SONY'S BLOCKBUSTER SEQUEL

By KIM MASTERS LOS ANGELES

So you have yourself a nice thriller set up, with Wolfgang Petersen directing hot off Air Force One and no less than Mel Gibson in the starring role, when--oops!--Mel decides he'd rather go elsewhere to do a pet project called Parker and then cash in on a ton of money by making Lethal Weapon IV for Warner.

Thus John Calley, the chairman of Sony Pictures Entertainment, lost the opportunity to trumpet a major project in the works. Such are the caprices of show biz. But for Calley the collapse of the deal is particularly irksome, since Hollywood is clamoring for action from him as he marks his first year on the job.

All this impatience strikes Calley and colleagues as hardly fair. Once pathetic Sony Pictures is flush these days, having just become one of only two studios ever to gross $1 billion in a year (Disney has done it three times). Even without a cartoon lion, Sony reached that nice, round number in record time (Aug. 31, beating Disney's best date--Nov. 23--by a stretch). And Sony expects to surpass the industry record of $1.22 billion, if it can scrape up the remainder on films such as Paul Verhoeven's sci-fi thriller Starship Troopers (a picture it's splitting with Disney), and As Good As It Gets, from Terms of Endearment director James L. Brooks.

Sony Pictures has become a cornucopia of hits: Jerry Maguire, Anaconda, My Best Friend's Wedding, Air Force One (another split with Disney) and the summer's box-office champ, Men in Black, which has grossed $243 million in the U.S. alone. Funny thing is, these hits were put together by guys who got fired a year ago, after the studio suffered through more than five money-losing years that bottomed out with Sony Corp. taking a $3.2 billion write-off--essentially admitting its investment had been worthless. Despite having ably handled the flock of pictures he inherited, Calley has yet to shepherd a film of his own devising from script to screen.

All this puts Sony Pictures in the ambiguous position of being simultaneously red-hot and not exactly. After the studio releases Zorro and Godzilla next summer, it's not clear what major projects it will have on its menu. In an industry that retains heat about as well as plastic, the cry is predictable: Show us the movies!

The anomaly raises questions in the minds of agents and their star clients, and even on Wall Street, about Tokyo's long-term plans. With revenues pouring in, Sony doesn't appear to be spending that much. Is the strategy to crank up some dazzling results and then snag a buyer? Is Calley just a caretaker? This is his second turn at the helm of a Hollywood studio; he headed Warner Brothers from 1967 to 1980. An engagingly candid, out-of-the-box thinker, Calley, 67, is nevertheless running a business that has changed drastically. Some in the industry wonder whether he has the will or the wile to stay in for the long haul.

Calley says he does and dismisses speculation that Sony will sell. "It's a good story," he says. "Nothing that I've seen supports that idea." Sony has stated that it will consider selling shares in all or part of its entertainment operations to the public but plans to keep control. Besides, Calley argues, current management deserves credit for what it has done right: savvy marketing and bold scheduling. "While we are living off the past at the moment, we are going to do more than a billion dollars this year, and that's not coasting." The studio didn't blink when Warner and Disney warned that Jerry Maguire would get steamrollered if it opened at Christmas, in competition with their respective offerings, Mars Attacks and The Preacher's Wife. According to Sony executives, Warner chiefs Bob Daly and Terry Semel even tried to enlist Tom Cruise to delay Jerry Maguire's Dec. 13 opening. (Daly says he knows nothing about such an effort.)

Instead of yielding, Calley saw an opportunity to boost morale--and upped the advertising budget. "I felt if we could kick the other studios' asses after they had told everybody in town that we were going to get murdered, that would be a major message and create a sense of empowerment here," he says. Masayuki Nozoe, Tokyo's man on the Sony campus, says Calley discussed the increase in spending with him, admonishing "This is the last chance for you [Sony] and the first chance for me."

Calley's plan worked. Mars Attacks and Preacher's Wife tanked; Jerry Maguire grossed $154 million in the U.S. and an additional $120 million overseas. During the summer, thanks to distribution chief Jeff Blake, Sony dared to open My Best Friend's Wedding against Batman & Robin. Once again Sony triumphed, with a film that grossed $123 million domestically and is performing well abroad.

