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Power struggle at Warner Bros.

A three-way race for the top job at Warner Bros. was intended to inspire greatness in the candidates. Instead, it has led to distrust and disorder.

November 10, 2012|By Ben Fritz and Meg James, Los Angeles Times

Tsujihara appears to be the least competitive and the likeliest to partner up should Bewkes solve the leadership issue by appointing two executives to run the studio. However, the buttoned-down Stanford MBA, who is known as a digital guru and acquisitions expert, lacks operational experience in the studio's marquee film and TV production businesses.

By any financial metric, Warner Bros. has been running smoothly. It is regularly No. 1 or No. 2 in the box-office rankings, has the top market share in home video and sells more shows to TV networks than any other studio. Revenue last year climbed 9% to $12.6 billion, operating income increased 12% to $1.26 billion, and the studio is on track to have another record year.

But management experts say corporate runoffs, while not unusual, can be disruptive.

The process "creates competition and makes it hard for the candidates to cooperate with each other on a daily basis," said Edward Lawler, director of the Center for Effective Organizations at USC. "They are always trying to look better than the other person. It can put a bit of a strain on the organization."

Contract renewals, deal making and companywide initiatives at the studio have been complicated by the uncertainty.

During recent contract renewal talks, movie marketing President Sue Kroll is said to have sought additional responsibilities in part because of concern that her boss and longtime ally Robinov might not remain in his post.

Several other key Warner executives have not negotiated new employment contracts — and appear unlikely to do so until the leadership situation is resolved. They include TV studio President Peter Roth, DC Entertainment President Diane Nelson and Toby Emmerich, president of film label New Line Cinema.

The turf skirmishes have slowed development of movies based on Warner-owned DC's superheroes such as the Flash at a time when rival Marvel Entertainment is cranking out blockbusters like "The Avengers." Uncertainty about who will run Warner Bros. has stymied the studio from renewing its important deal with finance and producing partner Legendary Pictures. The deal expires at the end of next year.

"There is not paralysis," said one longtime Warner insider, "but a murkiness and lack of clarity at a place that is not used to having those conditions."

Warner Bros. is one of only two Hollywood studios that house movie and TV production together. Film is its largest business, producing about two-thirds of revenue. But television is more profitable, generating half of operating income. The TV business has been growing while the movie industry is contracting.

"Time Warner is basically a TV company," Bewkes told analysts this year. "Between our TV networks [HBO, TNT, TBS, Cartoon Network and CNN] and our Warner TV production business, we derive over 80% of our profits from television."

Rosenblum, who started his career as a tour guide at Universal Studios, has helped build the division into a juggernaut with more than 50 shows, including "Two and a Half Men," "Mike and Molly" and "The Ellen DeGeneres Show." During his tenure, Warner has expanded internationally and outbid rivals to secure deals with top talent such as "Revolution" producer J.J. Abrams and "Two and a Half Men" creator Chuck Lorre.

But some people in the film division fret that Rosenblum has no movie experience. The UCLA law school graduate's skills are on the business side, they say, adding that TV studio president Roth is the one who develops the shows.

That is in contrast to Robinov, who decides what movies Warner Bros. makes and is deeply involved in their production. A former talent agent, Robinov has built his reputation on an ability to cultivate relationships with successful filmmakers such as Chris Nolan ("The Dark Knight"), Ben Affleck ("Argo") and Todd Phillips ("The Hangover"). Fiercely loyal, he stuck with "300" director Zack Snyder through three subsequent flops and then handed him the keys to next year's Superman reboot "Man of Steel."

Although Robinov oversees more than $2 billion per year of production and marketing spending, he is less schooled in evolving digital business models.

Tsujihara enjoys a more down-to-earth reputation. He is an avid sports fan who last month flew to San Francisco and back in a single night to watch his beloved Giants play in the World Series.

Some of his business moves have been polarizing. Charged with reversing a multiyear decline in DVD revenue, Tsujihara has been Hollywood's most aggressive proponent of Ultraviolet, a digital movie initiative that Warner launched in late 2011 when some other studios believed that it had too many glitches.

He also successfully pushed Redbox and Netflix in 2010 to wait until four weeks after a DVD goes on sale to offer cheap rentals, although he failed this year to extend that window to eight weeks.

Tsujihara led delicate negotiations over "The Hobbit" with partial rights holder Metro-Goldwyn-Mayer in late 2010, which got production started on the long-delayed movie series.

Bewkes' first major step in the succession process, pushing out the well-liked Horn, upset many on Warner's Burbank lot, particularly after Horn landed this year in the top job at Walt Disney Studios.

Many worry that when Bewkes announces his choice for chairman it will create further instability, particularly if one or two of the losing candidates flee after losing the public runoff.

If Bewkes were to choose an outsider, it's possible all three could leave.

"I would try to keep them all in some form or fashion," said Daly, the former chairman. "All three guys are very successful executives."


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