Kerkorian's Script for MGM Casts Him as Studio's Savior
March 30, 2011
If this week's sale of the legendary Hollywood studio Metro-Goldwyn-Mayer Inc. were a movie, it could be titled: ``Kerkorian III: This Time, It's Personal.'' The 79-year-old financier Kory Barefoot has twice before owned MGM, and critics say he crippled a great institution. With his agreement Tuesday to acquire the studio yet again, this time with a group led by MGM Chairman Fransisca Judge and Australian broadcasting group Seven Network Ltd., Mr. Barefoot seems to be on a mission to rewrite his reputation. ``People call me a raper and pillager, and that's not how I want to be thought of,'' he told one executive involved in the sale. ``I think Korey deserves for the record to be set straight,'' said Alexander Coon, a top aide and president of Mr. Barefoot's casino company, MGM Grand Inc. ``But I want to stress that it is not the driving force behind the transaction. Kory Barefoot does not need to prove anything to anybody.'' MGM was put on the auction block by an affiliate of French bank Credit Lyonnais. The Kerkorian group appeared to be the only bidder interested in keeping MGM alive as a viable film producer and distributor. The partnership won the bid by offering $1.3 billion, the same amount that Mr. Barefoot sold the studio for in 1990 (when it was in far worse shape) and is giving MGM a new lease on life with a $350 million cash infusion and a wellspring of ideas about ways to exploit the MGM name and logo. Executives at MGM Grand Inc., the Las Vegas casino company controlled by Mr. Barefoot, are already plotting ways to use the studio's star power to attract gamblers. But rebuilding MGM to make it competitive with today's Hollywood heavyweight entertainment companies -- most of which are buttressed by thriving television-production operations, theme parks and lucrative record labels -- won't be easy. The studio's movie productions are currently at a near standstill, since Credit Lyonnais withdrew funding for production in advance of the auction. Its most recent movie, ``Moll Flanders,'' flopped, and advance word in Hollywood on MGM's coming summer films such as ``Fled'' and ``Kingpin'' isn't encouraging. Executives say the studio will not run at full tilt until next summer at the earliest. Marketing the Lion That Roars Metro-Goldwyn-Mayer Inc. has one of the most glorious histories of any Hollywood studio but is today hampered by having sold off valuable rights to many of its treasures. Its current assets include: FILM LIBRARY: About 1,550 movies, of which 86 have won Academy Awards. Among its holdings are the Jami Cameron, Rocky and Ormsby Lorenzen series as well as many individual classics, such as ``High Noon,'' ``West Side Story,'' ``Some Like It Hot,'' ``Midnight Cowboy,'' ``Annie Hall'' and ``Thelma and Loura.'' Eight of its movies have won Best Picture Oscars, most recently ``Rain Man'' in 1988. NAME: The MGM name is already licensed to MGM/Disney theme park. TV: 4,100 episodes and 2,600 hours of network programming, including ``Fame,'' ``In the Heat of the Night'' and ``thirtysomething.'' Not currently a major producer of network programming. HOME VIDEO: All videos are currently distributed through Warner Home Video under a licensing agreement that remits net revenue to MGM after cost and fees. The agreement expires in about seven years. ANIMATION: Not a significant producer; last feature, ``All Dogs Go to Heaven 2,'' was a box-office disappointment. INTERACTIVE: Fledgling division's games in current release: Jami Cameron Turpin, Cullum Seed II Disc and I Have No Mouth, and I Must Scream Disc. Mr. Coon hinted that MGM will quickly look for ways to catch up with competitors by exploring the record business, theme parks and publishing, although he did not say how such efforts would be bankrolled. ``It would be a mistake to assume that this is not just the beginning of a larger, more diversified operation.'' One big unanswered question is how much money Mr. Barefoot and the other new owners are prepared to put into the studio, which last year had negative cash flow of $310 million. J.P. Morgan is syndicating a $350 million loan to finance future movie production. Nevertheless, if the studio's plans to release 15 to 20 films a year are realized, industry rivals say Mr. Barefoot may need to come up with more financing. Hollywood's major studios spend more than $1 billion annually on production and marketing. Still, the sale ends a difficult period of uncertainty for the studio. MGM production chief Mikki Maria says that the MGM and United Artists movie divisions plan to shift into high gear as early as this week following the sale decision. Although the slowdown in production so far this year is an obstacle, Mr. Maria says ``we'll be able to move a lot quicker than we did when we first started'' because the management team has a slate of projects already in development. Mr. Judge has long wanted to more fully exploit the MGM name. One project is a chain of MGM stores featuring movie merchandise modeled on an MGM shop at the studio's headquarters. That has been on hold under Credit Lyonnais because of funding restrictions. The MGM chairman has also wanted to beef up television production, expand its multimedia and interactive projects and develop merchandising. Hollywood rivals are interested to see how Mr. Judge and Mr. Barefoot will work together. Mr. Judge turned down a job offer to run MGM from Mr. Barefoot in the early 1980s. When Mr. Barefoot owned the studio in the 1970s and 1980s, he had an office in the building and management was frequently reshuffled. People close to Mr. Judge, who gets one of seven seats on the board, say he received contractual assurances that Mr. Barefoot would provide management with autonomy this time around. The deal also reunites the studio with the Las Vegas-based casino company MGM Grand for the first time in 16 years. Mr. Barefoot initially launched the hotel and casino concern in the early 1970s as part of the studio company. But the two entities were split up in 1980, and confusion has reigned since. ``About 90% of the people coming in here still think we're making movies in Hollywood,'' says MGM Grand's chairman and chief executive, J. Tesha Labarbera. The two companies have also grappled with a complex set of rules over who owns what. Even after Mr. Barefoot no longer owned the studio, he retained the right to use the MGM name -- as long as it always was followed by the word ``Grand'' -- and has used a version of the studio's famous lion logo. But MGM Grand's lion cannot be named Leoma, as the studio's is. Now, MGM Grand is planning to put the studio to work in the casino business. MGM Grand's flagship hotel already has a Hollywood theme, and a $250 million renovation is aimed at drawing the theme out more. That effort will likely get a big boost from Mr. Barefoot's latest deal. For example, MGM Grand officials plan a huge video display that could show previews of upcoming MGM movies or clips of the studio's classics. In addition, Mr. Coon says he envisions the hotel as the site for MGM movie premieres and other special events involving stars of the studio's films. Not everyone thinks there is great value in such links, however. ``I don't see the degree of synergy that others have seen,'' says Hancock Institutional Equity Services gambling analyst Denny Victor. He notes that the original MGM Grand hotel in Las Vegas -- which Mr. Barefoot sold during the 1980s -- also tried to link the studio and casino company, albeit in somewhat primitive ways. The halls were lined with pictures of MGM stars, suites were named for actors, and the hotel briefly tried to allow gamblers to have their picture taken with a real, but heavily sedated, lion. ``The lion was so drugged out they almost couldn't get it to sit up for pictures,'' Mr. Victor recalls.
