[Interpreted] Let's move to the next person. Hirakawa from BofA Securities.

[Interpreted] BofA Securities, Hirakawa. I have one request in smartphone games. In yesterday's Corporate Strategy Meeting, mobiles games importance was focused. And then last year, Disney's Twisted-Wonderland became a big hit after FGO. In the smartphone games, it's difficult to come up with the big hits. And then this is the second hit that you had. Are you going to have the third or the fourth success, repeatability of the hit? Is there any secret of repeated success? Whether -- and tell us whether you feel that repeatability of the success has enhanced -- been enhanced.

[Interpreted] In the mobile game market, there's -- no forecast prediction is allowed. It's a red ocean being intensified one major title appears and then users time will be absorbed by such major hits. So it's a red ocean. Last year, Twisted Wonderland is a new application game we launched and then it became a big hit. And that gave us more confidence to us game team. And based on the success of FGO, various games were launched. And then sometimes we didn't succeed so much, but we accumulated findings and then we are growing based on these experiences. As far as our titles are concerned, fun engagement has to be captured to maximize the lifetime value of an IP. That's how we develop titles. And then it's not only pursuing the size, but the quality of the game is important to us. And then our strength is like animation by Aniplex and label management, managing music and talents. When the game is being made into IP, we leverage on this strength. And so we are going to improve on this in the MRP. For Demon Slayer the development business is included, so we try to respond to the expectations of the fans to deliver the high-quality games.

[Interpreted] Move on to the next question, SMBC Nikko Securities, Katsura, please.

[Interpreted] I have 2 questions about M&A. Your view about M&A. The first question is that in a traditional music business, globally, publishing and recorded music, there have been a lot of deals existing there. And back in Japan, some old electronics manufacturers and the independent, the players, there are many. And they are adversely affected sometimes by COVID-19. So in that -- under those circumstances, do you have any opportunity. But because of the difference in culture, you will take different approach or with evolution of the market, whether that chance is attractive or not. So that is the first question. And second question is that in Anime area, in the front end, the manufacturing production for Netflix, like distributor like Netflix, sometimes has a direct equity, the participation in production company. And they are -- majority of them are small and medium-sized companies, and there are so many different ones. And so the Aniplex or SMEJ, I don't know which entity. Is there any approach to have a direct equity participation and/or support in those companies?

[Interpreted] So answering your first question. It has been increasing globally in music market and whether we -- there are opportunities in Japan or not, that is your first question. So when we look at the music market, as a whole, in Japan, as Rob already mentioned in his presentation, for instance, there's still room for the digital distribution, the physical still occupies 60% to 70%. And streaming market, of course, that has been growing 20% year-on-year. So there is a good -- the process growth. But streaming is not the main player yet. So in light of this situation at this moment, of course, using the master, the record, the business, of course, we would like to create good ones and for physical or download or streaming, need to deliver the good titles. That we continue to pursue, but in an effort to expand the music business further, live business or fan club management or merchandising business will grow, and that's what we would like to do. So in that area, there could be the chance for M&A, not only from 0 to 1, from one, how we are able to expand it to deliver the services to fans. So could be the opportunity to make investment in different kinds of services. And the front end process of the anime production and anime, excluding Netflix and the gigantic platformers, interest in the production of Japanese anime and A-1 pictures, CloverWorks, and there are 2 first party studios on our own. And we do have creators creating the titles for us. And they are our own employees, and their creative capability and the capability to deploy the titles, we need to streamline their capabilities. That is the first thing we have to focus on. And on top of that, in order to enhance the quality of titles, we do need to enter into the strong partnerships of external partners. That's also we would like to pursue.

[Interpreted] Thank you. Let's move to the next question from Morgan Stanley MFJ -- UFJ Securities, Ono.

[Interpreted] Yes. My name is Ono. I have one question. Starting this year, the new MRP starts. As SMEJ, your contribution to the performance -- financial performance in terms of that contribution, what kind of performance trend are you expecting? I don't think you are going to disclose numbers and figures. But in the FY 2020, you witnessed various hits. You are blessed with many hits, but at the same time, considering post pandemic period, maybe the events will come back. There are positives and negatives about that. But from Demon Slayer, LiSA came as a hit broader but hits as a synergy. Is it going to continue in expecting post pandemic, what kind of profit trend are you expecting next year and the year beyond?

