Sony Group Corp
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Sony Group Corp
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Ladies and gentlemen, thank you for joining us today, despite short notice. We would like to start the press conference for the announcement of changes to Sony Group's Management Structure. And today I will be the Master of Ceremony. My name's Ishii from Corporate Communication Department. Nice to meet you.
Now I would like to introduce to you who are on the stage, Mr. Kenichiro Yoshida, currently Director, Representative, Corporate Executive Officer, Chairman, President and Chief Executive Officer; who will assume Director Representative of Corporate Executive Officer, Chairman, CEO as of April 1st this year. And Mr. Hiroki Totoki, Director Representative, Corporate Executive Officer, Executive Deputy President and Chief Financial Officer who become Director Representative, Corporate Executive Officer, present Chief Operating Officer and Chief Financial Officer. The speeches will be made in the order of Mr. Yoshida and then Mr. Totoki, and we'll take questions afterwards. After the Q&A session, we will have about five minutes for photo session.
Overall, we plan to have about 40 minutes for this press conference, and then followed by the briefing on the Q3 result. Mr. Yoshida, please take the podium.
Thank you all for coming today, despite the short notice. I would like to explain the executive changes announced today. Effective on April 1st, Hiroki Totoki, currently Executive Deputy President and CFO will be appointed, President, COO and CFO, and I will become Chairman and CEO. These changes are intended to strengthen our Group Management Structure. From April onwards, we will describe for the further evolution and growth of Sony and this new management structure.
First, I'd like to touch on the background of these management changes. Sony is engaged in the diverse businesses based on our purpose to fill the world with emotion through the power of creativity and technology. Furthermore, in April 2021, we transitioned to a new group architecture and established Sony Group Corporation, which is aligned with all our businesses in an equidistant manner.
Our approach to business management is one where the vectors of each business are connected by the social significance of creating and delivering of candor, but also emphasizes the autonomy of individual businesses, organizations, and employees.
On the other hand, in order to enhance the group's overall values over long-term perspectives, it's vital, thoroughly implement capital allocation, collaboration between businesses and business portfolio management. And to do this, I concluded that we should strengthen our management structure and proposed to the nominating committee and the Board of Directors to promote Mr. Totoki, who has deep understanding of each business operation to President and appoint him as COO. This proposal was approved today. He will also continue as CFO. This is because the CFO also needs to have a deep understanding of the business, and we believe that this role is closely related to the duties of the COO.
For approximately five years since I became CEO in April 2018, he has been driving force in the implementation of growth strategy for the group, particularly from a financial perspectives in his role as CFO. His greatest contribution has been in supporting our investment for growth, primarily in two major areas. One is content IP. While we have made acquisitions in the DTC domains such as anime distribution company Crunchyroll, we have focused particularly on strengthening content IP. This started from the acquisition of EMI Music Publication in May 2018, just after I was appointed CEO, he led this acquisition including the negotiation of terms.
The other is semiconductors. I regard CMOS image sensors as creation semiconductors that generate Kando. He supported our investment in this area, while managing risks through in-depth discussions, with the business side regarding demand, the competitive environment, and the development roadmaps. His other contributions included setting the ¥2 trillion framework for strategic investment in the current mid-range plan. This investment framework established by him has led to an improvement in the growth mindset of the entire group.
Furthermore, there is also the repurchase of our shares, which we have positioned as a part of our strategic investment, while constantly taking investment opportunities and financial conditions into account, he had supported the repurchase of approximately ¥500 billion of Sony shares since fiscal 2018. I have worked with Mr. Totoki since 2005, when I became President of Sony. I have also learned quite a lot from him with his strategic perspectives encompassing the broader external environment.
Furthermore, he has the experience of planning and founding Sony Bank himself and operating it as a Representative Director. He has accumulated a wide range of experience including directory leading a large organization as the Head of Sony Mobile for more than three years, starting in 2014. Going forward, I'm confident that he will make an even greater contribution to enhancing our corporate values as President, COO and CFO.
As part of a full strengthen our management structure. We have also decided to appoint Toshimoto Mitomo as the Executive Deputy President and CSO. Mr. Mitomo possesses extensive experience in the intellectual property field, technological expertise, and strategic perspectives. Most recently, he has [indiscernible] areas including a new business development and corporate venture capital, and his leading discussions across the group in areas such as virtual production and the metaverse.
At Sony, we applied our business in the Kando value chain of creating and delivering Kando, and he helps an important role in expanding and deepening the scope of this business. I look forward to Mr. Mitomo in collaboration with the Hiroaki Kitano, who was appointed CTO last year farther contributing to Sony's evolution as a creative entertainment company with the solid foundation of technologies.
Sony's purpose is to fill world with a motion and its corporate direction of getting closer to people will remain unchanged. Approximately 110,000 employees who share this purpose, driving force of the Sony Group's diverse businesses. The management team will work together as one along with our employees to create values from a long-term perspectives are based on our purpose. That is all for me. Thank you.
Next, I'd like to invite Mr. Totoki.
I'm Hiroki Totoki, and will be assuming the role of President, COO and CFO of Sony Group. Thank you for your attendance. I'm grateful to Mr. Yoshida and the Board of Directors for their trust in recommending and appointing me, and at the same time feel a great sense of responsibility.
