Guber Leaves Sony Pictures to Form Own Firm

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Peter Guber, the mercurial movie producer tapped five years ago by consumer electronics giant Sony Corp. to build its movie business, quit Thursday as the company's top executive in Hollywood, dissolving one of the priciest and most tumultuous regimes in recent motion picture history.

Guber, 52, who with producing partner Jon Peters was lured by Sony's Japanese owners with an outlay of more than $700 million to lead the company, will leave his post as chairman and chief executive of Sony Pictures Entertainment immediately to form a Sony-backed entertainment company.

Guber's departure--a topic of speculation all year because of the poor performance of Sony's movie business--comes at a critical time for Sony Pictures, which owns the Columbia and TriStar studios. The company has lagged behind other major studios in movie production and, critics say, lacks a clear strategy for taking advantage of today's rapid shifts in the entertainment business.

Under Guber, Sony's releases ranged from the highly profitable "Sleepless in Seattle" and "In the Line of Fire" to such flops as "Last Action Hero" and "I'll Do Anything."

Despite Sony's well-publicized problems this year, Guber and Michael P. Schulhof, chief executive of Sony Corp. of America, insisted in interviews that it was Guber's idea to leave.

"Are my interests, my passions and concerns with this kind of job? Clearly, right now, they are no longer. That's what motivated the change," Guber said.

Still, Guber's move was viewed by Hollywood executives as a graceful way to give Guber and an increasingly impatient Sony what they both want--a fresh start. One top executive who knows Guber said he was weary of the pressure and criticism, while others said he has been unhappy for some time.

"The Sony job was so removed from what excites him--putting together and creating movies," said James Wiatt, president of the International Creative Management talent agency. "He was never thrilled with the job, and the negative attention that came with it."

Some senior studio executives who worked under Guber speculated that he may have taken matters into his own hands out of a belief that a showdown was brewing.

"I think Peter sensed that he might be let go and didn't want to go down in disgrace. He wanted to do it before it was done to him," said one high-level executive.

Guber will leave with a lucrative payout, including an unspecified share of a $50-million bonus he is said to be splitting with a handful of Sony executives.

Guber is the second major film executive to move on in the past few weeks. Jeffrey Katzenberg disclosed last month that he will leave as chairman of Walt Disney Studios effective this week.

Guber's departure is yet another chapter in Sony's five-year ordeal in trying to build a movie business, which it calls "software," to complement the company's electronics "hardware." Sony bought Columbia Pictures for $3.4 billion in 1989, and by some estimates has overall sunk $6 billion to $7 billion into Hollywood, an investment that so far remains far from paid off. Sony's experience serves as a vivid reminder of the minefield that foreign investors face trying to turn a profit in Hollywood.

Despite such movie successes as "City Slickers" and "A League of Their Own" during his time at Sony, Guber's tenure the past 15 months has brought the studio an unprecedented level of scrutiny and criticism. Sony suffered through such public embarrassments as the "Last Action Hero" debacle, the Arnold Schwarzenegger film that is said to have lost about $25 million for Sony, and the media frenzy surrounding the scandal involving alleged Hollywood madam Heidi Fleiss. Sony was linked to the affair when one of its Columbia executives publicly denied being involved with her.

Lately, Sony's movie business has been plagued by a string of box office disappointments such as "North" and "City Slickers II." The combined box office market share for Columbia and TriStar--now at less than 10%--is less than that of major competitors Walt Disney, Warner Bros., Paramount, Universal and 20th Century Fox. One top financial analyst estimated Sony Pictures' negative cash flow at $250 million in the first half of the year.

In addition, Sony has suffered through turmoil in its executive ranks, complaints from producers about a logjam in getting projects approved and the inability of Sony officials to attract a strategic partner to invest in the studio.

Columbia's release schedule also slowed to a trickle early this year, with only two movies released in the first five months compared to seven during the same period in 1993. The number of films released is expected to pick up in the next few months, however.