[Interpreted] Now our CFO, will answer that.

[Interpreted] Thank you for your question. In the current MRP, our contribution to the profit, what kind of payments do we have in especially the music hits and anime hits and post pandemic environment, what would be our contribution. I think that's the gist of your question. In FY 2021, pandemic was supposed to end JPY 600 billion is the market of the live concert market, and we were expecting that will come back, but the situation is not that as you know. After the second half, I'm sure that kind of situation will come back again. And then before FY '19, the music masters were not doing well, but the live events were quite contributing to the profit and revenue that was the market structure. But when the pandemic is over in this MRP 3 years, live events, music and anime, there should be maximization of synergy among these things to contribute to the profit. In terms of synergy, the stronger genre can lead weaker ones. But in our case, unfortunately, music, anime, entertainment solution group, they have infrastructure platforms. And in each genre, each one is almost #1 in the group, and then they are collaborating to have the maximum synergy to contribute to the MRP targets. And in Sony Group, electronics, R&D and game, mobile, we worked with them for the last several years. Our collaboration with them has become quite active among the employees not only try to see what the others are doing. The artists come to see the technologies and give us feedback to leverage that into the new services and new products. And that kind of environment is being generated in each genre -- in addition to the growth of each genre, entertainment leveraged on the new technology, the new genre, if that can be generated, that can be -- give us the lift in our contribution to the profit.

[Interpreted] Time begins to run up. So next question will be the last question. [Operator Instructions] Mr. Nakane of Mizuho Securities, please?

[Interpreted] Nakane from Mizuho Securities. I have one question. Particularly in the anime business, your collaboration with the pictures, America, and looking from outside, for the division of role or the decision making process, we do not know how the role is divided. So how -- what is your collaboration? What kind of organization structure is the best. Do you think that current structure is the best or there is any chance of the better organizational structure going forward?

[Interpreted] So in the United States, we have a collaboration with SPE. How we collaborate for decision making and the current -- the structure is the best or not? Those are the questions. And regarding SPE, in terms of decision making, within Sony Group, animation comes into our group. And particularly, the Japanese animation content. Since within funimation and SPE, there are other people stationed who are able to check the quality, the check of Japanese anime. So he's permanently located there. And from Japanese side, of course, directly to Los Angeles SPE, we constantly communicate with them through the meetings and conferences. And as organization structure, how we should position Japanese animation or SPE, they have motion picture business. And of course, there are a lot of things in common between the 2. And as Mr. Yoshida talked about the -- IP's nature is different. And therefore, the nature of the IP differs from country to country under the different cultures. And therefore, setting aside the question whether the current -- the organizing structure is the best -- yes that is a question we have to consider. So with this, we would like to end the session for Sony Music Entertainment. Thank you.

[Interpreted] The picture session will start at 10:40. Thank you. [Break]

[Interpreted] We're going to start the picture sessions shortly. Please wait for a while. Now it's time to start the session on the pictures. Please watch the presentation by the Chairman and CEO, Sony Pictures Entertainment, Tony Vinciquerra.

