Sony Sale Speculation Returns – But Can Japan Let Go of Reborn Studio?

Back to its fighting weight, SPE might be too valuable to spin off, insiders say

Last Updated: February 2, 2018 @ 7:07 PM

Buzz about the possible sale of Sony Entertainment resurfaced this week after news of their major leadership changes  — but the Japanese company won’t likely catch the media consolidation fever gripping Hollywood, industry experts told TheWrap.

Unlike recent splashy deals — AT&T scooping Time Warner, Disney swallowing most of Fox and the recombination of CBS and Viacom — Sony is likely to hold on to its content and distribution engines as its current CEO Kazuo Hirai steps down in April.

“It would be a slap in the face to sell this company right now. They just got back on their feet,” said one movie producer with several projects on the lot. Sony stock closed six points above average over sale speculation after Hirai announced his resignation.

Sony Entertainment has never looked better, especially after an almost insurmountable climb back from the studio’s 2014 hack. The cyberattack’s leak of personnel documents and executive emails scandalized the studio.

Hirai and his then-CEO Michael Lynton stabilized the company, installed Tom Rothman to run the motion picture group and did their best to maintain the success of its TV production business. Lynton was replaced last January by veteran executive Tony Vinciquerra, who seemed to have inherited a brand-new company.

After some devastating losses, Sony Pictures successfully remounted the Spider-Man franchise with the help of Marvel Films. New Dwayne “The Rock” Johnson franchise “Jumanji: Welcome to the Jungle” is defying expectations and nearing $850 million at the worldwide box office. Out of nowhere, Rothman also secured distribution rights to the next Quentin Tarantino film about the Manson murders.

“They’ve got a hit with ‘Jumaji,’ prestige with Tarantino, and Spider-Man is working again,” the producer said. “The cylinders are all firing.”

Sony Pictures posted $96 million in operating profit for its last quarter, starkly contrasting with the same period last year when the studio took a $920 million write-down.

Two weeks ago, Vinciquerra himself said he had no interest in  a potential sale, but growth was a concern.

“If we don’t grow, we will be somebody’s purchase,” the executive said at January’s NATPE Conference in Miami. “I didn’t take the job to do it for a year and sell the company.”

That decision, however, now belongs to acting CFO and incoming CEO Kenichiro Yoshida, who in his succession announcement in Tokyo on Friday stressed “an urgent need for change” and that Sony’s “position in the global market is very different to where it was 20 years ago.”

But the very culture of Sony, according Gerber Kawasaki Wealth & Investment Management CEO Ross Gerber, would prohibit any swift action.

“The number-one barrier to spinning off stuff or doing anything bold is that it’s a Japanese company. They care about different things than shareholder value … people keeping their jobs, for example. The minute you sell off a division, people are going to lose their jobs. It’s not that simple in Sony’s mind,” Gerber said.

Not that it wouldn’t be smart.  Jason Squire, editor of “The Movie Business Book” and Associate Professor at the USC School of Cinematic Arts, said that in selling, “Sony’s own exposure is reduced. Simply because the environment today for theatrical movies is increasingly intense and competitive. This is because Disney and Warner seems to be ahead of the pack.”

Squire said tech giants like Apple, Amazon and Netflix would be natural buyers, as all are still trying to find footing and infrastructure in show business. Gerber added that Apple already poached two top Sony Pictures Television executives last summer — Jamie Erlicht and Zack Van Amburg — so why not complete the set?

“Taking over Sony Pictures, if that was possible, it would be a great move for Apple because they would have more content to add onto Apple TV or whatever it wants to do with it. That’s the only player I see out there,” Gerber said.

There’s also the question of Sony Music — a profitable division that’s an artist developer, distributor and publishing entity in one. Purview of that company was removed from the Sony Entertainment CEO role after Lynton left, and handed to New York-based exec Rob Stringer.

After Hirai’s big news on Friday, Sony reported Q3 revenue of $23.6 billion. Sales jumped 11.5 percent from the same period last year, while its earnings spiked 1,400 percent year-over-year — and that’s not a typo — thanks to the Playstation 4 unit, music and content.

Umberto Gonzalez contributed to this report.