Sony Group Corporation (6758) Earnings Call Transcript & Summary

Thank you very much for joining us today in spite of your tight schedule. We would like to start the Sony Group Corporation's Corporate Strategy Meeting 2023. My name is Ishi from Corporate Communications. I'm happy to serve as a moderator today. This meeting is expected to run for about 90 minutes, including speeches and Q&A. I would like to call up on Chairman and CEO, Kenichiro Yoshida to deliver a speech. Yoshida-san, please?

Ladies and gentlemen, thank you for joining us today. Today, I will talk about the direction of management. And after that, President Totoki will talk about growth strategies and other matters. First, I'd like to talk about how our business has spread from the origins of sound and about our long-term management perspective. Our company name and brand, Sony, is derived from the Latin word sonus, which means sound. It can be said that Sony expanded its electronics business from sound products such as the Tape Recorder, Transistor Radio and Walkman. Sound is also the origin of our entertainment. The launch of CBS Sony Records Company Limited in 1968 was the starting point of our entertainment business. Since then, we have expanded our music business every 10 to 20 years, including the acquisition of CBS Records in the United States. With the acquisition of Columbia Pictures in 1989, the entertainment business expanded to pictures. It then expanded to games by the release of PlayStation in 1994. I believe that the game business, which started as a joint venture between Sony in electronics and the Sony Music Entertainment Japan was the greatest synergy that Sony achieved in the 20th century. These 3 entertainment businesses, which were developed in the 20th century, have accelerated their growth, especially since fiscal 2012. The last fiscal year, both sales and operating income exceeded 50% of the consolidated group. Semiconductors, which started from electronic component called transistors have evolved into a business centered on CMOS image sensors since the turn of century with external customers using them. In this way, Sony has expanded its business from a long-term perspective, with sound as its origin. I believe that the starting point of a long-term perspective is our founders. The life insurance business that started in 1979 is a symbol of this. Sony Life is a business that Morita, one of our founders, started with a vision of 20 years. In fact, Sony Life has eliminated its accumulated losses in the 20 years since its founding, Sony Group Corporation's head office building, including the land, is owned by Sony Life. It can be said that the Financial Services segment supported the group during the most difficult period for Sony after the Lehman Brothers' collapse. Now I would like to talk about the efforts of the current management team. In February 2012, my predecessor, Hirai, used the word Kando for the first time at a press conference as President. I defined our purpose with this Kando, Emotion as a keyword. Fill the world with emotion, through the power of creativity and technology. Based on this, in recent years, we have been working to reorganize the group architecture, focus on creativity, and expand the Kando space. In 2020, we announced a restructuring of the group architecture. This was done with the aim of spinning off the electronics business from the group headquarters and connecting each business at an equal distance based on the keyword, Kando. We also announced that we would make our Financial Services business as a wholly owned subsidiary. I believe that this reorganization boosted synergies not only between electronics and entertainment, but also between the content IP used by the entertainment businesses. Next is about our focus on creativity. The content we handle is wide ranging, including music, pictures, games and anime. In order to strengthen our creativity, we have focused on getting closer to creators and creating Kando. And at the same time, we have invested in the ability to create Kando. In terms of content IP, we have invested approximately JPY 1 trillion over the past 5 years. In addition, collaboration with partners is important in delivering our creators' works to more users and filling the world with emotion. The Last of Us became the most watched shows in the history in both Europe and Latin America on our partners' service, HBO MAX. The show being a megahit, boosted sales of The Last of Us game software, as well as the number of streams played of Sony Music Publishing's song used in this show. In this way, in recent years, our group collaboration in content IP has become more active, leading to the strengthening of creativity. In parallel with strengthening content creation, we're also working on direct-to-consumer, DTC services that deliver Kando directly in specific areas called Communities of Interest. These DTC services are initiatives to learn from users, and at the same time aim to contribute to creators. Crunchyroll, a DTC service