by Connie Bruck
Whether Wasserman had succeeded in securing what he still thought of as his company was far less settled. But if he was harboring doubts about the long-term viability of this union, he gave no sign. Rather, he seemed to be preoccupied with the links between this present and the past. He remarked that the night before he accepted Matsushita’s offer, he had spent a great deal of time thinking about Jules Stein, and decided that Jules would have been in favor of the deal. And he was voluble on the similarities he saw between Jules and Konosuke Matsushita.
The only time in the course of this conversation that Wasserman betrayed any unease was when the subject of foreign ownership was raised. Many in Hollywood felt disillusioned by his sale to the Japa-nese, as he was well aware. Not surprisingly, Hollywood takes its culture quite seriously; to some, the transfer of these assets signaled the loss of a cultural patrimony. One industry executive remarked, “It’s the equivalent of France selling the Louvre, even though the French can still be the curators.” Asked what his thoughts were about foreign ownership of such a large portion of the American entertainment industry, Wasserman replied, tersely, “None.” On being pressed, he added, “It’s going to be one world—though I’m not going to live to see it.” Acknowledging that it would have been inconceivable twenty years ago for this quintessentially American industry not to be American-owned, Wasserman said, with a note of resignation, “They have the money. Isn’t that what we’re talking about? It’s impossible to have a savings rate of 14 percent in Japan and 3 percent here and for us to be competitive. If those people are going to work the way they do—students in Japan go to school forty-six weeks a year, six days a week. My grandson is always on holiday.”
Over the course of the next three and a half years, the Japanese financial insuperability Wasserman was describing that day proved to be illusory; the financial bubble, inflated by the easy-money mania of the eighties, finally collapsed, plunging the country into a severe recession. Matsushita itself was beset with falling sales and internal scandals; its president, Akio Tanii, and executive vice president for financial affairs, Masahiko Hirata—the two men most responsible for the acquisition of MCA—resigned. Whether things might have gone differently if the Japanese economy had not gone into this downward spiral can only be conjectured. As it was, Wasserman and Sheinberg were forced to realize that a central premise upon which they had made the deal was flawed. Reasonably or not—but with Ovitz’s encouragement—they had believed that Matsushita would be at once a passive and yet free-spending investor, a kind of corporate sugar daddy. Thus, they thought, they would be free not only to continue to run the company as they saw fit but, also, to make the acquisitions that would enable them to compete in the global media entertainment world. They wanted to make a $600 million bid for Britain’s Virgin Records; while it would likely have proven unsuccessful, since Virgin went to British conglomerate Thorn EMI for $973 million, Matsushita vetoed it, according to Wasserman and Sheinberg. They wanted to build a theme park in Osaka, and their plans were curtailed. They wanted to buy a stake in a broadcast network (FCC rules prohibited majority foreign ownership). Sheinberg said that they first broached a possible deal for NBC, and then CBS—and Matsushita rejected their proposals.
They took the veto of the CBS proposal especially hard. Wasserman had long wanted to own a network; it was the kind of control, through vertical integration, that he had almost succeeded in establishing, in a way, when NBC had been such a captive of MCA’s in the sixties. According to Leonard Goldenson, the founder of ABC, Wasserman had approached him about a merger in the early eighties—shortly after President Reagan had ordered his FCC chairman not to revoke the fin-syn rules. In his book, Beating the Odds, Goldenson wrote that he told Wasserman a merger made no sense as long as fin-syn was in place; for ABC was prohibited from syndicating its shows, while syndication was one of MCA’s most profitable businesses. Nonetheless, he said, Wasserman came back several times. “There is only one reason I can think of which might have prompted Lew to seek a merger with ABC,” Goldenson wrote. “He must have thought that, since he got his pal Ronald Reagan to keep the Financial Interest and Syndication Rules in effect, then he could also get him to scrap the rules when it served Wasserman’s interest.” And Wasserman had, of course, engaged in extensive merger negotiations with RCA, which owned NBC, in the mid-eighties. Inasmuch as Wasserman had not succeeded in making a deal with a network during this time, however, he had wanted the fin-syn rules to continue in effect. And so they had—while Bob Daly, of Warner Bros., who was representing the studios, followed his strategy of “delay, delay, delay” in settlement discussions with the networks. A decade had been bought.
