Wednesday, October 31, 2007

Sony for Sale: Bad News for Me

Does anybody have any extra cash laying around???
LOS ANGELES, Oct. 30 — Sony Pictures Entertainment is considering selling half of its fledgling animation studio, maker of the films “Surf’s Up” and “Open Season,” and even more of its thriving 15-year-old digital visual-effects company, which pioneered computer-generated imaging techniques in films like “Stuart Little,” “The Polar Express” and the “Spider-Man” movies.

Sony Pictures, a unit of the Sony Corporation, has hired the investment bank Houlihan Lokey Howard & Zukin to assess the value of the two divisions. An outright sale of both, which is possible, could bring around $500 million, according to people involved in the discussions.

All told, Sony has invested more than $400 million in the animation and effects businesses over the years.

One person involved in the talks, who spoke anonymously because the matter is still at an early stage, said the company intended to sell no more than a 50 percent stake in the five-year-old Sony Pictures Animation, which had modest success with “Open Season” last year.

The studio does not have an animated feature scheduled until “Cloudy With a Chance of Meatballs” in March 2009 and “Hotel Transylvania” six months later.

A sale of the animation business would resemble a slate financing deal, in which a studio sells a stake in a fixed number of movies, except it would be open-ended, the person said.

The person said Sony planned to retain at least some interest in its special-effects company, Sony Pictures Imageworks. Though Imageworks is a lower-margin business, it makes the animation studio far more cost-effective.

Imageworks — which handles special effects for Sony live-action films and films from rival movie studios — generates work for hundreds of Sony animation workers between feature films, times when they would otherwise have to be laid off. Saving money on downsizing and ramping up between animated films means those films can be made at two-thirds the cost of films by rivals like Pixar and DreamWorks Animation, the company says.

Potential buyers of Imageworks, people involved in the talks said, include investors who believe the company could expand by getting into the production of computer games and television advertisements, which rely heavily on the kinds of effects the company has become known for. But Sony is likely to seek one transaction with an investor in both Imageworks and the animation side, given the degree to which the two businesses are intertwined.

Not included in the sale discussions is Sony Online Entertainment, the maker of multiplayer interactive computer games like Everquest.

In a statement, a Sony Pictures spokesman, Jim Kennedy, said the company was “open to exploring equity partnerships, and it’s no surprise that there is market interest in our visual effects and animation businesses,” but stressed that “we continue to maintain a strong commitment to making animated movies going forward.”

Imageworks, which now rivals George Lucas’s Industrial Light and Magic and Peter Jackson’s Weta Digital as one of the biggest effects houses, has been expanding lately. It bought 50 percent of what now is Imageworks India, where it employs about 85 workers, and is to open a new plant in Albuquerque next year.

What became Imageworks began at Sony Pictures in 1992 with five people using computers to help plan complicated live-action scenes — a practice that has since become known as previsualization. It quickly became an in-house special-effects shop with credits on Sony movies like “In the Line of Fire” (1993) and other studios’ films like 20th Century Fox’s “Speed” (1994).

In April, Sony Pictures signed a three-year deal with Aardman Animations, a British studio known for the “Wallace & Gromit” films. That deal would not be affected by a sale.

David M. Halbfinger reported from Los Angeles and Andrew Ross Sorkin from New York.


rickart said...

Why do you think this is bad news?

Tom Moon said...

I have the same question.

Krayonzilla said...

Corporate suits STRIKE AGAIN!!!!

Jeff's probably worried cuz they are in down mode and he's off working in conjunction with a live action/animated film. Plus his idea for the short he pitched could be in trouble due to these changes. My 2 cents speculation until we hear from da man.

Mr Goodson said...

I hope it's not Disney all over

Dok said...

Ugh. Most of us, as commercial artists, have sat in this "maybe bad news for me" seat, haven’t we? And it sucks. Most of all for the uncertainty.

But to add another couple pennies, I think this press release is just as read, and not something more ominous regards Imageworks.

It’s true that Sony has been deeply embarrassed by all the widely reported weaknesses in their global position. They're not at all accustomed to that kind of exposure, and they sure don't like it. But the recent profits from the hard-electronics side of Sony has (finally) let them exhale a little bit. TVs, audio equipment and gadgets in general are so integral to their corporate self-perception. My feeling is that no matter what happens in the future, that's the side of Sony that they will never, ever give up.

The rest of their endeavors will rank under that priority. And I think that this press release is another part of them making sure that they avoid being caught with only bad choices again. Never have to give up something that they don’t want to. So.. they’ll continue to gather resources, raise capital and forge more partnerships to share risks and grow into new financial models outside of hard-electronics.

Obviously we all pray, given our knowledge of Jeff’s extreme skills, that any project he’s for will flourish. Here’s hoping that getting more security will help that along!

-the long winded one

rickart said...

Hear hear, Dok! I second your sentiments.

Jeff, if you think it's time to move on... you know there is a nice studio up here in Emeryville that I hear makes some decent films... perhaps it's time to join us up in the Bay Area! :)

Jeff said...

Thanks guys for the words of encouragement. The problem was that we got this e-mail the first thing yesterday morning without explanation. Then the management dismissed it as a "blip" and said this stuff happens all the time. So I just posted the NY Times article for you to see. I'm still on the fence about the whole thing. Mary Claire cautioned me to not talk about the details or what I know because that would be considered inside trading information. So I'll just sit back and wait it out. Not panicking yet, just concerned. Let's just say my Spidey sense is tingling.

Scotty Buncake said...

Just remember, Pizza Hut is always on the lookout for hard-working ethnic-types like yourself. They have no benefits to speak of, but ohhhhhh the free cheesy sticks.

Tom Carroll said...

And maybe you can check in with Ellis so he can help you brush up on your Claymation skillz (well, whatever he might remember from his Neverhood days) ... old school to be sure, but those guys at Aardman seem to keep getting gigs for new pics. Practice facial animation by saying, "Gor-GONE-zohl-lah!"


Jeff said...

DAMN YOU SCOTTY BUNCAKE!!! You've cut me to the quick again!!! Arrrgh!

But seriously I'm okay.

Davis Chino said...

I'm most hurt by the fact that they didn't even mention Open Season.

Jeff, my proselytizing at work has led to multiple purchases of the DVD and everyone has spoken very, very highly of the film. Hard-line animation guru Mike Dietz even judged it superior to Ratatouille (as did almost everyone I know who saw both, including Dear Wife--this despite her bias toward Rat's Parisian locale!). I know it's cold consolation, but yr flick continues to gain fans. I ain't never heard anybody say the same about Happy Feet....

DVD sales may still float yr studio to unheard-of profitability. Bonuses for everyone!

Davis Chino said...

UGH!--I meant to start with the complaint that they didn't even mention "SURF'S UP!!" Not "Open Season"

Maybe things were better here while I wasn't posting....

Sorry, man!