Tuesday, 2 July 2013

Hollywood Babble On & On #1038: On Bombs, Spin Offs, & Hedge Fund Thinking.

Sony Pictures has dropped two huge bombs this summer, After Earth and White House Down, and one modest hit with the sleeper This Is The End. That means the company has lost a couple of hundred million bucks pretty much overnight, and the shareholders are getting restless.

Hedge fund billionaire Daniel Loeb controls 6.9 percent of the shares and is calling for what they call a "partial spin-off" of about 20% of the company.

"What are they talking about?" you ask as you furrow your heavy brow in a feeble attempt to understand.

Well, it's going to involve some business talk, so sit back and I will try to explain.

Spinning off is when a large multi-faceted conglomerate sells off one or more of its facets for quick cash and that facet continues to run as their new owners see fit.

So what can Sony Entertainment sell off? 

Let's take a look.

Status: Unlikely. Despite the recent bombs it's still the core of Sony's movie business. Too pricey for be considered a good buy.


Status: Likely. Tri-Star Pictures was started in the 1980s as a partnership between Columbia Pictures, HBO, and the CBS TV network. It's original mandate was to make and distribute modestly budgeted movies that HBO has first dibs for cable, CBS for network broadcast rights. During the merger madness of the 1980s the partnership ended leaving Columbia and henceforth Sony, the sole owner of what is effectively a pretty much separate movie producer and distributor. It was briefly folded by Sony, but was then revived as a marketing, acquisition and distribution company specializing in low to mid-range budget "genre" films, only recently getting back into the big-budget game with the upcoming science-fiction action film  & poor economics lesson called Elysium.

Since Sony/Columbia doesn't need Tri-Star to function as a major studio, they could structure the company into a fully independent distributor. They could then sell it as a distributor for a pretty good price and have some wiggle room in the price depending on how much of the library or other assets will go with it. A financier with deep pockets might want to buy it so they can be master of their own fate distribution and box office profits wise.


Status: Likely, but maybe not successfully. It started out as Columbia Pictures' animation department, then it was their television division, and now, under Sony Pictures, is a producer of low budget "genre" fare.

It doesn't have its own distribution, most of the big titles in the library, like the Underworld and Resident Evil franchises will probably be kept by Sony. It would be like Relativity Media's acquisition of Universal's Rogue Pictures, spending a lot of money for a label and not much else.


Status: Unlikely. This is Sony's prestige label for distributing foreign and independent Oscar bait. It's a relatively small player in this whole kerfuffle, and what it lacks in revenue it attempts to make up for in corporate prestige.


Status: Likely, but not successfully. Triumph and Destination Films were started to sell films either direct to video, or to small theatrical releases.

They have no distribution of their own to think of and their libraries are comparatively negligible and don't have the weight of a "brand" with at least some record of success in the zeitgeist. Not only that, even Sony Pictures isn't quite sure if these companies are still functioning or functional.

Not going to get much money, and even then they probably wouldn't be a good buy.

But spinning off one or two divisions is not the magic bullet that will solve all of their problems. Sony and Columbia must reform their business practises. They tend to pile on heaps of money on stars and filmmakers that they have a previous relationship with, even when they're long past their "sell by" date. Remember this is the company that pissed away $120 million on a romantic comedy.

A little frugality could go a long way to keep them from being battered by their own bombs.

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