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Sony’s film division looking to make $100 million cost savings

By | Published on Wednesday 20 November 2013

Sony Corp

Sony Entertainment is looking to cut $100 million in overheads at its film division, the New York Times reports.

This follows a cut in advertising spend and the firing of the Marketing Director at Sony Pictures earlier this year, in turn following disappointing box office takings on a number of films. In addition to its movie studios, Sony Entertainment also encompasses the corporation’s television and videogames businesses, and music firms Sony Music and Sony/ATV.

Management consulting outfit Bain & Company has reportedly been brought in to oversee the cost cutting exercise. A spokesperson for Sony told NYT: “As part of a nearly four-year process of increasing financial discipline, Sony Pictures is conducting a review of its business to identify further efficiencies. Our object is, and always has been, to operate an efficient studio that is uniquely positioned to capitalise on further growth opportunities”.

This move follows the previously reported proposal by investor Daniel Loeb that Sony sell off 20% of its entertainment business in a stock market float that would also force the entertainment companies to become more transparent to investors. Loeb’s Third Point hedge fund is now a significant Sony shareholder, controlling just under 7% of its stock, so the suggestion was taken serious by the Corp’s senior management.

However, in August CEO Kazuo Hirai said in a letter to Loeb: “Sony’s entertainment businesses are critical to our corporate strategy and will be important drivers of growth. I am firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses”.

At the time Loeb said he was “disappointed” with the decision, and would “explore further options to create value for Sony shareholders”. It’s not clear if bringing in Bain & Company is in anyway a response to Loeb putting pressure on management, or if it has further implications for other Sony entertainment divisions beyond film.

Certainly talk of cutbacks at the Sony film company has led to rampant speculation that similar cuts might be planned for the Sony Music record company and Sony/ATV music publisher, though nothing in the New York Times report suggests that is on the agenda. And Sony Music’s big release of the year, next week’s One Direction album, is unlikely to bomb like ‘White House Down’.

It’s expected that Sony Entertainment Chief Exec Michael Lynton will formally announce his cost cutting plans for Sony Pictures at an investor meeting this Thursday.