April 25, 2024

Sony, Like Old Hollywood, Banks on Familiar Faces

As Hollywood has backed away from movie stars as too expensive and too unreliable, Sony has embraced its favorites. On Friday, the studio will open “Friends With Benefits,” a romantic comedy with Justin Timberlake in a leading role. It is Sony’s third film with Mr. Timberlake in less than 10 months, and comes on the heels of his performances in “The Social Network” last October and in “Bad Teacher,” which opened just over three weeks ago.

This month Sony released “Zookeeper,” a comedy, made in partnership with MGM, with Kevin James as the star, a writer and a producer. Next year, it has “Here Comes the Boom” with Mr. James, last year it had “Grown Ups,” and the year before, “Paul Blart: Mall Cop” — in all, four of his latest five pictures.

Sony, whose film operation for 15 years has been run by Amy Pascal, the company’s co-chairwoman, has emerged as perhaps the closest contemporary approximation of a classic studio. Its movies change, but those who make them remain remarkably consistent, thanks to personal relationships and shared tastes that have largely supplanted the rigid contractual arrangements that allowed Mayer to build an empire around the likes of Norma Shearer, Greta Garbo, Lionel Barrymore and Clark Gable.

Of the Sony films released in 2011, the studio reckons that all have involved filmmakers or stars with whom it has worked repeatedly.

Adam Sandler and Will Smith, two of Sony’s most reliable suppliers, both have a film on tap in the next year. Mr. Sandler, 16 of whose latest 21 films have been at Sony, next has “Jack and Jill,” a comedy set for release in November.

In May, Mr. Smith stars in “Men in Black III.” It will be the eighth time he has landed at Sony in his last 10 films (putting aside voice work and a cameo elsewhere).

“It gives us stability,” Ms. Pascal said.

This kind of stability is rare in Hollywood, where there has been a decline in the number of production deals. Instead, studios are focusing on core relationships.

Thus, Universal Pictures has worked repeatedly with Judd Apatow, who has directed three movies there since his debut with “The 40-Year-Old Virgin” in 2005, and Warner’s relationship with Clint Eastwood has lasted decades.

But few have matched the breadth or consistency of relationships at Sony, where Dennis Dugan, the director of “Jack and Jill,” has made nine of 10 pictures since 1997, including “Don’t Mess With the Zohan.”

“It’s Hollywood, it’s still whom you know,” said Peter Dekom, an entertainment lawyer. The arrangement has been steadily, if not always hugely, profitable.

In its latest fiscal year, which ended March 31, Sony Pictures contributed $7.3 billion, or about 8 percent, of $87 billion in total revenue for its parent company in Japan, the Sony Corporation. In addition, about 78 percent of the unit’s reported $466 million in operating profit for the year came from two television transactions.

But for many in contemporary Hollywood — where virtually everyone is suffering from the decline in home video revenue — the goal is not so much to score huge profits as to stay in the game until presumed new revenue streams grow from quickly evolving digital technologies.

At Sony, that has meant finding a comfort zone in which executives can work regularly, and often economically, with a core group of stars and filmmakers who consistently earn their keep, even if their pictures do not often challenge the more expensive animated and effects-driven blockbusters at the box office.

This article has been revised to reflect the following correction:

Correction: July 17, 2011

An earlier version of this story misstated the movies made by Dennis Dugan for Sony. “I Now Pronounce You Chuck and Larry,” a movie directed by Mr. Dugan, was made by Universal Pictures.

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DealBook: Lawmakers Challenge Derivatives Rules

Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee.Win Mcnamee/Getty Images Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee.

A growing number of lawmakers are pressuring regulators to water down a series of new rules for the derivatives industry.

The lawmakers, Republicans and Democrats alike, argue that some proposed rules could force Wall Street’s derivatives business overseas. They also say that regulators are ignoring a crucial exemption to the rules spelled out in the Dodd-Frank financial regulatory law.