I'm pleased to discuss Sony Pictures Entertainment's business, particularly at this extraordinary moment when we are seeing such great progress in managing, containing and hopefully, eradicating the ongoing COVID pandemic. We have many reasons to feel optimistic about the direction things are now headed. Now as you know, the entertainment industry was hit especially hard by the pandemic, especially in the early months. With theaters closed in all major markets, productions shut down and it severely upended advertising market, revenues across the entire industry have been negatively impacted. It's been a challenging year to say the least but we've kept our business moving forward. Theatrical distribution was the most severely impacted part of our business. Without theaters, we had to push several major titles into the next year. And for other titles that could not be pushed or that we felt would get lost in an oversaturated market once theaters came back online, we made strategic licensing deals with several streamers. Those licensing decisions were necessary due to the pandemic, and all of them were great deals for us. We remain firmly committed to theatrical exhibition, and we very much look forward to being back in theaters in a big way. We'll discuss that in greater detail shortly. As the pandemic stretched from weeks into months, we were one of the first major studios to get back to production, working with local government and health officials and industry partners to restart safely. That was and still is a massively complicated effort and essential for keeping our pipeline strong for film and television. And during this time, we tapped into the explosive demand for in-home content and saw our direct-to-consumer businesses grow significantly, including funimation, our global anime service and ratings for key shows also performed exceptionally well, especially in our game show business, including fan favorites, Wheel of Fortune and Jeopardy!. Our Indian networks were a standout. Viewership grew during the pandemic, and SPNI having 2 of the top channels in the Hindi markets, a strong sports business and a market share of over 17%. And as markets began to return to some semblance of normalcy we are making great strides in capturing the rebound of ad sales. Now all that said, and despite the enormous challenges and negative impact on revenue, the studio posted very strong financial results for the fiscal year ending 2021 and a strong forecast for fiscal year 2022. And a few years ago, at this same meeting, I talked about our margins and our goal to improve them. And as you saw in our most recent earnings report, we made meaningful progress on that front. And while this past year is certainly an outlier as the lack of marketing costs for major theatrical releases led to our strong fiscal year profit. We've been able to steadily improve our operating income through tighter, more strategic management of our businesses and cost discipline. Sony pictures plans to generate a stable level of operating profit for the 3 years of the new MRP by continuing this strategy and through onetime items like our recent Seinfeld deal, which was a great example. As we look at the current entertainment environment, we're seeing fundamental shifts in long-standing consumer behavior that's impacting every part of our business. Industry consolidation and the strengthening of streaming players due to the pandemic has altered the landscape considerably, with media players focused on driving value via their direct-to-consumer services. These industry changes are especially apparent in our television production business and in theatrical distribution, which is undergoing a veritable sea change in the traditional theatrical windowing model. In television production, the shift from linear to on-demand viewing, something that started long before the pandemic, but has greatly accelerated over the last 12 months has upended the traditional TV market, with far lower demand for broadcasting cable series, especially dramas and reductions in episode and series counts, there is less long-term value for third-party television producers. Our U.S. and international television businesses are focused squarely on adjusting their business model to align with these new realities, with so many new streaming players entering the market, demand for content continues to rise, and our television production teams are really busy. Shifting priorities from traditional linear distribution to digital platforms, volume and franchise building with key Sony IP, including mining Sony's vast library of game shows and meeting increased demands for lower cost unscripted content. On the film side, the traditional theatrical window model has been completely upended, another dramatic industry shift, greatly accelerated by the pandemic. Several studios are now exploring shorter theatrical windows before offering content on their streaming services or even offering day-and-date releases with streaming and opening in theaters on the same day. Ultimately, this will raise the bar for theatricality in films and films following a traditional theatrical release will continue to be important to talent. Indeed, with our firm commitment to theatrical distribution, we've seen an uptick in top talent wanting to work with us. Now we have great confidence that audiences are going to return to theaters globally as COVID begins to wane. Here are some really promising signs. China has seen 3 films gross over $400 million in local box office since reopening. Detective Chinatown 3 released in China grossed almost $400 million during its opening weekend alone, shattering Avengers End Game's box office record. Demon Slayer, the hugely successful anime film coproduced by Sony Music Entertainment, Japan's Aniplex, was released in the middle of the pandemic and became the highest grossing film in Japan's history ever, a very positive sign. And just last month, in its first 5 days, Warner Brother's Godzilla versus Kong, grossed close to $50 million at the U.S. box office signaling a comeback of theater going. This was especially encouraging to see considering only 55% of the U.S. Canada exhibition market was in operation in those 5 days. So people clearly are eager to return to theaters. And our motion picture group's Slate Strategy reflects that, targeting the same volume of theatrical releases that we maintained pre-pandemic, but there's more. We will now also be producing for streaming. Our Slate Strategy moving forward will be a combination of larger budget event films that meet the incredibly high bar for theatrical entertainment, while also producing more moderately priced films with flexible distribution options. This streaming component to our Slate Strategy is additive, not in place of our theatrical output and is reflective of the irrefutable changes in consumer behavior and high demand for streaming content. As you may have seen a few weeks ago, we signed an exciting deal with Netflix that includes a first look at any films we intend to make directly for streaming or decide later to license for streaming. That is a terrific deal for both Sony and