Expanding His Repertoire

To use the language of a gambler, Edgar Bronfman Jr., rather than fold, is doubling down.

Just a few weeks ago, some in Hollywood and on Wall Street speculated that Bronfman might go so far as to divest his entertainment holdings altogether out of frustration with the performance of his Universal Studios Inc.

Instead, the Seagram Co. scion is pushing all his chips onto the table by buying European entertainment conglomerate PolyGram for $10.6 billion, betting his family’s liquor dynasty that his decision to move into show business three years ago was the right one.

With PolyGram, Bronfman has again shown he is adept at what he appears to relish most: landing the big fish. Three years ago, he plunged into show business when he purchased 80% of Universal Studios Inc., then known as MCA, for $5.7 billion from Japan’s Matsushita Electric Industrial Co.

While Bronfman has shown that he can buy assets, operating them with a seamless management structure is another matter. By taking over PolyGram from Dutch electronics giant Philips, Bronfman faces even more pressure to do that. It’s one thing to get your arms around a great company. It’s another to do it full justice.

Seagram now moves from becoming a beverage company that happens to be in the entertainment business to an entertainment company with only one-third of its business in Chivas Regal, Crown Royal and the like. The spirits business that Bronfman’s grandfather and father leveraged into a billion-dollar family fortune in Canada earlier in the century has now clearly taken a back seat to the younger Bronfman’s Hollywood vision.

Still, Thursday’s announcement was a rare, welcome respite for Bronfman, who has been pummeled in the media lately for management missteps and splitting off most of Universal’s TV assets to Barry Diller in a deal that most analysts and Hollywood executives still think was a bad one for Seagram. Bronfman has also committed the cardinal Hollywood sin of overspending, as when he agreed to buy half of the production arm of producer Brillstein-Grey before it had any proven successes.

In addition, Bronfman has taken shots over the lackluster performance of Universal’s motion picture unit, particularly such films as “Mercury Rising” and “Primary Colors.” It is the company’s most visible operation, even though it’s a relatively small part of the full Seagram picture and some other units that receive much less attention, notably music, have been doing well.

Shareholders received Bronfman’s news well, boosting Seagram’s shares $3.75 to a record $44.75 on the New York Stock Exchange.

Investors said that they believe Seagram is getting PolyGram at a good price at a time when the record industry is poised for a comeback, and that within five years the asset is likely to appreciate considerably even though the price may seem steep now. That goodwill buys Bronfman some time to make the two operations mesh and figure out how to run the show right.

“It’s a fair price for a scarce asset. It allows them to rise to a higher playing field with companies like Disney and Time Warner. It’s a clear challenge to integrate PolyGram,” said analyst Jill Krutick of Salomon Smith Barney.

For starters, Bronfman must fully empower an executive--presumably Universal Chairman and Chief Executive Frank Biondi Jr.--to oversee all of the operations. Bronfman went out of his way to make sure that Biondi, whose future at Universal has been the subject of much speculation in Hollywood, was at center stage with him for Thursday’s announcement.

But Biondi’s experience at Universal has been anything but conventional for a chief executive. For starters, he was one of the last hires Bronfman made. Usually companies first hire a chief executive, who in turn brings in a trusted team. Biondi inherited a team others hired before him.

Bronfman also severely undercut Biondi last year, when he made a deal on his own to transfer most of Universal’s television assets to Diller. Biondi wasn’t clued in until late in the game.

As for the music operation, technically it reports to Biondi, who until arriving at Universal had not overseen a music company because his previous employer, Viacom Inc., didn’t have one.

The reality is that Universal’s top music executives--such as music chief Doug Morris, Interscope co-founder Jimmy Iovine and Nashville chief Tony Brown--are a highly independent group who can pick up the phone any time and call Bronfman directly. Indeed, Bronfman feels a special kinship with music, having dabbled in songwriting for 20 years.

If Bronfman is right in his long-term bet, he has two things in his favor. He is young, having turned 43 on Saturday. He is known to have told people that one of the main advantages he has over fellow moguls such as Disney’s Michael Eisner and News Corp.’s Rupert Murdoch is that presumably he’ll be around for another 30 years or so.

The other is that Bronfman’s family still controls Seagram--it will have 29% of the company after the PolyGram deal is completed.

Bronfman technically answers to millions of shareholders, but in truth only two count--his father, Edgar Sr., and his uncle, Charles. Charles had reservations when Bronfman decided to get into entertainment three years ago but eventually signed on for the benefit of family peace.

As long as they continue to back him, Edgar Jr. can afford to take his time.

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Times staff writer Sallie Hofmeister contributed to this report.

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Making Music

Seagram’s proposed acquisition of PolyGram would create a global music Goliath with a combined market share that would best competitors’ both in the U.S. and overseas.

Top Markets

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Retail value Percent of Country (billions) world market United States $11.9 31.3% Japan 6.26 16.5 Germany 2.84 7.5 Britain 2.73 7.2 France 2.20 5.8 Brazil 1.20 3.2 Canada 0.98 2.6 Australia 0.74 1.9 Netherlands 0.60 1.6 Spain 0.60 1.6

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Global Market Share

Universal/PolyGram: 23.0%

Sony: 15.7%

Warner: 14.5%

BMG: 14.0%

EMI Group: 11.2%

Others: 21.6%

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U.S. Market Share

Universal/PolyGram: 22.7%

Sony: 18.3%

Warner: 17.9%

EMI Group: 13.3%

BMG: 11.9%

Others: 15.9%

Note: Global figures are estimates for year-end 1997; U.S. figures are year-to-date 1998.

Sources: Music Business International, International Federation of Phonographic Industries, Recording Industry Assn. of America, Soundscan. Researched by JENNIFER OLDHAM / Los Angeles Times