Ladies and gentlemen, it is now time to start the Second Quarter Fiscal 2020 Earnings Announcement of the Consolidated results. My name is Kato from Corporate Communications, and I shall be serving as the Emcee for this session. This briefing is being held for the members of the media, analysts, and institutional investors to whom we have invited. The session can be viewed on the internet through our investor website. We have with us the Executive Deputy President and CFO, Mr. Hiroki Totoki, to talk about the consolidated results of the second quarter 2020, as well as the forecast for the full year 2020. There will be a question and answer session, and we anticipate that this session will last for about 70 minutes. Mr. Totoki first, please. Thank you.
Major changes are occurring in society and economy, as well as in people's lives, primarily due to the spread of the new coronavirus disease and an increase in geopolitical risks. At Sony, the increased export restrictions the U.S. government has imposed on a certain major Chinese customer are having a significant negative impact on our image sensor business, while stay-at-home demand resulting from COVID-19 is having a positive impact, primarily on our game business. In an operating environment such as this, where change is both rapid and broad, our diverse business portfolio augments the resilience of Sony and provides us an opportunity to expand new businesses. Now, I would like to explain the following topics as you see here.
Fiscal 2020 second quarter consolidated sales decreased slightly compared to the same quarter of the previous fiscal year to JPY 2,113.5 billion, but consolidated operating income increased JPY 38.8 billion year-on-year to JPY 317.8 billion , which was a record high for the second quarter. Income before income taxes increased 37.5 billion JPY year-on-year to JPY 299.6 billion . Net income attributable to Sony Corporation stockholders for the quarter increased JPY 271.7 billion year-on-year to JPY 459.6 billion . This significant increase in net income was primarily due to the improvement in operating income I mentioned, and a JPY 214.9 billion reversal of a portion of the valuation allowances recorded against deferred tax assets in the consolidated tax filing group in Japan. For details of adjusted profit excluding extraordinary items recorded in second quarter, please refer to pages four through seven of the presentation materials.
Now, this slide shows the results by segment for fiscal 2020 quarter two. Next, I will show the consolidated results forecast for fiscal 2020. Consolidated sales are expected to increase JPY 200 billion compared with the previous forecast to JPY 8,500 billion, and operating income is expected to increase JPY 80 billion -JPY 700 billion. We have also upwardly revised the forecast for income before income taxes to JPY 765 billion, and the net income attributable to Sony's Corporation shareholders to JPY 800 billion. Our forecast for the consolidated operating cash flow, excluding the financial services segment, is JPY 630 billion, an increase of JPY 80 billion compared to our previous forecast. Our assumed foreign currency exchange rate for the second half of the year is JPY 105 to the U.S. dollar, JPY 123 to the euro. Now this slide shows our forecast by segment.
I will now explain the situation in each of our business segments. First, G&NS. In the G&NS segment, software and network services performed well in second quarter, primarily due to our first-party software title, "Ghost of Tsushima," becoming a big hit, and PlayStation Plus subscribers increasing as a result of stay-at-home demand. Sales increased 11% year-on-year to JPY 506.6 billion, with all categories increasing except for hardware, which is anticipating a launch of the PlayStation 5. Operating income significantly increased JPY 39.9 billion -JPY 104.9 billion, primarily due to an increase in software revenue. The fiscal 2020 sales forecast has been revised upward JPY 100 billion compared to the previous forecast to JPY 2,600 billion, and the operating income forecast has been revised upward JPY 60 billion -JPY 300 billion.
Although it has leveled off compared with its peak in April, stay-at-home demand, which drove sales and profit in this segment in the first half of the fiscal year, continued to have a positive impact, with total PlayStation user gameplay time in September up approximately 30% compared to the same month of the previous year. We expect this level of stay-at-home demand to continue in the second half. Last month, we announced the price, release date, and the software title lineup of the PS5. The price we announced is the same one we incorporated into the fiscal forecast we disclosed at the last earnings announcement fiscal year. We are aiming to exceed the 7.6 million units we sold in our fiscal year of the launch of the PlayStation 4, which achieved a substantial market share and was a major success.