Netflix, which will enable us to take advantage of our terrific movie making teams, and we have great capacity there. That first look deal was actually part of a larger, multiyear, 2-part output deal with Netflix and Disney that replaced our Stars deal, which expires next year. Netflix will have exclusive first pay 1 window rights in the U.S. to SPEs feature films, following their theatrical and home entertainment windows beginning with our 2022 film slate. Disney will then follow that with the U.S. rights to distribute Sony content across its vast portfolio of linear entertainment networks and streaming platforms. Both were great deals for SPE and reflect not only our outstanding content, but our advantages as an independent studio. Our ability to work with any and all partners and platforms is what made these deals possible and continues to be a key strategic advantage of ours as we look to the future. I'll conclude today with what we see as some additional growth drivers for the studio. As we look forward, we see several key areas of focus, including further investment in our established brands and creative talent for a new IP, growing our key communities of interest, including anime, Kids, faith, family and our India businesses. Broader monetization of SPE IP through location-based entertainment, expanding and diversifying our talent pipeline with greater diversity to reach broader audiences and leveraging the vast Sony media and technology ecosystem to Sony Group's synergy efforts. Our IP continues to be among our strongest assets. Our current slate in both film and TV reflects how we have built on our IP over time to create incredibly strong content across all platforms, especially as we look to grow our Sony pictures universe of Marvel characters and revitalizing classic IP such as Bad Boys, Jumanji, Ghostbusters and Cobra Kai, Karate Kid, just to name a few. And we continue to invest in creative talent and innovative deals to build our new IP. Last August, we struck a multiyear first look deal with Leonardo Dicaprio's Appian Way Productions to produce scripted feature films and are already in development on 2 projects. In September, Jamie Foxx and his producing partner, Datari Turner signed an overall deal with SPE to develop and produce feature films. We formed a terrific partnership with HarperCollins to acquire valuable book publishing rights. We signed a big overall television deal with the Oscar winning Duo, Phil Lord and Chris Miller, to develop live-action comedy and drama series as well as animated shows through their Lord and Miller production company. That will include a suite of TV series based on Sony's universe of Marvel characters. And another important overall television deal with Homeland co-creators/executive producers, Howard Gordon and Alex Gansa. We will also continue to grow SPE's diverse communities of interest, such as Kids programming, being driven by our animation and home entertainment teams and by our recent Silvergate acquisition. Family and faith, which has been very strong for us with our Affirm entertainment label and will grow even stronger now with our recent acquisition of Pure Flix, the popular family and faith streaming service. Anime, where our direct-to-consumer funimation had its most successful year ever, launching in Latin America and growing its subscriber base significantly. And as you saw in December of last year, we announced an agreement to acquire Crunchyroll, the U.S. Anime streaming service distributor, publisher and licensing company. That deal is currently making its way through the regulatory approval process. It is worth noting that while we've made the decision not to have a general entertainment streaming service, our 2 niche streaming services, funimation and Pure Flix, are profitable and growing. And finally, our growing networks business in India, which, as I said earlier, has seen viewership skyrocket. We've also been exploring several options to broaden our location-based entertainment business and license our key IP for immersive experiences across the world. Some recently announced parks include, our deal with Amazon Falls to develop Columbia pictures Aquaverse in Thailand, the world's first Columbia Pictures theme and water park. And our new Hotel Transylvania Attraction at Dream Island theme park, Europe's largest indoor theme park located in Moscow. These 2 projects build on the IP we've licensed for Columbia Pictures zone at Motiongate Dubai. And our individual theme park attractions based on Ghostbusters, Hotel Transylvania, Zombieland and Men In Black in the U.S. and around the world. Now as we look ahead, we're also actively finding ways to expand the pipeline for diverse stories and talent of all backgrounds with innovative and impactful programs such as our diverse directors and diverse writers programs. 2 great programs, which provide hands-on experience for emerging talent. Our television group has also recently launched the rising Storyteller search, a competition seeking emerging voices and female centric stories. Cine Sony, our premier movie channel for the bicultural U.S. Latino audiences, partnered with the National Association of Latino independent producers on an annual short film program for aspiring Latin next filmmakers called new voices. And most recently, the studio signed a unique first look deal with Jeff Friday Media, founder of the American Black Film Festival whereby the studio will be offered first consideration for narrative feature films submitted to the festival and access to emerging filmmakers. And finally, a critically important growth path for the studio lies in our ongoing collaborative efforts across our Sony media ecosystem. The Sony Group synergy connecting the studio with Sony Music, Sony Interactive Entertainment PlayStation and also Sony's vast technology and hardware businesses is a key competitive advantage for us. Some key collaborations include: our ongoing work with Sony music to collaborate on film and television content with key Sony music artist, Camila Cabello in the upcoming Cinderella, for example. Our work with Sony Electronics on Bravia Core to offer celebrated Sony pictures content on Bravia XR models and our terrific partnership with Sony's Aniplex on funimation. And especially with our close collaboration with PlayStation on developing game IP for film and television. That PlayStation partnership has tremendous momentum with the establishment of Playstation productions and 10 projects currently in development. 4 have been announced with some high-profile titles with top talent underway, Uncharted starring Tom Holland and Mark Wahlberg is currently in post production. The Last Of Us TV series from Chernobyl creator, Craig Mazin and starring Pedro Pascal and Bella Ramsey will begin production this summer. Twisted Metal, a television series in development from Deadpool writers, Rhett Reese and Paul Wernick and Ghost of Tsushima, a very big game title is now being adapted with John Wick's, Chad Stahelski directing. I'll conclude here and Philip Rowley, our Chief Financial Officer, and I will be happy to take any questions you might have. Thank you.

