by Ben Fritz
Sony essentially had three major franchises: James Bond, Men in Black, and Spider-Man, all of which came with baggage from bad decisions in the past. That was illustrated dramatically in 2012, the only year in the 2010s when Sony ranked number one at the box office. Unbeknownst to many, though, the profits from its trio of blockbusters that year were shockingly small.
Sony’s highest-grossing movie, and the fourth highest in the industry, was the Bond sequel Skyfall, which collected a phenomenal $305 million domestically and $1.1 billion worldwide, a record for 007. Typically, studios make several hundred million dollars in profit on such movies. Sony made only $57 million (measured as an “ultimate,” or the expected profit over the next decade, which is standard in the industry).
The reason? Sony didn’t actually own the Bond franchise. Another studio, MGM, did. Executives at Sony Pictures had advocated buying MGM, but the company never pulled the trigger. Instead, MGM emerged from a bankruptcy in 2010 as a small independent entity that needed a partner to co-finance and distribute its movies. Sony bent over backward to add one of the industry’s highest-profile franchises to its otherwise lackluster slate. It agreed to pay 50 percent of the Bond movies’ costs, but keep only 25 percent of the profit. “Who else is gonna make such a one sided deal with mgm?” Pascal asked, rhetorically but tellingly.
Men in Black 3, Sony’s third-biggest movie of the year, was even uglier. It grossed $624 million worldwide. But after dishing out $90 million in gross points to talent like Will Smith and Steven Spielberg under deals set in place with the first two MIB movies in 1997 and 2002, the studio earned no profits at all. It broke even.
The Amazing Spider-Man, a reboot of Sony’s most successful franchise, earned about $110 million on $758 million of worldwide ticket sales, a respectable amount. Still, that was less than half the profits of 2007’s Spider-Man 3 and one-quarter of the profits of 2002’s original movie about the web-slinger. “Even though we were #1 at box office in 2012,” Pascal would later admit, “it was a shitty year.”
There were still solid hits in the 2010s that fell right in with the Pascal wheelhouse of high-quality, mid-budget dramas and comedies, like the hilariously subversive 21 Jump Street and the Oscar-nominated Moneyball, The Social Network, and Captain Phillips. Each could throw off profits of around $40 million to $60 million—real money, but nothing compared to a global blockbuster.
Yet some movies made under the “old” Sony model were outright debacles. One of the most damaging to the studio’s bottom line and its claims of financial discipline was 2010’s How Do You Know? from Pascal’s old friend James L. Brooks. It cost a staggering $120 million to make and grossed less than $50 million. It was both a major money loser and an embarrassment, given that its budget was three or four times higher than that of most romantic comedies.
A new low came in 2013. With no franchise properties for the summer, Pascal and her team were forced to take big swings on movies they weren’t totally confident in. These included After Earth, a Will Smith passion project whose main star was actually his son, Jaden, and whose director, hand-picked by Smith, was the ice-cold M. Night Shyamalan; another was White House Down, a Jamie Foxx–Channing Tatum action movie whose script Sony bought for $3 million in 2012 and then rushed into production. It wasn’t fast enough, however, to beat the very similar Olympus Has Fallen, which came out in March 2013 and left June’s more expensive White House Down looking like a shiny but unappealing leftover. After Earth, meanwhile, simply lacked an audience for its moralistic science-fiction tale about a boy lost on a post-apocalyptic planet.
Perhaps most important, both films felt like relics—star-driven movies in a summer when big brands surrounded it, from Fast and Furious 6 to the Superman reboot Man of Steel to the animated sequels Monsters University and Despicable Me 2. After Earth and White House Down each cost about $150 million to make and both bombed, and White House Down‘s foreign grosses were particularly dismal. It lost more than $50 million, while After Earth lost about $25 million.
And these films appeared right in the midst of the activist investor Dan Loeb’s assault on the studio. He gleefully compared them to infamous industry bombs such as Ishtar and Waterworld. Sony rejected Loeb’s criticisms (though it did agree to host that entertainment investors’ day in November to try and placate him), but the stink of that summer’s bombs never washed off.
