Sony Group Corp

We'd like to start the Sony Group Corporation's FY2025 Q2 Consolidated Financial Results presentation. This is Ishii from PR. I'll be the MC. So today, we will present the FY2025 Q2 financial results as well as the full year forecast from Lin Tao, the CFO, Corporate Executive Officer. We will have questions and answers after that. The total time will be 70 minutes. Lin Tao's financial results will be presented in English based on the pre-recorded video, which will be streamed.

Hello, everyone. Today, I will explain the content shown here. Sales of continuing operations for the quarter increased 5% compared to the same quarter of the previous fiscal year to 3,107.9 billion yen. And operating income increased 10% to 429 billion yen. Both were record highs for the second quarter. Net income increased 7% to 311.4 billion yen. The financial results by segment are shown here. As for our full year result forecast, we upwardly revised sales from our previous forecast 3% to 12 trillion yen, operating income 8% to 1 trillion 430 billion yen, and net income 8% to 1 trillion 50 billion yen. We expect that the impact of additional U.S. tariffs on the operating income of our continuing operations to decrease 20 billion yen from our previous forecast to 50 billion yen. And we have reflected that impact in the forecast for each segment from this quarter. We upwardly revised our forecast for operating cash flow 18% to 1,500,000,000 yen. The forecast for each segment are shown here. Now I will turn to an overview of each business. First is the GNNS segment. FY25 Q2 sales increased 4% year on year, primarily due to the growth of network service revenue and the software sales. Despite the impact of the increasing sales, operating income decreased 13% year on year. This was primarily due to the recording of approximately 49.8 billion yen in non-recurring losses resulting from an impairment of intangible and other assets and the correction in the amount of previously capitalized development costs. Excluding these non-recurring items, operating income would have increased 23%. We upwardly revised our sales forecast 3% from the previous forecast to 4 trillion 470 billion yen. This is primarily due to the impact of foreign exchange rates. Despite the negative impact of the non-recurring items and the inclusion of a 30 billion yen tariff impact that we are recording from this quarter, our 500 billion yen operating income forecast is unchanged from the previous forecast. This is primarily due to the positive impact of foreign exchange rates. our PlayStation platform continues to demonstrate its strengths as the best place to play and best place to publish. User engagement trended well with the number of monthly active users across all of the PS in September increasing 3% compared to the last September 219 million accounts. And total play time for the quarter also increased 1% year on year. game software and network service sales are steadily growing. We expect this trend to continue in the second half due to a continued shift to higher tiers in our network service business and the contribution of first-party titles. As for PS5 hardware, we plan to expand the install base during the year-end sales season while continuing to balance that expansion with the profitability of the entire segment. Although performance varies by title, our live service game overall accounted for more than 40% of our first-party software revenue, similar to the previous quarter, and are a recurring source of revenue. Regarding Destiny 2, partially due to the changes in the competitive environment, the level of sales and user engagement have not reached to the expectation we had at the time of the acquisition of Bungie. While we will continue to make improvements, we downwardly revised the business projection for the time being and recorded an impairment loss against a portion of the assets at Bungie. On the other hand, Helldivers 2, which was also released for Xbox in August of this year, is doing extremely well, not only attracting new users on Xbox, but also seeing increased engagement from existing users on PS5 and PC. This resulted in a significant increase in sales of the title year on year. MLB The Show 25, released in March, also continued to perform well during the quarter. In the single-player AAA title space, following the release of Death Stranding 2 on the beach in June, we released Ghost of Yode in October. Ghost of Yode surpassed 3.3 million units sold globally as of November the 2nd, becoming a major hit like its predecessor. Building on this recent progress, we aim to strengthen our studio business and expand our IP franchises through continuous learning and improvement. Next is the music segment. FY25 Q2 sales increased 21% year on year and operating