Can Paramount’s Success Last? : Analysts Are Worried That Studio’s String of Hits Is Nearing End

The ubiquitous Wayne Campbell of “Wayne’s World” would undoubtedly offer his trademark “EXCELLENT!” if he got a look at Paramount Communications Inc.’s latest financial report.

On Tuesday, the New York-based company posted significant gains in first-quarter earnings from the dismal year before, thanks mostly to a 160% surge in entertainment income.

Hits such as “The Addams Family” and “Star Trek VI” boosted first-quarter operating income from entertainment to $73.2 million, compared to $28.2 million in 1991. Overall revenue grew 19%, to $1.1 billion, and earnings rose to $18.4 million from a $7.3-million loss.

The results strongly suggest that Paramount--which has another hit now in “Wayne’s World”--is flourishing under its new management team of company President and Chief Operating Officer Stanley R. Jaffe in New York and studio Chairman Brandon Tartikoff in Hollywood.

But in Hollywood--where studios depend on a steady stream of money makers--executives question whether Paramount’s momentum can be sustained after Wayne and his head-banging pals “party on” into the sunset.

Assessments of Tartikoff, the former NBC programming whiz who has been called one of the sharpest executives in show business, vary. While the studio chief gets high marks for “Wayne’s World,” sources close to Paramount say he’s been slow to forge alliances within Hollywood’s clannish film community--and even slower to put a slate of pictures into production.

Paramount so far has only one film set for the crucial holiday season, when the studios generate nearly 20% of their annual domestic box office revenue. And that movie, a thriller titled “Indecent Proposal,” wasn’t added to the holiday film slate until Tuesday.

“It’s making everyone hysterical,” one studio source said. “They should be worried about next summer now. Instead, everyone is obsessing over Christmas, spring and summer.”

At the broader corporate level, rumors of a possible takeover bid persist, despite frequent denials by Paramount of any kind of pending deal, including one issued at Tuesday’s annual shareholder meeting in New York.

Many analysts expected the company to make a strategic acquisition last year with the $1.5 billion left over from an asset sale. But while Chairman Martin S. Davis and Jaffe have held discussions with NBC and a few record companies--and have even enlisted the aid of corporate matchmaker Michael Ovitz, chairman of Creative Artists Agency--a suitable partner has not emerged.

Lisabeth R. Barron, an entertainment analyst witG. Warburg & Co. in New York, maintains that the company has missed opportunities.

“Davis . . . is afraid to make a mistake,” she said. “But there have been things passed over that would have made sense--such as (theme park operator) Six Flags, the Financial News Network, the Home Shopping Network. Those are really interesting assets.”

Other analysts look more favorably on Paramount. Christopher Dixon of PaineWebber in New York issued the latest “buy” recommendation, saying he anticipates strong profitability. Jeffrey Logsdon of Seidler Amdec Securities said Paramount’s success with modestly budgeted films such as “Wayne’s World” bodes especially well for the future, after the studio suffered through a string of costly underachievers, such as “The Godfather Part III.”

The strong quarterly results, which were anticipated, had no impact on Paramount’s stock. It closed unchanged at $47.125, just under its 52-week high, in New York Stock Exchange trading.

At Tuesday’s shareholder meeting, there was heated questioning from stockholders on issues such as executive pay and board composition. But company executives downplayed talk of a possible sale.

“We’ve had more rumor, we’ve had more innuendo,” Davis replied. “(But) we haven’t had anyone come to the table with a check.” Until that time, he said at the meeting, “we will continue to catalogue the rumors and innuendo” and not comment.

Apart from their cryptic shareholder remarks, executives have been mum about the company’s plans and have even gone so far as discouraging others from speaking on their behalf. Neither Jaffe nor Tartikoff would comment for this story.

The biggest enigma is Jaffe, a former producer (“Fatal Attraction”) who has skillfully avoided press contact since assuming the president and chief operating officer’s post a year ago. Spokesmen maintain that he is preoccupied with reorganizing the company.

