Chapter 090　What Did Sony Redefine?

What did Sony redefine? To answer “a Japanese company that came back” is to mistake a story for an analysis. Coming back means returning to where you were. This company has not returned to where it was. What this chapter establishes is the axis on which a collection of businesses was rewritten into a single enterprise. This is the only Japanese company treated in this volume, and its starting conditions are unusually specific. We separate what can be learned from what cannot. Praise is not analysis.

1 What makes this enterprise worth a question

Start with the numbers. The numbers are not the conclusion. Consolidated revenue for fiscal 2025 (ended March 31, 2026) was ¥12,479.6 billion, up 4 percent on the prior year. Operating income was ¥1,447.5 billion, up 13 percent. Both are record highs. The operating margin rose from 10.6 percent to 11.6 percent. Net income from continuing operations was ¥1,030.9 billion (results materials released May 8, 2026, and the Form 6-K filed with the U.S. Securities and Exchange Commission). Net income attributable to shareholders of the parent, however, was a loss of ¥326.9 billion. The accounting effect of treating the financial services business as a discontinued operation was the main cause. In a single year, a record operating profit and a bottom-line loss stood side by side. That pairing is what shows where this enterprise now stands. The following first quarter of fiscal 2026, ended June 30, 2026, produced revenue of ¥2,837.8 billion and operating income of ¥476.5 billion. Both are records for a first quarter (announced July 31, 2026). Full-year guidance was raised as well, to revenue of ¥12,500 billion and operating income of ¥1,720 billion. There are three reasons this enterprise is worth a question. First, the combination of businesses resists explanation. Game & Network Services, Music, Pictures, Entertainment, Technology & Services, and Imaging & Sensing Solutions. Revenue for fiscal 2025 lines up as follows: Game ¥4,685.7 billion, ET&S ¥2,260.5 billion, I&SS ¥2,151.5 billion, Music ¥2,120.1 billion, and Pictures ¥1,499.3 billion. Textbook portfolio theory has trouble justifying this combination. Second, the company released a financial services business it had held for a long time, effective October 1, 2025. Just over 80 percent of the shares of Sony Financial Group were distributed in kind to shareholders, and just under 20 percent were retained. The form is known as a partial spin-off. Third, all of this happened inside Japan’s institutions and labor market. When a case comes from another institutional setting, differences of condition can be offered as an excuse. Here the redefinition was carried out inside one fixed institutional setting, and that exit is closed.

2 Conventional answers and their limits

Three explanations about this company are in circulation. Each is partly right. Each drops the part that matters. The first conventional answer: “It sank once, and then it came back” This is the most widely told story. There was the weakness of the 2000s, then structural reform, and now record profit. As a matter of fact, performance improved. But the story cannot answer the decisive question: back from what, to what? The word recovery implies restoration of a prior state. The current earnings structure does not resemble the earlier one. The three entertainment fields rose from about 30 percent of consolidated revenue in fiscal 2012 to about 67 percent in fiscal 2025 (Business Insider Japan, May 2026). This is not recovery. It is a different enterprise. The recovery story hides the content of the change. What we should ask about is not the speed of the rebound but the substance of the rewriting. The second conventional answer: “It became an entertainment company” This explanation rests on proportions. About 70 percent of revenue sits in entertainment, so call it an entertainment company. But two businesses float free of that description: Imaging & Sensing Solutions, and ET&S. I&SS revenue grew 20 percent year on year in fiscal 2025, and operating income grew 37 percent. This field is not a subordinate category of entertainment. Further, on July 30, 2026, Tamron disclosed that it had received a proposal from Sony Group to make it a wholly owned subsidiary. A special committee has been established to consider it, and the proposal is described as non-binding. Sony is already Tamron’s largest shareholder, with 15.35 percent of its shares (as of December 31, 2025). This move cannot be explained under the heading of an entertainment company. The third conventional answer: “It executed selection and concentration” This explanation rests on the financial separation. On this reading, non-core businesses were cut and resources were moved toward the core. But read this enterprise through the logic of concentration and a contradiction remains. Holding game, music, pictures, and semiconductors at the same time is the opposite of concentrating. And in fiscal 2025 the company recorded ¥120.1 billion of impairment for the full year, on Bungie intangibles and related items. The concentration story does not explain that failure. Selection and concentration is a frame that asks about the number of businesses. What this enterprise changed was not the number of businesses. What all three answers miss All three ask what this company sells. But the second dimension of Enterprise Redefinition does not ask what a firm sells. It asks what value the firm delivers. Change the question and what you can see changes. The reason this enterprise can hold unlike businesses at the same time is not affinity between the businesses. It is that it fixed, as the language of management, a single unit that holds good across them.