To introduce myself, I joined Sony in 1987, and after working in finance, including an overseas assignment in London, I left Sony in 2002 to take on the role of Representative Director of Sony Bank, a company that I led in establishing. While it was on a small scale, the experience of launching and managing a new business with a spirit of startup formed the foundations of my current value perspectives in management. Then in 2005, I moved to our ISP business Sonnet, where I took on a wide range of roles including CFO under Mr. Yoshida's leadership.
In December 2013, I returned to Sony and following roles including CEO of Sony Mobile and Corporate Executive Officer and CSO of Sony. I was appointed to my current position of CFO in 2018 when Mr. Yoshida became CEO of Sony. Since then, as a member of the management team led by Mr. Yoshida, I have dedicated myself to enhancing the corporate value of the Sony group.
This fiscal year is the second year of our current fourth mid-range plan. Thanks to the effort of management at each of our businesses and from each and every employee, we are focusing strong results this fiscal year, including record sales and more than ¥1 trillion in operating income.
On the other hand, looking at our current business environment, there is increasing instability due to factors such as the uncertain global economic outlook, geopolitical risks, energy issues, and the natural environment.
In addition, I feel an acute sense of urgency that there is a fine line between whether we can channel the rapid evolution of technology with AI as a leading example into further business growth, or conversely, whether our business will be disrupted by it. As a business environment and technology continues to undergo great change, I believe the key to increasing the resilience of the overall Sony Group is evolving our diversity.
Diversity in our business and talent is part of Sony's DNA, but we must further evolve this diversity goal is to bring together people with various attributes, experience, and expertise from inside and outside the company to co-create the future by unleashing their ideas and creativity, and to continue to grow both as individuals and as a company.
By leveraging the Sony Group's diversity and continuing to evolve and grow, I would like to create a positive spiral that begins with Sony being chosen by customers, which then energize our employees, enables us to attract more new talent, increases our corporate value, and ultimately enable us to give back to society. Working together with Mr. Yoshida, the Sony Group's management team, and our employees around the world, I intend to continue to develop through my efforts to the further evolution growth of our business based upon our purpose. I look forward to your continued support.
From now, we would like to take questions. And time for questions and answer is about 25 minutes. And due to time constraint, we will not separate the sessions. We would like to take questions from the investors and analysts. And those who are asking questions online, please connect your phone to our branch officers. And those who have questions in this venue, please raise your hand. And those who have questions online please press one after the asterisk key on the phone. And in this venue our staff will bring you the microphone. And due to time restriction, we would like to limit your question to one question per person. So please raise your hand should you have a question. Then the far right, the second row from the front on the right Shimai Kenta from NHK.
I have a question to Mr. Totoki, the new CEO. In your self-introduction, you were talking about the Sony bank, and talked about the ventures Spirit. And so will be continuing your position as a CFO and you become CEO this time, and as a CFO you have -- and so in your position as the President, what business would you like to develop and what is your wish for your new position?
Thank you for the question. And so the management and also the group business will be continued and with the current mid-range plan, we have some plans for the actions. We will thoroughly, put those actions into place. And basically we would like to strengthen all aspects of our business. That's my basic thinking.
Thank you. Next question, please. Person in the middle row, the third row from the front, on the right side from the side.
Honda. I'm a Freelance Journalist. I have two questions, and to Mr. Yoshida. As Mr. Yoshida presented in, it is great to have the support by person who is quite knowledgeable about the finance. And at the same time, I recognize that the CFO has certain unique authority and do you think that there are any conflicts or problems for CEO is also a CFO?
And it appears to me that this is rather sudden that this announcement was made. So why now? That's my second question.
Let me then answer to your question. About the first question, whether the double hating of a CEO and CFO would be a problem. Well, this COO of Mr. Totoki especially is going to be a group COO not the CEO. COO and so it'll be a little bit different from a giving the direct instruction to the front-line. So this is the COO position who understands the operation very well to double hat as a CFO. When we think about the group structure of our company, I think this is reasonable and efficient. And in this group, in each part of the group, we're going to confirm the standing of each part of the business to lead the way for further growth. I think it make sense.
And the second question was why now? And Sony, is now practicing this mid-range business plan or the plan. And we are right in the middle of the force, mid-range plan, and we have business planning people, but the actual management itself is being done with the long-term perspective. At the moment when we look at the external landscape the changes are accelerating. As Mr. Totoki also mentioned, the technology is changing rapidly. And also there's heightened geopolitical risks. And so, as I mentioned, capital allocation and also the business collaboration. And also the portfolio management of the businesses need to be strengthened. That's all.
And we'd like to move on to the next question on the second row from the front on this side.
My name is [indiscernible] Tokyo. I have a question to ask Yoshida and this management changes will lead to a two top lectures, Yoshida and Totoki, and both of you are former financial sectors, financial areas. So, what's going to be the impact and the two top structures of the management.
And the purpose of this management changes is just to strengthen our management structure and architecture. So, we assign a new COO and the capital allocation and business portfolio management and the business structure management is to be operated for sure. That's the purpose. And as CFO experience, that's quite right. And I myself has been serving for So-net, the Internet provider, serving as the supply center for nine years.
