SONY GOES TO HOLLYWOOD--AND TAKES A BIG BATH

(Originally sent to Fukuzawa, Friends, and ISSHO Fri, 21 Feb 1997)


Here's something I ran across from ENTERTAINMENT WEEKLY magazine (I have a subscription) on Japan and Hollywood. When Sony bought and even renamed Columbia Pictures and CBS Records--along with Mitsubishi buying Rockefeller Center, Matsushita buying MCA, and somebody buying Pebble Beach golf course--pundits churned out "signs of the times" articles and predicted the future in Kanji. Ten years and one bubble economy later, whassup?

The article describes the excesses of the Hollywood execs and the faltering performance of Sony Pictures and Music as an institution--dropping from industry leader to third place in 1995. The information is a bit dated (EW December 22, 1995, p 22-3), and I've updated it at the end.


CENTS AND SENSIBILITY By Gregg Kinsay and Anne Thompson

AFTER BLOWING BILLIONS, MICKEY SCHULHOF LEAVES A SONY EMPIRE IN DISARRAY

The Sony brass in Japan--chairman Norio Ohga and his new president, Nobuyuki Idei--might experience a sinking feeling while watching their new, $65 million Columbia Pictures release, JUMANJI: "You have to roll the dice and play the game to the end," instructs Robin Williams in the board-game-come-to-life fantasy. But each new roll of the dice brings another disaster: marauding monkeys, stampeding rhinos, raging rivers.

Rampaging primates must seem like a a day at the beach compared with what showbiz has done to Sony. It was ex-physicist Michael "Mickey " Schulhof who first advised the venerable Japanese firm to take a chance on the entertainment business in 1987. But during his reign as head of Sony Corp. of America, Schulhof rolled loaded dice one too many times. On Dec. 5, he was forced to resign. Here's why.

BETTING THE HOUSE:

In the end, Schulhof may be best remembered for treating Hollywood to one of the biggest spending sprees in its gaudy history. He began by persuading his Tokyo-based bosses to spend $2 billion to buy CBS Records in 1987 and another $3.4 billion to grab Columbia and TriStar Pictures in 1989. And though they'd never run a studio, Schulhof picked producers Peter Guber and Jon Peters (BATMAN) to head up the show, paying a staggering $500 million to buy the dynamic duo out of their existing Warner Bros. contract. "Schulhof was completely naive," screenwriter James Toback (BUGSY) says of the trust placed in two of Hollywood's most notorious spendthrifts. "It was one of the most colossal hustles in the history of the world."

That's not putting it mildly, but it isn't all hype. In addition to Schulhof's own extravagant ways (his palatial New York headquarters included an exec dining room founded by a four-star chef), Guber and Peters spent an additional $1 billion and repaid Sony with costly duds like I'LL DO ANYTHING and the infamous LAST ACTION HERO. "There was no accountability," laments a former Columbia exec. Bills mounting, Peters got the boot in 1991. Finally, with Sony forced to take a staggering $3.2 billion write-off in 1994, Guber too was shown the door--but not before Schulman rewarded him with a rumored $20 million exit package *and* a $200 million production company.

HEDGING BETS:

Alan J. Levine, Guber's former attorney, took over the studio and began belt-tightening. "We've brought discipline to our business. Overall overhead is down over 10 percent," says Levine. "We're making movies at more reasonable prices."

This year did get off on the right foot: Brad Pitt's LEGENDS OF THE FALL and the buddy cop pic BAD BOYS proved unexpectedly strong, pulling in $66.5 million and $65.6 million, respectively; and Sandra Bullock's THE NET, which cost just $22 million, earned $51 million. "We've made a lot more money on those picutres than on [some expensive] $100 million blockbusters," Levine insists. Adds Alan Horn, chairman of Castle Rock Entertainment, a Sony supplier: "Sony seems to have turned it around to a certain extent. They've had a pretty good year."

[NB: For an idea of scale, remember that the most expensive movie ever made, Universal's WATERWORLD, cost $175M. (EW 2/2/95 pg25) Even eye-popping INDEPENDENCE DAY was a mere $75M. ]

But other studios aren't buying it. "They're still making more expensive movies than anyone," says a rival studio head. "Under Guber and Peters, the excess was wretched. Now it's not wretched, just excess." Third- and fourth-quarter flops tend to support such views: The $75 million FIRST KNIGHT turned into a medieval clinker (collecting just $37 million domestically). And the $68 million MONEY TRAIN has earned a mere $29 million to date.

Sony's competitors have particular scorn for studio chief Mark Canton, who continues to oversee columbia/TriStar. When Canton paid Jim Carrey $20 million to star in the currently filming CABLE GUY, the industry howledthat he'd triggered an inflationary spiral--indeed, other superstars began upping their prices. More recently, Canton provoked additional howls after promising Harrison Ford $20 million for DEVIL'S OWN, and Tom Cruise another $20 million to star in the comedy JERRY MAGUIRE. "I don't know anyone in the business who doesn't wish they had the next Cruise or Carrey film," says Canton in defense of his movies.

