Lame-Duck Chiefs Risk Clipping Warner’s Wings

Shortly before John Calley left Warner Bros. in 1980, his then-boss, Warner Communications chief Steve Ross, asked him if he’d like to stick around until a successor could be found.

“It doesn’t make any sense because I’ll be perceived as a lame duck,” Calley recalled telling Ross.

Ross’ response: “A lame duck is better than no duck.”

Calley agreed to come back, staying for another six months until Bob Daly joined the company from CBS as the new chairman.

Nearly two decades later, Daly and co-chief Terry Semel are the new lame ducks at Warner Bros. Last week, the two abruptly disclosed that they will leave the studio they ran together for nearly 20 years when their contracts expire at year-end.

The surprise announcement puts enormous pressure on Gerald M. Levin, chief of parent Time Warner Inc., to fill the void at Warner’s $10-billion-a-year film, TV and music operation as quickly as possible.

“In our business, nothing ever sits still,” said one top industry deal maker.

Top talent gets skittish about going into business with studios that are in major transition since they can’t count on who will be in charge down the line and what that might mean for their projects. Producers know their efforts can be undermined as soon as a new team takes over.

Decision-making paralysis can set in among executives who know they may be shown the door when new managers arrive.

Still, some believe that Semel and Daly aren’t about to let things get out of hand. Producer Sidney Sheinberg, who in 1995 was in a similar position when he ran MCA (now Universal Studios Inc.) until new buyer Seagram Co. found a replacement, says fears that Warner could suffer severely under lame-duck management is an “overrated concern.” “These are very professional fellows,” Sheinberg said.

A Warner spokeswoman said she too doesn’t buy the lame-duck theory because many of the other executives at the studio have been around as long as Daly and Semel, providing continuity.

“Everyone still considers them here,” she said.

In interviews, Levin said he can take his time replacing Daly and Semel. But as one top industry insider noted, “everyone--including Jerry--knows he cannot wait until the end of the year to make a decision or the place will fall apart.”

Even if Semel green-lights a movie today, he won’t be there to oversee the project through to completion as he normally would. Nor is there any guarantee that the studio’s production chief, Lorenzo di Bonaventura, will be kept on by his new boss even though he, like many of the division heads, recently signed a new contract.

Sources said Levin will meet with Daly and Semel this week in Los Angeles to plan the succession, which the two agreed to participate in before leaving.

Regime changes make for very nervous executives and unstable times at studios. After jettisoning various existing projects, incoming brass often gets caught without enough time to put together new movies fast enough to fill a future release slate.

No one knows that better than Calley, now chairman of Sony Pictures, who experienced it firsthand when he and his team took over a few years back.

“We went a year and a half, two years without our own product,” he said.

Daly and Semel’s departure will be especially jarring to Warner Bros. In an industry where few managers last more than five years, their 19 years at the same studio is like an eternity. Establishing a new culture at a studio that hasn’t seen change at the top since Jimmy Carter was president will pose a huge challenge to whoever replaces them.

The departure of Daly in particular leaves a big void in Hollywood as well. With former MCA mogul Lew Wasserman no longer very active in the business, Daly has become the de facto dean of studio chiefs in dealing with industrywide regulatory issues, legislative concerns and labor disputes.

The departure of Daly and Semel is also likely to set in motion the Hollywood domino effect as other executive pieces begin moving within the studio and throughout the industry.

While Daly and Semel have indicated a desire to move on to entrepreneurial projects (together or separately), both are essentially back on the market in an industry facing a dearth of executive talent as experienced and admired as they are.

People who know the two agree it is unlikely that Daly, 62, will take another executive post, though they say that may not hold true for the 56-year-old Semel. It’s almost certain that Semel will be approached again by one of his biggest fans, Seagram chief Edgar Bronfman Jr., and offered a top job at Universal Studios as he was in 1995.

And who’s to say that Sony Corp. won’t make an overture to Semel if Calley, 69, decides to retire and a long-mulled initial public stock offering takes place.

Having made hundreds of millions of dollars at Warner Bros., it’s hard to imagine Semel wanting to work for another boss. But if he does accept a studio offer, you can bet he’ll demand a pound of flesh in stock options, enough to make him more than just a working stiff.

With a potential public offering of Sony’s entertainment unit, he’d have a big show to run and could be an owner. At the same time, he would be a big asset to Sony when it tries to sell the stock to investors.

Levin has indicated he will probably pick a successor or successors to Semel and Daly from within the Time Warner family--which would cause pieces to shift throughout the company’s divisions.

Among the executives most frequently mentioned as candidates to play a role in a restructured studio are Jeff Bewkes, chairman of HBO; Barry Meyer, executive vice president and chief operating officer of Warner Bros.; and Michael Lynne, president of Time Warner-owned New Line Cinema.

Should Levin go outside the company, recruits might include former Warner Bros. TV chief Leslie Moonves, whose contract as president of CBS Television comes due in about a year; Disney Studios Chairman Joe Roth, who may be looking for a change; and producer Brian Grazer, who as co-founder of Imagine Entertainment has always longed to run a studio.

Warner is unique among Hollywood studios in having had few owners and managers since the four Warner brothers started a nickelodeon in the early 1900s.

Jack and Harry Warner sold the studio to Seven Arts in the 1950s, with Jack staying on to run it. Ross bought the company in 1969 and had Calley run the studio along with former agent Ted Ashley and lawyer Frank Wells. In 1980, Daly and Semel were brought in.

Calley joked that maybe he and Ashley, 76, should go back to Warner “and in 10 years, Bob and Terry can replace us.”