specializing in anime, feeds back viewership data to creators. The Anime Awards held in Tokyo in March this year was an event where anime fans around the world and creators were connected. Under the long-term vision of expanding the number of people directly connected to the Sony group to 1 billion people, I would like for us to continue delivering Kando in specific areas such as anime, games, and in India, and make use of them in our creations. So far, I've touched on the strengthening of creation in the entertainment field. We aim to become the brand chosen by creators around the world who create Kando. Technology is one of the key elements to achieving that. The segment, which handles our electronics products is ET&S, the Entertainment Technology & Services segment, and we have been strengthening our creation here as well. Our video production camera, VENICE, is widely used not only by Sony Pictures, but also by other Hollywood studios. It was used in Avatar released last year, and Gran Turismo, which is expected to be released this year. We are also focusing on virtual production that supports creators' new visual expressions with technology. Here, in addition to cameras and displays, Epic Games' game engine is used as a content production technology as real-time CG technology. Hawk-Eye, renowned for its sports officiating, provides excitement through entertainment technology services. CMOS image sensors are indispensable as technologies that support creation. I call them creation semiconductors that create Kando. At last year's football World Cup in Qatar, Sony's full-size mirrorless single-lens camera, Alpha 1, captured the Mitoma's 1 millimeter. The image sensor, which was developed with the big goal of capturing the perfect moment has contributed to capturing the exact moment that determined victory or defeat. Sony CMOS image sensors are contributing to users around the world to become creators, through smartphone cameras. Over the past 5 years, we have invested more than JPY 1 trillion in this area, and we will continue to focus on key devices that support creation. So far, I have talked about strengthening creation in the fields of content, products and semiconductors. As we pursue Kando, we are also working on the challenge from a long-term perspective to expand the field of Kando from real space into virtual space and mobility space. The virtual space created by game technology is a place of creation and a place where people connect with each other. Live service game is one example. We are also working on live performances where music artists and fans share time and space, and initiatives that increase sports fan engagement. I also think it is important to create connections with the real world. Through technologies such as VR, which leads people to virtual world; mocopi, which makes creation easy and fun; and skeletal tracking system that reproduces the real movement of athletes, we are working to seamlessly connect the virtual and physical team. Gran Turismo Sophy, a racing AI agent that enhances experience in the game space, is an example of connecting the real and the virtual with AI. AI is positioned as an important technology that expands the creativity of creators and we will continue to promote research and development, along with social implementation. In the mobility space, we will contribute to the evolution of mobility in areas such as imaging and sensing technologies, entertainment as well as communications and networks, including 5G. We will also provide these technologies to AFEELA, which is being jointly developed with Honda. Along with Sony Honda Mobility, we will collaborate with Epic Games in the mobility space as well, to pursue new entertainment possibilities utilizing the Unreal Engine. In the future, we would like to extend the field of Kando to outer space, and we will conduct exploration activities to bring emotional experiences through the nano-satellite EYE. So far, we have talked about our efforts to expand our business with sound as a starting point. Here, I would like to mention India as an example. Sony has been working to spread Kando in India since 1980s. Sony India, which leads the electronics business, has been providing products which create and deliver Kando. Sony Music entertainment India, which holds more than 20% market share in India, is engaged in expanding the local music business, such as the creation of new labels and the acquisition of Bollywood music catalogs. Sony Pictures Networks India, SPNI, delivers Kando content through media networks and a DTC service, which we began operating in 2013. Crunchyroll, which is also available in India, has been streaming Hindi dubbed content since last year. Going forward, we would like to further expand creations rooted in local culture through our expected merger with Zee Entertainment, a publicly listed Indian entertainment company. From here, N.P. Singh, who has been supporting SPNI for about 24 years, will talk about his efforts in India. N.P., please come up on stage.