3 What was redefined — an analysis across the five

dimensions We read along the five dimensions of Enterprise Redefinition. The order follows the canon: Purpose, Business, Organization, Capital, and Leadership. What follows is what can be read from public information. It is not an assertion about internal decisions. Purpose — a common unit that crosses the businesses In 2019 the company set its Purpose: “Fill the world with emotion, through the power of creativity and technology.” Four Values were placed alongside it: Dreams & Curiosity, Diversity, Integrity & Sincerity, and Sustainability. The process is public. Kenichiro Yoshida, who became CEO in 2018, put the call out internally in July of that year, and about half a year was spent gathering views from employees worldwide (Nikkei XTREND). This was not wording decided by the executive layer alone. Internal surveys were reported to show more than 80 percent of employees receiving it positively. What deserves attention is that the Purpose established emotion as a unit. Games, music, film, and sensors can all be spoken about in that unit. For a collection of businesses to become one enterprise is not a matter of sharing an accounting unit. It is a matter of sharing a unit of value. As the canon states, Core Purpose can remain stable while its expression and realization evolve. This company’s core reads as working on human senses through technology. The 2019 wording can be understood as putting that core into language. Business — from selling objects to continuing relationships The rewriting of the business dimension shows up in the form of revenue rather than in proportions. Operating income in the game field was ¥463.3 billion in fiscal 2025, a record. On a basis excluding the Bungie impairment, that is a 45 percent increase on the prior year (4Gamer, May 8, 2026). PlayStation monthly active users hit a record 125 million accounts. Meanwhile, annual PS5 unit sales were 16 million, down from 18.5 million the prior year. Units fell; profit and users rose. That asymmetry is what shows the rewriting of the business dimension. What is being sold is not a device but a continuing relationship. The same shift surfaced in a sharper form. On July 1, 2026, Sony Interactive Entertainment announced that it will end disc production for new titles released from January 2028. It cited demand for digital far exceeding demand for physical discs. It is a decision to end, by its own hand, a business form premised on logistics and retail. The music field points the same way. Fiscal 2025 revenue was ¥2,120.1 billion and operating income was ¥447.0 billion. Revenue rose 15 percent on the prior year and operating income rose 25 percent. The center of gravity has moved from selling works outright to holding a catalog over time. Organization — the boundary extends outside the enterprise In the organizational dimension, capital relationships with outside parties function as part of the organization. In December 2024 the company announced an additional investment of about ¥50 billion in KADOKAWA. Through a third-party allotment on January 7, 2025, it became the largest shareholder with about 10 percent. The stated aim was to maximize the global value of the intellectual property both companies hold (joint announcement by KADOKAWA and Sony). Crunchyroll, the anime streaming service, grew from about 13 million members in fiscal 2023 to about 21 million in March 2026 (reporting on the fiscal 2026 corporate strategy meeting). Production, rights, distribution, and merchandising run as one flow across parties inside and outside the company. As the canon defines it, an organization is not a collection of people. It is a value-creation system made of people, AI, partners, universities, and customers. This company’s organization has close to that shape. But the further the boundary extends outward, the harder control becomes. The Bungie impairment reads as an instance of that difficulty surfacing. Capital — releasing the smoothing device, leaning into IP The capital dimension carries the most weight in this case. In May 2025 the company fixed its policy for a partial spin-off of the financial services business, and executed it on October 1 of that year. Sony Financial Group listed directly on the Prime Market of the Tokyo Stock Exchange. Just over 80 percent of the shares were distributed in kind to shareholders and just under 20 percent were retained. The financial business was also a device for smoothing the effects of the business cycle. A decision to release it works in the direction of lowering the stability of earnings. In fact, the bottom line for fiscal 2025 went into loss through the accounting treatment. At the same time, the destination of capital has moved. Music catalogs, investments in IP, film and television production, and semiconductors. First Principle 3 states, Capital Exists to Create Possibility. Capital exists to create possibility. What can be observed in this case is allocation in the direction of less capital securing stability and more capital creating possibility. The third equation of the canon defines capital as follows. Future Capital = Financial × Human × Learning × Trust × AI × Knowledge × Ecosystem × Purpose This is multiplication. If any single term is zero, the whole product is zero. In this company’s case, the Knowledge, Ecosystem, and Purpose terms compounded over a long period. The center of gravity of value sits outside financial capital. Leadership — from directing individual businesses to editing them The rewriting in the leadership dimension shows up in the object of decision. At the fiscal 2026 corporate strategy meeting, CEO Hiroki Totoki said of AI, “This is simply a tool. It does not replace artists or creators” (ITmedia, May 11, 2026). Sony Pictures has invested more than $50 million in technology infrastructure, and AI features for users are said to be under consideration in PlayStation Network and elsewhere. This position overlaps with the thinking behind Human-on-theLoop Management. The point is not to supervise AI. The point is to decide in advance, as system design, where human creativity operates. First Principle 4 states, AI Optimizes. Humans Define. The fourth equation of the canon defines leadership as follows. Leadership = Purpose × Question Design × Capital Allocation × System Architecture × Trust This equation is multiplicative as well; a zero in any term empties the whole. What stands out in this company’s leadership are the Purpose and Capital Allocation terms. Decide what to keep and what to put out. The job has become editing a set of businesses rather than operating them.