After Tartikoff’s appointment last spring, Jaffe was an omnipresent figure on the studio’s Melrose Avenue lot. Insiders credit him with making a production deal with former studio chief Robert Evans and with putting Paramount behind such films as “Indecent Proposal”; “Alive,” a co-production with Walt Disney Studios, and the Christopher Columbus film, “1492.”

Mace Neufeld, who has an exclusive production deal at Paramount with his partner, Robert Rehme, said Jaffe’s presence has gradually diminished.

“Stanley had been coming out much more often, almost on a weekly basis, before Brandon settled in,” said Neufeld, whose company produced “The Hunt for Red October” and the upcoming “Patriot Games.” “But the trips are less frequent now. Brandon is running the movie studio, with some input from the East Coast.”

For Tartikoff, who was accorded cult status during his NBC years, the film community--always wary of outsiders and known for its constant management turnover--has proven less devotional.

Tartikoff alienated some people early on by habitually failing to return phone calls. He was also criticized for bringing television sensibilities to film when he rushed “All I Want for Christmas” through production last year. Hollywood cheered when the movie failed, and some even took to calling him “Chauncey,” a reference to the bumbling character in the book and film “Being There.”

In his defense, associates say that Tartikoff was initially overwhelmed by the dual responsibilities of assembling a new management team and learning his job. With his team now in place, Tartikoff is expected to become more fully engaged in the movie-making process.

He has already repaired relations with comedian Eddie Murphy, who felt unappreciated after making some of Paramount’s biggest hits. Others working on the lot are “Saturday Night Live” producer Lorne Michaels, who brought “Wayne’s World” to the studio before Tartikoff came aboard; “Cheers” producers Glenn and Les Charles, and the star of the television series “Hunter,” Fred Dryer.

If “Wayne’s World” is any indication, Tartikoff will be a very hands-on executive. He personally cast Rob Lowe as the film’s smarmy TV executive and sat in on script readings.

“Ghost” producer Howard W. Koch, who’s been affiliated with Paramount for 31 years, said the change is ultimately healthy for the studio. “It’s a learning process for Brandon,” said Koch, who ran the studio himself from 1964 to 1966. “But he’s responding very well.”

The real test will come in the months ahead, as Tartikoff shapes Paramount’s long-range schedule. “The Addams Family,” “Star Trek VI” and “Wayne’s World” started under the former regime. And the current slate only runs through fall, with the exception of “Indecent Proposal.”

Some Hollywood executives suspect that Tartikoff will lean heavily toward juvenile fare--what one executive calls “dumb boy movies”--based on his own comments about the studio’s recent success. But others say it’s premature to make predictions.

“If a client asks whether Paramount will buy a project, I never know the answer,” said entertainment attorney David Colden, “because I can’t define what Paramount’s taste is.”

At the shareholders meeting, Jaffe maintained that Paramount is already well-positioned for the future. The studio plans sequels to “Wayne’s World,” “The Addams Family” and “Naked Gun.” Alan Citron reported from Los Angeles and Victor F. Zonana reported from New York.

Good Times for Paramount Paramount Communications--a New York-based entertainment and publishing giant--owns Paramount Pictures studio, movie theaters in the U.S. and Canada, cable networks and T.V. stations and the New York Knicks and New York Rangers sports teams.

Earnings have fluctuated...

...with the first quarter of 1992 showing improvements over the year before...

in millions of dollars

1992 1991 Revenue $1,070 $897 Earnings $18.4 ($7.3) Operating Income from Entertainment $73.2 $28.2 Operating Income from Publishing ($29.7) ($40.8)

...due to a string of recent hit movies.

(Domestic box office revenues to date, in millions of dollars)

The Addams Family: $111

Star Trek VI: $72.5

Juice: $19.2

Wayne’s World: $57

Sources: Variety, the company