As for software for the PS5, we expect to have more titles than at any launch of our history, thanks to our high-quality first-party software that is exclusive to this PlayStation and to a collaboration with our publisher partners. We expect to launch the PS5 in great shape due to this appealing software lineup, the strength of the PlayStation brand, our preeminent game ecosystem, and our cohesive gamer community. We aim to accelerate the growth of recurring sales and profit by expanding the reach. Next is the music segment. Fiscal year 2020 Q2 sales increased 5% year-on-year to JPY 230.9 billion , primarily due to an increase in streaming revenue and a hit album released by Kenshi Yonezu in Japan.
Operating income increased JPY 15.4 billion -JPY 52.9 billion due to the impact of the increase in sales and a one-time gain resulting from the transfer of a business. In the recorded music space, advertising-supported streaming, which was negatively impacted by COVID-19, is recovering, and streaming revenue during the quarter continued to grow at the high rate of 18% year-on-year. Primarily because streaming revenue in recorded music is exceeding our expectations, fiscal year 2020 sales are expected to increase JPY 60 billion compared to our previous forecast to JPY 850 billion, and operating income is expected to increase JPY 32 billion -JPY 152 billion. Demon Slayer, of Sony co-produced and co-distributed, opened on October 16, 2020, and became the first film ever released in Japan to exceed JPY 10 billion in box office revenue in the 10 days after opening.
The TV series is being distributed outside of Japan via channels such as Funimation, which is also a Sony Group company, and it is extremely popular. We expect this IP to contribute even further to the enhancement of synergy across our entertainment businesses, not just the animation business we are focusing on. Next is the picture segment. Fiscal year 2020 Q2 sales significantly decreased 26% year-on-year to JPY 192.3 billion, primarily due to a significant decrease in theatrical releases resulting from the impact of COVID-19 compared to the same quarter of the previous fiscal year, in which the major hit "Spider-Man: Far From Home" was released, as well as a decrease in advertising revenue in media networks. Operating income decreased 7%, motion pictures and other factors.
Our forecast for fiscal year 2020 sales has not changed, but the forecast for operating income has increased JPY 7 billion- JPY 48 billion to reflect the results of the first half. While taking steps to prevent the spread of COVID-19, we have restarted motion picture and TV show production in stages since July. Box office revenue has begun to recover, but the closure of theaters in major cities in the U.S. continues, and the major studios are postponing the release of large films. Once theaters reopen, there is a possibility that increased competition from a crowded motion picture release schedule will cause the recovery of our sales and profit to be delayed.
The motion picture business model is one where sales and profit are generated over multiple years, starting with theatrical release, where hits are made, and progressing to successive windows such as home entertainment and TV and video-on-demand licensing. As a result, the negative impact on our financial results of not being able to release films into theaters will continue for several years going forward. On the other hand, advertising revenue in the media networks business, which was significantly negatively impacted by COVID-19, is recovering. Next is the EP&S segment. The second quarter sales increased 2% year-on-year to JPY 504.7 billion, primarily due to an increase in unit sales of TVs. Operating income increased JPY 12.6 billion year-on-year to JPY 54 billion, primarily due to a reduction in operating costs and an improvement in the product mix and an increase in the unit sales of TVs.
No change has been made to the forecast for fiscal year 2020 sales, primarily due to the favorable impact of foreign currency exchange rates, we increased the FY 2020 operating income forecast by JPY 7 billion compared to the previous forecast to JPY 67 billion. This segment was significantly negatively impacted by COVID-19 early from February of this year, it regained its stability in Q2 thanks to a stabilization of the supply chain, stay-at-home demand for home audio and video products, and a recovery of demand for digital cameras and other products. We are operating the business with extreme caution as recent signs of a resurgence of COVID-19 have proven that the unpredictable situation is continuing.
We are working to build a business that can generate a profit under even more severe circumstances by further accelerating management of the segment as one unity, improving the efficiency of our operations, and optimizing our scale.
Moreover, in order to bring reality, real-time, and remote value to our customers using Sony's technology, we will work diligently to sow the seeds of future growth. The I&SS segment. Fiscal year 2020 second quarter sales decreased slightly year-over-year to JPY 307.1 billion, and operating income significantly decreased JPY 26.5 billion -JPY 49.8 billion. Sales for fiscal year 2020 are expected to decrease JPY 40 billion -JPY 960 billion, and operating income is expected to significantly decrease JPY 49 billion - JPY 81 billion. Even accounting for the decrease in operating income in fiscal year 2020, we expect the difference between the total of operating cash flow and investing cash flow for the segment over the three fiscal years that began in April 2018 to be positive.