So I think that the variety of experience is quite important for us to serve for the company. And he has ever worked for the start of the Sony Bank, and he has been serving as the President of Sony Mobile as well. So I do believe that he can take the privilege of his experience.
Now, next question. The person in the middle, second row, from line from the top, from the front.
Each present had a slogan [indiscernible] is focusing upon manufacturing and sales. Yoshida is to become closer to people. What is the slogan that you have in mind?
Thank you for your question. I'm focusing upon growth, business and company. If growth is stagnant in various ways, one tends to fall into negative spiral. Therefore, I am focusing upon growth and realize growth, as I said in my speech, to be chosen by customers and energized people and positive spiral is to be created. So in short, it is the growth. Thank you.
Next question, please. The person in the middle row, second from the front, to the left side from this side.
Thank you very much for this opportunity, [indiscernible] from Nikkei. And I would like to ask a question about the necessity of COO, this as in the comment by Mr. Sumi about the necessity of the COO, there was a discussion in the board and in the past, in the era, there was the CEO and the COO separate, and there was the split between the CEO and COO under Howard Stringer and whether they functioned or not, there's another question, but so in order to maintain the forces, I think it may be a difficult question to answer, but when you have the CEO and COO, there are some views that may be better to be separated in terms of the functions, what do you think?
Well, our Sony's management, well, myself is not so much their one top management. I am part of their management team, and that's what we have been demonstrating as management of our business. So with that, as I mentioned, external landscape, there are major changes happening, the geopolitical risks and also acceleration of technology. And then also these positions move our independent position while valuing the independents, we together think about the business, to business collaboration and also the business portfolio improvement.
So, we all -- the management team needs the deep understanding of the external environment. Of course, Mr. Totoki has a deep understanding of the external landscape. And with this titles of the COO and CFO and he can bring it to the higher level of the understanding and elevate it to the higher level, his understanding of the external landscape. Next question, please.
And I would like to take questions in the middle row, the second from the front.
My name is Nishita [ph], Freelance Journalist. I have questions and the CEO, and its positions. So in terms of the strengthening of the product portfolio is quite well understood, but would you please be a bit more specific, what we want to do? So Yoshida leadership and Totoki leadership, what they will be and how each of you would like to work for Sony Group.
And probably Totoki will make another comment, and that's for the details, and that's subject to the discussions from now on. But as for business structures, we have six segments of businesses and we have to maintain and let them glow. But as for the discipline of the corporate management, we should regularly check, whether or not, those portfolios and segments are optimum. That should be the role of the Board of Directors and the Management. That's my ideas. So I'd like to make some additional comments for the questions. As for the business portfolio, should not be a static. That should be dynamic.
And the diversified business means the different harvesting cycles. So, we need a cyclical revisiting, and the reviews of those business portfolios also still be update, and we need enormous power to do so. So as Yoshida said, the strengthening the management structure is quite plausible for us to carry on, and we have to raise the management capabilities, and I have to play my role to do that. Thank you.
Next question. Those of you online, if you have any question, please press one, followed asterisk followed by one. Now the person, third line, third row from the front [indiscernible].
I have two questions to Totoki, Sony Group, what kind of company would you like to steer the company into your vision? And I think this is a message for the employees as well, what is your vision for the company and Mr. Totoki, personally you are something believe that you are, you think is important. Thank you very much for your question. What kind of company I would like to make Sony into?
Yoshida and we defined purpose and expand the kind of value chain. And we have been sending that message internally and externally. We have to make this more concrete, ideal way would be without be having to explain, everybody can have an image as to what we have to do. That is the ideal situation. So we are going to bring this into reality. As for my belief, it's not something that big, but from before, the key of management is the courage and patience. I like this saying, many people are saying this, you'll, as one is engaged in management of company, identifying risks and make judgment, and you have to have the courage to make decisions. Also, at times, you may be faced with headwinds and also contradictions, but you have to persevere and should have patience. And I feel the need of patience. I am telling myself the importance of this always.
Thank you.
Let's move on to the next question. So the person in the middle row on the far right, please, on the front row.
Thank you very much for this opportunity. [Indiscernible] and under the new management structure, going to be the CFO and Totoki, I believe you have exerted your position as a CFO as well. What are the other concrete actions, and were there any other choices or options?
Well, so this change to Sony Group's management structure. First we had a discussion with the nominating committee in July last year. And at that time, and of course there were lot of discussions, but I then talked about Mr. Totoki's strengths. And biggest strength, I think is the strong willingness for growth. And I think it is a very important key attributes that is required of the management of the company and the company growth. I think it's important for it to result in the growth of the employees as well. So that's my view, and I strongly stress that Mr. Totoki is suitable as a new leader of Sony Group. And that's what I've been repeating to the nominating committee as well as in the board meetings as well at several occasions. Let's go to the next question.
And on this role, with white shirt.
My name is [indiscernible] Business. I have two questions, and you have the experience of CFO, what's your positive effect on your future jobs and how you can take the privilege of your experience as CFO and as CEO, Mr. Yoshida, what you are going to do as an CEO?
