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Technology Stocks : Netflix (NFLX) and the Streaming Wars
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the Streaming Wars, Sony Stands on the Sidelines

As competitors are ‘beating each other’s brains out,’ the only major studio that’s not a combatant is finding ways to profit

By R.T. Watson
Wall Street Journal
Aug. 7, 2021 12:00 am ET

In Hollywood’s streaming wars, the only major studio that doesn’t have its own service might also be the biggest arms dealer on the battlefield.

Like its rivals, Sony SONY -1.71% Pictures Entertainment is bullish about the long-term prospects of the streaming business. Unlike the others, however, Sony’s management is betting on a strategy that involves selling films to longtime rivals that are spending billions of dollars to bulk up the offerings on their platforms.

Simultaneously, without its own large-scale streaming service, the Sony movie studio—owned by Sony Group Corp. —is gambling more heavily than its competitors on the return of moviegoing. Sony executives describe their commitment to theaters as part of a strategy for attracting talent and for securing high prices when they sell movies to streaming services, which often pay based on box-office revenue.

Rather than going head-to-head with Walt Disney Co. , Warner Bros., Universal Pictures and Paramount Pictures—all of which are trying to use movies they have produced to attract consumers to their own streaming services—Sony says it hopes it can play those counterparts against one another.

“None of them can deal with each other, but all of them can deal with us,” said Tom Rothman, chairman and chief executive of Sony Pictures Entertainment’s Motion Picture Group, adding that his company’s future will be well served by selling to rivals. “It’s certainly been a zigging-where-everyone-zags strategy. It’s proved very lucrative for us.”

Sony’s rivals believe their multibillion-dollar investments in streaming services will pay off in lasting ways. The growth prospects for Disney’s flagship Disney+, for instance, have propelled the company to the kind of stock-market valuation typically associated with the tech sector.



Sony’s handful of successful franchises in recent years has included a Jumanji reboot and its sequel. PHOTO: FRANK MASI/COLUMBIA PICTURES/EVERETT COLLECTION
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Sony recently closed a pair of big deals, boosted by competitive bidding, to provide movies to the streaming services run by Netflix Inc. and Disney. Sony titles released over five years starting in 2022—including new Spider-Man films—will become available on Netflix after their theatrical runs, the companies said. Sony also agreed to give Netflix a first-look option to pick up movies the studio is making specifically for streaming platforms. Following their run on Netflix, according to a person familiar with the matter, Sony’s theatrical releases will then head to Disney which will be able to show them on its various distribution channels, including Disney+.

The Netflix and Disney deals, combined, are worth close to $3 billion over several years, according to a person familiar with the terms of the deal.

Sony continues to strike deals to make TV series that will run on various streaming services, including HBO Max and Netflix.

Sony was an early entrant in the streaming wars, launching the Crackle service the same year Netflix started its online offering. But the service didn’t become a serious contender, as Sony never made a massive investment in content. After Crackle struggled to attract top-tier programming or serious subscriber numbers, Sony sold control of the service in 2019 to Chicken Soup for the Soul Entertainment. It maintains some niche streaming offerings, including Funimation.

As streaming services proliferate and seek to stand out from the crowd, entertainment companies are spending unprecedented sums on making new content. Amazon.com Inc. recently agreed to pay $6.5 billion for the nearly 100-year-old MGM film and TV studio, which is expected to provide programming for the company’s Prime Video service. Actor and producer Reese Witherspoon’s production company, Hello Sunshine, sold for about $900 million. Her company adapts books into films and series like HBO’s award-winning “Big Little Lies.”



The upcoming ‘Venom: Let There Be Carnage’ is part of the studio’s plan to expand the Spider-Man series. PHOTO: MARVEL/ SONY PICTURES/EVERETT
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Mr. Rothman, who recently extended his contract after six years on the job, argues that his company’s lack of its own streaming service could be an asset rather than a liability.

“It did become clear at a certain point that many companies were going to lose many billions of dollars beating each other’s brains out,” says Mr. Rothman.

Sony has often ranked last or second-to-last in box-office revenue among its peer group since 2013. But it nonetheless boasts an extensive library of hit movies and television shows, including Spider-Man, its most valuable franchise.

MoffettNathanson analyst Michael Nathanson believes Sony may have a competitive advantage not being pressured to sell movies to itself. “Talent will always question whether or not the internal transfer price was the right price,” he said.

The streaming push has already alienated some talent. Scarlett Johansson sued Disney last month for breach of contract, alleging that the company’s decision to release “Black Widow” simultaneously online and in theaters ate into her pay, which was partially tied to box-office revenue.

The risk for Sony, according to Mr. Nathanson, is that competitors might accumulate big enough war chests from subscription revenue that they could outspend the studio on entertainment production. That, in turn, could hamper Sony’s ability to attract high-profile projects and talent and potentially lead to a downward spiral.

Many in Hollywood predict that Sony’s recent round of deal making should provide sufficient capital to test its strategy for at least four years.

After that it is uncertain if Sony will be generating enough high-profile movies to secure lucrative licensing deals or have enough capital to pay the talent that drives success for most films at the box office.



Mr. Rothman, Will Smith, Martin Lawrence and fellow Sony Pictures executive Tony Vinciquerra, left to right, at the premiere last year of ‘Bad Boys For Life.’ PHOTO: KEVIN WINTER/GETTY IMAGES
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The company’s chairman of distribution and networks, Keith Le Goy, says the studio’s lack of ties to any particular streaming service should also help it get the best prices for its movies and TV shows.

Sony’s sell-to-the-highest-bidder strategy is reminiscent of smaller production companies, like Ms. Witherspoon’s, that can take advantage of the current seller’s market for entertainment content.

“Our independence allows us every time to find the right home for any story, rather than being confined to the walled garden of our corporate siblings,” Mr. Le Goy said.

During Mr. Rothman’s tenure, the studio has released two Spider-Man films: “Spider-Man: Homecoming,” which grossed $880.2 million world-wide in 2017, and 2019’s “Spider-Man: Far From Home,” which made $1.13 billion. Another installment is slated for later this year.

Sony is trying to extend the franchise by plucking characters from the Spider-Man comics for villain-centered spinoffs such as “Venom: Let There Be Carnage” and “Morbius,” scheduled for releases this year and next, respectively.

Not all Sony’s franchise films have yielded box-office glory. The latest Men in Black and Charlie’s Angels films both underperformed in 2019. Sony racked up wins with two family-friendly Jumanji films and “Bad Boys for Life,” the Martin Lawrence-Will Smith reboot that was last year’s highest-grossing film in the U.S. and Canada.

Mr. Rothman argues that at its core, Hollywood is still primarily about producing entertainment that connects with consumers—whether on streaming services or in theaters.

“What I try to focus on is: ‘What is it people want to watch?’ ” he says. “That’s what’s going to matter.”

Write to R.T. Watson at rt.watson@wsj.com

Corrections & Amplifications
Tom Rothman is chairman and chief executive of Sony Pictures Entertainment’s Motion Picture Group. An earlier version of this article incorrectly said he was chairman and chief executive of Sony Pictures Entertainment. (Corrected on Aug. 7)

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Appeared in the August 7, 2021, print edition as 'The Switzerland Of Streaming.'

In the Streaming Wars, Sony Stands on the Sidelines - WSJ
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