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Sony CEO Michael Lynton on surviving the 2014 hack, making money in an evolving world, and why 'The Nanny' is a hit in Russia

Michael Lynton Ignition 2015Business Insider IGNITION 2015David Brancaccio (L) interviews Sony Pictures CEO Michael Lynton (R) at Business Insider’s IGNITION 2015 conference.

Michael Lynton has been CEO of Sony Pictures for a decade, overseeing the production of hit movies like “American Hustle,” “The Social Network,” and the James Bond franchise. He has 21 different record labels under his management, including Sony and Epic. And he led the company through last year’s major cyber attack. Lynton was a featured speaker at Business Insider’s Ignition Conference earlier this month. He was interviewed by David Brancaccio of American Public Media’s radio program, “Marketplace.” The following has been edited for clarity and length.
DB: Welcome to the man whose studio is behind the latest James Bond film, “Spectre,” which I think brought in $200 million in its first weekend. Congratulations.

ML: Thank you.

DB: Speaking of espionage and skulduggery, I have to ask about the Sony hack. The anniversary, if I can call it that, is about a year ago. Right? Just before Thanksgiving.

ML: Not an anniversary I like to celebrate.

DB: Yes, I know. The Obama administration blamed it on North Korea. Before we get, Michael, to the enduring lessons of that incident for you and your company, give us a sense of some of the lessons we can draw — all of us who are in business — from what happened to you.

ML: You know I’ve talked to a lot of people who are currently running companies and they always ask that question. And I think the focus on trying to bolster your cybersecurity is a good idea. But ultimately that’s not the solution.

I think the focus on trying to bolster your cybersecurity is a good idea. But ultimately that’s not the solution.

I think actually one of the key things you need to do is know who to call when it happens. Because if it is a sovereign nation, which is what we’re told it was in our case, calling the local police department doesn’t do you a lot of good. So you better have a contact, as we did, through Nicole Seligman, who’s the president of Sony Corporation of America, in the FBI or in the Department of Justice or Homeland Security.

DB: Are there some boys at Fort Meade that have a hotline or something?

ML: I’m sure there are. But you need to know who to call. The FBI was spectacular, and DOJ was great, and they were on the scene within a day and that was what was critical to the whole thing.

DB: So know who to call. What about knowing what to write in an email?

ML: Well, I think that’s the other lesson. We’ve become as a culture, and everybody would say this, over-reliant on email. And it’s particularly true if you are in a multinational company and you’re dealing with multiple time zones and a lot of people on the road all the time. But inevitably there are a lot of things that should be kept to a phone conversation, particularly when it’s sensitive, that people are now randomly putting into emails that probably don’t make sense.

Sony since 2014 hackSamantha Lee

DB: There’s changing email behaviour. But what about changing what you actually do? Is there any of that at Sony, given what happened?

ML: Yes. I think people are a little bit more moderate in the way they are expressing themselves generally. But you know inevitably you get back to business as usual and I’m sure people start saying things probably they shouldn’t. It is the entertainment business.

But you know inevitably you get back to business as usual and I’m sure people start saying things probably they shouldn’t. It is the entertainment business.

DB: One of the many features of that whole sorry incident was how you eventually released the movie that may have been the catalyst for some of this. It was supposed to go to theatres, but it didn’t in the end. Tell us about what you learned from that non-traditional release of “The Interview.”

ML: So, unfortunately, I’m not sure that it really is a good test case. When the decision was made, or rather made for us, that we couldn’t get the movie released nationally in theatres, we decided that we better get it out somehow. We called all sorts of platforms to release it and ultimately Google and Microsoft came forward. We released it at a very cheap price relative to what you would normally do in a national release. We released it on the day we promised we would release it, which was on the Wednesday following. We released it nationally but there was almost no advertising to tell people how we were going to do it. And as great as Google and Microsoft are, they’re not the go-to sites for feature movies. I think a lot of people saw the movie or bought the movie just out of patriotism. So we did learn that you can get to a very big number in a very short time even with all those obstacles in place. So it does suggest that there is something there.