Thank you and first question is to be answered by Totoki and what I'm going to do as an CEO and there are so many things for me to do. Ultimately, I have to take a ultimate responsibility sub the Sony Group and CFO experience, how those experiences will sub positively to my jobs and CFO and depending on the companies, and probably the roles might be different, even though they may carry the same name. And CFO in the Sony Group has a wide range of roles and quite deeply involved in the strategies and the management, and that's been true since Mr. Yoshida as CFO. And those experiences, should be quite positive, positively served to be the President, because we can have overall view and we can read our financial and we can take that, take leverage of those ideas through interaction with investors and analysts. Thank you.
Let's move on to the next question. Anybody who are connected online, please press asterisk, followed by number one. If not, then once again, back to this room in the center, in the center, in the front line. [Indiscernible] from Nikkei ESG.
I have a question to Mr. Totoki, Mr. Yoshida, after he became President, Creativity, he has been saying that, that he has a purpose of fit abroad with emotion through the power of creativity and technology, and have been working upon this, Totoki, after you become President, what would be the priority areas that you would like to address?
Thank you for your question. I, myself, as Yoshida clearly defined the purpose and disseminated this purpose to the group. As I mentioned earlier, we have to make sure that the purpose takes root in the group, and we have to make some, the purpose into something concrete, purpose itself is the Kando value chain. So it is made into something concrete, Kando value chain. We create Kando and deliver Kando, and that's where we are doing our business. So we have to make this even stronger and wider in the range as well.
That's all. Thank you.
Now, we are running out of time, so, we would like to take one last question. So, from JP Morgan Securities, [indiscernible]. Please ask your question.
Thank you very much. My name is -- from JP Morgan. Now, I have one question. About this management change, Mr. Yoshida from, Mr. Totoki, each, about the Group Executive Officers, what did you tell them or what are you planning to tell them or and also to the employees, what are your messages from each person, I would like to hear? Thank you.
Thank you for your question. Well, already the message has been issued, and today, as I mentioned in my speech, there's a change in the external environment, and also there are things that we need to tackle internally. I have already conveyed to our employees in the same manner I mentioned in the speech and also the purpose of the company. And also, we are going to get closer to people that will not change, and together we are going to attain further growth.
And that was my message from myself too, basically I delivered the contents of my speech with a little more, meets to it, in a sense to our employees and also to the key team members individually. I had opportunities to speak to them one by one. And so I asked them for their corporation because I'll be assuming this new position. And we received a lot of feedback through the email and the messengers. I would like to take my time to read through all the messages, I'm looking forward to doing so.
That's all.
Thank you very much. It is time. So then this concludes the question-and-answer session. And next, there will be a photo session for the meeting.
[Break]
Ladies and gentlemen, let us start Sony Group Companies and Consolidated Financial Results Announcement. My name is Shin Chi [ph], from IR Group of Financial Department. I'm happy to serve as MC. And please, let me introduce, those who are on the podium. Hiroki Totoki, Executive Deputy President and CFO; and Ms. Naomi Matsuoka, Senior Vice President in Charge of Corporate Planning and Control, Support for Financial Business and Entertainment Areas; Sadahiko Hayakawa, Senior Vice President, In Charge of Finance and IR. Those three are on the podium.
First Totoki San will have the floor to talk about the Q3 FY 2022 consolidated financial results, and then go down to the questions and answers. And as for the questions and answers, we will first entertain questions from investors and analysts. Then to the separate sessions from media, and in total we are planning for 45 minutes. For the related documents, we have posted on the IR website, please refer to that. So Totoki San, you have the floor.
Today, I will explain the following. Consolidated sales for the quarter increased 13% compared to the same quarter of the previous fiscal year to ¥3.412 billion and consolidated operating income decreased by ¥36.4 billion to ¥428.7 billion. This operating income result was close to the record high reached in the same quarter of the previous fiscal year, which benefited from the recording of ¥70.2 billion gain on the transfer of a business in the picture segment.
Income before income taxes decreased by ¥63 billion year-on-year to ¥398.6 billion. And net income attributable to Sony Group Corporation stockholders decreased [Technical Difficulty] mainly due to the impact of the increased sales of first party software, despite an increase in cost. The focus for FY '22 sales is unchanged from the previous forecast. We have upwardly revised our operating income forecast to ¥240 billion, an increase of ¥15 billion from the previous forecast.
Expenses associated with acquisition for the current fiscal year are expected to be approximately ¥57 billion. 7.1 million units of PS5 hardware were sold during the quarter, and the cumulative number of units sold by the end of December exceeded 32 million. Based upon this result, we have set our sales forecast for the fiscal year at 90 million units. By optimizing our operations, we are exerting every effort to sell as many units as possible to meet the strong demand.
Due to the penetration of PS5, the percentage of PS5 users in the number of monthly active users in December increased to about 30%. Engagement metrics to users who transitioned from PS5 to PS5, such as the PS Plus subscription rate game playtime and average is spending amount are significantly higher than those when they played on PS4. And we will continue to focus on accelerating transition of PS4 users to PS5.
In addition, nearly 30% of PS5 users will never use PS4. So with the spread of PS5, the acquisition of new users is progressing. Although total game playtime of all PlayStation users during the quarter was down 3% year-on-year, it was up 6% compared to the prior quarter, and it was up 14% in December compared to the prior month.
