Sony’s message to investors: We get it — we’re cutting back.
In the wake of expensive summer film flops like “After Earth” and “White House Down,” Sony Pictures on Thursday promised investors it is ready to embrace more fiscal restraint. Kicking off a day for investors at its Culver City lot, Sony Entertainment CEO Michael Lynton promised a “new era of greater accountability and transparency” that will result in fewer films being made.
The studio will reduce the number of films it makes from roughly 20 annually to closer to 18 each year. It has also learned a a valuable lesson from a crowded summer that saw tentpole films like “Iron Man 3” and “Despicable Me 2” make it difficult for original films to establish a toe-hold.
Next summer, Sony will reduce the number of films it debuts from nine to four, executives said.
Also read: Sony to Cut More Than $100M in Coming Months
It’s also refining its development process and has been trimming the number of “first look” deals it has with producers. Cutting back on these pacts, has cut costs 50 percent from a peak seven years ago, according to Amy Pascal, co-chairman of Sony Pictures Entertainment and chairman of Sony Pictures Entertainment Motion Picture Group.
“We’re refining our greenlight process,” Pascal said. “We’ve raised the profit thresholds, demanding an even higher standard for creative and financial success.”
In some cases, this new discipline has taken the form of finding shooting locations in states like Louisiana or Georgia that offer tax incentives — a practice that has resulted in $100 million per year in savings, on average. In others, it means doing away with deals that gave stars a percentage of “first dollar” grosses, before the studio has seen a profit on a film.
Pascal also had a warning for auteurs who fail to fall in line with the spirit of belt-tightening.
“We don’t work with directors who go over budget,” Pascal said, noting that profligate filmmakers “face real financial penalties.”
The show of economizing was prompted by activist investor Daniel Loeb’s attempts last summer to pressure Sony to spin off its entertainment assets into a separate publicly traded company (Loeb’s Third Point Management owns a 6.5 percent stake in Sony). The technology and media conglomerate rejected Loeb’s entreaties, but Sony Chief Executive Officer Kazuo Hirai has publicly stated that the studio needs to improve its greenlighting process.
Sony has hired management firm Bain & Company to identify inefficiencies within the company and advise it on more than $100 million in planned cuts to its staff and overhead.
For his part, Lynton defended Pascal’s track record, despite the rough summer, saying, “she has an unparalleled creative vision.”