In explaining his move, Guber said he wanted to take the "ee" out of his title and add an "er" to it--becoming an employer instead of employee. He added that changes in his personal life--including turning 50 in 1992, the recent adoption of two children by Guber and his wife, and receiving a full professorship at UCLA--caused him to re-evaluate his career.

"This is the third act of my life," said Guber, who is expected to work the next few weeks raising money from overseas investors for his venture.

Schulhof, who developed a close friendship with Guber to the point where their children once dated, said he supported Guber's plans.

"Four months ago, Peter came to me and said, 'I think my time is up,' " Schulhof said. "When he told me what he had in mind, to create an entertainment company, I said, 'Not only will I support it, I'll invest in it.' "

Sony said it will not replace Guber, and that Sony Pictures Entertainment will be run by Alan J. Levine, a low-profile lawyer who has been at the studio for five years.

Levine retains his title of president and chief operating officer, and has signed a new contract, believed to be for five years. The arrangement is similar to the structure Schulhof set up at Sony Music, where he oversees the operation but allows Thomas D. Mottola, also a chief operating officer and president, to run it.

Levine said he did not expect to make many changes, and defended Guber's tenure, saying that criticism has unfairly blamed Guber for movie flops and ignored more successful operations such as Sony's television and movie theater businesses.

"People always focus on just the movies. They say they had a good movie, so it must have been Peter. They had a bad movie, so it must have been Peter. He was chairman and CEO of the whole company," Levine said.

Levine, Guber and Schulhof all refuted talk that Guber's departure was sparked by the recent hiring of former CBS Entertainment chief Jeffrey Sagansky as an executive vice president directly under Schulhof. They also denied that Sagansky, who also formerly ran TriStar, will play a major role in Sony Pictures movie operations.

"He would have stayed in California if that were the case," Schulhof said.

Other sources say that Sagansky--more highly regarded for his work in TV than in film--does not want to focus on the big screen. They also discounted talk that Katzenberg will play a role at Sony.

One theory circulating had Mark Canton, who oversees Columbia and TriStar and reports to Levine, being given a grace period to turn things around. Others argued that a company that has been through so much turmoil is unlikely to shuffle its executive ranks soon.

Canton, who recently extended his contract, reportedly for three years, said he has no plans to leave.

"When Sony decided to extend my deal a month and a half ago, they made all the statement they need to make about my ability. I have no plans to leave. My sole interest is doing this job as well as I can. . . . I'm not nearly living up to my own standards.

"For six or eight months, things went awry," Canton said. "I'm not trying to sweep that under the rug. But the only paralysis these days is in my neck from reading so much material. Between Columbia and TriStar, we'll release eight movies before the end of the year."

Guber's deal was worked out late Tuesday. A dozen or so department heads were called together for the announcement Thursday morning. None, said one participant, expected the news.

Guber and Peters, his production partner on such 1980s hits as "Batman," were an odd couple when conservative Sony picked them in 1989. Guber cut his ponytail and shed his T-shirts for suits. Peters left Sony two years later and is now an independent film producer.

Sony spent dearly to get them--buying their production company for $200 million and paying $500 million to spring them from their long-term producing contract with Warner Bros. The two also spent Sony's money freely, generating now-legendary stories about excesses such as delivering flowers via a Sony jet.

One producer who has worked with Guber said that Guber and Sony will both be better off in the end. "He's a better maker of movies than 99% of the producers around town. He may have miscast himself as the mogul," the producer said.

Guber's office once housed movie-making legend Louis B. Mayer when Sony's lot was the Metro-Goldwyn-Mayer facility. On Thursday, Guber said a picture of Mayer he keeps on his desk helps keep the latest development in perspective.

"Every time I get full of myself, I look at it and remind myself that I'm only renting," he said.

* HIGH ANXIETY: Guber steps down at a critical time for Sony Pictures. D1

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