The law excused airlines, oil companies and other nonfinancial firms known as end-users from new restrictions, including a rule that derivatives must be cleared and traded on regulated exchanges. The firms use derivatives to hedge against unforeseen market changes, say a rise in fuel costs or interest rates, rather than to speculate.

“We are concerned that recent rule proposals may undermine these exemptions, substantially increasing the cost of hedging for end-users, and needlessly tying up capital that would otherwise be used to create jobs and grow the economy,” Senator Debbie Stabenow, Democrat of Michigan and chairwoman of the Senate Agriculture Committee, and Representative Frank D. Lucas, her Republican counterpart in the House, said in a letter this week to regulators.

Regulators have not promised any changes, although they now are agreeing to slow the pace of their rule-writing.

The Federal Reserve and other regulators announced on Thursday that they would grant the public two additional weeks to weigh in on the controversial new proposals. The comment period, which was supposed to expire on Friday, was extended until July 11.

The decision comes a week after the Commodity Futures Trading Commission, under pressure from lawmakers, announced a six-month delay for certain derivatives rules.

Some proposals, unveiled in April, would require banks to collect upfront margin from so-called commercial end-users that enter into derivatives trades. Regulators and consumer groups defend the rules as necessary curbs on the derivatives industry, which played a central role in the financial crisis.

“The Dodd-Frank Act was intended to and should to bring real change to the derivatives market,” Americans for Financial Reform said in a recent letter to the commodities agency.

But companies like Shell Energy and United Airlines contend that the collateral payments would tie up precious corporate funds. Ms. Stabenow and Mr. Lucas called the proposed rules “overly restrictive.”

Over the last several months, lawmakers have stepped up their attacks on several new derivatives rules.

Representative Spencer Bachus of Alabama, chairman of the House Financial Services Committee, wrote to regulators in December to say that imposing margin “requirements on companies that engage in the hedging of legitimate business risks would therefore defeat the purpose of the end-user exemption and contravene Congressional intent.”

The lawmakers have joined a chorus of complaints from bankers and corporate executives.

Barry Zubrow, JPMorgan Chase’s chief risk officer, told the financial committee last week that the “draconian” margin requirements could “effectively end” Wall Street’s overseas derivatives business.

His boss, JPMorgan’s chief executive, Jamie Dimon, has been even harsher. Mr. Dimon said earlier this year that the Commodities Futures Trading Commission’s new derivatives rules “would damage America.”

The concerns, bankers and lawmakers say, stem from confusion over Dodd-Frank’s borders.

Under Dodd-Frank, derivatives rules do not apply in foreign countries unless there’s a “direct and significant connection with activities” in the United States. It remains unclear whether regulators will enforce the rules on United States banks that book a derivatives deal through a foreign subsidiary.

“There continues to be a lack of clarity regarding the territorial scope of Dodd-Frank,” Ms. Stabenow and Mr. Lucas wrote.

Foreign regulators, meanwhile, have been slower to act. The European Commission, the European Union’s executive body, may take until 2012 or later to complete its own derivatives regulations. Until then, bankers say that Dodd-Frank will enable big European banks to poach their business.

“We recommend that all of the agencies implementing Dodd-Frank be mindful of recognized principles of international law,” Ms. Stabenow and Mr. Lucas said. “While robust oversight is necessary, this proposal could put U.S. firms at a direct and significant competitive disadvantage outside the United States.”

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DealBook: On Capitol Hill, Regulators Plead for More Money

Mary L. Schapiro, the S.E.C.'s chairwoman, and Gary Gensler, the C.F.T.C.'s chairman.Andrew Harrer/Bloomberg NewsMary L. Schapiro and Gary Gensler.

Financial regulators asked lawmakers on Wednesday for more money to enforce dozens of new rules and oversee Wall Street.

Although the Commodity Futures Trading Commission and the Securities and Exchange Commission received some additional money in April, the agencies say they are still hurting for cash. Now, the regulators are adopting a refrain more familiar to disappointed sports fans than powerful regulators: wait till next year.

