by Ben Fritz
For Pascal, the end of 2014 was a never-ending nightmare, as she told anybody who would listen. Not only were bloggers’ deep dives into her e-mails humiliating, but the harm done to Sony Pictures was painful for a woman whose identity and self-worth were inextricably tied to it. I’ll never forget talking to her on the phone as I drove down Santa Monica Boulevard and explained why I’d be using a few of her stolen e-mails in a business story.
“I’m not using anything personal,” I said, thinking I could separate myself from the bloggers who wrote about her orders on Amazon.
“You don’t get it!” she retorted. “It’s all personal!”
Lynton, meanwhile, got personally involved in a way he never had before. He dined in the cafeteria and invited employees to approach him with questions about what FBI agents were doing on the lot, how payroll would be processed, and when security guards would be able to stop hand-writing passes for visitors (that would end up taking more than a year).
He took charge when people claiming to be the hackers threatened violence against any theaters that played The Interview. Major cinema chains quickly caved, with the backing of other studios fearful that audiences would avoid multiplexes entirely and harm their holiday releases too. Though Sony had the contractual right to force theaters to play the film, executives decided not to do so. “No movie is worth a human life,” Belgrad declared at a meeting in Pascal’s conference room, earning nods from the rest of the studio’s leadership team.
Sony executives expected they would be credited for not forcing anyone to play their film, but instead they were perceived to be bowing to a terrorist threat and were widely criticized. Even President Obama said the studio “made a mistake.”
Lynton was furious that Hollywood wasn’t uniting to defend Sony against terrorists who threatened the industry’s freedom of expression, as book publishers had rallied around Penguin when, under his leadership, it released Salmon Rushdie’s Satanic Verses. The heads of other studios, meanwhile, grumbled that the aloof Lynton had long lacked interest in getting to know them and working together until this moment of crisis, when he needed them.
He did find friends, however, in Silicon Valley. Right after theater chains passed on playing The Interview, Lynton began secretly calling the heads of major cable and Internet companies, from Comcast to Amazon to Apple, seeking a partner to release it online. Most said no, but Google’s chairman, Eric Schmidt, agreed that his company would offer The Interview online by Christmas. Microsoft joined too, as did 331 independent theaters, and the comedy got a release, of sorts, on Christmas Day.
By the new year, coverage of the hack seemed to die down as the regular release of stolen e-mails and documents throughout November and December ended, and the public turned its attention elsewhere. Inside Sony, however, the drama continued.
Lynton still faced a key question: whether to keep Pascal. Her contract would expire in March, and before the hack, extensive negotiations had been underway to continue her employment. But the fact that she hadn’t been renewed by November indicated Sony’s uncertainty and became yet another source of anxiety for Pascal, who one evening e-mailed, texted, and called Sony’s head of human resources multiple times on his cell phone to demand an update.
Instead of continuing to base her annual bonuses on the performance of the entire studio—giving her the benefit of the success of a television business she technically oversaw but had almost no involvement with—Sony had before the hack proposed basing 70 percent of Pascal’s bonus on the business that she spent 99 percent of her time on: motion pictures. And they wanted to reduce her maximum annual pay from $21 million to $16 million. “In all cases the new offer has me earning substantially less money,” she complained to her lawyer. “That sounds like an insane thing to ask me to agree to.”
The most insulting part for Pascal, though, was that after her tenure of nearly twenty years at the company, Lynton wasn’t enthusiastically urging her to stay. “You know ml will be as rude as possible and try and make me feel AKWARD instead of loved,” she told Lourd.
Still, Pascal seemed confident that she would return, one way or another. And she didn’t even mind that Lynton wanted to shorten the length of her contract from that of the previous renewal: five years. She just wanted enough time to make Sony a winner again and then bid adieu. “3 years I’m done for good,” she said.
