Sony’s Idei Still Has Much to Learn About Industry Workings

Sony Corp. President Nobuyuki Idei, who has only been at the helm of the Japanese electronics giant for a year and a half, already has a credibility problem in Hollywood.

While his hands may be clean of all the management and financial chaos that has plagued the Columbia Pictures and TriStar Pictures operations since Sony’s acquisition of the studios in 1989, Idei has yet to articulate or demonstrate a clear vision for the entertainment company.

Idei took over the Sony presidency in March 1995 and some seven months later made his first decisive move on the entertainment side by ousting Sony’s top U.S. official, Michael Schulhof. This came a year after Sony’s huge $3.2-billion loss on its movie operations.

In the last few weeks, after more than a year of internal unrest and a string of costly box-office flops and under-performers, Idei finally acted again and fired Sony Pictures movie chief Mark Canton and President Alan J. Levine.

He is being applauded in Hollywood circles for listening to advice from industry insiders about recruiting United Artists President John Calley, a highly regarded movie executive with strong talent relations, to replace Levine and getting the beleaguered unit turned around. (By late Thursday, Calley’s deal was not yet finalized.)

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But the handling of all three of these moves was clumsy and much more drawn out than necessary. Canton and Levine twisted in the public eye for months, as speculation about their futures was played out in the pages of the entertainment press despite ongoing denials from Sony management here and abroad that anything was up.

News of negotiations with Calley leaked out this week before Idei had worked out the exact title and responsibilities.

Of course, leaks about executive moves are common in Hollywood, though sometimes it can be done right. Last year, Michael Eisner worked out every detail with super-agent Michael Ovitz behind closed doors before the surprise appointment was announced to the world.

In this case, not only did word leak out, but, by all accounts, it seems Idei hasn’t fully worked out what the new structure and new management team will look like.

It remains unclear, for example, whether Sony Corp. Executive Vice President Jeff Sagansky, who has no defined role other than to oversee the company’s theater holdings and new media, will have a role.

Unanswered, also, is whether Idei will put a single executive in charge of the entertainment operations or create a committee to run it.

“Nothing ever seems to be seamless,” said a source close to Sony Pictures. “There are never any clean edges.”

Although it can’t be blamed on Idei, Levine’s aborted efforts to hire William Morris Agency’s Arnold Rifkin in a last-ditch attempt to save his own job was yet another public embarrassment for Sony management.

Getting a credible executive like Calley in place might give Sony Pictures the kind of creative injection and sorely needed stability it has lacked for years. If that happens, Idei may well solve the problem of how to put the historic studio back on the map as a viable Hollywood major.

But many in Hollywood view the hiring of the 66-year-old Calley strictly as a stopgap measure.

Is it any coincidence that Idei was attracted to Calley in part because of his role in helping resurrect MGM to prop it up for a sale? While Idei has emphatically said he has no plans to sell the entertainment operation, he has left open the possibility of spinning off part of Sony’s entertainment software assets--possibly including music--to the public or finding a minority strategic partner in the next year or two.

If Calley does his part, he can walk away having been handsomely rewarded for his contribution.

“It’s a fantastic move--temporarily,” says a highly placed corporate executive. “He is someone who can’t get them into more trouble.”

But that said, where does this leave Sony going into the 21st century? Surely Calley is not one of the “digital dream kids” Idei had in mind when he coined that term to describe Sony’s efforts to target emerging digital businesses on the Internet and home computers.

What Idei has failed to articulate is his plan for integrating Sony’s U.S. entertainment software assets into his concept for creating a “truly globalized total entertainment company,” as he called it in a speech earlier this year.

“There is no plan,” said a source who knows Idei well. “There’s been a cancer growing there for seven years and they’ve put it into a culture in shock. They won’t pull out of this until they totally reconstitute the company.”

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Sony’s acquisition of Columbia Pictures in 1989 was viewed as a way for the company to hedge its bets against a future Betamax debacle. Sony executives believed its lack of software to back up the hardware caused the technology to lose out to rival Matsushita’s VHS format.

That view has now been discarded and it’s yet to be worked out how software flowing from Sony Pictures and Sony Music will add value to the next generation of personal computers, online services and other new digital technologies.

Sony’s electronics business has also suffered in recent years with a lack of competitive consumer products. Promising areas such as digital videodisc and mini disc players and high-definition TVs have yet to catch on.

In order to make Sony truly competitive with other, more diversified media companies like Disney/ABC, Time Warner-Turner, Viacom/Paramount and News Corp./Fox, Idei will have to commit hundreds of millions more dollars to buying or building additional businesses, such as cable networks and new-media ventures.

Idei has spent part of his first year meeting with top entertainment industry executives, and a number of them have come away with the same basic impression.

“He’s really smart and has a big vision about being a global entertainment company, but as to the specifics of how to do the mechanics, I think he’s clueless,” said one.

Idei himself said in an interview with The Times last summer: “What we need now is a clear direction. . . . We need to talk about our vision and our dream and show the results. It will take a few years.”

Since Schulhof’s dismissal, Idei, as promised, has reined in U.S. operations and taken a more hands-on role in the goings-on at Sony Pictures.

Last year, Joseph Osha, an analyst at Merrill Lynch Japan, told The Times: “Sony is in the process of trying to bring the operation under tighter control. They realize they have to get in and get their hands dirty; they have to understand the business.”

Idei comes to Los Angeles or New York at least once a month and has picked the brains of such savvy players as David Geffen, Barry Diller, Terry Semel, Bob Daly, Frank Biondi and Ovitz about how the business works.

There is some debate both inside and outside Sony’s American-based operations about whether Idei will now take an even more direct role in guiding the entertainment operation once a new management structure is in place.

Since Sony Pictures accounts for only 7% of Sony’s $43 billion in annual revenue, there are those who say Idei instead will pull back and focus on bigger issues.

“He has spent a disproportionate amount of time focusing on SPE,” suggests one source, noting that once the studio is back on its feet, he can turn his attention back to other aspects of the company.

“He can’t micro-manage this company,” said a source.

However, until the new management takes hold, sources say Idei is likely to spend more time in Culver City and New York.

He is expected to leave Sony’s New York headquarters today for a business trip in Europe. Sony insiders hope that before he goes he’ll clarify this still very murky picture.