TOKYO — Moody's Investors Service Inc. said Friday it has downgraded its long-term issuer rating of Sony Corp. by one notch to Baa3 from Baa2 on concerns about the impact of the weakening demand for digital audiovisual products on the company's earnings.

The Baa3 rating is just one level above the speculative grade and the outlook of its ratings for the Tokyo-based electronics maker is negative, the U.S. rating agency said.

The downgrading reflects "concern that an increasingly rapid deterioration in demand in the digital AV market due to sluggish economic conditions and fast structural changes will weigh more heavily on Sony's earning than previously expected," Moody's said in a statement.

In the market, there has been "the cannibalization of demand" for such products as compact digital cameras due to the rapid expansion of smartphones, while the market for major digital appliances including flat-panel televisions is maturing, Moody's said.