Semel’s Warner Contract Not a Done Deal

In Hollywood, where management teams usually enjoy about as much job security as Third World potentates, Warner Bros. has stood as a symbol of stability for more than a decade.

Studio Chairman Robert A. Daly’s and President Terry Semel’s realm extends from film (“Lethal Weapon 3,” “The Bodyguard”) to television (“Murphy Brown”), and even into retailing. Their division had record pretax earnings of $410 million last year, based on those successes.

But lately there have been rumblings about possible changes. Industry sources say that Semel is unhappy with the terms he’s being offered to renew his contract, which expires at the end of the year. Specifically, Semel is said to want a bigger equity stake in the company’s businesses--something that corporate parent Time Warner Inc. is not inclined to grant.

While Semel declined comment, executives in the industry say he has been vocal about his interest in making a bigger score financially, even though he earns as much as $5 million a year and reportedly made $40 million to $50 million from the merger of Warner Communications and Time Inc. three years ago.

Semel’s business options are said to include teaming with his good friend, financier Ronald O. Perelman, in a bid for Paramount Communications; rebuilding Orion Pictures in conjunction with Metromedia’s John Kluge; and leading a buyout of any number of other entertainment companies, including those owned by the French bank Credit Lyonnais--MGM and United Artists.

All the talk will, of course, quickly fade if Semel signs on the dotted line, as Warner executives insist that he will do before month’s end. Semel last met with Time Warner Chairman Gerald M. Levin four weeks ago. They expect to return to the bargaining table in two to four weeks. Warner sources say Semel’s resistance has more to do with age than money. At 50, they say, he’s assessing whether he wants to commit to another five years or do something else.

Such conflicting scenarios are not uncommon in Hollywood, where people tend to put their own spin on everything. But it is surprising to find Warner Bros. at the center of such high-level speculation. Besides its management stability, the Burbank-based studio is defined by an inbred corporate culture that discourages public laundering of company affairs.

When former Time Warner Chairman Steven J. Ross took a leave because of prostate cancer last year, company executives insisted that he would be returning--up until the day he died.

Semel and Daly have yet to forge the kind of close relationship with Levin that they enjoyed with Ross, an empire builder and a larger-than-life figure who enjoyed palling around with the stars as much as forging multibillion-dollar business alliances. Some sources say that Levin has actually antagonized the Daly-Semel team by putting off certain deals.

The two have guided Warner’s fortunes since 1982, at times seemingly as one person. They’ve been lauded for blockbusters such as the “Batman” and “Lethal Weapon” series, but Warner’s greater strength in film has been a steady series of less-expensive hits, such as “Driving Miss Daisy” and “Under Siege,” a reflection of the studio’s consistent productivity.

Warner is also a major force in television production, with “Full House,” “Family Matters” and “The Jackie Thomas Show,” as well as “Murphy Brown.” And it is rapidly expanding its brand-name retailing operation.

Daly, who’s expected to easily reach agreement on a new contract, has responsibility for television and administration under the working relationship. While they share in film duties, Semel is known as the hard-bargaining deal maker with more say over video and merchandising.

Warner has consistently ranked as No. 1 or 2 for domestic box office share under the Daly-Semel regime, and Premiere Magazine just named them Hollywood’s most powerful executives, based on their vast influence over the theatrical market.

For that and other reasons, people close to Semel say that it would be very tough for him to cut the umbilical cord. Many believe that his Warner loyalties will ultimately prevail. “He may be angry now,” one colleague said. “But you have to remember, this is one of the most entrenched old boys in town.”

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The busiest place on earth: Walt Disney Co., which made headlines on Friday with its acquisition of “Crying Game” distributor Miramax Films, is on the move again. Company Chairman Michael D. Eisner and Studio Chief Jeffrey Katzenberg are traveling to Houston in preparation of another possible announcement.

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In the lion’s den: Despite a concerted effort by TriStar Pictures to woo back Carolco Pictures, look for Metro-Goldwyn-Mayer to begin distributing the independent’s big-budget films in 1994 as planned. Sources say the outcome was never in doubt because Carolco’s strategic investors include electronics giant Pioneer, archrival of TriStar owner Sony Corp.