income increased 28%, reaching record highs for the second quarter. This was primarily due to a higher visual media and platform revenue driven primarily by the success of the theatrical release of Demon Slayer, Kimetsu no Yaiba, Infinity Castle. It was also due to an increase in streaming revenue. On a US dollar basis, streaming revenue for the quarter increased 12% year on year in recorded music and 25% in music publishing. We have upwardly revised our full year forecast for sales 6% to 1,980,000,000 yen compared to the previous forecast and operating income 7% to 385,000,000 yen. During the quarter, SMEJ made great strides recording its highest ever quarterly sales and operating income and contributing significantly to the growth of this segment. Demon Slayer, produced by Aniplex, became a global hit due to our collaboration with Toho for distribution in Japan, as well as the strengthening and expanding of distribution overseas by Crunchyroll and Sony Pictures. As of October 13th, 77.53 million people worldwide, including in Japan, have seen the movie and the total box office revenue has exceeded 94.8 billion yen. Coco has enjoyed a long run in theaters in Japan and has captivated a large audience, being selected as Japan's entry to the 98th Academy Awards in the Best International Feature Film category. The successes of Demon Slayer and Coco are examples of how we can increase the value of IP by discovering appealing IP and combining them with the production capability of talented creators. We look forward to attracting not only fans, but also many creators and actors. In recorded music, Iris Out and Jendo by Kenshi Yonezu, an artist affiliated with SMEJ, have been breaking records on music charts, both in Japan and overseas, thanks to synergy with the theatrical release of the anime Chainsaw Man, the movie Resi Arc. Outside of Japan, SMG is also achieving very strong results. The global success of artists and songwriters such as Tyler, the Creator, and Bad Bunny has led to a double-digit increase year-on-year of sales and operating income for the quarter. In addition, SMG is further enhancing its relationship with DSPs. It entered into licensing agreements with Spotify during the quarter and in collaboration with several other record labels, agreed to support Spotify's efforts to ensure that AI is used in a manner that will benefit artists and songwriters. Next is the picture segment. FY25 Q2 sales decreased 3% year on year and operating income decreased 25%. This was primarily due to the impact of a decrease in sales from theatrical release, which benefited from hits like It Ends With Us in the same quarter of the previous fiscal year. Partially offsetting the decrease in operating income was the impact of higher sales at Crunchyroll. There is no change to our full-year forecast for sales and operating income. Crunchyroll continues to work to enhance the 360-degree IP experience of anime fans through the theatrical distribution of Demon Slayer, the launch of Crunchyroll manga service, and other efforts. Crunchyroll manga, which currently digitally distributes hundreds of popular Japanese manga titles, has been positively received by fans and publishers since its launch in October. We expect it will contribute to an increase in fan engagement and grow in subscribers. In television productions, new season of popular existing series were released this quarter such as Dark, Gen V, and Twisted Metal. In motion pictures, productions has begun on the major title, Spider-Man Brand New Day and the next Jumanji, which are scheduled to be released next fiscal year. Fans are eagerly awaiting the two titles with five years having passed since the previous Spider-Man film, Spider-Man No Way Home, and seven years have passed since the previous Jumanji film, Jumanji The Next Level. Next is the ETNS segment. FY25 Q2 sales decreased 7% year-on-year, primarily due to a decrease in unit sales of TVs. Operating income decreased 13% year-on-year, primarily due to the impact of the decrease in sales, partially offset by reductions in operating expenses. We have slightly increased our full-year forecast for sales from the previous forecast to 2 trillion 300 billion yen, and we have decreased our operating income forecast 11% to 160 billion yen, reflecting a 20 billion yen impact from tariffs from this quarter. In the imaging markets, demand has slowed in two regions. China, where government subsidies that last through the first quarter ended June 30th, significantly declined, and the U.S., primarily due to the impact of additional tariffs. However, this decrease in demand is essentially in line with our previous forecast, and global demand remains solid primarily because of Asia. The severe operating environment for TVs and smartphones