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MGM Continues to Struggle to Reinvent Itself


Metro-Goldwyn-Mayer seems doomed to be in perpetual flux.

Every time Kirk Kerkorian changes top management at the company he has owned three times, it's with the fantasy that the ever-struggling operation will somehow regain the status and luster it once enjoyed as one of Hollywood's premier movie studios.

Having been bought, sold, reconfigured and restarted so many times through so many decades--by Kerkorian and other investors--MGM has long suffered from a lack of continuity and consistency of ownership, management, strategy and output.

With such instability, it's no wonder that the studio is unable to regain any real parity with the other Hollywood majors, let alone live up to its illustrious past.

There's nothing more terrifying to top writers, directors and stars than to commit to projects at a studio where ownership or management could change at any moment.

Consequently, talent and literary agents have long been reluctant to send their biggest clients to MGM.

"The concept of stability and continuity would be helpful, since you're always wondering when the next shoe is going to drop," said Jim Wiatt, co-chairman of International Creative Management, one of Hollywood's most powerful talent agencies.

Last week, the rug again was yanked out from under MGM--albeit deservedly so, given its poor financial state--when Kerkorian evicted six-year chairman and industry veteran Frank Mancuso and replaced him with his top hotel and casino lieutenant.

MGM hasn't turned an annual profit since 1988 and is forever looking to raise more cash. Last week, the company posted first-quarter results showing substantial write-offs from such recent box-office duds as "The Mod Squad," "The Rage: Carrie II" and "At First Sight." (MGM shares gained 6 cents to close at $15.25 on the New York Stock Exchange on Monday. They have tumbled from a 52-week high of $27.)

It doesn't inspire confidence among creative types that Alex Yemenidjian, who most recently was president of the MGM Grand in Las Vegas, is a Hollywood outsider with no practical industry experience.

The 43-year-old is considered a smart business executive but is an odd counterpart to Hollywood's other movie chairmen: Sony's John Calley; Paramount's Sherry Lansing; Disney's Joe Roth; 20th Century Fox's Bill Mechanic; Warner Bros.' Bob Daly and Terry Semel; and Universal's Ron Meyer.

Each of them has decades of experience working inside Hollywood and has a frame of reference when it comes to tackling trends, talent relationships and the tricky politics inherent in managing an entertainment company.

Yemenidjian has spent the last 10 years at Kerkorian's closely held Tracinda Corp.--which owns 90% of MGM--focused on building its hotel and gaming businesses.

Yemenidjian, who is said to be smarting from recent negative coverage of MGM, was unavailable for comment.

It helps that he will have an experienced movie executive working for him in Chris McGurk, who Wednesday signed on as vice chairman to operate the studio. Many industry insiders were surprised that McGurk would abandon a top job as president of Universal Pictures and join MGM.

But Universal has its own problems, and McGurk said he views the new gig as an opportunity to run the creative divisions of a studio for the first time (with movies and television reporting to him), as well as a chance for a big payday if and when MGM's stock improves.

McGurk is considered a smart hire. He is a savvy executive, with an entrepreneurial bent, who has engineered some interesting financing deals and acquisitions while at Universal.

"I do think that McGurk is a top-flight manager who understands the business," said ICM's Wiatt, who is not alone in suggesting that MGM might be much better off if it drastically reduced overhead and made just a handful of films.

McGurk and Yemenidjian are saying they want MGM to release about 12 films a year, some of which will be co-financed with other studios. McGurk is a big proponent of joint ventures and as part of his early release from his Universal contract, MGM has agreed to put $100 million toward co-productions with that studio.

The new management team is also involved in negotiations with various strategic partners, including an international video distribution deal with 20th Century Fox and efforts to generate more cash from MGM's valuable 5,000-title movie library.

But even as MGM's new managers wax on about plans to reshape and reinvigorate operations, and Kerkorian has agreed to invest an added $500 million for new production through an upcoming stock offering, the company is in the news as perhaps on the brink of merging with a content-hungry company like Cablevision.

Such speculation makes it much tougher for Yemenidjian and McGurk to persuade Wall Street and Hollywood that Kerkorian isn't looking to position MGM for an eventual sale.

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