Calley also gets credit for saving the big summer '98 film, Godzilla, and he plans a slew of sequels and recyclings. He has approved follow-ups to My Best Friend's Wedding, Jumanji and Bad Boys. Naturally you'll see more Men in Black. And, as Calley observes, "we can make Zorro forever if it works." His plans also include another Ghostbusters installment and movie versions of such TV shows as I Dream of Jeannie and Bewitched. He even threatens a Charlie's Angels for the big screen.

If it all seems a little retro, so is Calley. After an extremely successful run at Warner, he dropped out in 1980. He lived in seclusion, first on Fisher's Island, N.Y., and then in rural Connecticut. He played the foreign-exchange market and ignored movies, except for producing an occasional project with his friend director Mike Nichols, like 1990's Postcards from the Edge. At one point Michael Ovitz--then the top man at Creative Artists Agency--dropped by to ask if he was satisfied with his life. At the time, says Calley, "I felt I was living a little bit in God's waiting room. I was sleeping 18 hours a day...I like to dream. It was not a sign of advanced depression. [But] I said, 'I think I've probably been sleeping too much.'"

When Calley awoke, he was running United Artists, a division of the nearly moribund MGM/UA--a job arranged by Ovitz. He had been away for 13 years. During his sabbatical he had remained "way out of touch" with the industry. Meanwhile, everything about the business was different. Movies opened on hundreds of screens with multimillion-dollar advertising campaigns. Instead of just network television, there was cable, home video and a burgeoning foreign market. "The horizons were vast," he says.

Too vast: Calley turned out a string of flops--among them Wild Bill, Tank Girl, Hackers--that were ultimately offset by a couple of major hits, Goldeneye and The Birdcage. But he had always been perceived as a short-termer at MGM/UA, since the company was for sale. In the meantime, Sony's newly installed leader, Nobuyuki Idei, was trying to end a long period of grotesque mismanagement at the studio by hiring a seasoned veteran he could work with.

Calley says he has a long-term, global plan for Sony. He believes, as he told Idei when they first met, that "the Hollywood-centric universe" is doomed by rising costs. He argues that the industry has to "give up the arrogance of Hollywood" and start finding ways to exploit the rest of the planet. In his Warner days, the studio supported such foreign directors as Federico Fellini and Francois Truffaut. While many of their pictures weren't big business, they often produced tidy profits. If Sony can create outposts in Germany, England, Asia and so on, he contends, there should be a healthy regional and possibly an international market for the films that result. Sony is uniquely situated to adapt to cultures around the globe. "There is the possibility for a company like ours to truly internationalize ourselves and yet be local film producers," he says.

Calley's competitors greet this strategy with a skepticism bordering on derision. But it does fit into Sony's grand scheme, which involves serving a generation that Idei likes to call "the digital dream kids" in ways that most of us--including studio executives--have not yet begun to imagine. Jon Feltheimer, president of Sony's Columbia-TriStar television division, envisions Sony software beamed through a pipeline that Sony may or may not own to a Sony-manufactured screen. As for Calley, he doesn't even try to explain. "I'm not digital," he says. "I'm not even analog. I'm abacus."

Sony's big dreams may or may not come true. But on a simpler, more pragmatic level, Sony's strategy seems to be about diversification. "It will become much more difficult to rely on the hardware business when everything becomes digitalized," says Nozoe. "The content side will become more significant."

Sony must still prove that it can shoot the Hollywood rapids and run a consistently profitable studio. Other outsiders--from soft-drink to insurance companies to Sony's rival, Matsushita--have taken on the entertainment industry and found the business too volatile for their taste. Nozoe thinks his company will be a survivor. "The business is unpredictable," he says, "but there might be a possibility to have better science in it." Science in moviemaking? No one has found that formula yet. If Sony can figure it out, it will be one of the company's most valuable inventions to date.