An investment consortium that includes Sony Pictures Entertainment finally completed its $5 billion purchase of the fabled Metro-Goldwyn-Mayer studio on Friday, and immediately announced details of a new management team that includes several current players in the studio’s television operation.
The announcement came a day after Sony Pictures Television announced a realignment of its top executives, in part in preparation for the deal with MGM. The changes include an expanded role for Sony Pictures Television President Steve Mosko as part of his signing of a new employment contract.
Sony is not buying MGM outright. The studio with the famous roaring lion logo has been sold to a group that will operate a downsized version of MGM. What Sony got was extensive distribution rights and access to the huge MGM library, which includes 4,000 film titles and 10,400 television episodes. That brings Sony’s film and television libraries to 7,500 titles and 45,400 episodes, respectively, among the largest in the world.
The investment consortium had previously announced that the new MGM would be led by former Chief Financial Officer Dan Taylor, who becomes president of the company. Charles Cohen, previously MGM’s executive VP of corporate finance and development, becomes executive VP.
Jim Packer, who had been MGM’s executive VP of North American television distribution, will become the new MGM’s executive VP of television distribution. People familiar with the matter said Mr. Packer will continue to be responsible for the production and distribution of five existing MGM-owned TV series, including the “Stargate SG-1” and “Stargate: Atlantis” franchises, as well as upcoming television series based on MGM’s “Barbershop” and “Legally Blonde” films.
Bruce Tuchman, MGM executive VP and architect of the rollout of MGM’s 122 branded networks worldwide (all outside the U.S.), will continue in that role at the new company.
Other MGM executives who will continue are Blake Thomas, executive VP of worldwide marketing, who becomes executive VP of home-entertainment distribution, and Travis Rutherford, senior VP of consumer products and interactive, now executive VP of consumer products and location-based entertainment.
In all, about 250 of MGM’s 1,400 employees will move over to the new MGM, which will be based on the Sony Pictures Entertainment lot in Culver City, Calif. All of the current MGM employees losing their jobs will receive a severance package that includes a payment equal to at least six months of their current annual compensation.
Meanwhile, at Sony’s television operation, division president Mr. Mosko expands his oversight to include domestic pay television and video-on-demand services. Both had been the domain of Michael Grindon, president of Sony Pictures Television International, who also oversees Sony Pictures Television’s international business. He will continue to do so under the new arrangement.
SPT President of Distribution John Weiser will serve as the point man on the domestic pay-per-view and VOD services, and oversee merging MGM and Sony’s film libraries.
While Mr. Mosko said it is too early to discuss exactly how Sony will leverage MGM’s library, he said the completion of the merger comes at a time when Sony’s TV operation is preparing to step up its game. “We want to be the premier independent studio in town,” Mr. Mosko said in an interview. “Wherever there are screens, we want to have a product on those screens.”
In acquiring the assets of MGM, Sony is part of an investment group. The lead partner in the group is private-equity firm Providence Equity Partners, based in Providence, R.I., which put up $525 million. The other investors are Texas Pacific Group, which put in $350 million, DLJ Merchant Banking Partners, which put up $125 million, and cable giant Comcast Corp., which put in $300 million. JPMorgan Securities, JPMorgan Chase Bank and Credit Suisse First Boston provided $4.25 billion in debt financing in connection with the merger.
They paid MGM shareholders $12 a share, or around $3 billion in cash, and assumed nearly $2 billion in debt. Prior to the sale, MGM had a cash distribution that was worth about $9 a share to each shareholder.
Sources close to Sony said last week that the inclusion of MGM’s library of titles will be a central factor in the growth plans for Sony’s television, which is seeking to raise its profile as one of the last television production and distribution shops without a direct link to a U.S. broadcast network. While Sony officials declined ahead of the closing of the deal to provide details of how the company wants to leverage the MGM library, sources point to Sony’s deal with Comcast for clues.
In return for Comcast’s contribution, Sony agreed to give the cable giant certain distribution rights to its film library, which will be used to launch VOD channels for Comcast’s 21.5 million subscribers. Comcast officials have said that once the MGM deal closed, they would look to launch four new cable channels (one of which would be for children) and would mine MGM’s library to augment existing VOD outlets and launch new ones.
Sources said Sony hopes to leverage its newfound size to strike deals with cable operators looking to bolster their VOD and pay-per-view content.
Sony has been working hard to make it clear that despite cutbacks in the past, it is still very much in the television business. SPT has co-production roles in a number of high-profile series, such as CBS’s “Joan of Arcadia,” and “King of Queens” and the FX Network’s “The Shield” and “Rescue Me.” It distributes a number of off-network shows, including “Seinfeld,” “Mad About You” and “Married … With Children.” It produces the daytime soaps “The Young and the Restless” and “Days of Our Lives.” Sony also has pilots in development with several networks which are contenders for all slots.