Cents and Sensibility: Sony's Spending Spree | EW.com

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Cents and Sensibility: Sony's Spending Spree

After blowing billions, Mickey Schulhof leaves a Sony empire in disarray

The Sony Brass in Japan — chairman Norio Ohga and his new president, Nobuyuki Idei — might experience a sinking feeling while watching their new, $65 million Columbia Pictures release, Jumanji: ”You have to roll the dice and play the game to the end,” instructs Robin Williams in the board- game-come-to-life fantasy. But each new roll of the dice brings another disaster: marauding monkeys, stampeding rhinos, raging rivers.

Rampaging primates must seem like a day at the beach compared with what showbiz has done to Sony. It was ex-physicist Michael ”Mickey” Schulhof who first advised the venerable Japanese firm to take a chance on the entertainment business in 1987. But during his reign as head of Sony Corp. of America, Schulhof rolled loaded dice one too many times. On Dec. 5, he was forced to resign. Here’s why.

Betting the House: In the end, Schulhof may be best remembered for treating Hollywood to one of the biggest spending sprees in its gaudy history. He began by persuading his Tokyo-based bosses to spend $2 billion to buy CBS Records in 1987 and another $3.4 billion to grab Columbia and TriStar Pictures in 1989. And though they’d never run a studio, Schulhof picked producers Peter Guber and Jon Peters (Batman) to head up the show, paying a staggering $500 million to buy the dynamic duo out of their existing Warner Bros. contract. ”Schulhof was completely naive,” screenwriter James Toback (Bugsy) says of the trust placed in two of Hollywood’s most notorious spendthrifts. ”It was one of the most colossal hustles in the history of the world.”

That’s not putting it mildly, but it isn’t all hype. In addition to Schulhof’s own extravagant ways (his palatial New York headquarters included an exec dining room founded by a four-star chef), Guber and Peters spent an additional $1 billion and repaid Sony with costly duds like I’ll Do Anything and the infamous Last Action Hero. ”There was no accountability,” laments a former Columbia exec. Bills mounting, Peters got the boot in 1991. Finally, with Sony forced to take a staggering $3.2 billion write-off in 1994, Guber too was shown the door—but not before Schulhof rewarded him with a rumored $20 million exit package and a $200 million production company.

Hedging Bets: Alan J. Levine, Guber’s former attorney, took over the studio and began belt-tightening. ”We’ve brought discipline to our business. Overall overhead is down over 10 percent,” says Levine. ”We’re making movies at more reasonable prices.”

The year did get off on the right foot: Brad Pitt’s Legends of the Fall and the buddy cop pic Bad Boys proved unexpectedly strong, pulling in $66.5 million and $65.6 million, respectively; and Sandra Bullock’s The Net, which cost just $22 million, earned $51 million. ”We’ve made a lot more money on those pictures than on [some expensive] $100 million blockbusters,” Levine insists. Adds Alan Horn, chairman of Castle Rock Entertainment, a Sony supplier: ”Sony seems to have turned it around to a certain extent. They’ve had a pretty good year.”