continues, but we are adapting by proactively reducing operating expenses and have been able to minimize the impact on profitability. At the segment level, there are no major changes to the demand outlook for the year-end sales season and second half of the fiscal year. We plan to continue to control costs and inventory and operate our business cautiously. In our sports business, which is a growth area, we completed the acquisition of StatSports in October. StatSports excels in active tracking technology, which collects and analyzes real-time data on athletes' physical condition and performance during games. By combining this data with the optical tracking technology of Hawkeye and KinaTrax, we aim to provide industry-leading sports data solutions to teams and athletes around the world. We also hope to accelerate the growth of our sports business overall. Last is the INSS segment. Sales for the quarterly increased 15% year-on-year and operating income increased 50%, both reaching record quarterly highs for the segment. This was primarily due to a higher unit prices resulting from larger sized sensor for mobile devices and increased sales volume of sensors for consumer cameras. We upwardly revised our full year forecast for sales 2% to 1,990,000,000,000 yen and operating income 11% to 310,000,000,000 yen, primarily due to the impact of foreign exchange rate. Based on the trends in the final product market and the demand forecasts from our customers to date, we have decided not to include any impact from tariffs in this forecast for this segment. The smartphone market continues to show signs of gradual recovery on a global basis. Sales of mobile sensor during the quarter increased significantly year on year due to higher unit prices resulting from larger sensors being used in new products by our major customer and a higher shipment volume than our previous forecast. In addition, growth of the market for cameras that use new video shooting styles such as handhelds contributed to the growth in sales. Our customers might have brought forward the purchase of components during the first half of the fiscal year due to the additional tariffs and other factors. Therefore, we have kept our fiscal year sales forecast unchanged from the previous forecast when the impact of foreign exchange rate is excluded. We expect sales for the fiscal year to increase an already significant 11% from the previous fiscal year. During the third quarter ending December 31st, 2025, we plan to carefully assess the possibility of another upward revision. The higher sales of image sensor and our fixed cost management through an accelerated review of low profit business and a shift of resources and costs to priority areas are contributing significantly to profit growth this fiscal year. During this mid-range plan period, we intend to continue to focus on improving the efficiency of business operations and product development. In the next mid-range plan period, we aim to build on those efforts by continuing to work to improve the profitability of the business by considering measures that balance business expansion with improved efficiency of capital expenditure. To summarize, excluding non-recurring items, the GNNS, Music, and INSS segment all achieved record high operating income during the quarter, and we believe that our business momentum is strong. Looking ahead to the second half of the fiscal year, given the uncertain business environment, we intend to continue to operate our business cautiously while striving to steadily achieve results. The upwardly revised operating income forecast for this fiscal year presented today projects an average annual growth rate of operating income of 18% compared to the final year of our fourth mid-range plan, and a cumulative operating income margin for the fifth mid-range plan to date of 11.3%. This demonstrates that we're making steady progress toward achieving the targets of our fifth mid-range plan. As for shareholder return, we established today a share repurchase facility of a maximum of 100 billion yen to be executed by May, 2026. And we successfully completed the partial spinoff of the financial service business on October the 1st. We would like to reiterate our sincere gratitude to our shareholders and investors. This concludes my remarks. Thank you.

So that was a presentation from Lin Tao. From 425, we will accept questions from the media. And from 450, we will accept questions from investors and analysts. The time allocated for questions and answers is 20 minutes each. Those of you who have registered your questions beforehand, please click the link which says participate in webinar. As for the instructions on how to ask questions, please refer to the information that was sent to you beforehand. We will break for a while.

