Sony in a Stew of Controversy : The Michael Jackson Case Tops a Recent String of Brouhahas Touching the Firm

The most popular soap opera in Hollywood these days isn’t “Days of Our Lives” or even “All My Children,” though it could be confused with “The Bold and the Beautiful.”

It’s called Sony Corp. of America, and it boasts a dream cast consisting of Michael Jackson, Heidi Fleiss, Woody Allen and others too numerous to mention.

Those following the serial have been spellbound by the unexpected plot twists. Seldom has a company become so mired in melodrama as Sony, which merely hoped to make a few bucks when it got into show biz with CBS Records and Sony Pictures. Instead it has emerged as ground zero for every recent brouhaha short of Burt’s breakup with Loni.

“Suppose you owned those companies and went through the last few months,” said one top Hollywood executive. “Everything that can go wrong has. It’s like Murphy’s Law.”

A police investigation this week into accusations of child molestation against Jackson, by far the biggest star in Sony’s constellation, comes as the New York-based division of Japan’s Sony Corp. is still reeling from unsubstantiated reports linking its Columbia Pictures to alleged Hollywood madam Heidi Fleiss.

Before that, industry gossip centered on Columbia’s summer film “Last Action Hero,” the costly Schwarzenegger opus that was trashed by critics and moviegoers alike. And previous to that, the buzz was all about Woody Allen, who was accused by Mia Farrow of molesting their daughter just as Sony’s Tristar Pictures division was about to release “Husbands and Wives.” Allen was cleared of any wrongdoing.

While the string of events is strictly coincidental, it has taken a toll on Sony executives, who have been forced to become seat-of-the pants crisis managers.

It has also overshadowed recent positive events, such as the chart-topping debut of Billy Joel’s “River of Dreams,” the box office success of “In the Line of Fire” and “Sleepless in Seattle” and the unusually good terms Sony extracted for the sale of its Castle Rock Entertainment stake.

Sony declined to comment on Jackson. But sources say top executives are not taking part in crisis meetings concerning the superstar. According to company sources, Sony of America President Michael P. Schulhof is vacationing in Europe. So is Sony Pictures Chairman Peter Guber. Likewise, Sony Music Group President Tommy Mottola is somewhere out of reach with his wife, singer Mariah Carey.

Sony Corp. had a terrible first quarter, with net income plunging 48.5% to $71.9 million for the period ended June 30, partly due to the appreciation of the yen against other currencies. Its stock remains strong, however, with the Japanese market rebounding. Sony shares in the United States, trading at $42.375 on Thursday, are up sharply from a low of $32 earlier this year.

It may be weeks before the full impact of the Jackson case on Sony is known. Those close to the performer insist he would not jeopardize his career, which he’s managed with a keen eye for business. But even they were troubled by Thursday’s news that police are focusing on possible relations with four different children.

Those revelations are all the more troubling for Sony, since Jackson is not only the world’s biggest star but a company symbol. In Japan, where the electronics and entertainment giant is based, Jackson is the closest living thing to a deity--if you don’t count the Emperor.

On the economic front, one theory among financial analysts is that the imbroglio could stall a long-planned American stock offering by Sony, if only because of the public relations issue. One analyst, who asked not to be named, said the money-losing “Last Action Hero” already forced one postponement in the entertainment division offering, which Sony denies.

“They were trying to get four quarters in a row of decent numbers before the offering,” the analyst said. “But they really blew it with ‘Last Action Hero.’ ”

People who manage big companies say Sony’s image may take an even bigger beating than its bottom line.

“This is a public company,” said one executive. “But more important than that, it’s a brand-name consumer product. So it’s a giant deal. You can’t have Sony’s name constantly bandied about in this way without it suffering some damage.”

Sony forged its long-lasting link to Jackson in 1991, when it signed him to a contract that was supposed to return $1 billion in gross revenue to the conglomerate. Besides giving him an unprecedented share of profits from six albums, the deal was designed to expand Jackson’s reach to film, video and the record label business.

“We’re married to him now,” Schulhof said at the time. Instead, Jackson has remained primarily focused on music, releasing “Dangerous” in late 1991.

A planned film role in a Columbia Pictures project called “Midknight” was scratched, and there’s been little heard from Nation Records, the label that Sony reportedly agreed to set up with a $2.2-million annual administration budget.

Jackson’s sales remain in the stratosphere, even though some record executives at other labels feel he has peaked.

“Dangerous” sold about 20 million copies worldwide, compared to 25 million for “Bad” and 40 million for “Thriller.”

Ironically, Jackson was said to be deeply into negotiations with Sony to improve his record deal when the controversy broke.

*

Box office, schmox office: A remarkable thing happened in Hollywood the other day. Daily Variety, the trade paper that popularized movie box office reporting, disowned its own methodology.

In a front-page story, the paper said past estimates were off by as much as 20%, due to “phantom” revenue projections from military bases and other out-of-the-way places. It went on to say that future findings will be more phantom-free, thanks to new reporting methods.

Some took that as a slap at Art Murphy, the pioneering box office analyst who recently jumped from Variety to its archrival, the Hollywood Reporter.

But others insisted that real strides have been made in reporting as computers and other tools have come into the process.

The irony, however, is that the grosses, despite their broad use in places ranging from “Entertainment Tonight” to small-town newspapers all across America, still say nothing about profitability.

And that seems to be the way the major studios like it.

“It’s a magical number,” said one Hollywood executive. “It’s also a publicity tool. But no studio actually gets those dollars. There are too many hands in the pie.”

Times staff writer Chuck Philips contributed to this story.

* SEARCHES COMES UP EMPTY: Warrants served at Michael Jackson’s ranch and townhome didn’t yield evidence “that would support a criminal filing,” a police source said. A1