Pursuant to export restrictions announced by the U.S. government on August 17, 2020, we terminated product shipments to a certain major Chinese customer as of September 15th. The forecast disclosed today for the second half of this fiscal year does not include any shipments to that customer. The operating income for the quarter includes an approximately JPY 70.5 billion write-down of finished goods and work in process inventory for that customer recorded at the end of September. Based on this situation, we are further revised from the perspective of capital expenditures, research and development, and customer base. We are further postponing the timing of capital expenditures with cumulative capital expenditures for the three fiscal years that began April 2018, expected to be reduced JPY 40 billion from approximately JPY 650 billion I explained the last time.
We do not think it is prudent to prematurely reduce research and development spending because we want to meet the needs of a wide range of smartphone customers, as well as maintain and increase our future technological competitive advantage. We have had some success expanding and diversifying our customer base for fiscal year 2021. The financial impact on our business in fiscal year 2020 is limited. We do think it is possible to recapture in fiscal year 2021 a large portion of the market share on a unit basis we lost this fiscal year. However, we expect that it will take a long time for other customers to follow the trend to higher functionality and larger die-sized smartphone cameras that the Chinese customer was leading. Thus, we expect the substantial recovery of profitability driven by those high-value-added products to take place in the fiscal year ending March 31, 2023.
By recapturing market share in fiscal year 2020 through an increase in sales of commodity sensors and by recouping our business profitability in fiscal year 2022 through more high-value-added products, we aim to return the mobile image sensor business to growth. In addition, there's no change to our mid to long-term strategy of growing our business through expansion of applications that use edge AI and 3D sensing capabilities, as well as through starting up automotive sensors in earnest. Last is the Financial Services Segment. Fiscal year 2020 second quarter Financial Services revenue was essentially flat at JPY 373.9 billion. Operating income increased JPY 4.9 billion -JPY 43.7 billion, primarily due to an improvement in valuation gains and losses on securities held at Sony Bank and the decline in the loss ratio for automobile insurance at Sony Assurance.
We expect fiscal year 2020 financial services revenue to increase JPY 60 billion compared to our previous forecast to JPY 1,460 billion, primarily due to an increase in net gains on investment in the separate account related to variable insurance products at Sony Life. We expect operating income to increase JPY 13 billion -JPY 155 billion, primarily due to the decline in the loss ratio for automotive insurance at Sony Assurance. Sony Financial Holdings became wholly owned subsidiary of Sony Corporation on September 2nd, 2020. Going forward, we will disclose information shown here pertaining to the financial service segment on a quarterly basis in our supplementary information. Lastly, I would like to discuss the outlook of our businesses into next fiscal year. The slide shows our current view as to the momentum for each business from today through the next fiscal year and beyond.
As I have explained today, we're incorporating a negative impact on the financial results of the I&SS segment relating to a certain major Chinese customer. There is no change to the mid to long-term growth momentum of our business overall, and we are gaining confidence that it is possible to strengthen and grow our business despite the COVID-19 pandemic. We aim to grow even more in the future by returning to the past profit growth from the next fiscal year, which is when we start the next medium-range plan. Thank you very much.
That was CFO Hiroki Totoki making the presentation. The question and answer session will be starting at 4:20 P.M., 20 minutes past 4:00 P.M. In the first 20 minutes, we receive questions from the media. In the next 20 minutes, we'll be receiving questions from the investors as well as analysts. Those members of the media, investors, or analysts who have previously signed up to send in questions, please call in to the number that we have previously specified. If you have not previously signed up or registered, you can continue to listen to the Q&A session over the Internet. Please wait for a while before we start our Q&A session.
Ladies and gentlemen, we'll be starting the session, with the members of the media. Please wait for a while. Ladies and gentlemen, thank you for waiting. We'd like to now open the questions from the media.
The questions will be answered by Hiroki Totoki, the Executive Deputy President and CFO, Naomi Matsuoka, the Senior Vice President in charge of Corporate Planning & Control, Finance and IR, as well as Mami Imada, the VP and Senior General Manager in charge of Corporate Communications. If you have any questions, please press asterisk followed by number one. When it is your turn to ask your question, we will call your name. Please identify your name and affiliation before you pose your question. Please limit your questions to two per person. Thank you for your cooperation. In order to prevent echoing, if you have any devices around you, please make sure that the audio for these devices are turned off.