“It was two fucking movies . . . . . . how long does this go on,” Pascal complained to Lynton.
It would go on for several years. And get much worse.
Along with the Loeb settlement, Sony also agreed to find $350 million in annual savings, resulting in more than two hundred layoffs. The studio’s headcount was in the midst of a dramatic shrinkage—from nearly eight thousand in 2009 to six thousand by 2014.
The number of movies released shrank too, from twenty-two in 2011 to just thirteen in 2015. And annual development spending, the R&D of the movie industry, fell dramatically, from $127 million in fiscal 2010 to $71 million in 2015. Pascal even had to let go of her longtime assistant, Mark Seed. He made her life run so magically that she nicknamed him “Mark Poppins,” but he made more than $250,000 per year.
Pascal had less to work with and at the same time, Sony Corporation demanded more from her, as it responded to pressure from Loeb and the struggles of its electronics business. One result was growing tension between Pascal and Lynton, who in 2012 had been promoted to CEO of Sony Entertainment, putting him in charge of the company’s music businesses and officially making him Pascal’s boss, not her partner.
Their relationship grew less familial, and he privately admonished her about the company’s faltering financial situation. “Why is everyone freaking out[?]” she asked, when the Hollywood Reporter revealed her assistant’s eye-popping salary. “Because we said no cost is too small,” responded Lynton. “An assistant paid that amount suggests a lack of controls. We claim to have those controls.”
Despite her frustrations, Pascal was determined to turn things around. “I’m trying to put this company back together,” she told Scott Rudin, now long gone from Fox and one of the industry’s most powerful producers. “It’s not so easy.”
But she believed she couldn’t do it with just her current senior team, which included Doug Belgrad and Columbia’s president of production, Hannah Minghella, a young and fast-rising favorite of the mogul, whom she referred to as “My Hannah.” So Pascal brought in two more senior executives (a decision that played poorly among the studio’s rank and file, given that the executives were paid multi-million-dollar salaries while so many were being laid off): De Luca became a second head of production for Columbia, alongside Minghella, while Tom Rothman, recently fired as chairman of 20th Century Fox, was given a largely dormant Sony label, TriStar, to run.
To Rothman, who quickly became a trusted friend, Pascal admitted what many around her had been noticing: that her confidence in herself, in her ability to pick the movies that audiences wanted to see and whose profits Sony would be happy to take home, was shaken. Rothman responded with tough advice. “What is happening to you is that the financial pressures, and your desire to please your bosses, are causing you to doubt your instincts,” he told Pascal. “In our jobs, we must be able to hear our inner voices clearly and yours are getting undermined and hence confused.”
Lengthy, sometimes barely comprehensible late-night e-mails from the boss, panicking about the latest crisis and the state of Sony’s business, had long been a fact of life for Pascal’s subordinates. But as stress at the office grew, these communications became even more common. “The un marvel marvel world that is rooted in humanity but instead of it being like a trilogy or a story this is the opening of a world that will be unleashed,” Pascal wrote one night at 10:48 in an attempt to figure out what to do with Spider-Man. “A little too late for me to decipher your poetry,” responded Belgrad.
The Hollywood trade press, meanwhile, was speculating about whether Pascal was about to lose her job. “I’ve
been miserable for two years,” she confided to CAA partner Bryan Lourd, one of her best friends, in 2014. She even had to reassure her parents she wasn’t about to be fired.
She wasn’t the only top executive at Sony who seemed to have lost all joie de vivre. “Work is drudgery,” Michael Lynton told a friend just a month after Pascal complained that she was miserable. Facing his toughest times yet after more than a decade on the job and unsure about his relationship with the new CEO of Sony, Kaz Hirai, Lynton was considering escaping Hollywood entirely. Working with a recruiter, he lobbied aggressively to be considered for jobs in academia and the nonprofit world, such as president of New York University, or Tulane, or the Smithsonian Institution.
As he traveled for interviews and meetings with academic acquaintances who could help his cause, Lynton had a good sense of what his current colleagues in Hollywood would think. “We have to keep this very confidential,” he told Walter Isaacson, another friend and a superstar writer. “With all that is going on at Sony if word got out about this it could be v harmful to the company.”
