What the Crystal Ball--Freshly Polished--Has to Say

Will Mel Karmazin sell CBS television? Will Seagram’s Edgar Bronfman Jr. resuscitate his reputation in Hollywood with a turnaround of Universal Studios? Will Walt Disney Chairman Michael Eisner name a new president? What will become of Metro-Goldwyn-Mayer? And UPN?

Trying to predict the big entertainment stories of the new year is as chancy as trying to produce hit TV shows. Developments such as Seagram’s $10.4-billion purchase of PolyGram last year demonstrate just how surprising Hollywood can be. (Analysts were betting Seagram would buy EMI to beef up its music portfolio.)

And who would have predicted that Microsoft billionaire Paul Allen would best his former partner Bill Gates’ investment in cable by becoming the seventh-largest U.S. operator--with designs on moving into the top three?

Sometimes, the moves that seem the most obvious to analysts and Hollywood insiders never materialize. For two years now, we have predicted a spinoff of the entertainment group of Sony Corp., which continued to sit on the sidelines last year as Fox and CBS sliced off sections of their business into new stocks.

While some of Company Town’s annual predictions miss by a mile--no record showing for “Godzilla,” for example--others have just been premature. Two years ago, we predicted that Tele-Communication Inc.’s cable systems would be purchased by a long-distance carrier. It didn’t happen until 1998, in a deal with AT&T; that is expected to be completed by March 1999. The same year, we predicted that Rupert Murdoch’s ASkyB satellite business would merge with another satellite TV provider: Its purchase by EchoStar Communications Corp. will also close in the new year.

With freshly polished crystal ball, based on interviews with industry executives, investors and analysts, here are our best guesses for the new year.

GOOD BETS

* Kirk Kerkorian Gets Antsy: The billionaire looks for a Hollywood exit strategy as losses mount at MGM. When he does, it will be the third time he has unloaded the studio.

* Calley Calls It Quits: Despite continued denials, Sony Pictures’ 68-year-old chairman, John Calley, retires before his contract expires in 2001 and returns to independent production, possibly teaming up with a pal and former partner such as Sydney Pollack or Mike Nichols.

* Turnaround Artist: Leo Hindery, who put TCI back on track as its president before the cable giant’s sale to AT&T;, resigns by spring and lands in politics or tries his hand at a Hollywood turnaround.

* Sagging Networks: The major networks’ share of the television audience falls into the high-40% range during prime time as cable and the Internet continue to lure away viewers. Advertisers grow restive, refusing to pay a premium as the networks’ hold on the masses shrinks. Tensions swell between networks and affiliates as more plans are floated for restructuring their relationships.

* Diller Envy: Entertainment companies spin off Internet operations into their own stocks, salivating over the preposterous run-ups of such ventures as Barry Diller’s highflying Ticketmaster Online, whose value in less than a month on the market is about half that of its moneymaking parent, USA Networks Inc. At the least, the Disneys, NBCs and Time Warners whine loudly about their Internet activities to get Wall Street to push up their stock values.

* Sports Fever: News Corp. Chairman Rupert Murdoch buys out his partner Liberty Media’s 50% stake in their cable sports business, which includes a handful of regional channels and the FX entertainment network.

* Paxson Goes Bust: Overextended from the launch of his wholesome-values network, Lowell “Bud” Paxson is forced to morph or go bust when cash-flow problems get worse. (Sources say Paxson is restructuring terms with some suppliers and is paying others default interest payments.) The chairman of Paxson Communications Corp. could be saved if Congress relaxes station ownership rules, allowing him to sell.

* “The Phantom Menace”: George Lucas’ “prequel” to “Star Wars” will shatter all records.

* Rap Sheet: Seagram buys the remainder of Def Jam records after insisting it won’t, bringing an onslaught of flack from rap critics.

* Roth Leaves: Disney Studios Chairman Joe Roth heads for the door, tired of waiting for his boss Michael Eisner to anoint him as president or give him a percentage of the profits from movies produced or released under his watch. Roth jumps off the executive track, partnering with his close friend, producer Jerry Bruckheimer. ABC Inc. President Robert Iger, due to move to Burbank in March with most of his division to follow, becomes Eisner’s next president-in-waiting.

* Mired Meyer: Universal Studios President Ron Meyer doesn’t turn things around in the beleaguered movie division, forcing Seagram chief Edgar Bronfman Jr. to do something radical like offer successful producer Brian Grazer an ungodly sum to leave Imagine Entertainment to become an executive. Or Bronfman merges with DreamWorks or strikes a deal in the movie business similar to his TV arrangement with Barry Diller.

* AT&T;’s Cable Spree Continues: The long-distance giant buys the nation’s fourth-largest cable operator, Media One, along with Century Communications Corp., making it the dominant cable supplier in Los Angeles and California. Paul Allen, who had his sights on Los Angeles, concentrates on buying up systems in mid-sized cities.

* Lachlan Comes to L.A: After a five-year stint running his father’s Australian-based newspaper unit, News Ltd., Lachlan Murdoch, heir apparent at News Corp., moves to Los Angeles to learn the television business at the knee of chiefs Peter Chernin and Chase Carey.

* Finally, an EMI Sale: Its profit drops in the first quarter and EMI is scooped up by BMG unless Rupert Murdoch emerges with a last-minute bid.

WHAT IFs

* UPN Caves: With the netlet’s ratings hovering in cable territory and operating losses swelling, Chris-Craft Industries throws in the towel on the network and agrees to sell its station group to its

UPN partner, Viacom. But how will Viacom Chairman Sumner Redstone leverage the value of one of the nation’s largest station groups? He could joint-venture with his former Nickelodeon chief, Geraldine Laybourne, who needs distribution for her women’s channel and is finding cable expensive and overcrowded. Her partners at Carsey-Werner and Harpo Productions know the ropes of broadcasting and, if the WB Network can make it with teens, why not an all-women’s brand for broadcasting? Another scenario has Redstone selling his station group to buy CBS.

* Bandwidth Wars: Broadcasters turn the tables on the cable industry using John Malone-style leverage: Local stations set aside their rivalries, muster some backbone and vision, and pool the spectrum leftover after transmitting their signal digitally to offer a pay-television service that is cheaper than cable.

* The Mega-Merger: Time Warner and NBC merge, forming a vertically integrated entertainment company that would be impossible to duplicate. To avoid cable-broadcast cross-ownership restrictions, NBC spins off its stations into a new joint venture controlled by one of its key affiliates--Gannett Broadcasting or A.H. Belo. The WB is spun into a new venture controlled by its partner, Tribune Broadcasting.

* Pairing of Titans: Rupert Murdoch teams up in a 50-50 joint Web venture with Bill Gates after Microsoft is cleared of antitrust charges. While Time Warner, Disney and NBC have forged alliances and made acquisitions to build a Web presence, News Corp. has remained watchful, staking its bet so far on a partnership to control the television navigational system through a new TV Guide partnership.

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Times staff writers Chuck Philips, Claudia Eller and James Bates contributed to this report.