If for some reason the connections are disrupted, due to time concerns, we will be moving on to the next person who will be asking a question. If you'd like to withdraw your request for a question, please press asterisk followed by number two. I would like to now open the question and answer session. If you have any questions, please press asterisk followed by number one. The first question, Takahashi-san from Mainichi Shimbun, please. Please wait for a while. From Financial Times, Inagaki-san, please. Financial Times, Inagaki-san, please. Please ask your question. Inagaki-san, can you hear us? Sorry for that. Due to the connections, I think we need to move on to the next person in line. Bloomberg, Furukawa-san, please. Thank you. Furukawa from Bloomberg. I hope you can hear me.
Yes, we can hear you. Regarding the semiconductor business, I have two questions.
First of all, regarding the CapEx plan, the Nagasaki plant, it's to start operating April of 2021. Is there any changes to the schedule of the operation, and also CMOS sensor production capacity by March 2021? I think 138,000 per month. I think that was the plan. Is there a modification to that? That was on the first question. Should I ask one by one? Yes.
No, please ask the second question as well.
Okay. Second question, the semiconductor, there's a certain customer in China. Other than that customer, for North America or other Chinese manufacturers, is there increase in orders that you're receiving? Anything that you can share with us on that, please?
Thank you for the question. I would like to respond to the first question first of all. The Nagasaki plant has been expanded, and it's a question about the production resumption schedule.
We have always said that we'll be starting our production in April 2021, and that schedule has not been changed as of now. However, after the production has been resumed, the pace at which the production increase will be taking place, that may be revisited in the production plan in fiscal 2021. As for at the end of this fiscal year, the capacity will be 138,000, whether the plan had been changed or not. On that question, yes, we will be introducing a production facility, and no changes to that. Whether when or when it's going to start the production, it will depend on the demand in the fourth quarter from the customers and also the capacity factor of our production facility. That will be used as a basis for making a decision on when the production facility will start.
Regarding the customers other than that Chinese major customer, in general, in North America, over the previous year, it has been increased year-on-year. For other Chinese customers, there has been some additional orders, and I think we are making efforts to increase orders, and I think it's been effective. This concludes my response.
Going on to the second question. We had heard from Mainichi, Kato-san, please. Kato-san, do you hear? Yes. Kato, Mainichi Shimbun, go ahead.
About anime business is what I want to ask you about. In terms of segment, does it belong to music? The Demon Slayer, what is included in anime streaming or internet distribution? Is that the target, or what about the pictures? Is it going to be included in the annual pictures sales?
Thank you for the two questions. First question is about the segment. Is the anime included in the Music segment? The Demon Slayer is a big hit, and is it going to contribute to streaming of animation, or is it going to be included in the Pictures side? Matsuoka will give you the answer.
Thank you for those questions. With regards to anime, the segment is music. Yes, music segment. It is in the video image production. As for the Demon Slayer, anime streaming revenue, as you know, there's Netflix and Amazon, where there's streaming, and so there's such contributions. As mentioned earlier, there is the contributions on the pictures side, too.
Let us take the next question. Nikkei Newspaper, Shimizu-san will be the next.
Shimizu from Nihon Keizai Shimbun. I also have two questions. The first question is about the game. Earlier, you said that PS5 in the initial year is expected to sell 7.6 million units. Given this, is it a possibility that it may exceed the 100 million unit that PS4 achieved? The second question is you want to diversify the customer base. You did talk about a specific major customer, but does it mean that you will place more emphasis on commodity products?
Thank you. Let me address the two questions myself. First is about the game, PS5. Would it exceed, in the long run, the accumulated sales of PS4 of 100 million? Yes, it is a challenge, but we are very eager and committed to succeed and surpass the aggregated unit sales of PS4. Do you think that we will change the direction of development? As I have mentioned earlier, right now, for a particular customer in China, we have provided the high-resolution, high-added value technology. Today, we have to change that direction in the near term. For 2021, we will try to capture more share using the commodity products. On the custom-made products, it enjoys high added value. Once it is on the right track, it has so much potential to grow as a big business.
Since it's custom, in parentheses, you have to have a certain developmental lead time. As I have mentioned earlier, we believe that earnings recovery in the full scale, we will have to wait until 2022. Thank you.
From Nishinippon Shimbun, Ishida-san, please. Please ask your question.
Thank you. I hope you can hear me.
Yes, we can hear you.
I'd like to withdraw my question because somebody else has already asked the question that I wanted to ask.
