Sony film mess reflects gadgets-entertainment gap
Dec 26, 2014 3:33 PM (ET)
By ELAINE KURTENBACH
Associated Press
http://apnews.myway.com//article/20141226/as--sony-muddled_marriage-c12ea8dc02.html
TOKYO (AP) — Sony's iconic gadgetry and the star appeal of Hollywood may
have appeared to be a perfect match when the electronics giant bought
Columbia Pictures in 1989. A quarter century later, it's apparent that
Sony Corp. has not attained the magic synergy it was hoping for.
The stolid silence of Sony's Tokyo headquarters over the hoopla
surrounding Sony Pictures Entertainment's "The Interview" underscores
the longstanding divide between the Japanese parent company and its
U.S.-led and -run motion pictures subsidiary, successor to Columbia
Pictures.
Marrying the cultures of Sony Corp., a quintessentially Japanese
company, and its Hollywood studio was such a challenge that company
founder Akio Morita and his successor as chairman, Norio Ohga, never
really tried, analysts say. Instead, they left Sony Pictures to mostly
run itself.
"They're separate businesses run by separate management," said Damian
Thong, a senior analyst at Macquarie Capital Securities (Japan). "Since
the late 1990s it's been run basically as a stand-alone business."
Sony Corp. in Tokyo refused requests for comment on developments related
to "The Interview," referring all inquiries to Sony Pictures in the U.S.
After first withdrawing the movie from a planned Christmas release on as
many as 3,000 screens, Sony Pictures made the movie available on various
digital platforms Wednesday, a day after Sony and independent theaters
agreed to release it in over 300 venues on Christmas.
There were no plans to release the movie in Japan, even before hackers
objecting to its satirical portrayal of an assassination of North
Korea's leader Kim Jong Un staged a massive cyberattack on Sony Pictures.
As entertainment has shifted to digital delivery systems, technology
analysts say it has become increasingly clear that Sony botched an
opportunity to outdo Apple in creating a far more influential and
valuable business from melding its consumer electronics expertise with
ownership of a major movie studio and recording label.
"It feels like there has been a lot of fumbling and a lack of
coordination there for too long," said Rosenblatt Securities analyst
Martin Pyykkonen. "They really haven't won in anything in a long time
when they could have been a leader in terms of bringing devices and
technology together. So shame on them."
The lack of integration between Sony's main divisions carries throughout
the group and is among the reasons why the once iconic electronics giant
has fallen behind, says Sea-Jin Chang, author of "Samsung vs. Sony" and
a business professor at Singapore University.
Looking back, Chang believes Sony's 1989 acquisition of Columbia
Pictures was mainly a trophy purchase driven by Morita's personal whims.
"They made all the possible mistakes they could make in an acquisition,"
Chang said. "It was driven by ego. It suffered from bad implementation.
If you teach a class on M&A (mergers and acquisitions) this is the case
study on how not to do it," he said.
Sony's top executives have generally refrained from meddling in the
moviemaking process, giving Sony Pictures an autonomy that allows the
studio creative leeway. But in turn the Sony brand has not gotten much
exposure through the films it produces.
"To be fair, I don't think there has ever been that much of a synergy in
the sense that a Sony picture has ever sold a Sony product in a
meaningful way," Thong said.
Twenty or 30 years ago, that didn't matter so much. But now that Sony
Corp.'s overall brand appeal has faded, it needs all the help it can get.
Sony Pictures has its ups and downs but has been a relatively strong
performer in recent years, with hits like "American Hustle" and "22 Jump
Street" adding to the studio's brand value. For the fiscal year ended
March 2014, Sony Pictures generated operating income of $501 million on
revenue of $8.05 billion; its parent reported total operating income of
$257 million on sales and revenue of $75.41 billion.
"Sony Pictures overall is quite important from a marketing relationship
point of view, just because it's one of the few properties now that is
really getting people to see the Sony name anymore," said Benjamin
Cavender, a senior consumer electronics analyst at China Research Group
in Shanghai.
Some of the frustration with this longstanding malaise boiled over last
year when an activist investor, New York hedge fund manager Daniel Loeb,
bought a 7 percent stake in the company and urged CEO Kazuo Hirai to
spin off the entertainment division. Hirai didn't, but Sony cut costs,
laying off dozens of workers, to boost Sony Entertainment's profits
before Loeb sold his stake earlier this year.
Like many long-established companies that have been caught off guard by
technological upheaval, Sony was still making too much money in its
traditional lines of businesses to have the incentive to try something
radically different, analysts said.
In the meantime, a traditional tendency toward building consensus
fostered bureaucratic obstacles between its various lines of business
that make "it very difficult for anyone to integrate anything within the
organization because people aren't talking to each other and they're not
sharing information," Cavender said.
"Sony is run like a group of silos," agreed Wedbush Securities analyst
Michael Pachter, who bought more than 8,000 shares of Sony stock after
Loeb tried to shake things up. "I don't think Sony was ever going to be
the first mover (in entertainment's digital shift), but being Japanese
meant things moved a lot slower than they should have been. They could
have been a lot more nimble."
Instead, Sony has been outmaneuvered by technology companies that
anticipated the changing trends. Apple introduced the iPod to accompany
its iTunes music store followed up by the iPhone and iPad, devices that
have become entertainment and information hubs. Google bought the video
site YouTube in 2006 and then gave away its Android software to create
the leading technology platform on mobile devices. Netflix has built the
Internet's biggest video subscription service by working with a wide
variety of devices, including Sony's PlayStation video game console.
Amazon.com has been trying to orchestrate its own digital medley of
devices, video, music and books.
Sony, meanwhile, is still struggling to serve both its home and global
markets and to decide if it will stick with its television manufacturing
business or spin it off entirely, focusing instead on more profitable
areas such as imaging sensors, games and entertainment.
"It used to be that you'd see a Sony TV or Sony Walkman and think, "Man,
Sony is the coolest product to have," and that doesn't exist to the same
extent anymore," Cavender said.
"It's important that they handle what they do with Sony Pictures very
carefully. From a marketing point of view, it means a lot."
_______________________________________________
Medianews mailing list
[email protected]
http://etskywarn.net/mailman/listinfo/medianews_etskywarn.net
