Sony Agrees Mgm Deal

The Sony Corporation today agreed to buy the Hollywood film studio Metro-Goldwyn-Mayer and its valuable film library after rival Time Warner withdrew from the bidding.

The purchase of the 80-year-old studio - which owns the James Bond films - for around $4.8bn (£2.6bn) means Sony will have the world's largest film library of around 7,600 titles, with around 4,100 of those from MGM.

In a separate deal, Sony said it had also reached an agreement with the US cable TV operator Comcast for it to offer Sony and MGM movies over its video on demand systems and new cable channels it would form with Sony.

If the deal goes through as agreed, the big winner will be the 87-year-old Kirk Kerkorian, whose 74% stake in MGM means he stands to make around $2bn.

Founded in 1924, MGM produced such classics as Gone With the Wind and The Wizard of Oz, and Mr Kerkorian began an on-off relationship with the studio when he first bought it in 1970. He then sold it to Ted Turner in 1986 before buying it back, only to sell it to Pathe Communications in 1990. He bought it once more in 1996.

While Mr Kerkorian stands to make a handsome profit, analysts have questioned the deal's value to Sony, which has had a mixed record in Hollywood since buying Columbia Pictures in 1989.

It is unclear whether accumulating a large film library will help Sony's key electronics business at a time when competition from Samsung Electronics, Sharp and other Asian rivals is eroding profits.

Kazuya Yamamoto, an analyst at UFJ Tsubasa Securities in Tokyo, said the "synergy" between electronics and entertainment that Sony executives had been discussing for years was difficult to attain.

"What Sony is going after is extremely ambitious," he said. "But the integration of the electronics and content businesses is unfathomable."

Other analysts believe Sony should be concentrating management resources on its struggling electronics division, which accounts for $45bn, or two thirds, of its total sales.

Although Sony's profits recovered in the April-June quarter compared with a year ago, operating income in its electronics sector dipped by 50%, partly because of costly restructuring.

Sony also has to make up for lost ground in flat-panel TVs and DVD recorders after making a late start in those areas. However, reclaiming its once-unquestioned domination in electronics, symbolised by the heyday of the Walkman, could be far more crucial to determining the company's long-term future, experts say.

The announcement of the MGM deal came after Time Warner withdrew from the race, saying it could not reach an agreement on the price.

Time Warner, the world's biggest media group, had reportedly offered $4.6bn, and is now free to focus its attention on a pending auction for the bankrupt cable operator Adelphia Communications.