In a surprising and unusual move, MGM/UA Entertainment Co. said Monday that it will split its movie-making activities into two independent production units.
The Culver City-based company said veteran film executive Alan Ladd Jr. has been named president and chief executive of United Artists Corp., while Frank Yablans, who had been running MGM/UA's film division as chief operating officer, will now serve as president and chief executive of MGM Films Inc.
Both Ladd, 47, and Yablans, 49, will be vice chairmen of MGM/UA and will serve on the corporation's executive committee and board of directors.
Ironically, the decision to separate the two companies restores them to the position they occupied in 1980, when MGM bought United Artists from Transamerica Corp. for $380 million. The initial plan revealed by MGM principal shareholder Kirk Kerkorian was to keep both studios operating independently in terms of production while consolidating distribution and marketing functions.
In the intervening years, however, the distinction between the two divisions was technical at best. First David Begelman and then Yablans basically picked all the movies to be made for the studio and, in most cases, arbitrarily assigned them an MGM or UA logo.
The parent studio will continue to distribute movies made by both divisions, but MGM and UA will each have its own marketing operation. MGM/UA Chairman and Chief Executive Frank Rothman said Monday that each unit will have an annual production budget of about $120 million and will be expected to produce 10 movies a year. In effect, the arrangement cuts Yablans' former production budget in half.
"We're looking for two separate and full lines of product," Rothman said in a phone interview. "That's the whole reason for this exercise."
Rothman said he expects the two companies to be fully competitive, which means some additional overhead costs in the duplication of administrative and marketing functions. Rothman added that the financial and legal departments will report directly to him.
MGM/UA has suffered two consecutive poor earnings reports, which Rothman blamed at a shareholders meeting Jan. 12 on "the disappointing performance" of many of the studio's film releases. There was no mention made at the meeting of the impending management reorganization.
Although "2010," MGM/UA's major Christmas release, has performed respectably at the box office with ticket sales to date of about $40 million, many of the studio's other releases have fared poorly. Rothman singled out only 11 future movies at the stockholders meeting as being part of what he called the company's "exceptionally strong release schedule" for this year.
Yablans said Tuesday that the management shift will mean less responsibility for him but added: "I'm absolutely thrilled by it. I think it's good for me personally, and great for the company."
In a telephone interview, Ladd said Monday that he had met last week with both Kerkorian and Rothman before accepting the job. "It's really going back to what Kirk dreamed of in the first place," Ladd said of the dual production entities. "This way we're dealing with two major studios under one roof. I welcome the idea of starting up a company again."
Ladd has been without an executive job since his independent production company went out of business last spring, when Warner Communications announced that it was severing its financing and distribution arrangements with Ladd Co. Although recognized for several critical successes, including "Body Heat" and "The Right Stuff," the company's only commercial success, "Police Academy," came too late to save it. He was president of 20th Century Fox Film Corp. in the mid-1970s, when that studio reaped a bonanza from "Star Wars."
Ladd had entered into agreements as an independent producer with both MGM/UA and Columbia Pictures. Last week, Ladd signed what Rothman described Monday as a long-term contract, in excess of three years. Rothman also said Ladd would be paid the same salary as Yablans, whose base salary in fiscal 1984 was $605,999, plus $375,000 in an incentive bonus and 1,000 shares of MGM/UA stock.
Rothman said the current films in production and development for MGM/UA will be divided between the two divisions, with those films historically produced by UA, including the upcoming James Bond film "A View to Kill" and the "Rocky IV" Christmas release, going to Ladd's unit.
Reaction to the announcement in Hollywood was typified by the comment of a top film executive at a rival studio. "It's like throwing two animals in a cage and seeing which one comes out alive," he said of the dual production arrangement.