Thank you, Yoshida-san. [Foreign Language] Greetings from India. Good morning to all of you. I am N.P., and I have 42 years of corporate experience, 24 of those have been with Sony. Being at Sony has given me a unique opportunity to witness rapid evolution of entertainment industry firsthand. Our focus in India is to strengthen industrial leadership by providing emotionally engaging content that expands our viewership across platforms. First, let me talk about the Indian market. India is expected to continue being one of the fastest-growing economies with a 6.3% GDP growth. A population of 1.4 billion plus provides a vast and encouraging market for growth, making it a perfect Kando space. By 2030, India's media and entertainment industry is expected to reach a market size of over $60 billion with a CAGR of 10%. Sony has been active in the Indian market since the early 1980s and established Sony India in 1994. Currently, it maintains its position as a leading provider of electronics and creative entertainment. Sony Pictures Networks India, SPNI, has been operating for 28 years with 26 channels, reaching 700 million viewers across 167 countries. Sony LIV, our DTC service has 40,000 plus hours of content in 8 languages and 33 million subscribers, including our partner platforms. We offer international formats such as Shark Tank, Master Chef, Who Wants to Be a Millionaire, Indian Idol, et cetera, and also present successful local shows, including the longest running Indian sitcom with over 3,500 episodes already done. Our in-house content unit, Studio NEXT, creates original content for the industry with the creators using Sony's professional cinema-line cameras and equipment. SPNI has made significant investments in sports, including key cricket properties, UEFA tournaments, World Wrestling Entertainment and Grand Slam tennis, to name a few. We are committed to visual storytelling creation that inspires social change and unites communities. Our SET India YouTube channel, with 156 million global subscribers, is the world's third-most subscribed. Sony Research India is actively collaborating with SPNI to develop AI models such as video analytics, recommendation engines and speech recognition. We are also excited about what's in store with our partnerships. In 2021, we announced the signing of a deal to merge Zee into SPNI, which upon closing, will enable us to expand our Kando content creation and strengthen our connection with diverse communities within India. The closing of the transaction is subject to regulatory approvals. We are also working with Sony Music India. In 2022, Sony Music and Sony Pictures established Sony Entertainment Talent Ventures India to offer Indian artists and creators a chance to collaborate and form global partnerships. The rapidly expanding gaming market presents an exciting opportunity for Sony to expand its console, PC games, mobile games and e-sports presence. The Indian Hero project initiated by Sony Interactive Entertainment, also supports local game development talent. We are eager to explore potential collaborations within the gaming industry. We have partnered with organizations to support nearly 50,000 individuals across India through our CSR initiatives focused on empowerment for women and LGBTQ+ communities, education and environment. India is a global economic powerhouse and an opportunity destination for artists, content creators, game developers, studios, platforms and technology companies. Our efforts in India are aligned with Sony's purpose of filling the world with emotion and we strive to push the boundaries and go beyond what is expected. I would like to close my speech with a video introducing Sony Group's initiatives in India. [Foreign Language] Thank you. [Presentation]

