A REAL-LIFE HOLLYWOOD HORROR STORY
HIT & RUN
How Jon Peters and Peter Guber Took Sony for a Ride in Hollywood
By Nancy Griffin and Kim Masters Simon & Schuster -- 479pp -- $25
It was 1989, and Frank Price had just finished a job interview he would not soon forget. Price, a Hollywood insider who had run the studio operations of both Columbia Pictures Entertainment Inc. and Universal Studios, had been job hunting in New York. Sony Corp. was about to plunk down $3.4 billion to buy Columbia from Coca-Cola Co. and was looking for someone to head it. But to get the post, Price needed the approval of Walter Yetnikoff, the volatile head of Sony's CBS Records unit. At a lunch at Yetnikoff's New York office, the mood was hostile and dismissive. The meeting--and Price's bid for the job--ended abruptly when a barber arrived and Yetnikoff donned a kimono to have his hair cut.
Why Sony deferred to Yetnikoff, an executive whose Hollywood track record consisted of a few movie soundtracks and who had just returned from treatment for substance abuse at the Hazelden clinic, is still unclear. What is known is that Yetnikoff immediately called a candidate he preferred, Peter Guber, producer of such hits as Rain Man--and of $100 million in losses at a film company he had run for PolyGram.
The story of how Sony blundered into Hollywood reads like a train wreck ready to happen. With Yetnikoff's blessing, Sony hired the ponytailed Guber and his partner Jon Peters, a seventh-grade dropout and onetime hairdresser to the stars. As co-chairmen, they proceeded to take Sony for the ride of its life, wildly bidding up the cost of movies and building the most lavish studio in a town that thrives on lavishness. In addition to annual salaries of $2.7 million, each man got his own corporate jet. Peters sometimes used his to fly flowers to an actress working in London. Inevitably, they ran up losses the likes of which Hollywood may never see again.
In Hit & Run, Nancy Griffin and Kim Masters skillfully chronicle the lunacy of the deals, personalities, and excesses that made up Sony's Hollywood nightmare. Both are accomplished Hollywood reporters--Griffin formerly at Premiere and Masters for Time. As they tell the story, Sony's misadventures serve as a cautionary tale for any investor seeking Tinseltown riches. And despite the notorious history of Sony and archrival Matsushita Electric Industrial Co., overseas investors can't seem to resist this glamorous but treacherous business. The current buzz: Korean executives may be behind bids for MGM, now being peddled by banker Credit Lyonnais. If so, they had better put on their reading glasses.
Lesson No.1: Find someone who knows the business. To negotiate the deal with Coke, Sony relied on Mickey Schulhof, a PhD in physics who had risen to head the consumer-electronics company's U.S. operations. But Schulhof was hardly a dealmaker, and pitting him against veteran entertainment investment banker Herbert Allen Jr.--representing Coke--was ``like putting my Labrador retriever Thunder against a Chihuahua,'' Yetnikoff said later. And the $5 billion in cash and debt assumption that Sony paid for Columbia showed the mismatch. Only five years later, Sony would take a $2.7 billion write-down to erase the overpayment.
Still, Sony might have weathered the purchase by putting the studio in better hands. Superagent Michael Ovitz, who had brokered the deal by putting Coke and Schulhof together, wanted the job. But Sony resisted his demands: total control, a chunk of stock, and freedom to buy more companies. Ovitz then took himself out of the running--and walked away with an $11 million fee.
That left Guber and Peters. Guber, dressed in flannel shirt and jeans, flew to New York and seduced Schulhof with his trademark charisma and a hyperkinetic flow of ideas. In the end, Sony agreed not only to hire the two men but also to pay an astounding $200 million for their film-production company. Only later did Sony find that it would also have to pay an estimated $500 million worth of concessions to free the duo from an existing contract with Warner Brothers.
By then, money was no object. Guber and Peters were left alone to spend whatever they wanted to restore Columbia's shopworn Culver City studio and to revive a near-moribund company. Costs spiraled out of control for Steven Spielberg's Hook, for the Michael Douglas-produced Radio Flyer, and for Hudson Hawk, produced by and starring Bruce Willis. None made money; Hudson Hawk alone lost $42 million for Sony. Emblematic of the prevailing mood was Willis' response to the soaring costs--as reported in Hit & Run: ``I don't give a s---.''
In the end, it seems, no one did. Not Yetnikoff, who was forced out by Sony when his sway evaporated with such key talent as Bruce Springsteen and Michael Jackson. Not Peters, who was shoved out by Guber. And certainly not Guber, who even as he was being forced to resign from the studio he had mismanaged, finagled a package valued at $200 million to make films for the company. Schulhof was ousted from his Sony USA post a few months later.
The writing in Hit & Run isn't flashy, but Griffin and Masters have produced a readable if slightly dated account of one of Hollywood's real-life horror stories. This is no Indecent Exposure, David McClintick's brilliant account of the David Begelman check-kiting scandal at Columbia in the '70s. But that was crime, greed, and venality. The Sony story is primarily one of stupidity.
By Ronald Grover
Updated June 14, 1997 by bwwebmaster
Copyright 1996, Bloomberg L.P.