MCA Inc., intent on building the Florida studio tour first proposed four years ago, has enlisted film maker Steven Spielberg as an investor and increased the scale of the theme park proposal, MCA President Sidney J. Sheinberg said.
But the fate of the $290-million project hinges on securing a complex funding agreement with the Florida state employees pension fund and dealing with the specter of a rival attraction proposed by Walt Disney Productions, Sheinberg indicated in an interview last Friday.
Until now, MCA has insisted that it needed a major partner to build the $203-million Orlando theme park initially proposed. Now, however, the Universal City-based company has promised to build a bigger park, committing $140 million of its own funds if it secures a $150-million loan from the Florida Retirement System Pension Fund.
The pension fund's loan would be secured by a 16-year mortgage on the theme park land and all improvements, MCA officials said.
As an integral part of the deal, however, the pension fund must also agree to invest $35 million each year for five years in MCA's Universal Pictures feature film production. The pension fund would be guaranteed full recovery of its annual investment seven years after each installment payment is made.
The proposal is now being weighed by pension fund officials and their investment banking advisers at First Boston Inc., MCA officials said.
Sheinberg declined to disclose the magnitude of Spielberg's commitment to the project other than to say that the film maker "has a financial interest and he is going to serve as a creative consultant." Spielberg, who runs his own film production company from a $6-million complex built for his use on the Universal lot, has publicly credited Sheinberg for launching his career 17 years ago. The film maker could not be reached for comment Friday, however.
Sheinberg expressed concern over Disney's recent announcement that it plans to build a studio tour of its own on its vast acreage at Walt Disney World, near Orlando. When asked whether he thinks two competing studio tours can survive in the already congested Florida theme park market, Sheinberg said, "We really have done no research on that. . . . In my judgment, the answer is no."
Sheinberg complained that Disney Chairman Michael D. Eisner was made privy in 1981 to confidential MCA plans in his former role as a Paramount Pictures executive because MCA invited Paramount to become a partner in the theme park venture.
But Eisner, in a telephone interview Friday, said the presentation occurred "many, many years" ago and said: "When I arrived at this company, the studio tour was already on the drawing boards and had been for many years."
"The Disney studio will be built in Florida. We will not be intimidated. We will not be diverted. We will not be slowed, and we will not in any way impede anybody else . . . from doing the same. We believe in a free enterprise system," Eisner said.
If MCA enlists the $8-billion Florida pension fund as an investor in its film production for the next five years, the action will signal a radical departure for MCA, which has never sought partners on such a large scale. Most of the other major Hollywood studios in recent years have raised sizable sums through limited partnerships offerings for multi-picture deals.
Offset Production Costs
Sheinberg said MCA needs to offset its film production costs if it is undertaking the large theme park without an equity partner. MCA had initially hoped to invest just $35 million to $40 million of its own money in the studio tour, Sheinberg noted.
Under its proposal, MCA would recoup its advertising and print costs, as well as a flat 12.5% distribution fee, before any proceeds from a motion picture would be distributed to the pension fund. After paying residuals and any obligations to third-party participants, proceeds would be divided between MCA and the pension fund on a prorated basis until the fund recouped its $35-million investment for the year. If there are additional proceeds, the pension fund then receives every available dollar until it earns a $14-million profit, or 40% of the year's investment.
At that point, MCA would be allowed to recoup a deferred distribution fee, and, finally, the two entities would split any remaining proceeds on a prorated basis.