Bronfman Says He Won’t Sell Movie Business

One of the big questions hovering over Hollywood is whether Edgar Bronfman Jr. wants out of the movie business.

Big losses in Universal Studios’ film division, exacerbated by a $100-million-or-more write-off expected from costly box-office flops “Babe: Pig in the City” and “Meet Joe Black,” have led some to conclude that Bronfman has lost confidence in the ever-volatile industry.

The question was raised again last week when it was reported that Barry Diller was talking to Universal about buying its controlling interest in specialty film distributor October Films and some of the assets of PolyGram Filmed Entertainment.

In a phone interview Friday, Bronfman--whose family-controlled Canadian liquor business, Seagram Co., plunged into entertainment in 1995 by buying 80% of Universal Studios--said he has no intention of abandoning the movie business, which he regards as essential to a major entertainment corporation.

“Remember, I’m the guy who made ‘The Border’ and got back into the movie business,” quipped Bronfman, referring to the box-office dud he produced for Universal in 1982 that starred Jack Nicholson.

“Having a bad 18 months is not enough for me to lose my stomach,” Bronfman said. “I knew exactly what I was getting into. Despite going through a year like this and possibly going through it again, though I hope it won’t happen real soon, I’m committed to the movie business.”

Universal’s current “Patch Adams,” starring Robin Williams, has grossed nearly $100 million so far and is the first hit the studio has had since 1997’s “Liar Liar” and “The Lost World: Jurassic Park.” But last weekend’s release of the costly “Virus,” starring Jamie Lee Curtis, rained on the parade with a paltry three-day opening of about $5 million.

In early December, Seagram announced that its film unit was expecting to lose at least $65 million for the quarter. The poor performance caused Bronfman to make wholesale changes in the division’s management, putting the movie operation directly under the control of Universal Studios President Ron Meyer.

His Proclamations Were ‘Misinterpreted’

Bronfman has often said that Seagram’s priority is to bolster Universal’s position as the world’s leading music company (since its recent $10.4-billion purchase of PolyGram) and to expand its global theme park business while decreasing the investment in movies. Those comments have also raised questions about Seagram’s long-term commitment to movies.

But the Seagram chief said his proclamations were “misinterpreted” and that perhaps he was to blame for being unclear.

“What I meant was, when we bought Universal, we had to build up the music business because we were No. 6, and the recreation business, where we were a distant 2 or 3. We had a lot of structural work to do. We were already a major force in the movie business.”

Would he sell Universal Pictures for the right price, much in the same way he sold the bulk of the studio’s TV business to Diller’s USA Networks?

“No. I went through all of this pain to transform a company into being a leading entertainment company, and you can’t be a leading entertainment company without being a major motion picture distributor,” Bronfman said.

Some sources say he has been approached about selling the movie side.

“My wife asked me the same thing,” Bronfman said. “It doesn’t matter. It’s not for sale to anyone.”

Bronfman said his long-term strategy in the movie business is to “stay in it, be successful and grow it.”

He denied rumors of a cash flow crunch at Universal triggered by debt created by the PolyGram acquisition.

“There is no cash crunch at the company due to the PolyGram acquisition,” he said. “There’s a lot of cash flow to pay for the debt.”

Bronfman and Universal’s management also denied rumors of curtailed spending in the movie division.

“I’d say we’ve turned the focus up on spending well,” Bronfman said. “The motion picture business is not going to meet its target from a cash and earnings standpoint.”

Meyer acknowledges that he is under the gun to turn things around.

“I put myself and everyone who works for me under tremendous pressure,” he said. “I want to be smart about how I spend the money.”

Meyer became head of the movie division by default when Bronfman fired production chief Casey Silver last month. Meyer says he’s enjoying the job more than he expected to and hasn’t offered the post to anyone. “I’m doing the job,” he said.

Both Meyer and Universal Pictures President Chris McGurk insist there is no mandate to cut spending, only to be prudent.

“Obviously, assimilating a big acquisition has an impact on the balance sheet and cash flow requirements,” McGurk said. “However, in terms of operating our film group, we’re being completely consistent with the strategy we implemented two years ago.”

McGurk said Universal is seeking a broader, more diverse slate than it has served up in the past by offering six to 12 lower-budget titles and some higher-cost event movies, for a release schedule of 15 to 20 a year.

To manage its financial exposure, McGurk said, the studio is continuing to seek co-financing partners on a number of its existing projects--a strategy that’s become increasingly popular (and is a way of life at Paramount Pictures) as a means to share the risk of rising costs and shrinking margins.

Universal has co-ventured with other studios over the years on such movies as “Twister” (with Warner Bros.), “Small Soldiers” (DreamWorks SKG) and “Shakespeare in Love” (Miramax), which it will release overseas.

McGurk said that since making 15 to 20 movies a year is “considerably more expensive than it was years ago,” Universal is also looking to use other people’s money by structuring off-balance-sheet financing deals for its key movie suppliers, including its biggest and most successful one, Imagine Entertainment.

Rather than bankroll movies from its labels on a one-off basis, Universal would secure outside funding for an entire slate of movies to guarantee delivery over a period of years.

Hard Look at Joint Projects

Universal already has a co-financing deal with Beacon Communications, which kicks in more than half the budget of its movies, and a co-venture on a package of movies with Mutual Film Co.

Even so, Universal is clearly looking hard at costs. Though Beacon was willing to put up 60% of the cost of a $90-million Kevin Costner film about the Cuban missile crisis called “13 Days,” Universal passed.

A brouhaha also erupted at Imagine last week when a story appeared in Daily Variety saying Universal was turning aside its big-budget project “Curious George.” Universal management quickly assured Imagine that it still planned to make the $100-million film.