Putting Universal’s Chiefs to the Test

Just days after taking his new job in March, Universal Pictures Chairman Marc Shmuger stood on a soundstage at the studio’s lot and proclaimed that a “new Universal” was taking shape.

His remarks perplexed some of the 200 employees in the audience. After all, the studio, owned by General Electric Co.’s NBC Universal, had been profitable for eight consecutive years because of a steady stream of hits including “The Mummy,” “American Pie” and “A Beautiful Mind.”

Last year it ranked third in market share among its studio peers. Under Shmuger’s predecessor, Stacey Snider, Universal had become the darling of the creative community.

Yet Universal had not kept pace with its rivals in some key areas.

“There was a time when we did some things better than we do today,” Shmuger acknowledged in an interview, pointing to the high marks the studio received several years ago for developing hit franchises. “In recent years, we have been less successful at doing that, and we need to ask why.”

To bring the studio up to speed, Universal Studios President Ron Meyer tapped Shmuger, who oversaw marketing and distribution under Snider. As Shmuger’s co-chairman, Meyer named a seasoned international film finance executive, David Linde, who had been co-head of the studio’s acclaimed specialty unit, Focus Features.

The new team identified other weaknesses to fix in addition to Universal’s sickly roster of franchises. For one, Universal is one of the last studios without a substantial presence in the lucrative animation and family film businesses. It also does not distribute its own films abroad.

Then there’s one of GE’s corporate mandates: to use digital technologies to distribute the company’s content, including Universal movies, over the Internet.

“A lot of these strategies are not instant, ‘just add water’ and they will pop up tomorrow,” said Shmuger, 47.

Nor is it guaranteed that Shmuger and Linde can keep Universal’s bread-and-butter movie business whirring. “Marc and David are both experienced film guys,” said producer Marc Abraham, who has been at the studio a decade. “But their effectiveness will be measured in how well they maintain the machine and ultimately how they are able to put their imprint on it.”

Shmuger and Linde inherited a slate of films that will carry the studio well into 2007. But this year there has been only one surefire hit: the Jennifer Aniston romantic comedy “The Break-Up,” which is on track to bring in $200 million worldwide.

The studio’s biggest gamble, Michael Mann’s expensive “Miami Vice,” will be released July 28. A dark and violent R-rated version of the popular 1980s TV cop show, the movie cost $140 million to make. But given the somewhat tepid tracking with audiences so far, the film could have difficulty turning a quick profit despite a $50-million marketing and publicity campaign.

Shmuger, who sometimes refers to Universal’s movie slate using cold business terms such as the “product line,” must prove himself to a creative community that gushed for Snider, who left in February to run Paramount Pictures’ DreamWorks SKG unit.

His appointment was seen by some filmmakers as further evidence of the ascension in Hollywood of the “suits” -- a trend reinforced last week when Walt Disney Co. chose marketing chief Oren Aviv to replace head of production Nina Jacobson.

Some filmmakers worry about losing their creative sounding boards as marketing executives take the helm.

“People are judged by how well they treat talent and how easy it is to get movies made,” said producer Michael Shamberg, who left Universal for Paramount last month. “At Universal, they are inheriting one of the best traditions in Hollywood, where you were supported emotionally but the corporate agenda was clear. It’s not just about saying no, it’s how you say no.”

One of the big tests for the new Universal team is persuading sought-after Working Title Film’s Tim Bevan and Eric Fellner, who have produced such hits as the “Bridget Jones” series, to renew their contracts at the studio when they expire at the end of next year.

Universal would also be wounded should it lose Brian Grazer’s Imagine Entertainment when its contract ends in December 2008.

Meyer said he was well aware of Hollywood’s anxieties when he chose Shmuger and Linde. “Marc really was a leader and deserves a lot of credit for having helped re-create this place,” said Meyer, referring to Universal’s rebound after a slump in the early 1990s. “What he didn’t have was real production experience. I knew there would be a lot of criticism about that, but Linde had hands-on development experience.”

Linde, 46, shepherded the production of last year’s Academy Award-nominated film “The Constant Gardener.” He also engendered Meyer’s confidence because of his long, successful partnership with Focus Chief Executive James Schamus, who produced “Brokeback Mountain” and co-wrote “Crouching Tiger, Hidden Dragon.”

Meyer acknowledged that the arranged marriage was a risk: “The question was, were these two guys going to like each other and work well together?”

After all, they hardly knew each other. Meyer coordinated several meetings for the two in New York, where Linde was based, and in Los Angeles, the studio’s headquarters.

At one point the two executives sat down with a yellow legal pad and charted a course for the company’s growth.

Just before being named to their new positions, Linde and Shmuger had what could be called their engagement dinner. Over sushi at their favorite midtown Manhattan Japanese restaurant, the pair talked for hours about where the business was headed, what kinds of movies they would make and whom they could cast.

They got along so well that Shmuger pulled out a disposable camera. “We were taking pictures like tourists on their first trip to New York,” he said. “I wanted to preserve the historic moment.”

They moved on to a bar after dinner. “We wanted to keep talking so we headed out for a few beers,” Linde said.

Linde bought a house six blocks away from Shmuger’s in Brentwood. They found other common ground: live-in in-laws and recent family vacations in Japan. On the day of an interview, they wore identical outfits: navy slacks, black shoes and socks and white plaid shirts. A coincidence, they say.

To promote togetherness, they are building two new offices, adjoined by a conference room with see-through glass doors.

Most important, they say, is their shared mission to make Universal more competitive at a difficult time for the business.

Since 1981, Universal and Paramount have relied on their London distributor, United International Pictures, to deliver their movies abroad. Though this saved on overhead costs, it has handicapped both studios’ ability to make more money, prompting them to unwind the venture.

Universal, however, has the double-barreled challenge of taking over its distribution system at a time when it has lost key suppliers of movies -- DreamWorks SKG and its sister studio, DreamWorks Animation. Paramount took over distribution of movies from those companies when it acquired DreamWorks SKG this year.

“There is more of an onus on us than ever,” Shmuger said.

Beginning in January, Universal will distribute its own films abroad in top territories including Britain and Germany. Linde said the studio would become more active in the increasingly lucrative business of acquiring and producing foreign films for the international market.

The studio also has new ambitions in live action and animated family films.

“We were probably late in figuring out how important [family films] are and how big it was going to get,” Meyer acknowledged.

The studio has relied heavily on its profitable direct-to-video titles such as the “Land Before Time” franchise, which has generated more than $1 billion.

But it has yet to venture into computer animation. The studio is pinning its hopes on the $50-million animated fairy tale “The Tale of Despereaux,” based on Kate DiCamillo’s popular children’s books. The film, which is targeted for 2008, was written by Gary Ross, who wrote and directed “Seabiscuit.”

Focus Features will soon release its own, smaller-budget computer-animated films, “Coraline” and “Nine.”

Universal also plans to capitalize on its digital expertise in Europe, where it has been in the forefront by offering digital download-to-own services.

“This is a precursor for what we will be doing everywhere,” Linde said.

Domestically, the studio has been rumored to be pursuing partnerships with Apple Computer Inc. and Amazon.com Inc. Last week Universal joined three other studios in offering the first downloadable movies that can be legally burned on DVDs through the online movie service CinemaNow Inc.

“We want our movies available as broadly as possible,” Shmuger said. “There are so many different ways we experience movies -- in the home, on the small screen, in the car. The whole term ‘moviegoing’ is almost a relic of the past.”

Shmuger and Linde now have to make sure their studio doesn’t suffer the same fate.

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Times staff writer Claudia Eller contributed to this report.