Okay, thank you. I'd like to move on to the next question, from Asahi Shimbun, Suzuki-san, please. Suzuki from Asahi. I hope you can hear me.
Yes. First question, anime business. The Demon Slayer, you were talking about The Demon Slayer. Specific numbers, what is the amount of contribution in the second quarter or so in the full-year forecast? What is the amount that you're expecting?
Also, second question, specific Chinese customer. You mentioned that customer. Once again, I would like to know more about the numbers, the write-down of the inventory, and beyond the next fiscal year, or the full-year forecast for this fiscal year. Do you have any numbers as to how much the impact would be? Could you share that to the extent that you can, please? Thank you.
The first question, regarding "The Demon Slayer," and in terms of numbers, quantitatively, what is the impact? Actually, as of now, it's been a very short time since the release. The full-fledged merchandising is only going to start from now. I will refrain from talking about specific numbers as of now. Regarding the specific Chinese customer and its impact and how much impact there is, that was your second question.
Once again, in the first half and the second half, there may be some reductions. If you look at how much it has degraded, I think you can see that there has been an impact beyond the difference between the first half and the second half. That gap, as I mentioned in my speech, have been offset by other customers' business. We have been able to recover for that gap due to other customers' business.
Thank you. Going on to the next question. Sorry we were disrupted earlier. Financial Times, Inagaki-san, are you with us?
Sorry about the disruption earlier. Can you hear me?
Yes.
Yes, I am Inagaki from Financial Times, and there have been questions about the Chinese customer, and that's what I'd like to ask about. The other day, Samsung Electronics OLED panel permission was given by the U.S. government, that is for supplying to the Chinese market. They made that clear. The similar special transaction, maybe you will get that license. Do you expect to get the license? In the second half, well, you have an estimate for the second half, and for example, what about the possibility to resume the transaction? Another question, second question that is, about games. In the financial statement, there is a third-party other company's software is delayed.
It was mentioned. What is the extent of the delay? In your in-house studio, is there a similar delay that you see? Towards the launch of PS5, I think you are making preparation, and how much impact will the delay have?
Thank you for those questions. About the export license, I would like to refrain from commenting. With regards to whether the transactions can be resumed, what I can say at the present time is, for this fiscal year estimate, after September 15th, the transactions have not been included. About games, that is, third-party software development is delayed somewhat, and in-house, too. Is there a delay, is your question? The delay in development is not just due to COVID, but, well, it happens even without COVID, and you have to recover. In other development times, we see this happening. Our understanding is that there is no delay that will impact the PS5 launch in a big way.
Thank you. We would like to move on to the next question. Nikkei Asian Review, Nagao-san, it's your turn.
Thank you. I hope I'm being heard.
Yes. It's clear.
For the full year forecast, as of August, PS5 cost was apparently going to be increased, overall, the game business seems to be doing quite well. What will be the contribution of PS5 vis-à-vis the overall performance of this category? I'm sure the increase of the business of PS4 is contributing, though, compared to the first quarter, the second quarter user add has been declining. This is for the PS Plus.
Thank you. For PS5 contribution for the full year. Are you asking about the contribution of the hardware sales of PS5?
Well, that was my understanding, let me respond to that question. PS5 hardware. It's not the earnest contribution that we expect, I think it will be a negative contribution for the time being. Having said that, I would like to state that penetration, the increase of PS5 in the market, would urge customers to buy the software. Overall, as a business, the PS5 ecosystem will be activated, and, in consequence, would grow earnings. Now, MAU, how do we see the decline of MAU, from the first quarter? MAU. The total number of hours being played by our customers. I think it was in April when we recorded the peak. There were people stayed at home. More recently, compared to the previous year, I believe that it has come down to 30% increase versus the same period of last year.
That change trend has been reflected in what you have stated. Things have stabilized, so as far as the second quarter or second half is concerned, we believe that the current level will be sustained.
Thank you. I think we are running out of time. The next question shall be the last question. From Nikkan Kogyo Shimbun, Kunihiro-san, please.
Kunihiro from Nikkan Kogyo Shimbun. I hope you can hear me.
Yes, we can hear you.
Thank you. November 3rd in the U.S., there will be presidential elections in the U.S. The foreign exchange rate or any impact on your business, how do you view the impact from the presidential elections in the U.S.?
Thank you. Yes, we are monitoring it very carefully. For now, depending on the results of the election, the full year forecast is not to be impacted. That's our view right now. That's all.