We believe that user engagement is on the recovery trend due to the penetration of PS5 and the contribution of hit titles in terms of software for PlayStations, the new title, God of War Ragnarök recorded sales of more than 11 million copies in the first 10 weeks after its release on November 9th, making -- marking it the fastest selling first party title ever.
Looking ahead to next fiscal year, we have strong titles planned to be released for both first and third-party, including Marvel Spider-Man 2. The sales contribution of PC software is steady increasing, thanks to the rollout of our popular IP to PCs such as Marvel Spider-Man Miles Morales, which went on sale in November. As for bunch, pre-orders are steadily increasing for the Destiny 2 Lightfall expansion, which is scheduled to be released this month.
On the 22nd of this month. PS VR2 will be released worldwide by maximizing next generation sensing functionality and the performance of PS5. We aim to provide a virtual reality experience like never before. In anticipation of the launch, we are preparing a lineup more than 30 titles, including Horizon Call of the Mountain, the latest title in our IP, and Gran Turismo 7, which will be upgradable to PS VR2 for free.
In this way, we are seeing a steady results from the various measures, we have taken in terms of both hardware and software. And we believe that, we have created positive momentum to reaccelerate growth and the game business centered on the expansion of the penetration of PS5.
Next is the music segment. FY '22 Q3 sales increased by 23% year-on-year to ¥367.7 billion, mainly due to the impact of falling exchange rate and the increase in streaming sales. Operating income was ¥63 billion and increase of about ¥7.8 billion year-on-year. The contribution operating income from visual media and platform accounted for approximately 10% of the operating income of the segment for the quarter. There is no change from the previous fiscal year forecast.
Streaming sales in the quarter continue to grow steadily with year-on-year increase of 33% of the recorded music and 60% of the music publishing 7% and 28% respectively on the U.S. dollar basis. In recorded music following the first half of the fiscal year dwelling, which we had many new albums hits by artists such as Harry Styles and Beyoncé, we continue to generate hits on with oblige of 38 songs in the Spotify's Top 100 weekly global music rankings in the current quarters.
And among them the singer song like this SZA's album SOS released on the December 9th, became a big hit remaining in the number one in the Billboard 200 for the consecutive seven weeks after the release in publishing, our affiliated song Lighters participated in all of the top five most streamed albums on Spotify in calendar year 2022. And we believe this part solidify Sony's positions in the industry leader.
Next is the picture segment. FY '23 Q3 sales were 331.5 billion a significant decrease of 28% compared to the same quarter of the previous fiscal year, which benefited from the blockbuster release of a Spider-Man: No Way Home and U.S. Television Seinfeld. Operating income fell by significant ¥123.9 billion to a ¥25.4 billion, primarily due to the recording of the game from a transition club GNS games business in the same quarter of the previous fiscal year. And the impact of the decreased inside sales.
And FY '22 forecasting sales are ¥1.400 billion decrease of ¥40 billion from the previous year. There is no change from the previous focus in operating incomes. Due to the fewer films, being released a result, mainly from the production delays blocked by the COVID-19 situations and box ops revenue in the U.S. calendar year was about 60% of the calendar year 2019. Next fiscal year Sony plans to release highly appealing films including the sequel of the Academy winning animation film of the Spider-Man: Across the Spider-Verse and the new film of Sony Picture Universal of Marvel characters following like Banham.
And we also and crunchy longest paid members exceeded 10 million as the top of the -- by the end of the next years. And we have that evidenced by the release of one piece film led and following on from unchartered which recorded box office revenue of more than $400 million worldwide with more than 10 projects under the way convert Games IP to video, including Gran Turismo and God of War.
The live action television drama adoption of the last of us, which began airing HBO, HBO Max and Max January 15th, began the big hit in the first episode, since its first release with the 22 million viewers. Due to this, the game of the last [indiscernible] released in 2020 and Amazon sales ranking for PS4 software in the U.S., which has the positive impact on the Gamesload. More by, in March, we plan to release the first PC game software, by using this IP. In this way, we plan to further increase strengthen our values, highly appealing IP through multifaceted exploitation of the IP into the collaboration after [indiscernible].
Next is the Entertainment Technology & Services segment. FY '22 Q3 sales increased 10% year-on-year to ¥752.8 billion due to foreign exchange rates and increased sales of digital cameras. Operating income increased ¥1.1 billion year-on-year to ¥81.1 billion primarily due to the benefit of the increased sales of digital cameras, despite the impact of decreased sales of televisions. In FY '22, forecast for the sales of ¥2.480 trillion [ph], a decrease of ¥30 billion from the previous forecast. There's no change from the previous forecast for operating income.
By responding swiftly to market changes and minimizing the impact of the economic slowdown and deterioration of the market environment in certain categories such as TVs, we secured a profit for the entire segment during the quarter that was the same level as of the same quarter of the previous year. Regarding interchangeable lens cameras. Although the pent-up demand due to product shortage in the previous fiscal year is abating, there has been no noticeable negative impact from the economic slowdown so far.