His time was also taken up by one of the nation’s hottest tech startups: Snapchat, the app on which messages disappear after a set time. Lynton had gotten to know the founder of Snapchat, Evan Spiegel, after the Sony CEO’s wife noticed their daughters were using it. Lynton e-mailed the young Stanford dropout, who had attended the elite private school where the Lynton girls were students. Within an hour, Spiegel was at their house, and the couple agreed to invest in the startup, among the earliest to make that commitment. Not long after, Michael Lynton joined Snapchat’s board, eventually becoming its chairman.
As Snapchat grew rapidly and eventually had a $24 billion IPO, the Lyntons’ personal stake reached more than $500 million.
Desperately Seeking Franchises
Among the rest of the studio’s movie executives, meanwhile, it was a time of heightened urgency. Almost every weekend as De Luca left work with a pile of scripts to read, Pascal would ask him, “Where’s our tentpole?! Where’s our tentpole?!”
By the mid-2010s, it was clear that the most consistently successful studios had the most franchises in their quiver, which they used to cycle sequels and spinoffs while enjoying the freedom to develop the next hits. Disney and Warner held that status for most of the decade, while the rest struggled, with varying degrees of success, to reach that elite level. None had a harder time than Sony Pictures.
De Luca, Minghella, and other Sony staffers eagerly picked up anything that smelled like a potential franchise. They bought the rights to make movies based on Barbie, the Fifth Wave series of young adult books, and Stephen King’s Dark Tower novels. Looking to expand the successful but relatively small Jump Street franchise and reinvigorate Men in Black, Sony cooked up a plan to combine the two in a single film (“jump street merging with mib i think that’s clean and rad and powerful,” commented the star Jonah Hill). They tried to get movies that had been languishing in development for years into production: a remake of Cleopatra, a third Ghostbusters, another Bad Boys, and adaptations of the toy-based animated TV series He-Man and the Masters of the Universe and of Sony’s Indiana Jones–esque video game Uncharted.
And instead of putting out a new sequel to Spider-Man every few years, Pascal and her team started developing spinoffs they could release annually, like those based on the Sinister Six team of villains, in order to create their own superhero universe to rival Marvel’s.
But few of these development projects turned into actual movies. By 2013 and ’14, the trend in Hollywood was to announce a prime release date for major franchise films years in advance, before a script was even in place, and then marshal resources to reach that goal. Sometimes it worked brilliantly to focus attention, and sometimes it resulted in creative disaster when the date proved unrealistic—but at least it got movies out the door.
The new model called for a studio chairman to set a big goal and then direct his or her deputies to make it happen, come hell or high water. That wasn’t how Pascal typically worked, though. She loved to get her hands dirty, working personally with writers, directors, and producers to get a project just right. And no matter how important the big movies were, the lure of small, prestigious, and potentially Oscar-winning films, like a biopic of Steve Jobs, kept stealing Pascal’s attention.
Lynton, in his typical manner, which some considered respectful and others passive-aggressive, expressed his concerns to her: “I worry that we are signing up a lot of smaller movies and that the big ones, 5th wave, Masters of the universe, ghostbusters, unchartered are not crossing the line. If columbia is spending all this time on the smaller ones, how are they getting the big ones done.”
Pascal, writing to Belgrad, vented in her typical way: “barbie is in freeefall and we paid a fucking fortune for it . . . when are scripts cpoming in on things that can be movies uncharted monkeys we don’t have a writer on barbie we don’t have a writer on the chris hemsworth movie sinister 6 is a scary problem because of marvel and warners when do you think we are getting the gb script can we make jump street real what is happening with winters knight and hood and eden and dishonorables and narnia and bad boys . . . .michael bay isn’t doing it i don’t know what to do with my frustration so I’m writing you.”
Only two of the big ideas in the works in 2013 and 2014 would make it to the big screen by 2016: the female-led Ghostbusters reboot and The 5th Wave, and both disappointed at the box office. In the meantime, Sony faced a conundrum: how to produce the big results that Tokyo wanted ASAP, given the lack of vibrant franchises they had to work with. One answer, which often blew up in their faces, was to overpromise.
