Sony Hack: Hollywood Assesses Amy Pascal's Survivability

Industry Assesses Amy Pascal's Survivability - H 2014
Illustration by: John Ueland

Industry Assesses Amy Pascal's Survivability - H 2014

Change is coming, say observers, as both Pascal and Michael Lynton feel the heat from creative decisions that led to the biggest studio scandal in years

A version of this story first appeared in the Jan. 9 issue of The Hollywood Reporter magazine.

When public relations specialist Matthew Hiltzik began representing Sony Pictures with PR firm Rubenstein to help it cope with the expanding horror of the hack attack, one of his first moves was to persuade studio co-chair Amy Pascal to attend THR's Dec. 10 Women in Entertainment breakfast. Putting on a strong public face as the studio suffered embarrassing leaks would go a long way toward restoring normalcy on the Sony lot.

That effort now seems quaint. For Pascal, 56, and Sony Pictures CEO Michael Lynton, 54, the damage has gotten far worse as the flood of stolen material — including both of their email inboxes — keeps coming, and on Dec. 16, the hackers, dubbed Guardians of Peace, threatened a 9/11-style attack on theaters that show Seth Rogen's North Korea assassination comedy The Interview. Pascal, the lead creative executive on Interview, tells THR she believes she has the backing of her Tokyo-based employers. But by now, high-level insiders have moved from speculating about whether she will be replaced to asking when and by whom.

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Sony might have to wait to avoid looking as though it is capitulating to a terror attack. "Japanese companies are very concerned with checking all the facts before making any announcement," notes Dr. Jochen Legewie, head of consultancy CNC Japan and a crisis adviser. But many believe even corporate overseers as remote and passive as the Sony bosses have to be at the breaking point. "Do I think her long-term prospects are good?" says one source with ties to Pascal. "No. I'm not an idiot. But I don't believe they would do anything in the middle of this."

Many in the industry have sympathy for Pascal, knowing few could withstand the exposure of their private email. But they also think the guard probably will change. It's not just the hack itself, which has paralyzed the studio, crushed morale and opened Sony to costly litigation. It's also that the leaked emails have raised long-simmering questions about her leadership. Dave Logan, who teaches at the USC Marshall School of Business, says he can't see a way for studio management to survive such a cluster of damaging revelations. "So many bridges have been burned all at once," he says. "It's an awful situation, but if it happened to any one of us, the outcome would be the same."

Pascal apologized for racially charged emails about President Obama that she exchanged with producer Scott Rudin, and she set a meeting with Al Sharpton before the premiere of Annie. She also is said to be apologizing preemptively to industry figures who may learn of insults as more emails become public.

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Maybe a studio chief could withstand the embarrassing emails that highlight Pascal's long-established reputation for being filmmaker-friendly to a fault, such as the ones in which Rudin bullied Pascal over the planned Steve Jobs movie as she pleaded for mercy. ("Why are u punishing me?" she asked at one point.) But how would another studio — say Comcast, with its acquisition of Time Warner Cable under review in Washington — have reacted to the racially charged banter about Obama? It's far from clear that apologizing, publicly and repeatedly, would be enough to allay the concerns of top management at Disney or 20th Century Fox or at any other studio.

But beyond the embarrassment of the emails, a top executive at a competing studio observes that it's hard to make sense of Pascal's judgment when Sony CEO Kazuo Hirai and others expressed concern over Interview. In emails with Rogen in September, Pascal said her bosses had raised questions about the film.

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The rival executive expresses incredulity that Pascal seemed to need Hirai to give her "the most common-sense f—ing opinion in the world." But perhaps even more surprising is that Hirai's dialogue with Pascal focused largely on getting her star to dial back the gore of Kim Jong Un's death. Turning to Rogen, Pascal wrote, "You have the power to help me here." Rogen agreed to such tweaks as fewer "head chunks" onscreen. Ultimately, Pascal persuaded Hirai to accept a version that had emerged "after much cajoling and resistance from the filmmakers." With Hirai placated, Pascal emailed Rogen: "I am damn happy."

These exchanges took place in September, months after a warning from North Korea that the film depicting Kim's death could lead to backlash. (North Korea has denied that it is behind the attack while praising it.) Pascal, known for her creative relationships, stood by her filmmaker-star, but one executive with ties to the situation allows that in this instance, she appears to have fallen short in balancing "her devotion to the talent versus her duty to the public company."

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To media analyst Harold Vogel, the roots of this problem date to Sony's 1989 acquisition of the studio — long before Pascal became chairman in 2003. The purchase was made in pursuit of elusive synergies, and Sony never seemed to get a handle on how to manage across a geographic and cultural chasm. For years, Sony Pictures has had a reputation for generous spending. When dissident shareholder Dan Loeb began calling out the studio for its largesse last year, some began to wonder whether the ice under Pascal's feet was thinning. Only in the wake of Loeb — who since has moved on — has the studio shown clear signs of fiscal restraint.

Vogel believes Sony should have heeded Loeb's complaints and spun off the entertainment assets. "It would have been a sought-after IPO," he says. "Now it's not the same anymore," adding that a sale "would be at a lower value because of the hacking." Apart from disruption, "These disclosures have upset delicate relationships with the creative types. What you've got is people probably saying, 'My next picture? Maybe I won't put Sony at the top of the list.' "

Over the past year, Sony has brought aboard several top executives: former Fox chief Tom Rothman, hired to revive its TriStar label; former New Line and DreamWorks president of production Michael De Luca; and ex-Warner Bros. film chief Jeff Robinov, who set up his new company, Studio 8, in partnership with Sony. It seems Pascal has provided Sony with a deep bench of executive talent, which might pay off in a time of crisis.

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Since he was hired in August 2013, Rothman has kept a fairly low profile while putting together a slate of movies from Ang Lee, Robert Zemeckis and Jonathan Demme. Rothman has a good story to tell of running a profitable studio at Fox and could bring — really for the first time in the history of Sony's ownership of the studio — strong fiscal discipline. The head of one entertainment company predicts that Sony will conclude that turning to Rothman is "the easiest, smoothest way forward."

Some in the industry have come to Pascal's defense, including Aaron Sorkin and producer Doug Wick, who argued in an open letter on the THR website that the discussion should focus on the malevolence of the attack. And it's fair enough to say that studios shouldn't consult foreign dictators on creative decisions. But based on their monetary interests, the studios already steer well clear of creating offending Chinese villains. It turns out North Korea might not have been a safer choice. (And it's safe to say hell will look like a scene from Frozen before another North Korean villain appears on the big screen.)

The Interview is a smallish comedy, with a budget of just $44 million, leaving many to wonder whether Pascal's decisions could be worth all the pain. "It's not Christopher Nolan and Inception," says one veteran executive. "Why create this level of exposure for yourself and your company?"