George Clooney To Hedge Fund Honcho Daniel Loeb: Stop Spreading Fear At Sony

Hedge Fund News: Daniel Loeb, Dell Inc. (DELL), Herbalife Ltd. (NYSE:HLF)

By JAKE MANN in Hedge Funds
Published: August 5, 2013 at 8:45 am


Editor's Note: Related tickers: Dell Inc. (NASDAQ:DELL), Royal Bank of Scotland Group plc (ADR) (NYSE :RBS), Herbalife Ltd. (NYSE:HLF), Sony Corporation (ADR) (NYSE:SNE), Yahoo! Inc. (NASDAQ:YHOO), Hess Corp. (NYSE:HES)

George Clooney slams Daniel Loeb over Sony (Telegraph) In an interview with Deadline Hollywood, Mr Clooney, 52, said Mr Loeb was trying to manipulate the film market. "[Loeb] calls himself an activist investor, and I would call him a carpet bagger, and one who is trying to spread a climate of fear that pushes studios to want to make only tent poles," Mr Clooney said, referring to high-profile, big budget films. "What he’s doing is scaring studios and pushing them to make decisions from a place of fear. Why is he buying stock like crazy if he’s so down on things? He’s trying to manipulate the market." Mr Loeb's Third Point hedge fund  owns 7pc of Sony Corporation (ADR) (NYSE:SNE) stock and Mr Loeb has been calling for Sony Corporation (ADR) (NYSE:SNE) to spin off part of its entertainment arm.

Michael Dell closes in on buyout with $25 billion deal (BusinesssPectator) Dell Inc. (NASDAQ:DELL) and Chief Executive Michael Dell clinched a new $US25 billion deal on Friday, boosting the bid and offering a special dividend in hopes of ending months of wrangling with opponents of the founder's proposed buyout of the world's No. 3 PC  maker. The new agreement includes a special dividend of 13 cents per share on top of a 10-cent increase in the sale price to $US13.75 per share. In return, Michael Dell and his private equity partner Silver Lake convinced the company's special committee to agree to change the voting rules so that abstentions no longer count as opposing votes, a big boost for their camp. Dell Inc. (NASDAQ:DELL) shares rose after the announcement. But activist investor Carl Icahn, who has amassed an 8.7 per cent stake in Dell Inc. (NASDAQ:DELL) and has opposed the buyout offer as too low, vowed to keep fighting.

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Thank you for your letters.  We welcome the opportunity to exchange views with our shareholders, and we appreciate that you have shared your perspectives.  We agree with the statement in your May 14, 2013 letter that Sony has “one of the most prestigious entertainment businesses in the world.”  Your investment in Sony has increased the market’s focus on our entertainment businesses, which we welcome.

Since your first letter on May 14, 2013, the Board of Directors and management team, with the assistance of external financial and legal advisors, have thoroughly considered the merits of your proposal for a rights or public offering of 15-20 percent of our entertainment businesses.  Our external financial advisors have met with you and heard your views in more detail.  While we share with you the objectives of increasing profitability and driving shareholder value, after careful review, the Sony Board of Directors has unanimously concluded that continuing to own 100% of our entertainment business is the best path forward and is integral to Sony’s strategy.  We do, however, expect to increase disclosure regarding Sony’s entertainment businesses.  We agree this can help market participants analyze their performance and monitor their success.

I have been a part of the Sony family for nearly 30 years, the last year being my first as CEO.  I have witnessed Sony’s long history of innovation and our passion to create groundbreaking products, content and services that inspire and excite our customers all over the world.  During my tenure as CEO, we have made many changes, and we are encouraged by our progress and the opportunities ahead as we continue to execute on ourOne Sony strategy.  Our strategy includes a commitment to:

•   Further strengthen profitability in the entertainment businesses.  Sony Pictures and Sony Music are critical elements of our strategy and fundamental drivers of Sony’s growth for the future.  We expect that our strategy will result in strong growth and increasing profitability through investing in high-growth, high-margin businesses, particularly in television production and international networks.