On Saturday, January 31, 2015, Lynton visited Pascal’s house to inform her that she wouldn’t get the chance. He was letting her go. The poor performance of the movie business over the past several years was the ostensible reason. But there was no denying that, fairly or not, the hack had done severe damage to her reputation in Hollywood and around the world, and thus it had hurt her ability to perform her job.
The hack had also heightened Pascal’s unhappiness in the job, so she didn’t put up too big a fight. She agreed to stay on the Sony lot with a multi-million-dollar deal to become a producer, the job she had envisioned twenty years earlier.
Her eleven-year partnership with Lynton, once hailed as among the most successful in Hollywood history, was now at an end. The two would remain on cordial terms, but Sony’s reputation as the most talent-friendly studio in Hollywood—one that had prospered under an unlikely partnership that defied expectations—was officially over. It was the end of an era.
Lynton’s choice to replace her was Tom Rothman, whose bottom-line orientation and knowledge of the global market also delivered a signal that Sony was finally bowing to the realities of the worldwide franchise-driven movie business, even if it meant killing the studio’s talent-friendly reputation.
But as they announced Pascal’s departure (laughably spinning that it was entirely her choice), the now former partners had a secret: just a few days earlier, Lynton had traveled with Pascal to Palm Beach, Florida, where they agreed to relinquish control of one of their most valuable assets in a deal that demonstrated how power in Hollywood was slipping out of the hands of major studios like Sony.
3
Inception
The Secret Origin of the Superhero Movie
It was a warm Tuesday night in November when Amy Pascal reached out to one of Hollywood’s top directors with a desperate plea.
“I really need your help with you know who I’ve made a mess of it,” she told Sam Raimi. “I don’t want to blah blah blah about how badly Peter needs to be rescued [but] I don’t know where to turn . . . i realize i sound like i am talking about a person . . . probably anyone beside you would think ive lost my marbles.”
The “Peter” in question was Peter Parker—not a real person, but the alter ego of Spider-Man, one of the world’s most famous superheroes. He was the basis of one of Hollywood’s most successful franchises and the single biggest source of profits for Sony’s movie business. For Pascal, working with Raimi on 2002’s Spider-Man and its 2004 and 2007 sequels was a career highlight—her skills in working with creative talent and finding the emotional heart of stories were paired perfectly with a marquee property that could achieve box-office success and earn acclaim from audiences.
Many still believe Spider-Man 2 is the best superhero film Hollywood has made. And the four most profitable fiscal years for Sony’s motion picture business this century were, not coincidentally, those in which it released the first four movies starring the red-and-blue web-slinger.
But, along with the rest of Sony’s movie business, Spider-Man suffered in the 2010s.
In 2014 The Amazing Spider-Man 2 grossed $709 million. That sounds like a big number, but it’s the lowest box-office take of any movie in the series and of any superhero movie that year. Sony spent $260 million to make the picture, in hopes that it would be a blockbuster. The studio internally targeted $865 million in ticket sales, but Pascal was privately urging her colleagues to aim higher and get Peter Parker “in the billion dollar club.”
Its underperformance blew a hole in Sony’s financials for the year. Instead of earning $138 million in profits as expected, it made less
than $20 million. Just as disappointing, the film was a creative dud—something Pascal had privately known for months but had hoped wouldn’t impact the box office.
“Uneven skitzo tone . . . Repetitive Long doesn’t ever hit the center bullseye for a long enough time weird disjointed not one single great set piece because action is just big and not story telling not funny at all,” she wrote to Belgrad two months before The Amazing Spider-Man 2 was released, insightfully listing many of the flaws upon which critics and fans would later pounce. “Prob if I’m really honest,” she added, “wring director and wrong casting.”
Still, she believed, “We will almost get away with it.”
In fact, The Amazing Spider-Man opened to a respectable $91.6 million domestically. But then, as word of mouth spread, ticket sales fell off a cliff. The next weekend, Sony and most of Hollywood was shocked when the superhero sequel was beat at the box office by the low-budget Seth Rogen comedy Neighbors. “They just kicked our ass on Spider-man and look like geniuses for betting against our most important franchise,” Belgrad lamented to Pascal.
