Sunday, October 25, 2009

Sony’s Version of Tracy and Hepburn

October 25, 2009


DAYS after Michael Jackson died last summer, an executive at Sony Music phoned Amy Pascal, the co-head of the company’s movie studio, to tell her that the pop singer had left hours upon hours of rehearsal tapes for his planned run of 50 concerts in London.

Ms. Pascal watched 12 minutes of the tapes and saw a surprisingly limber Mr. Jackson strutting across the stage. She told her partner at the helm of Sony Pictures Entertainment, Michael M. Lynton, that the studio should be aggressive in securing the movie rights. Mr. Lynton quickly agreed, and after days of negotiations, the pair sealed a deal with an offer to pay $60 million upfront.

The film created from those rehearsal tapes, “This Is It,” opens this week for a 14-day run at theaters here and abroad. Days before opening, it had already sold out at more than 1,600 theaters domestically, according to Fandango and MovieTickets. “It’s not ‘Spider-Man,’ but it can make us good money,” Mr. Lynton says.

The Jackson deal was just the latest coup from a pair who are putting on a leadership display that is rare in any industry, outside of family-run businesses: a man and woman, equal partners, at the helm, and operating in sync. It has worked at Sony Pictures, say executives who know both people, because Mr. Lynton checked his ego after first being offered the job alone, while Ms. Pascal has put aside her resentment at not getting the chance to run the show herself after a long run at the studio.

What’s more, they say, it combines Ms. Pascal’s talents at picking films with Mr. Lynton’s penchant for minimizing financial risk. During their tenure, the studio has had its best year at the box office, in 2006, when it released “The Da Vinci Code,” and, over all, raked in more than $1.7 billion domestically.

“Amy is a gut-level decision maker,” says Matt Tolmach, one of two presidents of Sony’s Columbia Pictures, which is releasing the Jackson film. “She responds very viscerally to material and to people. Michael is very analytical and Socratic.”

It’s an arrangement that sprang from strife six years ago, and one that few in Hollywood — a land of ego, extravagance and desperate, daily scorekeeping — gave a chance of succeeding. A result has been that Sony, which entered Hollywood in 1989 with the purchase of Columbia Pictures and suffered through bouts with dysfunction and chaos, now has a management team that has been more durable than those at some other major studios.

That stability is a big advantage at a time when the industry is facing deep despair over the economic recession and a steep decline in DVD sales, which have been the recent lifeblood of the industry. At the same time, the Internet and social networking have fractured audiences across the media universe.

In some ways, the economic realities of the movie business have necessitated a different style of leadership: fiscally conservative, cooperative and less top-down.

While keeping tight reins on their budget, Ms. Pascal and Mr. Lynton have also tried to change the hierarchical culture of the studio by creating a campus-style environment and eliminating executive perks like the corporate dining room (in favor of a commissary where rank-and-file eat alongside top management).

More important, in addition to playing down their personal rivalry, they have shown a willingness to set aside corporate rivalries within Sony. The studio has worked more closely with the company’s electronics division, a sharp contrast to previous practices at the studio.

The Jackson deal was a rare example of Sony’s movie division and its music company, which held the rights to Mr. Jackson’s recorded music, working together — something that Howard Stringer, Sony’s chief executive, has stressed during his tenure, but that in practice has been more aspiration then reality.

Over breakfast recently at his office in New York, Mr. Stringer said of the partnership between Ms. Pascal and Mr. Lynton: “I never really thought it wouldn’t work. I didn’t think it was as risky as people thought it was.”

THE idea of creating an equal partnership between them was not Mr. Stringer’s original thought.

In 2003, when he phoned Ms. Pascal to tell her he planned to install Mr. Lynton, an outsider, as her boss, she was virtually apoplectic. She had served as president of Columbia since 1996, and felt that she had earned the promotion.

Mr. Stringer says: “I had complete confidence in Amy with the movies. Amy had a pretty good argument for, ‘Why are you bringing in this guy?’ ”

But Mr. Stringer was trying to refashion Sony in a way in which its film, television and music business would serve its hardware business. A movie studio, he said, could no longer be viewed as a corporate faction where television shows and movies are made, but as a “place where the future was invented.”

He trusted Ms. Pascal as a movie picker but thought that Mr. Lynton, who formerly ran AOL Europe, was needed to navigate the changing media environment brought on by new digital technologies and to help Sony expand internationally.

As Ms. Pascal recalls, “I thought I should have your job,” as she gestures toward Mr. Lynton, who is sitting on her left as they have lunch at the new commissary. “Howard thought you should have it. I said, ‘I’m leaving.’ ”

When Ms. Pascal protested, Mr. Stringer switched gears and asked Mr. Lynton if he would accept an equal footing with Ms. Pascal, with both reporting to Mr. Stringer. Ms. Pascal flew to New York to speak to Mr. Lynton, whom she had never met. Over drinks at the Sony Club, the two discussed the parameters of the relationship.

“Howard said, ‘I think you need some alone time,’ ” recalls Mr. Lynton. “It was like a weird, arranged India marriage. The principle was it has to be equal and open.”

The two couldn’t be more different, in style, temperament or background.

Mr. Lynton, 49, grew up in the Netherlands, and his path to Hollywood was by way of Phillips Exeter Academy, Harvard and, briefly, Wall Street. The scion of a wealthy family, he has an easy manner and runs in New York media circles.

