×
You will be redirected back to your article in seconds

Third Point Rips Sony Pictures’ Lynton, Pascal Over Film Flops

Hirai criticized for giving execs "free pass" over 'White House Down,' 'After Earth'

Stepping up criticism of Sony Pictures Entertainment, private equity firm Third Point said that Sony leadership was giving “free passes” to chairman and CEO Michael Lynton and co-chairman Amy Pascal, and called into question the studio’s big budget film slate.

In a letter to investors Monday, Third Point says that that they find it “perplexing” that Sony CEO Kazuo Hirai “does not worry about a division that has just released 2013″s versions of ‘Waterworld’ and ‘Ishtar’ back-to-back, instead giving free passes” to Lynton and Pascal, the “executives responsible for these debacles.”

Third Point was referring to a question posed to Hirai at the Allen & Co. Sun Valley conference, when he was asked about the poor performance of “After Earth” and “White House Down” at the box office. “I don’t worry about the entertainment business; it’s doing just fine,” Hirai said, according to Bloomberg News.

“To us, the latest blunders are prima facie evidence of our thesis that Entertainment’s U.S.-based business is being ineffectively overseen and needs its own governance structure led by a board whose job it will be to worry about such troubling results,” Third Point said.

In May, Third Point’s Daniel Loeb delivered a letter to Hirai, calling for a spinoff of as much as 20% of the entertainment division. Although the letter was critical of studio management, it did not refer to them by name. Third Point increased its stake in Sony, and last month had about 70 million shares, or about 6.9%.

A spokesman for Sony said, in a statement, “Sony is focused on creating shareholder value by executing on our plan to revitalize and grow the electronics business, while further strengthening the entertainment and financial service businesses, which generate stable profit. The Sony Board of Directors, as previously noted, is reviewing its proposals. Sony looks forward to continuing a constructive dialogue with our shareholders as we pursue our strategy.”

The studio has reported cost cuts in the past year and has, compared to the TV and electronics divisions, been a bright spot in the Sony empire. Some analysts, accepting the wisdom of spinning off the division, nevertheless express regard for the studio management. The division has expanded its international TV and cable business, and has ramped up its domestic TV production business.

Nevertheless, Third Point said that the entertainment division has a culture that “is characterized by a complete lack of accountability and poor financial controls.” It said that the division “remains poorly managed, with a famously boated corporate structure, generous perk packages , high salaries for underperforming senior executives, and marketing budgets that do not seem to be in line with any sense of return on capital invested.”

Third Point argues that if the entertainment division — which includes music, movies, TV production and cable — “achieved peer margins,” its earnings before the deduction of interest, tax and amortization expenses, or EBITDA, would increase nearly $800 million to just over $2 billion.

While Hirai expressed confidence in the entertainment business at a recent conference in Sun Valley, he also said Sony Corp. would give serious consideration to Loeb’s proposal. The board is expected to meet Wednesday in advance of the company’s earnings call, although insiders don’t anticipate a decision any time soon. Sony Corp. is expected to hold a major strategy meeting in September, according to one individual with knowledge of plans, and an answer on a Sony spinoff could come after that.

Third Point also said it was “concerned” about the 2014 and 2015 film slate, saying that it lacks “lucrative ‘tent pole’ franchises” and that its “pipeline is bleak, despite overspending on numerous projects.”

Third Point did offer praise to Hirai for changes made in the electronics business, by cutting overhead an the number of products offered, They also praised the “perfectly executed introduction” of Playstation 4, and said that the “visible improvement in Sony’s new products has caused us to rethink our approach to valuing Electronics.”

More Biz

  • Hollywood celebrated the individuals redefining "on-screen

    Media Access Awards Honors Individuals Increasing Representation for Disabilities

    Hollywood celebrated individuals redefining “on-screen representation for the disability community” with the Media Access Awards, in partnership with Easterseals, at the Beverly Hilton Thursday. Norman Lear and Jimmy Kimmel kicked off the event, which featured Camryn Manheim, CJ Jones, Coby Bird and “The Peanut Butter Falcon” actors Zack Gottsagen and John Hawkes presenting awards along [...]

  • 'Roxanne' Singer Arizona Zervas Signs With

    'Roxanne' Singer Arizona Zervas Signs With Columbia

    Hotly tipped singer-songwriter Arizona Zervas, whose viral hit “Roxanne” is in the top 40 of the Billboard Hot 100,  has signed with Columbia, Variety has confirmed. Since the release of the track on Oct. 10, “Roxanne” has reached nearly 50 million streams on Spotify. The single topped Spotify U.S. top tracks chart for an uninterrupted [...]

  • Jax Media at Variety New Leaders

    Jax Media Accepts Variety's Creative Leadership Award at New Leaders Cocktail Party

    This year’s Variety New Leaders event, presented by City National Bank, honored innovative visionaries in entertainment. The cocktail party was hosted on a chilly Thursday night in Lower Manhattan’s Jimmy Rooftop Bar at the James Hotel. Patrick McCarthy, senior VP and head of marketing for City National Bank, kicked off the event highlighting the new [...]

  • taylor swift, scott borchetta and scooter

    Rage Against the Big Machine: What's Driving the Taylor Swift Showdown

    The latest Taylor Swift-Scooter Braun-Scott Borchetta kerfuffle involves the sort of music business minutiae that doesn’t commonly interest the general public — in fact, it’s probably safe to say that untold thousands if not millions of people are suddenly familiar with the concept of re-recording old masters. But in blasting Braun on social media and [...]

  • Redbox

    Redbox Settles Disney Suit, Agrees Not to Sell Download Codes

    Redbox has settled its litigation with Disney, agreeing not to resell codes that allow customers to download movies. Redbox has traditionally offered DVDs for rent through its distinctive kiosks. In October 2017, the company also began offering download codes at a considerable discount compared to the price on iTunes, Amazon or other services. Redbox did [...]

  • Shari Redstone: ViacomCBS 'Can Compete With

    Shari Redstone: ViacomCBS 'Can Compete With the Best of Them'

    Shari Redstone is emphatic: ViacomCBS has plenty of resources and the scale to compete in the new world order for media giants. “We absolutely have enough scale,” Redstone said Friday morning during her Q&A held as part of the Paley Center for Media’s International Council Summit in New York. “We have an incredible library. We [...]

  • Taylor Swift

    Taylor Swift Denies Big Machine's Claims Over Song Use, 'Millions' in Debt

    In the latest salvo in a rapidly evolving media battle that has evolved over the past 15 hours, Taylor Swift refuted Big Machine Records’ claim that the company did not try to block her from using material from her early albums, which are owned by the label, in forthcoming television specials. Swift had leveled those [...]

More From Our Brands

Access exclusive content