One of the main reasons audiences rejected The Amazing Spider-Man 2 is that four weeks earlier, the company that actually owned Spider-Man had released a far better movie and raised quality expectations for superheroes beyond what Sony seemed able to satisfy. Captain America: The Winter Soldier was the latest in a nearly nonstop string of hits from Marvel Studios, which included Iron Man, Thor, and The Avengers.
The rise of Marvel Studios over the past decade has been one of the most extraordinary stories in Hollywood history. Utilizing a crew of second-rate superheroes and run by a team of unproven executives, Marvel upended the industry’s conventional wisdom. Previously, almost everyone in Hollywood believed that the general public was interested only in marquee superheroes like Batman and Spider-Man, and nobody would see a movie about Ant-Man or the Guardians of the Galaxy; that the resources and experience of major studios gave them an unbeatable advantage over upstarts; that tightly managing budgets on would-be global “event” movies was penny-wise but pound-foolish; that tying together the plots of disparate films was too risky because if one failed, they all would; and that the only Hollywood brand name that meant anything to consumers was Disney.
The massive success of 2008’s Iron Man and almost every Marvel Studios release that followed proved each of those precepts wrong, throwing the entire movie industry on its heels. Studios nearly a hundred years old struggled to understand what had happened and how to compete with a new, unstoppable cinematic universe of superheroes. More than any other company, Marvel Studios is responsible for the dominance of branded movies at the box office and the rush by every studio to create their own cinematic universes, in the process tossing most original films for adults aside like foul-smelling trash.
Marvel’s rise particularly stung Sony, which until 2008 could justifiably brag that with its first three Spider-Man movies, it was king of the superheroes. At that point, Spider-Man and its two sequels were the most successful superhero pictures of all time. By 2016, though, the original Spider-Man had been knocked down to number seven, and four of the top six spots were taken by films from Marvel Studios (the other two were held by the Dark Knight Batman films produced by Warner Bros.).
Pascal had to admit Sony was “being eaten by Marvel.” Resurrecting Spider-Man was absolutely critical to the survival of her studio and her career. By late 2014 she concluded that she needed help and cast a wide net in search of answers, including her ultimately fruitless flirtation with bringing back Raimi to direct or produce another installment. Nothing seemed likely to succeed, however, except one option that would mark a humiliating creative defeat: admitting her team no longer had the chops to make a blockbuster superhero movie in the current environment and allowing Marvel, which first licensed Spider-Man to Sony in the late 1990s, to take back control.
That such a partnership was even on the table was ironic, and not just because twelve years earlier, Sony had shown Marvel how it’s done by producing the first global blockbuster based on one of its comic books.
The two companies’ stories had actually been intertwined for more than a quarter-century. During that time, Sony had missed the opportunity to own the entire Marvel cinematic universe but had made so much money off Spider-Man that it inspired the comic book company to enter and ultimately dominate the movie business.
Spidey’s Sordid History
In 1990, a young lawyer named Peter Schlessel working for Columbia Pictures’ home-video operation in New York was asked to help unwind a deal with a B-movie schlock-meister named Menahem Golan. Columbia had previously agreed to release twenty of Golan’s movies on videotape, and Schlessel, who would later hold a number of top posts for the studio, including president of production, had no problem letting go of most of the low-budget movies on Golan’s slate except for one that caught his eye: Spider-Man.
Created in 1962 by Stan Lee and Steve Ditko, Spider-Man was the first superhero whose story combined fantastic adventures with the problems of a geeky teenager, including trouble with girls and bullies and an initial reluctance to use his powers to help others (thus the famous motto “With great power comes great responsibility”). Kids who read comic books could relate more to Peter Parker than they could to the square and stolid Superman and Batman. A sales sensation, the web-slinger with super-strength and “spidey sense” quickly became Marvel’s most popular character, both in comic books and toys. Nearly five decades later, in the late 2000s, Spider-Man would account for an astounding 62 percent of Marvel’s total profits.