In the Pictures business, we are aggressively investing in our global television production business, with 32 new and returning TV series on air in the US this year, including 15 new series in 2013-2014, the most ever for Sony.  We continue to invest in our attractive, high-growth worldwide networks business.  Indeed, we have grown revenue in our worldwide networks business from approximately $600 million in the fiscal year ended March 31, 2008 to $1.5 billion in the fiscal year ended March 31, 2013.  We are also building upon our diversified film slate strategy, and expect to continue to explore the use of slate financing when it is advantageous to us.

We are very focused on increasing margins at Pictures, including through the growth initiatives described above, and by reducing costs.  While we believe our theatrical marketing costs have been and continue to be in line with our competitors, and that our margins are generally comparable to some other major studios, we recognize that our margins should be higher.  In the year since I became CEO, we have driven growth and profitability in our entertainment businesses, and during that time we have taken additional steps to tighten controls and reduce costs.  For example, in the past year we have undertaken a rigorous cost savings initiative, including structural changes, that we expect to generate significant annual savings at Pictures over the next few years.  We have also instituted an even more exacting “green light” process for film production, focusing more intensively on overall slate profitability as well as per film returns-on-investment.

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Our Music business continues to be profitable with margins we believe are generally in line with peers.  We are nurturing and developing new talent, exploiting our vast catalog and copyrights, and exploring other growth opportunities, including leveraging our vast music content for use with increasingly popular digital music service platforms.  We continue to seek cost reductions and pursue operating efficiencies.

Finally, our executive compensation arrangements at Pictures and Music are tied to the performance of their business.  We believe this aligns incentives for the executive management teams at Pictures and Music, specifically by linking compensation to financial performance.

Pictures and Music are critical to Sony’s corporate strategy and will be essential drivers of our future growth.  Many of your observations regarding our entertainment businesses, and in particular Pictures, are not consistent with the businesses I know.  I am personally involved in the oversight of these businesses and firmly committed to assuring their growth, to improving their profitability, and to aggressively leveraging their collaboration with our electronics and service businesses.


•   Revitalize our electronics business.  While the industry environment for our electronics business remains challenging, we have made significant progress over the past year, and we are confident that we are on the right path.  We have accelerated structural reforms through our global business operations, as well as portfolio realignment, including divestiture from non-strategic businesses, and allocating capital to areas of focus.  We have also released powerful new products that appeal to consumers globally.  As you mentioned in your recent investor letter, our Xperia series smartphones have been very well received in Japan and Europe, and this momentum is expanding internationally, while our Cyber-shot RX1 won the prestigious Camera Grand Prix 2013 as the best new camera in Japan.  We are also encouraged by the positive feedback from the announcement of the PlayStation 4, which is highly integrated with our leading networks and mobile businesses.  The transformation of our television business has been progressing as planned.  We are investing in Mobile, Imaging and Game, and these business units are inextricably linked to our One Sony strategy.

•   Continue financial services’ steady contribution.  We expect the financial services business to continue to deliver highly dependable financial products and services, and maintain its high customer satisfaction ratings.  Through these efforts, the business is expected to achieve stable and growing profitability and reinforce the power of the Sony brand.

•   Achieve our growth and profitability goals.  We believe that a continued focus on steady execution will allow us to achieve the financial targets we set at the beginning of fiscal year 2012.  Specifically, for fiscal year 2014 (ending March 31, 2015), we are targeting consolidated sales and operating revenue of ¥8.5 trillion, an operating margin of more than 5% and a return on equity of 10%.  For the electronics business, for fiscal year 2014 we continue to target sales and operating revenue of ¥6.0 trillion and an operating margin of 5%.

