Outside of its DRM strategy and price, the Xbox One had a good showing at E3 — it just wasn’t able to power through the goodwill for Sony’s PS4. That post-E3 momentum has continued for Sony, to the point that PS4 pre-orders sold at such a rapid pace that getting a PS4 launch-day bundle at Amazon now appears to be the only way to guarantee a PS4 on its ship date. Even more encouraging for Sony, at least from an investment standpoint, is a large hedge fund today increasing its ownership in Sony stock and claiming that a spin-off entertainment business is now more justified than ever.
The CEO of the hedge fund Third Point today wrote that his company has increased its investment in Sony based on “increased confidence” in the company — tied certainly to the PS4’s performance at E3 and subsequent boom in pre-orders and positive PR. The CEO, Daniel Loeb, also said he remains steadfast in his belief that Sony should spin-off its entertainment business into a new company. Sony’s entertainment unit includes one of the largest music labels in the world and one of Hollywood’s largest film studios, as well as Sony Computer Entertainment, which is responsible for the PlayStation brand.
According to CNBC, Third Point CEO Daniel Loeb “flew to Tokyo this past weekend for three days of meetings with government officials, regulators and senior Sony executives…. He hand-delivered a letter on Tuesday to the company’s chief executive, Kazuo Hirai, that praises a turnaround effort….” Video game aficionados will recognize Kazuo Hirai as the former head of Sony Computer Entertainment who was promoted years ago and has not returned to E3 since. Jack Tretton has since led the charge for Sony at E3.
Third Point is among Sony’s biggest shareholders, owning approximately 7 percent of the company’s shares. Following Loeb’s request to Kazuo Hirai that Sony spin-off its entertainment business into a new company, Sony’s shares jumped 3 percent in early trading. Much like Sony’s post-E3 PR success, that figure far outperformed the 0.36 percent gain in the broader Nikkei stock index in Japan.
According to Loeb, who first called for the Sony spin-off in May, a spinoff of the entertainment business including the PlayStation unit could bolster Sony’s share price by as much as 60 percent. CNBC also says Loeb is “expected to argue that Sony’s electronics division must slash more costs, including … focusing on a few core products.”
Without question, one of the core products with market momentum right now is the PlayStation brand, although its revenues aren’t near those from the music label or Hollywood studio. Still, with PS4 pre-orders going gangbusters in the days following E3, it’s hard to see how the PS4 hasn’t at least contributed to that “increased confidence” Loeb cites from the recent weeks.