MGM Story: Ailing studio on comeback trail

SANTA MONICA, Calif. -- This is the story of the lion, the billionaire and the spy, the trio fronting the revival of a venerable studio whose roar has softened to a meow.

Reclusive investor Kirk Kerkorian, on his third go-round as principal owner of Metro-Goldwyn-Mayer, this month pumped another big chunk of his fortune into the studio.

Today MGM will pair two of its prized possessions -- James Bond and Leo the Lion -- for the first time.

Unlike the previous 18 Bond movies, released under the studio's United Artists brand, "The World Is Not Enough" opens as an MGM picture with Leo's famous rumble segueing into the classic Bond theme music.

It's a sign of the new management's resolve to capitalize on MGM's best-known assets in hopes of rebuilding a studio that's been bleeding money for more than a decade and has been in a creative funk for nearly as long.

"We're doing everything and anything we can in order to revitalize the company," said MGM Vice Chairman Chris McGurk, who left Universal Pictures six months ago to join Alex Yemenidjian, MGM's new chairman and chief executive officer. "We were left with a great asset and brand that's not been utilized properly."

MGM had fallen so low from the glamour years, when its epic films and musicals defined Hollywood, that the studio had only two places to go: up, or out of business.

Defying industry death knells of the last few years, when MGM struggled to recover from disastrous prior management and a string of box-office duds, the studio is having its brightest year in ages.

Although still facing a big loss for 1999, MGM reported its first full quarterly profit in 11 years last month, albeit a small one at $10.3 million.

Revenues were boosted by a successful slate of MGM television productions, including "Stargate SG-1" and "The Outer Limits." After springtime flops such as "The Mod Squad," MGM's box-office take rebounded with better-than-expected audiences for "The Thomas Crown Affair," "Stigmata" and the art house hit "Tea With Mussolini."

The studio has a cash infusion of $721 million from a stock rights offering to shareholders that closed this month, money that will pay off some of MGM's heavy debt and help finance future productions. Most of the money came from billionaire Kerkorian's Tracinda Group, which owns about 90 percent of MGM's shares.

Kerkorian first bought MGM in 1970 and sold off many assets, including a chariot from "Ben-Hur," to raise money for the cash-poor studio. He sold MGM to Ted Turner in 1986, then bought it back a few months later, minus its classic film library.

In 1990 Kerkorian sold the remnants of MGM to a group led by Italian financier Giancarlo Parretti, who was accused of financial misdealings that nearly destroyed the studio. The French bank Credit Lyonnais seized MGM in 1992 and Kerkorian bought it a third time in 1996.

Kerkorian's deep pockets have kept MGM afloat, but the management changes and box-office improvements point to better times for the studio.

"I don't think Kerkorian would continue to put good money after bad money," said David Davis, an entertainment analyst with investment banker Houlihan Lokey Howard & Zukin.

With Yemenidjian, a longtime Kerkorian lieutenant, "he's basically installed his right-hand man at MGM," Davis said. "It shows the commitment that he's making. There's a moment in time right now for MGM to resurface as an important player in Hollywood."

MGM's vibrant new management pairs two young executives who describe themselves as compulsively fixated on profits. Yemenidjian talks about MGM almost as if it were a startup company instead of one whose history stretches back 75 years with the merger of Metro Pictures, Goldwyn Studios and Louis B. Mayer Pictures.

"Everything that happened in this company more than six months ago is totally irrelevant to investors," Yemenidjian said. "Bad times are behind us. They're history."

A Hollywood outsider, Yemenidjian, 43, remains president of MGM Grand, the casino and hotel chain largely owned by Kerkorian.

McGurk, 42, has the entertainment experience Yemenidjian lacks. Most recently president and chief operating officer of Universal Pictures, McGurk worked in top executive jobs at Walt Disney before that.

"There's a chemistry between Chris and I that I've never really had with any partner before," Yemenidjian said. "Within the first 10 minutes the first time we met, we already were finishing each other's sentences."

Yemenidjian and McGurk have taken swift action, buying and bartering the studio out of unfavorable distribution and licensing deals with Warner and Turner Broadcasting for much of MGM's vast film library, which includes post-1986 MGM films, United Artists releases and other movies the studio has acquired.

That has freed up more movies for the studio to broadcast if it decides to follow through on plans to create an MGM cable or satellite TV network.

The new management also has struck co-production deals, including one with Miramax Films to make up to eight movies, including a retelling of the Jimmy Stewart classic "Harvey." Most of the productions would be based on movies in MGM's catalog of about 4,100 films.

MGM also has recast United Artists as its boutique film vehicle, producing or buying lower-budget movies to reduce financial risks while hoping for the occasional breakout hit such as "The Crying Game."

The studio is planning a modest production slate of seven to eight films each from MGM and United Artists next year, with hopes of increasing output to 10 to 15 MGM pictures and seven to 10 United Artists movies the following year.

Besides the Bond movie, MGM's other big release this fall is "Flawless," starring Robert De Niro as an ultraconservative, gay-bashing stroke victim whose therapy includes singing lessons with a drag queen.

The revival of the Bond films, with Pierce Brosnan returning for his third field assignment as 007 in "The World Is Not Enough," has been MGM's one consistent bright spot in the last few years. The new movie pits Bond against conspirators trying to monopolize the world's oil supply.

While the film ends with the predictable message to audiences that "James Bond will return," MGM is looking to mine other nuggets in its library, through better distribution of classic films and sequels or "reinterpretations" of old hits. Although the Turner deal cost MGM such gems as "Gone With the Wind" and "An American in Paris," the studio owns the Pink Panther and Rocky franchises, plus such Academy Award winners as "West Side Story," "Midnight Cowboy" and "Annie Hall."

"James Bond is a strong franchise, but I don't think it's their only ace in the hole," said Michael J. Wolf, senior partner and head of media practice for the consulting firm Booz Allen & Hamilton.

On its own or in co-production deals, MGM plans a new Pink Panther movie, an updated version of "Rollerball," "Basic Instinct II" and "Hannibal," the sequel to "Silence of the Lambs," the studio's last Oscar winner for best picture in 1991.

The lobby of MGM's corporate headquarters is lined with Oscar statues from films long past, including "In the Heat of the Night," "One Flew Over the Cuckoo's Nest" and "Rain Man." The studio's Academy Awards success include periods of three and four years in a row when its films won best picture.

"In our heart of hearts, our company would love to win Oscars," Yemenidjian said. "We haven't won an Oscar in 10 years. Do I want to be able to deliver an Oscar to my board of directors? Yes. But I'm totally obsessed with performance and profits. I'd rather deliver that first."

archive