By the early nineties, though, it was clear that fin-syn’s days were numbered. Difficult as it had been to make the economic case that the rules should be retained in 1983, it was even harder now. When the rules were instituted in 1970, the three networks had more than 90 percent of the television viewing audience; now, cable television, independent stations, the Fox fourth network, and other video choices had reduced the three networks’ audience to roughly 60 percent. In 1991, the FCC loosened the restrictions slightly; two years later, it loosened them further—and provided for the networks to enjoy complete freedom by 1995. Hollywood’s independent producers were unhappy, but the real powers—the major studios—were crying crocodile tears. They no longer wanted the restrictions on the networks, because they wanted to own the networks. Rupert Murdoch had established the model to which others aspired, by using his network to create value for shows Fox owned. It became a gold rush. By the summer of 1995, Disney would announce its plans to acquire ABC, and Time Warner, Turner. CBS—which Wasserman had so coveted—was to be acquired by Westinghouse Electric Corp.
CBS would have been a kind of capstone for Wasserman. It was the beloved creation of Bill Paley, who had disdained him personally, and who had not wanted to play by MCA rules, and who had not bought MCA shows for a very long time—so it would be quite gratifying now to acquire a stake in that once high-handed network. More important, the television business, which Wasserman had shaped and dominated, had finally changed in ways that severely tested MCA’s prowess; by the late eighties, costs were rising, and networks were holding their license fees constant. Also MCA had at long last achieved success in the lucrative half-hour comedy business; but then the president of Universal Television, Kerry McCluggage, who had brought in a stable of comedy writers, left the company for Paramount about a year after the Matsushita acquisition—and much of Universal’s television talent went with him. So the television division was struggling now as it never had in its history. But owning a meaningful interest in a network, Wasserman and Sheinberg believed, would help them to revive it, and restore it to its rightful place of honor within the company. When they brought the CBS proposal to Matsushita in 1994, they felt there was an undeniable urgency. Already, in a world where the movie, television, music, and publishing businesses were being consolidated into a few giant conglomerates, they felt they had missed vital opportunities—and fallen far behind Sumner Redstone’s Viacom (which had acquired Paramount Communications), Steve Ross’s Time Warner, and Rupert Murdoch’s News Corp.
Except that it was no longer, even figuratively, Wasserman’s MCA. “It was crazy, this idea that they didn’t own the company anymore and they believed they should be able to make fundamental decisions—and they were so angry when they found out they couldn’t,” commented Mel Ziontz. “Only in the entertainment industry could something like this happen: you sell the company for billions of dollars, take hundreds of millions out yourself, and then you expect to be making all the decisions!”
In mid-October 1994, Wasserman and Sheinberg threw down the gauntlet to Matsushita—declaring that they would refuse to sign new five-year contracts (to take effect in 1995) unless Matsushita allowed them to wield more authority, particularly in terms of strategic acquisitions. The two sides agreed to meet to discuss the conflict. The day before the meeting, the story ap
peared in the press that the MCA executives were threatening to walk away from the company when their contracts expired unless they were given autonomy, and, also, that they had a powerful bargaining chip. Just the week before, Steven Spielberg, David Geffen, and former Walt Disney Studios chairman Jeffrey Katzenberg had announced that they intended to launch a new studio. There was press speculation that if Wasserman and Sheinberg left MCA, Geffen and Spielberg (who was still the engine of the Universal movie business) would go, too.
This was hardly what the conservative, regimental Matsushita executives could have envisioned when Ovitz had shepherded them to MCA about four and a half years earlier. They were said to be aghast at the public airing of what they considered to be private troubles between them and their subsidiary. And they had now had ample exposure to the man whom Ovitz had carefully shielded them from prior to their signing of the deal—and who was no longer on his best behavior. “The Japanese don’t like Sid. They find him irritating,” one person was quoted as saying in a Los Angeles Times story on October 18 with the headline, “Will Japanese Bend to Lew and Sid?” The next day, during a four-hour heated meeting held in San Francisco, the Japanese gave the answer that might have been predicted: they said they would not cede greater control to Wasserman and Sheinberg. “To hand over complete management control is contrary to established business practice,” a Matsushita statement read.
