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Banned
http://www.bloomberg.com/news/2014-05-18/sony-breakup-would-be-better-late-than-never-real-m-a.html
"“Last year there was some hope, and now we’re seeing a capitulation of that hope,” Daniel Ernst, an analyst at Hudson Square Research Inc. in New York, said in a phone interview. “The worse the electronics part of the company does, the more pressure there will be to look at” Loeb’s suggestion."
"A breakup is “long overdue,” Chris Konstantinos, [...] said in a phone interview. “You could almost do what I would term a ‘good bank/bad bank’ type of scenario.”
"A breakup would make it easier for investors to assess the disparate units, said Konstantinos of RiverFront. One way of doing that would be to put higher-growth divisions, including PlayStation and entertainment, in one business and more commoditized operations, like TV, in a “cash cow” business focused on buybacks and dividends, he said."
"“For the first time over the last four or five months, I am seeing real signs that the company is doing all the right things,” Anvarzadeh said by phone. “You could argue that it’s come too late, but we are where we are and the question is, ‘How would you restructure this business at this stage?’”
Severing ties between the electronics and entertainment operations now would be a mistake, he said.
“For Sony to give up its best businesses, its highest cash-flow generating businesses, when it needs it the most, doesn’t makes any sense,” Anvarzadeh said."
A couple of opposing views there. I wrote a lengthy post the other day on why I believe their media divisions need to be either reformed or freed from the dead hands of Sony management. I'll dig it up in a minute and post it under here. They are not part of the article, and represent my views alone.
"“Last year there was some hope, and now we’re seeing a capitulation of that hope,” Daniel Ernst, an analyst at Hudson Square Research Inc. in New York, said in a phone interview. “The worse the electronics part of the company does, the more pressure there will be to look at” Loeb’s suggestion."
"A breakup is “long overdue,” Chris Konstantinos, [...] said in a phone interview. “You could almost do what I would term a ‘good bank/bad bank’ type of scenario.”
"A breakup would make it easier for investors to assess the disparate units, said Konstantinos of RiverFront. One way of doing that would be to put higher-growth divisions, including PlayStation and entertainment, in one business and more commoditized operations, like TV, in a “cash cow” business focused on buybacks and dividends, he said."
"“For the first time over the last four or five months, I am seeing real signs that the company is doing all the right things,” Anvarzadeh said by phone. “You could argue that it’s come too late, but we are where we are and the question is, ‘How would you restructure this business at this stage?’”
Severing ties between the electronics and entertainment operations now would be a mistake, he said.
“For Sony to give up its best businesses, its highest cash-flow generating businesses, when it needs it the most, doesn’t makes any sense,” Anvarzadeh said."
A couple of opposing views there. I wrote a lengthy post the other day on why I believe their media divisions need to be either reformed or freed from the dead hands of Sony management. I'll dig it up in a minute and post it under here. They are not part of the article, and represent my views alone.
I read that Loeb wants to try again, but if anything Sony needs to rid itself of legacy businesses and transform itself into a proper media company and transition PlayStation from an electronics division into a media division. The fact is that the PS4 is likely to be the last Sony home console, PS Now is their future, and that means SCE becomes a content division like SPE and SME. Pooling resources and IP is the key to making Columbia Pictures/SPE successful again. The biggest problem for SPE is that they have very poor ROI, a couple of years back people raved that they had the biggest box office takings in the US of all the major studios, but for FY12 SPE made just $500m globally. A pittance compared to Disney, WB and Fox.
Dan Loeb has the right diagnosis of SPE, but he has the wrong solution. Sony needs to realign the studio to make it more efficient and to push for higher quality. ASM2 is a classic example. While I enjoyed it, I also admit it is a poorly written film with flimsy plot points and unnecessary scenes. The first one had a better written plot that hung together more easily but the villain was poor and it redid the origin story. Instead of keeping Steve Kloves who did a decent job they hired "AAA" writers Orci and Kurtzmann who are known for horribly low brow scripts, proper "popcorn movies". While globally ASM2 will outperform Cap 2 because Spider-Man is a much more popular super hero, in the US ASM2 won't reach anywhere near what Cap will do because the story is too contrived and it treats viewers like idiots. The only saving grace is the chemistry between the leads. The other issue I have with Sony's mishandling of SM is that they spend around $350m per film on production and advertising which means they need to do around $750m BO to break even. ASM just about made the grade and they probably made some level of profit after home video revenues, ASM2 will do slightly better because of strong RoW revenues and the expansion of western cinema in Asia, but it will also barely beat the break even point. The goal of SM movies shouldn't be to barely break even. They should be looking for at least 10-15% RoI from BO receipts for SM movies (if not closer to 25%) otherwise it is not worth risking $350-375m every single time unless they take in between $850m and $1bn BO globally. SM movies should be the centrepiece of the profit plan to allow the studio to try their hand at riskier projects elsewhere. But they don't, SPE management seem to content breaking even on them.
Anyway, I think SM is a microcosm of what is going wrong at SPE in terms of movie making, they seem to be too happy with hitting the break even mark and too happy with making poorly reviewed movies. They need a big rethink for the third one before they begin production. In Andrew Garfield they have a truly talented actor and great SM, I just hope they don't waste their final movie with him. The story is still recoverable and they have all the right elements in place for a solid third entry if they can get good script writers involved who want to make a decent movie rather than a piece of crap with a few big set pieces to "wow" the audience. Out of the dead hand's of Sony management SPE could actually be very successful, but this desire to create "popular" movies rather than good ones means they will never have real success. Their TV management is excellent though, they really seem interested in funding and creating great TV shows rather than aiming for mindless popular crap. Audiences have responded, 5 seasons of BB, 5 seasons of Community, The Blacklist got renewed, plus a whole bunch of other shows and they have a decent pipeline AIUI. If only the Pictures side would learn from that and realise quality and success go hand-in-hand.
I would like to add that the $500m global operating profit was boosted by strong performance in their TV division and asset disposals, it is actually highly likely that in the year that SPE topped the BO charts in the US they made an operating loss overall. That situation has repeated itself this year, though there have been some restructuring costs and a couple of outright bombs to deal with like After Earth and White House Down. Excluding the bombs it's possible that SPE had some kind of operating profit.
The reason Dan Loeb is even bothering with his line of attack at Sony is because of this situation, how can the studio that owns Spider-Man and has the ongoing distribution and most of the production rights to James Bond not be making money overall. It is horribly mismanaged, and if Sony were forced to sell 49% of it to the market for $7-8bn it would force them to open up their books so investors could see exactly where the money is being wasted and exactly where savings can be made.
What's worse for SPE is that until around 2012 they had it easy, movies were internally financed because Sony had so much cash on hand, now with costs elsewhere weighing down their balance sheet and operating losses in their core electronics divisions sucking up resources, SPE has had to go for external finance. That raises their operating cost to a level that may be unsustainable with their current model of being happy breaking even on large projects.