BY MATHEW HORSMAN
in London and
PHIL REEVES in Los Angeles
Sony made it clear last night that it had no intention of following its arch-rival Matsushita out of Hollywood.
"Sony has increasingly realised the importance of Hollywood," the company said in a statement, responding to Matsushita's sale of 80 per cent of MCA, the Hollywood entertainment conglomerate, to the drinks company Seagram. "We have no plans to release the administrative rights of Sony Pictures Entertainment."
Speculation continued to mount, however, that Sony might eventually bring in a partner to help run its entertainment interests.
In the US, investors pushed Seagram's shares slightly higher in morning trading yesterday but that did little to reverse a week-long slide, which saw 18 per cent of the shares' value wiped out, as investors signalled their concern about Seagram's strategic shift.
Seagram will pay for the acquisition, at least in part, from the $7.7bn it netted from last week's sale of the company's 24 per cent stake in the chemicals company Du Pont, which it had held for 14 years and which accounted in 1994 for almost 70 per cent of Seagram's net income of $474m.
Some long-term Seagram investors were said to be furious, complaining that the company was trading the proven dividends from Du Pont for the uncertain earnings of a high-risk, capital-intensive business.
Analysts who follow the drinks market in Britain saw a silver lining: "This is bound to be good for Seagram's competitors in the UK drinks business," said one. "Company management is likely to be less focused on spirits and wine and more on Hollywood movies."
Seagram is one of the world's leading distillers and distributors. Its brands include Chivas Regal and Glenlivet, both Scotch whiskies, Martell cognac and wines distributed under the Barton & Guestier brand. It is also a producer of fruit juices, under the Tropicana label.
Certainly, most Seagram-watchers were taken aback by the MCA deal, despite the week-long rumours, although the company had clearly signalled its interest in multimedia by paying $2bn for a 15 per cent stake in the media conglomerate Time Warner in 1993. Matsushita had decided several months ago to seek a buyer, ready to take a loss, in yen terms, on its $6.1bn investment.
Matsushita management had clashed with MCA's Hollywood senior executives, Lew Wasserman and Sidney Sheinberg, particularly over whether MCA should invest further in the music business. The pair's rich expense accounts and spiralling movie budgets also raised eyebrows at Matsushita's Osaka headquarters.
Perhaps a North American management - Seagram is based in Montreal, Canada but managed from New York - might soothe the troubled waters.
But corporate clashes were not the only problem. MCA had some good years since Matasushita bought it in1990. However, it never came close to making the Japansese company real money. Nor did the hoped-for synergies between a hardware manufacturer of home entertainment equipment and a software producer of films and music ever materialise. Why should Seagram expect to do better?
The company's chief executive, Edgar Bronfman Jr, is unrepentant. "We are committed to the global consumer economy and to the ownership of leading brands and franchises within that economy," he said yesterday. "We believe that the entertainment sector has an unusually high future growth and profit potential."
Mr Bronfman, the 39 year-old grandson of Seagram's founder, Samuel, clearly hopes to translate his company's proven track record in branding, marketing and distributing spirits, wine and non-alcoholic beverages into the potentially lucrative but still risky business of films, television and music.
Mr Bronfman was last night scheduled to meet Mr Wasserman, 82, and Mr Sheinberg, 60. The entertainment industry was buzzing with speculation over whether he would decide to retain the two men, whose contracts expire at the end of this year. On Sunday, Mr Bronfman issued a statement saying that he was "looking forward" to working with the two "to shape the future direction of MCA", but this was regarded as a doubtful guarantee they would survive.
His relationship with the twocould be crucial in determiningwhether MCA forms an alliance with Hollywood's newest arrival, DreamWorks SKG, the entertainment conglomerate being set up by Steven Spielberg, the music impresario David Geffen, and the former Disney studio chief, Jeffrey Katzenberg.Reuse content