FACING THE MUSIC:

Meanwhile, cross-country in New York, at Sony Music headquarters (home to the Columbia and Epic labels), president Thomas Mottola has had to contend with a different set of problems. Though Sony has had its hits--most noticably with Mariah Carey, Mottola's wife, who has already sold 1.8 million American compies of her DAYDREAM--Columbia, the industry's oldest major label, is seen as overly dependent on aging artists while unable to lure new acts. Micahel Jackson's super-hyped HIStory, which arrived on the wings of $30 million of promotion, has sold a disappointing 8.5 million units worldwide. And while Bruce Stpringsteen adds prestige to the Sony roster, his new album, THE GHOST OF TOM JOAD, is quickly falling from its No. 11 peak on Billboard's pop chart.

"The feeling inside Columbia is that if you can't get a hit, don't sign it," says a former exec at the label. "It's great to have pop hits, but every label needs to be building superstars for the future. That's the part that's scaring the Japanese."

Sony Music's 1995 operating revenues increased by 7.2 percent over 1994, but the onetime industry leader has slipped to third in market share, trailing Warner Music and PolyGram. Sony spokesperson Patricia Kiel says Tokyo has given the music division a vote of confidence--unlike the more severely troubled film side--and insists, "There's no great shakeup planned." But according to one source, Mottola (who was unavailable for comment) has been given one year to put octane in Columbia's sputtering tank.

ENDGAME?:

Certainly, there are hopeful signs on the horizon: Though the jury's still out, JUMANJI could prove a holiday hit [it was--cost $65 million, made $100 million: EW 2/2/96 pg29]. Emma Thompson's SENSE AND SENSIBILITY appears guaranteed to win Oscar nominations [it in fact got snubbed big time--nominated for BPic, BActress, and BSupActress, but only won, um.. "Best Screenplay Adaptation"?].

And at least on paper, the '96 release slate promises potential hits: Demi Moore's STRIPTEASE [told you this article was dated], Ford's DEVIL'S OWN (with Brad Pitt) [perennially postponed with production problems], and that little Carrey movie [see update below]. The studio's even putting a face-saving spin on the recent rush of filmmakers like John Singleton and Danny DeVito leaving the fold as deals expire: Just think of the savings!

Tokyo says it has no intention of selling off Sony's entertainment properties, but Hollywood remains skeptical. Not replacing with a strong executive, says a competitor, is "like hanging out a For Sale sign. But then the wild card is, the Japanese don't play by the same rules." Maybe they should forget the lessons of JUMANJI: Before rolling the dice again, check out CASINO.


ARTICLE ENDS.

UPDATES:

1996's SONY PICTURES' DISAPPOINTMENTS:

DeNiro's THE FAN (cost $55M, grossed $25M. Pity. I liked it.), Carrey's THE CABLE GUY (cost $47 million, made $62M), DeVito's MATILDA (cost $42-50M, grossed $35M), Moore's STRIPTEASE (cost $40M, made $35M), Michael Keaton's MULTIPLICITY (cost $40-50M, grossed $25M) (EW Sept 6, 96, pgs 21-25)

AS A RESULT: Sony Pictures drops from third to sixth place as a studio in 1996, behind Buena Vista (Disney), Warner Brothers, Fox, Universal, and Paramount. Sony's market share drops from 12.8% (1995) to 9.4% (1996) (ibid)

Sept 13, 1996: "After reading in FORTUNE that Sony Pictures Entertainment president Alan Levine plans to fire him, Mark Canton is relieved of his duties as chairman of Sony's Columbia and Tri-Star studios." (EW BEST OF 1996, 12/27/96, pg76)


UPCOMING GAMBLES FROM SONY PICTURES (Nov 96 to Summer 97):

THE MIRROR HAS TWO FACES (budgeted at $42 M), JERRY MAGUIRE ($50 million), THE DEVILS OWN ($79-100 M--after luring Pitt for $8-10M, Harrison Ford for $20M, and Director Alan J Pakula for $6-7M), STARSHIP TROOPERS ($95-100M), MEN IN BLACK ($80M) (EW Sept 6).

Which means that these movies are going to have to gross over $200M worldwide to give Sony any market share back. And "blockbuster status" now means making that much *domestically* before hand! Examples: LION KING, INDEPENDENCE DAY, FORREST GUMP (all $300M and climbing), TWISTER and TOY STORY (around $240M and climbing), even WATERWORLD took in $254M worldwide.

Yet Sony continues to encourage ballooning budgets--by concentrating on stars and special effects more than scripts--which puts itself (and Hollywood in general) at risk.


THE CONCLUSION is that while all studios have hits and flops, Sony Pictures has had a disproportionate amount of the latter--no hit since JUMANJI over a year ago. And it shows. Meanwhile, the other (minor) Japanese player in the market, Matsushita's MCA, has maintained its 7% market share and seventh-place ranking (though it has also, with hits GOLDENEYE, GET SHORTY, and THE BIRDCAGE.

Signs of the times: Mitsubishi has since sold Rockefeller Center. Matsushita has sold 80% of its MCA share to Seagram. Even Pebble Beach has changed hands. Is Sony next?

Dave Aldwinckle

Sapporo


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