[Interpreted] Thank you very much. We now like to entertain questions. At this point it is from Sony Pictures Entertainment, CEO and Chairman; Tony Vinciquerra; and Senior Executive Vice President and CFO, Philip Rowley, those 2 will be responding your questions. So we'd now like to start the Q&A session. [Operator Instructions] Mr. Ezawa of Citigroup Securities, please.

[Interpreted] I'm Ezawa of the Citigroup. The first -- I have 2 questions. The first question is about Netflix and Amazon. They have a great funding capability. These powerful 2 companies are like that. They are trying to enter into the movies production and so on and TV programs. And so that's a trend that they spend more money in these areas. So on behalf of the overall industry, for the content production front, I think it's likely that the overall funding will go up for content production on behalf of Sony Pictures. So you do -- you don't see any change in terms of the funding backup for your company. But how do you cope with this new emerging situation? And now as to the performance and target goals for this fiscal term, the revenue target. The pictures in terms of revenue, the highest level of the revenue is planned to be achieved. But during the latter half that theatrical release as well as the secondary business, the window. You might have a concentrated release at the same time. It's kind of closed, so you might not be able to achieve the big hits or the revenue. So you still plan to have this big revenue. So what's the basis to support your forecast?

So let me -- let me answer the second question first. We have a terrific slate of films coming up, and we're very, very confident that we're going to compete very aggressively in the marketplace. So you're right, there will be, for the next 18 months or so, a veritable feast of films for consumers to see and the marketplace for theatrical releases will be terrific, and we're very confident that people will come back, as evidenced by just this past week, we released the Peter Abbott film in England. And in the face of 20 films in release in England, as theaters opened, we did -- we were able to take in 64% of the people who went to see films. And we believe that our slate is very strong and will be fine. On the first question, I'm not exactly sure what you're asking, except that there is going to be for the foreseeable future, at least through the next MRP period and probably further beyond a tremendous desire for quality products that gets done on time, that gets done on budget. And our studio is looked at as one that will produce terrific product. We have great creators. We have great IP and people who buy product from us know that they're going to get the product on time and on budget. So we're very confident that we can compete. And we do believe that the revenue streams from Netflix and Amazon and Disney+ and other streaming services will remain. Thank you.

[Interpreted] Thank you. We proceed to the next question from Macquarie Securities, Mr. Thong, please.