Thank you for the many questions. It is time to close this session with the members of the media. Those analysts who will be participating in the next session, please wait until 4:46 P.M. We need to change the membership of the persons responding to questions. Starting at 4:46 P.M.
We will start the Q&A for investors and analysts, so kindly wait a little while longer. Thank you for your patience. We would now like to take the questions from our investors and analysts. I am acting as the emcee, and I am Hayakawa, in charge of finance and IR. To ask your questions, we have Hiroki Totoki, CFO, Executive Deputy President. We have Senior VP from Corporate Planning and Control, Finance and IR, Naomi Matsuoka. Hirotoshi Korenaga, Senior General Manager, Global Accounting Division and Senior Vice President. If you have a question, please press asterisk, the number one. When your name is called, please ask your question. Kindly limit your questions to two per person. To prevent audio feedback, please turn the surrounding devices off or turn down the volume.
If, because of the transmission, there is a disruption in the sound, our time is limited, so we may have to go on to the next question. If you wish to cancel your request to ask a question, please press the number two after asterisk. Let us now start. If you have a question, please press asterisk one. JPMorgan, Ayada-san.
Thank you. This is Ayada of JPMorgan. I&SS and G&NS, two questions, please. First question, the image sensors. Totoki-san gave an explanation earlier toward next year that you could recover shares on a volume basis. Can you give the reason? In other words, the market doesn't have supply capacity, so customers have to come to you, or maybe you will work hard to regain shares with pricing. Can you talk about this process?
After that, probably it's going to link to the custom product market share increase. Compared to your competitors, the catalog specification, high resolution, higher definition, maybe it's a different customer and they seem to be a bit behind. Is it a level that can be adjusted? It's not a fundamental problem, I'd like to confirm that. Then the second question, if I may go on, is about games. The slide you showed at the end, next year, it seems that games is sunny. The background of this, next year, stay-at-home demand will decelerate and there will be the improvement of the cycle of the new PS5. Is that going to be the absorbing factor? In connection with that, add-ons and software sales, network, next year. It will be maintained at a high level, it will not go down. Is that the right understanding?
That's all. Thank you.
Thank you for those questions. First of all, I&SS question. Towards next year to regain share, next year, as you say, probably 0.7 micron, this fine scale will be the main battlefield, fine pixel, and we will have to catch up. Well, it's a commodity, so for price, we will have to make efforts. More than high resolution, the margin will fall. However, to an extent, we will permit that to get share, and we will expand our customer base. Having done that, higher quality, higher resolution will be pursued, and there are customer needs in that direction, so it will be supported. On both fronts towards 2022, our business foundation will be upgraded. The second question about games.
That there's no misunderstanding, I'd like to say upfront, for the next year almost, in terms of business momentum, we show the picture, and it's not the results forecast. Please look at this from that perspective. The reason why it's sunny, well, we have very strong PS5 customer demand and reputation, and the lineup, the software strength is there. Next year, the customer base, we believe, can be expanded even more. There is that expectation. Mid to long term, the service will be reinforced and recurring revenue will be increased. It's not so much the single year, but rather over the mid to long term, what kind of expansion can be realized? That's where we see the essence of competition.
We would like to move on to the next question. Ezawa-san from Citigroup Securities. Mr. Ezawa-san, can you hear us? Ezawa-sama?
Apparently, there is a telecommunication difficulty. Let us move on to the next person. From Mizuho Securities, Nakane-san.
Good evening. My name is Nakane. I have two questions. The operating income for the full year, you made a revision. The second quarter, it went up. Some had been realized already, but in the second half, you do expect some upward impact. Can you give the details by segment? That's the first question. The second question, you always stated, the number of input, the capacity at the end of the year, and the capacity, and the prospects for the operation, the capacity utilization, and end-of-the-year inventory. JPY 17.5 billion of write-down. Is it for customer products, but rather a commodity product? Can you sell to alternative customers if it's a commodity that you have written down?
Thank you. The first question, this is on a consolidated basis. I think you're referring to the question of the balance between the first and second half. The numbers, I think, are self-explanatory. The first half was a good half a period, and it looks that it will deteriorate in the second half. Most of them are temporary, short-term impact. Let me explain by each segment. First, Game & Network Services, second half, we will incur cost to launch PS5. Stay-at-home demand. Of course, that demand was stronger in the first half, so that trend is impacting. Music, one-time impact. There has been a transfer of certain business. One-time gain was recorded in the Music. Pictures. Theatrical release requires marketing cost, and we anticipate that there will be increased marketing cost. There are very few, if any, during the first half, the theatrical release.
