Resignation puts Sony's US arm in doubt

Beat it: Coup shifts the power centre of beleaguered music business back to Japan

The fate of Sony Corporation's struggling music and film studio interests in the US was up in the air yesterday after the sudden resignation of the head of its American operations for the past six years, Michael Schulhof.

Mr Schulhof, who engineered Sony's move into the entertainment industry at the end of the Eighties, was ousted from his position as president and chief executive of the Sony Corporation of America late on Tuesday.

The removal of Mr Schulhof in effect shifts the power centre in Sony's US subsidiaries back from America to Sony headquarters in Japan. No successor has been named and Mr Schulhof's responsibilities will pass to management in Tokyo, led by Sony's new president, Nobuyuki Idei.

On Wall Street, meanwhile, speculation was rising that Sony may be tempted to find new investors for its film and music units or even unload them entirely. "It's more likely now that they'll spin off the movie and music operations," suggested Dennis McAlpine of Josephthal Lyon & Ross.

Mr Schulhof led Sony into the entertainment business, first with the acquisition in 1988 of CBS Records for $2bn and, a year later, with the $5bn purchase of Columbia Pictures Entertainment Inc.

Analysts calculate that today the combined entertainment interests may be worth no more than $8bn, not much more than the company's original investments.

Nor has Sony's foray into Hollywood been happy. Last year the company revealed that it had accumulated $3.2bn in write-offs and losses in its movie studios. Although the film division has since picked up a little, it has had no big hits. Sony Music has also faced hard times recently, its share of the US market dipping to 13.6 per cent from 17.3 per cent in 1993. Most recently, it was hit by the disappointing performance of Michael Jackson's latest album, HIStory.

Mr Schulhof, 53, said he was leaving Sony because he wanted to "explore a new enterpreneurial role outside of the corporation and I am eager to get on with it".

Any attempt by Sony to draw in its horns in Hollywood would represent another chapter in the humbling of Japanese corporations faced with disappointing American investments.