We’re Melding With Columbia, Sony Chief Says
In Europe, the Sony televisions that line storefront windows flicker with familiar scenes from the movie “Hook,” a proud product of Sony’s film division. Outtakes from the updated Peter Pan fable have also found their way into Sony’s new corporate image campaign in Japan.
On the company’s Culver City studio lot, meanwhile, Sony hardware executives are hard at work on the technologies that are expected to take the film industry into the next century.
The Japanese electronics giant offers such developments as evidence that Sony is edging toward its strategic goal of oneness. Despite continuing skepticism over its efforts to marry movies and machines--and fears that the studio will remain a drain on company profit--Sony says it’s satisfied with the match made in 1989. It acquired Columbia Pictures Entertainment that year for $3.4 billion, unleashing a flood of Japanese dollars into Hollywood.
“Everybody is proud of being part of the Sony family,” Sony founder Akio Morita said in an interview Thursday with foreign journalists. “I think the synergy of hardware and software is gradually beginning.”
But outsiders--who have been struggling to find signs of synergy in Japan’s big investments in the movie business--say the evidence on Sony remains meager.
Analysts say it could be years before the studio turns a profit or demonstrates significant synergistic value to the rest of the company, despite a recent series of box office successes, including “Prince of Tides” and “Hook.”
And that lag could not come at a worse time for Sony. Thanks largely to a downturn in the electronics business, Sony is expected to show a $160-million loss for the fiscal year ended March 31--the first in its 46-year history.
Michael Jeremy, an analyst in Baring Securities’ Tokyo office, maintains that the debt that Sony took on when acquiring the studio “constrains their ability to invest in new-product development.” As proof, he points to Sony’s decision to cut capital spending this year by 40%, compared to cutbacks of just 20% at other consumer electronics companies.
Sony executives blame the investment cutbacks on a weak market. Products such as camcorders are near market saturation, while the technology to build a new generation of products marrying computer and consumer electronics technology remains a couple of years away.
And sales of large, costly high-definition television sets, which were expected to take off this year, have proved a bust, industry executives acknowledge.
Nevertheless, Sony is maintaining its high level of research and development spending.
And Sony executives are striving to make their far-flung operations work more closely together.
When Sony acquired CBS Records in 1988, Morita ordered his employees to stay away from the record company’s offices. “We didn’t want to give the impression that an occupation force had moved in,” he said.
Now the battle plan has changed. Nobuyuki Idei, a Sony director, said this week that the company is eager to squeeze out what he called the “invisible benefits” of owning a Hollywood studio.
While even a longstanding relationship with CBS Records left Sony hesitant to interfere in the company after buying it, Idei said, “we will be less patient with Sony Pictures.”
Beyond the “Hook” scenes in European stores, how that plays out on a practical basis is unclear.
Sony Pictures executives deny rumors that Tokyo ordered them to trim their 1992 budget 30%. But there have been layoffs, and Sony recently has dismantled one of its production units, Guber-Peters Entertainment Co.
Analyst Harold Vogel of Merrill Lynch in New York said Sony has yet to prove that the studio purchase was a practical investment.
“They could have shown clips of ‘Hook’ on all the televisions in Japan without spending $6 billion” to acquire the studio and pay related costs, he said. “Any time you talk about the benefits they’ve derived from this, it’s like talking about a one-armed paper hanger. You have to talk about the costs too.”
Even Idei conceded that Sony has a ways to go. “To realize these invisible benefits is our goal, but it will take time,” he said. “You will have to judge this over 10 years. (Sony President Norio) Ogha and Morita used their sixth sense when they decided that a motion picture company would be an asset. How we utilize that asset is a future question we have to answer.’
Sony’s two studios--Columbia Pictures and TriStar Pictures--are expected to release about 30 pictures between them this year. Michael P. Schulhof, president of Sony Corp. of America, who oversees the film division, said he’s pleased with the studio’s progress so far. Schulhof also maintained that the synergies Sony expected when it bought the studio are “tangible.”
The Culver City HDTV studio--which uses the latest Sony technology--is so popular that it is fully booked, Schulhof said in a Tokyo interview. Warner Bros. used it to create a shimmering fireball of a sun for a scene in its new movie “The Power of One.” While it now is used primarily to create special effects, Schulhof said the studio will soon be producing whole films on HDTV equipment.
While those movies will continue to be distributed on traditional film, experts say the real savings will come when new movies can be distributed directly to theaters via satellite, saving the hundreds of thousands of dollars now spent on making prints for theaters.
Before beginning to shoot “Bram Stoker’s Dracula,” Francis Ford Coppola laid out the story line first by taking video still pictures of the key scenes with his Sony electronic camera, the Mavica. Other directors have since picked up the idea, Schulhof said.
When Michael Jackson--a Sony recording artist--heard the new Sony Mini Disc, he was so “blown away by it” that he asked to work on the promotion campaign, Schulhof added.
He sees even more potential ahead.
Columbia’s film expertise, for example, will be used in building sophisticated video games in which the player has the experience of flying in an airplane. Sony this year will begin marketing a new lineup of VCR decks using the 8-millimeter tape now used primarily in video cameras. In conjunction, Sony Pictures will aggressively market its movies on 8-millimeter tape.
“Synergy means being able to participate in markets you helped to create,” Schulhof said.
Helm reported from Tokyo and Citron from Los Angeles.
