Sony Corp is due to announce its Q3 earnings on Thursday this week, but ahead of that the company said today it is taking a goodwill impairment charge for the Pictures division of 112.1B yen ($962M). This is being recorded as an operating loss in the third quarter ending December 31, 2016 as a result of revising the future profitability projection for the studio’s motion pictures business. Shortly after this morning’s filing, Sony Corp CEO Kazuo Hirai and outgoing Sony Entertainment CEO Michael Lynton jointly sent a note to employees which highlighted management’s commitment to Sony Pictures Entertainment.

Hirai and Lynton said management takes the recording of a substantial impairment charge “very seriously.” They added, “Make no mistake, Sony Corp’s commitment to SPE remains unchanged. The value of high-quality content continues to rise. As we have stated on many occasions, including at SPE’s All Hands meeting at the end of last year, Sony Corp sees SPE as a very important part of Sony group, and will continue to invest to achieve long-term growth and increased profits in this space.”

The impairment charge is described as a “non-cash loss” that relates to a number of factors, including the purchase of the studio almost 30 years ago, and “dramatic shifts in the home entertainment space currently being felt throughout the entire industry.” A majority of the goodwill that was impaired, Sony said, was originally recorded at the time of the acquisition of Columbia Pictures Entertainment in 1989.

While underlying profitability projections of film performance were reduced, Sony said the adverse impact is expected to be largely mitigated by measures that have been identified to improve the profitability of the business.

The business cycle for motion pictures, Hirai and Lynton noted today, “is long… our reform initiatives take time to produce results.”

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Sony Pictures

The Pictures division recorded a $32M profit in Q2 with help from the releases of Ghostbusters, Sausage Party and Don’t Breathe. While Ghostbusters was a disappointment, the $19M-budget Sausage Party made $140M worldwide and Inferno set overseas audiences on the trail with $185M ($220M WW) off of a $75M production cost. Lower budgets are an important element going forward as is an energized local-language business. This weekend, the studio led offshore box office for Hollywood with Resident Evil: The Final Chapter pushing the video game franchise over $1B global.

But it’s been TV, not film generating the majority of the profits for Sony. Last quarter, sales in TV productions increased significantly due to higher SVOD revenues for The Crown and The Get Down.

Lynton told employees earlier this month that he is stepping down as CEO of Sony Entertainment to focus on his job as chairman of the board of Snap, Inc, parent of SnapChat.

Today, he and Hirai said, “We will be spending more time on the studio lot over the next several weeks, focused on two main priorities: (1) naming and transitioning to a new CEO of Sony Pictures, and (2) building on the turnaround efforts currently underway at the studio, particularly in motion pictures. Those efforts to date — including expanding the studio’s global reach, growing and leveraging SPE’s existing IP and realizing a culture of financial responsibility — have laid the groundwork for real reform, and we are confident they will lead to an increase the profitability of our motion pictures business moving forward.”

The impact on the consolidated results forecast for the fiscal year ending March 31, 2017 is currently being evaluated and will be disclosed at the earnings announcement Thursday.