A Geeky Viewpoint

This morning the credit rating services of Fitch and Moody's downgraded Sony stock to Junk Bond status after the company announced a $1.2 billion USD dollar loss for the quarter. That's a loss of $13.5 million USD every day. Standard and Poor's is expected to follow suit in days if not hours.

This spring's release of The Amazing Spider-Man 2 has highlighted Sony's problems for the past five years when it comes to Columbia Pictures.

The Amazing Spider-Man 2 production budget was in excess of $200 million USD according to multiple sources and upwards of $50 million USD was spent on marketing.   When you add in the fact that Sony and Columbia Pictures use a line of credit (loan) to pay for the tent pole films you can add upwards of 15% to the cost of the film.     An astute blogger has suggested that with production costs, marketing costs, and interests on these line of credit the real cost of TASM2  was somewhere in the $275 to $290 million USD making it the most expensive film ever made.   To put this in perspective including marketing both X-Men: Days of Future Past and Marvel's The Avengers were in the $200 to $220 million USD.
So far in 2014 Sony / Columbia pictures have release 16 films (18 including films released during December 2013) and made $1.1 billion USD in US Domestic Release.  Figuring in the theaters percentage drops that number to around $880 million USD.  That sounds good until you factor in that the announced budget for those films was $954 million USD.  
By way of comparison Buena Vista made $1 billion USD on an investment of $700 million USD and 20th Century Fox mad $1.3 Billion on $800 million USD investment.   Of the major six studios only Sony / Columbia Pictures did not turn a profit in the US domestic market.
That's not to say Sony and Columbia Pictures did not turn a profit on their worldwide releases, world wide Sony brought in an additional $1.2 billion dollars in comparison to $2.7 billion for Buena Vista and roughly the same $2.7 billion USD for 20th Century Fox.

In 2015 unless Sony has a breakout hit on their hands it is only going to get worse finically.   To be fair Bond 24 and Popeye are on the list of 11 movies that Sony is releasing.

Lets not get started with the 2016 list of films Sony has already announced....

You remember the point of downgrading Sony's Credit Rating, well that effects how much it costs Sony to borrow money, the lower the credit rating the higher the fees and interest rates are.
Add into that Sony, unlike Buena Vista and 20th Century Fox, uses a line of credit to pay for tent pole films and the cost of these films is going to increase by 5 to 10 percent each.    For a film like TASM2 the costs would add $15 to $30 million USD without adding additional revenue.

What can Sony / Columbia Pictures do?

1) Do nothing.
2) Reduce the amount of money it spends on films
3) Sell, Spin of Columbia Pictures
4) Sell some of the rights Sony owns to competitors
5) Work with their competitors

1) Do Nothing
This is the least likely scenario I see playing out.  Sony Stock holders have given the latest chairmen a little breathing room as he has only been on board 18 months and is working diligently to reduce costs, get innovative, and sell off other properties.   More has to change if he is going to keep his job another 18 months.

2) Reduce the amount of money it spends on films
The real problem here is the cost of film is increasing, while some new technology is reducing the cost of post production CGI rendering (OTOY cloud based system for example) Sony competitors are using more CGI in every film with reduced costs.

3) Sell, Spin off Columbia Pictures
Columbia Pictures did post a profit in 2013 and will again in 2014 including worldwide box office receipts, but its profits are not at the same level of the other five major studios.  Add in the studio is worth $30 to $45 billion today it may be attractive, but to who?  

4) Sell some of the rights Sony owns to competitors
In this case lets look at the Spider-Man IP, its worth $2 to $4 Billion, that 2 to 4 times the total amount of box office receipts for the entirety of 2014.
Unfortunately that leaves Sony with one fewer  tent pole opportunity in their line up.   They have nothing to replace it with.

5) Work with their competitors
While not as common as it once was this is something Sony could look at especially on its tent pole films as a way to not only reduce the cost of these films but reduce the overall risk.

What do I think should happen and what do I think will happen?

I think Sony has/is tried/trying to sell some IPs or assets.  I however don't think there is a buyer at the moment willing to move under Sony's conditions.  Sony is desperate at the moment, with multiple reports of their studio chiefs making the rounds to visit their competitors is not a good sign.   The problem is the heads of competitor studios probably smell blood in the water at the moment and like any good shark knows its better to wait until the prey is completely helpless.

Focusing on just the Spider-Man IP for a moment. 
Who could Sony sell it to? 
Marvel the most likely candidate, but they can afford to be patient as the studio doesn't need the IP, but wouldn't mind having it.  If Sinister Six fails the bottom falls out of the value.   Rather than the $2 billion Sony would love to get it drops to $500 million.   Marvel is in position to wait.
Marvel isn't the only candidate to sell the IP to, there is also 20th Century Fox.   Lets be honest a sale to Fox also sets up a potential long and costly legal battle it not out of the realm of possibility here.  While Marvel can wait a year or two 20th Century Fox will know more about their position with the release of The Fantastic Four comes closer.    20th Century Fox is spending millions on a test to see if they can reduce the cost of films using OTOY for post production rendering.   If they are happy with the result they could enter into bidding for the IP to add it to their X-Men and Fantastic Four IPs they already control.   A bidding war is the only way that Sony gets any value out of the IP by the way, however the rumors on the street for The Fantastic Four are not good making that possibility less likely.

There are multiple rumors that Marvel is willing to work with Sony, including financing for the Marvel related films, if Marvel gets some control over the scripts and ability to use characters in their own films.
For Sony this devalues the IP immensely, especially if they want to sell the IP.   It destroys any ability to get a bidding war started.  There is no way 20th Century Fox would even consider submitting a bid under those circumstances. 

So Sony is stuck.
Under duress Sony will eventually come to terms with Marvel Studios.   Whether it is a sale of the IP or mutual agreement to use characters is yet to be determined.    I think based upon what people are saying publically Marvel would prefer that Sony still be the releasing studio for the Spider-Man Universe as it frees up assets in Marvel Studios to focus on what is working for them today.