Sony Group Corporation (6758) Earnings Call Transcript & Summary

[Interpreted] Ladies and gentlemen, it's time to start Sony Group Corporation's 2022 Business Briefings. My name is Hayakawa. I'm happy to serve as your moderator. I'm from IR Group, Finance Department. First, please watch a video on Sony Group's purpose. [Presentation]

[Interpreted] At the opening, I invite Sony Group Corporation Executive Deputy President and CFO, Hiroki Totoki, to explain how this business briefing is positioned and to introduce the speakers. Totoki-san, please.

[Interpreted] Thank you for joining Sony Group 2022 Business Briefings. At the outset, may I spend a few moments to explain the idea behind this Business Briefings and introduce the speakers. This year, we've changed the name of this event from IR Day to Business Briefings. Back in 2014, when Sony held its first IR Day, our performance was sluggish, and we are faced with the challenge of improving transparency of management. With this recognition, our CEO, CFO and the heads of businesses started to hold IR Day with the aim of directly communicating with those in the capital markets, so they would deepen their understanding of our businesses. Past 4 to 8 years, so we believe we have achieved a certain level of results for our initial objectives. So we decided to start holding this event as Business Briefings from now on for a wide range of stakeholders. At the same time, as regard to our dialogue with the capital market, we'll improve its quality of holding -- by holding small meetings by business segments in a timely manner. Allow me to spend a few minutes to explain the purpose -- the progress on the fourth mid-range plan, MRP, which I discussed at our financial results briefing on May 10 this year. Under that theme of the current MRP, Evolving Sony, we aim to evolve Sony into a company that achieves faster and higher growth through investment and business expansion in the growth markets and through further collaboration across our businesses. As our CEO, Yoshida, explained at the Corporate Strategy Meeting on the 18th, Sony will accelerate investment in IP, DTC and technology and will create mid- to long-term values and based on that, realize growth of our businesses. The forecast for 3-year cumulative total adjusted EBITDA, which is now our -- which is our consolidated group KPI, is an increase to JPY 4.9 trillion, up 14% compared to the initial target of JPY 4.3 trillion, based on the progress we've made in achieving record-high financial results in fiscal 2021, the first year under the current MRP. Investment for growth is steadily proceeding. In capital allocation, we decided to increase capital expenditures in the I&SS segment by approximately JPY 200 billion. On strategic investment against the plan of cumulative JPY 2 trillion in 3 years' time, a total of approximately JPY 1.60 trillion have been executed or decided already. Now I want to discuss the 2-day Business Briefings starting today. At the financial results briefing the other day, I said that the external environment surrounding our businesses will be harsh. Needless to say, we are required to respond appropriately to the changes in the environment. At the same time, it's important that each business segment will consistently pursue mid- to long-term growth. Therefore, our Business Briefings will mainly focus on mid- to long-term growth story of each business segment. During the following sessions, based on these focus points, heads of business segments will share the kind of growth stories they envision and the initiatives and programs they will implement to achieve such growth. Finally, let me introduce 2-day schedule and speakers for each session. Here are speakers on day 1; speakers on day 1. I hope you enjoy the coming 2 days.

[Interpreted] Thank you, Totoki-san. Now we'll move on to sessions of business segments. In each session, there will be a presentation by the head of each segment, followed by questions and answers by investors and analysts who have registered in advance. [Operator Instructions] Also, please note that there might be consecutive interpretations during the Q&A session. Those of you who haven't registered in advance, you can listen to the Q&A session on webcast. We'll be starting Game & Network Services session shortly. Please kindly wait until the session begins. Thank you for waiting. Ladies and gentlemen, we will now begin a session on Game & Network Services. First, please watch the video presentation by Jim Ryan, President and CEO, Sony Interactive Entertainment.

Hello. My name is Jim Ryan and I'm the Senior Executive Vice President for Sony Interactive Entertainment. I'm here today to update you on what's happening in the world of PlayStation. Today, we're going to look at SIE's road to profitable transformation through 3 lenses. The first one is that of our thriving core business with its 2 console platforms, PS4 and PS5. The second captures our 3 principal vectors of growth and expansion, while the third talks to the transformative work that has been done in the area of Sony Group collaboration. First, a quick recap of how the pursuit of our strategies is leading to ever-increasing earnings and ever-higher profitability. You can see on this chart that historically, platform transition at SIE was marked by sharp downturns in financial performance. The launch of PS5 was completely different. The robust business structure of that new platform, the size and engagement of the PS4 community and the emergence of very significant persistent revenue streams from our service businesses, all contributed to an extremely strong transition and are providing us with the springboard for further growth. So let's start by taking a close look at the first of those cornerstones, PS5. There are many, many reasons why we remain convinced that PS5 will be our biggest-ever platform. Six of these are listed here and we shall dig into each in some detail. This slide is headed 'Unprecedented Demand', and that is exactly what we have. A year ago, when I made the same presentation, I reported that PS5 was completely sold out everywhere in the world 6 months after its launch. A year on, 18 months into its life, that remains the case. Purchase interest is almost double what it was at the equivalent point in the PS4 cycle. And that reflects itself in the rate that the console is selling, both in absolute terms and relative to its predecessor, itself a very strong performer. The data shown here is for the U.S. market, but the picture is the same the world over. While the picture is the same everywhere, it's worth singling out the progress that we're making in China, the biggest gaming market in the world. That market has soared from 11th place last time around in terms of the size of the PlayStation console market to 6th now, with this growth underpinned by very meaningful increases in both device spend and the number of PlayStation Plus subscribers. All of this is against the backdrop of projected continued strong gaming industry growth. The growth that our industry experienced during the past 2 years of lockdown is well-documented. Our category is projected to continue to expand at a brisk pace, with the console segment showing strongly with a forecast 4% CAGR through 2025. Our expectation is that with PS5, we will capture a growing share of this growing pie compared even to the strong prior generation. Looking at ourselves, I've always said that our 3 principal assets are our brand, our games and our community. Let's look first at our brand. Brand strength has always been one of PlayStation's cornerstones and that very much remains the case. There are many ways to look at this. Here we have picked just 2. The Prophet study of brand relevance in the U.S. has us moving up 2 places to 7th measured across all brands in the world. While within the console category, our leadership position remains clear and strong with perceived brand momentum in the PS5 era continuing to outstrip that of PS4, even beyond the natural peak at its announcement and launch. A platform is ultimately defined by the games that you can play on it. PlayStation 5 has more and better games at this early part of its life cycle than any other PlayStation. And what is striking is the contribution that we've seen from PlayStation Studios. Critical acclaim has been consistently high, resulting in extremely strong commercial performance. Third-party support has also been at a very high level. We have enjoyed successful marketing partnership with all of the great titles shown here. This translates itself in turn into community engagement. This slide is a little busy, but let me explain. Seven of our key engagement metrics are shown here. Where we stand on PS5 is shown on the right-hand side, with PS4 on the left and in the center, showing respectively, where we were at the equivalent point in that life cycle and where we stand now. PS5 performance in every 1 of the 7 categories is very apparent. These are stronger engagement metrics than we've ever seen before and indeed far stronger than what we were expecting. This impressive engagement in turn results in increased monetization. PS5 is 15% ahead of PS4, fueled by the explosive growth that we've seen in the live service game category. The one area where we've fallen short of expectation is in our ability to supply the market with consoles. COVID-19 took its toll on our supply chain in 2021. The situation is starting to improve, although COVID-related uncertainties persist, specifically in the impact that ongoing lockdowns in Shanghai and Beijing might have. But things are definitely improving. Right now, we're planning on a significant ramp-up in PS5 production this year, allowing us to close the gap versus PS4 in its own third year, then to overtake PS4's year 4 installed base within FY '23. Beyond that, we're planning for heavy further increases in console production, taking us to production levels that we've never achieved before. Moving now to PS4. Here, the task is a simple one: to maintain and prolong our longest-ever tail, not least because we and other publishers still have fantastic new content coming for PS4. This slide underlines the importance of that task. Last year, PS4 consoles accounted for almost 2/3 of our PlayStation Store revenue. Sustaining the engagement and securing the monetization of that base is critical. We're helped in this by the ever-increasing propensity of that user base to spend digitally. The emergence of the free-to-play category over the past 5 years or so is a major weapon in our armory here. The proliferation of these games means that free-to-play now accounts for more than 1/4 of all the dollars spent on the PlayStation Store on PS4. Another very significant tool that we have is PlayStation Plus. PlayStation Plus enjoys extremely high levels of subscriber satisfaction amongst the almost 70% of its subscribers who experience the service via PS4. I'll share more later on in the presentation about the exciting innovation that we're bringing to PlayStation Plus this very quarter, but we anticipate higher-still user satisfaction, monetization from our strong base of PS4 subscribers in the coming months. All of these things come together to generate a PS4 user base of 84 million at the end of FY '21, way more than double what we had on PS3 at the corresponding point of the PS4 cycle. Monetization is equally strong, again more than double the PS3 number. That brings me to the close of this first section, where I've spoken about our console business with its 2 powerhouses, PS5 and PS4. I now want to turn my attention to some of the new growth vectors that will help us on our journey to grow SIE yet further in the future. Some of these I spoke about last year and I'm pleased to report meaningful growth. But there are also a number of new initiatives to share with you. As you can see, there are many of these new growth vectors. We've grouped them into 3 categories: initiatives that will grow our commercial capabilities, those that will expand our portfolio offerings and finally, those that will expand our audience. Let's look first at initiatives that will expand our commercial capabilities, beginning with the new PlayStation Plus. Historically, PlayStation offered 2 services to its community, PlayStation Plus and PlayStation Now. While we were happy enough with the commercial performance of these services, and as you saw earlier in the presentation, gamer satisfaction has been high, we felt that there was an opportunity to do better by our community and for example, address the fact that 3/4 of those who hold a PlayStation Now subscription also subscribe to PlayStation Plus. So we will combine the services and create one 3-tier service, which will be called PlayStation Plus. The first tier, PlayStation Plus Essential, will be the same as today's PlayStation Plus. While the second tier, PlayStation Plus Extra, will offer a range of over 400 PS4 and PS5 games to download. The final tier, PlayStation Plus Premium, will provide a number of attractive features, including cloud streaming, try before you buy and a range of classic games from earlier generations, all for our most avid players to enjoy. We've just begun the global rollout of the new PlayStation Plus, beginning with Japan and Asia, and will extend to U.S. and Europe over the course of the next month. We see a wide range of consumer and commercial benefits to this significant change, making it a win-win for everyone. I spoke about PlayStation Direct last year, and I'm pleased to report excellent progress. We launched as planned in 6 European countries in late 2021 and intend to largely complete the European picture in 2023. The launch in Europe, together with further growth in the U.S., will allow us to grow PlayStation Direct to become a $1.5 billion business in FY '22. PlayStation has and always will stand for innovation and PlayStation VR2 is the latest manifestation of our commitment in the innovation space. Our plans are now well-advanced, with the most striking aspect being the sheer joy expressed by gamers and developers alike when they have the chance to enjoy virtual reality on PlayStation VR2. Let's turn now to the ways in which we're expanding our portfolio. This is the area of the most dramatic shift in our strategic thinking of late and also the area that has seen the most activity. Our confidence in making the investments that you'll hear about is underpinned by the considerable success that PlayStation Studios has enjoyed for a number of years now with its strong lineup of internally developed titles. We've been extremely active in the area of M&A and investment. Deals to fully acquire 5 developers have closed, with talks ongoing with Bungie and Haven Studios. Strategic investments have been made in Discord, Devolver studios and AccelByte. It should also be noted that this slide does not include the further investments into Epic Games made by Sony Group Corporation. The purpose of these investments is to increase our core strength at PlayStation Studios, but also to acquire expertise in areas of game development where historically, we have not had a significant presence. The planned partnership with Bungie is a great example of the latter. Bungie is one of the leading developers and publishers of live service games in the world today. And we're incredibly excited at the thought of applying their expertise and lessons learned as we build out our plans in the area of live services. Correspondingly, we believe that many of SIE's assets and expertise will allow us to help Bungie to fulfill its dream to be one of the world's leading entertainment companies. New IP is the lifeblood of all entertainment and SIE is significantly increasing the amount that it is spending in this space. From less than 1/4 of the total spend in FY '19, we will augment the proportion invested to 50% of a much larger number by FY '25, investment that we anticipate will yield significant returns in the second half of this decade. The strength of our existing IP portfolio, together with our major investment plans, is increasing our appetite to extend these properties beyond gaming and to make them relevant and loved in a wider world. There are many examples of this, 3 are shown here, in 2 of which the participation of Sony Pictures Entertainment is very apparent. The final area of portfolio expansion is live services. As you can see on the left-hand side, most of the considerable growth that is foreseen for the gaming category is anticipated to come from live services, the so-called games with no end. On the right-hand side, you can see how our investment approach is pivoting to allow us to exploit this, with more than half of the money that PlayStation Studios is spending to be on live services by FY '25. This will result in a significant rebalancing of our portfolio. In FY '21, we were effectively managing just 1 live service franchise. By 2025, the number of active live service titles is planned to total 12. The third new growth vector is that of audience expansion. This represents the biggest opportunity, but also the biggest challenge to growing the size of the PlayStation community to something significantly bigger than what we enjoy today. First of all, PC publishing. We've now published 3 of our leading IPs on PC, most recently and most notably, a wonderfully reviewed and received version of God of War in January of this year. We have big plans for FY '22 and beyond with exponential growth anticipated in the year just begun. And with the opportunity for our new live services strategy to boost our PC revenues even more aggressively in the years to come. Our strategy on mobile has seen much activity behind the scenes over the past year and is now taking shape. There are 3 pillars to this: collaboration on exploitation of some of our top IP with select industry leaders in the mobile space, establishing our own network of internal development expertise and finally, building a top-class publishing team with the necessary tool set to successfully publish mobile content. The initiatives to broaden our audience that you've just heard about will have a fundamental effect on the shape of our game portfolio. As you can see here, by FY '25, almost half of our new release lineup will come from PC and mobile, a dramatic change from anything SIE has done in the past. Finally, as we consider our plans to grow our audience, it's important to note that we're not restricting ourselves to content. We have nothing specific to report today other than our determination to forge a future where large elements of the community enjoy unique PlayStation gaming benefits beyond the console. The final section of the presentation deals with the importance of Sony Group collaboration. A huge amount has been accomplished in this area in the past year, with some of the details shown on this slide. The biggest single example that we've yet seen has been the collaboration supporting Sony Pictures' release of the Uncharted movie earlier this year. Based on one of PlayStation's most beloved and iconic franchises, the partnership between the 2 divisions was perhaps at its most strong in the marketing of the movie, which included leveraging many of PlayStation's assets in an extremely powerful manner. But our collaboration with our sister companies extends beyond this, from the reciprocal [ heroing ] of different Sony Entertainment content and services to the joint promotion of hardware, to the continuing strengthening of Sony's master brand, we continue to work more effectively together than ever before. Another key area where Sony is making big statements across the group is in ESG, environment, society and governance. I couldn't be prouder of the progress that SIE is making across all of the initiatives shown here and of the contribution that it's making to help Sony Group achieve its goals. So that's it for me, at least in terms of the presentation. Hopefully, I've been able to give you a sense that our core business is thriving, that we're pursuing growth in many exciting areas and that our contribution to helping Sony become a bigger and better company is a considerable and growing one.

