A Calley to Arms : Sony Pictures’ New Management Undertaking a Major ‘Re-Engineering’

Some hot new titles from Sony Pictures Entertainment include the current releases “Anaconda” and “The Fifth Element,” as well as “Men in Black,” the expected summer hit

Then there’s “Time for a Change,” a 12-minute video still under wraps, which stars Tom Cruise and a cast that includes the lesser-known John Calley and Tikka Tinnon and that’s intended to be shown to Sony employees in coming weeks.

Spliced in between scenes with Cruise lifted from Sony’s hit film “Jerry Maguire,” in which his sports agent character questions corporate morality, are interviews with Sony employees venting their frustrations about what has long been a dysfunctional Hollywood studio.

One worker tells of receiving a form letter four months after she was hired that regretted to tell her the job was filled. Another describes her department’s systems as “horrendous.” Tinnon, who works in purchasing, compares Sony’s operations with “The Flintstones” and says it needs to be more like “The Jetsons.” The tape ends with Calley, Sony’s president and chief operating officer since last fall, agreeing that Sony and Hollywood have “a Stone Age corporate culture facing the challenges of a Space Age marketplace.”

It’s definitely not business as usual on the Sony lot. The new management team is undertaking a major “re-engineering,” a trendy corporate buzzword to describe a wholesale reevaluation of how a company does business, and it’s seeing some positive impact both operationally and morale-wise. In purchasing, Sony last year wrote checks to 14,000 vendors, now pared down to 800, which will save up to $15 million a year. Employees now get reimbursed with expense checks in five days rather than 10.

But whether Sony Pictures, to paraphrase Jerry Maguire, can finally show parent Sony Corp. some serious money under its third top executive in three years is the question all Hollywood is asking while watching the Calley-led turnaround. Skeptics still wonder if the studio isn’t being dressed up for an eventual public stock offering of Sony’s entertainment assets, or even an outright sale, though the parent company says it will keep the studio.

They also wonder, in the age of one-stop decision makers such as News Corp.’s Rupert Murdoch and Viacom Inc.’s Sumner Redstone, whether an entertainment company can be run with the kind of management-by-committee style that Calley favors. In Sony’s case, the yen stops thousands of miles away in the offices of Sony President Nobuyuki Idei at the Japanese electronic giant’s Tokyo headquarters. Calley pays a visit there about four times a year.

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Under obvious pressure from Tokyo, Calley and his team of strategists--which includes co-President Jeff Sagansky, Executive Vice President Yuki Nozoe, Senior Executive Vice President Bob Wynne and Chief Financial Officer Ted Howells--are scouring the studio operations for ways to boost sales, trim unnecessary costs, increase cash flow and produce steady growth amid the inevitable ups and downs of the volatile movie business.

Known for profligate spending in the early 1990s under then-Chairman Peter Guber, the studio now, as one producer on Sony’s Culver City lot puts it, “watches every buck you spend.” Sony also is seeking creative financing arrangements that will help blunt the high cost of making movies without giving away lucrative distribution rights.

On the creative side, Calley is being choosy about the films the studio decides to develop, as tens of millions of dollars a year typically are spent on projects that never see the light of day. He also wants to eliminate what he calls the “randomness of production,” where little forethought is given as to why a particular movie gets made.

Ironically, the much-maligned management team that Calley & Co. succeeded, led by President Alan Levine and studio chief Mark Canton, left behind one of the better movie slates Sony has enjoyed in years. “Jerry Maguire” was a big hit and “Anaconda” performed surprisingly well. The Sony-distributed “The Fifth Element” is currently No. 1 at the box office.

Sony leads other distributors in market share, though the year’s biggest moviegoing seasons--summer and Christmas--are still to come. Sony’s own summer offerings, “Men in Black” and “Air Force One” starring Harrison Ford, are enjoying some of the strongest buzz in Hollywood, though “The Devil’s Own,” with Ford and Brad Pitt, was a money-losing dud despite how great it looked on paper.

Calley, who turns 67 in July, gets high marks in Hollywood for boosting morale in the company’s once-paralyzed movie operation and instilling a more mature, less self-centered, “collegial” attitude among top executives. After years of finding itself in the media spotlight, Sony has also been enjoying a respite from the barrage of controversy it long engendered.

Calley has had a honeymoon with the news media, coming off as an affable and literate raconteur. That image belies what sources say is a sometimes chilly side to the executive, demonstrated when the president of Sony’s TriStar unit, Robert Cooper, resigned May 2 after just nine months on the job.

Cooper--a former, independent-minded head of HBO Pictures whose hiring predated Calley’s--never meshed with the team approach of the new regime. Cooper was about to tell his staff he was leaving when Calley called and instructed him not to break the news. Instead, two of Calley’s senior executives told the staff.

“John should have let the guy exit with some dignity,” a Sony insider said.

Calley has no regrets about the handling of the situation: “We felt our company should make corporate announcements. . . . It’s about running our own business the way we see fit.”

Calley may favor a collaborative approach with his executives, but he clearly has the final say in all creative decisions, no matter how big or small. Some sources wonder how long the collegiality will last at what seems like a studio top-heavy with senior creative executives, all in similar jobs.