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The Board and management team strongly believe that continuing to own 100% of our entertainment business is fundamental to Sony’s success and that neither a subscription rights offering nor a public offering is consistent with our strategy for many reasons.  These include:

•   Demand for content is increasing its value in a dynamic industry environment, and we believe our entertainment businesses will increasingly benefit from these trends.  We are in an extraordinary industry environment, where we believe the emergence of new distribution platforms, the proliferation of powerful mobile devices, and near-ubiquitous broadband access will continue to spur increasing demand for premium content at unprecedented levels.  We believe Sony is well-positioned to drive value from our global content assets in this exciting environment and, thus, we believe our shareholders will benefit from owning all, rather than a part, of these valuable assets.

•   Full control of our entertainment businesses drives internal collaboration, facilitates synergies, and allows us to be more nimble.  Content, technology, and consumer and professional products are rapidly converging, not diverging, and we therefore expect the interplay between our entertainment and electronics businesses only to increase in size and form over the coming years and to help drive the growth of Sony’s electronics business.  We observe this trend in many of our businesses, and especially in our Mobile business, where a rapidly changing landscape demands flexibility, timely decision-making and speedy execution.  We also see this in the increasingly strong linkage between Sony Pictures and our Professional Solutions Group within our electronics business, in particular in focus areas such as 4K television, professional equipment, and digital production systems.  These are only examples.  We believe the many opportunities for collaboration in this regard are only increasing, and a rights or public offering would put obstacles in our strategic path, creating the need for otherwise unnecessary and burdensome arm’s length intercompany relationships and for consideration of minority shareholder rights, thereby limiting our control and strategic flexibility.

•   There are alternative sources of capital available, should Sony require it.  We believe Sony has adequate capital resources to fund our business plans.  Our entertainment businesses have used their cash flow to fund and invest in their businesses, and their cash flow has not been utilized to fund other businesses.  Should management determine that Sony requires additional capital, there are more efficient sources available to raise the approximately $2 billion of capital you have suggested raising through a rights or public offering.  Should we require capital, or in the event of unanticipated events, our priority would be to raise it without selling a portion of an asset fundamental to our growth strategy, and without unnecessarily burdening Sony’s ability to execute our business strategy for both entertainment and electronics.

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•   We can achieve increased disclosure regarding Sony’s entertainment businesses without a rights or public offering.  We agree with you, other shareholders and a number of analysts that there may be advantages to providing more disclosure about our entertainment businesses, but we believe a rights or public offering is not required to provide such disclosure. We believe that providing additional disclosures will help investors better analyze the performance of these businesses. Starting in the second fiscal quarter of this year, we expect to include quarterly revenue figures for certain categories within the Pictures and Music segments, as well as certain other metrics.  We also expect to include, on a quarterly basis, necessary information to enable investors to calculate adjusted earnings before interest, taxes, depreciation and amortization for each segment, including Pictures and Music.  Finally, we plan to host regular meetings with our entertainment management team to assist investors and other market participants to improve their understanding and knowledge of our entertainment businesses.

Sony’s Board and management team fully understand that the industries in which Sony operates are challenging, fast moving and competitive, and as a result we are very focused on avoiding obstacles that may hamper alignment among our businesses.  We believe Sony is already changing for the better, and we are encouraged by the opportunities that lie ahead as we aggressively pursue our One Sony strategy.  We remain committed to pursuing sustained growth in profitability and shareholder value, so that we can meet and exceed the expectations of all of our stakeholders.

We thank you for your commitment to Sony and will continue to give full consideration to any constructive feedback from our valued shareholders.  We look forward to maintaining a productive relationship with you and welcome an ongoing dialogue.

A battle between Sony Corp. and Daniel Loeb, in which George Clooney plays an extra, escalated today as the electronics and entertainment giant rebuffed the U.S. hedge fund activist’s push for a partial spinoff.

This saga has been playing out for a while, gaining broader interest last week when Mr. Clooney accused Mr. Loeb as someone who “knows nothing about our business.”

