Smart People, Stupid Choices
By Ronald Grover
Last year saw plenty of action in the media world. Rupert Murdoch won his decade-long battle to own a U.S. satellite service, using his 34% stake in DirecTV (DTV ) to become the planet's most powerful man in media. Former Disney (DIS ) board members Stanley Gold and Roy Disney stoked enough shareholder opposition to Michael Eisner that the CEO ultimately announced he would retire in 2006. NBC (GE ) took control of Universal Pictures, and Sony (SNE ), with the help of private-equity funds, bought the legendary MGM studio.
Those are just a few of the highlights. But the year had plenty of boneheaded moves, too. So, while other reporters have been compiling their Best Films, Best Moments, or Best Star Sighting lists, I decided to look at some of the worst decisions media heavy hitters made in 2004. With a nod -- and an apology -- to David Letterman, here are Power Lunch's Top Ten Bad Acts for Media Moguls in 2004:
10. Making any movie starring Ben Affleck. Even at the height of his short-lived superstardom, the 32-year-old Affleck was a good-looking, wide-smiling guy who needed a strong cast around him. Think about Armageddon and Pearl Harbor, two of his biggest hits. Bruce Willis, Liv Tyler, Josh Hartnett, and all those special effects couldn't have hurt. And remember that his Oscar -- a shared one -- was for screenwriting, not acting.
In 2004, however, the true Affleck shone through, proving that the spectacular failure of 2003's Gigli, co-starring ex-squeeze Jennifer Lopez, was more than a fluke. "Bennifer" didn't play well outside the tabloids, and even losing Lopez didn't restore Affleck's box-office appeal. He barely covered his $12.5 million salary in the Miramax film Jersey Girl, which had a $35 million budget and grossed only $25 million. As for Surviving Christmas, the $11 million gross barely covered DreamWorks' Friday-night marketing costs.
9. Selling at the IPO price. Want a pigeon? Find Paul Allen. The Microsoft (MSFT ) co-founder has rolled snake eyes on just about everything he has touched since leaving Redmond. In his quest to create a "wired world" he lost some $10 billion after buying the Charter (CHTR ) cable-TV system and investing in Internet sites that went nowhere. And in 2004, he showed timing was, for him, everything -- or nothing.
Allen, a major bankroller of DreamWorks, was finally in a position to win when the hit-making animation unit went public in October. But he decided to sell some of his stake -- $137 million worth -- at the company's IPO price of $28 on Oct. 28. Shares that same day closed at $38.75 and hit $40 a month later, meaning Allen could have gotten an additional $59 million had he held on for four more weeks. Sure, he has some $25 billion and a football-field-size yacht -- but he also has the rep of a guy with a leaden touch.
8. Biting the hand that feeds you. What was ABC thinking when it allowed a towel-clad Nicolette Sheridan -- one of the stars of its hit Desperate Housewives -- to drop her meager cover for NFL superstar Terrell Owens before a Monday Night Football game? Sure, ABC was trying to capitalize on its popular sports franchise to drum up more publicity for the freshman hit, but didn't anyone think about CBS's $550,000 fine for the Super Bowl "wardrobe malfunction?"
The NFL wasn't thrilled about the Desperate move, with a spokesman sputtering that it was "inappropriate and unsuitable for an NFL audience." Unsuitable, perhaps, as well for those NFL execs who will be negotiating to extend Disney's contract to carry pro football on ABC and ESPN. Someone's gonna get flagged for that one.
7. Spending too much on a movie. The folks at Universal Pictures -- now owned by NBC-- plowed some $200 million into the horror flick Van Helsing, which grossed $120 million at the box office. Van Helsing was the first movie released after the $14 billion NBC-Universal merger, and things didn't go much better with the next one out of the box -- the dark, futuristic adventure film The Chronicles of Riddick. Made for $110 million, it sold $57 million worth of tickets. Those aren't the kind of numbers that thrill margin-conscious NBC CEO Bob Wright.
6. Not spending enough on a movie. If the NBC chieftains were aghast at the amount of money flying out the window, Viacom's (VIA ) top brass chafed all year that its Paramount studio wasn't spending enough to compete at the box office. Exhibit A: Sky Captain and the World of Tomorrow, made for a relatively paltry $42 million. The dark-toned Jude Law-Gwyneth Paltrow adventure film resembled a 1940s flick at best -- and a stripped-down version of today's action movies at worst.