We are about to start the Q&A session for the media. You're kindly requested to wait for a few more minutes. Thank you for waiting. Let's start the Q&A session. To answer your questions, we have on the podium Lin Tao, CFO, Corporate Executive Officer. Hirotoshi Korenaga, Senior Vice President in Charge of Accounting. Now we are Ho Di Yi, Senior Vice President in charge of Corporate Planning and Control Disk Manufacturing Business and Storage Media Business. Now we will take questions from ladies and gentlemen of the media. Please be reminded that each one may ask up to two questions. To ask questions, please click raise hand button on the Webex screen. The first one is from NHK, Ms. Taruno, please. Can you hear me? Yes, we can hear you. Thank you. I have two questions. You have just explained the results this time in and out of Japan. What about the market conditions as you see it, including the consumer behaviors and activities? That's my first question. And the second is that demon slayers or kokuhou have become such a big hit in There's a music and pictures related contents business. How are you going to grow these content related businesses and what kind of initiatives are you going to continue? Thank you for your questions. First, about the market conditions and the business sentiment in and out of Japan for Japan and the U.S. It seems that there's some stability. Quite recently, however, we are doing business globally, and U.S. economy is something that we focus on. in the latter half, towards the latter half of the year, it seems that there's signs of slowing down in U.S. economy in terms of inflation. Inflation rate is going up, and the job applicant ratio is coming down, and statistics Because of the closure of the government services, we don't have much data, but it seems to me there's a lack of transparency or certainty. Towards the latter half of this year, we are being cautious and trying to be conservative in our business operation. About your second question, Demon Slayer and Kokuhou. Thanks to your patronage in Japan and outside Japan, they have become such a big hit and then they contributed a big positive impact on our business going forward. content as content ip we will continue to adapt the titles to the films and motion pictures and then partnering with the distributors both in japan we would like to grow this business not only demon slayers but especially in hollywood The box office revenue, very high box office revenue was achieved. And I think culturally this gives us a big power. So Japanese content, make it successful in Hollywood going forward is a good, not only for Sony, but for content publishers of Japan as a whole. Going forward, in addition to the deployment of IPs, 360 degrees utilizations and LPs, merchandising, we will make an effort to expand this. Thank you very much.

We will take the next question. Yoshida-san from Nikkei. This is Yoshida from Nikkei. I hope you can hear me. Yes, we can hear you. I do have two questions. The first one is as follows. The live service in game business. And the development status of a marathon and whether you wish to launch it this year, have you made any changes to the plan? That's the first question. And then also looking at the actual performance of the add-on service from July and September, and you recorded the underperformance for the first time in 13 quarters, and then this might have been attributable to the delay in the live service or new title of releases. That's the first question. And second question, so you said that the Demon Slayer has a really culturally significant impact And what is the reason, in your view, that these titles are exceeding your expectation in terms of performance? Thank you very much for your question. The first question, with regards to the development set of a marathon, is we are still working on it. And from October 22nd and then 28th, for a week, there was a technical test that involves 80,000 people. And as a result, the gameplay, and then retention. Those are the key KPIs that we tested on. And then we are in the process of analyzing the performance against those KPIs. And as needed, we will make corrections. And then we are fully dedicated to launching the title schedule. And then, yes, we assume that we will launch this within this year. And that is included in the forecast. And with regards to add-on, compared to last fiscal year, there has been a reduction, as you mentioned. But with regard to add-on, and whether it's add-on or full game, it really depends on the most popular titles, most played by the gamers and users. So we don't believe that this represents a reduction or slowdown. And as we gear up for the year-end sales season, and we have launched new titles, and I hope that the performance will be even strengthened. And then second question. So Demon Slayer upside and the reason for it. First, as a content business, or thinking about the nature of the contents business, it's really difficult to accurately predict the performance. And then the previous title was really successful during the pandemic. And at the time of the launch, we had a lot of confidence. However, in this title exceeded the expectation, and this could be attributable to the great performance in overseas market. In Hollywood, and we generated top grossing revenue, and that was unprecedented. So from that perspective, we were able to deliver a performance that was unexpected. Thank you.

Let's go to the next question. From Toyo Keizai, Umegaki-san. Thank you. I have two questions. The first question is about music segment. 25 million, I think, was the upward revision that you made in operating income. I wonder how much of the contribution was from the demon slayer. I understood that it was already reflected in the forecast, but in the visual media platform, it was like a 200 billion yen revenue. So what kind of contribution did this upside impact make? Now, the next is on pictures. The 250 billion was the operating income. I believe that in the first half you had a little bit of a difficulty. The TV production, I understand, is kind of going down. You mentioned about the sequels, but I'm wondering what the sequels, how the sequels will be contributing. Those are the two questions. Thank you very much for the questions. In music, in the music segment, the upward revision was the 25 billion upward revision that we meant. The contributions were from Demon Slayer and Kokuhou and the streaming music. Kokuhou and Demon Slayer together They contributed about 50% of the upside impact. And as for the pictures, the full year forecast for the first half, the picture segment, the nature of the picture segment, tends to have this launch in the latter half rather than in the first half. So please understand that this is a seasonal impact. So TV production and movie production, structurally, we are seeing the depressed business of the industry. So how can we control the cost and produce projects or items that will be very successful. As for the pictures segment, Crunchyroll is one of the driving force for growth. The subscribers as well as the sales have both increased since the previous year. So in the pictures segment, Crunchyroll will be focusing on that in order to grow the business. Thank you.