This is Damian Thong from Macquarie. Just 2 questions. The first one is on your production pipeline and how that will shift? As you mentioned the streaming is increasing its importance, would you have a sense of like how your, I guess, your production budgets will shift from theatrical to streaming? In the old days, I guess, you were producing and releasing maybe 10, 15 films a year, would that change for theatrical? The second question relates to TV production. Obviously, the demand for content continues to increase. Do you see yourself aiming to capture more of the long tail revenues, especially for TV production that they produce for streaming services?

I'll answer the first question. I didn't quite understand the second one. In terms of our production pipeline on the film side, we produce and release about 12 to 15 films a year and we have for many years. That's about what we think the marketplace will take. There is a battle for win, for getting on the schedule, for getting the appropriate gating for films. And that's probably the number that we are best suited for and other studios as well. We do buy some films and release them that are probably targeted at smaller revenue targets, and we have Sony Pictures classics as well, which is really deals in art house films and goes through a separate set of exhibitors. The deal we did with Netflix, however, provides a direct to streaming platform service where we will give them first look at that films that we will produce strictly for streaming services. We have great capacity, as I mentioned, in the short video you just saw to produce many more films than the 12 to 15 that we do for theatrical release. We have great talent. We have wonderful people in the film group, and we're all very, very excited to increase the number of films we produce. And we're still do the same number for theatrical release, and we'll do many, many more for streaming release. And would you repeat the second question, please?

Yes, I'll repeat that. With the case of the decline in broadcast and linear television, there's probably also a decline in that sense of, I guess, your the -- your ownership of the rights, I guess, the back end of the content you generate? Obviously, Netflix tends towards ownership of the content they buy. But with the strong demand out there, could you negotiate or are you negotiating better rights and better terms that allows you to capture more of the longer tail of revenue, I guess, for streaming content?

Every deal we've done with streamers is a licensed deal, that's not a sale of the product, so we do get the product back at some point. There are really 3 things you negotiate with the streaming services. One is the length of term that the license to the streamer is, the payment terms and the premium that we get on top of the production budget. And one of the things that's really been interesting is that as the streamers continue to compete with each other so aggressively and spending so much money to market and produce product, the budgets for these shows have gone up pretty dramatically. They're much higher than you'll see on -- than you have seen or we have seen on cable and broadcast productions. Thank you.

[Interpreted] We'll entertain the next question from Morgan Stanley, Ono please?

[Interpreted] I'm Ono of Morgan Stanley. About the movie film production, I have 2 questions on the films. First question is the industry positioning status, the Hollywood major companies, and you are one of the Hollywood major studios. But to maintain that Hollywood major producer status in the future, of course Netflix and other streaming will be utilized by you as well. But the total -- the production budget and cost might increase in the future or not. Because just for the sake of streaming, you might have more efficient production. So you don't really need to increase expense for movie production? That's first question. The second question is about content for the theatrical release contents. Maybe portfolio can be interpreted in a different way, as you have mentioned, conventional IP. You already have the classic and other IPs. That will be the basic assets. So that kind of series type of production of the films might increase its weight in importance or the famous actor and actresses, big stars might be used and some of the event type of huge films might be created more. So what will be the change of the portfolio and product mix in the future? What will be the change? So the famous big star artists and actors might be used more or the vice versa, the other way. Could you please tell us your future direction on what kind of films you will be producing?

So I think I just -- on the second question, I think I just touched upon that. We will continue with our Art House films through Sony Pictures Classics, where, by the way, we just won 2 Academy awards with The Father, which is a film that really we released through Sony Classics pictures. We will -- we have a label strategy where we release our major films through Columbia Pictures. We have several other labels, as we mentioned earlier, the Affirm group, which releases faith-based films. And we will produce 12 to 15 films on our own and buy some more and buy additional films and put and release those through our terrific distribution group. But the -- we will add -- as I said a few moments ago, we will add a number of films to be produced for Netflix and other streamers. We have the capacity to do that. So there will be a different mix. We will release about the same number of films to theaters, and we'll be releasing another number of films that we will license to streamers. They will not be sales, they will be licenses, and we will get those back in our library as we will with our TV shows. And the first question on cost of production, Phil, do you want to touch on that a little bit?

