September 1989: The Acquisition of Columbia Pictures by Sony Corporation
BEAMING ONTO THE BIG SCREEN
In September 1989, Norio Ohga, CEO of Sony Corporation, announced the agreement to buy Columbia Pictures Entertainment Inc.1
The purchase price, $3.4 billion for Columbia’s stock and another $1.4 billion in debt to be assumed by Sony, was soon augmented by the settlement of a $1 billion breach-of-contract lawsuit by Warner Brothers, and a spree of internal spending to rebuild sickly Columbia. All told, Sony would invest about $6 billion in Columbia.
The public reactions were sharp: “They clearly overpaid,” noted the chief at one studio,2
“no relationship to the worth of the entity,”4
“an epic of excess, a drama involving big egos and bigger sums of money . . . not just a public relations disaster for Sony, but a financial debacle as well.”5
Over the ensuing five years the unit gave a meager return and failed to lift its share of market materially. Sony wrote off $2.7 billion in November 1994. The writeoff was one of the largest in Japanese corporate history. A housecleaning of senior management ensued: Gone were the CEOs of Columbia, Sony Corporation of America, and Sony Corporation. Akio Morita, co-founder and CEO of Sony and in ill health, resigned within 14 days of the writeoff. Sony denied that his departure was related to the debacle in Hollywood, though he had been the unmistakable champion of Sony’s entry into film production. In 1995, the new ...