4 Structure — maturity and the value chain

4.1 Where it sits on the Enterprise Redefinition Maturity Model

The Enterprise Redefinition Maturity Model (ERMM) sets out five levels: Reactive Enterprise, Improvement Enterprise, Transformation Enterprise, Continuous Redefinition Enterprise, and Future Value Enterprise. What can be read from public information is that this company’s maturity varies by dimension. Nothing can be asserted, but the following can be said within limits. In the Purpose dimension, maturity reads as high. The assessment question is this: “Does the organization periodically re-examine its Core Purpose and adapt its expression without unnecessarily weakening organizational identity?” The 2019 wording reads as a case of updating the expression without changing the core. In the business dimension, behavior close to a Continuous Redefinition Enterprise can be observed. Ending disc distribution is self-redesign ahead of external compulsion. But not every business moves at the same speed. ET&S revenue fell 6 percent year on year in fiscal 2025 and operating income fell 17 percent. Confined to that field, a state closer to the description of an Improvement Enterprise remains. In the capital dimension, the financial separation and the allocation toward IP read as allocation toward Future Value. On the other hand, the Bungie impairment and the cancellation of the EV business do not indicate that the allocation is precise. The leadership dimension cannot be observed sufficiently from outside. Here we recall the canon’s notes. The Enterprise Redefinition Maturity Model evaluates organizational coherence rather than isolated excellence. An organization can be at Level 4 in AI capability while remaining at Level 2 in leadership. Placing this company at a single level is itself a misuse of the model. Maturity is also assessed across all five dimensions in balance: exceptional technological capability with weak leadership redesign does not produce higher maturity, and strong purpose without adaptive organizational systems remains insufficient. And Level 5 must not be treated as a target to be reached as fast as possible. The appropriate level differs by industry and environment.

4.2 Where in the Future Value Chain the value was created

The causal order fixed by the canon is as follows. Purpose → Learning → Redefinition → Creation → Enterprise Value Lay that order over this company’s seven years, and the point where value arose can be identified. The starting point is Purpose. In 2019 the unit of emotion was set. Learning comes next. The networking of games, the streaming of music, and the global distribution of anime were environmental changes the company learned in each of its businesses. Redefinition is the stage at which that learning rewrote the boundaries of the businesses. The financial separation, the investments in IP, and the end of physical distribution all belong to it. Creation comes after. The record first-quarter profit of fiscal 2026 is the result that appeared last. Enterprise Value came last. The order must not be read in reverse. Work backward from financial figures in search of reasons, and we will always mistake an outcome for a cause. The second equation confirms the same structure. FVCC = Purpose × Learning × Redefinition × AI Integration × Ecosystem × Capital Allocation × Trust Seven terms, multiplied. In this company’s case, Purpose, Ecosystem, and Capital Allocation held high values at the same time. Had any one of them been zero, the whole would have been zero however large the other six.