Golan, whose filmography includes the second Texas Chainsaw Massacre film, the embarrassingly bad Superman IV: The Quest for Peace, and an adaptation of Marvel’s Fantastic Four so awful it was never released, bought the movie rights to Spider-Man from the perennially cash-strapped Marvel in 1985 for just $225,000.
Companies run by Golan spent $2 million developing a Spider-Man film, and in 1989 he held a press conference at the Cannes Film Festival to announce that the picture would soon begin production. But Golan was never able to get the financing together to start the cameras rolling. He did, however, manage to make a mess of the rights, selling the television rights to the media company Viacom, which would later buy Paramount Pictures, and the theatrical rights to Carolco Pictures.
Schlessel didn’t know when, or whether, a Spider-Man movie would actually be made, but he knew he had heard of the character and that name recognition was fast becoming a valuable asset in the movie business. It took him a year to reach a settlement with Golan that would keep the Spider-Man home-video rights at Columbia. And it would take another decade for that bet to pay off.
In the early 1990s, Carolco agreed to pay James Cameron, arguably Hollywood’s hottest writer-director (just coming off 1991’s Terminator 2: Judgment Day), $3 million to adapt Spider-Man. He wrote a forty-seven-page “scriptment,” a mixture of narrative and screenplay-style dialogue, and it was set to become a $50 million blockbuster production (big money at the time).
But Spider-Man’s path to the big screen would continue to prove as tortured as his personal life in the comics. Golan sued Carolco for allegedly trying to shove him out of the picture. A financially struggling Carolco sued Viacom and Sony in an effort to reunite the movie rights, and they both countersued Carolco, as well as Marvel and Golan. Another studio, MGM, also got involved, claiming it actually owned the Spider-Man rights through a deal it had made with one of Golan’s many companies.
As if that wasn’t enough, Marvel in late 1996 filed for bankruptcy, weighed down by $700 million in debt, as well as bonds with a face value of $1 billion. It was one of the most contentious and protracted bankruptcies in American history. The Wall Street titans Ron Perelman and Carl Icahn turned a small, struggling comic book publisher into the vehicle for a titanic battle of egos. During the process, deal-making essentially froze, including any effort to make movies out of Marvel characters. Most people involved in the company recognized t
hat films could be a growth driver due to the success of the 1989 hit Batman, produced by Warner Bros. and directed by Tim Burton.
During the bankruptcy, a court-appointed trustee tried to sell Marvel, and numerous entertainment companies kicked the tires, including MGM and Warner Bros., the owner of Marvel’s competitor DC Comics, which publishes Superman and Wonder Woman comics. But the Hollywood company that came closest to buying Marvel, unbeknownst to many, was Sony Pictures.
John Calley, the former MGM and Warner executive who took over Sony in 1996, recognized the value of Spider-Man on the big screen and encouraged executives to try to expand their home-video rights to take full control of the character. The key player for Sony was Yair Landau, a young, aggressive Stanford MBA looking to make his mark. Working with the toy manufacturer Hasbro, Landau put together a $500 million offer. Each company would put up half the money to buy Marvel. This represented a rare willingness on the part of the Japanese parent company to take a gamble on a long-term investment. Hasbro, one of the world’s most successful toy manufacturers, would handle consumer products under the plan, while Sony would make movies. The films would spur toy sales, of course, while toys would spur more people to see the movies.
Spider-Man was the crown jewel, but Landau believed that a legal loophole would allow him to take back Marvel’s most popular super-team, the X-Men, whose film rights had previously been sold to Sony’s competitor 20th Century Fox for just a few hundred thousand dollars. This would have enabled Sony to make movies featuring any and every one of Marvel’s characters (except for the Hulk, controlled by Universal), which numbered more than five thousand.