Yes. So overall, we try to be really very disciplined in terms of our production costs. So we don't expect them to go up massively. Clearly, there is a lot of competition for talent and that potentially can push up the cost of production a bit. And I think you're right, what we make for streamers, they're like -- they're not going to be the big high budget movies that you would normally expect. But I don't think we're expecting that apart from adding in the movies that we will make for streamers, I don't think we expect our production -- our overall production spend on movies to go up massively.

In fact, from this past year, we believe our production budgets will go down into the coming year because we're assuming that the COVID expenses will come out of those budgets. Thank you.

[Interpreted] Let's move to the next person from Crédit Suisse Securities, Nishimura. Nishimura, can you hear us?

[Interpreted] Nishimura speaking, One major question. Page 10. Sales and profits are shown for the next 3 years on a longer-term basis. What do you see the possible improvement of profit margin going forward, especially by expanding of the streamers, content's value is increasing, then how will -- does that affect your profit margin?

So I think one of the things that you always have to remember with profit margins overall is that it comes from a mix of business. And we have businesses with very different profit margins. So our Motion Picture group and TV production are on the lower end of the scale. Our network through the middle end of the scale. And then things like Wheel of Fortune and Jeopardy! got extremely high margins. So as you look at margins, you have to take that mix into account. We would generally expect the profit margins in each of our areas to grow, except in this coming year compared to last -- in the year that we just started compared to last year, because, of course, it's a year that we've just been in. We had very low revenues, about 30% down, below what we normally have. So we will see in the next year, undoubtedly, a margin decline, but we expect in each of our areas to be able to build margins as we move forward.

[Interpreted] We will have to entertain next question from Nomura Securities, Okazaki, please.

[Interpreted] I am Okazaki of Nomura Securities. About media network, what do you think of that philosophy. In the past, this you are trying to really figure this channel. But now India, direct-to-consumer is now -- has joined you. So you are quite active for that. So as the media network growth strategy, what is the plan and strategy for media network growth?

Well, our plan n pretty clear. We've been pretty consistent in talking about that over the past 3 or 4 years. We had a bunch of networks that we're following the trend of what goes on around the world where distribution through cable and satellite systems were reducing pretty significantly, and we had networks that were not doing well. So we've sold some. We've closed some. We've given some away. We've done a lot of things to rationalize that portfolio. And we're really, really now focused on India. India has been a terrific market for us. We have a very strong -- we have a very strong direct-to-consumer business that is called Sony Liv, which since last August has gone from about 800,000 subscribers to 5.6 million subscribers. So we're very confident that, that will continue to grow, and we're looking forward to fueling that even further with increased production expenditures. We have, as we mentioned, Pure Flix, we have funimation. We're hoping to get the Crunchyroll deal done soon. So our -- they are included within our networks business. We're looking for that business to really be the -- really a primary driver of our growth over the next several years. Thank you.

[Interpreted] Let's move to the next question from Mizuho Securities, Nakane.

[Interpreted] Nakane of Mizuho securities here. In the Motion Pictures and Media Networks, for each, in the FY 2020, and the final year of the MRP, the market outside the United States, India, China, Latin America, the proportion of the revenue -- what kind of change will it go through in the next 3 years? You talked about India earlier, India and Brazil, but China and Latin America as well, we would like to know. So if you could touch on the China and Latin America, I would appreciate it.

Well, China, obviously, is an important marketplace for us on the film side not as important on the television side, but it is beginning to grow a bit there. On the film side, we have some films -- we do have some films that will be released in China over the next year that we think will do terrific Venom, Morbius, which is another Spiderman character and Spiderman himself, which will be released in December. So we're looking forward to the next year and beyond as a real benefit to our China business. Latin America is a very unique area right now and hard to predict because of COVID. It's about 4 to 5 months behind where we are in the U.S., we think, in terms of recovery, as is India, which obviously is having a bit of a hard time. Brazil, particularly is in tough shape regarding COVID. We think that those marketplaces in Latin America, all the various countries will be very strong for us, though, because there's strong growth in the population, there is strong growth on streaming services. And it is one of the few places in the world where linear channels are still very, very strong, and we have a number of linear channels in Latin America. So we're looking forward to those continue to be big contributors to us. And then playing on the streaming growth as well. Thank you.

