The Must Read PSA Weekly Research Round-up (week to 08 Mar)

REPORTS: CyberAgent (4751 JT) – Our Positive View Remains / Feb 2019 US Auto Sales Decline on Lower Incentives and Winter Storms / Is Sony (6758 JT) Still on Track to Achieve FY21 OP of ¥1tril? / Fanuc (6954 JT) Remains a Winner in the Automation Industry / INDUSTRY INSIGHTS: Calls from members of the banking sector to the BoJ to end QE / CMOS prices are stable / Has iPhone situation bottomed? / MACRO / MARKET: Are results from children’s wear maker Pigeon the canary in China’s consumer coalmine? / China export figures for Feb / Weak leading economic indicator for Japan / COMPANY INSIGHTS: The slumbering giant that is Nintendo’s subscription services is waking up and the firm is bringing VR to Switch with Labo / Hoya vs ACG in EUV blanks / Mazda’s all new crossover to launch in Europe earlier than we expected / CyberAgent’s AbemaTV to distribute premium video ads

The Weekly Comment by Pelham Smithers

Sony and Michael Jackson
Following a WSJ article on how Sony (6758 JT) last year signed a deal worth US$250mil to distribute Michael Jackson’s recordings over seven years, there’s been considerable nervousness over Sony’s exposure to the singer following horrid allegations in the ‘Leaving Neverland’ documentary. The Jacksons famously left Motown for what was then CBS Records, in what was a very lucrative deal (but having to leave behind Jermaine Jackson, who had married the daughter of the founder of Motown, Berry Gordy). Michael Jackson’s terms with CBS were even more favourable, which is why it was worth Sony – these days the owners of CBS – securitizing the back catalogue for US$250mil, even though the recordings are on their label. Ultimately, the Michael Jackson estate owns the masters and the publishing rights, and it gets a high royalty rate on what is still approximately 1.3mil records sold a year, as well as a large amount from radio / streaming performance fees. Given the allegations in Leaving Neverland, it is likely that revenues will suffer. The US$250mil deal probably reflects about two-thirds of the value of Michael Jackson to Sony, given the company’s existing involvement with the artist. That equates to US$50mil/yr. Assuming that revenues fall by half as a result of the pushback, then the impact to Sony is US$25mil/yr or ¥2.5bil/yr.
Not so long ago, that would have been a sizable dent in Sony’s bottom line, but not so much now. So, at that level it shouldn’t be a huge problem. However, Sony Music is beginning to get a bit of a reputation. Earlier in the year Sony had to part with its executive R Kelly over sexual abuse and harassment. In 2017, the head of Sony Music, LA Reid, was ousted on similar grounds. Also in 2017, there was the lawsuit between Kesha and Dr Luke, the producer who co-owned Kemosabe Records with Sony. In 2018, there were allegations made against former Sony Music executive, Charlie Walk, over his behaviour during his time at the company. In January this year, there was an open letter sent by several anti-harassment groups to Sony Music’s CEO, Rob Stringer, urging the firm to “…drop all artists with allegations of sexual or domestic violence against them and to take a proactive role in fighting rape culture at the company…” The full letter can be found at

Reports / Flash Notes Published This Week: Headlines at a Glance

1. CyberAgent (4751 JT) – Our Positive View Remains
2. Is Sony (6758 JT) Still on Track to Achieve FY21 OP of ¥1tril?
3. Fanuc (6954 JT) Remains a Winner in the Automation Industry
4. Feb 2019 US Auto Sales Decline on Lower Incentives and Winter Storms

Company / Sector / Thematic Comments at a Glance

Technology: Consumer Electronics / Gaming

1.Growing Attention on Tetris 99 and Nintendo’s (7974 JT) Switch Online Service
2. Nintendo (7974 JT) Brings VR to Switch with Labo
3. Has the iPhone Situation Bottomed?
4. Undercover Games / Hello Kitty to Say Hello to Hollywood

Technology: Industrial Electronics / Precision / Components

5. Any Readthrough from Renesas (6723 JT) News?
6. CMOS Prices Stable? Encouraging for Sony (6758 JT)

Chemicals / Materials

7. Chemical Profit Hurdles Lowered by Problems in FY18
8. Hoya (7741 JT) vs AGC (5201 JT) in EUV Blanks
9. Examining a Battered Sumco (3636 JT)


10. Auto Stocks Down on US, China Growth Concern
11. Mazda (7261 JT) Presents All-New Crossover at Geneva Motor Show

Auto Parts / Machinery

12. IHI (7013 JT): Engine Maintenance Issue
13. Ichikoh (7244 JT) Results Meeting: Neutral

Internet / eCommerce

14. CyberAgent’s (4751 JT) AbemaTV to Distribute Premium Video Ads
15. Gree’s (3632 JT) Legal Clash with Supercell is Playing on Social Media
16. GungHo (3765 JT) Has Gained 66% YTD

Enterprise Software

17. NTT DoCoMo (9437 JT) to Acquire Stake in M3 (2413 JT), Create JV
18. NRI (4307 JT) Lays Out 5G Roadmap for Japan

Macro / Market / Miscellaneous

19. Pigeon (7956 JT): A Canary in China’s Consumer Coalmine?
20. China’s Trade Data for Feb
21. Japan’s Weak Leading Economic Indicator Data
22. Mizuho Financial (8411 JT) Calling on BoJ for QE to End

PSA Company Visits, Tours and Interviews

• Visited: Hoya (7741 JT), Sumco (3436 JT), Asahi Kasei (3407 JT), Nitto Denko (6988 JT), Dexerials (4980 JT), Sekisui Chemical (4204 JT), Kaneka (4118 JT)
• Phone call with SMC (6273 JT)
• Attended earnings meeting for Ichikoh (7244 JT)

PSA In the News This Week / Conference Speaker

• Pelham Smithers’ on gaming apps:
• Pelham Smithers was also a panellist at the Singapore Exchange (SGX) Conference in London

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