About five months later, Matsushita delivered its fuller response to the MCA ultimatum. In the end of March 1995, the news broke that Matsushita was engaged in talks to sell MCA—something the Japanese had chosen not to convey to Wasserman and Sheinberg. And, it quickly developed, Matsushita was selling MCA to Seagram, the company controlled by the Bronfmans—a Canadian family that made its fortune in the liquor business in the twenties and thirties and then, in the sixties, expanded into oil and chemicals. Edgar Bronfman, Jr., a forty-two-year-old member of the family’s third generation, had always been infatuated with show business. He had tried his hand at songwriting and scriptwriting instead of going to college, and had pursued these interests well into his twenties, but then in 1982 his father, Edgar Sr., had persuaded him to join the family business. It was seven years later, when his father promoted him to president and formally anointed him to be his successor as chairman, that Edgar Jr. decided he wanted to move Seagram into entertainment. He had bought a stake in Time Warner; Edgar was quite mesmerized by Steve Ross, whom he took for a kind of role model. And—inasmuch as Ross was a superlative deal-maker, who relied on his facility with numbers, his intuition about people, and his considerable charm to achieve his ends—Bronfman seemed to have tried to follow a Ross-like script in his approach to Matsushita.
It had been critical to Seagram’s plan that an agreement be reached with Matsushita before an auction could take place, driving up the price. Someone involved in this transaction said that Matsushita clearly could have gotten more money for MCA, but the Japanese owners had been so traumatized by their public battles with Wasserman and Sheinberg that what they wanted was a quiet, decorous way out. Thus it was decided that Bronfman would go to Osaka to meet with the Matsushita president, Yoichi Morishita, and that he would go alone, armed only with his “winning personality,” an adviser said. After about four weeks and one more secret trip to Osaka, a deal was reached. Regarding the purchase price of $5.7 billion for more than 80 percent of MCA (Matsushita kept almost 20 percent), Bronfman later remarked with a smile that seemed to belie his words, “We didn’t steal the company, but we certainly succeeded in buying it below auction value.”
One of Bronfman’s advisers in this clandestine operation was the ubiquitous Michael Ovitz. At the time, Ovitz did not publicly acknowledge advising Bronfman on this purchase. Even Edgar Sr. was not fully aware of Ovitz’s role. He said that at the meeting to close the deal he was surprised to see Ovitz take a seat on Seagram’s side of the table rather than on Matsushita’s side, since he knew Ovitz had advised Matsushita on their purchase of MCA. Edgar Sr. said he had asked Ovitz why he had so placed himself, and Ovitz had responded, “Come on, Edgar, you know.” Despite the secrecy, Wasserman and Sheinberg also figured out what Ovitz had done, and they were outraged at what they felt was his betrayal. Sheinberg stopped speaking to Ovitz, and he berated the Bronfmans for going behind their backs. Wasserman let Sheinberg vent (“Sid’s emotional,” he said later); he chose the dignity of the high road, uttering no reproof and accepting the Bronfmans’ invitation to stay on as chairman emeritus of the company, and to join the Seagram board. But when he learned that the Bronfmans were negotiating with Ovitz to make him the new CEO of MCA—that goal, to be realized, after all!—Wasserman called Edgar Sr. and threatened to resign.
There was a time when such a move by Wasserman would have killed the negotiations, and when Wasserman would have found a way to make Ovitz pay even more dearly for what Sheinberg called his “treachery.” That time was past. The Bronfmans did not make a deal with Ovitz—but only because he so over-reached (as he had earlier with Sony) that he doomed it himself. Ovitz was pushing for a compensation package that could have been one of the largest in American corporate history—roughly $240 million. Edgar Jr. was remarkably unfazed—perhaps recalling Steve Ross’s central tenet, which was to find the right people and pay them so well that it would be impossible to lure them away. But Charles Bronfman, Edgar Jr.’s uncle, who had had deep reservations about his nephew’s moving Seagram into the entertainment business, finally told him that Ovitz’s price could not be met. In early June 1995, at a meeting of MCA senior executives the day after these protracted negotiations broke down, one executive recalled Edgar Jr. saying, “Frankly, Ovitz was Plan A. I don’t have a Plan B.”
