Sony Pictures outlines budget cuts, trims film slate
Sony Pictures Entertainment, reeling from several box office disappointments and under assault from an activist shareholder, said at a Thursday morning meeting for investors that it would undergo a “significant shift” away from movies and toward the “higher margin” television business.
“We are reducing the number of films we make,” said Sony Pictures Co-Chairman Amy Pascal, adding that while the studio has typically released 23 movies per year in the past, it would put out roughly 18 per year moving forward.
Though the studio released nine films this past summer, she said, it expects to put out only four next summer.
Several executives from Sony Corp.-owned Sony Entertainment Inc., which includes the film and television studio, Sony/ATV Music Publishing and Sony Music Entertainment, are speaking at the event for buy- and sell-side investors. It is being shown live in a webcast.
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Sony Pictures has had a tough year, feeling the adverse affects of a poor showing at the box office, with disappointments including “After Earth” and “White House Down.” On Oct. 31, the studio posted an operating loss of $181 million for the fiscal second quarter.
Sony Entertainment Chief Executive Michael Lynton, also chairman and chief executive of Sony Pictures, addressed cost-cutting at the Thursday meeting, saying the company had identified $250 million in “overheard and procurement savings” that are now being implemented.
The Times reported Monday that Sony had hired consultancy Bain & Co. to examine the studio’s expenditures. Bain is expected to identify an additional $100 million or more in budget cuts.
The cuts are expected to result in layoffs, which the studio has experienced in recent years. Lynton said that the studio had laid off 800 people in the last four years, and added, “We are in discussions with experts to help identify more efficient ways to do business in the future.”
Lynton said that Sony projects the studio will generate $8.4 billion in revenue for the fiscal year ending March 2015.
“Consider this meeting a down payment -- the beginning of a new era of greater accountability and transparency,” Lynton said.
For much of 2013 the studio has also been hammered by criticism from activist shareholder Daniel Loeb, who in May proposed that Sony make an initial public stock offering of up to 20% of its entertainment arm.
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In July, Loeb, whose hedge fund Third Point owns about 7% of Sony, criticized Sony Entertainment for being “poorly managed,” appraising the situation in a letter to Third Point investors.
Loeb labeled two disappointing Sony Pictures summer releases -- the Will Smith action movie “After Earth” and the Channing Tatum vehicle “White House Down” -- “2013’s versions of ‘Waterworld’ and ‘Ishtar’ back-to-back,” a reference to two of the most famous flops of all time.
Sony rejected Loeb’s proposal in August. A representative of Third Point was expected to attend the event at Sony’s Culver City lot.
The studio has already taken steps to respond to Loeb and the disappointing run at the box office. In September, Sony Pictures fired Marc Weinstock, then its head of domestic and international marketing.
When Sony rejected Loeb’s proposal, President and CEO Kazuo Hirai said in a letter to the hedge fund investor that the company would “increase disclosure regarding Sony’s entertainment businesses. We agree this can help market participants analyze their performance and monitor their success.”
“After Earth” grossed a disappointing $244 million worldwide and “White House Down” has taken in $205 million globally, according to Box Office Mojo. Another Sony release, “Smurfs 2,” also underperformed, taking in $347 million worldwide -- far from the original 2009 movie’s $564-million global gross.
“In 2013 we had some movies in the summer that didn’t meet our expectations -- that resulted in the second quarter that we have shared with you,” Pascal said. “That has led us to take a hard look at what we are doing.”
The studio has recently found success with the Tom Hanks-starring thriller “Captain Phillips.” That film has grossed $164 million worldwide since being released Oct. 11.
Shares of Sony were up 11 cents to $18.64 on Thursday.
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