Bronfman’s Hollywood Report Card: He Didn’t Make the Dean’s List

Earlier this year, Seagram Chief Executive Edgar Bronfman Jr. sold a home in Malibu, which he had never lived in, for more than $10 million. It was a tidy profit, considering he paid $6.5 million in 1997.

Now, five years after acquiring Universal Studios Inc., Bronfman is selling the studio along with the rest of his Seagram empire to France’s Vivendi. As with the Malibu home, he’s making a nice profit on a place where he has been little more than an absentee landlord.

Well-timed entrances and exits are one of Bronfman’s few areas of expertise. He jumped into Hollywood amid expectations that he might have been a talent-friendly mogul in the spirit of the late Time Warner chief Steve Ross. Instead, Bronfman has been a disappointment to both the studio as well as the creative community at large. His aloof, secretive style frustrated his executives, and many of his formerly close relationships are now frayed. Although he boosted shareholder value through some key transactions, Bronfman has been a dud as a manager.

If Bronfman were a student, after five years at Universal it would be time to give him his grades.

Basics of Shareholder Value: A

Bronfman diversified his family’s holdings from a reliance on the slow-growth liquor business to a major entertainment concern on the upswing.

In acquiring MCA, which he renamed Universal Studios Inc., Bronfman paid $5.7 billion to Japan’s Matsushita Electrical Industries for 80% of the company. Today it is arguably worth three times that. He skillfully and stealthily negotiated an exclusive arrangement with Matsushita, a move that prevented a bidding war and cut out the need for an investment banker.

Although some critics believe he overpaid when he bought music giant PolyGram for $10.4 billion, Bronfman gets high marks for placing his bets on music as the Digital Age dawns.

Bronfman went toe-to-toe with street fighter Viacom Chairman Sumner Redstone in a legal battle to control USA Networks and the Sci-Fi Channel. Bronfman won.

Beginning Mogul: C-

When he first arrived in Hollywood, Bronfman looked like an easy mark. In one of his first deals, he gave DreamWorks SKG a sweetheart arrangement in which Universal would distribute the fledgling studio’s films internationally and videos worldwide.

His most controversial deal--spinning off control of his cable and television assets, including the USA Network, to Barry Diller--also was a solo negotiation. Critics believe Diller picked Bronfman’s pocket, noting that the cable networks Bronfman sold could be worth twice their current value if he still controlled them.

Still, the deal hasn’t been a total bust. It left Diller hamstrung and frustrated. And Seagram points out that the value of Universal’s 45% stake in USA Networks is now about $7 billion, roughly four times what it was at the time of the 1997 deal. Many in Hollywood give Bronfman high marks just for getting into business with Diller, considered the brightest mind in TV.

The really dumb deals resulted from desperation. When the movie division was bleeding money from such costly losers as “Meet Joe Black” and the “Babe” sequel, Bronfman pressured his executives to find a quick cash fix to lower risks that most people thought weren’t that big in the first place. They sold off valuable rights to the low-cost comedy “American Pie,” which became a worldwide hit, as well as the Julia Roberts film “Erin Brockovich.” The short-sighted decisions ultimately cost Universal hundreds of millions of dollars in lost profit.

Personnel Management 101: D-

With the exception of music, Bronfman’s hiring record is baffling, as is the secretive, often callous way he handled executive firings.

He installed as president of Universal Ron Meyer, a widely liked and talented agent with no experience running a movie studio. Then he hired Meyer’s lawyer-buddy Howard Weitzman as a senior executive. Best known as a criminal defense lawyer, Weitzman was a flop as an executive.

Months later, he finally hired a chief executive, Frank Biondi, but only after tying Biondi’s hands by hiring all his underlings first. Then he kept Biondi out of the loop on major decisions, such as the Diller deal. Biondi had to learn from a Times reporter that Bronfman was firing him.

Shortly after getting the keys to Universal, Bronfman spent at least $100 million on a highly touted “re-engineering” program to save money. Company executives complained that this management-by-consultant approach found only common-sense savings, such as using fewer travel agencies.

Bronfman ultimately fired many Universal long-timers, including motion picture chief Casey Silver, who, despite a string of flops, left the studio such hits as “The Mummy” and “Patch Adams,” as well as theme park chief Ron Bension.

Bronfman would get an F in personnel management if not for the one area where he hired well: music, where he relies on such experienced executives as Doug Morris and Jimmy Iovine.

Interior Design: B

Under Bronfman, Universal’s commissary got an expensive make-over and went from tuna sandwiches to bluefin sashimi on the menu. The effort was so important that it occupied considerable time of Meyer and Weitzman, who hired the prestigious chef.

Bronfman gutted the antique-filled executive floors of Black Tower to create a more open feeling in the executive suites, better views and a lovely two-story atrium. The stodgy antiques are nowhere to be found.

Getting Along with Others: F

When Bronfman first bought MCA/Universal, he had a close circle of heavyweight confidants and advisors, among them Michael Ovitz, David Geffen and Barry Diller. Now, he’s barely on speaking terms with any of them.

Bronfman tried to recruit Ovitz to run the company, only to see the effort fall apart when Ovitz overplayed his hand on his demands. Geffen and Bronfman’s relationship soured over a proposed deal to sell Universal’s movie operations to DreamWorks.

Diller and Bronfman’s relationship has been strained for the last year. Diller feels totally boxed in by Bronfman, who has veto power over any major deal, such as buying NBC. (Although most in Hollywood believe that Bronfman was the one to nix Diller’s proposed plan to buy NBC, a source with knowledge of the deal said it was Diller who killed it because he refused to report to an independent board comprised of Seagram, USA and NBC.)

In no time, Bronfman grew testy with Hollywood, calling it a “dumb town” for criticizing the TV deal he made with Diller. He also dissed the previous Universal regime, which meant trashing the legacy of one of the industry’s legendary figures, Lew Wasserman.

Bronfman embraced the arrogant, mogul mind-set . . . after it was long out of style.

At a 1998 media conference, Bronfman suggested that the movie industry consider changing its ticket-pricing structure so that moviegoers pay more for big-budget movies than they do for less-expensive ones.

“This is a pricing model which makes no sense, and I believe the entire industry should revisit it,” he said. (The entire industry, including theater owners, laughed.)

Storytelling: A

Bronfman could coolly tell untrue stories in the face of overwhelming evidence to the contrary. He lied to even his own executives at Universal Studios, denying there was any truth to widespread rumors that Seagram was on the block and that he was holding talks with a number of parties, including News Corp., Disney, Sony and Canal Plus, to sell the company.

Speaking at an executive retreat in March at the La Quinta resort near Palm Springs, Bronfman opened the question-and-answer session by telling the group that he would answer the first question before it was asked. “The company is not for sale,” he told his people.

As one top executive who was there recalled: “He flew in especially to lie.”

(BEGIN TEXT OF INFOBOX)

(Report Card)

Name: Bronfman, Edgar Jr.

Subject Grade

Basics of Shareholder Value A

Beginning Mogul C-

Interior Design B

Personnel Management 101 D-

Storytelling A

Remarks: Edgar does not play well with others and keeps to himself too much during recesses. He is very adept at economics and should do well in the Junior Business Club.