Hello, everyone. Today, I would like to talk about these 3 topics. First, I will provide the progress of the fourth Mid-Range Plan. 3-year cumulative adjusted EBITDA, which is a KPI of the current mid-range plan, has greatly exceeded the initial plan, mainly in the Music and Pictures segment. As of today, we are projecting adjusted EBITDA of JPY 5 trillion, an increase of 16% from our target of JPY 4.3 trillion. We anticipate an unstable business environment in the current fiscal year, but we will promote business operations with a focus on immediate risk management to ensure the achievement of KPI. Next, I would like to explain the growth strategies of each business segment from the perspective of group management. Please note that further details will be provided by the heads of each business at the Business Segment Meeting. First is the Game & Network Services, G&NS segment. Central to our strategy in this segment is increasing the number of active users. I consider the driver of this to be the growth and expansion of PlayStation 5, PS5, and the strengthening and expansion of our first party game portfolio. We shipped 6.3 million units of PS5 in the fourth quarter of fiscal '22 and continue to manufacture at full capacity. Going forward, we intend to work with the publishing and development communities in addition to PlayStation Studios, to expand our content pipelines and provide increasingly innovative and compelling game experiences that grow the PS5 installed and increase the number of active users. To strengthen and expand our first party game portfolio, we plan to continue to taking on board knowledge from Bungie which we completed the acquisition of in July 2022 and expect to enhance our ability to develop and operate live service games. We also intend to increase the number of active users on PC, in addition to PS5. In the Music segment, our strategy is to outpace the market growth of streaming and emerging media. There are 4 pillars in our approach to outpacing streaming market growth. The first is to promote new songs from our wholly owned labels and signed artists to increase market share. The second is to expand our portfolio of services for distributed labels, centered around The Orchard. The third is to ensure early contact with emerging artists through channels such as AWAL. And the fourth is to further explore emerging markets, including unearthing local artists. We will also strengthen initiatives to monetize emerging media. Music is required for any entertainment media. Social media and live concerts within games is a prime example, but by generating profit for the music industry from the many forms of new media, we can increase returns for artists and also connect this to Sony's growth. In the Pictures segment, maximizing IP value over the long-term is central to our strategy. This approach is supported by our position as a strategic supplier, and our emphasis on theatrical releases. In this segment, we intend to continue our current strategy as a strategic supplier of limiting the burden of investment we would incur by having our own distribution platform and instead allocating these investment resources to the creative side, and enhancing the quality of our protections. We aim to maximize the long-term value of our IP by providing it to the distribution platforms that best understand its appeal. We're also continuing to focus on the theatrical window of our releases. Despite the wider trend of prioritizing distribution platforms, Sony Pictures Entertainment has maintained its focus on theatrical releases, leading to record results of SPE's Motion Pictures Group over the last few years. The cultural impact of a theatrical release is important for creators as well as improving long-term profit. We feel that this stance is supported by the industry as well. Recently, it appears that industry players with distribution platforms are gaining renewed awareness of the value of theatrical releases, and we look forward to the return of even more movie fans to theaters and excitement they provide. I would now like to touch on our initiatives to maximize the value of IP by deepening the deployment of IP across our 3 entertainment segments. The first is the unique synergies we are able to generate between Sony's entertainment businesses, and then location-based entertainment. A leading example of synergies that can be generated between our entertainment businesses is the visualization of game IP and accelerating the growth of anime, which Mr. Yoshida mentioned. Following on from the success of last year's feature film, Uncharted and this year's The Last of Us on HBO, PlayStation productions is working on the production of film and TV adaptations of other PlayStation IP, including Gran Turismo and Twisted Metal. We are also planning a number of biopics based on Sony Music artists. In the area of anime, through collaboration between Aniplex, the anime production company behind the titles such as Demon Slayer: Kimetsu no Yaiba and Crunchyroll, one of the world's largest DTCs specializing in anime, and together with our partners, we are maximizing the value of anime IP globally while also increasing the number of anime fans we connect with directly and accelerating growth. These examples demonstrate the synergies that Sony is uniquely positioned to generate through cross-business, and we will aggressively implement these types of initiatives going forward. Next, I would like to introduce some of our recent activities in the area of location-based entertainment. In Thailand, Columbia Pictures' Aquaverse is a water theme park based on various Columbia Pictures IP. A new ride that takes people through the world of Unchartered -- Unchartered, one of the leading titles from PlayStation Studios, at high speed through darkness is opening soon at an amusement park in Spain. In Japan, THE TOKYO MATRIX, an indoor interactive attraction opened with Aniplex Sword Art Online series as its first collaborative IP, and LBE as a business is making steady progress. THE TOKYO MATRIX is located in Tokyo Kabukicho Tower, and I recently visited it myself. It's very exciting, but also very difficult to capture the dungeon, so I look forward to you all taking on this challenge. I believe there are significant growth opportunities we can access by accumulating knowledge through these initiatives, sharing this within Sony Group, and advancing LBE measures that leverage the wealth of IP we possess within our respective companies. I will now return to our growth strategies for each segment. In terms of the Entertainment Technology & Services segment, my focus today will primarily be on our efforts to get closer to creators. Our fundamental approach is to steadily