HITS Daily Double


Reports: Spinoff Strategy to Involve Movies, Music, Possibly Games; PlayStation Portable Debuts
Japan’s Sony Corp. may be planning to take its entertainment assets public in the U.S., according to a New York Post report.

While Sony insiders have previously suggested that a public offering of Sony’s U.S.-based entertainment divisions, including movies, music and video games, would be a logical move for the electronics giant, its recent move to enter a month of exclusive negotiations to buy MGM has apparently re-ignited talk of the theory.

An IPO would give a group of private equity firms teamed up to help finance Sony’s MGM bid—including recent Warner Music Group investor Providence Equity Partners—a way to cash out, and would also provide Bertelsmann with a convenient way to exit the music business, should its proposed merger with Sony Music get done, the Post points out.

While a U.S. public offering is not on the immediate horizon, if Sony acquires MGM, the added bulk the studio would give Sony’s entertainment assets would reportedly make such a move more likely by attracting greater investor interest. Sony would most likely float its movie and music divisions, and possibly part of its game division.

"That is just not true, we have no such plan," a Sony spokesperson told the Post when asked about the possibility of an IPO.

However, insiders say that just such an IPO strategy is compelling and has in fact been a part of Sony’s planning for some time. "Sony is a conglomerate which trades like an electronics company, but it has a huge, undervalued entertainment asset buried inside it that could - and should - trade at a much higher multiple on its own," the Post quotes a source as saying.

Sony’s electronics and entertainment divisions have not traditionally worked closely together, and in fact have often sparred over issues including how entertainment “software” should be distributed. Sony’s recent entry into digital distribution, via its Connect online store, reportedly represents an internal effort to achieve better cooperation between the divisions.

Meanwhile, Sony yesterday unveiled its long-anticipated PlayStation Portable, or PSP, according to Reuters. The hand-held device, which plays games, movies and music is set to go head-to-head with Nintendo’s dual-screen DS device, the successor to its popluar GameBoy Advance.

Nintendo has long dominated the hand-held game market, but the PSP is considered to be a strong contender as Sony tries to recapture the magic of its Walkman days.

Expected to be priced around $200-250, the PSP won’t be cheap. But if it gains traction in the market the way Sony hopes it will, it could be a big factor in driving business to the Connect store.