In an unusual lawsuit between two entertainment giants, National Broadcasting Co. charges that Sony Corp. and its Columbia Pictures Entertainment unit have secretly undermined an 8-year-old home video distribution venture.
In a suit filed Thursday in Los Angeles Superior Court, NBC claims that Sony/Columbia has been hampering RCA/Columbia Home Video, a 50-50 joint venture set up by NBC and Columbia in 1982. The network claims that Sony/Columbia, by negotiating for home video rights behind the network's back, wants to set up its own home video distribution company to the detriment of the joint venture. The joint venture has two years remaining before it expires, and it holds the rights to over 500 titles beyond mid-1992.
In particular, NBC points to a deal struck last month in which Columbia will distribute Orion Pictures' next 50 films overseas in both theatrical and home-video markets. Columbia advanced Orion $175 million for the rights.
NBC claims Columbia balked at the Orion package when it was first presented to the joint venture. Three previous agreements to distribute Orion titles have been highly profitable for the joint venture, NBC said, but Columbia management blocked approval of a fourth package because it was secretly trying to funnel the Orion films into its own future home-video operation.
According to NBC's suit, the value of the joint venture is being hurt by Columbia's actions and by perceptions that the home video company will be "winding down" as the expiration date approaches. The network claims damages of at least $250 million and says the actual cost could be more than $500 million.
The lawsuit also describes a deteriorating and increasingly mistrustful relationship between the partners, including NBC preventing joint venture employees from traveling to London for a meeting with Columbia and Sony representatives to discuss the venture's operations. The network says Sony and Columbia officials tried to misappropriate confidential financial information from joint venture employees.
A Sony spokesman declined comment and said the company has not yet seen the lawsuit. But the company issued a statement that "the lawsuit is surprising because Columbia and NBC have enjoyed a good relationship."
Just how good is abundantly clear from disclosures made in the lawsuit. NBC says that the joint venture generated profits of more than $74 million in 1989 on worldwide revenues of $470 million. The joint venture was described as having 400 employees and a payroll of $20 million. NBC estimates the "overall value" of the company to be more than $1 billion.
Tom Adams, a home-video analyst with Paul Kagan Associates, a Carmel-based media investment firm, said the joint venture is ranked seventh among home video companies, behind all the majors with the exception of Orion. He estimated that domestic revenue has been flat over the past two years because the joint venture, with the exception of "Ghostbusters II," has not released any blockbusters.
Although Sony and Columbia representatives denied that the companies have ever stated they intend to launch a new home video arm, as NBC alleges in its lawsuit, Adams nonetheless says "that's always been the speculation, and privately I've heard that."