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Monday, December 05, 2005

WSJ: Sony spends, Disney experiments


Just renewed my subscrip to the Wall Street Journal Online - which had lapsed for about a year. They're doing some great coverage lately of the movie industry:

- "Sony's Stringer Faces Havoc at Two Units," is one story from today's paper. The units in question are music and movies. Kate Kelly and Ethan Smith write:

    "...the company's movie unit, Sony Pictures Entertainment, has had one of its worst runs at the box office in recent years. Of the two dozen movies Sony has released this year, several have cost more than $100 million to make, but only one, the romantic comedy "Hitch," has sold more than $100 million of tickets domestically. The situation has prompted Mr. Stringer and the division's heads, Michael Lynton and Amy Pascal, to re-examine the way in which they set budgets, approve pictures for production, and decide how many movies to release each year, according to people familiar with the matter. While these people say that neither executive presently is in danger of being replaced, prolonged dismal results could put added pressure on them in the new year.

    Such management and financial troubles come at a time when Mr. Stringer can ill afford them. The task of fixing the electronics units has kept Mr. Stringer circling the globe almost nonstop. Now the entertainment units' failures have added a painful irony, given that it was Mr. Stringer's solid track record as head of the Sony Corp. of America, where he had overseen the music and pictures divisions since the late 1990s, that helped him clinch the top Sony job earlier this year. After his promotion, Mr. Stringer chose not to replace himself in his old job -- leaving him on the hook for the growing mess in the entertainment units.

Later, they point out that this month's "Memoirs of a Geisha" and "Fun with Dick and Jane" could prove to be hits - but that at least one "Titanic"-sized gamble is on the way:

    "...[R]educing the cost of movies is a challenge. A case in point: `Spider-Man 3,' scheduled for release in 2007. Already, the budget for the film is said to be between $250 million and $300 million, people close to the studio say -- a gigantic price tag, even for an immensely successful franchise."

In a Q&A today with Disney CEO Bob Iger, the top dog gets one thing very right and one thing very wrong:

Right: Experimentation can invigorate an entire company to think differently about its business.


    WSJ: You smashed the glass with the deal to sell episodes of "Desperate Housewives" and "Lost" for $1.99 on the new video iPod. What were the most important achievements of that agreement?

    Mr. Iger: Firstly, we'll learn more about consumer behavior and using new technology in a new window with different pricing. Secondly, I really wanted to use it as a catalyst to get the company thinking more about breaking with tradition and following the consumer. Interestingly enough, nothing has done more to reignite the company than this deal. It almost has created more value for the company than the deal itself.

    WSJ: How have your troops responded?

    Mr. Iger: I think the troops love the fact that we were first. It's had a great impact on the company's spirit. The feeling is tangible; whether that translates into behavior change is a little too early to tell, except that I do sense that there is a lot of exploration going on at all of our businesses. The other thing that's good is that the company seems to have learned very quickly that it shouldn't be about just making a deal, it has to be the right deal. We've been besieged with other opportunities but instead of just getting in line and just checking off 25 other deals, we're actually being very selective.

    WSJ: Did advertisers complain about the iPod arrangement?

    Mr. Iger: We heard from just about everybody. Affiliates, advertisers, mass retailers. No one quite knew what to make of it. Everybody wanted either to make a little noise or register a complaint almost in advance of any change in the marketplace conditions.


Wrong: There's an idea and talent shortage in the movie business, and that means studios should concentrate on making fewer big budget films, and spending more on marketing them.

    WSJ: You mentioned that too many movies are made these days. What do you mean by that?

    Mr. Iger: I think the business has changed, it's gotten more competitive, but movie companies are following a business-as-usual approach. I'd rather that everybody made fewer movies and they were more selective in the movies they made. I don't think the talent pool has expanded enough to feed the number of movies being made.

    WSJ: Will the slate in 2006-2007 reflect that criticism?

    Mr. Iger: It will at Disney. I can't speak for the others. We're reducing the number of films. At Miramax, we're using the opportunity of ending the relationship with Harvey and Bob Weinstein to cut back our investment in that business by hundreds of millions of dollars.

Iger also talks with the Journal about changes to movie release windows, and the Pixar relationship.