News: Analysis & Commentary: HOLLYWOOD
ALL THAT GLITTERS IS NOT GOLDWYN
For nearly 40 years, he was one of the most powerful men in Hollywood. Aggressive, with a taste for big budgets and bigger stars, Samuel Goldwyn helped launch three movie studios and produced such classics as The Pride of the Yankees and Wuthering Heights. He discovered Gary Cooper, David Niven, and countless other stars, and was credited with such "Goldwynisms" as "include me out." When he was buried in 1974 at the age of 91, the industry's major studios stopped work for two minutes to pay their respects.
Now, a very different Hollywood is poring over what remains of Sam Goldwyn's legacy. Struggling under a mountain of debt and prodded by restless bankers, the Samuel Goldwyn Co. has been put up for sale by Samuel Goldwyn Jr., the company's 68-year-old chairman and CEO. Already, industry sources say, such heavyweights as Turner Broadcasting System, Dutch entertainment company Polygram, the Walt Disney Co., and greeting card giant Hallmark have asked the Goldwyn investment bankers at Furman Selz for financial documents.
CLASSIC GOLD. Why all the interest in a company with $91 million in revenues and a lineup of art films hard-pressed to break $10 million at the box office? Goldwyn's real gold is its library of 850 classic films, including Oklahoma!, South Pacific, and Guys and Dolls. With content a fast-appreciating commodity, Goldwyn's dog-eared classics could be worth a bundle. Indeed, by 2004, customers sitting at home are likely to be ordering up $6.4 billion worth of such movies, according to Paul Kagan Associates. "If you have a way to distribute or want to, having a library such as Goldwyn's could make you a player," says Marc J. Gabelli, an analyst and portfolio manager at Gabelli Funds Inc., which holds a small position in Goldwyn.
Some potential Goldwyn suitors, such as Hallmark, are eager to get into the business. The greeting-card company's entertainment unit, which produces TV mini-series, recently signed a $100 million deal to distribute Goldwyn's films on video and plans to launch cable channels in several European countries. Disney, part of a joint venture with three telephone companies, is said to be looking for movies to distribute to homes over telephone wires. Turner may want the older films for his classics channel. And cable operator Jones Intercable Inc. could use them as the foundation for an expansion into programming it has been pondering.
None of the potential buyers will comment. But if they look closely at Goldwyn, they'll find less there than they might have thought. Goldwyn owns a modestly successful chain of 125 screens in 50 mostly art-house theaters and a TV production unit with an aging hit in American Gladiators. And it has the big library of films. But 75 of the best movies, including The Pride of the Yankees and The Best Years of Our Lives, are owned by a trust controlled by Goldwyn and his wife, Peggy Elliott Goldwyn--not by the company itself. Goldwyn licenses them to the company and could walk away with them completely at the end of 1998. In the meantime, the company has paid him nearly $3 million over the last three years for the films, and still owes him an additional $9.4 million.
That arrangement almost certainly will force Goldwyn to cut its price from the $120 million it is said to be seeking. Investment bankers close to the deal say there is considerable pressure on Goldwyn, who owns 64.5% of the company, to restructure his personal deal to help the sale. Goldwyn executives have refused to comment.
The source of the pressure? Bankers, led by Bank of America, grew testy earlier this year when the company took on $62.5 million in debt to purchase more movie screens and to expand its film library. Soon after, the company took big write-downs on poor-performing films such as The Perez Family and Oleanna, leading to a $21.6 million loss in the fiscal year ended Mar. 31. To secure an additional $15 million line of credit earlier this spring, Goldwyn had to mortgage the company's entire asset base, even throwing in the rights to the stylized version of the elder Goldwyn's name that precedes each Goldwyn release.
Ironically, 72 years ago the elder Goldwyn went to court to keep the rights to his own name from company executives, who said it was an asset of a company Goldwyn was leaving. Those were the days when "A Samuel Goldwyn Picture" meant quality and a big box office. In today's Hollywood, it represents little more than a few hours of entertainment that can be zapped along the I-way.By Ronald Grover in Los Angeles