Through Third Point LLC, Mr. Loeb says he owns some 7 per cent of Sony shares, and is pushing the company to sell as much as 20 per cent of its entertainment operations via a public stock offering.

Today, Sony publicly released a letter to Third Point saying that “while we share with you the objectives of increasing profitability and driving shareholder value, after careful review, the Sony board of directors has unanimously concluded that continuing to own 100 per cent of our entertainment business is the best path forward and is integral to Sony’s strategy.”

Sony, which recently reported a quarterly profit, added in the letter that it has options should it require more capital, a response to Mr. Loeb’s suggestion that the company could raise $2-billion (U.S.) through a partial spinoff.

“Should we require capital, or in the event of unanticipated events, our priority would be to raise it without selling a portion of an asset fundamental to our growth strategy, and without unnecessarily burdening Sony’s ability to execute our business strategy for both entertainment and electronics.”

Last week, Mr. Clooney, whose Smokehouse Pictures is affiliated with Sony, slammed Mr. Loeb in an interview with the Deadline Hollywood website.

“I am no apologist for the studios, but these people know what they are doing,” Mr. Clooney said. “If you look at the industry track record, this business has made a lot of money”

Mr. Loeb’s Third Point said today it would continue discussing the issues with Sony, suggesting the fight will continue.
“Third Point looks forward to an ongoing dialogue with management and intends to explore further options to create value for Sony shareholders,” it said.

On June 19th, I emailed Sony Pictures Entertainment Vice Chairman Jeff Blake and asked if he was leaving the studio. "Up in the air. Will know soon. Promise to tell you," he replied. To which I responded, "OK. Please tell me first." His Sony bosses Michael Lynton and Amy Pascal were trying to force Blake into retiring rather than demonstrate to Hollywood that they were firing the beloved 22-year studio veteran as the sacrificial lamb for all of Sony Pictures’ many problems. [You must be registered and logged in to see this image.]During the last 3 years, the studio’s summer event pictures had not lived up to expectations beginning with 2012′s reboot of The Amazing Spider-Man. What no one knew is that Lynton and Pascal had nearly fired Blake exactly a year ago as the fall guy for Summer 2013′s box office disappointments like After Earth, White House Down, Smurfs 2, and Elysium. Just like she’d done during last summer referring to Blake’s health, Pascal a few weeks before Blake’s forced departure on Tuesday was again mentioning to media that, after 22 years in his very exacting big job, it was time "for Jeff to take care of himself". What she really meant to say, but didn’t, was "for Jeff to take the heat off Michael and myself".

But, at only age 61, Blake felt he wasn’t finished overseeing worldwide movie marketing and distribution at the job and the studio that he loved. "They wanted me to say I am going to retire, and I wouldn’t," Blake told a pal. "If I really thought I was losing something, I’d kind of know it in my heart of hearts." Lynton and Pascal finally were able to buy him off. "It was done very nicely. Jeff has less than a year left on his contract so Amy and Michael gave him a lot more money than that. And with no contractual responsibilities after August 1st because Jeff wanted to find a new job immediately," an insider told me. And he will, no doubt.

The announcement of Blake’s departure was made on Tuesday. He kept his word and tried to tell me first but Lynton had already made a deal with Deadline. (Blake did call me early that morning, only I was fast asleep after a late night of reporting.) Later that day Blake turned in his Sony Blackberry and set up a personal gmail account. He was out. It followed a dismal Sony Summer 2014 box office when the reboot sequel The Amazing Spider-Man 2 disappointed (more on that in upcoming Part Two), several other films fell short, and last weekend when Sex Tape bombed. The timing made it look as if that was his fault, too. "What I’m telling my people on the way out is, ‘Tell the truth’. You just can’t give everybody what they want to hear. And to test films outside of Los Angeles. They loved Sex Tape in LA but not in Kansas City," Blake told me when we finally spoke. "We’re the only ones touching the consumer, so I encouraged people to find out what the real world thinks. You don’t have to be out on a ledge to relay what the rest of the world is saying. But the truth is the only way out of here."

