Sony for Sale: Bad News for Me

Does anybody have any extra cash laying around???
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LOS ANGELES, Oct. 30 — Sony Pictures Entertainment is considering selling half of its fledgling animation studio, maker of the films “Surf’s Up” and “Open Season,” and even more of its thriving 15-year-old digital visual-effects company, which pioneered computer-generated imaging techniques in films like “Stuart Little,” “The Polar Express” and the “Spider-Man” movies.

Sony Pictures, a unit of the Sony Corporation, has hired the investment bank Houlihan Lokey Howard & Zukin to assess the value of the two divisions. An outright sale of both, which is possible, could bring around $500 million, according to people involved in the discussions.

All told, Sony has invested more than $400 million in the animation and effects businesses over the years.

One person involved in the talks, who spoke anonymously because the matter is still at an early stage, said the company intended to sell no more than a 50 percent stake in the five-year-old Sony Pictures Animation, which had modest success with “Open Season” last year.

The studio does not have an animated feature scheduled until “Cloudy With a Chance of Meatballs” in March 2009 and “Hotel Transylvania” six months later.

A sale of the animation business would resemble a slate financing deal, in which a studio sells a stake in a fixed number of movies, except it would be open-ended, the person said.

The person said Sony planned to retain at least some interest in its special-effects company, Sony Pictures Imageworks. Though Imageworks is a lower-margin business, it makes the animation studio far more cost-effective.

Imageworks — which handles special effects for Sony live-action films and films from rival movie studios — generates work for hundreds of Sony animation workers between feature films, times when they would otherwise have to be laid off. Saving money on downsizing and ramping up between animated films means those films can be made at two-thirds the cost of films by rivals like Pixar and DreamWorks Animation, the company says.

Potential buyers of Imageworks, people involved in the talks said, include investors who believe the company could expand by getting into the production of computer games and television advertisements, which rely heavily on the kinds of effects the company has become known for. But Sony is likely to seek one transaction with an investor in both Imageworks and the animation side, given the degree to which the two businesses are intertwined.

Not included in the sale discussions is Sony Online Entertainment, the maker of multiplayer interactive computer games like Everquest.

In a statement, a Sony Pictures spokesman, Jim Kennedy, said the company was “open to exploring equity partnerships, and it’s no surprise that there is market interest in our visual effects and animation businesses,” but stressed that “we continue to maintain a strong commitment to making animated movies going forward.”

Imageworks, which now rivals George Lucas’s Industrial Light and Magic and Peter Jackson’s Weta Digital as one of the biggest effects houses, has been expanding lately. It bought 50 percent of what now is Imageworks India, where it employs about 85 workers, and is to open a new plant in Albuquerque next year.

What became Imageworks began at Sony Pictures in 1992 with five people using computers to help plan complicated live-action scenes — a practice that has since become known as previsualization. It quickly became an in-house special-effects shop with credits on Sony movies like “In the Line of Fire” (1993) and other studios’ films like 20th Century Fox’s “Speed” (1994).

In April, Sony Pictures signed a three-year deal with Aardman Animations, a British studio known for the “Wallace & Gromit” films. That deal would not be affected by a sale.

David M. Halbfinger reported from Los Angeles and Andrew Ross Sorkin from New York.