Creating an Entertainment Giant : THE RIVALS : Possible Strategies for Biggest Entertainment Players

Spurred by this summer’s deal mania, entertainment companies are finding a growing need to seek merger partners or form strategic alliances--but there are fewer free-standing players left from which to choose a partner.

What should Hollywood’s other major players do? Here’s a look at possible strategies for five of the biggest:

Seagram Co.: The Canadian beverage company’s $5.7-billion acquisition of 80% of MCA in June signaled the first of the summer’s many mega-deals. Although MCA owns the Universal movie studio and a pair of successful theme parks, analysts say the company needs to round out its holdings to compete with the likes of Time Warner.

Seagram Chief Executive Edgar Bronfman Jr. may have added incentive to compete head to head with the media giant. Before the deal with Turner, Seagram was the largest holder of Time Warner stock, with a 15% stake. But that’s expected to be diluted to the 8% to 9% range. Time Warner never offered Bronfman a seat on its board, and investors say an unhappy Bronfman wants to sell his stake in the company.

Earlier this month, Bronfman hired Creative Artists Agency executive Sandy Climan to help cash-rich MCA identify and evaluate potential acquisition targets. MCA is rumored to be considering a rival bid for CBS Inc., which has agreed to merge with Westinghouse Electric Corp. On Friday, Westinghouse Chairman Michael Jordan mused about joining with a content provider to supply CBS, and investment bankers considered Seagram the most likely candidate.

Other possibilities to round out Seagram’s portfolio include the acquisition of music giant Thorn EMI and a bid for the Los Angeles Kings hockey team.

Viacom Inc.: The parent of Paramount Communications owns the venerable Paramount studio, Simon & Schuster publishers and Blockbuster Entertainment, a diverse set of holdings well suited for the coming media environment.

However, Viacom appears to be bucking the “bigger is better” trend by putting its Spelling Entertainment Group up for sale last month.

Viacom’s fledgling television network, UPN, may take years to rival ABC, NBC, CBS and Fox. Analyst Chris Dixon of PaineWebber Inc. in New York says Chairman Sumner Redstone could easily make a play for CBS as well.

If Viacom’s stock remains about $52 a share, it won’t have to issue additional shares to help pay for Blockbuster, and that could free up more cash for acquisitions.

News Corp.: Analysts often mentioned Rupert Murdoch’s News Corp. as an ideal candidate to acquire Turner Broadcasting System Inc. That illustrates some of the Australian company’s weaknesses--lack of a credible news organization for its upstart Fox Network and too few distribution outlets for the movies and television shows that come out of its Twentieth Century Fox studio.

In May, long-distance company MCI Communications invested $2 billion in News Corp. to launch a joint venture to deliver electronic information services, particularly News Corp.’s content--which also includes the HarperCollins publishing company--over MCI’s new computer network.

News Corp. already owns the Delphi on-line service, but this venture may be a preview of deals to come as the Baby Bells start jumping into the fray, as analysts expect.

Walt Disney Co.: For a short time after announcing its pending $19-billion acquisition of Capital Cities/ABC Inc., Disney could boast it was to become the world’s largest entertainment conglomerate--but Time Warner would regain its historical lead with its Turner bid.

Analysts cite the Disney-Cap Cities combination as an excellent example of the synergies that can accrue to a company with products to promote across many markets.

The deal allows Disney’s content to be distributed with greater ease in movie theaters, the leading television network and the Disney cable channel.

Disney still has money to spend and has been looking for more good deals since announcing that it would buy Cap Cities. The Mouse is in talks to buy an interest in New York’s Rockefeller Center, for example.

Sony Corp.: After taking a $2.7-billion write-off last year on Sony Pictures Entertainment, Sony has reiterated its commitment to the entertainment and media business.

But analysts suggest Sony could become a takeover target rather than a buyer because its large movie and television library could be a valuable asset to a suitor in search of content.

Investors Herb Allen and Ronald Perelman are rumored to have joined with Terry Semel, co-chairman of Warner Bros. Studios, in a possible takeover of all or part of Sony Pictures Entertainment. General Electric Co., NBC’s parent, has also surfaced as a possible suitor.

Sony of America President Michael Schulhof has been shopping a 25% stake in the movie and television operations, but with a valuation of the assets at $12 billion, no firm bidders have come forward.

Sony insiders suggested recently that the company may look for a strategic partner in a network or a regional phone company.

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Times wire services contributed to this report.