Let us proceed to the next question. From Yomiuri Newspaper, Nakayama-san, please. Thank you. My name is Nakayama of Yomiuri Newspaper. Thank you for the opportunity. I have two questions, if I may. One, a very detailed question. As you have just said, in the music, the operating incomes, half of the upside comes from Demon Slayer. and Kokoho. If you could give me a breakdown between Demon Slayer and Kokoho, I would appreciate it. Second, about the impact of tariff, 50 billion yen. And last time you talked about the utilization of the strategic inventory. What would be the background of this 20 billion yen worth of decline? Now about the breakdown, For each individual title, may I refrain from making comments on the Breakdown of each title and about the tariffs impact, Hori will answer. Thank you for your question. As you rightly pointed out, the impact of the tariff used to be 70 billion yen. Now it's 50 billion yen. That's a 20 billion yen worth of decline. In the I&SS segment... The impact of the tariff in the previous time, we incorporated that to a certain extent in the I&S segment, but if you look at the final products market and the orders received from the customers, we look at these factors, and then this time, In this particular segment, we don't see any further need of incorporating the impact of the tariff in this, so we excluded that. The 20 billion decline comes mainly from INSS segment. Thank you.

We are running short on time, so the next person will be the last questioner. Narisawa-san from Omaenichi Newspaper. Narisawa-san, can you hear us? Can you hear me? Yes, we can hear you. Sorry about that. And this is Narisawa from Mainichi. And I have a question about game segment. And PlayStation 5 celebrating a sixth anniversary since 2020, and then also this year, and the performance is quite good, and then you are looking to expand the install base. And as for, can you talk a little bit about the future strategy? Thank you very much. This year and we are in year six since the launch and then PS5 has been growing in its installed base and our view is that And compared to conventional console life cycles, and looking at the PS4 life cycle, it seems to be getting longer and longer. and especially the PS4, which was launched in 2013, and it's been over a decade since then. But there are many active users enjoying the console, and they're enjoying the console. So from that perspective, we believe that the PS5 is only in the middle of the journey, and we are really planning to expand it even further. And as for the year-end sales season, and thinking about the customer lifetime value, and then also thinking about the profitability we want to promote so that we will expand the installed base. And as for the future launches and successors, we are not in a position to make any comments about that, and that's all we have. So this concludes the Q&A session for the media. And the Q&A session for the investors and analysts will commence at 4.40 p.m. We will soon begin the Q&A session for investors and analysts. Please remain on standby. Thank you for waiting. We will now take questions from investors and analysts. I am Kondo from the IR Group, and I will serve your moderator. Thank you. The same three speakers from the media session will be responding to your questions. And we will now begin the Q&A session. If you have a question, please limit yourself to two questions per person. And if you have a question, please click on the Raise a Hand button on your WebEx screen. And SMBC Nikko, Katsura-san, please go ahead. Thank you very much. And this is Katsura from SMBC Nikko. And I would like to ask about GNNS and then INSS. And the first question is about GNNS. Apart from 14.9 billion yen impairment, And the operating income for the second quarter is 15.3%. And Q1 is 15.8%. And you are able to achieve this high level of profit without major titles. And this could be a threshold. And can you talk a little bit about how do you see it? And are there any factors contributing to this great performance? That's the first question. And then also, and the land price is increasing, and that might have the negative impact on the PS5, the hardware profitability. So what's your plan for the remainder of the years and the next fiscal year? And then with regards to INSS, you said that you are going to strike a good balance between business expansion and the profitability improvement. And in North America, uh smartphone seems to be doing really well but three months ago there are a lot of news and with regards to changes in geopolitical situation what sort of uh plans that you are planning to take for the midterm and then do you have any updates so those are the two questions thank you the first i would like to take the questions on game And the profitability in Q2, and the major contributing factor is the Forex and network service and SDN and A, and there was a reduction in M&A expenses. And so from that perspective, we were able to realize a relatively high rate of profitability, whether this is a sustainable one or not, that is the question. And basically, the network service, which commands higher profit and then software, And especially a first-party software, if they perform really well, we should be able to maintain high level of profitability. And with regards to memory prices, and then with the potential impact on the hardware profitability, and then for this fiscal year, and we have already secured all the parts that we need. But because the market is continuing to fluctuate, so we keep a close eye on the situation on the market. And, of course, the supplies and parts and their prices, when they go up, of course, that will have an impact on the profit of the hardware. For the NFI, so next fiscal year and onward, and we have already achieved the 18 million installed base for PS5, and assuming this will