When Hollywood studios greenlight movies, they typically make a box-office projection that will create an acceptably big profit, after considering all the revenue expected to follow from DVD, digital, and television sales. Such projections are based on comparisons to similar movies with similar budgets released at similar times of the year, and they always include some level of subjectivity. (Is the remake of Ghostbusters most similar to other Melissa McCarthy comedies? To buddy comedies? To generic summer action films? To the first two Ghostbusters films in the 1980s?) But because executives are judged on whether their movies hit the projections made at greenlight, not whether the movies are simply profitable or not, the projections are supposed to be made as objectively as possible.
That was always challenging at Sony, because when Pascal really wanted to make a movie, she sometimes rejected projections she deemed too low. She certainly wasn’t the only studio chief who bent others to his or her will, but it was telling that some executives referred to greenlight meetings at Sony as “enablement sessions” for Pascal. That’s how 2004’s dour James L. Brooks dramedy Spanglish, for instance, was greenlit, with a projection that it would make more than $100 million domestically (it ended up with $43 million).
Pascal’s willingness to go with her gut could pay dividends, though. Superbad, in 2007, seemed like a risky bet: an R-rated comedy about high school (meaning most of its target audience would be too young to buy tickets), featuring Jonah Hill and Michael Cera, totally unknown then. But she believed it would succeed and so the film was greenlit, with a target domestic box office of $30 million, which seemed like a stretch to some inside Sony. It ended up grossing $121 million.
By 2013, Sony Pictures was regularly projecting very high grosses on its films, both in order to make it seem like they could achieve the big profits its parent company wanted and to justify budgets that, while shrinking, still weren’t exactly the tightest in Hollywood. So 2014’s The Amazing Spider-Man 2, which cost $260 million and grossed $709 million worldwide, was a major disappointment because it was projected to make $865 million.
A rash of other movies that year and the next were greenlit with optimistic expectations and failed to deliver: the R-rated comedy Sex Tape (projection: $180 million; result: $126 million); the robot film Chappie (projection: $200 million; result: $102 million); 2015’s only summer tentpol
e, Pixels, featuring video-game characters alongside the fading stars Adam Sandler and Kevin James (projection: $282 million; result: $245 million); the drama Ricki and the Flash, starring Meryl Streep, from Rothman’s TriStar label (projection: $100 million; result: $41 million); the drama Concussion, starring Will Smith (projection: $135 million; result: $49 million); the comedy Aloha, directed by Cameron Crowe (projection: $90 million; result: $20 million); and the comedy The Brothers Grimsby, starring Sacha Baron Cohen (projection: $200 million; result: $25 million).
Some movies overperformed, most notably 22 Jump Street (projection: $215 million; result: $331 million) and the animated Hotel Transylvania 2 (projection: $325 million; result: $473 million), but Sony was too frequently stretching, and many inside the studio knew it. “The projections were insane,” admitted De Luca.
Another movie with a big number on it was Sony’s R-rated 2014 comedy The Interview, starring Seth Rogen, which cost $41 million to make and was projected to gross $100 million at the worldwide box office after its debut on Christmas Day. Instead, it grossed $11 million, but not because of miscalculations by Sony’s production executives. Its release was aborted because of the worst corporate hack in American history.
The Hack and the Aftermath
Tens of thousands of e-mails and documents were posted online by the hackers and then covered breathlessly by press around the world. Among the most embarrassing were offensive jokes Pascal and Scott Rudin made about which movies with African American casts President Obama would like best, criticisms of A-list stars like Angelina Jolie, and a copy of the script for 2015’s James Bond movie Spectre. There were even internal discussions at Sony as to whether North Korea would seek to retaliate over The Interview, which mocked the country’s dictator, Kim Jong-un—discussions that unwittingly presaged the hack itself. The U.S. government and most experts eventually concluded that hackers backed by North Korea broke into Sony’s computer system, most likely in retaliation for The Interview. The issue was never fully resolved, though, and some still believe that disgruntled ex-employees are to blame.