[Interpreted] Now we would like to entertain questions from investors and analysts. We have with us Jim Ryan, President and CEO, Sony Interactive Entertainment to answer your questions. Now, we would like to open the floor for questions. [Operator Instructions] Now first, on the original language line, Ezawa-san from Citi Global Markets, please.

It's Kota Ezawa from Citi Group. I have two questions, please. The one -- number one question is about the Metaverse. I'd like to get to Jim's idea, how you think about the Metaverse market size? And I am [ not deciding ] the future. And then what would you say against the idea that the Metaverse will simply replace today's gaming market but not really creating the new dollar market? Or you're expecting incremental new dollar market creation by Metaverse? If you think that is the yes as answer, can you also elaborate how it can happen? Do you think the consumer's wallet will increase to spend in the gaming industry? This is the question number one. The other question is in Slide 34. I think that this is an astonishing chart that you shared. So up to 2025, you will have up to half of the titles will build -- will be by PC and mobile. Could you elaborate a bit on more profit side? Do you think that the SREs profit will be generated like at half the profit by PC and gaming -- sorry, PC and mobile game in 2025?

Thank you, Ezawa-san. Two interesting questions. On the first one, on the question of the Metaverse, I do not -- first of all, nobody knows exactly what the Metaverse will look like at some point in the future. But I do not believe that whatever form that it takes, it will directly be substitutional for existing -- for the existing ways in which people play games. It will appeal to some individuals, to some portion of the market, but equally, there will be many, many individuals and groups of players who prefer to enjoy games in the way that they have played them for the past 30 years or more. So therefore, I think that Metaverse will lead to some form of incrementality. To what extent that is meaningful? Nobody yet knows. But we consider it to be an opportunity for incrementality and additional growth. On your second question, related to Slide 34. I think a little explanation about the strategy here. PlayStation Studios, historically, has executed wonderfully in the delivery of a strong portfolio of first-person, narrative-rich, graphically beautiful single-player games. And -- but it is certainly the case that we have restricted ourselves to a rather narrow portion of the gaming market that rather now is a segment of the gaming market. By expanding to the PC and mobile -- and it must be said, relevant to another chart, to also to live services, we have the opportunity to move from a situation of being present in a very narrow segment of the overall gaming software market to have been present pretty well everywhere. So I think if we do this right, if we execute with intelligence and if we execute with excellence, the opportunity for significant growth in the number of people who play our games, the number of people who enjoy our games and the number of people who spend money on our games is potentially an extremely large one. I would say, for example, that if we are successful in making a portion of the 12 live service games that we have under development at PlayStation Studios, if only a portion of those enjoy critical and commercial success, that the impact of that will, over time, be completely transformational to our business structure. Thank you for the question.

And I would like to move on to the next from the Cowen and Company, Douglas Creutz.

It's Doug Creutz from Cowen. Jim, I appreciate it. I wonder if you could talk about -- in the past, you've talked about the cost of game development and the fact that you want to preserve the value of those games in your portfolio. Your main competitor, of course, is doing sort of an all-you-can-eat plan, where their AAA games are going into it on day 1 as part of a subscription service, and they're going to be potentially adding some big franchises next year due to M&A. I'm sure you've done tons of consumer surveys on what gamers care about. And how important of a competitive differentiator do you think that is? And how much do you worry about gaming content potentially becoming devalued as a result of sort of the all-you-can-eat subscription model? My second question, just a brief one. In the slide deck, you listed one live service title in fiscal '21 in [ the F3 ] in fiscal '22. I was just wondering, have you announced what those 2 incremental games are going to be and is one of them Destiny, assuming that the Bungie deal closes?

Yes. Thank you, Doug. In terms of our assessment of what gamers want, our view is this is quite simple. Gamers want great games. And how they are -- that's the -- that is the first and overwhelming perspective that they have. How they are delivered is rather a secondary concern. And I would say, whether it's in absolute terms or in relative terms compared to our own history or compared to anything that any competitor is managing, that we have never been in a stronger place with PlayStation Studios than we are now. And we anticipate that, that position of strength and excellence will only continue and will only grow. We are in a virtuous cycle, where success has allowed investment, which has generated more success, which is allowing us to invest more, which will hopefully generate yet more success. Now that virtuous cycle, we feel that if we were to move to a different model, which involved putting our AAA games into a subscription service on day 1, we feel that there is significant risk that, that virtuous cycle that we've established so successfully, that cycle would be compromised and potentially broken. And we definitely feel that, that is not in best interest of the PlayStation gamer. So that is our view on that particular issue. On the second smaller question, Destiny is not included in the 3 games slated for FY '22. The 2 other ones are yet to be announced. Thanks for the question.

[Interpreted] We'd like to move on to the next question. Morgan Stanley Securities. Ono-san , please.

Thank you for your detailed explanation. I have two quick questions. Number one, you have announced plans to increase R&D spending by JPY 40 billion to strengthen your own software, first-party title development capabilities. But will this be used primarily to increase the number of engineers? Actually, I am aware that the SIE Studio title did not have many [ multiplayer ] titles. But can I assume that the increase in expenses will be used to expand in this area? And the second question is further-related question around the charge. In terms of PlayStation VR2 you have announced, so in terms of charging [ momentum ] for R&D, what kind of a momentum so we can assume this year? So it should be heavier or people will be in the next couple of years? Please share your information. So that's all from my side.

Thank you, Ono-san, for your questions. The answer to the first question is that the nature of game development is that the great majority of expenses is always people related. In terms of where that money has been spent, as we indicated on the chart, increasingly, we see money invested in FY '22 and going forward, been deployed in order to help us realize our strategy in the area of live services, so -- which clearly are all multiplayer in their nature, and also to help us expand our horizons in the area of PC and mobile. So clearly, growing the potential audience for our games and hopefully growing the amount of engagement over a very sustained period of time that we have with the community on those games. In terms of the second question relating to investment in the area of PlayStation VR2, we clearly will tailor the amount of spend to the point in the life cycle that PlayStation VR2 finds itself. So right now, there is a considerable amount of money being spent on partnerships with independent and other third-party developers to secure a considerable pipeline of attractive virtual reality content at the launch of PlayStation VR2. And that energy and that effort and that money will continue to grow as the installed base of PlayStation VR2 headsets grows also. Thank you for your question.

[Interpreted] And from the regional language line, SMBC Nikko, Katsura-san.

My name is Katsura. Thank you for your presentation. Two questions. First, on Page 7, you're showing that the overall game market takeout would be 5% and console game market would be 4%. Do you have any vision of what type of top line growth you guys are looking in both segments, is the first question? The background of the question here is that on Page 12, you're showing that the PS5 growth rate would continue to be stronger than PS4, especially after year 4. If this console life gets longer, there still be opportunity that console market could have a longer life than the prior console. So how do you state that the console market and the other PC, mobile market is, the first question? Second question on Page 25. Obviously, fiscal year '21 was the big year for you guys to strengthen the [ PS ] Studio investing first-party titles. From fiscal year [ '22 ] and beyond, would you still continue looking -- searching for the additional studios, including Japanese studios? Or it is going to be more of a PMI phase work together, try to develop by your own studios today?

Thank you, Katsura-san. On the -- with regard to the first question, we are confident that growth of PlayStation can outstrip the average projected console CAGR that's shown on this survey. And one of the reasons -- one of the things that I would point to, to justify that confidence is the fact that we show on another chart that the monetization that we see on PS5 is 15% above that, which we enjoyed on PlayStation 4. And this, we believe, is a function of many things, but two principally. First of all, the very attractive gaming content that is available on PlayStation 5, which surpasses anything that we've seen on previous PlayStation generations at the same point in time. And secondly, the top-class feature set the PlayStation 5 has at its disposal. Some of these features are very unique and available only to PlayStation gamers. And to give substance to that, I would cite the illustration of the dual sense controller, which is a wonderful device that is much enjoyed by all PlayStation 5 gamers and is only available on PlayStation 5. So we remain quietly confident in our ability to outgrow the market. And obviously, also, our own growth will be fueled by our expansion into live services, into PC and into mobile, all sectors of the market in which we have not been present to any meaningful degree. So we believe in our growth story. The second question that you asked in terms of future M&A activity. The answer to that is, we are not at all finished with our strategy of trying to grow PlayStation Studios inorganically. And yes, you raised the question, is it that or PMI? And to that question, I would answer that it's not a binary question. It's not one or the other. Yes, we will certainly have to spend a lot of management time and management energy, ensuring that we properly integrate and properly manage the large number of studios that we've acquired. But equally, as we transition from our historic game development strategy to a much broader and much wider market reach than we enjoy today, it is very likely that inorganic stimulus will be required to help us to realize these dreams. And to the extent that potential targets fit with our strategy, to the extent that potential targets allow us to accelerate the way in which we are able to deliver on our strategy, we will certainly consider further M&A activity to add to our business portfolio. Thank you for the question.

[Interpreted] I would like to move on to the next person. Ayada-san from JPMorgan Securities.

This is Junya Ayada from JPMorgan. I have two questions. The first one is for ARPU trend. I think Slide 11 shows that ARPU was up 15% over the last 7 years. And my question is, how do you expect the ARPU trend next, maybe, 5 years? So obviously, here, ARPU was led by add-on revenue on this side. But do you think add-on will continue to grow or full game will continue to decline? And how do you see the upside for entire ARPU? This is my first question. And the second question is for live service. And I heard that you are investing more for live service rather than traditional. But could you share which type of service will be more for consumer spending on each title? I think traditional game title is around, let's say, USD 60 to USD 70 for new title. But regarding live service, the average users usually spend more than full game on each title. And also when live service portion outperforms traditional, how will it impact on the return on investment capital for game segment? Is live service usually more efficient? I think you have insight around here, but I'm happy if you could share with us. That are my questions.

Thank you, Ayada-san, for your questions. Yes, the chart that you referenced does show an existing ARPU of a 15% increase for PS5 over PS4. We anticipate that, that ARPU differential is likely to increase over time. And I would say two things for that. The quality of the games that we foresee -- that we see coming to the PS5 platform is only going to increase with time. And we already have visibility of some wonderful and very exciting games that show a relatively greater increase in quality than what we saw in the equivalent period with PS4. Secondly, I would say that the move that we are making to a greater component of live service games within our portfolio is likely if we execute well to further stimulate the increase in ARPU that I have just referenced. Similarly, on your second question, and this one is a little bit difficult to answer in general terms. The comparison of live service games with the more traditional historic way of publishing a console game, which is to charge, as you say, $60 to $70 upfront, it really depends on the quality of the live service game. If it's a great live service game, the ARPU will be significantly higher than the money that is recouped from the sale of a single game of $60 or $70. These games often realize ARPUs in the many hundreds of dollars. However, obviously, not every live service game falls into that category. There are some that are less successful and that have lower ARPUs, which is why I made the comment that I made earlier that if we are successful in having a meaningful proportion of the 12 live service games that we have under development be successful and have these games realize an ARPU perhaps in the many hundreds of dollars, net-net, that will help us move PlayStation's ARPU to levels that we haven't seen before. Thank you for your question.

[Interpreted] The time is running out, and I would like to entertain one last question. We accept only one question. One last question, [ Nakane-san ] of Mizuho Securities.

My name is Nakane. Thank you for the presentation. I have just one question. On Page 21, you just mentioned that you're targeting over 50 million PS Plus number of subscribers, which is great. And my question is that, can we expect the further growth of this payment like in 55 or even 60 million? And that if yes, how you can manage that? I'm interested in how you can make it in existing markets like U.S., Europe and Japan? And also, how you can make it in a relatively new market like China or [ Pan-America ]? This is my question.

Yes. Thank you, Nakane-san. We have just this week launched our new, revised PlayStation Plus service. We're very proud of the work that we've done on this service. And it's only 2 days. So it's far too early, but the very initial market reaction is extremely positive. I think if we execute well as we implement this service beyond Asia to Japan and then to the U.S. and then to Europe, the possibility for us to significantly grow our subscriber base is really real, particularly as the sales of PS5 consoles start to accelerate extremely rapidly. The other vector of this, of course, is that the new service allows us to optimize not only the number of subscribers but to offer the possibility for subscribers to join our second tier or our third tier and access a range of really attractive features and gaming propositions. And if we do that, if we are successful in that, not only will the number of subscribers grow, but the ARPU -- the average ARPU of each subscriber will also correspondingly increase. So there are opportunities along both vectors, the number of subscribers and the average ARPU of each of those subscribers. Thank you for your question.

[Interpreted] Thank you very much. The time has come. So we'd like to conclude the session on Game and Network Services. I thank you very much for your participation.

[Interpreted] Thank you for waiting. It's time to start the session for Sony Music Group. First, please watch the presentation by Rob Stringer, Chairman, Sony Music Group, CEO, Sony Music Entertainment.

