• by Thom Forbes  @tforbes, January 31, 2017

There’s no need for a spoiler alert on the direction big-ticket entertainment is taking but Sony’s nearly $1 billion goodwill write-down on its movie business yesterday in advance of it Q3 earnings report later this week is an indication of how predictable the plots are becoming.

Sony “will write down the value of its movie business by nearly 112.1 billion yen ($976 million) in the third quarter, blaming weaker film profits as online streaming services sap demand for movie DVDs,” Reuters’ Makiko Yamazaki and Tim Kelly report.

To be exact, it said: “The downward revision was primarily due to a lowering of previous expectations regarding the home entertainment business, mainly driven by an acceleration of market decline. Underlying profitability projections of film performance were also reduced, but the adverse impact of that reduction is expected to be largely mitigated by measures that have been identified to improve the profitability of the Motion Pictures business,” reports Patrick Frater for Variety.

“We knew the movie [business] isn’t in good shape, but the write-down was a total surprise,” Damian Thong, an analyst at Macquarie Securities, tellsMarketWatch’s Takashi Mochizuki.

“Although studios occasionally announce write-downs for individual films that bomb, as Viacom did for ‘Monster Trucks’ last year ($115 million) and Disney did for ‘The Lone Ranger’ in 2013 ($190 million), it’s rare for a media conglomerate to declare an impairment charge for an entire studio,” Ryan Faughnder observes for the Los Angeles Times.

“This is a wake-up call,” Peter Sealey, the Sausalito, Calif.-based business and marketing consultant — and a marketing honcho at Coca-Cola when it owned Columbia Pictures — tells Faughnder. “Studios have said ‘we’ve made a mistake’ on a particular film, but this is a mistake on a whole strategy.” 

There have been rumors that Sony has been looking to sell the business but it again insisted otherwise.

“Shortly after this morning’s filing, Sony Corp. CEO Kazuo Hirai and outgoing Sony Entertainment CEO Michael Lynton jointly sent a note to employees which highlighted management’s commitment to Sony Pictures Entertainment,” Nancy Tartaglione reports for Deadline Hollywood.

Earlier this month, Lynton announced that he was stepping down as CEO on Feb. 2 “to focus more intently on the popular messaging service Snapchat, where he was an early investor,” Brooks Barnes reported at the time for the New York Times. He weathered various corporate crises at Sony Entertainment over his 13-year tenure, including a devastating cyberattack and a battle with activist investors,” Barnes wrote.

“Hirai and Lynton said management takes the recording of a substantial impairment charge ‘very seriously,’” Deadline Hollywood’s Tartaglione writes. “They added, ‘Make no mistake, Sony Corp’s commitment to SPE remains unchanged. The value of high-quality content continues to rise. As we have stated on many occasions, including at SPE’s All Hands meeting at the end of last year, Sony Corp. sees SPE as a very important part of Sony group, and will continue to invest to achieve long-term growth and increased profits in this space.”

Starting this week, the Tokyo-based Hirai will be spending about two weeks a month at SPE’s Culver City, Calif.-based studio, ensconced in a new office on the lot’s new Morita building, which is named after Sony co-founder Akio Morita, Bloomberg’s Anousha Sakoui and Yuji Nakamura report.

 “He will take on the mantle of co-CEO of Sony Entertainment and begin the search for a new leader at the business,” they write. Lynton will be the other co-CEO for six months to help Hirai learn the business. 

“It is all about finding the magic and making movies that excite people,” Barton Crockett, analyst with FBR & Co tells Sakoui and  Nakamura. But “that will be a challenge,” they point out, “as competitors like Walt Disney Co. have over recent years invested billions of dollars into their movie businesses and the box office spoils have become concentrated among fewer, bigger budget movies.”

Quartz’s Ashley Rodriquez cites six shifts in how people consume entertainment as reasons for Sony’s troubles:

• Streaming video-on-demand services;
• Cord-cutting;
• Viewers are less likely to go to theaters as TVs and home projectors get better;
• The 3D TV revolution “ended almost as abruptly as it started”;
• DVDs and Blu-rays are yesterday’s technology;
• It costs a fortune to make prestige TV and films today.

And now this: “Is Watching a Movie on a Phone Really That Bad?” a New York Times headline on a Glenn Kenny story had the audacity to ask a couple of weeks ago.