Sony confirmed on Wednesday that it was seriously considering acquiring Metro-Goldwyn-Mayer (MGM) and said that it had been given exclusive rights to make a detailed evaluation of the company.
Sony is primarily interested in gaining the rights to MGM's library of 4,000 films, including the James Bond and Rocky movies, which it could repackage and redistribute as high-definition DVDs or over the Internet.
"We are in the stage of exclusive negotiations," Howard Stringer, the chief executive of the Sony Corp of America, said at a news conference in Tokyo where top executives outlined plans to rebuild the company's consumer electronics division.
They said they would produce new televisions, game machines, phones and other devices that would allow users to more easily download music and movies from the Internet.
Sony is leading a group of investors, including the private equity firms Texas Pacific Group and Providence Equity Partners, in negotiations to buy MGM from the billionaire investor Kirk Kerkorian for as much as US$5 billion, executives close to the situation said.
The chief executive of Sony, Nobuyuki Idei, confirmed that his company was considering the acquisition but said that Stringer would negotiate the deal.
"We don't plan to enter a business that loses money," Idei added.
The executives refused to comment on details of the negotiations, including a possible purchase price or when they expected the talks to conclude.
Sony thinks it can extract hidden profits from MGM's extensive library, which includes Academy Award-winning movies such as Annie Hall and West Side Story, by repackaging older films in much the same way that book publishers periodically republish works of literature, an executive briefed on Sony's plan said.
Sony would rerecord MGM movies in a high-quality digital format and could add features commonly included in recent DVD releases, like director commentary and additional scenes.
The right to negotiate exclusively with MGM will last about two more weeks, the executive said.
The negotiations come as Sony is gaining confidence in its ability to make money in the movie business. Sony's last seven films have been profitable, Stringer said. And the company has high hopes for Spider-Man 2 this summer.
Sony is bringing in partners so it will not have to foot all of the bill for an acquisition of MGM. The company is under pressure to cut costs as it overhauls its home electronics business amid increasingly tough competition from South Korean and Chinese manufac-turers, so it is reluctant to take on additional debt.
Ever since Sony paid US$3.4 billion to buy Columbia Pictures Entertainment in 1989, it has pursued a vision of greater profitability by making itself into an entertainment conglomerate that produces and distributes music and movies and makes the machines used to listen to and watch them.
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