DB: Beyond the hack and beyond that particular movie, you are wrestling with this all the time. I know you’re a big fan of the theatrical release. There is something about buying a big box of raisinettes and sitting there in a darkened room focusing on something. That’s rare in American life. But then there are the digital streams that are competing. So what is some of your current thinking on theatrical versus some of the other ways to get video out?

ML: Our studio is a big believer, as you say, in the theatrical experience. There are a lot of reasons for it. There’s the actual aesthetic or the experience of sitting in a dark theatre, particularly for big movies or comedies, where you want to see them with an audience. The business model also works incredibly well for us. You know you get lots of bites at the apple with theatrical and the other windows that come after it. There’s always going to be a question — and I think it’s an ongoing issue both here in the United States and outside of the United States — as to whether or not you shrink the window, whether you move one window in front of another window. You can see stuff going on right now in the Russian market, for example, where the window’s down at 30 days, which we would never do here.

DB: Thirty days between theatrical release and you can get it some other way?

ML: Yes, because piracy was so high that we figured OK, fine, the only way to combat that would be to immediately release the movie a month later on DVD. In France it’s mandated that it can’t come out by law until six months after theatrical release.

DB: That’s the law?

ML: That’s the law. You’re also not allowed to advertise movies on television there, by law, so you’re restricted on a lot of levels. You can get it out there other ways.

DB: That’s amazing.

ML: You know there’s always the possibility in the future that something else might happen, but for the time being, I think we like the windowing the way that it’s structured today.

DB: An interesting coincidence happened to me last night. When I got home and my wife was watching Cary Fukunaga’s “Beasts of No Nation,” the movie about child soldiers in Africa, on Netflix. Netflix is the producer of that movie. Does that worry you, Netflix as movie producer?

ML: No. I think it’s yes and no. The no is, the more the merrier. I think it’s a great idea to have another platform out there that’s making movies and giving an outlet for people. Yes, in the particular instance of this movie, because this specialty business depends on creating movies at the right price and having a specific kind of marketing and publicity schedule. Obviously if Netflix is competing in this instance at higher pricing going to the producers than what the average studio would do, it creates a problem for our specialty divisions. We’ll see how this plays out over time.

DB: That was a Jeff Skoll Participant Media thing. It’s really moving, but it’s not going to be a blockbuster, wide-release film. So help us understand this term of art that you probably deal with a lot, OTT, over-the-top content.

ML: Right so OTT is basically what you get with Hulu or Netflix, which is you receive it over the internet as opposed to over your typical cable subscription or satellite subscription.

DB: You do this yourself with Crackle.

ML: We have Crackle, which is an OTT service, which is advertising supported. It’s where we put originals on, a lot of originals, and we also put a lot of movies that Sony and other studios have produced in the past as well as television shows.

DB: Crackle has “Comedians in Cars Getting Coffee,” the Seinfeld series. It’s got “The Art of More” with Dennis Quaid, which is an original. Now when you sign up it’s free, so can you make money off this?

ML: Yes, absolutely you can make money off it. You know it’s back a little bit to the old broadcasting model, although I would argue the audience is much more specific than the old broadcasting model. But it doesn’t right now benefit from two revenue streams; it only comes out of advertising. But as long as you keep your costs in line and you get a large enough audience, I think you can make good money on it. And we’re broadening it out. You know we’re now in 21 countries. So the broader the audience, obviously, the better chance you have of making money.

DB: There’s a little piece of Crackle that caught my attention. Early this year you launched on Crackle I think something called “always on.” And that has one simple feature that is different from, let’s say, Netflix. It’s like old-style TV. Somebody somewhere else, a programmer, decided what’s on. And if you’re interested in tuning in for something, you have to come at the right time or just see what’s there.

ML: For some people in this world of infinite choice, it’s nice to have somebody else make the choice for you, and have somebody else curate for you. You see it in radio and certainly we see it in how popular that part of the service is.

DB: Sociologists study this. It’s called the paradox of choice. Sometimes you can be paralysed by it. I know in my household you go to Netflix and sometimes you just spend your evening pawing through possibilities.

ML: And what we also see — in this particular in the generation that has everything available to them at all times — is that they tend to not see a lot of stuff, particularly stuff that’s older, because they always say to themselves, “Oh, I’ll get to that at some point.” Whereas you know when I was growing up, certainly you had to see “Wizard of Oz” when it was broadcast on television or you had to see a certain movie when it was in the theatre. So there was an urgency to it. The minute you take that urgency away and you give continuous choice, I think people are actually in some instances less likely to see a lot of stuff.