Still, many in the creative community agree that Calley, who produced such films as Mike Nichols’ “Remains of the Day” and “Postcards From the Edge,” and his senior executive “brain trust” of Lucy Fisher, Gareth Wiggin and Amy Pascal, click well with producers and directors.

A former top Warner Bros. executive in the 1970s, Calley was recruited by Idei to fix Sony’s studio after helping resuscitate Metro-Goldwyn-Mayer’s dormant United Artists unit with such films as “The Birdcage” and “GoldenEye.” Since Sony bought into Hollywood eight years ago, its Columbia Pictures and TriStar Pictures units have been plagued by management upheaval and financial difficulties that culminated in a massive $3.2-billion loss in late 1994. Sony still lacks the kind of distribution infrastructure, such as cable outlets and broadcast networks, that competitors such as Viacom, Time Warner, News Corp. and Walt Disney Co. have built or purchased.

In an interview littered with corporate buzzwords like “zero-basing,” “re-engineering” and “value chain,” Sony’s top management described an operation that has never been positioned to fully exploit its movies.

“The appearance to Sony was that this was a rather random process of filmmaking without any clear, cohesive concept of how it was supposed to work,” said Wynne, a former corporate lawyer who in effect functions as the studio’s main operations executive. “There was a dysfunctionality, a lack of communication and a lack of a process on the filmmaking side to make the kind of films that would have downstream markets,” including consumer products, merchandising and other revenue-generating offshoots.

Sony has long admitted this problem in talk that is long on generalities but short on specifics. Executives say they are now coming up with an overall strategy to present to Idei in September. Idei visits the U.S. about once every two months, usually making a stop at the Culver City lot.

Calley sees his mandate as making more “franchise” films like the ones Warner Bros. developed with the “Lethal Weapon” and “Batman” series. Such movies reap big money at the domestic box office, play well overseas and generate big revenues in video and merchandise sales. Sony has high hopes that Barry Sonnenfeld’s “Men in Black” will prove a model franchise, along with next year’s “Godzilla,” the first film since the huge hit “Independence Day” from filmmakers Roland Emmerich and Dean Devlin.

Calley says he has “lived off those kind of franchise pictures all my life, and I think it’s irrational not to have that as part of our program.” Sources say that in picking projects, Calley is favoring big action movies and mainstream comedies like Universal’s hit “Liar, Liar” over more serious dramas.

Sagansky, whose main job is overseeing television and international operations from a strategic standpoint, says he spends a lot of his time with Nozoe “figuring out how we can build a marketing-based kind of company” out of what was previously a “transaction-oriented culture.”

If Calley, says Sagansky, “is going to have pictures with a long life, you’ve got to have a structure here that can exploit that.” He said that for the first time, Sony is concentrating on product planning.

“When ‘Men in Black’ comes out, we’re going to come out in the fall with an animated show, a toy line and as John works toward a sequel, we’re going to keep that alive.”

So far, Calley has been slow giving the go-ahead to new films, mostly helping existing projects such as “The Mask of Zorro” and “Godzilla” get off the ground. The only other films he’s approved so far are “Duets,” starring Pitt and Gwyneth Paltrow, and “Step Mom,” teaming Julia Roberts and Susan Sarandon.

That means the studio could face a major gap in its distribution pipeline for 1998, though Calley, who one weekend supposedly took home 26 scripts to read, isn’t daunted by that. However, he won’t discuss projects he’s considering. His slate won’t be announced for at least a month, and the bulk of the movies won’t hit theaters until the second half of next year.

Wynne says Sony also is exploring how to manage the budgeting process so that projected costs are honest. “A lot of the time when budgets are put together it may say $80 million, but everybody in the room knows it’s $110 million,” he says.

In order to help shoulder the high cost of its movies, Wynne said Sony is looking at everything from tax breaks and foreign government subsidies to strategic partners. Sony now finances its movies using commercial paper, a type of short-term corporate note, and doesn’t like to sell off potentially lucrative foreign rights, as some studios do.

Calley also believes the studio hasn’t been discriminating enough in buying movie ideas. That means more executives are being asked to evaluate whether films have a revenue life beyond the box office.

“You’re in a place and there’s no real design for living. It’s rather chaotic. It’s kind of random. A pretty good script comes along. It’s intriguing. It develops a sort of momentum. It seems cheap enough. But you never test the questions of how do we market this thing? Where do we see it fitting into our schedule? How many pictures do we need this year?” said Calley, unable to specify how many films Sony is looking to release annually.

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What can happen, Calley cautions, is a studio can wake up with 35 movies, “as this place did last year, or more, and you don’t have a place for them.”

Calley hopes that putting each of Sony’s investments to the test will save the company significant amounts of money otherwise wasted on projects that gather dust.

“We’re not going to just say, ‘Well, you know, it’s only $400,000’ [to buy a script, pitch or book rights], because it never is. . . . The rewrite gets up to $900,000 and then there’s the demoralization factor with the other executives who say, ‘You let her buy that, why can’t I buy this?’ ”

Pretty soon, says Calley, “you’ve got $5 million to $6 million in ‘Looney Toon’ projects that don’t stand the test of ‘What am I going to do with this?’ ”

It won’t be until this time next year that Hollywood, Wall Street and Tokyo will be able to judge how well Calley and his gang have stood up to that same test in running Sony.