Daniel S. Loeb, head of Third Point LLC, got the answer he expected from Sony Corp.’s (NYSE: SNE) board. It will not spin out or sell its studio and entertainment businesses.

That leaves Loeb with the difficult decision of whether he should fight a company that is headquartered in Japan, although its stock is listed on the NYSE. An international legal fight of that magnitude could cost tens of millions of dollars, with no guarantee of success. Loeb might be best advised to sell his shares and take his raider’s skills elsewhere.

In a letter to Loeb, the board wrote that it believes it can strengthen its music and video operations, although the board did not say how:

We are very focused on increasing margins at Pictures, including through the growth initiatives described above, and by reducing costs. While we believe our theatrical marketing costs have been and continue to be in line with our competitors, and that our margins are generally comparable to some other major studios, we recognize our margins should be higher

Does that imply that the margins are high enough?

And:

Our Music business continues to be profitable with margins we believe are generally in line with peers. We are nurturing and developing new talent, exploiting our vast catalog and copyrights, and exploring other growth opportunities, including leveraging our vast music content for use with increasingly popular digital music service platforms. We continue to seek cost reductions and pursue operating efficiencies

Why hasn’t Sony already cut those costs and posted savings well before Loeb’s complaints?

And, finally:

Finally, our executive compensation arrangements at Pictures and Music are tied to the performance of their business. We believe this aligns incentives for the executive management teams at Pictures and Music, specifically by linking compensation to financial performance.

Sony buries its compensation so deeply within its documents, it is nearly impossible to tell if this is true.

Loeb’s criticism is brilliantly taken. However, his crusade is too difficult to complete.

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