So Many Dreams So Many Losses

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Sony paid a daunting premium when it bought Columbia Pictures: 22 times the company's annual cash flow. But its bigger problem may have been a man, not a number: Michael Schulhof, president of Sony's U.S. subsidiary. A smart, capable 20-year company veteran with a Ph.D. in physics, Schulhof charmed his Japanese bosses with the nonconfrontational style to which they were accustomed. He was the only American to serve on the company's board. As a protege of both Ohga and Sony founder Akio Morita, he was given complete autonomy over the Hollywood operation even though he knew little about making movies.

To manage the studios, Schulhof quickly hired Jon Peters and Peter Guber, independent producers who had also never run a major studio. In retrospect, the amounts the Sony team spent verge on the hilarious. The company paid $200 million to buy the Guber-Peters company and gave the two men annual salaries of $2.7 million, as well as $50 million in deferred compensation. Sony then shelled out assets worth $500 million to settle a lawsuit that had been filed by Warner Bros., which had Guber and Peters under contract. "This was an obscenely expensive arrangement," says Porter Bibb, an analyst at Ladenburg, Thalmann in New York.

It was just the beginning. Ensconced in their lavish Thalberg Building suites, Guber and Peters continued on their spree, authorizing millions for antique furniture and fabulous parties. In 1991 Peters departed, but Guber kept signing checks. By 1993, though, the box-office picture was not pretty. The Sony studios scored a few hits during Guber's tenure, but nearly every one of their big-budget films was a failure, including Schwarzenegger's Last Action Hero (which is said to have lost at least $23 million).

With losses like that, it helps to have friends in the right places -- and Guber did. He and Schulhof became great pals, sharing family vacations in Spain. So entwined were the couples that for a time, Schulhof's son dated Guber's daughter. Guber was finally pushed out in late September, but he exited smiling. He reportedly pocketed $40 million in cash and received a commitment from Sony to invest an additional $200 million in his new production company.

But Guber may not be allowed to ride off into the sunset. Just last week former colleagues were accusing him of trying to poach several projects from Sony's development coffers, including an animal-rescue story called Elephants. And the Los Angeles Times reported that Sony is investigating the studio's accounting practices, although Sony denies this.