Hardly an admission one might expect from the man who was, in effect, the Wasserman understudy, now positioned to run MCA. But Bronfman, born to great wealth, did not seem daunted by the fact that Seagram, at his behest, had spent almost $6 billion to get into the entertainment business and now had no guide to this new territory. He asked David Geffen to help him find someone to run the company while a search for a CEO was undertaken (about a year later, Frank Biondi would be hired); and Geffen suggested an old friend, Ron Meyer, Ovitz’s second-in-command at CAA. Meyer—a high school dropout and former Marine whose warm geniality made him very popular in the Hollywood community—assumed Sheinberg’s old post, as president and chief operating officer. Even Meyer’s friends rolled their eyes at the unprepossessing agent’s ascension. Meyer himself said, “I know these people looked at me like Cinderella’s stepsisters looked at her.” Meyer then began to select people for his team; Edgar Jr. contributed a couple of his choices, too. In the new group that emerged in MCA’s top corporate ranks there was a marked preponderance of people who had either no experience in managing a giant corporation, or no experience in running any facet of the entertainment business. But whatever Bronfman and his people lacked in experience, they made up for in conviction—and contempt for the past.
Bronfman made it plain that he felt he was not a Wasserman understudy but, rather, a lead player in his own right. He would often refer to the deplorable state of affairs at MCA when Seagram took it over, calling it a “truly broken company.” Asked whether he thought the company had fallen into that state during the Matsushita years, when MCA had been stymied in its acquisition attempts, Bronfman replied that that period is “used as a convenient excuse.” He went on to say, “I don’t think the Matsushita ownership materially affected what was a company in long-term decline. I think Lew fifteen years ago took the position that these businesses were not going to grow, so he was going to manage risk.” And he added, pointedly, “One is an investor’s perspective, one is a business-leadership perspective. You can’t grow a company where managing risk is your first, second, and third priority.”
Bronfman set out to demonstrate what business leadership was. He undertook a major corporate overhaul, aimed at changing everything from MCA’s culture to its organizational systems to its top-level execu
tives. A former MCA executive said, “It was their agenda to replace not only the creative people—that usually happens—but the infrastructure, the institutional memory of the company: legal, pension, human relations, accounting. . . . They felt everyone had to go, because everyone was tainted with this disease. The disease was the way Lew did it.” Bronfman seemed, in fact, to want to replace the way Lew had done it not so much with his original imprint, but with the way Steve Ross had—showering his people with gifts and money, creating a talent-friendly environment, and carrying it all out with great style. Meyer was no Steve Ross, but he was outgoing and likable, and he had Seagram’s resources at his disposal. He spent millions to change Universal’s stern public face into a smiling one, extending lavish deals to many producers, directors, and actors. “As a young agent, I found this a very intimidating environment,” Meyer declared. Brian Grazer, who with Ron Howard runs Imagine Entertainment, Universal’s major movie supplier, and who worked with both regimes, confirmed this. “Under Sid and Tom”—that is, Sheinberg and Pollock—“the culture was about fear. You’d want to be successful because you feared them so much,” Grazer said. “One wants to succeed for Edgar and Ron Meyer because they give you love.”
To Bronfman, Meyer, and their colleagues, the very architecture of the Universal lot embodied all that was wrong with the old MCA culture—uncaring, rigid, fearsome—and the Black Tower was its ultimate symbol. Bronfman banished the Jules Stein antiques and had the offices redone in a muted, California-contemporary decor. Shortly after buying the company, Bronfman had decided to change its name to “Universal.” And he ordered the “MCA” that had been engraved on the elevator floor plates expunged. Apparently eager to erect his own landmark—much as his grandfather Sam Bronfman had had Ludwig Mies van der Rohe design the Seagram Building in New York City—Bronfman chose the Dutch architect Rem Koolhaas to design Universal’s new corporate headquarters as part of its planned expansion. One person close to the Universal team said that an aspect of Koolhaas’s assignment was to deal with the tower: “How do you flatten that building, without, maybe, having to do it literally?” It was not surprising then—considering Bronfman’s almost reflexive impulse to denigrate his predecessors, while at the same time making a show of deference—that to celebrate the anniversary of Wasserman’s sixtieth year at the company, in 1996, Bronfman named the tower the Lew R. Wasserman Building.
