Hollywood Poker
There they were. Steven Spielberg, David Geffen and Jeffrey Katzenberg -- three of Hollywood's leading lights, basking before the cameras at a jampacked press conference in Beverly Hills. In the cloistered world of entertainment, their news was nothing less than atomic. The trio were banding together, they announced with breezy assurance, to create a new movie, music, animation and television empire. Yet it was an odd scene. For beyond that bombshell, the tycoons had nothing much more to say. ""Premature,'' they said, brushing aside reporters' queries. They had no defined plan for their new venture, no partners, not even a name.
It all begged a question. Why had this glittery triumvirate come forward at this particular moment? They invoked history. Theirs was the first studio to be founded by filmmakers since 1919, when Charlie Chaplin, Douglas Fairbanks, Mary Pickford and D. W. Griffith broke away from Hollywood's establishment to create United Artists. This, too, was about artistic independence, a chance for talented, creative people to work their own way, said Spielberg, the world's most successful film director. Geffen, a billionaire music impresario, nod-ded his assent. Katzenberg, recently ousted as head of Walt Disney Studios, sipped Diet Coke and dubbed his troupe the ""dream team.'' In fact, last week's ""announcement'' may have been less of a wild leap of faith than it seemed. Instead, say sources close to the threesome, it was a veiled play for another movie studio -- MCA-Universal, owned by one of Japan's largest consumer-products conglomerates, Matsushita Electric Industrial Co.
That certainly wasn't readily apparent amid the week's hoopla. Hollywood was abuzz with talk of the Dream Team and how the brilliant trio would turn entertainment upside down. The secrecy surrounding their talks only heightened the excitement. Katzenberg was the ringleader, sources say. As soon as Disney announced he would leave the company on Aug. 24, Katzenberg began putting out calls and taking meetings at a frenzied clip. He talked to big-time business moguls, from CBS chief Laurence Tisch to cable tycoon John Malone. But mainly he talked with his friends, Geffen and Spielberg. They met at his house, or at Spielberg's in Malibu. But for all the talking and plotting, they weren't fully confident until Friday, Oct. 7, that the Dream Team would come together. Lawyers were put to work over the weekend, and by Tuesday night they were ""go.'' They made their splash the next day.
Katzenberg and Spielberg hunted for real estate in Santa Monica last Friday, suggesting that they were prepared to strike out on their own if they have to. But their preference, sources say, would be to avoid setting up their own shop completely from scratch. Katzenberg estimates that doing so could take six to eight years and cost $2 billion. It would be far easier to take over an existing studio with a working infrastructure and, most important, an established distribution network. For the Dream Team, that all pointed to a play for MCA-Universal -- where they already have close friends at the top, and the clout to keep them there.
This Tuesday, MCA-Universal's top two executives, Lew Wasserman and Sid Sheinberg, are supposed to face off in Hawaii against their Japanese bosses. The encounter may not come off as scheduled, but sooner or later it will happen -- and it promises to be bruising. The studio's American managers sold out to Matsushita for $6.6 billion in 1991, partly to grow and stay competitive in an increasingly global business. But they've been chafing ever since. Wasserman, 81, and Sheinberg, 59, have together invested more than 60 years of their lives in MCA-Universal. They built it into a $4 billion powerhouse, and they regret losing control. Matsushita, they complain, promised to help the studio grow apace with its competitors -- but whenever Universal tried to do a deal, the Japanese balked. The Japanese nixed an effort in 1991 to buy Virgin Records. Earlier this year they vetoed an investment in NBC. Says a source at Universal: ""Relations could not be worse.''
Enter Spielberg, Katzenberg & Geffen. Over the last few weeks, according to principals in the negotiations, the Dream Teamers have met regularly with Wasserman and Sheinberg. All go back a long way. Universal gave Spielberg his first directing job, in TV, more than 25 years ago. His production company, Amblin Entertainment, has produced the studio's biggest hits, from ""E.T.'' and ""Back to the Future'' to ""Schindler's List'' and ""Jurassic Park.'' MCA-Universal owns Geffen Records, home to Nirvana and Guns N' Roses. And though Katzenberg competed fiercely against Universal while at Disney, he is personally so close to Sheinberg as to consider him a mentor.
Gradually the team of three became a gang of five. A mutual opportunity became apparent, according to sources, and a plan emerged: to retake MCA-Universal. At MCA, the Dream Teamers could work in partnership with executives they like and trust and who would give them full independence. Sheinberg and Wasserman, in turn, could use the Dream Team's leverage to reclaim some measure of control from the Japanese. Sheinberg, especially, friends say, feels ""humiliated'' by his Japanese masters. ""If Tuesday's meeting goes badly, he's out,'' says one acquaintance. Wasserman is no less disgruntled. In Hawaii, insiders suggest, the two will seek more independence from Osaka. They may even offer to buy back MCA-Universal, in whole or in part. If they don't get what they want, they may quit.
For Matsushita that would be trouble. Wasserman and Sheinberg are valuable, but their relationships with Geffen and Spielberg are priceless. As Spielberg drove across town last Friday to meet Katzenberg for lunch at Dive!, the restaurant they jointly own, the director clarified his allegiances: ""I'm only there because Sid's there.'' Sources close to the Dream Team say that if the play for Universal doesn't work out, they might use a rival studio -- possibly Time Warner -- during the years it would take to start their own.
If the Japanese somehow missed these blunt facts of life, last week's press conference made them abundantly clear. The three amigos praised Universal. And the timing -- a week before the showdown in Hawaii -- was perfect for their message.
Will Matsushita play along? It denied last week that MCA-Universal is for sale, telling Newsweek that the studio is ""vital'' to its future. Nor is it likely to bow to any ultimatums from Hollywood. Japan's corporate culture, notes one New York investment banker, ""doesn't let managers tell owners what to do.'' Still, Matsushita may be willing to compromise. Its executives are painfully conscious of the stomach-churning vagaries of the movie business. They have a clear interest in keeping MCA's current management -- and in preserving its ties with Geffen and Spielberg. There's also the attraction of the Dream Team math. If Wasserman and Sheinberg stay at Universal, allied with the fearsome threesome, Matsushita will cash in on any big money the group makes. ""Jurassic Park'' broke all box-office records. Now Spielberg is talking of doing not just one but two sequels. Clearly, the stakes are high for Matsushita. If it doesn't accommodate the Dream Team, it faces the prospect of competing against them.
