Globe shrinking, Schulhof warns

If Hollywood has a future, it’s going to come in a number of foreign languages and be wholly interactive, Michael Schulhof maintains.

Throwing down a challenge to a roomful of Sony executives and a smattering of MCA exex yesterday at the L.A. World Affairs Council, the vice chairman of Sony U.S.A. pointed to a new form of entertainment in the year 2000, one that only the largest and most entrepreneurial of media companies could embrace.

“Globalization and technology,” he said, “are the two most important driving forces that are affecting changes in our industry.”

He swiftly painted a picture of a business where Hollywood has to think of foreign markets as its own backyard and rethink the notion of passive moviegoing , replacing it with electronically distributed films that audiences can interact with.

“The entertainment industry is in a unique position to use consumer electronics, movies and music in an interactive way that expands global markets and touches people’s lives. From a business standpoint, like it or not, this will be the only way that large entertainment companies can survive in the coming century.”

To this end, Schulhof, who holds a Ph.D. in physics, is redefining the $ 28 billion consumer electronics company’s entertainment operations to wring more revenues from its diverse product lines sold around the world. “It’s not just the software, it’s also the electronics,” he said. “Sony has to treat electronics, film, music as the same around the world.”

For one, Sony has been refining video projection of films in theaters. Schulhof contends a test in 100 movie houses in Brazil of video projection of advertisements and more recent side-by-side comparisons of video and film showed “electronic and film projection are indistinguishable from each other.” A satellite delivery of film to a movie-size high-definition screen could be the next step.

Moreover, film properties will be fully exploited to a number of vehicles, from videogames to theme park rides. Or, as Schulhof said, “You won’t just see the movie, you’ll feel it, play it, ride it.”

Already, Sony has toyed with an interactive movie from New York’s Interfilm, where viewers select different story lines on the screen via joysticks attached to seat armrests.

As a result, videogame properties will translate to the screen. “You are going to see feature-length motion pictures produced specifically for that market, just as some films are now produced for television or homevideo.”

Sony is also already cross-marketing film and music products. Schulhof cited the success of “My Girl’s” soundtrack, which sold more than 1 million copies. Likewise, videogames are being cross-promoted with films, starting with “Bram Stoker’s Dracula” and “The Last Action Hero” expected next. Sony Electronic Publishing, a relatively new group under Schulhof, has been successful bringing these titles to market.

“We started a multimedia group under 2 years ago,” said Schulhof, “and we expect $ 100 million in revenues in 1994, from a standing start. It’s explosive.”

It has been tough making more than tentative efforts to have the film and music groups work closely with the hardware side. But that, he said, is starting to change.

He said Sony Pictures, despite lower revenues in the third quarter, remains an excellent investment. Schulhof was instrumental in Sony’s purchase of Columbia Pictures in 1989. Since then, SPE’s market share has doubled and revenues increased substantially.

The music group, led by star performers like Michael Jackson, Gloria Estefan and Julio Iglesias, typifies much of Schulhof’s vision of Sony’s future as a global player.

Half of Sony Music’s revenue comes from overseas recordings, locally produced , featuring local artists. Iglesias, for example, records in seven languages. To promote foreign music in the U.S., Sony created TriStar Music last week.

Likewise, Schulhof chastised Hollywood for thinking of the international markets as secondary. Echoing points by made by industry attorney Peter Dekom, he argued that soon domestic and foreign film revenues will be equal, compared to today’s 2-to-1 ratio in favor of domestic.

“In the not-too-distant future, the total international market will be greater than the domestic market,” Schulhof forecast.

If the entertainment industry doesn’t take these steps and continues to market one-way to the world, Schulhof said, “that one-way export mentality will virtually guarantee a protectionist backlash.”

As for Sony’s progress in introducing new technologies, Schulhof conceded he was disappointed there weren’t enough Sony players to support the new Mini-Disc music format. Still, he was optimistic that the system, a small, 2 1/2 inch optical disc, will become a standard, replacing analog cassette tapes.

“It took compact discs 10 years to reach 40% of the market,” he said. “I predict it’ll take 10 years to reach 50% for Mini-Disc.”

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