How Tom Rothman Could Help Sony Lure Film Investors (Analysis)
The new TriStar chief's reputation for fiscal conservatism could calm potential financiers concerned about the studio's profitability.
Ever since the surprise Aug. 1 announcement that Sony Pictures was bringing aboard former Fox film studio chairman Tom Rothman to revive its TriStar label, industry observers and those with ties to the studio have been speculating about what this major new player will bring into the mix. One ingredient likely will be financial discipline. Another possibility: money.
SPE has been seeking financing partners and has an arrangement with Hemisphere Capital, which kicked in part of the budget of Smurfs 2 and Men in Black 3, and it has done recent co-financing deals with Megan Ellison's Annapurna Pictures (Zero Dark Thirty) and MGM (Skyfall). But one veteran entertainment-finance lawyer says Rothman's reputation as an executive focused on profitability could help Sony lure a new slate deal. According to this observer, attracting financing has been a problem for Sony because investors are concerned about the studio’s spending and profit margins."If someone were going to invest in a slate, they will more likely do it with Tom around," he says.
A prominent producer who has done business at Sony says linking with the studio will also make Rothman more alluring to potential investors. “You need the studio piece,” this person says. “They don’t just kick in blind.” And assuming that a deal comes together, he adds, “you get the kick of a second announcement.” Indeed, Sony's press release announcing the TriStar relaunch with Rothman stated, “The newly formed venture will have the ability to take on outside investments as well.”
It’s been a tough summer for SPE, which could use some good news. There may or may not be more trouble ahead as the futuristic Neill Blomkamp thriller Elysium is a question mark that cost the studio $115 million for worldwide rights, plus marketing costs. While Sony reaped profits from Seth Rogen’s small comedy, This is the End, and the Adam Sandler-led ensemble Grown-Ups 2, Smurfs 2 will disappoint domestically (its fate internationally is still unclear) and the studio already suffered costly, high-profile misses with Will and Jaden Smith’s After Earth and Roland Emmerich’s White House Down.
Sony president and CEO Kazuo Hirai has publicly rebuffed hedge-fund billionaire Daniel Loeb’s proposal to spin off the company’s entertainment operations but Loeb, still lurking in the wings, has shone a bright light on the studio’s spending, prompting Sony to pledge in an August 5 letter that it will be “very focused on increasing margins” and will provide more disclosure about the studio’s performance.
Industry insiders think these pressures led Sony Entertainment CEO Michael Lynton and Sony Pictures co-chairman Amy Pascal to add Rothman, who has been consulting at the studio since he left Fox a year ago. “I believe there clearly was a desire to do something to shake things up a bit,” says a source close to the studio. “This was a way to do it without upsetting all the other applecarts on the lot." (In other words, no one was fired.) This person says Rothman -- though he has alienated some filmmakers with micromanagement and rigorous cost control -- was no doubt easy to sell to the bosses in Japan based on a record of commercial success at Fox. “If you’re in Tokyo and you look at his resume, you might be impressed,” he says tartly.
But another observer describes the Rothman hire as “a short-term fix” and predicts “unintended consequences.” Rothman could make up to four movies a year, meaning that Columbia Pictures and the Screen Gems genre unit will lose slots, and the stage could be set for rivalry over material and especially release dates. The studio says the situation will not be competitive but that hasn’t allayed concerns among those who do business there. “Tom Rothman is not known for working particularly well with others,” says another with ties to Sony. “I hope the labels peacefully co-exist.”