Gary Gensler, the Commodity Futures Trading Commission’s chairman, and Mary L. Schapiro, the S.E.C.’s chairwoman, told a Senate appropriations subcommittee that they needed hundreds of millions of dollars in 2012 to prevent another financial crisis.

“In 2008, both the financial system and the financial regulatory system failed the test for the American public,” Mr. Gensler said in testimony before the subcommittee that doles out money to financial regulators.

In the wake of the crisis, Congress passed the Dodd-Frank Act, which requires Mr. Gensler and Ms. Schapiro to oversee the $600 trillion swaps market, an industry at the center of the financial crisis.

“An investment in the C.F.T.C. is warranted, because, as we saw in 2008, without oversight of the swaps market, billions of taxpayer dollars may be at risk,” Mr. Gensler told the subcommittee. The panel is weighing whether to increase regulatory budgets during the government’s fiscal year 2012, which starts on Oct. 1.

Ms. Schapiro said any cuts would have a “profound impact” on her agency.

Still, the agencies are hardly poor.

Both agencies received more money in April, on top of earlier budget increases approved in the aftermath of the crisis. The S.E.C.’s budget increased 6 percent this year, to $1.18 billion, which is nearly triple what it was a decade ago. The Commodity Futures Trading Commission’s budget recently grew 20 percent, to $202 million.

But the new money falls short of what President Obama had requested for the agencies and what the Dodd-Frank Act had called for them to receive.

As DealBook reported on Tuesday, the agencies are still struggling to fill crucial jobs, enforce new rules and upgrade market surveillance technology. Regulators warn that their money problems have also jeopardized their most important duty: keeping an eye on Wall Street.

The Commodity Futures Trading Commission says the uncertainty has forced it to delay some investigations and forgo other potential cases altogether. The S.E.C.’s enforcement division has adopted cutbacks, too, including curbing its use of expert witnesses in some securities fraud trials.

The agencies also face substantial new responsibilities under Dodd-Frank, which requires the S.E.C. to write more than 100 new rules, open five new offices and publish more than 20 studies.

To do so, the S.E.C. has requested a $1.4 billion budget for 2012, a roughly $220 million increase over its current funding. The Commodity Futures Trading Commission wants to add $106 million to its budget, which would bring it to $308 million.

But Republicans are looking to slash the agencies’ budgets, as the nation’s budget deficit swells. The Republican-controlled House of Representatives recently approved a 2012 budget plan that would roll back spending to 2008 levels, which would make huge dents in the regulators’ budgets.

“We’re all aware of our budget deficit,” said the subcommittee’s ranking Republican, Jerry Moran of Kansas. “Simply increasing funding does not ensure that an agency can successfully achieve its mission.”

Mr. Moran also questioned whether Mr. Gensler’s budget should focus more on increasing the agency’s market surveillance technology, rather than hiring new lawyers.

Mr. Gensler agreed that “technology is absolutely critical,” and his agency would roughly double its technology budget if it received a flood of new money. But he added: “You can’t send a computer into court to plead a case.”

Ms. Schapiro also warned that funding cuts “would have a devastating impact on the agency’s ability to protect the public from financial fraud.” The agency, she said, would begin fewer investigations into Wall Street wrongdoing, delay examinations of banks and other public companies and suspend its “tips and referrals” system that alerts the agency to potential fraud.

Ms. Schapiro noted that her agency costs taxpayers nothing. The agency offsets its budget with fees collected from the financial industry, often turning a profit for the government.

The Commodity Futures Trading Commission does not collect such fees, although its budget for 2012 would allow the commodities commission to start doing so, which would generate $117 million for the budget.

“The C.F.T.C. is a good investment for the American public,” Mr. Gensler said. “We recognize that the budget deficit presents significant challenges to Congress and the American public. But we cannot forget that the 2008 financial crisis was very real. “

The regulators on Wednesday received some reason to hope for bigger budgets, as the subcommittee’s Democratic members expressed support for the agencies.

“We depend on their foresight and leadership,” said Senator Richard J. Durbin of Illinois, the Democratic chairman of the panel.

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