Therefore, the second half, there will be no merchandising almost. Therefore, the second-half numbers would look poorer than the first half. EP&S, the first half.
Structure reform cost had increased. Overall, we anticipate the increase of structure reform cost. I&SS, the second half, the shipment has been terminated to a certain Chinese customer. We are not incorporating any business to that customer during the second half. There is an inventory adjustment that would affect the capacity utilization of our facility. I shall revisit this later. Financial services, Sony Bank. There are valuation gains for the securities at the Sony Bank. Others, elimination. First, there has been an increase of new business development. If you look at the overall picture, the business momentum, the actual strengths, I think it is fair to say that to really understand our strengths, you should look at the entire year, the full year. Now, I&SS, the wafer input and the capacity. Third quarter. Master input, the average is 30,000 for three months.
Right now, we are doing about 85%, which is 110,000. During the fourth quarter, the master, it'll be at the bottom range of our forecast. We would adjust production, and it'll be less than 70% of the capacity. That is our assumption as of today. This does not affect any possible increase of orders in the future. Should there be an increased order from our customers, the numbers would improve or would be higher. About the inventory, the fourth quarter, how much we will be receiving in terms of order, will there be incremental demand order, and also the strength of the demand in the first part of next fiscal year, we will have to observe those and also look at the inventory level at the end of the year to determine what we will do, what should be the right inventory level.
At this point of time, it is too premature to give you any indication. Our assumption for forecast is strategic inventory. The simulation doesn't assume the strategic inventory. Of course, we would like to be flexible because demand would be a determinant. I think there will be a reasonable amount of additional order. Now, write-downs. The majority is about the sales to this specific certain customer, customs, and commodity. It's fair to say the customs would be greater than commodity in terms of volume.
Next question from Morgan Stanley MUFG Securities, Ono-san, please.
Thank you. Morgan Stanley, I'm Ono. Two questions. First question, a more general question, and the other one is related to gaming strategy. In the second quarter, in the results, I think the overall results are very strong, and I think it's very favorable. According to you, Mr. Totoki, in the major segments, the ability to generate profits under this COVID-19 situation, and you have converted it to opportunity. For next fiscal year, are you going to continue to change? If there are anything that you think that you can continue to make things turn more favorable throughout the next year, please share with us. Secondly, regarding strategy for gaming, you have invested in Epic Games last year. You're going to have business relationship with the publishers.
Are you going to have some kind of action with these publishers? Is it something that you're going to make it a norm? You've been talking about the gaming contents, is what you're going to be aggressively acquiring. That position has not changed? Are you being a little bit more aggressive than before? Can you share with us the tone with which you are addressing these partners?
Thank you. Regarding the major segments, the profit-generating capacity, and the fear that I have on the businesses. As I mentioned in my speech, the biggest fear that I have is that under the COVID-19 situation, people could not report to work, people had to work remotely. Even with that restrictions, it was possible that the business can be executed with a lot of effort by the people. There is creativity included in it. I think that is the biggest finding that I had in this COVID-19 situation. Under these circumstances, people still have this demand for entertainment.
Actually, there's an increased appetite for entertainment, and that is something that I also felt strongly about during this COVID-19 period. If I may, for each of the segments, I do feel that there is a good feel. For financial services, Sony Life, the life planners have been working face-to-face. With the remote consulting services, we are now back in terms of acquiring new contracts compared to the previous year. I think with the remote activities, we can still capture opportunities and grow the business. Regarding your question about the gains, the relationship with the publishers, and do we have to have a stake in the publisher? No, we don't think so. If you have a lot of items for engagement or alliance, or if you have an in-depth alliance, maybe the capital relationship is probably going to be favorable as a strategy.
In any case, we want to have access to high-quality content on our platform so that we can deliver these contents to our customers. That is the goal, and that remains unchanged. We would like to have access to good content as much as we can. Thank you.
Next question. Ezawa-san from Citigroup.
