Bronfman Versus Hollywood

Bronfman Versus Hollywood

Montreal's Bronfman family is no stranger to controversy. After arriving in Canada from Russia in the 1890s, they made a fortune outrunning federal tax collectors and selling whisky to American mobsters. The next generation made headlines tussling over control of the family firm, Seagram Co. Ltd. Sam Bronfman and his sons disowned the cousins who lived next door, and the two groups of millionaires proceeded to carve up corporate Canada. The third generation, now split between Montreal and New York City, is currently in the process of reducing Seagram's traditional reliance on the world's appetite for hard liquor by reshaping the U.S. entertainment industry - a strategy that seems to have incited as much of a furor as all the Bronfmans' previous scandals combined.

Seagram's foray into music, television and films started in 1995 with the $8-billion purchase of Los Angeles-based MCA Inc., now called Universal Studios Inc. This month, it expanded into transatlantic negotiations aimed at acquiring the world's largest record company, Dutch-based PolyGram NV, in a deal that could be worth as much as $14.5 billion. In so doing, Seagram president and CEO Edgar Bronfman Jr. has provoked that most American of responses: instant and short-lived warmth towards the spunky newcomer, followed by derision and back-stabbing once the novelty wears off. For the 42-year-old Bronfman the honeymoon phase lasted three years. During the past six weeks, he has been forced to defend himself at every turn. "It's a remarkable phenomenon when you come right down to it," says Peter Bart, editor-in-chief of the show business weekly Variety. "One moment someone is a hero of showbiz, the next a bad guy."

In an open letter to Bronfman last month, Bart warned him that "like it or not, it's your turn in the barrel." He then listed a few of the reasons, starting with Bronfman's decision last October to fold Universal's television and cable assets into a partnership headed by former Fox Inc. chairman Barry Diller and ending with the recent box-office disappointment of Universal's highly touted political satire Primary Colors. Bart berates Bronfman for his lack of the vision thing, quoting a top Hollywood agent as saying that everybody understands Rupert Murdoch and Michael Eisner, but "we don't get Edgar."

Bronfman's critics alternately paint him as a mercurial lightweight and a ruthless number cruncher with no appreciation of the elusive forces at work in the U.S. entertainment business. Read between the lines, however, and a different grievance emerges. The Hollywood establishment seems less upset by Edgar Jr.'s purported lack of business smarts than by the growing sense that, 30-odd months after the handsome distillery heir rode into Tinseltown with a mountain of cash, he clearly has his own notions of what to do with it.

For one thing, Bronfman does not care much for television, however important a role it played in the former growth and glory of MCA. He has been the target of fierce criticism over the way he handled last fall's deal with Diller, under which Universal traded its entire television operation - including the rights to hit programs such as The Jerry Springer Show, Law & Order, and Xena: Warrior Princess - in return for 45 per cent of Diller's USA Networks Inc. Bronfman is a staunch defender of the deal, however, rebuking those in Hollywood who believe giving up control is tantamount to selling one's daughter. He contends it was the only way to persuade Diller - a longtime friend and mentor - to take charge of Universal's money-losing TV division. "Let's just say that in marrying our television assets with Barry's, we're sending our daughter to boarding school," says Bronfman. Referring to the criticism, he says: "I don't really pay attention to the people who tell me I'm an idiot, and I don't pay a lot of attention to people who tell me I'm a genius. I believe the deal was right."

Despite the fact that Edgar Jr. worked for Universal as a film producer until his father persuaded him to join Seagram in 1982, he does not demonstrate a deep emotional attachment to the movie studio. In an industry notorious for runaway spending, Bronfman has come under fire for sending in the bean counters. Much has been made of his recent suggestion, to a big entertainment industry conference in New York City, that film companies should look at rejiggering the way they sell movie tickets. Asking filmgoers to pay the same rate no matter what the product cost to produce "is a pricing model that doesn't make sense," Bronfman said, urging the industry to reject this "death paradigm" - paradigm is one of his favorite words - and become acquainted with the concept of price elasticity.

Bronfman was not the first entertainment executive to propose variable ticket pricing, but this time the howls could be heard far and wide. The remark coincided with the departures of several top Universal executives, including two marketing managers who were reported to have opposed Seagram's efforts to impose standard business procedures - things like budgets and sales projections - on the movie studio. This, in turn, set off a round of rumors that Bronfman was going to enlist his friends Steven Spielberg, Jeffrey Katzenberg and David Geffen of DreamWorks SKG to do a Diller-like deal for Universal's movie studio. Recently, that was replaced by an updated rumor saying the opposite, that the troubled DreamWorks trio is in the process of persuading Edgar to rescue it. An entertainment executive quoted in The New Yorker recently compared Bronfman to a piata: "Hit him and money comes out."

This says more about Hollywood expectations than about Bronfman, who has made it clear all along that the one place he is willing to invest more of Seagram's money is in the music business. Music is what he loves best, having been a professional lyricist (under the name Sam Roman) all his adult life, including his 16-year stint with Seagram. His best-known hit, composed with songwriting partner Bruce Roberts, is Dionne Warwick's Whisper in the Dark.

Whether Bronfman's detractors like it or not, the music business is where he intends to devote most of his time and money. When Seagram acquired MCA in 1995, the joke around L.A. was that the three letters - short for Music Company of America - actually stood for Music Cemetary of America. The unit has undergone a dramatic overhaul since Bronfman took charge, quadrupling the division's cash flow during the most recent fiscal year and increasing its share of U.S. album sales from eight to 12 per cent. Universal's operating profit rose more than 30 per cent in the latest quarter - a period in which Seagram's wine and spirits business, hit hard by economic problems in Asia, reported a loss of $10 million. For all the controversy, the value of Seagram's shares has climbed 40 per cent since late 1997, and big institutional investors seem to have confidence in Bronfman's leadership. In that environment, it's hardly surprising that Seagram's directors have endorsed their president's gamble on creating a successful music company.

Buying PolyGram, which caught Bronfman's attention last week after talks with Britain's EMI Group PLC fell through, could more than make up for Universal's widely noted lack of a summer blockbuster movie. It would instantly transform Bronfman into the world's most powerful music mogul, with labels ranging from Motown to Deutsche Grammophon and a roster of popular acts that includes aging rocker Elton John, the teenybopper group Hanson and soul singers Boyz II Men.

Like EMI, the PolyGram deal could fizzle if Bronfman decides he is being asked to pay more than the company is worth. That seems unlikely, however, given what is at stake - the opportunity for Bronfman to make his own mark on the family empire, in an industry he believes will be as lucrative as whisky was 70 years ago. Maybe then people will begin to understand what Edgar Bronfman Jr. is doing. It might even make him a hero again in Hollywood.

THE HOUSE OF SEAGRAM

Montreal-based Seagram Co. Ltd. earned $702 million last year on revenues of $17.6 billion, generated in three main areas of business:

Universal Studios

Universal Pictures, producer of such films as Primary Colors, The Lost World and Liar Liar.

Universal Music Group. Artists include Reba McEntire, No Doubt and B. B. King on such labels as MCA and Interscope.

Universal Studios theme parks in California, Florida and Japan.

Universal Studios New Media Group, developer of on-line content and video games such as Crash Bandicoot.

Tropicana Beverage Group

Fruit juices, soft drinks and coolers.

Seagram Spirits and Wine

Chivas Regal whisky, Martell cognac, Captain Morgan rum, Mumm's champagne and other beverages.

Maclean's May 25, 1998