A Sony entertainment spinoff would provide opening for CBS

New York hedge fund manager Daniel Loeb wants Japanese electronics giant Sony Corp. to spin off its Culver City entertainment business.

CBS Corp. might like that, too.

Loeb, whose Third Point funds own more than $1 billion in Sony stock, sent a letter Tuesday to Sony’s chief executive, Kazuo Hirai, suggesting an initial public offering of 15% to 20% of Sony Pictures Entertainment.

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Sony said that its Hollywood operations are not for sale, and a CBS corporate spokesman declined to comment on “rumor and speculation.”

However, CBS, in the past has said it would certainly look at any significant entertainment assets that become available.

Many people see a nearly perfect marriage in a tie-up between Sony’s entertainment assets and CBS, which, despite being one of the smallest of the major media companies, has among the largest ambitions.

CBS Chief Executive Leslie Moonves has long dreamed of running a major film studio. His CBS Films, while improving its track record, releases only a handful of movies a year. It doesn’t come close to the magnitude of Sony’s operation or competitors such as Universal Pictures or Warner Bros.

Sony also owns many television jewels, which would complement CBS’ robust television operations and its well-stocked library of classic TV shows, including “I Love Lucy” and “Beverly Hillbillies.”

Sony Pictures Television produces current prime-time shows such as the quirky comedy “Community,” which was renewed this week by NBC, and the critically acclaimed “Breaking Bad” on AMC. Sony also has two syndication juggernauts: “Jeopardy” and “Wheel of Fortune.”

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CBS also has its own thriving syndication business, churning out shows such as “Judge Judy,” “Dr. Phil” and “Entertainment Tonight.”

The combination of CBS and Sony Pictures would create a full-sized media conglomerate with the scale of NBCUniversal, Time Warner Inc., News Corp and Walt Disney Co.

Pivotal Research Group senior analyst Brian Wieser on Tuesday highlighted the value of a partnership between the two.

Unlike CBS, Sony does not own a broadcast network. U.S. communications rules forbid substantial foreign ownership of TV stations, a law that has stymied Sony’s television distribution in the past.

However, Sony’s library includes 50,000 episodes from 275 television series, Wieser noted, including the classics “I Dream of Jeannie,” “Bewitched” and “All in the Family,” which ran on CBS. Sony Pictures also retains significant rights to the “Seinfeld” library.

Sony has interest in 124 television channels in more than 159 countries, with particular strength in Latin America and Asia. It co-owns the Game Show Network, a cable channel, and owns Crackle, a video streaming service that needs more valuable content.

“By controlling Sony Pictures Entertainment, CBS could improve its exposure to revenue streams from the TV business in key territories, and many of SPE’s international channels offer programming which fit well with CBS’ existing content,” Wieser wrote.

“A broader global footprint would also help with global expansion of [CBS’ premium cable channel] Showtime, allowing it to more closely match HBO,” Wieser added.

CBS is controlled by billionaire Sumner Redstone, who turns 90 this month. Redstone also controls Viacom Inc. Redstone built his empire through a series of shrewd and -- most times -- risky acquisitions.

Moonves, who envisions CBS as a best-in-class player, would be the one behind the wheel. He has built a reputation as one of the most determined and patient executives in the business.

Next week, Moonves will achieve his dream of building the company’s flagship CBS television network into the No. 1 network as measured by total viewers and the key advertising demographic of viewers age 18 to 49. It will be the first time since Moonves joined CBS in 1995 that the network will have notched this important milestone.

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