Sorry, I had some problems. This is Ezawa from Citigroup. I would like to ask two questions. First question, pictures business. In the second half, you have the company plan in terms of results, I think the view is quite severe. Subcategory, motion pictures, what is the profit level? Theatrical and secondaries, along with time, I think that there will be some differences. If you could talk about the digital aspects, I would like to hear that. I think you said it will take a few years for recovery. For the next year, how are you going to recover the Pictures business? I would like to hear some kind of breakdown. That's the first question. Second question, capital allocation. Now, this time, operating cash flow plan has been revised upward, I think. This is favorable.
On the other hand, the capital investment, I think that's been lowered or revised downward. Free cash flow, the way you use money, the money coming out, how is it going to be allocated? Some new additional cash flow, what are you going to do with it? I'd like to hear your present thoughts.
Thank you for the questions, and the first question about pictures. That is the breakdown of the segments. What's the image of the breakdown is the question. Matsuoka-san, if you could answer. Matsuoka-san, please.
Yes. Matsuoka speaking. The image of profit contribution in the future, what will happen? I would have to speak in that way. I cannot really speak quantitatively. The production of pictures this fiscal year compared to the previous year, there's almost no releases. That being the situation, you have what came out last year, and those movies can be for home entertainment or for streaming. There could be sales there or income derived from those routes, which it's not coming out this year. On the other hand, the first half, there was no big movies coming out, but in the second half, we expect there will be some resumption. If that's the premise, then that means in advance of that, there will be marketing costs involved. It will be marketing and release with a delay, and we will have to recoup.
You usually have a theatrical release, and with that performance, you have home entertainment profits. That will be seeing a delay. Therefore, naturally, after the release, whether the movie will be a hit, well, that will be one factor. With COVID, what will happen to the theatrical releases, that's an uncertain factor. That is the structure, and other segments can make up for that is my prediction, media networks and TV programming. About capital allocation, let me give you the answer. First quarter results, if I may explain that this time, cash flow JPY 80 billion upward revision is seen, and CapEx is a reduction from what we showed you last time.
Strategic investment, there's no change in policy. The previous announcement, as we said, SFH, other than it being a wholly owned subsidiary, is about JPY 300 billion of strategic investment. In this JPY 300 billion, there's also already Bilibili and Epic investment, JPY 70 billion, and we have JPY 100 billion possibility of stock repurchase. Recently, there are increase in M&A opportunities. That's my feel. In that sense, in various segments, there are opportunities for strategic investment. Therefore, we have to have a good analysis and conduct the strategic investments in timely manner.
I'm afraid time is running short. We will take the last question. SMBC Nikko, Katsura-san.
Thank you. I&SS and EP&S would be the symbol of question. I&SS, you've given some numbers during the July-September period, the master input. Can you give me the number for July-September period? The write-downs, JPY 17.5 billion, and since 15th of September, the business is nil. In the meantime, I believe that you have obtained a license to export, and if you are allowed to export, of course, in 2016-2019 period, you had the write-down, but you are able to resume the business and you are able to reverse and revise the forecast. Would the same should happen this time, should you have the license granted? The another is EP&S. On page 19 of the slide, even if you excluded the mobile, both the top and bottom lines are increasing. TV is doing well.
The digital cameras, the unit numbers are declining. The HNS and IP&S, if you could dig deep into those areas. In the last slide, you talk about the momentum. EP&S, there are some sun rays coming out after the cloudy weather. Is this because the COVID-19 would go away, or are there any other factors that would affect this sector favorably? Thank you.
I&SS, the second quarter, the actuals, what was the number of wafer? As I have stated earlier, the capacity is 130,000, and the average is 110,000. That's the average. For mobile communication and digital cameras, there has been some production adjustment. There were special factors during the second quarter. There was statutory inspection in some plants. For a short period of time, the wafer number has declined because of the inspection. EP&S, second quarter, even without the mobile, the numbers have gone up, earnings and profitability. The contributor is TV. TV's contribution is the largest, followed by digital camera. That's by category. The remarks, we are looking at the momentum as of today till next year or beyond. It does not represent a forecast or performance or projection performance. Please do not be misled, why can we improve?
That is the first quarter, EP&S negative impact from the COVID-19 was quite significant in terms of revenue and earnings. This will be alleviated. The adverse impact will be alleviated. Of course, there'll be regional differences. There could be the second and third wave in certain geographical areas. I think we know better how to adapt to such environment. We believe that we can better accommodate the new environment. Overall, there'll be an improvement.
Thank you. Ladies and gentlemen, the time has come to close this earnings announcement by Sony Corporation. Thank you very much for your participation.