DB: So you see some young film aficionados who get a little blank when you say “Citizen Kane?”

ML: Not just “Citizen Kane,” I mean stuff that goes right up and through the ’70s and ’80s. When you say “Five Easy Pieces” or even if you were to say “Raging Bull,” they can list a lot of movies post 1995, but when it comes to pre-1995 or pre-1990 you find that all of a sudden you’re asking questions and they say, “well I meant to get to that but haven’t quite gotten into it yet.”

DB: So let’s talk about global reach and the work you’re doing at Sony. I mean you’re everywhere. I just saw the other day that “Mad About You” from the ’90s, there’s a version that’s just been licensed to China. I wouldn’t have thought that would work across borders, but you do a lot of that.

ML: Yes, we’ve had [that kind of international] business now for almost 20 years. It was first in Latin America and then we have a very big business in Russia with American situation comedies. We did “The Nanny,” we did “Raymond,” we’ve done “Married with Children,” all of them in Russia, with huge success, using local actors.

We did “The Nanny,” we did “Raymond,” we’ve done “Married with Children,” all of them in Russia, with huge success, using local actors.

The first few series, the first few episodes of the first few seasons are translations of the original. But after that they actually go forward and they become so popular in the case some of these series they write originals and go forward. You know, who would have thought “The Nanny” would translate to a Russian audience, but it does. It was hugely, hugely popular in its day. And so that’s why we’re trying it in China now.

DB: Let’s talk about the global economy. China isn’t growing as quickly as it did. Maybe Europe has bottomed out and could be improving. What are you seeing? Because we have the US economy, which seems to be on a different track. What are you seeing from your global operations?

ML: Actually we are seeing huge growth. It’s sometimes masked by the strength of the dollar. So you’re sort of swimming upstream because we report in dollars. But when you look particularly at things like the movie business in China where they’re adding, I don’t know, 6, 7, 8 screens a day and will quickly overtake the United States in terms of domestic box office. When you look at the demand for American drama television series in particular around the world for television networks all over the place we see that’s the area of growth for us, even in Europe where, as you say, it’s sort of bottoming out. But barring certain markets, obviously Brazil is having its difficulties at the moment, it’s definitely it’s a good time for American entertainment.

DB: So you report in dollars.

ML: And then it gets translated back into yen but in the first instance in dollars, yes.

DB: Do you think the global nature of a lot of your business changes the product in some sense? I remember seeing the original TV show “Mission Impossible” on several different television stations on trips through Africa. There’s little dialogue in “Mission Impossible” the TV show. There’s very little to translate and so it lent itself to international distribution. One imagines that movie scripts and perhaps TV shows are aware of that and that may change in some way.

ML: You know I get asked this question a lot when interacting with, not directly with the State Department, but parts of the US government that are concerned about public diplomacy. They are under the impression, as was the case back in the ’60s and ’70s, that American movies are in large part what inform people abroad about democracy and American culture. I would argue that’s not the case anymore. Particularly with the big blockbuster movies that we try and get out all over the world. We try and sprinkle the movies with casts that are international. We try and actually pull back a little bit on the American jingoism. I do think of the two, probably television is more attuned to public diplomacy right now than film. Because actually when you are making an American television show you don’t have those things in mind. The stakes aren’t as big. So if you cancel it overseas it’s not the end of the world. And a movie you definitely want to be able to have the world wide market right out of the gate.

DB: Norman Lear with those legendary shows on American television that had social content for an American audience, that’s a very different animal.

ML: Right. I grew up in the Netherlands, and between “M*A*S*H” and “All in the Family,” that was how I learned about the United States, for sure.

DB: But it’s quite different now, you think?

ML: I think it’s pretty different, yes.

DB: There’s a lot of talk about super-duper digital TV screens. Ultra digital 4K. Do you have any content for those TV shows?

ML: We do. We make a lot of it actually. So it’s worth getting the television set. I don’t mean to be hawking TV sets for Sony, and others. But it looks fantastic.


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