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Comapny Town | 1998-99: REVIEW AND OUTLOOK : The Biz

What the Crystal Ball--Freshly Polished--Has to Say

January 01, 1999|SALLIE HOFMEISTER

Will Mel Karmazin sell CBS television? Will Seagram's Edgar Bronfman Jr. resuscitate his reputation in Hollywood with a turnaround of Universal Studios? Will Walt Disney Chairman Michael Eisner name a new president? What will become of Metro-Goldwyn-Mayer? And UPN?

Trying to predict the big entertainment stories of the new year is as chancy as trying to produce hit TV shows. Developments such as Seagram's $10.4-billion purchase of PolyGram last year demonstrate just how surprising Hollywood can be. (Analysts were betting Seagram would buy EMI to beef up its music portfolio.)

And who would have predicted that Microsoft billionaire Paul Allen would best his former partner Bill Gates' investment in cable by becoming the seventh-largest U.S. operator--with designs on moving into the top three?

Sometimes, the moves that seem the most obvious to analysts and Hollywood insiders never materialize. For two years now, we have predicted a spinoff of the entertainment group of Sony Corp., which continued to sit on the sidelines last year as Fox and CBS sliced off sections of their business into new stocks.

While some of Company Town's annual predictions miss by a mile--no record showing for "Godzilla," for example--others have just been premature. Two years ago, we predicted that Tele-Communication Inc.'s cable systems would be purchased by a long-distance carrier. It didn't happen until 1998, in a deal with AT&T that is expected to be completed by March 1999. The same year, we predicted that Rupert Murdoch's ASkyB satellite business would merge with another satellite TV provider: Its purchase by EchoStar Communications Corp. will also close in the new year.

With freshly polished crystal ball, based on interviews with industry executives, investors and analysts, here are our best guesses for the new year.

GOOD BETS

* Kirk Kerkorian Gets Antsy: The billionaire looks for a Hollywood exit strategy as losses mount at MGM. When he does, it will be the third time he has unloaded the studio.

* Calley Calls It Quits: Despite continued denials, Sony Pictures' 68-year-old chairman, John Calley, retires before his contract expires in 2001 and returns to independent production, possibly teaming up with a pal and former partner such as Sydney Pollack or Mike Nichols.

* Turnaround Artist: Leo Hindery, who put TCI back on track as its president before the cable giant's sale to AT&T, resigns by spring and lands in politics or tries his hand at a Hollywood turnaround.

* Sagging Networks: The major networks' share of the television audience falls into the high-40% range during prime time as cable and the Internet continue to lure away viewers. Advertisers grow restive, refusing to pay a premium as the networks' hold on the masses shrinks. Tensions swell between networks and affiliates as more plans are floated for restructuring their relationships.

* Diller Envy: Entertainment companies spin off Internet operations into their own stocks, salivating over the preposterous run-ups of such ventures as Barry Diller's highflying Ticketmaster Online, whose value in less than a month on the market is about half that of its moneymaking parent, USA Networks Inc. At the least, the Disneys, NBCs and Time Warners whine loudly about their Internet activities to get Wall Street to push up their stock values.

* Sports Fever: News Corp. Chairman Rupert Murdoch buys out his partner Liberty Media's 50% stake in their cable sports business, which includes a handful of regional channels and the FX entertainment network.

* Paxson Goes Bust: Overextended from the launch of his wholesome-values network, Lowell "Bud" Paxson is forced to morph or go bust when cash-flow problems get worse. (Sources say Paxson is restructuring terms with some suppliers and is paying others default interest payments.) The chairman of Paxson Communications Corp. could be saved if Congress relaxes station ownership rules, allowing him to sell.

* "The Phantom Menace": George Lucas' "prequel" to "Star Wars" will shatter all records.

* Rap Sheet: Seagram buys the remainder of Def Jam records after insisting it won't, bringing an onslaught of flack from rap critics.

* Roth Leaves: Disney Studios Chairman Joe Roth heads for the door, tired of waiting for his boss Michael Eisner to anoint him as president or give him a percentage of the profits from movies produced or released under his watch. Roth jumps off the executive track, partnering with his close friend, producer Jerry Bruckheimer. ABC Inc. President Robert Iger, due to move to Burbank in March with most of his division to follow, becomes Eisner's next president-in-waiting.

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