[Interpreted] Any other question from the floor. If not, well, Mr. Ayada of the JPMorgan, please?

[Interpreted] Ayada of the JPMorgan. I have one question about financial the management and your philosophy, for example, theatric release in the period or window will be shorter in the future. And rather, the streaming will increase in terms of your revenue. But in terms of cash flow, what kind of impact will be brought about by the shortened theatrical release window? Like the cash convertible cycle might be extended prolonged. So in the short term, you might have a difficulty in gaining enough cash? Is that a likely problem? And in that case, so ROIC and then free cash flow, do you get some impact on free cash flow in the upcoming 3 years? So do you have any particular thought or idea as to how to deal with that situation?

I'll touch on that, and then Philip can add some -- sure we'll have some comment as well. You're referring to the change in the windowing strategy of film release, theatrical film releases, I believe. Is that correct?

[Interpreted] Yes.

Okay. So what will happen is, instead of the typical -- in the past 90 days of exclusivity to theatrical release, it will be shortened somewhere 45, 60, we're not sure exactly where that will end up, but we believe that will be a positive to us, not a negative. It will allow us to market the movies that we release once as opposed to twice. Today, when we release a film in the theater, you'd spend an enormous amount of money to do that and then 90 days later, when you go to home entertainment, you spend another enormous amount of money to release it in home entertainment. If it's 45 days, for instance, you can spend that enormous amount of money once and maybe do a little booster shot later on. So we believe we'll be spending less in marketing in a more effective way. And you're bringing more revenue in closer to the release of the film itself into the year where you release the films theatrically. Phil?

Yes, I think that's absolutely right. Remember that the vast majority of theatrical releases will come in within a 45-day window in any case. And it just means that we move into the home entertainment pay one windows faster. So if anything, it's going to help cash flow, not damage it.

And with the deals -- the deal we just did with Netflix and with Disney, those revenues will come in more quickly as well. So this is a positive, not a negative. Thank you.

[Interpreted] The time is running out. So the next person will be the last one to ask questions. SMBC Nikko Securities, Katsura.

[Interpreted] One question about the use of technology, I would like to ask your idea. Crystal LED is used. There can be a cost reduction coming out of it. Game engines, the use of game engines and the use of computer graphics technology is being used more and more for production. So in production area, is it going to reduce the total cost or the cost per IP may not change, but the quality of that IP may be enhanced, is that the reason to use technology. So your initiative now is there any differentiation from your peers? So any differentiating strategy that you have? I would like to know.

Well, we have a number of projects happening as we speak, to find ways to improve both the quality of the production and the cost of production. And we are really, really focused on that, both on the television side and the film side. You mentioned a few Crystal LED, the different ways that we can find to limit the cost of production where we have to go off -- out of stages and onto sets. We're very, very focused on that. We have a lot of projects happening. This is one of the real benefits of being part of a company like Sony, who is a leading proponent of finding new ways and new formats and new ways to find less expensive and more productive and higher quality production. Most films are now being produced with the Sony Venice camera, for instance, which allows much more flexibility for the director and the producer of theatrical films, and it's been accepted quite widely in a very, very short period of time, and we're very thankful for that. And we have, in our innovation studios, a studio here, a number of, call them experiments, but they're really ways to find process that will improve production and lower costs. So we're very focused on that. And hopefully, we'll be seeing some real results from that over the next year or 2. Philip, do you have anything to add to that?

No, I think that's absolutely right. And what will happen, of course, is that as these new technologies develop, we do expect that you get -- would get the normal effects of costs coming down.

Yes. And hopefully generate some revenue for Sony for the other parts of the Sony Group, which would be a nice thing, too. Thank you.

[Interpreted] Now it's time to end our session on the pictures. Thank you very much.

Thank you.

[Interpreted] This concludes IR day of Sony on the first day program, so we'd like to concluded this one. At 9:00 Japan time, we would like to resume this session tomorrow. Again, thank you very much for your participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]