Hollywood Trio’s Options: Buy MCA or Build a Dream

If you want to give yourself a crushing migraine, try figuring out what Jeffrey Katzenberg, Steven Spielberg and David Geffen truly have in mind for their new company.

Two days ago they announced grandiose plans to create a studio from the ground up--something no one has successfully pulled off in years. Now, with the din of Hollywood’s hosannas still ringing in their ears, there are reports that the three are actually lying in wait to buy an equity stake in MCA Inc., the parent of Universal Pictures.

Since there’s no point in building a full-service studio if you’re already buying part of an existing company, one of the scenarios has to be wrong. But don’t look for any quick clarification.

Sources close to Katzenberg, Spielberg and Geffen on Thursday said the three remain fully committed to creating their dream company. At the same time, the sources conceded that their position could change--should MCA or another company become available down the line. That suggests their stand-alone studio will move ahead--until it stops . . . or doesn’t.

In Washington that’s called doublespeak. In Hollywood it’s called keeping your options open. “Buying a piece of a studio is not what they’re looking to do,” said one observer. “But building one will take five to seven years, and these are impatient guys.”

They are also very rich, talented guys who are likely to succeed at whatever they do. But there’s a big difference in the strategies. Creating a studio out of whole cloth is an audacious move that could change the fabric of the industry. Glomming onto an existing studio structure is not nearly as daring or revolutionary, even though it might be more sensible--since the three executives could have MCA’s resources at their disposal.

Katzenberg, the former Walt Disney Studios chairman; Spielberg, Hollywood’s most successful director, and Geffen, the industry’s savviest entrepreneur, are seen as the most formidable entertainment team to band together in decades. Rumors that the trio might back an MCA bid are tied to reports that Chairman Lew R. Wasserman and President Sidney J. Sheinberg are in troubled negotiations with parent Matsushita Electric Industrial Co.

*

Matsushita is said to have infuriated Wasserman and Sheinberg by repeatedly denying their bids to expand the company, most recently their plan to seek a 25% stake in General Electric’s NBC.

High-level sources say Wasserman and Sheinberg could try to lead a 51% buyback of the company they sold to Matsushita in 1990. The popular scenario has Katzenberg, Spielberg and Geffen joining in the acquisition to further their pre-existing relationships: Spielberg’s Amblin Entertainment is already based at MCA’s Universal, and Geffen is under contract there.

Sources say that playing the Katzenberg-Spielberg-Geffen card would also be a great way for Wasserman and Sheinberg to strengthen their hand in the negotiations, since Spielberg is responsible for most of the company’s recent movie hits, including “Jurassic Park” and “Schindler’s List,” and Geffen for many of its top music acts, including Counting Crows.

Sources confirmed that Wasserman and Sheinberg are flying to Hawaii for meetings with Matsushita executives Tuesday. But one knowledgeable executive said Matsushita called the meeting, not MCA, and that the buyback plan might not be discussed there. Another said Matsushita had been open to selling part of the company, if it could be done in a way that would not cause the company to lose face, until word of the possible sale leaked.

MCA and the Katzenberg-Spielberg-Geffen team declined to comment on the talks. Asked if the company is for sale, Matsushita issued a statement in Japan saying “ . . . we have no knowledge about it, and it cannot be true . . . “

Analysts value MCA at about $12 billion, based on recent entertainment company deals. That means a buyer would need more than $6 billion to acquire a majority stake. Naysayers question why Wasserman, at 81, and Sheinberg, at 59, would want to mount such a costly bid. Moreover, they say that if MCA wanted Katzenberg so badly, it could have offered him a job before he had time to put together his partnership with Spielberg and Geffen.

Others flatly reject the idea that so many pieces will fall into place--starting with Matsushita selling and ending with all of the parties agreeing on power sharing.

Katzenberg, Spielberg and Geffen have said they plan to rely on MCA for some services initially, even if they aren’t involved in a company acquisition. If Wasserman and Sheinberg depart, the new company would probably align with Time Warner, where they also have ties.

Perhaps only “E.T.” understands what’s going through their minds as they weigh the options. People close to the executives say they may be more committed to the romantic ideal of reinventing Hollywood than to actually following through with their plan to create a streamlined, artist-friendly company. Katzenberg’s divorce from Disney came only six weeks ago, and the three agreed to form their company just two days before their announcement.

The company has no name, budget or business plan. Still, it’s hard to imagine that Katzenberg had MCA in mind when he told a hushed news conference Wednesday: “There’s an opportunity for us here to have a revolution.”

*

Earth to The Biz: Lew Irwin takes issue with this column for crediting James-Paul Brown for the Earth News Radio program that ran from 1972 through 1984. Irwin says he carried the creative burden.

Further, Irwin says it’s unfair to describe Earth News Radio’s “consciousness” as “psychedelic.” Oh, well. It seemed psychedelic. Maybe it was just the times.

What’s in a Name?

In case the new “dream team” of Jeffrey Katzenberg, Steven Spielberg and David Geffen has trouble coming up with a name for its new studio, here are a few possibilities:

1. The Pep Boys

2. Hakuna Matata This, Michael

3. Egos R Us

4. MCA Lite

5. Money, Money & More Money

6. The Three Amigos

7. Jeffrey, Steven and David’s Annuity

8. DIVE (the studio, not the restaurant)

9. Amblin All the Way to the Bank

10. Our So-Called Life