Japanese-Led Studios Seek TV Links : Sony, Matsushita Looking to Reap Big Royalties From Cable

With telecommunications alliances being formed by the day, Hollywood’s major Japanese investors are aggressively angling for position in the new world order.

In recent weeks, both Matsushita Electric Industrial Co. and Sony Corp. have indicated that they would be open to selling parts of their entertainment companies to a major cable television operator or a Baby Bell if the price were right.

Such a deal would provide access to the new technologies and a chance to reap bigger profits when their films and TV shows are sent into the household over new delivery systems.

It would also give the Japanese manufacturing giants--whose main electronics businesses are suffering, opportunity to recoup at a lucrative price some of the billions of dollars they invested in Hollywood.

“Everyone is talking to everyone else. Nobody wants to be left out of this dance,” said entertainment investment banker Michael Garstin.

Matsushita, which owns MCA and its Universal Pictures unit, is known to have chatted recently with Tele-Communications Inc. about potential deals. Sony, which owns Columbia Pictures and Tristar Pictures, has all but taken out advertisements asking to be courted.

Analysts and investment bankers say both companies could easily attract multibillion-dollar investments, because an insatiable demand for programming is expected to come with the exponential expansion in channels and services.

While they were once criticized as having paid too much for their studios, both companies now find themselves with rare assets wanted by an increasing number of deep-pocketed suitors.

The battle for Paramount Communications Inc., which escalated Thursday when QVC Network Inc. made a partial tender offer, has placed a higher premium on Hollywood’s studios. In addition, Bell Atlantic Corp.’s planned acquisition of cable giant Tele-Communications Inc. has lit a fire under telephone company executives mapping the futures of their companies.

“Suddenly, the Japanese don’t look so stupid paying what they did for the studios,” said Marc Nathanson, chairman of Falcon Cable TV.

Jeffrey Logsdon, an entertainment analyst with Seidler Cos., added, “They’re probably smiling now, saying, ‘You called us schmucks and called us stupid, but we were three to four years ahead of you all.’ ”

Matsushita paid $6.6 billion for MCA in 1991. Sony is believed to have spent more than $6 billion since 1989 to assemble its film units, including acquisition costs, debt taken on and the costs of a substantial recapitalization.

Evaluating either studio today is difficult since Matsushita and Sony reveal little about their finances and securities analysts don’t pay as much attention to them now that they are units of big industrial concerns.

Most believe that MCA as a whole is worth considerably more than the $6.3 billion Matsushita paid for it. Some analysts have said it could be worth $8 billion, with an outside shot that it could be worth $10 billion.

One big reason is Universal’s “Jurassic Park,” director Steven Spielberg’s summer dinosaur adventure movie that became the all-time box office champion, taking in about $755 million worldwide to date.

Next year will come another bonanza, when MCA launches a mass-marketing push to sell “Jurassic Park” on videocassette.

Sony Pictures draws a wider range of opinion as to its worth. Estimates range from about $5 billion, from critics who believe its cash flow probably remains inadequate, to as much as $7.5 billion from others who believe it is making strides.

There are several strategic options for Matsushita and Sony. One is to sell a chunk of a studio to an outsider, much as Time Warner has done with partners such as U.S. West and Toshiba.

Others see scenarios in which the film studios could be spun off into new companies with minority partnerships. Few believe that Sony or Matsushita would sell outright, or even give up controlling interest.

MCA President Sidney J. Sheinberg and other executives were at a Palm Springs management conference and were unavailable for comment. They previously declined to discuss potential investments. For his part, Sony Corp. of America President Michael P. Schulhof has made it clear that his company wants not only to enhance its distribution prowess, but also to avoid being left out of the information highway.

“Sony is at the front of the pipeline producing the content and the back end of the pipeline with electronics equipment. Our concern is that we have equal access to the pipeline,” spokesman Robert Zito said.

Others don’t see access as a hurdle for film and television companies. “If you have good software, you’ll have access,” said Michael Kuhn, who oversees Polygram’s film companies.

One studio executive argued that the shuffling is singularly about distribution and how the revenues will be divided when viewers can see movies, sitcoms and interactive programs on command.

“It’s about how much of that $4 we will get when people watch one of our movies,” he said.

Although cable companies’ and phone companies’ interest in buying into studios has increased over the last few weeks, the idea has been percolating for some time. Falcon’s Nathanson recalled attending the Academy Awards three years ago with cable pioneer Bill Daniels, only to find that their seats were far up into the balcony.

Nathanson quoted Daniels as saying: “Don’t worry. Someday we’ll be in the front row--when we own the studios.”

Times staff writer Kathryn Harris contributed to this report.

Japan in Hollywood

Among the biggest media deals of recent times are Sony Corp.’s purchase of Columbia Picture and Tristar Pictures and Matsushita Electric Industrial Co.’s acquisition of MCA Inc. Those acquisitions have been eclipsed by the deals that are uniting cable TV, telephone and other media companies into multimedia giants. Some observers believe that the Japanese-owned studios could easily get swept up in the frenzy, drawing huge investments and new partners.

Sony Pictures Entertainment

Studios: Columbia Pictures, Tristar Pictures, Sony Classics, Triumph Releasing.

1993 releases: (through Oct. 17): 14 for Columbia, including current films “The Age of Innocence” and “Malice”; 9 for Tristar, including current release “Rudy.”

Market share: (as of Oct. 17): 11.7% for Columbia, 7% for Tristar.

Financial data: $3.1 billion in revenue fro the year ended March 31; earnings before taxes, interests, depreciation and amortization are believed to be about $350 million for the same period.

Key executives: Sony USA Vice Chairman Michael P. Schulhof and Sony Pictures Chairman Peter Guber.

Winner: “Sleepless in Seattle”

Loser: “Last Action Hero”

MCA

Studio: Universal

1993 releases (through Oct. 17): 13 films, including current picture “Judgment Night.”

Market share: (as of Oct. 17): 15.1%

Financial data: Revenue of $3.6 billion for year ended March 31; operating profit estimated at more than $200 million for the period.

Key executive: MCA Chairman Lew Wasserman and President Sidney Sheinberg.

Winner: “Jurassic Park”

Loser: “The Real McCoy”