expand the range of solutions and services we provide that are driven by our technology, to a wide range of creators, from businesses to individuals. For photographers and broadcasters, we aim to build on the trust of our technology we have cultivated through our Alpha cameras to expand our business in the area of services, such as efficient visual production on the cloud, low latency, high-definition transmission and live AR video production support. In addition, by taking these technologies and services and optimizing them for individual creators, such as Creators Cloud, we aim to actively expand our creative user base amidst the so-called creator economy trend. For filmmakers, we plan to evolve new creation technologies such as our VENICE cameras and Virtual Production, which Mr. Yoshida mentioned earlier, from the perspective of both hardware and services to unleash them from the constraints of time and space. Sony PCL has already completed a total of more than 50 productions using Virtual Production. We're also strengthening our collaboration with Epic Games. Unreal Engine 5.2, which was released in March, enables more realistic expressions than ever before, and we will explore further applications for its use. For example, in real-time, pre-visualization in movie production. In the I&SS segment, our major focus is to further strengthen firmly maintaining our #1 position in image sensors. In addition to CMOS image sensors for smartphones, which are our mainstay, we intend to cultivate sensors for automotive and infrastructure applications into pillars of our business. The growth of CMOS image sensors for smartphones continues to be driven by the shift to larger sizes and higher performance. There are extremely high expectations for image sensors as a differentiating factor in smartphone cameras, and the technological standards required are increasing year by year. We aim to rise to this challenge by pixel evolution, enhancing functionality through the layering logic chips, ensuring high precision and stability quality through copper-copper connection. We plan to further refine our industry-leading technological and production capabilities in order to drive us towards further growth as the absolute #1 market leader. Going forward, we plan to also aggressively leverage the technologies we have cultivated to steadily expand our market share in the automotive and infrastructure fields where we anticipate future market growth. In the area of automotive, we intend to contribute to safer mobility through our sensor technologies, such as CMOS image sensors and SPAD depth sensors for LiDAR. In the industrial and social infrastructure field, we expect to expand potential use cases in areas such as inspection and recognition that drove on our unique and diverse area of sensors. We will also target opportunities for business expansion that arise from the shift to smart societies, for example, in automation and labor efficiency. I believe there are 2 keys to growth in our Financial Services business. The first is to reinforce our branding. In retail finance, where we focus on the Japan market, Sony brand by and of itself demonstrates the promise of long-term safety and peace of mind to customers, and we must continue to strengthen our brand appeal. The second is leveraging our group infrastructure and investing in growth. To expand our customer base, we must efficiently and effectively utilize DX infrastructure, including data collaboration across Sony Group companies and engage in IT system investments and M&A. At the same time, financial health is also an important requirement for the Financial Services business, and calls for significant capital. From the perspective of capital allocation for the Sony Group as a whole, it is a challenge to balance this with our investments in other growth areas, such as our entertainment and image sensor businesses. To address this issue and realize further growth within the Financial Services business, we have decided to explore the use of a partial spin-off treatment, which has been updated as part of Japan's fiscal 2023 tax reform. This is a groundbreaking reform that allows companies to spin off a wholly owned subsidiary, while still maintaining less than 20% equity in the company, and be eligible for tax-free treatment under Japanese law. We believe that this will also allow us to list the Financial Services business without having to change the names of each of its companies and its brand or its position within the Sony Group, and pursue further growth over the medium to long-term. With the Financial Services business' own fund-raising capabilities. During this fiscal year, we will conduct an assessment of the detailed issues involved in a partial spin-off, giving consideration to executing it within the next 2 to 3 years. This concludes my explanation of our overarching growth strategies for each business. Finally, I will touch on evolution of our diversity. For Sony to achieve further growth and create value over the long-term, we must also continue to evolve the diversity of our business and people. I aim to make Sony a place where employees from various backgrounds can gather and grow as individuals together with the company. I would like to introduce some of our measures to evolve the diversity of our people. For example, at the management level, we are making leadership appointments that encourage new perspectives and value creation, and compared to 5 years ago, the ratio of female executives at Sony Group Corporation has doubled to 12%, and the ratio of foreign nationals and executive positions has almost doubled to 24%. However, to further enhance diversification, we are engaging in additional efforts, both inside and outside the company. Internally, at Sony University, which aims to develop future leaders, we are increasing the diversity of participants, and the participation rate of both female employees and employees from our entertainment companies has risen to 30%. In addition, we provide various external programs that help people from various backgrounds, take on challenges in the film and music industry and inspire women to pursue careers as engineers or game developers. I would like to see the diverse individuals brought together through these measures share their knowledge and activities beyond boundaries, evolve our business diversity, and connect organically to further grow and enhance the long-term value of the Sony Group. Comprehensive strategies for the overall group's mid- to long-term growth will be finalized in the process of constructing a fifth Mid-Range Plan, and we plan to present these to you at our Corporate Strategy Meeting in the next fiscal year. This concludes my presentation.

