Sony Corp.'s movie unit -- for months the focus of scrutiny from activist hedge fund investor Daniel Loeb -- posted an operating loss of $181 million for the company's fiscal second quarter, a major contributor to its overall poor performance.
Sony, the Tokyo-based electronics giant, blamed its flop "White House Down," which starred Channing Tatum and Jamie Foxx and was released in the U.S. on June 28. The expensive action picture, about an assault on the White House by a paramilitary group, grossed $205 million worldwide against a budget of about $150 million, according to Box Office Mojo.
Sony posted a net loss of $197 million for the quarter ending Sept. 30. The company also downgraded its financial outlook for the fiscal year that ends in March, forecasting profit of about $305 million -- down from about $509 million.
Sony Pictures Entertainment's "White House Down," in which Tatum plays an aspiring Secret Service agent and Foxx the president of the United States, lost its debut weekend to the 20th Century Fox comedy "The Heat." Sony's film came on the heels of FilmDistrict's similarly themed White House-centered action film "Olympus Has Fallen," which was released in March and took in $161 million worldwide.
Sony said the "underperformance" of "White House Down" was in contrast to a blockbuster film that it had in theaters the same quarter a year earlier -- "The Amazing Spider-Man," which was released July 3, 2012, and grossed $752 million worldwide.
Earlier this year, things were looking up for Sony's movie division. Sony Pictures posted operating income of $38 million in the first quarter that ended June 30.
But by then, Loeb had already begun to pressure Sony. In May, Loeb began a campaign of public pleas for the company to adopt his proposal to make an initial public stock offering of up to 20% of its entertainment division. Loeb's company, Third Point, owns about 6.5% of Sony.
The company's entertainment arm, Sony Entertainment Inc., includes film and television studio Sony Pictures, Sony/ATV Music Publishing and Sony Music Entertainment.
Loeb ratcheted up his rhetoric a few months after his initial salvo: In late July, he used his second-quarter letter to Third Point investors to criticize the entertainment division as "poorly managed." He also criticized Sony President and Chief Executive Kazuo Hirai for giving "free passes" to Sony Pictures' Chairman and Chief Executive Michael Lynton and co-Chairman Amy Pascal.
Loeb labeled "White House Down" and another recent Sony disappointment, the Will Smith vehicle "After Earth," "2013's versions of 'Waterworld' and 'Ishtar' back-to-back," a reference to two of the most famous film flops of all time.
The company said this past summer that it would consider Loeb's proposal, but rejected the idea in August, saying in a letter addressed to the Third Point chief executive that its leaders "unanimously concluded that continuing to own 100% of our entertainment business is the best path forward."
In the Aug. 6 response, Hirai said the company would "increase disclosure regarding Sony’s entertainment businesses. We agree this can help market participants analyze their performance and monitor their success."
Third Point said in a statement that it was disappointed by Sony's decision but pleased that the company has made a "commitment to greater transparency."