Ms. Pascal, 51, is a native of Southern California and grew up in a middle-class family — her mother owned an artists’ bookstore and her father was an economist at the Rand Corporation. She attended the University of California, Los Angeles, graduating with a degree in international relations.

“Movies defined what was possible for a young ambitious girl growing up in Southern California,” Ms. Pascal told employees last year at a town-hall-style meeting.

She got her first movie job as a secretary for Tony Garnett, a producer. The phone didn’t ring much, so she read scripts and got to know screenwriters. Production executives at major studios sought her opinion, and eventually Scott Rudin, the producer, offered her a job at 20th Century Fox. It’s a familiar Hollywood trajectory, even for men: Barry Diller got his start in the William Morris Agency’s mailroom.

Ms. Pascal moved from 20th Century Fox to Columbia Pictures when she was still in her 20s. In her early days at Columbia, she oversaw films like “When Harry Met Sally” and “A League of Their Own.”

Ms. Pascal acknowledges that she was reared in the industry when money from DVDs was flooding in.

“When DVD was growing, everything was growing,” she says. “Michael came in and said, ‘This economy is going to change.’ Howard saw it coming, and that’s why he put the two of us together.”

The two have a conference room adjoining their offices, and this is where they iron out their differences.

“We fight, for real, like people do,” Ms. Pascal says. “But nobody sees that but us. We do it in our mutual conference room.”

Ms. Pascal says that Mr. Lynton talked her out of investing in “Evan Almighty,” a 2007 big-budget comedy put out by Universal that was not profitable. With a production budget of $175 million, the film had to “really hit big” to make money, said Mr. Lynton, who felt that it was too risky.

Despite his personal wealth, Mr. Lynton describes himself as cheap, and he often gets his haircuts from a barber on the lot. “I grew up in Holland, which is Calvinist,” he explains. “They watch their pennies. I go overboard in that way sometimes.”

After reading “Superbad,” a Seth Rogen comedy released in 2007, Mr. Lynton said he didn’t understand the humor, while Ms. Pascal said she thought it would “be fantastic and an anthem for this generation.” But because the investment risk was so low, he relented.

“Amy said, ‘You know what, you’ve just go to go with me on this one,’ ” says Mr. Lynton, who adds that the movie was of the type that is “never going to make sense on a piece on a paper.” But Ms. Pascal’s instinct was dead-on. “Superbad” cost about $18 million to make, and it generated about $120 million at the domestic box office, according to BoxOfficeMojo, which tracks ticket sales.

The pair say they have become genuine friends. They go to the same synagogue, Mr. Lynton used Ms. Pascal’s architect for his house in Brentwood, and their children go to the same schools and have sleepovers.

“It’s unique because we treat our partnership like a relationship, which I think two men would find hard to do,” Ms. Pascal says.

Brian Grazer, the producer who worked with Sony on “The Da Vinci Code,” says of the two: “Amy gets completely absorbed in the creative process of her work. I think that Michael, when he came in, was uniquely sensitive, and this is rare in the Hollywood equation. He was very sensitive to Amy and what her needs were.”

And Jeff Blake, the studio’s head of marketing, says, “You never see any fissures between them, never any angle where you can start playing one off the other.”

WHEN Mr. Lynton arrived at Sony in 2004, he set out to change the studio’s culture. He found an environment, he says, “in which people felt very reticent about sharing information, sometimes for personal reasons, and sometimes because they weren’t in the same building.”

The company recently spent millions, money committed before the recession set in, to build a new commissary and a gym. The new cafeteria, which is subsidized so employees can eat lunch for about $8, opened just weeks ago.

Mr. Lynton also shut down the Rita Hayworth dining room, a swanky space reserved for top executives and movie stars.

People around Hollywood have noticed an improvement in morale at the studio. Bryan Lourd, co-chairman of Creative Artists Agency, who often works with Sony on movie projects, says the new facilities have “enticed people to want to work there.”

He says the stability at Sony is in contrast to management upheaval that has afflicted other studios. In recent weeks, for example, two top executives at Universal Studios were ousted, and the head of Disney’s movie studio was replaced.

“Other studios aren’t as stable because of management changes, or changes in the direction of the entire company,” Mr. Lourd says. “They are largely living quarter to quarter.”

At Sony, he says, “it’s like walking into a hotel and the guy knows your name, and the bartender knows your name.”

Of course, all of Sony’s cultural change and fiscal discipline is in the service of an industry where keeping profits and revenue flat is considered successful. In Sony’s most recently completed fiscal year, its movie unit generated operating income of $305 million, compared with $339 million in 2004. In the first quarter this year, revenue rose 6.5 percent, and the studio posted an operating profit of $19 million, compared with a loss a year earlier. Executives say the studio has had five profitable pictures in row: “The Ugly Truth,” “Julie & Julia,” “District 9,” “Cloudy With a Chance of Meatballs” and “Zombieland.”

That said, no one is predicting much profit growth, mainly because of the decline in DVD sales, which have had more impact on profits than ticket sales.

To survive, Mr. Stringer says, studios need to move past the egos and flamboyance that typified other eras of Hollywood.

“Studios collapse in on themselves when politics interferes,” he says, noting that he had expected more sparks to fly when he made Ms. Pascal and Mr. Lynton equal partners. “But there really hasn’t been drama.”

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