‘Dumb Town’ Testing Bronfman’s Smarts

Industry watchers are wondering if the mogul who called Hollywood “dumb” this week is smart enough to pull off one of the biggest music deals ever without looking dumb himself.

Seagram Co. chief Edgar Bronfman Jr. just can’t seem to escape the spotlight these days.

The week began with a jarring quote from Bronfman in a New Yorker article in which he called Hollywood “a dumb town.” It ended with industry insiders and the investment community wondering whether he’ll make a play for music companies PolyGram or EMI.

Bronfman, who’s come under intense scrutiny and some criticism for management and business decisions since his Montreal-based spirits company took control of Universal Studios three years ago, presumably is feeling defensive and under siege.

How else to explain the “dumb” remark about his industry brethren to writer Connie Bruck for her piece on Bronfman’s “odyssey” in Hollywood?

Bronfman acknowledged that while some on Wall Street thought his startling deal to sell Barry Diller most of Universal’s domestic television and cable assets was smart, “Hollywood thinks it’s dumb.” When Bruck asked him why that was, he responded, “It’s a dumb town.”

Naturally, many in Hollywood think it was dumb of Bronfman to make such a comment about the world in which he does business. One top Hollywood player said the remark “will certainly endear him to everyone.”

He also took an unusually direct shot at former MCA/Universal chief Lew Wasserman, for whom he is said to have great respect: “I don’t think the Matsushita ownership materially affected what was a company in long-term decline,” he said in the interview. “I think Lew 15 years ago took the position that these businesses were not going to grow, so he was going to manage risk.”

By Thursday, media and industry focus on Bronfman had intensified when PolyGram’s Dutch parent, Philips Electronics, indicated that it was contemplating what to do with its entertainment assets.

Attention immediately centered on Bronfman, who for two years has been in on-again, off-again talks with EMI.

Neither PolyGram nor EMI is officially up for sale, although Seagram has approached both companies.

“He’s looking at both and trying to figure it all out and see which one he can get cheaper,” said a person familiar with Bronfman’s thinking.

The source indicated that Bronfman would probably be willing to pay as much as $9 billion for PolyGram, but industry analysts doubt the world’s largest music company could be bought for less than $10.5 billion to $11 billion.

Sources said Bronfman would pay $7 billion to $7.5 billion for EMI, which is regarded as a less attractive asset than PolyGram, but the British music company may not sell for less than $9 billion.

Given the sorry state of Universal’s movie unit right now and the fact that none of the company’s divisions are first in their markets, Bronfman might earn high marks for making the entertainment giant the No. 1 music force in the world with an acquisition of PolyGram. (Buying EMI would put it in the top three globally and No. 1 domestically.)

But he also risks drawing further criticism from those in the investment community who question his making such an expensive acquisition at a time when Universal seems to be floundering without a clear strategy.

The second-guessers have been in high gear since Seagram sold its stake in DuPont and made the Universal purchase.

Meanwhile, sources said PolyGram chief Alain Levy may be thinking about seeking investors to raise money for a possible management buyout of the company.