MGM Deal a Bold Miscalculation for Sony

MGM DEAL A BOLD MISCALCULATION FOR SONY
[SOURCE: Los Angeles Times, AUTHOR: Claudia Eller]
When Metro-Goldwyn-Mayer went on the block in 2004, Sony's Howard Stringer so lusted after the studio's coveted library that he told his boss he would resign if he didn't win a last-minute bidding war with Time Warner. Stringer, who at the time headed Sony's U.S. arm, figured the library's 4,000 film titles would give Sony more clout with DVD retailers and fuel the growth of its high-definition Blu-ray technology. Stringer's resignation wasn't required: He engineered a clever deal to buy the storied studio for $4.9 billion with a consortium of investors that shouldered most of the financial risk. But the deal that Stringer hoped would help cement his legacy has instead marred it. In late May, amid rising tensions among the partners, MGM's board voted unanimously to dismiss Sony Pictures Entertainment as its domestic DVD distributor after it failed to meet performance goals. It was a humiliating blow for Stringer, who lost control of the very prize he was after. Sony now finds itself on the sidelines. The deal hasn't been a total wash. Sony remains a 20% investor in MGM and is sure to recoup its initial $250-million investment. MGM's commitment to Blu-ray remains intact, giving Sony an edge in a format war with Toshiba Corp.'s competing HD-DVD technology. And Sony Pictures gets to share in the proceeds of the James Bond sequel opening next month and a future installment of the popular spy series, which could mean hundreds of millions of dollars in additional revenue. But being jilted as MGM's DVD distributor in favor of News Corp.'s 20th Century Fox movie studio cost Sony at least $50 million a year in future fees, not to mention public embarrassment in Hollywood and on Wall Street.
http://www.latimes.com/business/printedition/la-fi-mgm20oct20,1,7788724....
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