Power shift at Sony Corp.

Sony Corp. sent a powerful signal that it intends to stick to its entertainment “software” (read: movie) ventures despite its losses with the naming of Nobuyuki Idei as president and chief operating officer on March 22.

But the message came alongside a stunning admission by Sony’s Tokyo exex that Sony Pictures Entertainment went awry under former co-chairmen Peter Guber and Jon Peters. As a result, the company implied, Japanese toppers will take a more hands-on approach in those software ventures.

Idei (pronounced ee-Day), 57, assumes control of the massive high-tech company on April 1, succeeding Noria Ohga, 65, as president. Ohga will stay on as chief executive officer and chairman of the board, a position that is often honorary in Japan.

At a hastily called news conference in Tokyo, Ohga told reporters that he would help train Idei for the top slot, but maintained that he would still run the show as CEO. A similar transition occurred more than a decade ago when Ohga took over, but continued working under Sony founder Akio Morita.

“I want to emphasize that I am still CEO, and it’s my duty to help Mr. Idei to become CEO himself one day – but I still have a lot of time to go in the future,” Ohga says. “We are going to work together like two men running in a three-legged race.”

Ohga said he had considered many candidates to succeed him, but narrowed the list late last year and offered the post to Idei in January.

Idei is considered a saviour for SPE, sources say, because he has close ties to Sony Corp. of America prexy Michael Schulhof. Unlike many of the Sony execs, Idei speaks English and French, drives a Jaguar and sports a voluminous knowledge of film. After two years of queries about whether Sony would divest itself of the struggling entertainment divisions, sources say Idei’s promotion shows assures continued support.

Even Schulhof weighed in after the conference with a statement: “These appointments reaffirm Sony’s strategic vision to be a fully integrated electronics and entertainment company, powerfully positioned for the future.”

Idei added: “We are facing a growing convergence of computer telecommunications and consumer electronics industries, and an increasing importance of music, pictures and other software operations…. I hope to revitalize the company by capitalizing on the new business opportunities this will bring.”

Admission of failure

One shocking aside, however, was Ohga’s admission that Guber and Peters essentially failed as chairmen of Sony Pictures Entertainment, whose losses over the last few years forced Sony Corp. to take a $2.7 billion write-off last fall.

“Regarding our movie management operations, in the beginning we thought that Jon Peters and Peter Guber would be able to manage our movie operations well,” said Ohga in Japanese, simultaneously translated into English at the conference.

“We are very sorry to say, but that was our miscalculation. Peter Guber is a genius when it comes to making movies – this is no mistake…. Now, as you are aware, we have made major changes in management.”

Guber stepped down in September as chairman of Sony Pictures Entertainment. Alan J. Levine took over the top spot at SPE, being named chairman/chief operating officer. Mark Canton is chairman of Columbia TriStar Motion Picture Cos. Peters left his post as co-chairman of the company in 1991.

Ohga made no further comments on the Guber/Peters duo. But Ohga’s remarks came after he had implied that Sony would continue to modify the SPE film studio operations with more involvement from Tokyo.

“I do admit more work needs to be done in order to secure a leading position in the movie business,” he said. “With these people, we must create a team and think seriously about what shape we want our movie related software business to take in the 21st century.

“We must do this through serious discussion. In terms of such a discussion, I think Mr. Idei has the capability to pick out exactly what Sony has to do. Some people have no sense of software – like being tone deaf, there are ‘software-deaf’ people. I feel Mr. Idei has that ‘software spirit.'”

Part of Sony’s new strategy in Hollywood includes limiting film budgets – with a few exceptions – in order to avoid costly flops such as “Last Action Hero” and “I’ll Do Anything.” Most of the pictures in the 1995 lineup are in the production budget range of $20 million-$30 million. Another part of the strategy is to form financial partnerships on more films.

Ohga acknowledged the growing need for solid TV production at Sony, hoping to utilize former CBS chief programmer Jeff Sagansky, now exec vice president of Sony Corp. of America.

“For the management of a (studio), what is actually more important is the ability to make good TV programs,” he said. “What is very important for a (studio) is to produce as many TV program hits as possible. We hired Jeff Sagansky, who was in charge of programming for CBS, and with such people at the core, we have made full-fledged efforts to restructure our operations, and our efforts have begun to bear fruit.”

He pointed to such outlets as the compact satellite service DirecTv, which still has “many, many empty channels that can be filled with programs.”

The statement about Sagansky was surprising because many on the Sony lot thought Sagansky was brought in by Michael Schulhof, Sony Corp. of America’s CEO, to help shore up SPE’s film division.

Ohga’s announcement of his retirement from the presidency has long been expected. But few expected him to move Idei – Sony’s chief PR man and the youngest of the company’s managing directors – into that leading role.

Sources said Idei jumped over two levels of management and at least 11 execs to take the spot.

Idei joined Sony in 1960 after graduating in economics from Tokyo’s prestigious Waseda U. He became managing director in 1994 after serving as head of the merchandising and PR departments as well as chief of the creative communication department. More recently, Idei has been the main spokesman on the DVD format issue.

Sony officials said later that the appointments were formalized at an extraordinary board meeting just hours before the press conference.

Earlier in the week, Ohga flew to Hawaii to gain approval for the management shakeup from Akio Morita, the co-founder and former chairman who vacated his post last November after suffering a cerebral hemorrhage.

Idei’s appointment dealt a blow to the ambitions of Minoru Morio, the executive deputy president who was widely thought to be Ohga’s anointed successor. Morio is said to have taken the blame for mishandling the strategy over DVD formats.

Rumors swirled

Speculation peaked in January that Sony was close to abandoning its single-sided DVD format, developed jointly with Philips NV, after most of Japan’s consumer electronic giants came out in support of the double-sided format developed by Toshiba-Time Warner.

Ohga gave a strong hint of the face-saving strategy Sony may pursue on the DVD front, given the complete absence of public support from any other major Hollywood studio, by stressing the computer software applications of DVD technology.

“You (press) have been writing like spectators enjoying the (DVD) fiasco. We must consider the computer business also when it comes to DVDs… DVD-ROMs need to be incorporated in the DVD standards, and that is why we are sticking to our single-sided format. I just can’t understand where to put the label if you have a dual-sided format, and we believe the dual sided disc won’t stand as products in the market,” he said.

Other promotions at Sony included Tsunao Hashimoto, 62, currently executive deputy president, who will be upped to vice chairman; and Sumio Sano, Hideo Nakamura, Suehiro Nakamura and Katsuhio Hayashi all named managing directors.

– Robinson reported from Tokyo; Cox reported from Los Angeles.

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