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CEO Biondi Is Ousted at Universal Studios

November 17, 1998|CLAUDIA ELLER and JAMES BATES

Seagram Co. fired the head of its entertainment division on Monday amid a wholesale restructuring of the company, raising further questions about the liquor giant's ability to manage the movie, TV, music and theme park operations it bought just three years ago.

The move--The Times reported Friday that it was expected--suggests that Seagram's 43-year-old scion, Edgar Bronfman Jr., is still struggling to secure his footing in the entertainment business.

Since his family-controlled Canadian liquor concern spent $5.7 billion for 80% of MCA Inc., now Universal Studios Inc., in 1995, Bronfman has come under fire from investors and among Hollywood insiders for operating without a clear strategy and with seemingly unending management turmoil.

Monday's ousting of his top executive at Universal, Chief Executive Frank Biondi Jr., comes at a steep price for Bronfman. Biondi, who has been in his position just over two years, confirmed that the cash portion of his settlement will be $25 million to $30 million.

Biondi's severance is the latest in a string of huge cash payouts Hollywood has made to fired executives, some of whom enjoy multimillion-dollar golden parachutes after only a year or two's worth of work. The biggest to date is Walt Disney Co.'s settlement with former President Michael Ovitz, who received $39 million in cash and options for 9 million shares--currently worth $90 million--after 14 months on the job.

For Biondi, 53, it's the second time in three years he's been fired as chief executive of a major entertainment company. Viacom Inc. Chairman Sumner Redstone dismissed him in early 1996. That earned him a $15-million severance package. Back in 1984, Biondi was ousted from another top position as chief executive of cable channel Home Box Office.

No one in Hollywood or in the investment community is convinced that Biondi, who had more than 2 1/2 years to go on his five-year contract, will be the last executive to leave Universal.

Mounting financial problems in its motion picture division, exacerbated by this weekend's weak opening of the $90-million, critically panned Brad Pitt fantasy drama "Meet Joe Black," may soon result in the firing of another top studio executive--movie chairman Casey Silver.

The company has not had a major hit film in well over a year, and has been plagued by such costly duds as "Primary Colors" and "Mercury Rising." Further pressure is coming from problems surrounding the costly, special-effects-laden sequel to "Babe," which is still unfinished less than two weeks before its planned Nov. 25 opening.

For the last three years Bronfman has been consumed with getting Seagram's troubled spirits business together amid Asia's economic turmoil and transforming Universal into a global music giant. He says he'll now take a much more direct role in managing the entertainment side of Seagram's assets.

While declining to address other possible management changes at the studio, Bronfman did stress in an interview that "operating performance is the be-all and end-all and no one will be exempt from having to deliver operating performance."

Since the turnaround in his entertainment assets has been slower than expected, Bronfman has found himself cast in a role that he early on claimed to have little interest in--that of a Hollywood mogul.

Bronfman--under intense pressure from investors to make the entertainment division perform and raise the company's stock price--acknowledged that he now intends to be "an activist CEO."

Seagram's stock has lagged those of most major entertainment giants and is trading at the level it was at three years ago.

Bronfman is also under pressure within his own family, which owns 37% of Montreal-based Seagram. Indeed, his uncle, Charles Bronfman, who is co-chairman of the board, had reservations about his nephew's decision to buy control of Universal from Japan's Matsushita Electric Industrial Co.

Under the new structure announced Monday, Ron Meyer, Universal president and chief operating officer, who previously reported to Biondi, will now oversee movies, television and theme parks and answer directly to Bronfman.

Music, which had previously been grouped with Seagram's other entertainment businesses and reported to Meyer, will now be run separately from New York by Universal Music Group Chairman Doug Morris. He will also report directly to Bronfman, who is an occasional songwriter with an avid interest in the music business.

Bronfman said he will now take a more active role on the movie side as well, working closer with Meyer.

"I intend to be Ron's business partner," said Bronfman, noting that Meyer has "more skills than he himself acknowledges--he knows where the money is." Meyer, who for decades was one of Hollywood's top talent agents before joining Universal, has often said he lacked the financial expertise to manage a huge entertainment company.

While rumors have periodically circulated about Meyer's fate, he is known to have an unusually long, 10-year contract.

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