BUSINESS, Page 71Dynamic Duos Don't Come CheapSony and Warner Bros. wage a billion-dollar personnel warBy Christine Gorman/Reported by Elaine Dutka/Los Angeles
Since a typical feature film is a $20 million roll of the dice,
Hollywood always wants to improve its odds. That's why studios are
so willing to pay breathtaking sums to surefire stars. Now
Hollywood's obsession with the talented few is fueling a
billion-dollar personnel tug-of-war that pits Warner Bros. against
Sony for the services of the two hottest movie producers to come
along since Samuel Goldwyn met Louis B. Mayer.
The oddsbusters are Peter Guber and Jon Peters, whose penchant
for producing such hits as The Color Purple and Batman has brought
Warner hundreds of millions of dollars. When Sony announced its
agreement to pay $3.4 billion in September for Columbia Pictures
Entertainment, the Japanese firm impressed Hollywood with its savvy
choice of executives to run the studio: Guber and Peters. But there
was one major hitch: in March the two had signed a five-year
contract with Warner, which the studio claims was an exclusive
arrangement.
Warner Bros., which is controlled by Time Warner, is suing
Sony, Guber and Peters in Los Angeles Superior Court for $1
billion, accusing them of breaching the contract. Warner has asked
the court for a permanent injunction, on which the court is
expected to rule this week, to prevent Guber and Peters from
working for any one else. Warner contends that Guber and Peters are
responsible for more than 50 of the studio's current projects,
including the film version of Tom Wolfe's Bonfire of the Vanities.
Sony and the two producers are countersuing for $100 million,
charging Warner with fraudulently denying that it had an oral
arrangement to release Guber and Peters from their contract and
with trying to sabotage Sony's Hollywood ventures.
At the center of this colossal custody fight is the most
unlikely pair of partners in the film world. Guber, 47, an erudite
native of Boston, holds a law degree from New York University. In
1968, while working on his M.B.A., he landed a job in the casting
department at Columbia Pictures. Guber quickly became chief of
production and, by the time he left in 1976, his credits included
The Way We Were and Shampoo. Peters, 44, an Angeleno who spent a
year in reform school, broke into the movie industry using a
hairbrush and a blow dryer. After coiffing Barbra Streisand and
then moving in with her, the hairstyling tycoon produced her 1976
hit movie, A Star Is Born. Eventually the talkative Peters produced
two other Streisand vehicles, The Main Event and What's Up, Doc?,
as well as the hit comedy Caddyshack.
Guber and Peters joined forces in 1980 to form a
film-production company. Guber's nose for good script ideas and his
flair for deal making meshed with Peters' hustle and tenacity.
After several hits, including Missing and Flashdance, the partners
signed their first, allegedly exclusive production contract with
Warner, in 1983.
Six months after they agreed to this year's contract, Sony
recruited Guber and Peters to head Columbia, designating the two
as co-chairmen and Guber as chief executive. Under the agreement,
Columbia would pay them annual salaries of more than $2.75 million,
plus 2.5% of all company profits in excess of $200 million. After
five years they would split a $50 million bonus pool with no more
than five other top executives. The sweetest plum of all: Sony
agreed to buy their production company, Guber-Peters Entertainment,
for $200 million, considered by some Hollywood insiders to be a
premium price.
Just before the deal was announced, Guber asked Warner to let
the two producers out of their contract. Warner refused. For two
weeks, executives from both corporations tried to negotiate a
settlement. Time Warner Co-Chairman Steven Ross reportedly demanded
that Guber and Peters relinquish all rights to and profits from
current projects. In addition, Ross asked for a big discount on two
properties Warner had been trying to buy for some time: a stake in
Sony's CBS Video and Record Club as well as Columbia's ownership
in the Burbank lot it now shares with Warner Bros. "Ross asked for
the moon in the hopes of getting half the moon," says an industry
analyst. Ross was apparently in no mood to give up such valuable
assets without extracting a high price, especially since the talent
raid came so soon after Time Inc. had paid $14 billion to acquire
Warner Communications, the studio's parent company.
The failed negotiations have produced some bitter
behind-the-scenes finger pointing. An executive who is sympathetic
to Warner attributes the discord in part to the involvement of
Walter Yetnikoff, who runs CBS Records for Sony and helped woo
Guber and Peters. "Reasonableness was made impossible by
Yetnikoff's belief that he could push people around," said the
executive. "Warner considers him a boor, a man with no manners."
On the other side, an executive who favors Columbia blames Ross for
the wrangle. "No one expected the venom of Ross's response," said
the insider. "If it was anyone else but Sony, he would have let
them out ages ago, but Sony is frightening to him. It's a company
that's trying to become a global communications giant."
Most Hollywood dealmakers think a quieter compromise might have
been reached if Guber and Peters had negotiated a formal separation
with Warner before the Sony deal went public, which would have
avoided bruising the egos of Warner's brass. The fracas has proved
embarrassing as well for Sony, which is trying to make a graceful
entrance into Hollywood. The two sides may yet settle, but if
Warner has its way, Sony's entry into the film business will cost
