In a statement made by the Sony Corporation on Monday, January 30th, the company has made a $962 million impairment charge that will greatly affect the output of its film division. The Hollywood Reporter‘s Gavin Blair, along with Georg Szalai had this to say on the issue, quoting an unnamed analyst at Sony: “”the film business has been struggling for years. This year, the only big release will be Spiderman and last year there were no big hits.””. Because there are not “big” hits, and frankly there hasn’t been any bit hits for Sony in a long time, since the end of the Andrew Garfield Spiderman era (if they were even hits at all, at best marginal successes; nowhere near Spiderman 2 levels in terms of lasting impact) it is no surprise that Sony is making this decision; but what exactly does this mean? What is an impairment charge?
An impairment charge by definition is a charge that the company records on their financial statements when the value of goodwill exceeds its fair value. Goodwill is the intangible portion of a company’s value and that portion’s ability to be transferred into physical tangible entities (such as cash or goods). This means that Sony’s value as a film company is decreasing. In a statement by Sony, from the aforementioned The Hollywood Reporter article: “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”. Later on, the company claims that further reasoning for the write-off was to allow for changes to “improve the profitability” of the motion pictures business, by which they are referring to their own film division.
What this write-off will mean in the grand scheme of things is uncertain for the moment; as the effects of an impairment charge are not necessarily immediate and can take several months to properly implement. The only thing that we can be sure of however, is that the Sony Corporation is going to change, and if it means that the company retrofits their film division in the process then it might be a change for the better.