4.3 Time as a term

The fifth equation places time as an independent term. Future Value = Future Time × Future Capability This is multiplication as well. Where time is zero, no Future Value appears however high the capability. This company’s music catalogs and audiovisual rights are assets that generate value over decades. Moving capital toward assets with long Future Time enlarges the right-hand side of the equation. The Value Equation says the same thing. Value = Purpose × Trust × Capability × Time Time is one term of a product here too. What transfers from this case is not a choice of businesses. It is the handling of time.

5 What it looks like in practice — the pivots, and what

was given up Redefinition is not the act of adding. It is the act of deciding what to protect and what to release. We set out the pivots together with what was released. Pivot 1 — 2019, establishing the Purpose The language of purpose, scattered business by business, was brought into one. What was given up was each division’s own justification. Holding a common unit also reduces each business’s freedom to defend itself in its own words. Pivot 2 — 2025, separating the financial business On October 1, 2025, Sony Financial Group was separated and listed. What was given up was a device for smoothing the effects of the business cycle. Consolidated stability falls. Through the accounting treatment, the bottom line for fiscal 2025 became a loss of ¥326.9 billion. This is the kind of decision that worsens short-term financial indicators. Decisions that create Future Value often do. A management that protects only quarterly enterprise value is structurally unable to choose it. Pivot 3 — 2026, cancelling the EV business On March 25, 2026, Sony Honda Mobility announced the cancellation of development and launch of the “AFEELA 1” and of a second model. On April 21 of the same year, Sony, Honda, and the company announced that they had agreed on the future direction of the business. Losses of ¥56.3 billion in total were reported in connection with the EV business (Business Insider Japan, May 2026). What was given up was the part of the concept that involved building the vehicle itself — making moving space a new site of emotion. It is easy to call this a failure. What we can confirm is only the fact that something started was brought to an end. Pivot 4 — 2026, ending the physical disc For new titles released from January 2028, disc production ends. What was given up is the retail storefront as a point of contact, and a physical ecosystem that includes secondhand distribution. The decision has drawn opposition. Faced with petitions and criticism from consumer groups, the company is reported to have acknowledged the reaction while maintaining its policy (Game*Spark, July 31, 2026). What remains unresolved On that basis, we set out four open issues. First, the absence of a smoothing device. With finance outside, swings in entertainment and semiconductors pass straight into consolidated results. Hits and misses in IP cannot be controlled. The ¥120.1 billion Bungie impairment is a concrete instance of that fragility. Second, physical concentration. Following the earthquake centered on the Kumamoto region of Kumamoto Prefecture on July 28, 2026, the Kumamoto Technology Center of Sony Semiconductor Solutions halted production (announced July 29, 2026). Even a company that delivers emotion rests its base on specific buildings. Third, the position of ET&S. If this field keeps contracting, the inhouse technology base thins. The acquisition proposal for Tamron can be read as a move to supplement that base, but the outcome is not settled. Fourth, the tension between AI and creators. The statement positioning AI as a tool is clear. But as implementation advances in production, questions of employment and rights will necessarily become concrete. The distance between statement and implementation has not yet been closed. All of these are live issues, and none can be asserted. What we can say is that this company’s turn is structural and conditional at the same time.