Our sales are relatively stable. We have been able to control the supply chain disruption caused by the resurgence of COVID-19 in China since the end of last year, so that it does not affect sales. We are closely monitoring the situation after the Chinese New Year and are taking necessary action. We anticipate that the business environment will become even more severe over the next fiscal year. Therefore, we will revise our sales plan for the fourth quarter even more conservatively and will proceed with the business operations with the top priorities being prevention of any negative impact from being carried over into the next fiscal year and acceleration of our efforts to further strengthen our business structure. Next is I&SS segment. FY '22 Q3 sales increased a significant 28% year-on-year to ¥417.2 billion, mainly due to the impact of foreign exchange rates and increase in sales of image sensors for mobile products.
Operating income was ¥84.9 billion, a significant increase of ¥20.2 billion year-on-year and mainly due to a positive impact foreign exchange rate despite an increase in costs, both sales and operating income for the current quarter were recorded heights for this segment. The FY '22 sales forecast has been decreased ¥20 billion from the previous forecast of ¥1.420 trillion. There's no change from the previous forecast for the operating income.
The smartphone market continues to be sluggish, center to midrange and the low end products in China. Recently, this trend has become partially conspicuous for high end products as well, but that is highly within the expectations of our previous forecast. At present, we assume that the smartphone market will recover moderately starting from the second half of this fiscal year, ending in March 31, 2024, and we are proceeding with the careful verification and assessment in preparation for formulating a business plan for the next fiscal year.
On the other hand, sales of our large format high definition sensors for flagship models have grown significantly from the previous fiscal year leading to significant growth in sales for the segment. We believe that the growth in the trend towards larger size, higher image quality, higher performance mobile sensors is a major achievement this quarter.
Taking this into account, we will continue to consider medium to long-term investments in increased production capacity to further expand our image sensor market share. In the automotive sensor business, we expect to double sales in the current fiscal year compared to the previous fiscal year, and we expect the sales to continue to grow in a high level of the next fiscal year as well. Last is a Financial Service segment, FY '22 Q3 financial service revenue decreased significant 24% year-in-year to ¥359 billion mainly due to deterioration in the net gains and losses on investments in this separate accounts.
At Sony Life Insurance, operating income increased a significant ¥19.1 billion year-on-year to ¥54.3 billion primarily due to a reveal reversal of policy of reserves at Sony Life, resulting from the rise in interest rates during the quarter. Sony Life's new policy amount in force increased 57% year-in-year due to growth in our corporate business, and strong sales, mainly of the new individual variable annuity [indiscernible], there's no change in the previous forecast.
Next fiscal year will be the fiscal year of the fourth midterm range, mid-range plan, and it will be an important fiscal year where we establish a next mid-range plan. I believe that the most important theme in the next mid-range plan is a Sony Group strategy for the further growth beyond the current tough economic cycle. And our next fiscal year, we anticipate that we will need to operate a business in the face of headwinds while each business will focus on responding quickly and decisively to the changes it faces. We also will steadily lay the foundation for the future. We plan to further evolve the diversity of our businesses and human resources, which are our strengths, enhance resilience of our business portfolio, and take on the challenges of the creating new value in the growth markets. That concludes my remarks.
Now we'd like to move on to Q&A session. As we explained at the outset, first we'll be having Q&A session from investors analyst, and from about a quarter after five will be entertaining questions from the media. Those of you who have registered for asking question in advance, please connect the dial, the designating number and press asterisk followed by one. Those of you have question in the room, please raise your hand and then wait until the microphone is brought to you. Today because the time is limited, I'd like to ask you to limit your question to one per person. Now, those of you, if you have any question, please indicate now online participant, BofA Securities, Hirakawa-san, please.
Thank you very much. Hirakawa from BofA Securities. About PS5 question. PS5, 7.1 million units has increased significantly, as a market consensus is about 7.5 million, 7.1 million. If you can produce more, you could have sold more, or the demand was about this level. In the 3Q, you have exceeding PS4, so what is the current situation of PS5?
Thank you for your question. I would like to respond to your question. Sales unit of 7.1 million units is not a bad figure at all. However, the production and distribution problem continued. So the products are not delivered to the customers sufficiently, distribution channel at the shop front, the products are not delivered yet sufficiently. So we need to streamline the operation and so that, the units will be delivered to the customers as promptly as possible. Therefore, the momentum of demand, we are not concerned rather, we have to make sure that we can solidify the operation and we can deliver as many units as possible as quickly as possible. That's all. Thank you.
Thank you. Thank you for your question. Let's go to the next question, and once again from online, Morgan Stanley, [indiscernible].
Thank you and congratulations for assuming a new position. And I have a question concerning games and three months ago, you talked about some of the focused and games, KPI is now gaining momentum, I think, and especially MAU, 112 million, and that's quite a positive, the ways, and PlayStation is recovering in the quarter. But as for the user compositions, you talk about transition from PS4 to PS5. So how do you focused the transition status from PS4 to PS5, will it gradually the increase or depending on the new titles, and the two boost, the demand for PS5 and that's for PS5 and PS Plus, the paid member increase is might be one of the main factors. And as for the next quarter, and that's almost as planned. And as for PS5, the sales increase and promotional effect should lead to the increase of the sales. [Indiscernible] players for being away from the gaming. And that should be the reason for us to see this current level of the user. And as for PS5 and the [indiscernible] reopening purchases ladder high, and that should have a time lag to see the positive effect onto the figures. So that might be because of the time lag for that membership and the reflection onto the sales and the revenue. And we would like to continue to monitor the business, and we are going to solidify the software database and so as to enhance the engagement with the users for gaming. Thank you.