Hello, everyone. I'm happy to be with you today to give an overview of Sony Music Group's financial performance and creative progress in 2021. I will also outline the trend lines in the global music market and share some of our interpretation of the evolving complex transformation of our industry. Taking into account that rapidly changing landscape, I'll give you insight into our vision that guides our continued growth strategy. I'm obviously pleased to tell you that in 2021, our music group delivered all-time high financial results, setting new records for revenue, profits and margins for a fifth consecutive year. This success being built on strong creative judgment and sound artistic principles. Despite sustained uncertainty in many business areas from the global pandemic, mounting competition and ever-changing market dynamics around the world, our annual streaming revenue is outpacing the global industry, a huge indicator of our success. Over the same period, our operating income CAGR has risen over 26%. These margins have increased by over 5 percentage points. EBITDA is correspondingly growing in this period too, up 23.2% in CAGR and 5.5% in margin. All these key statistics leave us perfectly positioned to deliver further groundbreaking gains in the future. At the core of these metrics, as always, is the excellence of our creative content. In Recorded Music, we had the world's top-selling album of 2021 with 30 by the incomparable Adele, who also broke the record for the biggest first day streaming number ever. Our company's share of the global music charts continue to be dramatically better than 5 years ago. Our average weekly share of Spotify's worldwide Top 100 tracks rose to 36.1%, up 0.5 percentage points from a year ago. We've increased our share of the chart by over 15% in the last 3 years. Our share of the Spotify's Top 10 worldwide tracks, escalated to 48.5% from 39% in the previous year, a true reflection of how many big hits we had in the year. like hiphop, rap and pop, we have gained significantly in new release market share as we promised 3 years ago. Our publishing company, Sony Music Publishing, is #1 in the world, a position we have held since 2012. And of course, in that time, we have fully acquired the new EMI music catalog from it being previously a joint venture, and we are seeing the huge benefits fiscally and creatively of this purchase, now that the marketplace is so buoyant. SMP songwriters had an average of 33% of the weekly share of Spotify's Global Top 100, up from 27% a year ago. In addition to Adele's #1 position on the global best-selling album chart from the Record Music side of the company, SMP songwriter, Olivia Rodrigo have the #2 global bestseller with the album Sour as she became the youngest female artist to break multiple streaming records. The Kid LAROI, who we represent for both Recorded Music and Publishing, was another big breakout star, with the #2 best-selling global song of the year Stay. Our iconic songwriter Ed Sheeran, continues his remarkable career with the #4 global album of the year. Who would have thought a few years ago that Italian rock band could dominate the global streaming charts, but that happened with Maneskin. And we watched artists like Doja Cat, Lil Nas X continues to be in the global top 10 of the streaming charts consistently for a whole year. And finally, as we enter our new fiscal year, Sony Music recording artist Harry Styles will have the biggest selling global #1 chart into the year, so far, with his third album, Harry's House. We will keep accelerating our creative momentum with a continued aggressive investment in talent to expanding our roster of artists and songwriters organically and through strategic acquisitions of content companies. For example, we purchased the majority shareholding in the catalog and future rights of the renowned hip-hop label, Alamo, whose artist Lil Durk had the #1 U.S. album just last month. We also bought the remaining interest in the global electronic dance music label, Ultra, which has been very profitable for us over the years. We obtained final regulatory approval for the acquisition of AWAL, an innovative artist services, DIY distribution and neighboring rights company. And Som Livre, the leading independent pop music label in Brazil, where we are now the clear market leader. After a nearly 50-year relationship with Bruce Springsteen, we are now the proud owners who is recording and publishing catalogs forever. And after a 60-year partnership with Bob Dylan, we now are honored to own his recorded music catalog in perpetuity. All these acquisitions and partnerships reflect our desire to build on our already giant scaled creative content base. Now, let's talk about the general state of the music industry in 2021 and beyond. The music market continues to grow at an impressive rate. The Recorded Music sector experienced its seventh consecutive year of revenue increases in 2021. The Publishing sector achieved its ninth year of consecutive expansion last year, with revenues rising 17.6% globally. Our industry success is being propelled by more streaming subscribers worldwide, improved ARPU and greater revenue from new channels. The emerging markets are increasing all these metrics. And in fact, every one of those regions reported annual revenue gains for the first time since we've measured these statistics. In our mid-range planning, we expect the industry to grow at a rate of mid- to high single digits, consistent with industry analyst predictions. Underlying these metrics is the wide availability of easy-to-use, competitively priced streaming services, which are fueling mass market adoption of subscription models in most countries. Last year, the number of subscribers to premium services increased by 20%, particularly influenced by emerging markets. Revenue from ad-supported audio and video services is also rising year-to-year by 31.4% as we come out the pandemic-related impacts on our business. This expansion indicates a robust demand throughout the world for music-based content as the streaming market grows and predicted double-digit percentages over the next few years. Today, there's more music and more artists than ever before. Over 82 million tracks were available through Spotify last year, a gain of 17% from the previous year. In 2021, catalog represented 75% of global music consumption, up from 66% the year before. These statistics clearly stimulate huge interest in our sector from a range of financial investors. Hence, the constant fluid activity of catalogs being bought and sold, whether it be recording songs or even partial pieces of these assets such as royalty streams. With already owned visual content at the core of our business, we are obviously taking proactive steps to not only protect these assets, but to expand our key rights in this period of change. With that in mind, let's look at how Sony Music growth strategies are shaping our current and future success. We have transformed our position and strength in the ecosystem through smart acquisitions, partnerships and investments globally. We now offer a wider array of entry touch points to the creative community than ever before. For example, with the completion of the [ AWAL ] deal, we have rapidly scaled the [ IR ] services we can offer and have added a leading presence in the DI distribution enabling rights businesses. These services are uniquely collected to the dashboard of The Orchard, which already distributes music from 27,000 independent labels. We are clear market leaders in this sphere of audio content proposition. Over the last 5 years, we increased our global roster by over 30% in our frontline labels. And to work this roster, we've added to numbers of our creative staff by more than 85%. We will proactively expand our roster and staff as more and more music is available through the DSPs. Across the world, emerging markets are hugely responsible to the ongoing growth of our core activity. In Latin America, a region now generating over $1 billion of revenue per year, we are continuing to build our #1 position through integrations like the recent purchase of Som Livre in Brazil. In China, we're expanding our portfolio of artists, labels and creative partnerships such as with the launch of RCA China and our direct deal and investment in NetEase. In India, we are the leading company with 3 majors and continue to invest in collaborative ventures with music creators in this fast-moving market. In Africa, our roster of local talent is exceptional in a market that is attracting global music consumer excitement. Similarly, we are bringing on musical talent in the Middle East through artist and label deals. Our ongoing support for market innovation has inspired new uses for musical content and in turn, revenue growth opportunities for artists and songwriters. New business categories like social, gaming and fitness, account for nearly $500 million in revenue. We are actively participating in the Web3 market, which clearly has the potential to build multiple financial areas of our core offerings. We have invested in partnerships in the burgeoning NFT space. Anywhere there is consumer engagement with audio and visual content, we'll be heavily involved. We are committed to building best-in-class services for our creators through exciting new partnerships in merchandising, such as the Ceremony of Roses company, which represents many of today's biggest pop artists. We're also a company specializing in live concert and event promotion and artists in the songwriter management. In our podcasting strategy, which we believe is complementary to our audio content core, we are consistently adding partnerships such as the leading audio producer, Somethin' Else. These deals are not only intended to be profitable, but they strengthen our relationship with all creators. We have always believed in the benefit of the collective strength of the wider Sony brand through television and pictures, PlayStation and electronics. We create unique opportunities together, and our creators love and expect this synergy. We are unlike our competitors in this respect of true joint collaboration across the whole of our company. At Sony Music, we take great pride in our effort to be the most creator-friendly company in the modern music industry, and we will keep searching for the most principal ways to represent our talent. Examples like our new artists and songwriters forward programs, which promote complete supportive transparency in our relationships. We became the first major company to pay through earnings to many long-standing artists and songwriters regardless of any recruitment status. And now, we're expanding that effort to include even more qualifying artists, who have been signed to us for more than 20 years by offering eligibility on a rolling basis. All of this follows the initiative of being once again the first company to share our equity from Spotify. We have a suite of industry-leading digital insight tools that offer real-time earnings, reporting, cash out and advanced capabilities, which allow our creators to have more knowledge and control of their career finances. Related to this transparent approach, we believe in the well-being of our artists and songwriters. So we have launched an artist and songwriter assistance program that offers multiple ways of helping them with the rigors of the music business. We believe we are game changers in our desire to look after our talent properly in this complex digital age. We want to lead by example, not only for our creators but by our people embodying the core values of diversity, inclusion, respect and equity. These values form the way we build a progressive workplace to serve our people and, in turn, those creators. Our work has tremendous cultural impact. Music goes beyond borders to empower, inspire and to heal. We take that influence very seriously. And through our important philanthropy and social impact division, we leverage our resources to promote positive change whilst being intensely market competitive in every way. We will produce strong financial results and strategic value for Sony with an incredible future ahead through a visionary understanding of the complex marketplace we connect with. Thank you for your valuable time today.

[Interpreted] Thank you. We would like to take questions from the investors and analysts. To answer your questions, we have Rob Stringer, Chairman of Sony Music Group and CEO of Sony Music Entertainment. Now the floor is open for questions. [Operator Instructions] Yes, the first one through the English channel, from Goldman Sachs, Ms. Lisa Yang, please.

This is Lisa. Three questions, if I may. The first question is on recent catalog acquisitions we've seen in this space, I think Sony has spent nearly $1 billion on those acquisitions for the last year. Could you maybe talk about the rationale behind these acquisitions? What do you think is the outlook for future capital spend? And how does the Music think about return on these investments that created a lot of debate, a question from investors on that topic and 3 new trends emerging in the industry? So that's the first question. Second question is on streaming. Could you talk about the trends you have seen in the streaming industry and the potential impact you might see from the increased pressure on consumer discretionary spend? Do you see a risk of increased churn or maybe more limited ability from DSPs to put on price increases in this environment ? That's the second question. And thirdly, could you maybe talk about the revenue opportunities from emerging platforms like social media, like TikTok and gaming and Metaverse? And what sort of growth contribution do you expect from these new revenue streams over the coming years? And how do you think the model could [ resolve ]? These are my few questions.

Lisa, I think you asked every single question you could possibly ask in three questions there. I don't -- I think I've answered these okay. I think I'll answer every single question in the entire presentation. Okay. Starting with the first one, catalog. I mean, we're super strategic about our catalog acquisition. If you actually look at it across the Recording and Publishing divisions, we've basically done about 6. We are not looking to just be in this business, maybe like some outside investors or basing our strategy on speculation. We are extremely aware of the data that is available on, say, a Bruce Springsteen, who has been with our company, as I said, 50 years; on a Bob Dylan, who has been with our company for 60 years; on Paul Simon, who's been with our company pretty much for 50 years; on Jeff Lynne, who's been with our company on Records and Publishing 40 or 50 years. So if you look at the acquisitions, they heavily relied on our expertise as a company that's been involved in popular music for 100 years. So this is not a sort of flip and response to the market. It would be clear-cut that we are interested in retaining the catalogs of our key cornerstone icons at the right price. We have enormous amount of data on those catalogs. So we think we have inside track. And our policy, going forward, will be realistic on what we protect and what we think is added value. So I mean I think we've been really, really careful on this. We're not starting a brand-new business where we've never represented catalogs before, but we think the margins are good, and therefore, it's boom time. We have an enormous amount of research development on the artists we've done long-term catalog deals with, and that will continue in the future. And we will be selective. On streaming, trends and consumer patterns, well, you've seen the statistics the same as I have, and I'm sure you're -- at Goldman Sachs, you're pretty [ included ] in as to where the direction is going. I think obviously, you look at the streaming numbers in China, and you see a 49% growth year-on-year, 110 million paid subscribers in China now. Obviously, it's clear that there are some markets that are moving much more dramatically than some of the more mature markets. But I think in terms of patents, I think that we know the subscriber base is going up healthily around the world and we're a global company and we want to make sure that we're represented everywhere. So our streaming strategy might be very different in an emerging market to a mature market, but I think it's pretty healthy. And as for pressure from market economics, I think that we're not the same as visual content providers, who only have certain amounts of content. I think the DSPs have all the content. So therefore, I don't perceive that music streaming and audio streaming will be affected necessarily as strongly as audio/video content because you get everything. And that's across the board, whether it be streaming platforms in China or streaming platforms in Sweden or streaming platforms in America. Wherever they come from, it generally is all of music content. And I think that's a very, very positive message to the consumer. And also, obviously, you asked me about pricing. That's down to the DSPs, not us. But do we think the market and the mature markets can withstand pricing increases? We do. But again, that's not down to us. That's on the DSPs. Do we think this is possible? Yes. In emerging markets, there's a far more complex list of reasons as to where ad-supported revenue platforms or subscription platforms would be, and there isn't a one-size-fit-all streaming policy for the world. And the third question about emerging platforms, I'll [ conclude ] with everything in one go here. The emerging platforms, yes, of course, as we said, we are very aware, and we welcome as many platforms as possible that are interested in our music. We already mentioned in the presentation, we see social, fitness, gaming, all these are revenue models that we see increasing dramatically. We are fairly early in our relationship with some of the audio/visual platforms like Facebook, Instagram, TikTok. We are learning as we go along on the revenue opportunities for them. And I see a healthy situation. I think that the more competition in this area, the better. And then finally, on the Metaverse, we have done a lot of research and develop on the Metaverse, even specifically at Sony Music. And we obviously see the Metaverse as a fantastic opportunity for audio content like ours, moving forward. Hopefully, that answers some of those.

Thank you very much. We'd like to now move on to the next question. One more question from English channel. Credit Suisse, Meghan Durkin please. Ms. Meghan Durkin, please.

Can you discuss how the life cycle of [ Sony ] has evolved, as the business shifted from physical to streaming, and now it's the emerging platforms coming on? And has that changed the amounts that you advanced to your artists and then your timeline for recruitment? And then second, how do you see the relationship with those large global user-generated content platforms evolving over time? So as they increasingly monetize the explosive usage they're seeing through advertising and then e-commerce, will more dollars theoretically flow to your artists and into your business? And which line of the business do you see this contributing to more meaningfully? Is it all going to be in streaming? Will it be in your other revenue line within Recorded Music? Will it go to Publishing? Is it going to be everywhere?

Okay. Maybe I could reverse that. Yes, it's going to be everywhere. So I mean, obviously, if we have new revenue models, we deal separately in terms of negotiation with Publishing and Recording. So that goes without saying, hopefully, that that's what we do. But yes, I think it's everywhere. I think that in the new platforms, as I just mentioned, if music is used to the universality as we think it will be, we are going to be in a very, very strong position with our musical content. I can't imagine, for example, TikTok without audio content. So I think we're in a good position. And then working backwards, in terms of cycle, what we're learning from streaming is if you have a hit, it has a very long tail. So therefore, a song, if it breaks, it may break in a different way. It may break through a newer platform, or it may break through a visual platform like YouTube, or it may break through Spotify, Apple, Amazon, et cetera. But if something breaks, then the long tail is pretty dramatic. And that has changed the way we look at our revenue model, and it has changed the way we pay our artist. My intention is that any movement in the direction of how the monetary flow comes to us has to also affect the artist payment as well. And so I think it would be safe to say that artists who have hit records are paid more dramatically over a period of time. This has changed the advances model, partly because it is very competitive right now. So artists are able to take advantage of the competitors in the marketplace. And also, quite honestly, because the data is totally transparent. So there's no hiding when something has data that's positive. So I mean, if you wanted to look at the Spotify Top 200 right now and the exact number of streams yesterday, you could look at it online. So I think the main thing is that a hit last a long time. And as such, we can make revenue projections that probably go longer than any point during the physical era or the download era. It's, as I said, it's a long tail. And so our projections sometimes, where they might have been across a couple of albums, on certain streaming platforms, we can make projections for our content across years, if not decades. I hope that answers your question. Thanks.