As for his replacement/s, Blake openly wondered if Doug Belgrad’s recent promotion from Columbia Pictures president to Sony Pictures Entertainment’s Motion Picture Group presidency means he’ll be taking on larger responsibility. (I’ve learned that in a few weeks Belgrad is leading a presentation to the Japanese brass including CEO Kazuo "Kaz" Hirai. "It looks to me like they’re grooming him. He’s good financially and creatively, which is unusual," a source just told me.) Blake conjectured: "Or somebody on the outside. I hope not. I hope it’s some combination of internal people. They’ve got Rory Bruer [distribution] and Dwight Caines [marketing]. You always have to hope and be optimistic. It is difficult when targets keep getting higher. It worked for a long time. When it gets tough, sometimes the luck runs out."

Blake and I had an unusually close professional relationship after [You must be registered and logged in to see this image.]years and years of emailing one another on most days and every weekend to talk box office. "I always was trying to do my best and not be a fucking liar. You were tough, and you still are tough. I don’t even try to snow you. I gave you at least as much truth as I could tell you and not get myself killed," he explained to me. Only on a few occasions did I ever hear him complain abut his job. Once, about being sleep-deprived from staying up late every weekend night and early every weekend morning to follow the grosses. Another time, when tracking started to become meaningless. And a third time when Lynton and Pascal came after him during Sony’s lousy Summer 2013.

"Last summer was no damn good," Blake recalled.

Looking back at when the Sony saga started, I date it to last summer and an unusual confluence of bad choices, bad timing and bad marketing. First, unfortunately, came After Earth on May 31st. Even the studio’s own tracking indicated that the Will Smith/Jaden Smith space actioner was going to fail. Execs thought its domestic cume would likely end up in the mid to high $90sM. It made only to $60M. [You must be registered and logged in to see this image.]International was stronger but nothing like Will’s other big budget pics which have averaged $600M in global grosses. After Earth‘s problem was that its net cost was $149M ($170M budget, less $21M in production benefits) and Will received not just his full salary but also 20% first dollar gross participation. Some complained about the marketing. ("They paid Smith full freight. Yet why they didn’t put his name in big letters at the top of the billboards or have him smiling in the trailers is mystifying," one source told me at the time.) But people were clearly turned off by After Earth not only as a Jaden Smith pic, but as an expensive vanity project Will Smith pushed through for his son that simply didn’t look like any fun. Since this wasn’t a Will Smith picture, what was there left to market? Certainly not the pic’s director M Night Shyamalan, whom Smith had handpicked. Not only was the pic a conceptual failure, it lost a lot of money. Blake’s marketing prowess couldn’t overcome this meltdown, which Pascal belatedly admitted she had put into production simply because Will had made billions for the studio and she felt she just couldn’t say no to its most successful film partner.

At the time, Third Point hedge fund master of the universe Dan Loeb was destabilizing the Sony studio with his complaints as a major investor in the parent company. First, the After Earth failure played into his hands, and then the White House Down disaster on July 28th. [You must be registered and logged in to see this image.]That pic’s marketing was uninspired, first with action-oriented trailers and then ones making it look like a buddy action comedy. Toughest of all, though, was that it followed the very similar Olympus Has Fallen. Also, Channing Tatum’s most proven audience is female and this was an actioner. Its net negative cost plus P&A came to $280M, and I’m told it lost as much as $90M.

The very next day after White House Down‘s Friday’s release, Loeb got nasty in a letter to his investors. “We were surprised that after Entertainment’s highly touted big budget summer releases — After Earth and White House Down — bombed spectacularly at the box office, Sony CEO Kazuo Hirai, speaking at the Allen & Co Sun Valley conferences a few weeks ago, brushed off these failures saying: ‘I don’t worry about the Entertainment business, it’s doing just fine’”. Calling the films “2013′s versions of Waterworld and Ishtar,” Loeb wrote it was “perplexing” that Hirai gave “free passes” to Lynton and Pascal whom he called “the executives responsible for these debacles.”