Thank you. Then we'd like to move on to the next question. Please raise your hand if you have a question. So, then from the venue, the person in the middle of this row. Thank you very much.
[Indiscernible] Securities. I have a question about the finance area and financial services area. So the third quarter result of the new contracts, was it as expected and also the interest transition, how will it affect the performance and also the MCEV, what was the result? And in addition for the next-term, there will be plan for the change in accounting system. And at this moment, what is your view on how this may affect the performance?
Now, I would like to invite Ms. Matsuoka to answer about the finance services related questions.
Thank you very much for the questions. So about the new contract value, the third quarter situation is your question. And thankfully, as I -- as mentioned in Mr. Totoki's speech, the Sony is performing quite well and new contract is increasing, and therefore the new contract values is also increasing. And that is the trend and that is to last for some time. And also interest rate shift impact, and we do have a hedging. So there, we don't expect any significant impact. And even if there may be some impact, it will be very slight. But depending on how the interest rate shift, we need to look at the different spreads. And also, in particular, the bank spread certainly will be affected.
So in that sense, we would like to -- we will be increasing the profitability through that. And IFRS 17, in regards to this accounting system change, there will be another occasion for us to explain a more details about the IFRS. So please wait for that occasion. Thank you.
We'd like to move on to the next question, anybody. Next online -- participant online [indiscernible] please.
Thank you very much. [Indiscernible]. Congratulations for the good results. Now, I have a question regarding game. Recently, U.S., Europe, and China. Macro trend is different in December results and the forecast for March and the forecast for next fiscal year and onwards, business environment, hardware, and software network in by region. What difference in trend is observed or no difference? Can you give me some hint? That's my question. Thank you.
Thank you very much for your question. Game and network globally, the reservation of the economy. There is a difference by regions, but how does that impact our business at this point in time. By regions, there's is no significant difference. That's my recognition. Having said that, however, PS5 share compared to PS in Europe as compared to the United States, it is high. Our position is higher, so we are maintaining in high position in the United States.
Also, in summer, there was some narrowing of the gap, but more recently our share has expanded significantly. So impact, there's not much impact of the macro economy. Having said that, however, this is something dynamic. So we have to watch carefully the situation from the fourth quarter onwards. Thank you.
Thank you. And we would like to move on to the next question and the online participant [indiscernible] JPMorgan Security.
Thank you. And my name is [indiscernible] of JPMorgan, and I am this is. I have a question, based on your documents, and for the Q3 sales the North American the smart phone the production was the constraint, and that's for the Q4 wafer input. And that's almost on the same level of the previous fiscal year, but as for the capacity, seems to be lot smaller compared to the previous year's speakers. So, that might be decreasing factors for your productions. And so what is your perspectives for the North America market and production situations? Thank you very much.
For the first part of the question, for the -- based on the customers production the changes, and we had quite minor impacts, and that's for Q4, and we have yet to identify the exact cause. So, we need to continue to monitor what's going on. As for capacity and wafer input. And actually, Q4 90% is for the operating, the utilization rate. That's for image sensor productions related the changes. Specifically, for industrial use in the Kumamoto plant. And, but that's for the others. We are going to maintain the full-fledged productions. The Q4 capacity seems to be a dropping, but because of the plant and the maintenance and the inspection. Thank you.
And time is running out. So we would like to take one last question, and those from SMBC Securities, Mr. Katsura. Please ask your question.
Hello, I'm Katsura. Congratulations Mr. Totoki. Now, I have one question about the market landscape, how you interpret the market situation, its dynamic and your competitors and other peers may say that it's tougher than three months ago. And your semiconductor business is doing quite well. And based on this towards next year, what is your plan? And also EDNS, I believe that the forecast is quite tough and I believe that you would like to take some measures or counter measures. And so I would like you to explain to us what you will do?
Thank you for the question. And overall, economic landscape, I think that's a question. I believe last year, end of -- in comparison to end of last year, in particular, European, U.S. economy, there is an optimistic view that they may be making a soft landing and IMF forecast has been revised in upward manner. And also the equity market, financial market is the momentum is may be recovering in advance to the overall market recovery.
And so the -- generally, that may be the tendency, but when it comes to the real economy from the finance market, always come -- the changes comes in delay. So the first, the fourth quarter, and also the early next fiscal year, the real economy and also the consumption trend. We need to be cautious to be prepared for any shift. And as far as our business is concerned, currently the smartphone and low end and mid end are going down, and the TVs our demand is weak.
And I mentioned that, I can say that. And this is something that was foreseeable to a certain extent. So as far as we are concerned, we think we are prepared, but from the fourth quarter to the first part of next fiscal year, we are going to the right risk control. And so we're prepared for the next phase and the next momentum, so we will not be left behind then when the next momentum increases. And that is the overall view at this point in time. Thank you.
