Viacom Inc.'s tightfisted entertainment chief, Jonathan Dolgen, who revolutionized how movies are financed, resigned Wednesday after acknowledging that a shift in leadership at the company had left no room for him at the top.
Dolgen's exit followed by a day the resignation of his boss, Viacom President Mel Karmazin, who lost a four-year power struggle with the conglomerate's 81-year-old chief executive, Sumner Redstone.
For a decade, Dolgen helped make Viacom's film studio, Paramount Pictures, the most reliably profitable in the industry by forging financing agreements with rivals to spread the risk of a potential flop. But the conservative strategy also meant that the studio rarely swung for the fences with the bigger-budget movies that can bring box-office windfalls.
In recent years, Paramount has been bereft of the kind of successes enjoyed by competitors willing to dole out huge sums to draw stars to its ventures and put audiences in theaters. That didn't help Dolgen's standing at Viacom, and many at the studio say he is being unfairly blamed for Paramount's string of flops.
Dolgen didn't pick movies -- that creative responsibility rests with studio Chairwoman Sherry Lansing -- although he was responsible for their financing.
"Having more money would not have changed our results," Dolgen said in an interview Wednesday. "It was about the films we made."
His position at Viacom also wasn't helped, according to sources close to the company, by his legendarily rough-edged personality.
His new boss, Tom Freston, who turned Viacom's MTV Networks into a cable powerhouse, is known for a management style that is easygoing and accessible. Freston was promoted this week, along with CBS Television Chairman Leslie Moonves. The two men will assume Karmazin's former responsibilities and share the title of president, with Freston overseeing the movie studio.
The elevation of his two colleagues made it clear to Dolgen, 59, that he was no longer a contender to someday succeed Redstone, who said this week that he would retire in three years.
"I can't quarrel with their choices," said Dolgen, chairman of Viacom Entertainment Group, which had included Paramount Pictures, Paramount Television, Simon & Schuster, the Famous Players theater group and Paramount Parks. "But that structure didn't provide a role for me."
Dolgen's departure -- not officially effective until July 15 -- underscored the hands-on role that Redstone said he would assume now that the company he built into a media giant had been reorganized.
Redstone, who controls Viacom with 71% of its shares, had become more assertive in day-to-day operations as the stock hovered close to a 52-week low. He said on Wednesday that Viacom would return to its previous way of operating before its merger in 2000 with CBS Inc., then headed by Karmazin.
"In the old Viacom, nobody reported to anybody," Redstone said. "I was a real CEO then and we ran the company as a team. That's how we're going to run it now."
Redstone said he planned to set a new direction at Paramount Pictures, loosening the studio's purse strings to embrace bigger-budget movies.
The CEO cautioned, however, that the studio "will not be profligate.... It's not going to spend $200 million a picture like some of its rivals, but will have the money it needs to make pictures it believes in. You'll see them spending $100 million to $125 million on a film."
Concern over spending big -- and possibly losing big -- was behind Dolgen's pioneering co-financing strategy, crafted back when film production and marketing expenses skyrocketed in the mid-1990s. In an era of ever-escalating budgets, Dolgen promoted fiscal austerity. He sought to reduce risk on expensive movies by bringing in partners to share in the costs, and did so for almost every film on the Paramount slate.
Initially derided, the approach eventually was copied throughout Hollywood.
"He really reinvented the way to look at a global film model," said former Columbia Pictures chief Mark Canton, who worked with Dolgen at the studio in the early to mid-1990s.
For many years, Paramount prospered under this strategy, churning out such hits as "Saving Private Ryan" and "Braveheart," and a series of smaller films that also turned a profit.
One of Dolgen's masterpieces, which is still regarded as one of the savviest in Hollywood history, is Paramount's co-financing of James Cameron's costly epic, "Titanic," with 20th Century Fox.
Dolgen put a cap on what Paramount would spend. So when the budget soared during production, reaching $200 million, only Fox was on the line for the overages. Although both Fox and Paramount made a fortune when the movie grossed $1.8 billion worldwide, Paramount's take was far bigger.
The risk-averse approach had downsides. It inhibited the studio's opportunities to spend competitively and develop franchise properties and reap the kind of windfall that rivals like Warner Bros., New Line Cinema and Disney have had with such blockbusters as "Harry Potter," "The Lord of the Rings" and "Pirates of the Caribbean."
Paramount's thrifty manner, and what many say were uninspired decisions, alienated many in the creative community. Dolgen tried to cap the amount of backend profits given to talent, for example, and limit budgets to less than $100 million. When other studios boasted about box-office grosses, Dolgen boasted about profitability.
"Jonathan brings a thoughtful and analytical approach to the film industry," said Jeff Berg, chairman of Hollywood talent agency International Creative Management. "He understands the margin requirements and invites financial discipline into the process."
Not long ago, Dolgen was considered for a bigger role at Viacom. When Redstone was contemplating having to replace Karmazin in the event that a new employment contract couldn't be negotiated, one scenario seriously discussed was an office of the president consisting of Dolgen, Freston and Moonves.
Redstone on Wednesday said such an arrangement wasn't feasible.
"There have been enough questions about whether two co-heads can work together," he said. "A third person would be just too much."
Dolgen said he wasn't asked, but wouldn't have wanted the job anyway.
"I'm not covetous of a job I didn't want," he said. "I'm not looking to spend a third to a half of my time in New York."
In fact, Dolgen said, he left Columbia Pictures in 1984 because he didn't want to move back to New York, where he grew up.
Redstone declined to say why Dolgen wasn't considered for a larger role beyond studio head. But he noted that the two groups run by Moonves and Freston accounted for 70% of Viacom's cash flow, making them drivers of the company's growth.
By comparison, Viacom Entertainment Group has faded in importance. At a time when other studios have seen robust bottom-line growth, Paramount has been flat since 2002.
Last fall, Redstone publicly pronounced that the studio would take more chances and spend more to be in the event-picture business, where films such as "Spider-Man 2" cost more than $200 million. For her part, Lansing has since been on an aggressive message campaign in Hollywood to let agents and others in the creative community know that Paramount has changed its tune.
The studio recently had a modest hit with the teen comedy "Mean Girls," although Paramount's prospects for summer remain unclear. Next week, it releases the Nicole Kidman comedy "The Stepford Wives," which has undergone several last-minute reshoots.
As for his famously rough edges, Dolgen said that at Paramount he had done what was needed to "get the job done." Known for his sense of humor, he described his curt manner as "part of my charm."
In Hollywood, Dolgen is widely viewed as bighearted, loyal and altruistic to a fault -- considered rare qualities in Hollywood.
Shortly after the Sept. 11 terrorist attacks, Dolgen initiated a plan for Paramount to adopt Edwards Air Force Base. Studio employees volunteer their time to help out on the base with whatever tasks are needed, from gardening to painting. The studio also supplies military personnel with movies and invites them to premieres and to sit in Paramount's luxury box for events at Staples Center.
Last Christmas, the studio brought 500 airmen and their families to the studio lot for dinner and a screening of "White Christmas."
Dolgen also arranged for Paramount to provide holiday gifts each year to local schools. These have ranged from refurbishing gymnasiums to adding exercise and weight rooms at the schools.
"He's not doing it for accolades or publicity," said a Paramount executive, "like so many others in his position do."
Times staff writer Rachel Abramowitz contributed to this report.