The second charge is due to what Sony calls "demand for physical media contracting faster than anticipated," especially in Europe. Because of this, Sony says it does not believe the business will generate "sufficient cash flow in the future to recover the carrying amount of long-lived assets." It anticipates an impairment charge on those assets, and a second charge on the overall value of its disc manufacturing business, which will amount to 25 billion yen ($245 million).
Blu-ray was officially introduced in 2006, backed by Sony and other manufacturers, and briefly battled against competing "next-generation" format HD-DVD. Buoyed by widespread adoption thanks to integration with the PlayStation 3, the popularity of Sony's format of choice saw HD-DVDs die without trace.
Winning this battle required heavy investment from Sony, an investment that it expected to recoup with years of strong sales. Instead of the market moving from DVD to Blu-ray, consumers began to embrace downloads from Apple's iTunes service and streaming from sites like Netflix and Hulu. Although Blu-ray is integrated with some Windows laptops, it was never offered by Apple — Steve Jobs famously called the format a "bag of hurt." With the rise of movie streaming and downloads, Sony is now accepting that its disc business is not worth as much as it hoped.
