CEO Biondi Is Ousted at Universal Studios
Seagram Co. fired the head of its entertainment division on Monday amid a wholesale restructuring of the company, raising further questions about the liquor giant’s ability to manage the movie, TV, music and theme park operations it bought just three years ago.
The move--The Times reported Friday that it was expected--suggests that Seagram’s 43-year-old scion, Edgar Bronfman Jr., is still struggling to secure his footing in the entertainment business.
Since his family-controlled Canadian liquor concern spent $5.7 billion for 80% of MCA Inc., now Universal Studios Inc., in 1995, Bronfman has come under fire from investors and among Hollywood insiders for operating without a clear strategy and with seemingly unending management turmoil.
Monday’s ousting of his top executive at Universal, Chief Executive Frank Biondi Jr., comes at a steep price for Bronfman. Biondi, who has been in his position just over two years, confirmed that the cash portion of his settlement will be $25 million to $30 million.
Biondi’s severance is the latest in a string of huge cash payouts Hollywood has made to fired executives, some of whom enjoy multimillion-dollar golden parachutes after only a year or two’s worth of work. The biggest to date is Walt Disney Co.'s settlement with former President Michael Ovitz, who received $39 million in cash and options for 9 million shares--currently worth $90 million--after 14 months on the job.
For Biondi, 53, it’s the second time in three years he’s been fired as chief executive of a major entertainment company. Viacom Inc. Chairman Sumner Redstone dismissed him in early 1996. That earned him a $15-million severance package. Back in 1984, Biondi was ousted from another top position as chief executive of cable channel Home Box Office.
No one in Hollywood or in the investment community is convinced that Biondi, who had more than 2 1/2 years to go on his five-year contract, will be the last executive to leave Universal.
Mounting financial problems in its motion picture division, exacerbated by this weekend’s weak opening of the $90-million, critically panned Brad Pitt fantasy drama “Meet Joe Black,” may soon result in the firing of another top studio executive--movie chairman Casey Silver.
The company has not had a major hit film in well over a year, and has been plagued by such costly duds as “Primary Colors” and “Mercury Rising.” Further pressure is coming from problems surrounding the costly, special-effects-laden sequel to “Babe,” which is still unfinished less than two weeks before its planned Nov. 25 opening.
For the last three years Bronfman has been consumed with getting Seagram’s troubled spirits business together amid Asia’s economic turmoil and transforming Universal into a global music giant. He says he’ll now take a much more direct role in managing the entertainment side of Seagram’s assets.
While declining to address other possible management changes at the studio, Bronfman did stress in an interview that “operating performance is the be-all and end-all and no one will be exempt from having to deliver operating performance.”
Since the turnaround in his entertainment assets has been slower than expected, Bronfman has found himself cast in a role that he early on claimed to have little interest in--that of a Hollywood mogul.
Bronfman--under intense pressure from investors to make the entertainment division perform and raise the company’s stock price--acknowledged that he now intends to be “an activist CEO.”
Seagram’s stock has lagged those of most major entertainment giants and is trading at the level it was at three years ago.
Bronfman is also under pressure within his own family, which owns 37% of Montreal-based Seagram. Indeed, his uncle, Charles Bronfman, who is co-chairman of the board, had reservations about his nephew’s decision to buy control of Universal from Japan’s Matsushita Electric Industrial Co.
Under the new structure announced Monday, Ron Meyer, Universal president and chief operating officer, who previously reported to Biondi, will now oversee movies, television and theme parks and answer directly to Bronfman.
Music, which had previously been grouped with Seagram’s other entertainment businesses and reported to Meyer, will now be run separately from New York by Universal Music Group Chairman Doug Morris. He will also report directly to Bronfman, who is an occasional songwriter with an avid interest in the music business.
Bronfman said he will now take a more active role on the movie side as well, working closer with Meyer.
“I intend to be Ron’s business partner,” said Bronfman, noting that Meyer has “more skills than he himself acknowledges--he knows where the money is.” Meyer, who for decades was one of Hollywood’s top talent agents before joining Universal, has often said he lacked the financial expertise to manage a huge entertainment company.
While rumors have periodically circulated about Meyer’s fate, he is known to have an unusually long, 10-year contract.
Meyer said he is well aware “what is working in our business and what’s not working as well as I’d like it to.” He said: “I wish I could be satisfied with the results of our motion pictures, and I’m not. I need to be more hands-on, and I intend to be.”
Bronfman refused to comment on Biondi’s performance at the company and instead tied his termination to the restructuring. “There isn’t a role for two CEOs,” Bronfman said.
Biondi said Bronfman met with him Monday morning and “said he wants to be more hands-on and ‘I’d like you to resign.’ ”
Biondi added: “Is it shocking? No. Is it a bit of a surprise? Sure.” But, he said, Bronfman’s intentions are very clear. “He wants to run the business himself.”
Biondi first learned about his dismissal from The Times rather than directly from Bronfman. Biondi said Bronfman called him Friday, telling him he was flying to Los Angeles on Monday to meet with him.
Until Monday morning, Seagram had dismissed a report in The Times last week about Biondi’s impending termination as “wild speculation and rumor.”
Bronfman said his principal focus has been “to transform Seagram into an operating company that’s a leader in two fields of business--entertainment and beverages"--and that through a series of transactions, including the pending $10.4-billion acquisition of music giant PolyGram, “we’ve been reallocating Seagram’s asset base toward a very different future than before.”
With options, Biondi’s settlement could grow beyond $30 million, although Seagram’s stock will have to perform much better than it has in the past. A one-time grant of options for 1 million shares in 1996 is worth less than $1 million because Seagram’s stock, which fell 25 cents to close at $36.06 on Monday, is up only slightly from what it traded for then. Options on another 500,000 shares are worthless.
Wall Street analyst Christopher Dixon of PaineWebber Inc. described Biondi as “an extraordinarily talented individual” who found himself caught between a rock and a hard place at Universal. Biondi is often lauded as a top financial mind, although his critics say he is not an assertive leader.
Ever since Seagram transferred control of its USA Networks to Barry Diller last fall, Biondi “was basically a lame duck,” Dixon said.
It may be that Biondi’s hiring was ill-fated from the start. At most companies, when a new chief executive is hired, he or she then goes about choosing a team of executives.
Biondi was Bronfman’s last major hire, in part because Bronfman’s earlier negotiations to bring in former agent Michael Ovitz as head of the entertainment company had fallen apart. In the interim, Bronfman had hired a substantial number of execu- tives--including Ovitz’s former partner Meyer--and made key management decisions.
As a result, Biondi inherited a team, undercutting his ability to mold the company as he wanted. Bronfman sent an even stronger signal when he cut a deal, without including Biondi, with his friend and advisor, Diller, to sell off the bulk of Universal’s TV business.
By doing so, Bronfman stripped Biondi of his main area of expertise--cable television.
Biondi was paid well during his 2 1/2-year tenure. He made $6.3 million in salary, bonuses and other compensation last year.
According to details of his Universal contract, contained in Securities and Exchange Commission filings, Biondi will receive his $1-million annual salary and yearly “target bonus payments” of $4.5 million through the end of his contract on June 30, 2001.
Another major severance highlight in the contract calls for Biondi to receive a cash payment of $5 million to $15 million, depending on when he loses his job. The formula isn’t specified.