Thank you very much. Now it is time. So, we would like to conclude the Q&A session for the investors and analyst.
Thank you very much. Now it is time. So, we would like to conclude the Q&A session for the investors and analysts. Now we would like to start the [Technical Difficulty].
Now we would like to move onto entertaining questions from the media. Those of you who have any question in the hall, please raise your hand. Those of you participating online, if you have question, please press asterisk followed by one in this hall. Microphone will be brought to you if you raise your hand, because the time is limited, I would like to ask you to limit yourself to one question per person. Now, if you have any question, please raise your question. Now, in the middle fourth row.
[Indiscernible] is my name. Not directly related to earnings announcement, about semiconductor business, I have a question. In Kumamoto, you have built, you are considering building a new plant in Kumamoto. What is the current situation of considering the plant in Kumamoto?
Thank you for your question. It's not something that we have made an announcement of. So this is based upon speculation, and I would like to refrain from making, responding to the question, but generally speaking, image sensor markets growth in the mid to long-term and based upon that, consideration for expanding the production capacity is always considered not limited to specific location, but widely, we are considering that. And if there's anything that is decided, then we'll like to inform you immediately. Thank you.
And I would like to move on to the next question. Next question, please. So in the center, two rows from the front and the second from the left.
My name is [indiscernible]. And one question, and as for entertainment, music and pictures, and what is your strength as the conglomerate and centering around entertainment business and the macroeconomic situation has been lot improving. And that should be a driving force for you to maintain the good business performance. For the next fiscal year, and you are expecting further more solidifications of the user basis. So, what is your strength in that environment, how you can take the leverage of your corporate strength for that environment for the entertainment, related to being conglomerate.
And we may have, you may have a conglomerate discount, that might be negative factors for you. And if there is any discount, discounting factors, how are you going to minimize those factors and how you should address to those the elements?
Thank you for your questions. And as to the strength being conglomerate, we have the diversified businesses, diversified businesses, probably that they are not so closely related. So, and all of the sectors do not go along at the same time. So, and that should be one of the strengths for us to have multiple businesses. That's the same concept of the portfolio management. As for conglomerate discount, there should be many people saying different things. And as I talked in the presentations, as for the entertainment, three businesses, we have the Transmedia and we have a quite strong synergy effect between the different business areas and that that's almost visible in the financial figures. And we can expect some good circulation and the benign cycles for the bottom up the effects. So that should be another strength of ours.
And in addition to that, and we have the technologies. Sony is a technology company, that's one of our uniquenesses. And how we can take the leverage of those technologies to entertainment business. The Metaverse should be one of the topics that's represented by the Metaverse. So, that's our activity. So for the new digital experience and that entertainment, that should be a core factors of our future business. Thank you.
Okay, please raise your hand if you have a question, in the middle, second row from the front.
[Indiscernible] inventory level at the moment, for the other game and the electronics point of view. And so when we think about the market, I believe you may have to be conservative in planning on the inventory level. So, how are we to analyze your inventory level from the perspective and for the gaming, you have a high level of inventory, and we judge that, it can be mobilized and so what is your view on the inventory? Thank you for the question.
So I would like to share, add some information statement about the inventory level and for the game and network service for this third quarter sales, production sales is increasing. That is why it is, the inventory is building up significantly. And even if there's the sales and the demand for a long time we were not able to deliver products smoothly. So, we therefore increase the production capacity significantly and produce the products.
And we are in the middle of delivering this products. And in regards to the game and entertainment service, we are not worried about the inventory level actually, and the inventory level when we think about the sales momentum and also the PS4, so now the seasonality, now that it's in a fourth year in the past with the simulation, the inventory itself made increase in the monetary value. But in comparison to the PS4, the product unit price is much higher. And at PS4, we decreased the price in the fourth year.
And so the monetary value seems to be higher than what actually is. And when it comes to ETS, in the previous briefing, I mentioned that the inventory level at the end of the second quarter was rather high, and we worked on the reduction of the inventory. We managed to achieve a goal, to a certain extent, we are still working on it, but it is however slightly higher than what we think is appropriate level. So into this quarter, we would like to reduce the inventory and for I&SS, the CapEx optimization and also maximizing the business scale. And for that matter, we are taking a policy to have a high level of inventory as part of the investment. And for that, the CapEx timing can be delayed. That's all. Thank you.
Now, anybody who has a question, please raise your question. Next, participant online [inaudible] from Reuters, Takinaka from Reuters.
Game segment, early made a comment. I'd like to confirm this fiscal year PS5 sales target is 18 or 19, you have already increased in 19.
Yes, it is 19 million units. It was 18 million, and we raised 19 million, 18.5 million. We say 18, and it is 19. So we have raised the target. Thank you.
And the time is running short and would like to entertain one last question. And on this row on the right and the fifth from the front.
My name is [indiscernible] talked about, image sensor business and you are going to enhance the production capacity and will it be for the other applications that mobile products.
Thank you for your questions. That includes the other products, the mobiles but mobile image, image sensor products, the driving force for the most of the growth, that we have some other segments as well. Thank you.
So this is time for us to adjourn the session. This concludes the today's, the consolidated financial results announcement.