Company Town : Time May Be Right for Sony to Say <i> Sayonara</i> to Hollywood

Yo, Sony. It’s time to give it up and cut your losses.

It’s been six long, painful years and you still haven’t figured out how to make this thing work. What makes you think you can now?

Hardware plus software equals synergy? If you didn’t learn your lesson with HDTV and Betamax, this summer should have told you something when you failed to win enough support from the Hollywood studios for your digital video disc format.

Now you’ve finally rid yourself of your American point man, Sony Corp. of America President Mickey Schulhof. And last year you cleared your books with a $3.2-billion write-down on your disastrous foray into Hollywood.

This would be the perfect time to get the hell out. The market’s ripe and the timing’s perfect for selling these big Hollywood entertainment companies at large multiples. They’re going for a premium these days, so you’ll probably get a decent price. Remember, a couple of years ago Viacom paid a pretty $10 billion for Paramount and this year Seagram dished out $5.7 billion for MCA.

There are a lot of hungry buyers out there. Take PolyGram. General Electric. Media magnate Rupert Murdoch. Billionaire Ron Perelman. Maybe even Microsoft.

Sources say Barry Diller isn’t interested at the moment. Media tycoon John Malone has too much debt. And the German publishing company Bertelsmann has some funky clause in its charter that prevents it from making any huge acquisition because it would dilute its equity base.

But don’t fret. There would be some takers.

Especially if you sell your music business separately from your movie and TV assets, Columbia Pictures and TriStar Pictures.

Wall Street analysts seem skeptical that one buyer could fund the $12 billion to $14 billion it would cost for the entire shebang. But they say there could easily be half a dozen candidates--including Disney, Viacom and possibly MCA--for an $8-billion to $10-billion acquisition of Sony Music, as well as potential buyers like Perelman who might be willing to pay in the $4-billion to $5-billion range for Sony Pictures Entertainment.

And you don’t necessarily have to shed music, for which you expressed a great affinity this week, right away. Just as you bought CBS Records in 1988, a year before you acquired the Hollywood studios, you could hold on to what you love most for a while.

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So why not follow the lead of your rival Matsushita and let someone else have a shot at making your assets work?

Look at it this way: At least you weren’t the first one to retreat. When Matsushita finally saw that it didn’t have a clue what to do with MCA, it agreed to sell 80% of the company to Seagram for $5.7 billion.

We know it’s important to save face. And that it’s always hard to admit failure. But really. Including the cost of the acquisition itself, you have easily invested $7 billion to $8 billion in Columbia-TriStar since buying it. Not to mention losing probably another several hundred million in severance packages, which will now include Schulhof’s.

Sure, sure, your movie business has begun to show improved earnings lately and you’ve endorsed Sony Pictures President Alan Levine and his team, who have brought you three consecutive profitable quarters. That’s impressive. But then again, anything would look good after a colossal $3.2-billion loss.

What do you need a studio for anyway?

Unlike other media companies--Time Warner, Disney, News Corp., Viacom--that seem to capitalize on the integration of their businesses (a much preferable term to “synergy”), Sony has never accomplished that. You’ve never had distribution and, not being allowed to own a TV network in the United States, you never will.

With Schulhof out of the picture, you have this notion that you can seize back control of the U.S. operations and rein in your Hollywood movie studios, with the divisional heads from Sony Pictures Entertainment, Sony Music and Sony Electronics reporting directly to Tokyo. Not likely.

“You can do it. Can you be successful at it? The probabilities are so low, you don’t want to go that many decimal points on your calculator,” advises one media analyst.

The analyst also wonders, “What makes these remote-control managers think they can do it any better?”

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Having a middleman like Schulhof clearly wasn’t the answer. But he wasn’t the right person for the job, since obviously his skills as a physicist and pilot failed to translate into successfully steering a huge entertainment conglomerate.

Now you say you want to streamline the operation for accountability and so on. That’s fine, but maybe it would make more sense to find someone other than Schulhof who does have the ability manage such an enterprise.

With all due respect, despite Sony President Nobuyuki Idei’s conviction that he has a clear vision of where the company is going, you really need a Barry Diller type to guide the way. Good luck. It ain’t going to happen.

For one thing, Diller’s not available and there are very few like him. But it’s also obvious that you’d never let someone like that have enough autonomy to make something of the entertainment mess.

So essentially you’re back to square one. You virtually have to start over again to stay in the game.

Sell. Sell. Sell.

Too bad Michael Ovitz is now at Disney and out of the merger-brokering business. Maybe he could have helped you out.

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Times staff writer James Bates contributed to this column.