Hollywood Tests a Dynamic Duo
Two at Universal Pictures Contend With Flops, Fickle Audiences but
Last winter, Universal Studios President Ron Meyer tried to convince two executives from different units -- Marc Shmuger and David Linde -- that they should run the company's movie studio together despite coming from separate corners of its landscape. "It's a shotgun marriage," Mr. Meyer told Mr. Linde. "But you're going to like each other."
Liking each other has proved the least of their worries. Since Mr. Shmuger, 48 years old, and Mr. Linde, 46, assumed the top jobs at Universal Pictures last March as chairman and co-chairman, they have faced a long list of challenges that would test even the sturdiest corporate marriage. Halfway through the year, the studio went cold at the box office, with disappointments like "Miami Vice" that hurt theatrical revenue. Sweeping budget cuts were mandated in the fall by corporate parent General Electric Co.
Facing a dearth of films to release for the coming quarters, they were under pressure to whip up a compelling future slate. And the studio's international film-distribution operation was being rebuilt after the dissolving of a longstanding joint venture with another company.
Their problems reflect a truth about today's Hollywood: There has rarely been a tougher time to run a big movie studio. Across the board, major studios are grappling with the bitter cocktail of issues, including a slowdown in the critical DVD market, an uncertain transition to digital distribution of films, and an audience with volatile tastes.
Messrs. Shmuger and Linde were tossed together to attack these issues last spring after former Universal head Stacey Snider defected to Viacom Inc.'s DreamWorks Pictures unit. Mr. Shmuger, who had been vice chairman, previously oversaw marketing and distribution for Universal Pictures, while Mr. Linde was co-president of Universal's art-house division, Focus Features.
The men say they are hopeful about Universal's prospects despite the long list of challenges. "We believe in the perennial attraction of the motion-picture business to a sustainable audience," says Mr. Linde. "But the reality is, the technology by which you reach that audience is going to change dramatically."
He and Mr. Shmuger are bullish about HD-DVD -- their pick in a raging industry battle over the best format for the next generation of high-definition DVD content -- and about the potential of their new international distribution arm, which has been renamed Universal Pictures International, to increase revenue. They're mindful of the advances in digital downloading, but leery of cannibalizing the profitable theatrical and DVD businesses by embracing simultaneous movie releases on multiple platforms too soon.
When it comes to the near term, however, they have not divulged much about the type of film they want to make. Instead, they're hewing closely to a strategy that has historically worked well for Universal: cobbling together an annual slate of 18 or so movies, few of which will be "tentpoles," or big-budget films geared toward a wide audience, with the predominance being less-expensive pictures with, say, art-house or comedic appeal.
So rather than quickly stake out bets on big "franchise" movies in the "Harry Potter" or "Lord of the Rings" vein -- which frequently cost $150 million or more -- the men have so far green-lit a number of films with far more modest budgets that they hope will boost Universal's momentum.
The first movie to be approved and released by the new executive team was the violent $65 million thriller "The Kingdom," which stars Jamie Foxx and Jennifer Garner as federal agents; it comes out April 20. Also in the works is "Wanted," a $65 million spy movie from Russian director Timur Bekmambetov, one of the studio's biggest current hopes for an international hit.
After a quick 24-hour auction, Universal also bought the rights to "Borat" star Sacha Baron Cohen's mock documentary called "Bruno" for $42.5 million. "In the state of Hollywood today, successful decision makers have to be nimble in order to get competitive advantage and the best talents," says Mr. Shmuger.
One big risk is a film the studio might wish had been smaller: "Evan Almighty," the "Bruce Almighty" sequel starring Steve Carell, due out June 22. The visual-effects-laden film's initial budget of $140 million has soared to more than $175 million. Messrs. Shmuger and Linde say they're confident about the movie. But they've tightened up elsewhere. For the $100 million, 1970s-era crime story "American Gangster," they've asked director Ridley Scott and producer Brian Grazer, co-chairman of Imagine Entertainment, to be partly responsible for overruns. And last fall, Universal halted a screen adaptation of the videogame "Halo" after producers Microsoft Corp. and Peter Jackson wouldn't renegotiate profit-sharing deals.
The financial pressure comes from parent entity NBC Universal, which late last year mandated $750 million in operating-expense cuts. While the move was prompted mainly by setbacks in the company's TV business, Universal Pictures was also in a tough spot, weathering a string of flops that led to its worst box-office in recent years. Operating profit, which came to about $700 million in 2005, was also endangered, say people who have reviewed the figures, but a late-year windfall in the sales of DVDs and TV rights left 2006 profits relatively flat.
Over the summer, Mr. Linde and his family had relocated from New York to Los Angeles. Accustomed to hobnobbing with independent filmmakers at film festivals, Mr. Linde was suddenly dealing with the big budgets and bigger egos of established Hollywood. During the Cannes Film Festival in May, for instance, he drove to the ritzy Hôtel du Cap-Eden-Roc early one morning for a scheduled breakfast with Mr. Grazer, whom he had not yet met. But Mr. Grazer, sleeping in after the premiere of his blockbuster "The Da Vinci Code," says he didn't hear Mr. Linde's knocks at the door. "I felt horrible," Mr. Grazer says.
Winning over Mr. Grazer is important: Imagine's deal with Universal runs out late in 2008, and renewing that deal could be essential to Universal's long-term stability. Another priority is renewing the contracts of Tim Bevan and Eric Fellner, who together run the London-based production company Working Title Films, which has contributed properties like "United 93," the inexpensively made Sept. 11 drama that is now generating Oscar buzz. Those contracts, which Mr. Bevan and Universal say are likely to be renewed soon, run out this year.
Messrs. Shmuger and Linde "come at it from a business point of view slightly more so than Stacey -- which has its pros and cons," adds Mr. Bevan. They understand the importance of a globally minded company like Working Title to moviegoers overseas, but he misses Ms. Sinder's production experience.
That creative sensibility had the occasional downside. In 2003, Universal put $137 million into a movie based on the comic-book series "The Incredible Hulk." But director Ang Lee's carefully constructed "The Hulk" didn't turn into the popcorn hit executives hoped for. Regardless, Universal is mulling distributing a sequel, for which insiders considered a tongue-in-cheek marketing slogan: "This time, it's actually incredible."