grow next year, instead of additional hardware profitability, and we want to really continue to monetize the installed base that we have already secured, and I think that would be the priority. The second question will be addressed by Horii-san. Thank you very much for your question. first the first half of the question so the the business expansion for the next year and then also enhancement of the investment efficiency and we have been able to manage these quite well this year and especially on the expenses side we have been able to restrain the expenses so that we can generate the sales growth versus previous year and yes we want to maintain this and then further improve into the next year. And as for our response to the geopolitical risks, continuously, and with regards to production in the U.S., we want to ensure the quality so that we can produce in a stable way. And trying to do that in-house, that would be really difficult to achieve. and working closely with the different partners or making a joint investment and what else we can do to really address this issue of the U.S. production. There is no clear answer, but we will continue to explore all the options. Thank you.

Next, from Nomura Securities, Okazaki-san. So this time, the impairment loss, Bungie's intangible assets was reflected in that. In the balance sheet, how much assets do you still have, and what is the risk of the impairment loss? The second question has to do with the PlayStation 5. In Q1 and Q2, I think you sold more than in the previous year, but toward the end of the year, you said you're going to expand. Well, are you aiming to have an upward revision or is the sales going to be more than in previous year? First on the impairment loss, bungee. This is an impairment loss of bungee. the intangible assets as well as the tangible assets. They are the target for the impairment loss. And goodwill, that is supported by the whole game segment, so there will not be any impairment loss for the goodwill. So for this time, Destiny 2, which is a game, performance did not reach the expectation that we had when we acquired Bungee. So the balance, the assets, well, more specific, it's very difficult to give you specifics, but yes, we still have some intangible assets. And the question of whether there is still any risk remaining or not, marathon which is going to be launched and destiny to the the performance If the performance is not going to reach what we expect, of course there is a risk of impairment loss, but we don't believe that this will impact the whole game segment, at least at this point in time. Your second question was about the installed base in Q1 and Q2. It was more than in the previous year. So 150 million units is the goal we have for the year. And the number of units we believe we have forecasted for this year, we believe we can reach that. Thank you. Thank you.

JP Morgan, from JP Morgan. Ayata-san, please. Thank you very much. My name is Sayata from JP Morgan. I have a question about games and INSS, one question each. For games, as has been discussed earlier, network service sales in dollar terms increased by 35% in the second quarter. And what would be the breakdown, if possible? I would like to know. Two years ago, there was a price increase. Maybe there's an effect from that. And then the shift toward the higher-priced products, or the number of paying subscribers increase. Well, I think these are the possible items, what would be the breakdown in terms of priority. And INSS, in the first half, it seems that there is a customer, some customers brought forward the purchase of the components, but in the third quarter, the input of wafers from 155 to 160, there seems to be a shift. Against this backdrop toward the U.S. and the Chinese market, what would be your take on the market conditions? I am sure there is an upside, so please explain the risks and upside both. Thank you. The network service and the factors contributing to the increase in sales, as you rightly said, Price comes at the top of the list. The price increase impact still lingers. And then the number of subscribers or users increased compared to the previous year. And the product mix tier two and tier three higher tier users increased. Well, we have more and more people going to the higher tiers. I think those are the contributing factors for the increased sales. Well, there's a factor contributing to the increase in the operating income. That is to say, acquisition of the contents, efficient way of acquisition, looking at the data, that contributed to the operating income improvement. And INSS, please. Thank you for your question. As you rightly pointed out, in the first half, the shipment, the sensors shipment exceeded what we expected, and for the full year forecast, we place it unchanged. the supply chain of the CETA because of the U.S. tariffs or the shift in the production base. Because of this, there seems to be a certain level of opaqueness, a lack of clarity. So what we shipped but that some of them go directly to the final markets and that some of them still linger in the supply chain so we have to look at this and the third quarter we will continue full capacity wafer import opportunistically if things go well We can see the increase in sales and then from next fiscal year onwards, of course, we can think of accumulating the strategic inventory as well. So about the amount of volume of the input, we look at these factors. About our customers, I cannot mention each and individual customer's situation, but generally, as has been reported in the media, Depending on the customers, there are ups and downs, and the smartphone market is still on the recovery track, gradual recovery track. That's our understanding. At this point in time, in terms of market and customers, North America seems to offer a bigger chance and opportunities. Thank you.

