As Michael Lynton Exits, Will Sony Double Down on Hollywood or Sell?

One rumor holds that Sony may finally be ready to part with either all or part of its entertainment assets, with CBS' Leslie Moonves angling to buy.

It’s a rare thing for an executive who presides over a corporate disaster to remain on the job and even get promoted. But departing Sony Entertainment CEO Michael Lynton managed to do exactly that.

Two years have passed since the Sony hack was not only a debacle for the studio (and an international incident), but also exposed, via the leaked emails, Lynton’s quest to find employment elsewhere. Yet having quietly become chairman of Snapchat's owner Snap, Inc. in late December — while holding his position at Sony — Lynton is landing softly with a new role and a pile of stock in that company, which is expected to go public in the not-distant future.

The question is, where does his departure leave Sony Entertainment, especially its film studio? The rumor mill has heated almost to the melting point in the days since Friday's announcement, but it’s possible that Japan's Sony Corp. is poised to pursue a strategy meant to achieve — finally — what Sony founder Akio Morita set out to do when he overpaid for Columbia Pictures in 1989: Find a way to marry Sony hardware and software. Or, alternatively, it could dispose of some or all of its content business in a splashy sale, perhaps to CBS.

Though Sony has said Lynton will remain involved in management for six months while the company quests for a replacement, a widely rumored successor is Andrew House, president and global CEO of Sony Interactive Entertainment. House has been involved with PlayStation from its inception as it grew into one of the top gaming consoles and an entertainment hub. Consumers cannot only play games but stream live television programming through PlayStation Vue. It also is among the top platforms in the world for accessing Netflix. The interactive unit previously made an effort to move into original programming, notably with the comic book adaptation Powers, which was canceled after two seasons.

Obviously there would be an opportunity to take a different approach with that unit’s top executive overseeing the company’s film and television programming. A Sony insider says there has already been close coordination with House on such projects as Shawn Levy’s upcoming adventure film Uncharted, based on the PlayStation video game series. And a major initiative for Sony’s film studio has been finding ways to make movies based not just on ?Spider-Man but more of the 800 Marvel characters that it controls, such as Venom, Silver Sable, Black Cat and Sinister Six. That content could have strong appeal to many of the gamers who own PlayStations. Disney-owned Marvel controls consumer products associated with its characters, and it is likely Sony will work out partnerships there, as it did with Spider-Man. That character was relaunched in Marvel's 2016 hit ?Captain America: Civil War and is getting a stand-alone film ?Spider-Man: Homecoming from Sony and Marvel this summer.

Sony Corp. CEO Kaz Hirai is en route to Los Angeles and has said he will establish an office at the studio’s Culver City site “to ensure smooth management transition.” But don’t expect Lynton to be around for six months. Given the uncertainty that his departure has created, notably regarding the future of film studio chief Tom Rothman, a long transition would create big problems. Sony is under pressure to fill its pipeline and talent representatives are reluctant to set up major projects if it is unclear who is going to be in charge. (One film that Rothman had been counting on for 2018, Bad Boys 3, appears to be off at least for next year as ?Will Smith instead eyes a major role in Disney’s Dumbo.)

Even before Lynton’s departure was announced, names were swirling as potential replacements for the embattled Rothman. If House (or someone else) succeeds Lynton, it would only be natural for him to hire his own person to run the studio, especially since Sony finished fifth among the six majors in domestic market share in 2016 and several top Sony executives have expressed displeasure with Rothman's hard-charging management style. (Andrew Gumpert, the studio's well-respected head of business affairs, recently left for Paramount.) So if Sony intends to keep Rothman on the job, it would help itself to send a strong signal to that effect. If the plan is to replace him, letting months pass without making a move is likely to exact a toll.

An entirely alternative rumor holds that Sony may finally be ready to part with all or part of its entertainment assets, with CBS' Leslie Moonves angling to buy. The addition of Sony Entertainment would give CBS the major film studio Moonves has coveted (CBS Films is a modest endeavor and releases its films via Lionsgate) and add significantly to its television assets via Sony Pictures Television hits like Better Call Saul, The Blacklist and stalwarts Jeopardy! and Wheel of Fortune. The Redstone family, which controls CBS and Viacom, home of Paramount Pictures, would then own two legacy studio properties with two big libraries — and the opportunity to someday combine them into a megastudio. (Since such a deal would involve Japan's Sony Corp. possibly holding a stake in CBS, which owns a U.S. broadcast network, regulatory approval might be tough.) Sony's music company, also in transition as Rob Stringer takes over as CEO from Doug Morris, could be in play as an acquisition target.

A transaction or series of deals of this nature would be complex and time-consuming and potentially involve other parties. But perhaps that is why Hirai has set up an office in Los Angeles for six months.

Sony has repeatedly and recently denied any plans to sell. And a CBS source says, “There is nothing to it.” But in an era of consolidation, Sony lacks scale. And in a time of peak instability in the industry, it’s risky to bet against deals in the entertainment business.