Today, I touched on our commitment to creativity, centered on our Purpose and our initiatives for growth. At the beginning, I touched on the long-term management perspective by our founders' generation. In order to make the world sustainable, which is also a part of our Purpose, we are working on initiatives such as Road to Zero, a long-term global environmental plan, which we've started 13 years ago to achieve zero environmental footprint and projects that create opportunities to heighten awareness of the Earth. There is no end to the Purpose of filling the world with emotion, through the power of creativity and technology. Going forward, we will continue to create Kando with creators and contribute to expanding it to the world. Thank you for your attention.

This concludes the presentation part. [Operator Instructions] Please wait for a while until we resume. [Break]

Thank you very much for waiting. Ladies and gentlemen, we will start taking questions from the members of the media. [Operator Instructions] Any questions from the floor?

Yes. In the middle row, the front row that is to say, the person wearing spectacles, wearing gray jacket.

My name is Hurukawa. I have 2 questions. First, about the spin-off of the Financial Services segment. 3 years ago, using JPY 400 billion, you took -- made the TOB to make it wholly owned subsidiary and Mr. Totoki said that in order to have the investment with the semiconductors or others, you have -- this is a good option. I think 3 years ago, there was this expectation of the semiconductor investment to increase. However, you spent JPY 400 billion to make it a wholly owned subsidiary. And now we are spending up. What is the reason for that? Second question is related to my first question. Going forward, about your group portfolio idea approach. In 2021, 6 segments were established in Sony Group, the third point -- and the third point is requesting this to become the directors to spin off. But anyway, you didn't do that to have the whole group. Going forward, IPO can be -- are you thinking of the IPO for semiconductor business, for example?

Thank you. Your question is about spin-off Financial Services business and portfolios approach. Mr. Totoki will answer first.

As you rightly said, 3 years ago, we spent about JPY 400 billion to make it wholly owned subsidiary, Financial Services of the objective at that time. There was this listing of parent and subsidiary. We wanted to eliminate that to make it possible to have a quick decision-making. And then the strategy for each business has to be preceded while achieving group synergy after this wholly -- whole subsidiary -- whole owned subsidiary. There was this expansion of financial services businesses. And also, there is this group-wide collaboration. And then we steadily increased the management capabilities going forward, mid- to long-term growth and expansion, if you want to achieve that, investment is necessary. This is a kind of different level of investment from the past for image sensors and entertainment, that's something that we need to consider, which is not conventional in the [indiscernible]. Sony brand can be used or maintained and that the company name remains the same, and the synergy and collaboration among the group remains unchanged. And then this new entity will get the own fundraising capability. Therefore, these actions are looking toward the sustainability or sustainable growth on a mid- to long-term basis. These are all preparation for that purpose. So that's is my answer. And about our approach on portfolio. Business portfolio, in my view, is not static, but dynamic. This is something I have been saying, but business has its own environment and the market situation and the consumer trend and macroeconomics situation as well, business is impacted by these. And then according to that options our strategy has to be considered. At this moment, other than financial services business, we are not planning on any of this sort. But portfolios review will continue going forward on a continuous basis. This is what I wanted to share with you.