Thank you very much. We'll proceed to the next question. From original line, we can entertain a question from Hirakawa-san of BofA Securities.

This is Mikio Hirakawa from BofA Securities Tokyo. I'm quite impressed by what you have done in past years and your position today. So please let me ask a very long-term view. In longer term, let's say, in 10 years, the growth of streaming revenue would slow down -- and what will be the next driver of the Music business? And what kind of investment are you making today? That is my question.

Yes, sorry, is that the question -- sorry, is that the end of the question?

Yes. One question.

I understand. Okay. I mean, yes, I mean 10 years is quite a long projection. I know that there were projections from Goldman Sachs of the revenue of the business in 2030, for example, which is 8 years away. So if they're correct, then I think that we look at the next chapter at the same time as we're wandering through the journey of streaming, which obviously, isn't a complete picture because there are mature markets and there are emerging markets. And the models in the emerging markets is extremely different. The model in China isn't the same as it would be in Africa, or Africa isn't the same as it would be in India. So we're learning daily on how that fragmentation works on emerging markets. In terms of next chapters, I think that we may well be building bridges towards the Metaverse, but the Metaverse isn't here yet. As I said earlier, I can't imagine that the Metaverse would not include music or audio content and visual musical content. So I think we're going to be a dominant content provider in that area. We already see that with TikTok in the respect that TikTok uses music in a shorter burst way that YouTube use music, and we feel that we can monetize user-generated content. So I think I have to say it, it's not with any arrogance or any flippancy at all. But we believe the next 10 years, we will navigate with a really, really strong portfolio of revenue opportunities. Thank you.

Thank you very much. I would like to move on to the next question. Ezawa from Citi Global Markets.

It's Kota Ezawa from Citi. Just quickly one question. If you look at the Slide 4, it's a bit tricky to me finding you have as high as the 36% of the [ HSN ] market share, I presume these are the newer songs. And an overall market share shown in the bottom in the charts to 24%, up from 23% previous year. So these are the incremental gap between the newer IP and an overall your position. Could you talk a bit about the Sony's position in a new artist and a new IP criteria out of, let's say, overall market, overall your performance? You invested in the catalog in the past, but you have it higher position in newer content, that you can elaborate a little bit about on that.

Yes. I mean that's complex and easy at the same time to break down. So if there are 80,000 tracks per day being uploaded on major DSPs, then market share is going to be diluted by default. And the reason we have a strong strategy in the orchard and our recent acquisition of AWAL is to take a proportion of that 80,000 have a bigger proportion of the net that's being passed for content. If you look at The Orchard, it has 27,000 labels being distributed by The Orchard globally. So at the scaling, we realize we have to cast our net deeper and deeper and somehow get that music in our ecosystem. Because otherwise, literally market share will be diluted by default of the sheer volume of track, even quite frankly, if it's literary like flots and injection, and it's just stuff that's taking up some of the market share because of scale. And in terms of catalog, the same thing. In terms of frontline repertoire I have to believe in my job that hit is still important, particularly as I just talked about the long tail. As it happens today, and I didn't just do this for the benefit of this presentation, we have 60 songs in the Spotify top 100 today, and we have 58 in America today. So I believe in hits. I believe that hits with long tail. I believe, in hits, that will actually have the effect of catalog in 18 months to 2 years because the definition of catalog is more recent content than any point in recorded music history. So the hits of 2017 are more important than the hits of 2007. So I am juggling constantly but to being aware of the sheer scale. And I have to have a lot of hits to remain solid on market share. It's not very easy for any of the major labels, I believe, to increase market share dramatically, where you've got 80,000 tracks a day being uploaded into the DSPs. But obviously, if you look at the charts, then we are batting above our average. And I have to maintain that whilst also building an ecosystem with a lot of tracks and a lot of content flowing through our system with all the data that we can analyze coming out of that share volume.

Now let's proceed to the next question from Mizuho Securities, Nakane-san.

This is Nakane from Mizuho Securities. And then I have one question on Sony Group collaboration. Actually, you have seen already there are many achievements of the collaboration between the music and other divisions, which is very good. But from -- and I would like to ask a question, what kind of Sony assets and technologies are attracting few artist the most like in audio, video, VR, gaming, films? I would say the answer should be everything, but I'd like to get some sense for that. And then what kind of technologies and assets for Sony Group would be the biggest weapon for kind of SME to attract more musician globally?

Right. Okay. I think realistically, the good news is being in a company that has a gaming platform and has movies and television and technology, we do have inside access to what our sister companies are doing, and we know where music fits in. And I think that's a tremendous advantage. Obviously, gaming platforms, I mean, I'm sure you're aware, PlayStation has on its platform, well over 10 million subscribers from Spotify. So we know that music is in the heart of the consumer who games on the PlayStation network. So we are aware of that information. We are constantly look at -- and maybe a few years ago, this was just a phrase, but the truth is that there is an ability to put all the Sony family together and work out plans that actually benefit all areas of the company. I said -- I really believe this. Our artists expect there to be synergy. It's a brand advantage to be solely because people are aware of the gaming situation. They're aware we have a movie studio. They're aware we're an incredibly advanced technology company. And wherever there's synergy, we will put it to use, and it's pretty dramatic. And we constantly have examples. Even at the most basic level where we educate our artists coming into the company on the Sony branding. And there's not really a young artist to enter our ecosystem who doesn't have instantly some connection with the Sony platforms. And then as it grades up to the super artists, those deals become more public. For instance, Adele, we did the global Opera TV special with Sony Pictures and Sony Television for distribution. The biggest -- the second biggest song in the world last year by Kilroy, we've done lots and lots and lots of stuff with Sony Technology and Sony PlayStation. So we're constantly looking at ways of using all the platforms, but not just for the sake of it, for positive creative enhancement and hopefully more opportunities for our artists. And I think that everybody expects that for us. And I think it's part of the fabric of the company now. And I don't see getting -- as we move into the next chapter of technological platforms, I hope that we're market leaders in that synergy. Thank you.

The time is running short. So the next will be the final question for this session. Last person [indiscernible] from Macquarie Capital.

This is Damian Thong from Macquarie. Just one question. Clearly, increasingly sounds music is a data business. And I'm just curious what kind of technology spending? How much are you spending on developing these platforms? And how far are you along in integrating all the various systems for nurturing and finding artists and nurturing them? And also, what kind of development we can expect on -- especially on providing on the remuneration side, providing in artist services?

Well, I think that the -- I think one of the key words here is transparency. So it's very important to me that we develop tools, which I think we brought up in the presentation that we develop tools that enhance our transparency because this is the age of transparency, and it's not the age of a patent to the artists. So we absolutely are building as many tools as possible to not only tell the artists what's going on, but also measure consumer trends, measure the data. And we are very advanced in that process. We get an awful lot of data, as you could imagine, whether it be from the DSPs or from our own research and development platforms, and that data is all put to use. Hopefully, some of it is there to make our artists closer to us. That's partly the reason for having data tools is so the artists feel like we're acting in their best interest. But alternatively, it also makes it more competitive. So I think that it does no harm being part of Sony with that branding. But the fact is that we are constantly enhancing those tools. And we want to make sure that people know on almost like an instant basis exactly where they stand. And the same for understanding how we are selling content, how we are creating content. Every detail of our planning now is data-driven. And I think it's beneficial to the creative process and obviously, it's beneficial to the fiscal process, and I wouldn't really suggest that we would remotely want to go backwards on that strategy. My job really is to differentiate our company. I want us to be as open and transparent as possible, at the same time, as I said, by being as competitive as possible. So hopefully, our data tools do that. Thank you.

Now it is time to end the session of Sony Music Group. Thank you very much for your participation.

[Interpreted] Thank you for your waiting, and we are going to begin the session of Sony Music Entertainment. First, we are going to have the presentation by Shunsuke Muramatsu, President and Representative Director of the Board and CEO, Sony Music Entertainment.

[Foreign Language]

[Interpreted] Thank you for the presentation. I would like to entertain questions from investors and analysts. And we are going to have Shunsuke Muramatsu, President and Representative Director of the Board and CEO, Sony Music Entertainment and also -- and Satoshi Senoo Director of the Board, CFO and CIO, Sony Music Entertainment. Two of them will answer your questions. So let us start the Q&A session. [Operator Instructions] And the first question, in the original language -- channel. Ayada-san of JPMorgan Securities.

[Interpreted] My name is Ayada of JPMorgan. I think I have 2 questions. And the first question is for the data utilization. And you talked about global music and Rob Stringer talked about how the Sony is going to utilize the data. And how about in Japan for the artists and marketing purpose? Do you have any local characteristics of the data utilization in Japan? And besides that, and maybe not only for music, but for the animation, data and technology and Sony's technology legacy, how they are being used? And I'd like to hear -- I'm happy to hear that. And second question is that for the animation, the overseas business potentials. And you talked about some of the collaboration with the Crunchyroll? And what is your expectation? Well, what do you think you can achieve having a global distribution channel inside Sony? Will it contribute to our content creation and marketing? And what type of synergy effect and the positive effect? Or if you have any success cases after the affiliation? So I'm happy to hear that.

[Interpreted] Thank you for your questions. And I think I've got 2 questions and data utilization in Japan and some examples. And the second question is on how we are going to collaborate with the Crunchyroll for promotion of animation business. As for data utilization for the creative and marketing for the past 1 year or 2, there has been quite acceleration of the technologies, internally along with the communication initiatives. Probably Senoo-san, our CIO, can answer in more details. As for data utilizations at present, we have multiple projects going on in parallel with each other, physical, download, streaming and the respective sales for each artist and for each titles, and we have already visualized those classifications. And the promoters or the other internal Sony persons and almost 80% of the content has been utilized by those personnel. And we are now regardless of the recorded music, good sales and live concert sales and fund them creation for each artist, and we are now deploying systems to visualize those, the effects. So thanks to that deployment. And what type of support we should provide in the next stage, and we can tell, i.e., in each prefecture and how individual artists are being popular. And we can create something like a heat map and probably we can select far more effectively the best venues for particular artist to do a live performance. That's what I've been doing for the data utilization. As for the discovery of artists and talents and the data utilization is quite important. We have the essentials features and settling around the net creative, and we are trying to develop the artists, and we could expedite that process. And so as to quickly meet the talent with the promising features. And as for the second question concerning the collaboration with the Crunchyroll, in the previous year, and including Crunchyroll or the other collaboration with the other, we have the Demon Slayer and Ranking of Kings, and we could provide those contents directly to the consumers, and we could make a success. And as for Crunchyroll, for the theater window, the movies and we have joined distribution, and it could enhance the mutual trust between Sony and Crunchyroll and that has caused quite positive effect for the next business. As for the Ranking of Kings, and we have the ship titles, especially in the overseas and would like to enhance further more deployment on the overseas market. And as for merchandising and production, and we have the Flex and or localize the titles production is now going on. That -- so I hope I answered your questions.

[Interpreted] We will proceed to the next question from Crédit Suisse Securities, Nishimura-san.

[Interpreted] Two questions from me. One, going forward, 5 years hence, tedious hands, as SMEJ -- is there any possibility of changing your business portfolio? Overall, you're going to grow your earnings and existing businesses? Do you think that the existing businesses are the main drivers? Second, in anime business, on a global basis, it's growing and the competition is getting harsher in creating IPs, probably there'll be a grabbing of the resources and what kind of measures are taken, including the possible M&A in the future? Let me just ask you what is your plan for this?

[Interpreted] Thank you very much for your questions. Going forward, 5-year sense, 10-year sense, what would be the changes, possible changes of the business portfolio, that's the first question. And anime business under the harsher global competition, are there any grabbing out to the resources available? That's the second question in my understanding. First, mid- to long-term business, about the business portfolio. At this moment, thus, we are the comprehensive entertainment company, which is unparalleled in the world. So in music and visual and character and solution, these are the 3 business divisions, not probably equally, but all of them have to be grown. And each can collaborate with one another for their growth and that's our strength in creating hit IPs and then distribute this hit IPs globally. With a united front, we can grow. That's one of the major pillars of growth strategy from 0 to 1 to Infinity that I explained earlier. Know-hows and schemes have been accumulated within us. So we can replicate or reproduce this pattern going forward. In anime business there's a global competition, yes. Platformers have deep pockets as players and then in anime creation market they are coming in to take and secure the resources of creation. That's true. So we have our own anime creative studios, A-1 Pictures and CloverWorks. Those are the first-party studios, and we are trying to strengthen them and then we look out for the powerful partners and create partners and anime creations. We will strengthen our ties with those powerful partners. Basically 0 to 1 to infinity, well, we need to create hits. The ability to create IPs, that's where we focus our investment. Thank you very much.

[Interpreted] I would like to move on to the next question. SMBC Nikko Securities, Katsura-san.

[Interpreted] My name is Katsura. And I think I have two questions. First question is for the slide, Page 11 and the Japanese market, it seems to be quite unique compared to the global market. And in that context, the distribution of the label compared to 3 major labels on the global. They are quite different for the next 5 or 10 years SMEJ's positions, or do you expect any changes in the industry at all because you think that there will be a fewer companies after mergers? That's for the first question. And the second question, on 0, 1 to Infinity and for the overseas deployment and animation, you have a glance load collaborations. And I think that's one of the possibilities for the future. But how about for the music and the global deployment? What kind of opportunities for the -- do you foresee besides animations? BTS might be one of the success cases and the MÃ¥neskin, the Italy band made a big hit in the U.S. market. but we have yet to see any Japanese artist to bear a big success on the global market. So do you have any particular opportunities for engagement for the promotion of the Japanese artist?

