A slasher made his way through Sony Corp.’s Hollywood studio Thursday, cutting huge holes in budgets and overturning business models — leaving a decades-old free-spending way of life beaten and bloodied.
Wielding a cost-cutting cleaver, CEO Kazuo Hirai said he will cut $250 million in costs — moves that will reduce the number of films produced each year by its movie divisions to about 18 from 23, shift assets from film to TV production and even see more films made outside the pricey Los Angeles area.
“No cost is too sacred to cut,” said Michael Lynton, CEO of the entertainment unit.
The drastic, end-of-a-lifestyle changes to one of Hollywood’s most free-spending studios come after a number of box office bombs and pressure from shareholder activist Dan Loeb to spin off some entertainment assets, cut costs and for greater financial transparency.
While Loeb, founder of hedge fund Third Point, lost his bid to have assets spun off, he appears to be winning a war on the other counts.
As Hirai ticked off the cuts at a meeting in Sony’s Culver City, Calif., lot, a host of Sony division heads, including Lynton, looked on uncomfortably.
Movie boss Amy Pascal told the roughly 50 Wall Street analysts in attendance that the cost cuts could mean shrinking the summer movie releases of Sony’s studios — Sony Pictures, Columbia Pictures and Screen Gems — to four from nine.
Lynton said the budget-cutting would result in a significant “shift from motion pictures to higher-margin television production and networks.” Sony Television produced the popular “Breaking Bad” series.
Management consultants Bain have been drafted to find $100 million in cost cuts. The studio has already parted ways with its marketing chief, its head of corporate communications and the head of movie publicity in the past few months.
Sony did manage to bring aboard a new high-priced communications executive, Charles Sipkins, to try to address the Loeb problem.
Third Point declined to comment on the presentation and did not appear at the event.
Separately, Loeb revealed yesterday that his fund has taken a more than $1 billion stake in SoftBank, which earlier this year made an unsuccessful bid for Universal Music Group.
On Wall Street, investors Friday didn’t appear smitten with the cuts. Sony’s ADRs traded down 1.2 percent in late morning trading, at $18.43.
If Sony is serious about its need to reduce its overhead, outsiders question the need for two bosses to oversee the motion picture group.
Lynton, who took most of the questions during the Q&A session, and who was in contention for a senior role at Time Warner, may not relish the continued turmoil at the troubled consumer-electronics giant.
In addition to the more traditional cuts usually associated with an under-the-gun CEO, Hirai appears ready to over-deliver on the new austerity regime.
Among the CEO’s ideas is a money-saving move to replace grass on the studio lot with synthetic turf to save on maintenance, one source said.