Bronfman: they don't understand

HOLDING talks with two music industry majors in the space of a fortnight is testimony to the determination of Edgar Bronfman, Seagram's CEO, to catapult his business into the music business elite. But on Wall Street Mr Bronfman is criticised for considering the purchase of a record company at all.

Many analysts there believe Seagram has enough problems without expanding its MCA-Universal business at a time when the decline of super-groups and the rise of digital recording are undermining its profits.

Mr Bronfman, though, feels people simply don't understand him. He complained at an industry conference in New York in March that some people still believe he bought Universal three years only so he could pursue his side career as a songwriter. His credits include the theme song for last year's Sylvester Stallone film Daylight.

But it is clear that Seagram has been having a tough time.

Two films that Universal was banking on, Primary Colors and Mercury Rising, bombed, leading to the departure of several top executives. And the company's main spirits and Tropicana juice business is under pressure in Asia, one of its main markets.

"I'd give him an `F' for being attuned to shareholder value," said one Seagram investor.

Shareholders are worried about Seagram's foundering share price and a host of unfulfilled promises from the company's high-profile film studio acquired for $5.7bn in 1995.

To finance the acquisition, 42-year-old Mr Bronfman sold Seagram's 23 per cent stake in DuPont, the US chemical company, for $8.7bn. Today, that investment would be worth $19.1bn because DuPont's shares have more than doubled. Seagram's stock, meanwhile, is up just 50 per cent.

Outside Steven Spielberg's The Lost World: Jurassic Park last summer, Universal has not released any blockbusters under Mr Bronfman. This year, Universal ranks sixth among film distributors with just a 6.3 per cent share of the US and Canadian box office.

After the failure of Primary Colors, four executives resigned, increasing the sense of turmoil in Universal City.

Mr Bronfman has engineered the sale of most of the company's television businesses, including the USA Network and Sci-Fi cable channels, to Barry Diller's Home Shopping Network. He is also trying to get Hollywood to deal with the problem of runaway costs. He has brought in consultants and managers who have wrung out more than $100m in cost savings from the business. And he is expanding the company's lesser-known though profitable theme-park business.

He said at an industry conference in March that Universal is ahead of schedule in its five-year recovery plan. He also said this week that Seagram has no plans to separate its entertainment and beverage businesses.

"We have taken Seagram through a dramatic transformation, increased operating profit and increased the value of the assets we own," he said.

- Bloomberg