Struggle for Respect
Among the projects that survive Yaros? The Spirit/Esprit marketing and distribution systems, which Yaros was hired specifically to develop. Spirit is domestic; Esprit sits on top of SPE's international film distribution system gathering and sharing box-office and other performance data. Before the two systems, home office executives had no window into the tangle of incompatible domestic and regional systems scattered around the globe. Now headquarters and regional office staffs have instant access to data transmitted over the Internet via a virtual private network.
Using Spirit, for example, which digitizes and tracks every detail of a film's domestic releasefrom how many copies are being screened to how many tickets are sold and how much of the take individual theaters get to keepSPE was able to wind down the marketing machine on Sony's recent Columbia TriStar studio flop, Gigli, within hours, saving millions in suddenly inappropriate promotional spending.
And using the Spirit/Esprit duo, data about ticket sales, locations, screening times and percentage of seats sold can be sliced and diced by movie, genre, region and even individual theater to see whether what wows them in Wichita is already starting to nosedive in Nantucketor, just as importantly now, in Nice. "In the movie business, it's important to understand, quickly, how your product is doing, especially on the first weekend," says SPE's new CIO John Stubbs. "And it's become more and more important to understand how this all works on a global basis."
Indeed, in the case of police action flick S.W.A.T., Sony was able to determine within 24 hours of its early August debut that the film was doing better than expected, raking in $37 million and coming in No. 1 during its opening weekend. Armed with the updated projections, Sony's sales force was able to negotiate better revenue splits with exhibitors during the week after S.W.A.T.'s debut and, in some cases, persuade exhibitors to commit more screens to the movie than originally scheduled.
Marketing also was able to use the data, Gage notes. "We can make decisions on a film-by-film basis," he says. "Do we continue to invest in marketing it or is word-of-mouth sufficient to keep it rolling?" Typically, if a film is considered to be doing reasonably well, marketing will continue for a few weeks beyond release, amounting mostly to small newspaper ads that run six weeks and TV ads that air for two or three weeks. Says Stubbs: "As we're distributing across the entire world, we're in many markets that are different from the United States, where information may be less easy to obtain. IT can help you to get information faster in places where now you've just got agents or other people in the local market reporting back to you about what they feel has actually happened." Other studios are grappling with this, but Sony's push to digitize its international operations put it ahead in the game, as did its push earlier to digitize domestic marketing and distribution systems.
The differences can be drastic in other ways, Sands says. The first Men in Black, released in 1997, generated hundreds of logistical e-mails and faxes before and during its international releases. Each of the 60 regions set its own release date, made its own prerelease revenue projections and reported box office numbers via e-mail or fax. Planning for the international release of Men in Black II in 2002, however, was handled quite differently, through Sony's new Internet-based InterPlan system.
Rather than making each region puzzle out a revenue projection, Sony planners generated the initial projections, then encouraged each region to modify them as soon as they saw the first box-office numbers. The Web-based user interface is so simple, Sands notes, that exhibitors all over the world have begun to use it to handle the data generated by competitors' movies, giving themand SPE execsan even larger window on how to boost revenues.
But tracking box office receipts and winning more lucrative splits with theater owners are only the beginning of how IT can impact SPE's bottom line. One of the best returns expected on an IT investment this year involves one of the most mundane systems. For less than $1 million, the home entertainment unit now has an inventory control system, formally called the Home Entertainment Chargeback Management System, which SPE expects will save the company $2 million every year for the next five years.
Rolled out in early August, this system monitors returns of DVDs and VHS tapes from such major retailers as Wal-Mart Stores Inc. and Target Corp. Before the system was in place, Sony couldn't tell whether the retailers were claiming an appropriate credit for returned merchandise. Sony was not accusing retailers of claiming more than they were entitled to, but without proper records Sony was operating an honor system. Did one particular case of unsold DVDs go out at a discount or at full price? Now when a retailer returns merchandise, Sony can reconcile it against its original shipment price. This might not sound like much, but in the past, Sony had so few controls on returns that it had no way to figure out how much, or even if, it was losing. Now, though, retailers can't just assume that their credit invoices will be rubber-stamped; Sony matches each returned shipment against its own original invoices.
SPE, also as part of its Internet-based strategy, is setting up new Web sites for television stations and movie theater operators that allow them to shop, Amazon.com-style, for commercials, teasers, posters and other promotional materials online. With a few clicks of a mouse button, a theater owner can order up Spider-Man 2 posters, trailers or even life-size cardboard cut-outs of Tobey Maguire to display in the lobby. It's also hoped this will reap significant savings in Sony's promotional costs. "Before, we were calling them to see what promotional materials we could force down their throats," Yaros said. "Now we've created a self-service environment that greatly reduces our costs because we're no longer manufacturing or shipping materials that aren't needed."
Even Web site development has been streamlined, notes Chris Antonius, executive director of digital entertainment. Previously, SPE would hire a contractor to develop a promotional Web site as each new movie moved closer to its release date. Now, however, IT offers a series of templates for making each new Web site. By not paying outside contractors to reinvent the Web wheel each time, Antonius expects what he describes only as "a high six-figure, probably close to seven-figure, return on investment over the next 24 months" as Sony releases roughly 60 new films.
Not all IT projects have gone smoothly, of course. Another Yaros innovation, the international television management system called C2C, or contract-to-cash, has been a nightmare of missed deadlines and budget overruns, but SPE has no plans to discontinue it. Yaros almost seemed to enjoy taking full responsibility for the slips. "We copped to the mistakes. We'll pull it off," Yaros had said confidently in July, though his ouster now suggests that he may have underestimated the backlash.
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