Well, allow me to add one thing. Today's message is the long-term management perspective. We are talking about sales and operating income. Entertainment businesses, accounting so much of this, but at the time of the founders, they started to be developed. In financial services, while our founder has been nurturing this with the long-term perspective. And then from the long-term perspective in order for financial business to grow even further, we have discussed on this and that's how we came to our conclusion this time. Thank you.

Let's move on to the next question. Well then, on the right-hand side, the person in the very front row with a white shirt, please.

From Toyo Keizai. My name is [ Shigeki ]. I have a question about the financial services. So this time, unlike the previous time, I think you said that the equity will be decreased by 20%. So it's not a consolidated subsidiary. So it's not -- it's probably not a transfer of equity. It's going to become a completely different company, right? The founder has been managing based on long-term vision is what you said. But the financial services company is going to become a different company. What do both of you think about that?

Well, it's not a completely different company. The name of the company will not change, and it is part of the group. So -- and the brand will not change. So in that sense, the financial services of the group is going to grow further for the sake of the future. These are the preparations we are making. So it's not that it's going to become a completely different company. Please understand that. That's all.

Next question. In the middle row, the second from the top, person wearing white shirt.

From [ Kyoto ] my name is [ Nakajima ]. In the earlier question, Totoki talked about image sensors and entertainment. The investment, which is on another level from the conventional ones would be needed. What is the background of this necessity. And for these 2 businesses, what kind of investment are you thinking of planning on?

About your question. Well, I said that this is unconventional level of investment. I said that when we consider the competitors, they are global players with a large size of operation. So Sony itself together with the 6 segments, total, we have this market capitalization value. But when we look at each business segment compared to the global competitors, we are -- we fall short in terms of scale. So we are cognizant of this. We are aware of this all the time, and we try to build our position under such circumstances. So the investment has to be made continuously in the fast. Well, we have been making investments, but the size of the business as it grows, the level of investment has to grow as well, that's how we recognize the situation to be. And going forward in each segment, well, we have been doing this, but we may consider M&A opportunities for the last 3 years, the strategic investment, including this fiscal year, we spent JPY 1.8 trillion for capital expenditure JPY 2 trillion for this particular area. Probably in the 5th mid-range plan, we may have to step up our investment level.

Content IP and DTC and technology investment in these areas will continue.

Let's move on to the next question. In the middle, the person in white T-shirt in the very front row.

My name is [ Nishita, ] Freelance. I have 2 questions. The first question is about your policy for the mid- and long-term basis, you're going to expand. But on a short-term basis, what kind of COVID impact are you foreseeing, or what about the semiconductor impact? What kind of risk awareness do you have? And how will that impact investment in the mid- to long-term basis? Can you please elaborate? My second question has to do with the consumer business, especially ET&S. I understand that some are having a difficult situation. So including your portfolio, what will be your mainstay, including smartphones?

First of all, about investment, as you said, for this year, macroeconomics is unstable. And most likely, there is a lot of expectations, but also a lot of anxiety. That's how the whole year is going to play out. However, given that backdrop, I think we believe that this is an opportunity to grow in the future, in particular, smartphone image sensors. The current situation is that for this year, the global demand cannot be -- we cannot be too optimistic about global demand. In China, the distribution inventory is still high, and our competitors' image sensor inventory level is still high. Therefore, so in that sense, as for CapEx, of course, we have to be careful. And we have to be looking at the macroeconomics to decide when to do the investment, which timing would be the best time for investment. So as I have been saying since the past, we want to have inventory on a strategic basis. And without investing in capital or CapEx, we want to combine that with the level of inventory. As for ET&S, in the past the COVID impact, well, some of the demand was brought forward. So this year, I believe that the demand is not -- we're not too optimistic about the demand. Television and smartphones, we don't have plans that are too stretched for this year. We want to make sure that the margin will increase steadily. As for cameras, we're doing very well. After COVID, people are going out and there's a lot of pent-up demand. So we need to supply the pent-up demand and get new demand. So as long as this is still healthy, we believe that this is a new growth area like sports tech, medical areas or B2B network services. These are the areas that we would like to grow in.

