Warner's Semel and Daly Saw Turf, Compensation Threatened, Sources Say

In April, both Terry Semel and Bob Daly emphatically denied having any plans to leave their longtime posts as the co-heads of Warner Bros.

When asked about ongoing speculation about his plans, Semel told The Times: "I said last year, I said this year and I will say again today, Terry Semel is staying at Warner Bros. Terry Semel loves working with Bob Daly, his partner."

Daly, too, when pressed about his own status, replied: "I have no plans on leaving Warner Bros. I'm not a guy who moves around a lot, and neither is Terry. . . . We still enjoy what we do."

The proclamations directly contradict the action the executives took three weeks ago, when they surprised Hollywood by announcing they were resigning after a 20-year run.

In the news release, the two said they actually had been considering the move for months. Their friend, David Geffen, said the duo had been thinking about leaving for at least six months.

Daly now says he couldn't possibly have revealed what he was thinking in April because it would have wreaked havoc on the company.

Semel, too, now says: "I was definitely thinking about it, but why would I tell a reporter that I was thinking about what I was going to do with my life? It would have been horrible."

Perhaps the two were caught between a rock and a hard place, and, short of declining the interview or dodging the question, they could not have answered any differently.

Or maybe, as some sources close to the executives suggest, the two were being honest about their intentions and only later changed their minds after coming to believe that contract negotiations with Time Warner might not go their way.

"They wanted a very rich deal, and in the new deal they weren't going to get anything more--there wasn't as big a bump in stock options. . . . It was their signal to move on," said a source who considers himself a friend of the executives, both of whom made about $20 million a year and are believed to be worth hundreds of millions of dollars.

The source suggested that in addition to a lack of financial incentives in their new compensation package, it was clear to Daly and Semel that their boss, Time Warner Chairman Gerald Levin, wanted to restructure the studio, bringing in a top-level executive to run the music division--which has been under their watch for nearly four years.

"It was a continual carving-down of their turf," said the source. "It was clear that the carriage was going to start pulling the horse, and they had been the horses" for so many years.

Daly and Semel deny that anything of the sort--neither money nor anticipated changes at the company--influenced their decisions to leave.

"I've just had it," Daly said this week. "It was a personal decision. I needed a break and wanted to spend more time with my family. I had nothing else to prove." Daly said that had he been successful in his desire to buy the Los Angeles Dodgers with a group of investors two years ago, "I would have left then."

Semel said his final decision to leave, which he had been mulling for some time, had "nothing to do with getting paid $1 or $30. Compensation never entered my thought process."

He added, "I wasn't going to stay or not stay predicated on money." The 56-year-old executive said the only thing he "had restless nights about" was whether he should follow a gnawing desire to do something else after having spent his entire professional life at virtually one company.

"I knew if I didn't go for another career now, I would probably get to the point in my life where I might not want to do something new at 60 or 61," Semel said.

Sources have suggested for some time that both Semel and Daly were chafing under increased scrutiny and pressure from Warner's largest shareholder, Ted Turner, for spending too lavishly on movies and star perks, and that this played a part in their decisions to move on.

One source said the joy of the job had been all but drained from Daly, who was forced to become more concerned about quarterly numbers than producing movies, TV shows and music.

A source suggested that shortly before the two resigned, Levin had signaled to Daly and Semel that the board was not going to give them the deal they were hoping for and that in fact it intended to reduce their compensation package.

"Jerry has a way of letting you know," said someone close to Levin. "And I credit Terry with getting the body language. He and Bob saw the handwriting on the wall, and they are smart and rich and practical enough to know they had to walk away."

In a phone interview Thursday, Levin said such speculation was "absolutely not the case" and that "the board never played any role relative to their new contracts. . . . I never had any conversations with the board about their compensation."

He said he had planned to meet with the board after his scheduled July 14 meeting with Daly and Semel in New York at which the three had agreed to hold renegotiation discussions.

Instead, at that meeting, Daly and Semel informed Levin that they didn't plan to extend their contracts, and they handed Levin a letter to that effect to give to the board.

Levin also denied a rumor that a few days before that Wednesday meeting, he and Semel had discussed the upcoming contract negotiations at the wedding they were both attending in Venice, Italy, of producer Joel Silver. Based on the conversation in Venice, Semel realized it was time to call it quits, one source suggested.

"At Joel Silver's wedding I saw Terry," Levin said. "We were both there with our wives, and we talked about Time Warner. We didn't talk about our contract negotiations. We reconfirmed the time for our meeting that Wednesday."

Levin added, "We also talked about the restructuring of TWE [Time Warner Entertainment] but had zero conversations about what they were going to do."

He added that there were no discussions about taking music away from the pair.

Levin confirmed a report that he cried when Semel and Daly told him that Wednesday of their plans to leave. Levin said: "That is true. . . . I wasn't expecting to hear that. I'm a lot more of an emotional person these days."

Levin said that he knew, based on what Semel and Daly had told him--that their resignations were for highly personal reasons--that "it wouldn't make any sense for me to try and make them stay."

Semel and Daly maintain that they made their final decision on the 12-hour plane ride they shared on the Time Warner corporate jet coming back from Europe.

Semel said even before the plane took off, he and Daly "gave each other a hug and Bob said to me, 'You've made your decision, haven't you?' "

Those who know Semel well say it was uncharacteristic of him to quit without having a new plan in mind. Both he and Daly have said they'd like to do something entrepreneurial.

Semel said he has "never felt so liberated in my life" as he does now, not being bound by any contract or knowing specifically what he's going to do next.

But he did not discount the possibility of running another Hollywood major someday.

"Why can't I take a few months to look around? I'm going to look at the entire spectrum," said Semel, who leaves tonight for a two-week vacation in Australia.

Despite the fact that he could easily afford never to work again, Semel said that's one thing that's simply not in the cards.

"Work is my favorite hobby," he said.

Daly, 62, said he has an idea of what he'd like to do, but he wasn't prepared to share it publicly other than to say it involves "going down a totally different road."

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