[Interpreted] Thank you all for your questions, and thank you for your questions concerning music. Japanese market is being quite unique. And how SMEJ perceive the changes in the future and how to respond. The second question is for the from 1 to Infinity in the music business, what type of opportunities we are exploring. That's my understanding for those questions. As for the Japanese market for the future deployment, as I have already talked about, the streaming has been growing quite rapidly in the U.S. and the European markets. And it is the largest market ever -- against that are the Japanese. 26% of the streaming growth and quite high growth, but the 70% of the total has been occupied by the recorded music. So -- and if we have some decline of the physicals or the recorded music and along with the growth of the streaming and our market will be like European and the U.S. market. Now we have streaming, the subscribers around 17 million users. So we have to foresee 30 million customer on a consumer basis for the streaming. So for that context, the SMEJ, we have the streaming chart, best 10. So I already talked about Yuuri and YOASOBI and King Gnu were among those top 10 for the streaming. And 6 out of 10, the top 10 artists are the Sony Music Entertainment artist. So the streaming, the market share is quite important. So for that purpose, we have to produce hit titles while the discovering and developing the excellent and popular artists so as to deliver the music for sure to the society, not only the music but the consumers can find the effectiveness of the artist as well. That's what we would like to do and while trying to develop fandom and besides recorded music, live and fine event and merchandising or the other type of excitement [indiscernible] along fandoms Overseas opportunities are for music. Right now, Korean artists are now quite active and popular in the global music scene. So we can take a reference from that. We can grow good lessons that they are moving ahead of us. But we have the Japanese unique cultures, and we have unique attractiveness of the Japanese artist. So not so much in Japan, but while having the global market promotion from the very beginning, and we would like to furthermore promote the Japanese artists who can be popular in the global arenas. And thus, for the SMEs, we are going to have the joint audition collaborating with the overseas markets as well, not only in Japan. So that's my answers.

[Interpreted] Now let's proceed to the next question. From the Japanese channel, we take the question from Daiwa Securities, Sakae-san.

[Interpreted] My name is Sakae from Daiwa Securities. On Page 17 of your presentation material level question, high-quality game development. The graphic expressions and game playability are the ones that you focus on. Could you elaborate more on this?

[Interpreted] Thank you very much for your question. High-quality game creation. That's your question. In mobile market, there's this very high fan engagement, which supported our business in social engagement is high and the potential as we see it is that it is worth delving -- deep diving into. Now rather than pursuing the size, high-quality game playability is something that we focus on and we are committed to in creating game IPs. Fate/Grand Order is something that we have been working together with DELiGHTWORKS and we purchased the gaming development on. And make it -- made it a wholly owned subsidiary in Lasengle. And we try to further refine the FGO and develop new games, Lasengle will be committed to that. So this is -- Senoo may supplement my comment. Lasengle joined us, joined our group in developing FGO and operating FGO, developing new games. On these fronts within our group, we have very good communication and tightening communications as we proceed. That's the advantage, in our view. Another positive thing is that we have -- Lasengle have several hundred programmers, and they joined us music, animate solution in these businesses, highly game minded ideas from Lasengle can flood into us and create synergy. And among the business domains, there will be higher synergy. That's how we view this. That's the positive plus alpha coming from the joining of Lasengle.

[Interpreted] I would like to move on to the next questions, the time is running out. That should be the one last question. And Hirakawa-san of BoA Securities.

[Interpreted] My name is Hirakawa. And animation industry as a whole, and the Chinese companies are now investing quite actively to the animation production companies. And will it negatively affect the Sony's business? And what is your current understanding? And do you think of any countermeasures for those potential adverse effect?

[Interpreted] Thank you very much. And as I already mentioned and for this trend. And what we can do is our own the studios capabilities should be enhanced from the very beginning and the creativity enhancement and Aniplex that we have a quite long-standing experiences and some of the expertise and the capabilities. So we can maximize the knowledge on the human resource and the intellectual resources into that effort. And a follow-up question. And Aniplex -- besides Aniplex and there might be some subcontractors who they might be working with the Chinese companies, they may go to the Chinese investment. So you are not concerned for those subcontractors move. So we'd like to take responsibilities. So please do not worry that we'll take full responsibility for that.

[Interpreted] Now it's time to end the session of Sony Music Entertainment. Thank you very much for your participation.

Thank you very much for waiting, ladies and gentlemen. We will now begin the session on Pictures. First, please watch the presentation by Tony Vinciquerra, Chairman and CEO, Sony Pictures Entertainment.

Hello. I'm pleased to discuss Sony Pictures Entertainment's business during what continues to be an extraordinary and transformative time for our industry. At this time last year, every studio was still struggling with myriad challenges and uncertainties related to the COVID pandemic. Today, while COVID is by no means over, it is certainly much manageable, and our industry is bouncing back. Attendance at theaters is rising, productions are facing fewer shutdowns. And employees are finally able to come together and bring back the full force of our collective knowledge and creative efforts. For us at Sony Pictures, we really had an amazing year, achieving the strongest fiscal year results in the history of the company, while at the same time, initiating or completing several transformative M&A transactions that will strengthen and better position Sony Pictures for future growth. As you saw earlier this month, during Sony Group's earnings announcement, Sony Pictures results for the last fiscal year far exceeded expectations. Overall revenues of $11 billion and operating income of $1.9 billion. These results continued a 5-year upward trend in the studio's profitability, a remarkable 36.4% CAGR since 2017. That CAGR is not including a onetime gain on the sale of GSN last year. This incredibly strong performance has been the result of several factors. Our disciplined investment in areas of strategic strength and exiting businesses that are not core to us. Our continued investment in our incredibly strong IP and commitment to the theatrical window and our unique position within the broader Sony Group ecosystem. Each of these is at the core of a 4-pillar strategy that we put in place at Sony Pictures nearly 5 years ago. Leaning heavily into these key assets and advantages has been a critical part of the company's remarkable turnaround and continuing to keep a laser-like focus on them will be a big part of our growth strategy moving forward. I'll take just a few moments to describe more specifically what drove much of our success over the last year. More than just a look back, our successes also illustrate how Sony Pictures will continue to compete and thrive in the future. Nowhere was the value of our premium IP more fully maximized this year than in our Motion Picture Group. Faced with lingering challenges of the pandemic, our MPG teams under the leadership of Tom Rothman, had to once again rethink release timing and distribution strategies for our film content. And they did so masterfully striking the right balance between theatrical releases and licensing some films to streamers. This commitment to the theatrical window for our biggest IP in event films was not only extremely profitable for us, but it also illustrated that the theatrical experience is still highly valued by global audiences. Films like Venom: Let There Be Carnage, Ghostbusters: Afterlife and Uncharted all overperformed at the box office. And of course, so does Spider-Man: No Way Home, which became the studio's top earner of all time and third highest earner ever in the U.S. To date, Spiderman has made roughly $1.9 billion worldwide at the box office. And in its home entertainment window, Spiderman has now sold a record breaking 3.6 million units in EST in the U.S. It is worth noting that this was all achieved with an 88-day theatrical window and no China release. Our streaming deals for The Mitchells vs. The Machines, Fatherhood, Cinderella and Hotel Transylvania were also highly profitable for the film group. Mitchells vs. the Machines became Netflix's biggest animated film at the timing of its release and the others, all debuted #1 on the respective platforms. On the television side, Sony Pictures Television remained the leading independent studio with incredibly strong IP and is a market leader in several distinct businesses, including our Indian Media Networks business, game shows and anime. We continued to produce platform-defining television, like the Crown for Netflix. And this year, SPT was honored with an impressive 37 Primetime Emmy nominations in the top drama, comedy and reality categories. And we received 12 wins, a real testament to the strength and prestige of our content. Three of those shows The Boys, Cobra Kai and Woke premiered #1 on Amazon, Netflix and Hulu, respectively. And I'd be remiss not to mention the overwhelming success of Jeopardy! and Wheel of Fortune, the 2 highest-rated game shows on television, which continue to post very strong profits for Sony Pictures. As I mentioned, this year, Sony Pictures executed on an aggressive M&A strategy which included investments in several growth areas as well as strategic realignment and divestitures in various parts of our business to better position SPE for future growth. Our Crunchyroll acquisition, for example, which was initiated the year before, was completed over the summer. And the process of integrating that service with Funimation is now well underway. The deal established Crunchyroll as the ultimate destination for great animated content and greatly enhances Sony's already strong position in anime, one of the fastest-growing segments in entertainment. And we're already realizing the benefits of the deal with Crunchyroll's growing subscriber base who now have access to over 16,000 hours and 40,000-plus subtitled and dubbed episodes on the service. In another transformative acquisition, Sony Pictures acquired Industrial Media, home of over 100 nonfiction programs and franchises. Last year, we discussed shifting our television business strategies to better align with the new realities of the evolving television industry. And part of that strategy was making sure that SPT was able to meet the growing demand for unscripted content. The Industrial Media deal does exactly that. enabling us to add significant size, scale and capabilities to our current unscripted operation and grow our TV production business overall. And welcoming Industrial Media to the Sony family is special for me. Since earlier in my career, I was involved with 2 very big shows that we now have an interest in, American Idol, and So You Think You Can Dance. Also, in our television business better diversify SPT's production portfolio, grow IP and further our position as the leader in high-quality U.K. drama business, we took a majority stake in Bad Wolf, the powerhouse U.K. production company behind the award-winning drama His Dark Materials. And in December, we signed definitive agreements to merge Sony Pictures Networks India with Zee Entertainment. This landmark deal, which is still undergoing regulatory review, promises to bolster our already strong position in India, which is one of the world's fastest-growing markets. And it represents a major milestone in our commitment to investing in SPE's areas of strength in what we consider to be our key communities of interest, something we also highlighted as a top priority in last year's presentation. Lastly, we recently sold GSN Games to Scopely for approximately $1 billion in a deal that also gave us a significant minority stake in the mobile game publisher. That deal was in keeping with our ongoing portfolio review. We also sold channels in the U.K., Central and Eastern Europe in the last fiscal year as part of that analysis. Each of these deals was financially advantageous for SPE and really better positioned us to focus squarely on our areas of strength. And so with that, I'd like to talk briefly about the current entertainment environment in which Sony Pictures operates. The media and entertainment landscape continues to transform at breakneck speed, driven largely by shifting consumer behaviors. The streaming wars are fully underway with the industry's media players dedicating substantial resources to their direct-to-consumer platforms. And with the most recent mega merger deals, Discovery merger with Warner Media and Amazon's acquisition of MGM, competition and spending among streamers to fuel their platforms will only intensify. The theatrical window continues to evolve. Happily, the theatrical landscape has improved recently. However, box office is still not quite back to pre-pandemic levels. Part of this is related to lingering COVID-related reasons, but other factors are contributing. Many of the traditional studios are now prioritizing their streaming platforms over theatrical releasing. Another is geopolitical challenges in markets like China and Russia, where theatrical releasing for U.S. studios has become increasingly difficult. All that said, we have seen firsthand that audiences will come out for great content, and we're confident that we will see improvement in the theatrical market in the days ahead. While these industry changes create an increasingly competitive and challenging environment, we at Sony Pictures also see great advantage and opportunity. First off, as the industry's largest independent provider of world-class content with the freedom to work globally with all content distributors, the highly competitive streaming wars are good for us, that was evident with the landmark output deals we recently struck with Netflix and Disney. The global streaming rights deal for Seinfeld, which was realized last year and our incredibly strong fiscal year results. At the same time with traditional studios shifting more and more from theatrical to streaming, Sony Pictures finds itself in a unique position as the only major studio 100% committed to the theatrical window for premium IP. And that makes us an incredibly attractive home for top talent and creators who want their films to follow a traditional major theatrical release. Our IP remains our biggest asset and a huge competitive advantage. In recent years, we've realized the high value of some of Sony Pictures strongest film IP in the enduring strength and success of franchises like Jumanji and Bad Boys, and more recently, with the Spider-Man, Venom and Ghostbusters franchises. And our upcoming slate will continue to others, including the highly anticipated Spider-Verse sequel, Kraven the Hunter, and Madam Web, the latest from our Sony Pictures universe of Marvel characters and others. And you'll see a lot of original films in our upcoming titles, including the star-studded Bullet Train starring Brad Pitt, where the [indiscernible] based on the long-time best-selling novel and TriStar, the Women King. In addition to our commitments to keeping a robust slate for films that meet the high bar for theatrical entertainment, our Motion Picture Group is also moving forward with a mix of moderately priced films with more flexible distribution options to meet consumer demands for streaming content. We first discussed this addition to our slate strategy at the very beginning of the last fiscal year when we announced our Pay 1 output deal and first-look agreement with Netflix. We now have several films in development under that agreement, one of which Lady Chatterly's Lover is already in postproduction and due to be released later this year on Netflix. As SPAD penetration in the U.S. nears 80%, streamers are now looking to international markets for growth, which is driving up the demand for local language content. Sony Pictures International Productions, which produces film content in roughly a dozen markets around the world, and is home to key franchises is well positioned to provide originals to streaming platforms and contribute to local language theatrical markets. The strength of Sony IP is also a key asset for us on the television side with SPT focused squarely on leveraging known Sony IP to build franchises and create long-term value. That includes 2 spin-offs for Amazon's hit series, The Boys, Diabolical, which launched in March in Varsity is currently in production. Other expansions of key Sony Pictures Television IP is currently in development. And we're also looking to expand our profitable game show IP by growing the Jeopardy! and Wheel of Fortune brands. We have already begun expanding these beloved brands with prime-time specials, like Celebrity Wheel of Fortune and the Jeopardy! National College Championship and we're going to do more. I'll conclude today with what we see as some additional growth drivers for our business as we look ahead. As I mentioned, maintaining a laser focus on our core businesses and 4-pillar strategy remains our top priority, but we also see avenues for growth in the following areas: further leveraging of SPE's position in Sony Group's broader entertainment and technology ecosystem for future collaborations with our Sony sister companies, continued investment in our niche areas of strength and key communities of interest, continued investment in location-based entertainment and putting additional focus on our ESG strategies as well as expanding and diversifying our talent pipeline to reach broader audiences. Much has been said over the last few years about the advantages of cross-company collaborations among the Sony Group companies. Well, it's really happening. And none of our media and entertainment competitors have the advantages that we do in terms of potential partnerships with the world's leading music and games business. Their top talent and IP are with Sony's renowned technology prowess. That potential was truly realized this past year with the great success of the film Uncharted. Our first major feature film with PlayStation Productions based on the popular game IP was not just great box office, it's going to hit 400 million, by the way. It also really highlighted how successful this partnership can be and open the door for future projects and franchises. Right now, there are currently 10 additional film and television projects with PlayStation in various stages of production and development, including the Last Of Us, Twisted Metal and Ghost of Tsushima and our Sony Group company collaborations are not limited to PlayStation IP. Sony Picture has recently partnered with Sony Music to distribute a 2-hour special in 100-plus countries to promote the release of Adele's Album 30, broke multiple sales and streaming records. We partnered with Sony Electronics, a development and launch of Bravia Core, Sony's video service app included with select Bravia television sets that offers access to new releases and classic SPE films. Crunchyroll and Sony's Aniplex are currently in discussions to develop anime coproductions, and our use of Sony Tech continues to expand with the broader use of virtual techniques and other advancements being developed at Sony's innovation studios. So as we look ahead, we will also continue to invest in SPE's new growth businesses, niche areas of strength and communities of interest. These include our anime, faith and family and kids programming businesses, which we've discussed before, but also in other key businesses that differentiate us from our competition, including our robust Sony Pictures Animation and ImageWorks business that continue to produce award-winning and hugely popular animation like The Mitchells vs. the Machines, the beloved Hotel Transylvania franchise and the groundbreaking Spider-Man into the Spider-Verse features. And of course, our robust Indian Networks business, where despite significant COVID challenges over the past year, SPNI continues to deliver record profits for SPE. Several of its channels consistently rank among the top channels in India. And SPNI revenues and profits are expected to continue on the growth at. And we'll also continue to explore new location-based entertainment opportunities to provide audiences with a deeper connection to our IP through highly immersive experiences. Columbia Pictures' Aquaverse in Thailand will open later this year. And we're set to open new attractions later this year and in 2023, including the flagship location attraction in Chicago as well as a Ghostbusters Touring Exhibition and Jumanji themed attractions in Italy and the U.K. which are created by the way, in partnership with Merlin, one of the largest theme park companies in the world. We will continue to build on this momentum with new attractions that maximize long-term value through both licensing deals and self-funded opportunities. Finally, our ESG and diversity efforts remain crucial as we think about our future growth plans. We've already seen great progress with many of the activities that are part of our broader diversity and inclusion programs and Sony Pictures Action! initiative. We will continue to actively search for ways to expand the pipeline for diverse stories and talent of all backgrounds with innovative and impactful programs such as the Diverse Writers and Directors Programs and the Creative Diversity Fund. And we're continuing to make progress on our 2025 goal to reduce carbon emissions globally by 25% and eliminate single-use plastic across all of our business functions. So with that, I'd be glad to answer any questions you might have.

