Hollywood hype masks industry fears: Phil Reeves asks whether artistic flair is enough to guarantee success for Spielberg and his new partners

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The Independent Online
AS A stunned Hollywood contemplated the arrival of the first big new studio for decades, two questions ping- ponged their way around the industry's electronic mail boxes. Will it succeed? And who will the losers be?

No one disputes the impressive credentials of the triumvirate of powerbrokers behind the film, animation, television and entertainment company, whose pending launch was announced in Los Angeles this week to a fanfare of publicity.

Steven Spielberg is the most commercially successful movie maker in history; Jeffrey Katzenberg was the executive muscle behind such Disney hits as The Lion King and Beauty and the Beast; David Geffen's success in the record industry, pioneering bands including Guns N' Roses and Nirvana, has made him a billionaire.

Everyone agreed: such a combination of talent has not been joined together since Charlie Chaplin, Mary Pickford, Douglas Fairbanks and DW Griffith combined to form the United Artists movie empire in 1919. But does such artistic flair guarantee commercial success?

The last big studio to succeed, Twentieth Century Fox, was launched in 1935. Directors do not have a particularly good track record: Frank Capra (Liberty) and Francis Ford Coppola (Zoetrope), among others, both set up studios that crashed. As one executive remarked: 'Every time the inmates are in charge, it fails'.

But the three aspiring moguls have a number of advantages. Almost every large studio has changed management in recent years, and most are in turmoil. For example, the Japanese-owned Sony Pictures (which owns Columbia and Tristar), saw the recent departure of its head, Peter Guber, after a series of flops and embarrassments over overspending. Gains by smaller studios, such as New Line and Orion, have meant the market share of large studios has fallen from 94 per cent in 1992 to 86 per cent last year. It is a good time to grab a slice of the pie.

They also have plenty of money: a combined worth of an estimated dollars 1.7bn and access to much more. They are believed to be using dollars 100m of their own wealth to start up the venture, which is expected to require between dollars 1bn and dollars 2bn in capital over the next five years.

This will not be difficult to find. The moment their plan became public on Wednesday, they were bombarded with offers. 'In literally two hours I do not exaggerate in saying that billions of dollars (became) accessible to this entity on some basis,' Mr Katzenberg said. Their riches are such that they were able to joke among themselves as they announced their project - Mr Spielberg mistakenly called the company a 'country' - and added: 'Maybe it will be a country. Is Belize still for sale?'

Yet details remain too vague for everyone in Hollywood to be convinced that the three are automatically on to a winner. As yet the company has no name and no permanent base. The three will be equal partners, and do not plan to make a public stock offering. The most that is known is that the company will be divided into five divisions: movies, animation, television production, interactive entertainment, and a record label.

And other possible problems loom. Although the three have been close friends for 20 years, they also have egos to match their bank accounts. Mr Katzenberg and Mr Spielberg have reputations for being highly demanding and uncompromising. For all their high spirits, David Geffen admitted that he 'hadn't felt this much anxiety in 20 years'.

Although Hollywood gushingly embraced the new studio, there is plenty of nail- chewing behind the scenes. The troika seem certain to lure producers and directors from other studio lots, attracted by the idea of dealing with three creative talents.

For many, this offers an attractive alternative to negotiating with the hierarchical and bureaucratic multi-national corporations that control the modern-day studios.

In particular, a battle royal is predicted between the new enterprise and the Walt Disney Company, from which Mr Katzenberg is expected to try to recruit talent - especially to his animation division. Some feel he has a score to settle. In August, he quit as Disney's studio head after 10 years because the chairman, Michael Eisner, refused to give him the number two job, which became vacant when Frank Wells died in a helicopter crash.

But attention is also focusing on the future of MCA/ Universal, with which Spielberg has had an association for 25 years, culminating with last year's extraordinarily successful Jurassic Park, which grossed dollars 900m. The director plans to stop producing films for MCA's Universal Pictures once he has fulfilled his commitments, although he says he will maintain a relationship. His production company, Amblin Entertainment, will merge with the new company - a move that could prove a blow for MCA.

Last night another scenario began to unfold. MCA was purchased for dollars 6.1bn by the Matsushita Electrical Industrial Company of Japan in 1990; ever since its top executives have balked at foreign control. According to the New York Times, Lew Wasserman - who has headed the studio for 48 years - and Sidney Sheinberg, the president, plan to meet their owners in Hawaii on Tuesday to discuss a possible buy-back. The talk is that if the deal goes ahead Mr Wasserman may sell a large stake of MCA to Messrs Spielberg, Katzenberg and Geffen.

History of the big screen players

WALT DISNEY - founded 1923. Management overhauled in 1984 after period of decline, leading to dramatic turnaround.

COLUMBIA - founded 1924. Bought by Coca-Cola in 1982 for dollars 750m. Sold to Sony in 1989 for dollars 3.5bn. Recent history marred by flops and executive extravagance. Includes TriStar.

MGM - formed 1924. Taken over by the impresario Kirk Kerkorian 1970. Acquired United Artists 1981. MGM-UA sold to Turner Broadcasting System 1986. In 1992 Credit Lyonnais assumed near ownership.

PARAMOUNT - founded 1912. Became subsidiary of Gulf+Western 1966. Acquired by Viacom last year after lengthy takeover battle.

TWENTIETH CENTURY FOX - founded 1915. Oilman Marvin Davis bought company in 1981. Sold to Rupert Murdoch 1985.

UNIVERSAL - founded 1912. In 1950 Decca Records acquired large interest. Both absorbed by MCA in 1962. Matsushita bought MCA for dollars 6.6bn in 1990. Tensions between top executives and Japanese have led to rumours of buyout.

WARNER BROS - founded 1923. Ownership passed to Kinney National Service, headed by Steven Ross. Acquired by Time Inc 1989, becoming Time Warner.

(Photographs omitted)

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