TIME: Almanac 1993/TIME Almanac 1993.iso/time/110689/p71

Text File | 1992-09-23 | 5.9 KB | 113 lines

                                                                                BUSINESS, Page 71

Dynamic Duos Don't Come Cheap


Sony and Warner Bros. wage a billion-dollar personnel war

By Christine Gorman/Reported by Elaine Dutka/Los Angeles


    Since a typical feature film is a $20 million roll of the
dice, Hollywood always wants to improve its odds. That's why
studios are so willing to pay breathtaking sums to surefire
stars. Now Hollywood's obsession with the talented few is
fueling a billion-dollar personnel tug-of-war that pits Warner
Bros. against Sony for the services of the two hottest movie
producers to come along since Samuel Goldwyn met Louis B. Mayer.

    The oddsbusters are Peter Guber and Jon Peters, whose
penchant for producing such hits as The Color Purple and Batman
has brought Warner hundreds of millions of dollars. When Sony
announced its agreement to pay $3.4 billion in September for
Columbia Pictures Entertainment, the Japanese firm impressed
Hollywood with its savvy choice of executives to run the studio:
Guber and Peters. But there was one major hitch: in March the
two had signed a five-year contract with Warner, which the
studio claims was an exclusive arrangement.

    Warner Bros., which is controlled by Time Warner, is suing
Sony, Guber and Peters in Los Angeles Superior Court for $1
billion, accusing them of breaching the contract. Warner has
asked the court for a permanent injunction, on which the court
is expected to rule this week, to prevent Guber and Peters from
working for any one else. Warner contends that Guber and Peters
are responsible for more than 50 of the studio's current
projects, including the film version of Tom Wolfe's Bonfire of
the Vanities. Sony and the two producers are countersuing for
$100 million, charging Warner with fraudulently denying that it
had an oral arrangement to release Guber and Peters from their
contract and with trying to sabotage Sony's Hollywood ventures.

    At the center of this colossal custody fight is the most
unlikely pair of partners in the film world. Guber, 47, an
erudite native of Boston, holds a law degree from New York
University. In 1968, while working on his M.B.A., he landed a
job in the casting department at Columbia Pictures. Guber
quickly became chief of production and, by the time he left in
1976, his credits included The Way We Were and Shampoo. Peters,
44, an Angeleno who spent a year in reform school, broke into
the movie industry using a hairbrush and a blow dryer. After
coiffing Barbra Streisand and then moving in with her, the
hairstyling tycoon produced her 1976 hit movie, A Star Is Born.
Eventually the talkative Peters produced two other Streisand
vehicles, The Main Event and What's Up, Doc?, as well as the hit
comedy Caddyshack.

    Guber and Peters joined forces in 1980 to form a
film-production company. Guber's nose for good script ideas and
his flair for deal making meshed with Peters' hustle and
tenacity. After several hits, including Missing and Flashdance,
the partners signed their first, allegedly exclusive production
contract with Warner, in 1983.

    Six months after they agreed to this year's contract, Sony
recruited Guber and Peters to head Columbia, designating the
two as co-chairmen and Guber as chief executive. Under the
agreement, Columbia would pay them annual salaries of more than
$2.75 million, plus 2.5% of all company profits in excess of
$200 million. After five years they would split a $50 million
bonus pool with no more than five other top executives. The
sweetest plum of all: Sony agreed to buy their production
company, Guber-Peters Entertainment, for $200 million,
considered by some Hollywood insiders to be a premium price.

    Just before the deal was announced, Guber asked Warner to
let the two producers out of their contract. Warner refused. For
two weeks, executives from both corporations tried to negotiate
a settlement. Time Warner Co-Chairman Steven Ross reportedly
demanded that Guber and Peters relinquish all rights to and
profits from current projects. In addition, Ross asked for a big
discount on two properties Warner had been trying to buy for
some time: a stake in Sony's CBS Video and Record Club as well
as Columbia's ownership in the Burbank lot it now shares with
Warner Bros. "Ross asked for the moon in the hopes of getting
half the moon," says an industry analyst. Ross was apparently
in no mood to give up such valuable assets without extracting
a high price, especially since the talent raid came so soon
after Time Inc. had paid $14 billion to acquire Warner
Communications, the studio's parent company.

    The failed negotiations have produced some bitter
behind-the-scenes finger pointing. An executive who is
sympathetic to Warner attributes the discord in part to the
involvement of Walter Yetnikoff, who runs CBS Records for Sony
and helped woo Guber and Peters. "Reasonableness was made
impossible by Yetnikoff's belief that he could push people
around," said the executive. "Warner considers him a boor, a man
with no manners." On the other side, an executive who favors
Columbia blames Ross for the wrangle. "No one expected the venom
of Ross's response," said the insider. "If it was anyone else
but Sony, he would have let them out ages ago, but Sony is
frightening to him. It's a company that's trying to become a
global communications giant."

    Most Hollywood dealmakers think a quieter compromise might
have been reached if Guber and Peters had negotiated a formal
separation with Warner before the Sony deal went public, which
would have avoided bruising the egos of Warner's brass. The
fracas has proved embarrassing as well for Sony, which is trying
to make a graceful entrance into Hollywood. The two sides may
yet settle, but if Warner has its way, Sony's entry into the
film business will cost quite a bit more than the company
expected.