Now we are going to open the floor for questions from investors and analysts. We have with us Tony Vinciquerra, Chairman and CEO, Sony Pictures Entertainment to answer your questions. Now we'll begin the Q&A session. [Operator Instructions] First, from English channel. Mr. Michael Nathanson from MoffettNathanson.

Thank you Tony, can you hear me?

Yes, I hear you, Michael.

Thanks for doing this, Tony. I have 2 for you. There's a lot of concern now. You guys have had a great run by being a top [ player ] in streaming wars. What is your take on the recent reset by some of the streaming companies, potentially your reaction to the market's concerned about profitability? Are you seeing any changing in the demand for your content in recent months post kind of the shakeout in streaming land? And then secondly, any update on India, I know it's a key market for you, and just your thoughts about Indian profitability long term and maybe the importance of sports rights to building a business there. So any update there would be very helpful.

Thanks, Michael. Nice to hear from you. First of all, our opinion is that the reset you mentioned about streaming companies is a good thing for the business. We think that they will now be looking at themselves as businesses that are judged on profitability in the way they run their business as opposed to as a multiple of revenue or of subs. So I think they are all going to be reliant on companies like ours that are big enough and have scale and are reliable in terms of producing product on budget and on schedule. And look, we're actually pretty excited about it. And I think it's going to benefit us in a very, very good way. I don't think there'll be major changes for us in that regard. Since -- just since the reset of roughly a month ago, we had several commissions in very, very good stead. And so we're actually pretty happy about it and pretty enthusiastic about this, as you described it, a reset. In India, as you know, we made a deal to merge with Zee several months ago and signed the documents to do that. And we're now waiting for regulatory approval. We're thinking India is going to be a massive, massive win for us once this deal gets approved. It is going to put us in either 1 or 2 place position for entertainment companies in India. We have significant sports rights in the marketplace, and I think you're probably referring to the IPL bid, which is coming up in mid-June. And it has engendered lots of interest. I'll say this, it's something that we had for 10 years, the IPL and did very well with it. And we lost it last time around to the Disney channels there. Actually didn't really impact our business in a negative way. The last 2 or 3 years have been the most profitable years we've had in India. So we think sports rights are very important. We have a number of sports channels and many, many sports rights. IPL is a great property, and we're looking forward to bidding aggressively for it, but we're not going to be crazy. Thank you.

Credit Suisse, Nishimura-san.

My name is Mika from Credit Suisse. So I have 2 questions. So one is about the cost manage. So please tell us about the passage in and the future prospects of the cost management in the production of movies and TV programs, and also the marketing of the movies? And the second question should be the PlayStation Productions. So could you please the medium term mid to longer-term potential of this studio. So is there a possibility that the -- you can develop the new premium IP content going forward? And also, is there any hurdle to grow into the premium IP? So yes, this are my question.

Let me start with the second one and I didn't get the first part of your first question. So I'll ask you to repeat that if you might. On PlayStation IP, we have a very, very robust lineup of PlayStation IP coming. As you know, we talked about -- I talked about in the presentation earlier. Uncharted did really, really well as our first effort in combination with PlayStation IP is over $400 million in box office and has set a very, very good path for us. We have roughly 10 projects in development right now. As we started -- as we said, with Uncharted in production right now is show with HBO called Last of Us, very, very premium game at PlayStation and one we're very excited about. We have Horizon Netflix. We have got a war at Prime Video and Apple TV, and we have Twisted Metal at Peacock. And we're also looking at another one, game called the Gran Turismo. So we have lots of IP coming and many other projects we're thinking about putting into production. On your first question, I think you asked, did the pandemic effect our production and marketing? Is that what you're asking?

Yes -- apologies. So first question was the cost management on the production of the IPs and also the marketing of the movies. So about the past achievement and the future outlook about that.

Okay. So cost management, I think, is what you're asking about there. The pandemic actually increased costs pretty dramatically for us through the pandemic. But that's all behind us now for the most part, although much of the restrictions are still in place, and they'll be starting to go away over time, we assume. But we had a pretty good year last year in the face -- in the film company in the face of the pandemic and the costs for production. On the marketing side, marketing for films has changed dramatically over the past 4 or 5 years, whereas 5 or 6 years ago, we would spend 80% of our marketing budgets in traditional media and roughly 20% digital media. That's pretty much switched to probably 70-30, 80-20, 70% or 80% spend in digital media with trailers and marketing on digital platforms and about 20% to 30% spend in traditional media has become much more efficient, and we're actually spending a little bit less on marketing right now. So we're very, very happy on that transition. Thank you.

Now I'd like to move on to the next question. Ezawa-san from Citi Global Markets.

Kota Ezawa from Citi. I also have two questions for you, Tony. The first one is a question regarding Motion Pictures. You contracted with for pay 1 window, and then also the pay 2 to Disney. But can you tell us how this deal maximize Sony's revenue and then also probably the profit opportunity? And there might -- many windows establish [indiscernible]. And if you cut off other distributions and channels and focus on Netflix and Disney, correct me if I'm wrong. This is the first question. The second one is about the Grid collaboration. And I'm curious if there's dollar opportunity, if there is an eruptive business opportunity or value opportunity for Sony Pictures by doing the gaming might be into the movie titles? You already have touched a little bit on this part in the previous question, but let me repeat a little bit. What's the upside of using gaming IP into pictures content? This simply you have a high chance to making titles using it game IP. Or is there any cost advantage otherwise? If any information you can share with us would be great.

Sure. So your first question about our pay 1 and pay 2 window deals and do they cut off other revenue streams? No, actually, they enhance the revenue streams for us, and they'll be very profitable over time, assuming we can get people to come to theaters and sit in seats, which so far we've been able to do since the deal started. You saw how the -- we talked about Spider-Man earlier, how the electronic sell-through of that particular film was extraordinary. It's the biggest electronic sell-through film in the history of moviemaking after doing $1.9 billion in box office. So we don't think there's any -- I think your -- you asked if you were right or wrong, I think you're wrong on that point, and we're hoping we can prove that to you. The deals we did between -- it's not -- it wasn't really a traditional pay 1 and pay 2 window deal with Disney and Netflix. We kind of combine them and the 2 platforms will share the product over the next 5 years. It's a very different deal than would have been done in the past. And the details of that deal are very strong. I can't get into exactly what they are, but we'll put it this way. We had 6 bidders for those -- for that window, the pay 1 and pay 2 window. And as you know, as a businessperson, when you have 6 bidders, you get a pretty good price for what you sold. So we're very happy with how that worked out, and we're looking forward to monetizing that over the next 5 years by putting out terrific films. On the question about collaboration with PlayStation IP and is there a downside to it? Well, the downside could be in that -- is that if we don't make effective films, people won't come to see them, and that could damage IP and it could damage our business. Uncharted did really well. It's very important that we have the right approach to the films because the gamers are very passionate about the games that they're interested in and play. And if we don't do it right, they will have a negative response to them. But we think we found different approaches to how to develop these IP into projects on both film and television that viewers will like. The upside is that we do very well with the film on -- for Sony Pictures, and the other upside is that the game does very well in PlayStation, while Uncharted is a PlayStation 4 product, so we didn't really see a lot of new games being sold, but I understand that the usage of Uncharted on PlayStation 4s was up dramatically. And we're hoping that as we go forward, as we produce these projects on film and television that we actually sell the discs and the downloads of those games on PlayStation 5 and PlayStation 4 going forward. So we're hoping to enhance both our businesses, our business, obviously, through the box office and to the subsequent Windows and PlayStation's business through the usage of the game and sale of the game itself. Thank you for your questions.

We would like to move on to the next question from Nakane-san from Mizuho Securities.

This is Nakane from Mizuho Securities. So thanks very much for Tony for great presentation and taking my question. I have 2 questions. First 1 Sony pictures and a second one on Crunchyroll. And the first question is to better understand on what is happening in SPE? But question is what is the background to the ability to certainly create multiple top 20 U.S. box office revenue works every year for the past 6, 7 years, or much before. Is that coming from maybe themselves or operations are like planning, production, accuracy of demand forecast, marketing strategies? Can you elaborate on that?

It's very hard to hear you. The quality of your communication is very low. Could you speak a little slower and louder possibly?

Okay. Can you hear me? Is it okay?

I can hear you, but it's very difficult to hear.

Okay. So my 2 questions. First one is on the picture side. And what is the background to the ability to steadily create multiple top 20 U.S. box office revenue works every year for the past few years, unlike before, IP itself or operation side like planning, production, accuracy of demand forecast, marketing strategies? Do you please elaborate on this? And second question is on Crunchyroll, in combined with Funimation. What is the revenue and what is the timeline for the inflection point to see meaningful contribution to the earnings?

Okay. I'm going to start with Crunchyroll. So on March 1, in the U.S. in North America, we combine Crunchyroll and in an integration of those services by moving the Funimation subscribers over to Crunchyroll, and it was a massive success. And it's already your question about when it will be meaningful to the company? It's already meaningful to the company. On operating profit, you probably won't see the result of that immediately because of the purchase price accounting adjustments. But on EBITDA, it's already a very, very strong -- it will already be a very, very strong contributor to our bottom line. And we're very, very positive on how that's going to work. Our anticipation has been exceeded by a significant amount. We're not talking about what the what the subscription numbers are yet because we're still working through the movement of subscribers, but they're well in excess of our expectations at this point. So we're very positive about it. On the first part, I think you're asking, how do we keep our flow of strong IP going through Sony Pictures? And on the picture side, we have creative deals with about 200 creators, and they are the heartbeat of our television business. They create ideas. They create programs. They create revenue streams for us. And that's really what drives our business. That business has changed pretty dramatically over the -- again, over the past 3, 4 or 5 years, going from where we deficit financed almost all of our programming to today where we deficit financed almost none of our programming and everything is done on a, what's called a premium basis where we sell a program to a platform, be it stream or a network or a cable, the broadcast network or cable network, and we take a premium above the production cost as our payment for the show. And we own the show. We only -- we license it to those platforms. So on the television side, that's the play. On the film side, we talked about the IP that we now have with the PlayStation. We also have the Spider-Man universe of characters where in the past, we produced 1 character, Spider-Man. We actually have over 900 characters in the Spider-Man universe, and we're now exploiting that in a very aggressive way to film and soon to be in television. We also have Jumanji. We have Hotel Transylvania. We have Ghostbusters and it goes on and on. We have plenty of IP to develop and continue our string of successes. Thanks for your questions.

The time is running short. So the next person will be the last person. SMBC Nikko Securities, Katsura-san.

This is Katsura from SMBC Nikko. Two brief questions. One is about the DTC and the second one is about the location-based entertainment. About the DTC, you mentioned that you cannot communicate about the number of the Crunchyroll but last year, you talked about the Sony LIV alliance with NetRange and the number increased to 5.6 million subscriber. As for the bigger picture, what mentioning is about 1 billion direct-to-consumer in [indiscernible]. What role would SPE would contribute in that context is the first question. Second question is about the location-based payment. What would be the positioning of your strategy about this strategy? Would it be like Disneyland or Universal Studio, which try to make the business model, they make money by itself or it's more kind of a marketing kind of thing? And the future road map or growth opportunity going forward?

Great. Thank you. I appreciate the questions. So on DTC, we have -- we really have 3 DTC platforms. One is Crunchyroll, as you mentioned, which will get you more information about that as we move forward. We have Pure Flix, which is our faith and family business in the U.S. that is growing very nicely. It's nearly 1 million subscribers at this point. And we're right now developing it and trying to figure out how to expand that internationally as well, and that's growing very nicely. And then we have Sony LIV, which you mentioned. And we did say we have 5 million or 6 million subscribers last year. We actually have 16 million right now, but many of them are on a wholesale basis. We have about 8 million from those, the 5 to 6 became 8 in the last year. And then we have another 8 or so that are on a wholesale basis, which are not significant to the revenue base bring a lot of subscribers to it. Our goal in this deal that we're trying to get approved in India by the government -- by regulators in India to combine with the Zee is to combine Sony LIV with the Zee platform there, the DTC platform. And then really use the success of the linear programming channels, both at Zee and at Sony Pictures Network India -- Picture Networks in India to drive the development of our direct -- direct-to-consumer business in India. We are going to have a very, very, very strong general entertainment business in India. And look, we're ready to take on everybody there once we get this deal done, and that's going to be a massive business for us going forward. On LBE, we are -- it's more of an experimentation at this point. The part that we talked about in Chicago and opening a Wonderburst location, we're in the process of building it right now, and we're going to test the concept in Chicago to see if we can roll that out into many more cities in the U.S. and around the world. If it works, it will be a very nice business. But as I said, it is an experimentation at this point. On the other projects that we talked about, they're licensing. It's not -- we're not going to build a Disney World. We're not going to build Universal Studios. But we are licensing our IP at a very profitable rate in many cases, as we talked about in the presentation earlier, in many places around the world, you're going to see over a dozen of those examples coming on board over the next year to 2. Thanks for your question.

Thank you very much for your participation today. This is the end of the day 1 programs of the business segment for 2022. We are going to restart the session at 9:00 tomorrow morning. Thank you very much for your participation.

