Sony Feels More 'Ghostbusters' Pain Due to Finance Partner's Exit
LSC Film Corp. had pulled its backing about a month before the film went into production.
Sony Pictures Entertainment remained mum on losses from this summer's Ghostbusters in its earnings call on Tuesday, but sources tell The Hollywood Reporter the considerable financial pain inflicted on the studio by the July reboot was magnified by the fact that key financing partner LSC Film Corp. pulled its backing about a month before the film went into production.
LSC has invested in Sony movies since striking a deal with the studio in 2014, and has lost money on many, including The Brothers Grimsby, Money Monster and Aloha. The co-financier initially agreed to put up 25 percent of a Ghostbusters budget that SPE says was $144 million, including rebates, but other sources put closer to $160 million, not counting a considerable marketing spend. LSC ultimately had doubts about the film's prospects, which proved justified as Ghostbusters grossed just $229 million worldwide.
According to sources, Sony Pictures chairman Tom Rothman considered whether the studio could pursue a legal remedy to keep LSC, an entity backed by Texas-based private equity firm Lone Star, from withdrawing from the project. (Another partner, Village Roadshow, took another 25 percent and remained as an investor.)
Had LSC, credited as LStar on Sony films, stayed in the project, it would have covered about $26 million of the picture’s loss of about $70 million. (Sony says the loss was significantly less.) But the studio concluded LSC had acted within its rights and Rothman decided not to formally challenge the move. Though LStar Capital is listed on IMDb as a partner on the film (as is Village Roadshow), sources say that credit is an error.
LSC and Lone Star declined to comment. Sony responded to questions about the relationship with this statement: "LSC Film Corporation and Lone Star have been great partners with Sony Pictures for years — a collaboration of mutual respect. They are part of our family, and we share a strong future together."
Hollywood studios (other than Disney) pursue strategic partnerships to help shoulder the cost of financing their movies and to hedge their risk. Rothman is known to be especially eager to share risk with a variety of partners. Executives familiar with such agreements say it is unusual for an investor to withdraw from a project after having committed to it unless there is a significant change in elements such as the cast or director, or in the financial terms on which the picture is being made.
The LStar deal, which runs through 2019, was struck during the regime of Sony's previous film chief, Amy Pascal, and Pascal greenlighted the all-female Ghostbusters reboot on her way out of the door. Sources say subsequent to the Ghostbusters release on July 15, LSC and Sony began to discuss revising the terms of the agreement. Presumably LSC wanted to sweeten its position after suffering many losses, but Sony suggested instead that a new deal might exclude LSC from participating in the studio’s animated films. That was a non-starter for LSC, as its most successful investment by far to date was in Hotel Transylvania 2, the 2015 sequel that grossed $473 million globally.
A former Sony insider expressed surprise that the studio would try to drive a hard bargain with LStar, given the firm had invested in so many unsuccessful movies. “I don’t know how you punish them,” this executive says. “They got stuck with a lot of turkeys. You should give them a little preferential treatment to make up for it.”
The LSC discussions came at a time when multiple sources cite growing discontent among executives and some producers over Rothman's famously hard-driving, hands-on management approach. Sources say there have been multiple complaints to the studio's human resources department. Sony Pictures Entertainment CEO Michael Lynton seemed to underscore that he is standing by his pick to run the film studio by having what an observer described as a visibly friendly lunch with Rothman in Sony's commissary on Monday.
LSC is an investor in the upcoming Ang Lee film, Billy Lynn’s Long Halftime Walk, which appears as though it might underperform based on tracking and critical response from its New York Film Festival debut. It also backed this past weekend's domestic flop Inferno, as well as Passengers, a December sci-fi romance that stars Jennifer Lawrence and Chris Pratt; the in-the-works Emojimovie: Express Yourself; and the upcoming Spider-Man: Homecoming, among other films.