I learned that immediately after that Loeb letter, Sony Pictures actually phoned Universal to find out what Waterworld‘s red ink had been (only to be told that Waterworld broke even) and checked internally to see how much Ishtar had lost, and provided the info to their board. The studio considered hitting back publicly at Loeb and had a report written denouncing his claims. "A little reactive and sensitive?" a source told me at the time. "That’s Amy. This has been very tough, and she is a nervous personality. Wonderfully creative but very excitable. Michael was always very calm. But he started to get downright angry when Loeb started complaining."

I learned that, in reaction to Loeb, Sony Pictures had a major meeting the week before July 4th. Lynton, Pascal, Belgrad, the CFO, and three other execs attended. Blake was not there. Sources told me at the time Lynton led the meeting where a revised greenlight strategy was outlined and agreed upon.

The greenlight criteria was to become more stringent: that the numbers would drive everything, but also that there had to be a passionate belief in the project’s success from multiple execs, and that they must know the audience they’re targeting before they commit. Plus the studio now intended to view the North American market as a territory and make pictures aimed at the international audiences. That made sense: overseas theatrical box office was growing at a sustained rate and then accounted for 69% of global box office. Multiplexes were being built worldwide. New middle classes were emerging throughout the world and showing interest in movies. New markets in Asia, Russia, the Middle East, and Latin America were all growing. The MPAA reported that box office in China had grown 36% alone.

The Sony Pictures executives further pledged that third party participation would be reduced, first dollar gross deals would be the exception, and more cash break even deals would be the norm for talent. They also agreed that there was no more reason to spend the type of money they’d previously spent on pics such as The Amazing Spider-Man, Men in Black 3, etc. So budgets on franchises would no longer be gigantic and P&A expenditures should be approximately 10% less going forward.

Also discussed was that the studio needed to build more franchises and have more sequels and develop more brands, and these should be the key to the slate going forward. I’m told that the feeling after the meeting was, in the words of one source, "positive. I think it was smart and productive for them. I liked their plan going forward."

I soon learned why Blake was not invited. Because more then one top exec inside Sony was telling people they thought it was likely that Jeff Blake would be let go. That’s when I first realized the studio was nearly ready to unfairly fire Blake. Despite the fact that he had an unparalled reputation and record of excellence in Hollywood where his peers considered him a ‘god-like’ and ‘very cool" exec completely in control of his domain and staff.

But Pascal was battling for her own job that June – literally hanging by her fingernails – as Loeb kept bitch-slapping the studio’s leadership. Even Lynton was contemplating forcing out Pascal to save his own skin. "Michael was the co-chairman when all the pictures were greenlit, so he can’t completely back away from the slate," a source explained to me at the time. Lynton and Pascal have "always had a culture clash. Michael is empirically driven, Amy creatively. He has always wanted her to understand the numbers and she has always felt that creative decisions should overrule financial decisions. The disharmony is not personal: it is business and based on the results. To her credit, Amy has learned more about the numbers recently. It wouldn’t surprise me if Amy got fired if the rest of the summer doesn’t perform. But if the next three pics work this summer, then I think she gets more time."

Pascal was asking people that July if they’d been told she was being replaced. She’d heard 3 names: Matt Tolmach, Jeff Robinov, Neil Moritz.

When I told Pascal that I planned to write about Sony Pictures right around this time, she completely freaked out. The summer before she’d screamed at me for posting that 2012′s The Amazing Spider-Man reboot had disappointed at the box office – even though it had. In May 2013, she kept insisting to me that After Earth would do fine – until the day it was released and clearly a domestic disaster. Only then did she start talking candidly.

