PolyGram Film Workers Wait for Ax to Fall

As Seagram Co. prepares to take control of music giant PolyGram on Thursday, Chief Executive Edgar Bronfman Jr. has some hard decisions to make about what to do with the movie production and distribution assets of the formerly Dutch-owned enterprise.

The uncertainty in the seven months since Bronfman agreed to buy the world’s largest music empire--and found no buyers for subsidiary PolyGram Filmed Entertainment--has put hundreds of executives at the company’s various movie operations in an unsettling limbo.

One top executive at a PolyGram company bristled, “The thought that after all these months they don’t know what they’re going to do is horrifying and emblematic of the problems plaguing the whole operation.”

Seagram has been distracted from the movie division by a number of problems, not the least of which is figuring out how to absorb the world’s largest music company. (The New York Stock Exchange suspended trading of PolyGram shares Monday in anticipation of delisting later in the week.) A huge reorganization plan has been devised that will result in the shuttering of several well-known music labels and the firing of thousands of workers.

There is no such clear plan for PolyGram’s movie operations, though further job losses are certain. Seagram has also been dealing with serious problems at its own Universal Studios, which has seen the recent oustings of Chairman Frank Biondi Jr. and movie Chairman Casey Silver.

Only recently did Bronfman ask Universal’s top brass to evaluate what to do with PolyGram’s movie assets, which include a domestic distribution and marketing operation, an international distribution organization and various movie labels.

Analysts said Bronfman is unlikely to find a buyer willing to pay what he wants for those assets. Some, such as PolyGram’s U.S. distribution company, are redundant to Universal’s own operations.

PolyGram’s specialized film marketer and distributor, Gramercy Pictures, presumably would be combined with Universal’s own October Films since the two entities are in the same business.

There are several meetings set for this week and next between Universal and the heads of PolyGram’s various film labels to discuss the status of their operations.

“We’ve been waiting seven months, and it’s tough keeping our morale up and our business going,” said Steve Golin, co-founder and head of PolyGram-owned Propaganda Films, which is involved in the production of movies, commercials and music videos, as well as talent management.

“I’m looking forward to having a clear plan and finding out what the agenda is,” added Golin, whose company began production Monday on “Nurse Betty,” starring Renee Zellweger, Morgan Freeman and Chris Rock.

Golin, who meets with Universal on Thursday, said that any number of things, including a management buyout, could happen to the company he co-founded 13 years ago and today employs about 135 people.

For Golin, keeping his company up and going in its current state is what’s critical. “It’s the only real job I’ve ever had,” said Golin, whose company is behind such films as “Sleepers,” “The Game,” “Red Rock West,” “Wild at Heart” and Madonna’s “Truth or Dare.”

While the future of Propaganda is unclear at this point, Universal is close to a deal with producers Tim Bevan and Eric Fellner, who run PolyGram’s London-based production company, Working Title. The producers are behind such hit independent movies as “Bean,” “Four Weddings and a Funeral,” “Fargo” and “Dead Man Walking.” Their new movie, “Notting Hill,” a romantic comedy starring Julia Roberts and Hugh Grant, is a highly anticipated offering for next year.

Universal wants to keep Bevan and Fellner in its fold and are in the throes of extending the partners’ contracts with Working Title, which expire in late June. The pair have been pursued by virtually every studio in town.

When Bronfman agreed to buy PolyGram from Philips Electronics in May, he said he never intended to keep the company’s movie assets since much of PolyGram’s film businesses were redundant with Universal’s. (Seagram paid $5.7 billion for 80% of Universal in 1995.)

Bronfman had originally hoped to sell the movie company intact for as much as $1 billion to help offset the acquisition of the music enterprise.

Instead, the Montreal-based liquor company sought a buyer for PolyGram’s movie and television library. Even that didn’t go according to plan. Metro-Goldwyn-Mayer owner Kirk Kerkorian was interested in purchasing only the movie portion. In late October, he agreed to pay $235 million in cash for about 1,300 titles that include “The Graduate,” “The Crying Game” and “Fargo.”

Carlton Communications of Britain is said to be close to buying the remaining ITC portion of the library, mostly TV programming, for what Daily Variety reported as about $130 million.

Some PolyGram assets may complement Universal’s operations. One is PolyGram’s international distribution operation, which directly releases products in 14 key countries around the world.

For some time, it was speculated that French TV giant Canal Plus may buy the operation, but talks reportedly broke down over price.

The motivation for holding on to the international organization is that Universal doesn’t solely control its own foreign distribution. It is a one-third partner with Paramount Pictures and MGM in United International Pictures, which distributes its movies overseas. And the studio has a joint venture with Paramount in the foreign video distribution outfit CIC. While Universal is committed to UIP for another three years, it could extricate itself from the CIC partnership much sooner and start putting video product out through PolyGram. (Also, since UIP markets and releases the bigger movies, Universal could presumably put smaller theatrical films through PolyGram’s foreign pipeline.)

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Rick Dobbis, former president of PolyGram’s continental Europe division, will take over in January as executive vice president of Sony Music International. Dobbis is the first senior executive to quit PolyGram and join a competitor as a result of the upcoming reorganization, which will follow the announcement Thursday of Seagram’s $10.4-billion purchase of PolyGram. Chief Executive Jan Cook is expected to resign Wednesday.