Studio Report Card: Sony Corp. Bottom Line
Sony structure stabilized
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Sony Corp.'s desire to become a bigger entertainment player took a major step toward reality with the elevation late in the year of Howard Stringer to chairman of Sony Corp. of America. Both Sony Music Entertainment CEO & chair Thomas D. Mottola and Sony Pictures Entertainment CEO John Calley now report to Stringer, rather than to Sony's headquarters in Tokyo. The reporting arrangement not only establishes responsibility for Sony's U.S. operations in a single unit but gives SCA a single voice in Stringer. The autonomy previously accorded SME and SPE is thought to have hampered negotiations on certain business deals. Sony had entertained forming alliances throughout much of the year with other entertainment companies, including CBS. Stringer, who joined Sony as president of SCA less than two years ago, has dismissed speculation that the new structure is a prelude to a long-predicted initial public offering of SCA's music and film interests. "We are not working on an IPO at all now," he told Daily Variety. In addition to giving SCA one voice, Stringer's enhanced role should allow Sony president/co-CEO Nobuyuki Idei to take a step back from day-to-day operations in the States and to spread himself more evenly throughout Sony's $51 billion global busi-ness. Some Sony watchers believe Idei has been overly immersed in U.S. operations since its Hollywood studio wrote off a breathtaking $2.7 billion in 1995. HIGH POINTS: Sony and other partners completed their acquisition of Telemundo Group in August, thus paving the way for stiffer competition against dominant Spanish-lingo broadcaster Univision. Sony stands to benefit handsomely in the highly profitable battle for the Hispanic audience, having acquired 50% of Telemundo's network operations and 25% of its station operations. Despite operating losses for the worldwide division, Sony Music Entertainment not only posted record-high revenues for the first half of fiscal 1998 but, according to SME chief financial officer Kevin Kelleher, gained market share in virtually every territory. LOW POINTS: The unexpected resignation of SPE co-prexy Jeff Sagansky in early 1998 was attributed by many to a lack of vision at Tokyo headquarters. Sagansky himself blamed the exit on Sony Tokyo's taking a more "hands-on approach" to its international businesses, which, he felt, compromised decisions made by the studio, where, in his view, "the expertise resides." The confusion temporarily put a cloud over Stringer as well. But that has been removed by last month's elevation of Stringer, the CBS veteran and former president of its broadcast operations, to chairman and CEO of SCA. Hampered by the Japanese economic downturn, Sony Corp. saw its operating income drop 21% to $815 million in the first half of its fiscal year ended Sept. 30. Sony Music Entertainment was responsible for much of the decline, having experienced a 74% slide in operating income, even as sales increased 10.3% to $1.3 billion. Conversely, Sony Pictures Group posted a 5.9% gain in operating income while its revenues fell 6.7% to $1.1 billion. OUTLOOK: Sony Corp. appears poised to rebound with the Asian economy, while SCA stands to benefit from a more fo-cused vision and a delineated chain of command. The combination may well lead to the alliance Sony so desperately desires not only for the sake of clout but to secure distribution for its entertainment products. Sony Music, meanwhile, emerged from the holidays with hot sellers from Celine Dion, as well a best-of set from Mariah Carey and a four-CD boxed set from Bruce Springsteen. SME could also benefit from fallout over Seagram's absorption of Polygram, should the forced merger induce top Polygram acts to seek a new home with another major music company. In New York, Sony Pictures' profile could loom much larger should it nail down the deal it is close to finalizing to manage New York Studios, the new film and TV production facility planned for the Brooklyn Navy Yard.