Now let's start Entertainment Technology and Services session. First, please watch the presentation by Kimio Maki, Representative Director, President and CEO of Sony Corporation.

[Foreign Language] [Presentation]

Now we'll take questions from investors and analysts.

To answer your questions on the podium from Sony, we have Kimio Maki, Representative Director, President and CEO. Kazuo Kii, Executive Deputy President in charge of Operation. Yoshinori Matsumoto, Executive Deputy President in charge of Technology. And Yuichi Oshima, Executive Vice President and CFO. The floor is open for questions. [Operator Instructions] The first one from Morgan Stanley, Masahiro Ono.

My name is Ono. In the growth area, thank you very much for your detailed explanation about your financial targets by 2024, 1/4 of the operating income would come from the growth area. You said, but if possible, in the growth area, among the subsegments of growth area, depending on the contribution level if you could give us an idea, you're talking about fiscal '24. Second question. The positioning of the existing business, will there be any changes going forward? If you could comment on that, I would appreciate it. These are 2 of my questions.

Thank you very much for your questions. Your questions are about growth area and the distribution by category, subcategory. Second question is in the profit access, what will be the future direction? Concerning your first question, in the growth area, for a long time, we have been doing business in network services. And this is accounting more and more of our business portfolio. And Camera SDK business growth is following up very closely with high growth rate that's going to be in fiscal 2022. For fiscal '24, in addition to that, sports entertainment business has a great potential. On your second question on the profit access, what will be the future like? The market itself is not disappearing correctly. -- the conventional strategy will be kept, but the same time, product strengthened pills should be fortified in the high value-added area, we would like to be dominant in the market. That remains unchanged. And in addition, in operation, leaner operations should be the way for evolve -- evolution in the profit access we secured adequate profit in the 2 access management.

Thank you. We'd like to move on to the next question. JPMorgan Securities, Ayada-san please.

Ayada from JPMorgan. About profit access and growth access, 2 questions. Regarding profit access, it's not something that will disappear immediately. But out of many pieces existing, user generated contents market. Can you please explain the potential of this market? TikTok and YouTube, such creative opportunities are increasing. Xperia and Alpha, the different business opportunities are increasing from before or if it is a barrier going beyond mobile, for example, creation device, different from iPhone. And is that going to be recognized in that way. And for Alpha also, different users are purchasing Alpha, if you have specific examples and numbers, can you please share this information with us? My second question is about growth access on Page 22. The slides that you have explained, the fixed cost and operating cost. As the growth business increases in ratio, impact upon ROIC -- the segments impact upon ROIC -- for this segment, 19% ROIC, very high level of ROIC. As the mix changes in the future, the 19% level is something that is sustainable? Or can you -- should aim for upside -- higher level? Can you please explain this?

Your first question Out of the profit access businesses, the value of UGC will increase and also the base will increase further. And as more opportunities and different opportunities increase, what are the specific numbers? And in the second area, growth area, about the business structure, I think that was your question. So regarding your question, Oshima-san will respond. The first question the user-generated content without any doubt, user-generated user base is increasing. The size whether we are measuring that on a global basis, not necessarily the case. So going forward, we need to measure that. At the same time, we have 3.0, then the base will further expand and we need to support the creators. And technology for supporting the creators will be -- become much more important, not only Alpha, but RX and Xperia these input equipment will be further strengthened, so that we can support creativity of the users. With regards to the second question, I'd like Oshima-san to respond.

As explained today, the growth business will be increased. Of course, this is an area where we can expect growth. But in addition, as compared to the sell-off hardware business, the -- we see -- this is not so much impacted by the change of the environment, external environment. So we have to expand the growth business and so that it will account for 1/4 of the operating profit. . And this will contribute to increase in profit. But what is most important is to make sure that we will have a stable earnings structure. With regards to existing business, lean operation and further front-end operation, DX so that we can contain fixed cost and maintain profit at the same time. In addition to that, we have the growth business. So the overall ROIC, or R-O-I-C as compared to 18% to 19% at the current level, we will be able to increase ROIC.

Let's proceed to the next question. From SMBC, Nikko Securities, Katsura-san please.

My name is Katsura I have 2 questions as well. One in the growth business, growth access, there are several potentials Camera SDK and Sports, those are what you see potential. In addition, from outside like us, the scale and the progress of these new potential is difficult to see not initially, but going forward, what kind of communications are you going to make with the market? KPI and others, if you could share these views I would be appreciate it very much. Second question. On Page 22, what you disclosed is that the OP margin, 10%. And that's what you disclosed and you are managing on 2 axes and probably the investment should be important. OP margin, 10%. At that point, what's the EBITDA margin? And going beyond that, to what extent are you going to aim with your business portfolio? If you could give me a certain orientation, I would appreciate it very much.

First, your first question in the growth business, especially Camera SDK business, the scale, it's difficult to see and what view we have on that? That's the first question. The second question, OP margin, 10%, that's we aim at. That's true. And what is our view on EBITDA? And what is our view going beyond that? Allow me to answer. On your first question, growth business, growth access. High-growing business that's Camera, Alpha's reputation in the industry, and the market share is quite high in the industry and the customer loyalty remains quite high. And then a smaller and light-weight, high sensitivity and high definition. Those are the features that the customers -- users use depending on the use case. And the market size now is JPY 100 billion, a little over JPY 100 billion. And toward fiscal '24, I am sure that this area will grow even further. And the Camera SDK has a unique feature. This is a highly profitable business. That's what I want to emphasize. Going forward, as 1 of the pillars for growth, camera SDK is very important to us. Your second question. OP margin 10%. And when we try to further grow, it's indispensable to have the growth in the growth axis. And then in the areas in the growth business that we showed, the level of profit is higher than the existing one. That's our target. About the structure and composition Oshima will supplement me after this.

Oshima here to supplement the comment. As I said earlier, our growth business, right now, the existing profit access business, we need to go beyond the existing level of profitability. And by doing so, we try to be resilient against the external changes, and that's the business structure we would like to create and generate and at this moment, operating income is -- the view on operating its [ 1/4 ]. But in the mid- to long-term, that ratio is likely to expand. And then EBITDA and operating income will improve going forward. Especially for the new businesses, investments in the new businesses, Well, without doing everything by ourselves, if necessary, we try to cooperate with external partners, such as M&A thinking about the capital efficiency. So going beyond, we can aim at more than 10%.

We'd like to move on to the next question. Credit Suisse Securities, Nishimura-san, please.

I have 2 questions. The first question. About Life Science business. On Page 20, you are showing the increase in sales. And it is -- the flow cytometer is the centerpiece. And from FY '25 onwards, that will be Phase 3 and further acceleration of sales is expected, I would say. So longer perspective, how far, do you think that you'll be able to increase the scale of sales and the competitive environment. And is that something that you will be able to still increase your share? The second question. Including Life Science, in the growth business -- competitive environment, your company, you have a predominant solution, and you'll be able to maintain and increase shares. And do you have absolute advantage and the collaboration with other companies. How do you think about the collaboration with other companies?

Firstly, Life Science business, from FY '25, the Phase 3 acceleration of sales -- so how do I look at the size of the market from a longer perspective? Secondly, including Life Science for the growth business in Sony has the predominant share and the differentiation, what will be the differentiation point in order for us to differentiate ourselves against competition? The first question regarding Life Science. First, Medical, looking from medical perspective, the monitors and printers and medical peripheral equipment and Sony Olympus solutions developed surgical imaging equipment, including all these in FY '21. One, we were able to generate solid profit and supporting that Life Science is also showing steadfast growth. That is the overall business situation in Medical business. In the medium-term, Life Science will be the driver and show the kind of growth rate that will drive the business. But the market itself, the R&D of the cell immunology therapy, the fourth therapy, immunotherapy is being done. And we are not able to [indiscernible] the size of the market yet. But Sony's unique technological development adopted by medical institutions. And more than 1,000 usage institutes are utilizing our flow cytometer and conducting realized researches. So we are going to -- so analyzing and sorting the cells. We'll be expanding our business to these areas so that in this industry, end-to-end solutions can be provided by Sony, which is unique to us. Regarding the market size, I'm sorry, this is a growth category, and it's [ unfair for them ]. We are not able to say how the market is going to be. With regards to your second question. Growth business, including Life Science, Sony has the absolute solution or the share and what will be differentiation point and our strengths? Our greatest strength is input equipment cameras and other input devices, output, smartphone and others will become more commodity. Camera SDK input side and the output side, it doesn't matter what it is. But the input equipment is to be made open to the creators. And together with these creators we'll be strengthening this. That is where we have the strengths where others do not have.

The time is running out. So the next question will be the last. From Mizuho Securities, Nakane-san please?

Nakane from Mizuho Securities. 2 questions. About the fixed cost stuff. In the profit access, you're trying to reduce, it's a lean operation already. So what are you going to decrease. And with the automation, what is the advantage in terms of numbers and figures. And the external environment, which is changing domestic development the [ Malaysian ], Thai operations growth remains unchanged. Is my understanding correct? . Second question, about the procurement. In semiconductors and game, you are collaborating with games, gaming business and to secure the quantity and -- on cost you can be competitive. Any progress being made. In the procurement overall, what are the challenges in your view?

Your first question about the reducing cost in the profit business where are we going to reduce it? What's the advantage of automation. And then exchange rate and external environment, Malaysia/Thai operation, those are the questions -- those are the elements in the first question. Allow me to answer to a certain extent, supplement by Oshima and [ Kii ]. On your second question about cost strengthening by collaborating with semiconductor and games and what are the challenges, in my view. So on this question as well, I will speak first supplement by Kii. First, to reduce cost in the access. It's not our message. From profit -- well, we shift the portfolio from the profit access to growth access. And the advantage of automation is that in Malaysia, there will be a 50% target for automation in Malaysia. And then within the factories and offices, the cost within the office can be expected and protected and Oshima can support me on this particular point. In Malaysia and Thai, growth operation, Oshima can supplement my comment.

About the fixed cost that as you already know, Sony Mobile, [ SRMC ] smartphone business. There was a restructuring in FY '22, there was a withdrawal exit of Brazilian consumer business. In Shanghai, there were 2 operations merged -- which were merged in last year FY '21, in Malaysia, Penang factory and KL Tech were merged. So those are the examples. Going forward -- what we have to do going forward is as follows: in each business unit, for each location, there's certain things held for -- we have to have the overall view from an entire [ SEAC ], and there are rooms for further cost reduction. One example in Penang factory, it's an audio business is the main business and KL Tech is TV business. And then if we look at each business separately, we cannot go further. But if you have a comprehensive view from [ SEAC ] as an entirety, we could make a business judgment. It can be applied to other places. There are various variations throughout different business units and investments. And so we need to standardize leveraging the strength of business and system integration and data have to be consolidated. And there are rooms for leaner operation like this. And then concerning manufacturing, automation is to be promoted, of course. It will reduce the manufacturing fixed cost, but the major point is that by promoting these, existing inter factories variation can be more consolidated. What we want to aim at is that about the production sites, compatibility among the production sites should be improved. And then including geopolitical risks, we can be more resilient against the risks, including geopolitical risks, for example, supply chain risks.

About the second question is the semiconductor collaborating with games for procurement, what's the progress being made? And then what are the challenges? The first half, I will answer, and [ Kii ] will answer your latter part of your question. And from fiscal '21 for semiconductors, there's a tight supply and our response to that is that together with the semiconductor team on a wafer level, we look at the supply and try to share the stock we have. And depending on the semiconductor companies, when we negotiated with them, we will not negotiate as an [ SEAC ] alone SIE together cooperate in negotiation, and that kind of negotiation will continue. For challenges, Kii will answer. .

Here, I'm Kii to answer. At present, the procurement situation is quite tight. There are several challenges that we view and within a group -- I would like to share them with you. First, standardization. There -- in various businesses, various components and parts are used and -- there can be room for standardization. Therefore, we will do that thoroughly in terms of purchasing can be done, for example. And then group collaboration, as Maki said, we need to strengthen the collaboration on a worldwide basis, and there are sites, there are procurement members throughout the world design teams, and we try to network them so that there will be an efficient negotiation in each region. One more thing, partnership, that's important. We need to strengthen that, in our view, partnership that the game has and semiconductor has certain partnership within our group and ET&S has a partnership, but we need to leverage on them on a full basis and strengthen them.

The time has come, we'd like to conclude the session on Entertainment, Technology and Services. Thank you very much for joining.

Thank you for your waiting. And we are going to begin the session for Imaging & Solutions session -- segment. First, please watch the presentation by Terushi Shimizu, Representative Director, President and CEO, Sony Semiconductor Solutions Corporation.

[Foreign Language] [Presentation]

[Foreign Language]

And now we are going to entertain questions from investors and analysts. From Sony Semiconductor Solutions we have Terushi Shimizu, Representative Director, President and CEO; and Yasuhiro Kono, Corporate Executive and CFO. [Operator Instructions]. The first question is from JPMorgan Securities and Ayada-san.

My name is Ayada-san from JPMorgan Securities. I think I have 2 questions. And the first question is for the larger size. And on the Page 5 slide seems to be quite straightforward and especially for the high-end smartphones, and you talked about the 2 different partners. For the proprietary ISP and probably mainly for the Chinese customers for further more additional values. So do you find any particular competitiveness because for those type of sensors, you might have developed. So there will be some of the new development in terms of the profit. And as for the larger sensor size? And do you have any special ideas for how you are going to provide special additional values. And the second question, for the past few quarters, we had quite high utilization, and you may have a stack of the inventories. And probably the normalization of capital expenditure might have been 1 of the challenges. And there might be some impairment. So in terms the future context for the technology sections, and some people talked about for the further more standardization for the future point. And that's for the mobile, the product, especially for the Chinese market for the general purpose will be the main stay compared to a customized product. So is it possible for you to talk about some of the future directions between -- the balance between the general purpose ones and customized ones.