So today's message was that on devices and on content. So we're going to focus on creators and creativity. ET&S, the product input and creation will be our focus going forward. Television, smartphones, of course, we will continue to cherish them, but we're not going to pursue the numbers. We'll be looking at Alpha, VENICE and virtual production and Hawk-Eye the creations in these areas.

Next question, middle row, second line from the top.

[ Nike ESG ] My name is [ Soma]. I have a question, respectively for Yoshida-san and Totoki-san. Chairman Yoshida, in the latter half, you are talking about making the world sustainable. In the corporate blog last month, Mr. Yoshida, build the contribution to the planet and the virtual production and image sensors, lowering environmental load and I would like to ask you, virtual production, image sensors, those the contribution you will like to make a world the planet sustainable. What about the long-term growth? How do you balance. To Mr. Totoki, the industry is different, but [ Ajinomoto ] abolished -- decided to abolish the mid-range plan. So in formulating the next mid-range plan, how are you formulating this or developing this? Anything you think important or any changes you may make in formulating the next mid-range plan? Please tell me.

Thank you for your question. So I would like to answer the first question. And the second question will be answered by Totoki-san. For your first question, I can give you 2 examples. One, I briefly mentioned about the outer space. It's a nano-satellite and the camera with the CMOS image sensor is mounted on this nano-satellite. Satellite will be lifted to observe the planet -- for people to be able to watch the planet from outer space. I think that perspective from outer space is important. The diameter of the planet is 12,800 meters. So if you go up in the outer space, the astronaut told me that they recognize how thin the layer of air is, and there is no national boundaries over the planet, if you look at it from the outer space. Now another thing about Road to Zero. In 2010, Sony announced a Road to Zero. And Totoki and I both were at [ Sonet ] provider back in 2010. And the bottom line was minus JPY 260 billion, that's the Sony's bottom line. But at that time, I thought the company itself is -- doesn't look sustainable. And what's the point of discussing this, but looking back, I have a lot to reconsider. Looking back, Road to Zero in 13 years ago, the Sony, which announced this 13 years ago, is something that I'm feel proud of. That's the long-term management perspective to explore the future.

Now allow me to talk about my idea about mid-range plan. As you know every 3 years, we formulate mid-range plan and every year we make adjustments and refine it. And this cycle has taken root in the group and working functioning well. So we would like to continue this. The pros and cons of having a plan has been discussed for a long time. The beauty is that if you stick to the plan, you may miss the external changes quickly -- cannot capture it quickly enough, and that may lack flexibility. This has been discussed for a long time. But on the other hand -- well, with the basic plan, the management is easier to be conducted. So I don't have any idea of changing this mid-range plan drastically.

We have limited time. So the next person will be the last one to be able to ask a question. Then the person in the middle row, the person in the very front.

Tsutsumi from Nikkei, Nikkei newspaper. On the Financial Services business, I have 2 questions. I think you already mentioned about -- so it was made a wholly made subsidiary originally. So what's the reason for that? If this kind of parent subsidiary relationship is going to be dissolved, then you could have done that to begin with. But first, it was made into a wholly made subsidiary. And then you're trying to grow and then spin-off, maybe that was the decision-making process, can you please elaborate on the process? And the second question is on the same spin-off question. When did you start thinking about this spin-off? Can you please explain or give us an idea on that.