So we will take the next question. Ezawa-san from Citigroup Securities. This is Ezawa from Citigroup Securities. And we have one question, big question for game. And so there is a mention of the treating R&D capital as an expenses. Can you talk a little bit more about that? Is this related to some sort of impairment? Or, and also the titles related to this, if there are any specific titles related to this, and if you could talk about them, that'd be great. And then furthermore, and also the development asset capitalization. And as we run your business, will you foresee this will happen more often? And that is the one big question. The next question is also, this has to do with the development asset. And if you look at the supplementary presentation, and when you look at the depreciation by segment, it appears that there's no apparent increase. However, and the depreciation of the development is not really included, I believe. the capitalization of a development for the game biz what would be the scale of the the asset for the gaming development thank you for your questions so the capitalization and in correction and this is not attributable to the nature of the business this is a And Korenaga-san will talk more about the details of the revision. Thank you for the question. So this value is not an impairment of asset. And in the past, there was the network development which was treated as the intangible asset, and then part of it and should not have been capitalized and we found out so that's why for the past years and then for this fiscal year we made the correction in one go and specifically the network related asset and R&D are capitalized, but console and hardware R&D are treated as expenses. So this treatment was mistakenly done in the past, and which we made a correction retroactively. That's all. And through operational improvements, we will prevent the recurrence. So we believe that this will not happen again. And the next one is the game capitalization and then the depreciation or monetization. So the depreciation of the game itself And we do this in accordance with the rules. So it's not that all the games are capitalized. And we will work closely with the auditing firm So at the stage of the development, and basically, we will be able to finalize the value of the asset in the process. So in terms of value, it's not really that high. And on an annual basis, and we believe the tens of billions of yen, that level. And then as for the depreciation expenses, So when we launched the contents, we started to depreciate, and that is the nature of the business. Thank you.

So we have very little time left, so the next person will be the last person to ask questions. And please only ask one question. From Goldman Sachs Securities, Munakata-san. This is Munakata from Goldman Sachs Securities. Thank you for this opportunity. One question on G and NS. So the full year operating profit, I think it was 500 billion, but the tariff impact was not included in the forecast. And when you consider these items, I believe that the profitability has improved. And the current platform, I think, is looking at hardware and other services, which the prices are going up. So by looking at the competitors' trends, Next year, after next year, in order to improve your profitability, what will be the upside? It will be probably the game contents and these items. Are you planning to revise the prices of the game contents, for example? Thank you very much for the question. The game business for next year, well, first we have to focus on the year-end season and try to expand the installed-based units so that we can have 90 million units by the time we start next year. The upside and downside. The upside for next year, the first party contents The Insomniac Studio is developing that. The Wolverine will be launched. So, tentpole contents, that's there. And Marathon, it's a live service. So, if we can be launched this year, next year, I think we will enjoy revenue, profitability. On the other hand, The market situation, somebody else asked this question. The components and the supply chain are not very transparent, so we have to be careful about that, looking at the profitability, how to balance that. So going forward, when we plan next year's strategy, we need to take that into account. As for prices, I don't have anything that I can comment. Thank you very much. Since it's time, we'd like to conclude Sony Group Corporation's Consolidated Financial Results presentation. Thank you very much.