First, thank you very much for your questions. On the Page 5, related questions. And for the general purpose processor and proprietary and the IP. But as for the general IPs, we had some proprietary ISP. And what is the situation surrounding that. And as for the larger size sensors and how we are going to work on the pixels and the sensing technologies. And the second question is concerning for the balance. And the answer to the first question. As indicated on Page 5 and that's for the General-Purpose, AP and how capture the image. And -- this is for the combination with the General-Purpose AP and our own ISP. If they have application processors, they can work freely on the ISP, but as for and the General-Purpose AP has become more sophisticated. So if we try to picture -- capture the pictures and the features might be rather reflected. So OEM customers or the smartphone customers, they would like to use their own ISP. And so still overcome those reflections for the picture [indiscernible] features. So that's up to our customers. So we cannot tell definitely when those trends would be the main thing. So that may take time. That may not be by the end of this year or maybe beyond. And that's for the Pixel and additional values are with the larger-sized sensors. and as for the larger-sized sensors, the larger the dynamic sensor has become much larger. And also that's true for the picture capturing features. And that's for applications and the moving picture will be more [ prevalent ] than the still pictures. So the larger pixel counts will be quite important. The pixel size, larger and the pixel count greater, that will be the trend. And as for the inventories related to capital expenditure. And if we speak about our inventories, we are doing image sensor business. The largest component is for the mobile related. Mobile has been affected by seasonal factors. So always -- that's always a challenge to stabilize the production levels. So that's why we have to carry inventories to stabilize our utilization. But we do not have to produce the sensors which do not sell, so we always try to coordinate with our customers. Before COVID-19 pandemic, the [indiscernible] has been the main state for the sensors. But before COVID-19, we have never had a hard time to secure the logic devices, but after the COVID-19 and the geopolitical risks, we started to face difficulties for the security of the logic devices with the shortage of the semiconductor supplies. And the foundries -- global foundries are now trying to expand the production capacities. So in that context, so we need some extent of buffers based on our inventories. So that's not to face any difficulties for the difficult times for logistics. So Kono-san probably can follow up for the inventory.

Since last year, we tried to respond to a much wider range of customers. So that leads to challenge some extent of the inventories. And we have more general sensors needed to address the customers' needs while responding to the market needs. That's it from me.

We'll proceed to the next question from Morgan Stanley MUFG Securities, Ono san, please.

Ono from Morgan Stanley. Two questions. First, on Page 4, larger size graph by 2024. It seems that this trend will accelerate. And then smartphone manufacturers has the road map, but this is talking about fiscal 2024. So what level of conviction do you have about this forecast? And then smart high-end iPhone unit price has reached a high level. Now what about the cost of the camera including sensors? What will be the tolerance level of this increase? Second question is related to the first question, ROIC. You showed us your ROIC number on an IFRS basis, it seems that the level is about double the size according to IFRS. So please share with me your premises on these numbers.

First question is about the larger size are we aligned with our customers on this point or not. So if this trend is proceeding, smart manufacturers -- there's this [indiscernible] and then towards this camera, how much budget are they going to provide? Another is about ROIC? And I'll answer your first question and on ROIC, Kono will answer. Now about the larger size products, as you rightly said, the contact we share the road map with our customers. And then going forward, what are our customers thinking as I said in my presentation, compared to last year, it seems that there is a change bigger than last year. Constantly, when we talk about larger size, -- but the 8K video going forward, that's what we have been saying, but the productions -- sensors -- larger-sized sensors, that's fine. But when it comes to module form, we need to maintain the quality level when the sensor becomes larger, OIS and EIS, do they function well, are they not breaking up, and we have been sharing information with our customers. We have a certain vision and that is reflected in our road map. And about camera, if the sensor becomes so large, the price would go up because costs will go up. So do you have some concern. BOM cost is something that we discuss with our customers on a constant basis, and BOM cost, how are they going to evolve and change. That's what we look at. For example, 3 years ago, smartphones evolution was expected to have 3 ways: battery, display and camera. And display and batteries to a certain extent for the last several years have the progress and quality becomes so better. It seems that technologically, there's some saturation or maturation, but there's some expectations for the camera. So the entire BOM cost is not going up, but the application processor is evolving constantly. So which part is evolving? The other parts is being -- becoming mature. Well, saturated, we watch this, and we are constant along with our customers on this.

About the ROIC improvement, allow me, Kono, to answer. Present situation in the midrange sales, there's an increase and the margin is coming down. And the profit for this fiscal year seems to be a little lower than that of last year. But as Shimizu earlier, with this larger size trend many customers have expectations on us. And then we are quite sure of this trend against this backdrop. But in the performance briefings, we said that in the current MRP, JPY 700 billion investment was increased to JPY 900 billion increased by JPY 200 billion. So it's in progress. Investment that I talked about, we are expanding the facilities and installing the equipment. So this is the Fab will take some time to reach the maximum level of efficiency. So we need some time to improve the efficiency of our assets. Also R&D, in R&D, as we said today, automotive and system solutions business, we are making investments in these. And these businesses at this moment in terms of sales, the contribution is quite limited. However, on a midterm basis, they will make more contribution. So we watch this. And after there's some pause, we think 20% of ROIC can be achievable.

And we'll move on to the next question. Time is running out. And we are going to take only 2 more questions. That's one question per one analyst. And Nakane-san of Mizuho Securities.

My name is Nakane of Mizuho Securities. Just one question. And for the 10 years for the next 15 years capital expenditure, how you are going to be, on your own, in terms of the capital expenditures. And that's for logic devices, you have been outsourcing that for the mastering or the lamination or the others. And after 5, for example, 6 and 7 the masters and lamination and you will be on your own or to keep the better balance, and for example, mid-end and the smaller size, you are going to outsource, or you will be on the less self the independent. So for your 10 years or the 15 years of the visions so as to achieve and maintain the 20% of ROIC. So beyond Fab 5, do you have any special vision for the Fab 6 Fab 7 for the investment for the capital expenditures?

For the next Fab capital sub expenditures, we will be our own or the some external capital will be invested or injected. So we have both in our mind. Having said that, and that might be related to the previous question. Before COVID-19, up to 2019, and we have never rolled about the production capacity of global foundries for logic devices, and we did not have any concerns for the device and foundry. Now we could always utilize the capacity of foundries. That's not for [ 5 NAND or 3 NAND ] nanometers that might be shifting to a 28 nanometer. The mainstay, and as you know, the production capacity is now in quite planting in the 28-nanometer, the technology node. So we have to worry about the locations of procurement. So if we have tried to have the Fab in Japan, taxation or the other issues have to be taken into account. So if I jump to conclusion, so we have to take a variety of scenarios in our mind, so as to achieve the 20% of our ROIC as a target, we should go ahead for the larger size, the larger margin. But if we have more capital expenditures that might be a little more difficult for us to maintain ROIC. That's what we have to take into account.

The next will be the last question. [Operator Instructions]. SMBC Nikko Securities, Katsura-san.

So one question. Nakane-san talked about a bit long term, so I have a short-term question on Page 5 and 6, on the right-hand side on Page 5, this division range -- mid-range model, 0.5 the competitors are changing and if it is a midrange model, including the current smartphone environment, the competition on price would be harsher and 2-layer transistor pixel. If you do that against the quality, can you get the premium in terms of price competitiveness? How do you see this? The 60% volume share, that's your target. I think that came last year, not only the monetary value, but revenue share, but volume share. And then 2-layer transistor, can it be utilized in other areas other than smartphones, your strategy on this, please?

Thank you for your question. The midrange products within the midrange product strategy on sensors, that's your question. And the price competitor competition will become harsher and 2-layer transistor is more costly. What kind of lineup and what kind of smartphones are you going to provide this, supply this to. I think that's the gist of your question. In the midrange price zone, smartphone camera, when you think about the smartphone camera, main camera and sub cameras, there can be 2 cameras or 3 cameras. And the main camera, as I said in my presentation, in the midrange zone, has a large pixel try to improve the image quality. I think that's where we are going back to the small pixels and larger count, it will be difficult for the image quality. So the customers are going back in this -- on this point. So the smaller pixel 0.7, 0.5, with that level, the sales using that pixel in the midrange, products main camera, not to the main camera of the mid-range products. They can be used for sub cameras. That's what we assume. So we need to focus on that area.

So time is up. That's it for the section of imaging and Sensing Solutions segment. Thank you for your participation and questions.

Ladies and gentlemen, we will now commence the session on Financial Services. Please watch the video by Masashi Oka, President and CEO, Representative Director, Sony Financial Group.

[Presentation]

Now we'd like to entertain questions from the investors and analysts. Responding to your question, Masashi Oka, President and CEO, Representative Director, Sony Financial Group. [indiscernible], Senior Executive Officer. Now we would like to begin the Q&A session. [Operator Instructions] Now the first question, Mizuho Securities, Sato-san, please.

Sato from Mizuho Securities. I have 2 questions, if I may. First question, Sony Life, new policy -- performance of new policy and value. And the assumption was changed for calculation. And this time, performance was very good. At the same time, per capita life planner sales specialists, the performance is very good. Now you have achieved this good performance. What are the factors for good performance and the external environmental factors? How do you analyze the background behind the good performance? And do you think this is a level that is sustainable going forward? My second question especially Sony Assurance in the material, good driving utilizing digitalization, you have explained initiatives. In the next few years, the more smart automobile and with the auto smartphone type, what kind of approach are you -- how the approach is going to change regarding auto insurance, especially for example, in the Sony Group, you have mobility as one of the 2 focus areas. So the relationship with VISION-S, what can we think about this. At this point, if you have any idea, I would be happy to hear these ideas, please.

Thank you very much, Mr. Sato. I would like to respond to your questions. Your first question is about Sony Life and the new policy, the amount of value of new policy is increasing significantly, and productivity of life planner sales specialist is increasing. The factors for good performance. environment factors included, how do we analyze the factors behind this good performance. And this is a good performance sustainable. That was your question. First, as to the value of new policies, it is true that we have seen solid growth. Firstly, as a strategy, the kind of things that we were not focusing so much that is corporate sector. We have focused more on corporate sectors than before. At the same time, we -- it was important to increase the number of life planner sales specialists. But at the same time, it's important to improve the productivity of life planners sales specialists. So focus area is corporate customers and hence the overall level of life planner sales specialists. So we have implemented strategies very clearly as Sony Life management and life planner plan sales specialists implementing their strategies. With regards to the external environment, amidst the COVID-19, a difficult environment persisted, but remote consulting was introduced promptly. At this point, I would say around 30% is remote consulting. And this is utilized well, depending upon the needs of the customers, the consulting is provided. Productivity improvement by 20%. Is that enough? No, I think that there is still upside, especially corporate customers. High-performer life planners sales specialists were not focusing upon this so much, but now focusing upon corporate customers. So overall, enhancing the level of the life planners specialists. As I said in my presentation, the good performance style of work is to be standardized and the lower performance can also utilize that as well. Also, DX is used. So there's still potential. And in that sense, I think that this is a level that is sufficiently sustainable. With regard to your second question on a Sony Life. Automobile is becoming more smart and the smartphone type and also Sony Group's focus upon mobility. So whether or not the business model of Sony Life will change, I think that is the gist of your question, what you're driving at. Sony Life -- sorry, Sony Assurance business model, it is a direct insurance for 19 consecutive years, a top share for auto insurance. It is true that autonomous driving becomes more -- spreads more. Then what will happen to auto insurance in the long run. Naturally, we have to think about that. Direct insurance, the proportion of direct premium written will steadfastly increase. And we have the predominant strength in direct insurance and a high level of customer satisfaction. This is indeed very pleasing. And also for marketing as well, including AI or Sony Group, we will be utilizing the technology of Sony, and we are able to have very sophisticated marketing, utilizing these strengths that we have. There's still ample room for growth. Know-how of auto insurance can be applied to fire insurance as well. From 2 years ago, we have been actively working upon that and steadfastly smoothly, we are seeing growth. Life planner sales specialists are working and cross-selling the products. So fundamentally, these 2 businesses will be the mainstay, and we are going to grow the business, of course, while containing risks. VISION-S, your question about VISION-S. At this point in time, there's no specific initiative that we can explain to you now. But looking into the future, we will continue to examine the initiatives that we are going to take. One thing you may think that this is something that just came at the top of my mind. But through EV as Sony Group, there is a large amount of driving data to be accumulated. So for new products to be developed in the future, the accumulated driving data can be used for developing new products. Conversely, as explained in the presentation, good drive of Sony Assurance, depending upon the attribute of the driving refund of the premium. This is an app and so the driving data collected from this can be returned to be provided to Sony Group companies and utilized. That concludes my explanation. Thank you.

Thank you very much. I would like to move on to the next question, SMBC Nikko Securities. Muraki-san.

My name is Muraki. I have 2 questions. The first question is for the Sony Life products for the instruments. On Page 9, on the document. You talked about lifelong and whole-life product. And as for the sales volumes, that's declining by 16%. Is it because of the proactive engagement which was the cause of that decline. And for the past few years, we have a variable type policies. And based on the change of the immediate environment some of the price fluctuations, how has it affected your customer basis? That's the first question. And the second question is for the ROE. And as for the IFRS 17 adoption, that might be effective for you to shrink the capital. But as for the profit. And do you think it will be a positive effect or negative effect. So what is your take?

Thank you very much, Muraki-san for your questions. And I got 2 questions for the Sony Life, the products, the whole-life the volume shrink. Is it because of the proactive engagement. And that's for the variable life insurance policies increase. Is it because of the environmental change in terms of the customer basis or will it affect the relations with our customers. As for the whole-life product, we have some interest risk that's heavily dependent on the interest risk. So we have to reduce that risk. And Muraki-san has been constantly talking about as we need the effective utilization of our capital. And as for the whole-life, we have to let the capital rather dormant for many years. And of course, we had some needs. And of course, they continue to be the main stay. Having said that, we have to reduce the weight of those whole-life products against the total portfolios of ours. So that was the background motives. So we are going to continue to focus in that direction and so as to shrink the balance of the whole-life. As for the variable life insurance product, and there has been some effect from the changing environment. And -- but I do not think that, that has negatively affect our customer relationships. So we have no concerns. As for the adoption of IFRS 17 for the -- and to be specific, on the IFRS 17 has the effect to reduce the capital, but how about the effect on the interest. As for IFRS 17, we are still in the preparation stage. And profit and loss and the balance sheet based on IFRS 17, we have yet to work out for the PL or BS based on IFRS 17. Right now, we have adopted only IFRS 4, only asset has been evaluated, placed on the marketplace, and -- which means that the total amount of the insurance business will be on the market values-based. So liabilities will be placed on the market values, the more liabilities leads to a less than net assets. So that will cause that effect. But as for the market value-based appraisal, some effects on liabilities and assets, they are not exactly the same. So as for the asset side, we know what's going to happen. But we do not know yet what's going to happen to the liabilities side. So ROE based on IFRS 17, and we have yet to see the total picture. So we have to wait and see what's going to happen. And as for the effect or the impact on the PL has yet to be clarified. But one thing I can say, when we have some unearned -- interest or unearned gains at the time of the contract will be counted into the liabilities side and that will be accumulated year-after-year of asset. So in that context, the increased rate of profit might be a bit slowed down, but we have yet to work out the total picture. So that's my answer for now.

The time has come. So I would like to conclude the Q&A session. So with this, I would like to conclude the session of Financial Services. I thank you very much for joining. Thank you very much.