6 What transfers, and questions for the executive

What transfers from this case? And what does not? We write both. What can be taken, 1 — holding a common unit of value. A diversified company becomes one enterprise not through affinity between its businesses. It becomes one by fixing, as the language of management, a unit that holds good across them. For this company, that unit was emotion. Can you say your own single word in an executive meeting? What can be taken, 2 — the decision to end things. Finance, EVs, and physical discs. Each could have been continued if the company had wanted to continue it. The largest reason redefinition stalls in incumbents is not an inability to start new things. It is an inability to end old ones. What can be taken, 3 — changing the object of capital allocation. Music catalogs, IP, and investments in outside companies. These are hard to discuss within the frame of capital expenditure. What reaches the agenda of a capital allocation meeting in most incumbents is plant and acquisitions. People, rights, and external relationships tend to be handled as expenses. The conditions that cannot be taken, written honestly. This company has an overseas operating base built over decades. It holds core music and film companies in the United States, and its management language and its people were already international. Most incumbents do not have that premise. It also went through severe deterioration in performance in the 2000s. The memory of crisis grants internal legitimacy to transformation. An enterprise that has not been through a crisis will meet stronger internal resistance if it tries to move at the same speed. And since its founding, the structure of holding several businesses has continued. A company that started from a single business cannot import this company’s pattern as it stands. The appropriate level on the Enterprise Redefinition Maturity Model differs by industry and environment. It must not be imported as a model to copy. First Principle 6 states, Enterprise Exists to Redefine Itself. An enterprise exists to redefine itself. The redefinition meant here is neither DX nor reform. Digital transformation ends; Enterprise Redefinition does not. Finally, three questions. Each can be answered at your next executive meeting. Question 1 — What can you call the unit of value that holds good across your businesses? It is a unit that is neither revenue nor profit. If it cannot be said, the enterprise is still a collection of businesses and not one enterprise. Question 2 — What is your current “stabilizer” buying stability at the cost of? Stability is not free. A mechanism that absorbs volatility also absorbs the need to change. Only an enterprise that can put into words what was being protected is able to decide to release it. Question 3 — How many businesses have you decided to end within three years? This connects to the question of Recognize, the first stage of Enterprise Redefinition. What assumptions about our enterprise are becoming obsolete? AI cannot answer that. AI can test assumptions. Which assumptions should be doubted is decided by people. What Sony redefined was neither its business mix nor its revenue sources. It was the unit that binds the businesses together. A company that sells devices measures itself by the number of devices. A company that delivers emotion measures itself by the continuation of relationships. Change the unit of measurement, and what can be discarded and what must be protected trade places. The decisions to put finance out, to stop the EV, and to end the disc all come out of the same unit. And this turn is not complete. An enterprise whose record operating profit and bottom-line loss appear in the same year must not be read as a finished form. What we are looking at is not a result but evidence of order. There was Purpose, then Learning, then Redefinition, then Creation, and Enterprise Value came last. That order is open to any incumbent. What is not open is holding the decision to end things as an institution.

In brief

What Sony redefined is neither its business mix nor its revenue sources, but the unit of value that binds its businesses together.
What can be read from public information is that purpose and business look like a Continuous Redefinition Enterprise, while parts of the company are closer to an Improvement Enterprise.
Value was created in the stretch that runs from Purpose, through Learning, to Redefinition.
With the smoothing device released, hits and misses in IP now pass straight into consolidated volatility.

Key concepts

Purpose / Future Value Chain / Future Capital / Human-on-the-Loop Management / the Medium Pattern / the Ownership-to-Usage Pattern (→ Vol. VI, Ch. 059)

The chain of ideas

Purpose → Learning → Redefinition → Future Capital → Enterprise Value

Related first principles

Principle 1 — Purpose Precedes Profit. Principle 3 — Capital Exists to Create Possibility. Principle 4 — AI Optimizes. Humans Define. Principle 6 — Enterprise Exists to Redefine Itself.

Related chapters

Vol. VI, Ch. 059 “Cases of Enterprise Redefinition” — the definitions of the Medium Pattern and the Ownership-toUsage Pattern
Vol. III, Ch. 028 “Does Purpose Change Enterprise Value?” — what it means to set a common unit of value
Vol. VI, Ch. 056 “What Does It Mean to Redefine Investment?” — how to read capital allocation that releases a stabilizer
Vol. V, Ch. 044 “What Is the Enterprise Redefinition Maturity Model (ERMM)?” — how to read a level that splits by dimension

Papers and companion volumes

Kadowaki, N. (2026). Future Value Theory: A Management Framework for Enterprise, Capital, and Society in the Age of AI. VURA Working stract=7120980 / Paper. Zenodo: SSRN: https://ssrn.com/abhttps://doi.org/10.5281/zenodo. 21255662
Kadowaki, N. (2026). Enterprise Redefinition: Toward an Enterprise Evolution Theory for the Age of AI. VURA Working Paper. (Published on Zenodo; under review at SSRN)
100 Questions on Management in the Age of AI, #090 “Can Japanese Enterprises Win in the Age of AI?”

Chapter 090 What Did Sony Redefine?