That mid-July, I point-blank asked Pascal whether Blake would be fired, and she told me she didn’t know. Immediately, she sought to use Blake’s health as the reason he should go, telling me it was time "for Jeff to take care of himself". (She repeated those exact same words to me earlier this month.)

I told her how I felt and what I would do: that if she dared to touch a hair on Blake’s head, I would post what I really thought. That she should be fired, and moreover that the studio was blaming marketing when she should be falling on her own sword instead for making bad movies. I said it would be a miracle if Blake was able to get any filmgoers to buy tickets for the dreck produced by Sony that summer. And I told her that I knew about the meeting where Sony Pictures decided to change its film focus because of Loeb’s outside pressure.

Pascal lied to me and claimed that meeting never took place to get me not to write the Sony story. (But the meeting did take place – and was confirmed in a letter to Loeb a month later by Sony Corp chief Kazuo Hirai.)

I loathe those calls I sometimes have to make telling Hollywood bigwigs they’re in danger of getting axed. To my surprise, Blake verbally shrugged it off except to say "Water rising here". But he also asked for a favor, something he’d never done in all the years I’d known him: to "take a beat" before writing about the studio and him at least until after Elysium opened on August 9th. Rightly or wrongly, I agreed.

Pascal at the same time turned to Blake (of all people, but because she knew we were close) to convince me to include in my Sony piece that, even though some pics were failing at the box office, the summer would end profitably. I told Blake how I didn’t think that was true and wasn’t going to write it.

Then Smurfs 2 opened on July 31st and bombed domestically. Even Disney’s toon Planes had been out-tracking the Sony sequel, causing the Sony brass to sweat. [You must be registered and logged in to see this image.]The pic shocked by opening to merely half the U.S./Canadian grosses of the first. ("But even the $30M we expected would be disappointing, and the outside perception would be very bad," a source wrote to me at the time.) The studio blamed too many PG films at the multiplex but the real story is that critics panned it because it stunk. Even the foreign cume was blah at first. The negative cost for Smurfs 2 was $125M ($146M less production benefits of $21M). The disappointment was sure to put more pressure on the studio from cantankerous investor Loeb. Plus, it was Lynton’s baby: he’d taken the first Smurfs out of turnaround from Paramount only to have it catch lightning in a bottle and gross $563M worldwide. Smurfs 3 was already scheduled. My sources said the sequel had to make greater than $300M worldwide to show a small profit. It did, thanks to overseas, but grossed nothing like the original.

As a source told me at the time, "when you have a Will Smith pic, a Roland Emmerich pic, and two sequels in your summer, you should make big money." And Sony wasn’t. On the other hand, it’s a cyclical business, as everyone except Loeb seemed to know.

In those first days of August, a source emailed me to say, "I think Sony is going to fire Jeff. I also think Michael could fire Amy. I don’t know either for a fact." The question was whether Lynton, who was on his way to Tokyo, had read the tea leaves correctly about what big Sony wanted in terms of keeping management stability vs making changes. As for Lynton keeping his job, the source told me, "I think Michael has strong support within the board."

For now Blake was safe even though August releases Elysium and then Mortal Instruments both disappointed at the box office. This Is The End made money. ("It’s a nice piece of business but didn’t play overseas.") Yet someone’s head still had to roll after the summer flops if marketing was going to be blamed. Instead of Blake, Marc Weinstock who was president of worldwide theatrical marketing at Sony Pictures was shockingly ousted that September without any warning. "That one I never understood," an insider told me. "But Michael and Amy wanted it done. They claimed some of the team didn’t like him." Blake had to fire him. "I hated to do it. I thought he was a talented young guy." By the end of 2013, Weinstock had landed at 20th Century Fox as president of domestic film marketing.

I never wrote that Sony piece because I became consumed by employment problems with my then boss. All I can say, in summary, is that what people in Hollywood will do to save their own skins never surprises me anymore.

(Part Two coming soon.)