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Universal execs under fire for a flop-filled season

Chairmen Marc Shmuger's and David Linde's summer slate -- three comedies and a period gangster picture -- didn't bring the box-office heat. The failed strategy could cost them their jobs.

August 17, 2009|Claudia Eller

Universal Pictures' chairmen, Marc Shmuger and David Linde, have found themselves where all Hollywood executives invariably land when their studios falter: more talked about than their movies.

And Universal is having a dismal year, managing just one hit in eight months, the action-packed car racing sequel "Fast & Furious."

Not surprisingly, the chairmen and their boss, studio President Ron Meyer, are under pressure from their corporate overlords at parent company NBC Universal and owner General Electric Co. The executives are being grilled over why their movies haven't clicked with audiences, why they cost so much and what the plans are to change course.

NBC Universal Chief Executive Jeff Zucker recently dispatched his chief financial officer on a three-week mission to the studio's West Coast headquarters to scrutinize management's method for picking movies and setting production and marketing budgets.

Universal's troubles come at an already trying time for Zucker, who also faces problems with the media company's struggling network. NBC Entertainment suffered its latest management shake-up last month when co-Chairman Ben Silverman left after only two years.

There are rumblings that a similar executive overhaul could soon unseat Shmuger and Linde, who have been Meyer's top movie lieutenants since 2006 and had their contracts renewed in January for four more years. Nasty infighting and finger-pointing inside the executive suites have prevented Meyer's team from working together smoothly and haven't helped the situation at Universal.

And if the studio doesn't rebound, Meyer knows that he too will be held accountable.

"I share a great deal of responsibility, and we are all in this together," Meyer said. "It's easy to second-guess ourselves, but 90% of our decisions were the right ones with the wrong results. Marc and David have done a great job leading this organization, and I have confidence in the entire team to come up with the proper solutions to get us back on track. We've got a bad case of the flu, but by no means is this terminal."

For the most part, Universal has been stable since NBC Universal acquired the studio five years ago. Meyer's team delivered record profits in 2007 and 2008 from hits such as the musical "Mamma Mia!," the action sequel "The Bourne Ultimatum" and the R-rated comedy "Knocked Up."

But the last year has been a far different picture.

In the most recent quarter, Universal lost money. In the last two years, the studio accounted for about 25% of NBC Universal's total revenue, but this year its contribution is expected to be lower.

The studio's cold streak dates to December with the disappointing performance of the animated feature "The Tale of Despereaux" and "Frost/Nixon," one of several high-profile, adult-oriented dramas that audiences largely rejected along with "State of Play," starring Russell Crowe, and "Duplicity," featuring Julia Roberts.

Universal's strategy this summer to bet on three comedies and a period gangster picture rather than follow Hollywood's customary practice of releasing audience-pleasing sequels and "franchise" films has cost the studio dearly. The expensive Will Ferrell comedy "Land of the Lost" stands to lose about $70 million. Sacha Baron Cohen's raunchy "Bruno" alienated many moviegoers; Michael Mann's "Public Enemies" fell short despite the usual drawing power of Johnny Depp; and no one's smiling at the disappointing performance of Judd Apatow's "Funny People."

Shmuger and Linde recently discussed the state of affairs at Universal.

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Presumably you've been thinking a lot about what went wrong this year. What lessons have you drawn?

Shmuger: It has certainly been a humbling year. First, there's a real need to be making movies for less money. Second, there's a real premium on sharper, more marketable concepts. Audiences are clearly seeking escape from their lives.

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Are you shifting strategy?

Shmuger: We are refocusing our efforts on doing what we think we've always historically done best, which is modest-budgeted comedies. And we really need to get our franchises and tent poles moving again.

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Is it a fair rap from your bosses that Universal's movies cost too much?

Shmuger: This year one of the challenges we've had is that the cost base of the movies has been too high, and we need to address that.

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How do you plan to do it?

Shmuger: Make tougher decisions. Be willing to say no if we can't get a picture that we happen to love at the right price, because that's what's necessary in this new economy in order to run a successful business.

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How much pressure are you feeling from NBC Universal and GE?

Linde: We have an obligation to run the company at the highest level a studio can operate, and that is defined ultimately by profitability. In the last couple of years, we've been at the height of profitability of any studio in this business. We're having a down year, absolutely.

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There's supposedly been infighting among the executive team. Why?

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