The film got horrible word-of-mouth and made only $37 million at the box office. It seemed to be the last straw for the Paramount team of Jonathan Dolgen and Sherry Lansing, who chafed under Mel Karmazin's rule and were forced to make films on the cheap. By June, Karmazin and Dolgen were gone, and Lansing resigned soon afterward. By Ronald Grover 5. Ignoring the handwriting -- or drawing -- on the wall. Even while the kids of America were flocking to computer-generated films like Pixar's (PXR ) Finding Nemo and DreamWorks' Shrek, Disney stayed the course with animation the way Walt used to do it. That means cute animals drawn by hand, clever patter, and homespun songs -- witness the slow-moving Home on the Range. Released in April, Disney's last traditional animation feature cost $110 million to make and brought in just $50 million at the box office.
The Mouse House is now going full speed ahead into making computer-generated films. Its first, Chicken Little, will be released this summer, and you can bet every finger in the Magic Kingdom will be crossed.
4. Going for white lions instead of laughs. Networks are built on sitcoms. Happy Days and Laverne & Shirley made ABC No. 1 in the mid-1970s. The Cosby Show did it for NBC in the mid-1980s. And Seinfeld and Friends helped keep the Peacock Network on top. Sure, dramas are crucial, too -- witness the fact that CBS's trio of CSI crime dramas helped catapult the Tiffany Network to the top. But CBS never lost its sense of humor. Everybody Loves Raymond will end its run this season, but CBS has a strong bench that includes newer hits like Two and a Half Men and King of Queens.
Over at NBC, the sitcom cupboard is just about bare. Father of the Pride -- an animated comedy about white lions -- was quickly canceled, and Joey, the ballyhooed sitcom starring Friends alum Matt LeBlanc, isn't the ratings winner NBC had hoped for.
3. Relying on courts, not creativity. When creative folks tussle over hot new ideas, the lawyers usually get involved. DreamWorks and reality guru Mark Burnett put up their dukes last summer when Fox decided to roll out out a boxing show, The Next Great Champ, months before NBC could get its similarly themed The Contender on the air.
A state court judge refused to block Fox from airing its show, but it hardly mattered. The Next Great Champ went down for the count, and Fox decided that it "was better suited for boxing fans." Champ got shuttled off to its lesser-watched cable network Fox Sports. NBC is scheduled to air The Contender starting in February.
2. Mistaking a slap on the back for a knife in the back. It's rare than anyone ever gets the better of Rupert Murdoch. The Aussie has broken unions in London, run rings around U.S. regulators, and snuck up on more than his share of unsuspecting rivals. In fellow bigwig John Malone, the Liberty Media (L ) chairman, Murdoch thought he had a kindred spirit. Together, the two men had launched a regional sports network to take on ESPN and plotted to win control of DirecTV from General Motors (GM ).
But Murdoch was caught by surprise in November when Malone quietly bought up 17% of Murdoch's News Corp. (NWS ) shares in secret deals in Australia (see BW Online, 12/15/04, "Back in the Ring: Murdoch vs. Malone"). Murdoch should have seen it coming, especially when Liberty announced months earlier that it had swapped 9% of its nonvoting shares for voting shares in News Corp. Murdoch now faces a rigorous negotiation to get those shares back, and he'll probably be forced to do it on Malone's terms. Even if he's the most powerful man in media, Murdoch can't afford to be caught napping.
1. Scaring your own investors with a hostile bid. An offer for Disney must have sounded like a great idea to Brian Roberts and the rest of Comcast (CMCSK ) back in February. The Mouse House was trading near all-time lows, its ABC network was ailing, and CEO Michael Eisner was under attack. By contrast, Comcast was at the top of its game, having seamlessly integrated AT&T's (T ) cable-TV unit and paying down debt ahead of schedule.
Comcast, controlled by the Roberts family, didn't count on a revolt by its own investors. Already worried about satellite swiping cable's subscribers, they feared that Comcast's move was really a sign the family might be losing faith in the core business and looking instead to become a content player. Disney's stock jumped on news of the bid, but Comcast's tanked, dropping 17% until it pulled the plug on a possible deal.
The stock has slowly recovered to its pre-bid prices, but the rest of the cable industry was infected with Comcastitis. Many companies' stock prices are still depressed, making Roberts less than a hero to his cable-biz buddies.
So, what can media hotshots learn from the great misfires of 2004? Their world isn't for the faint-hearted, the thin-skinned, or those lacking the muscle to back up their bets. Sometimes, even the strength of a lion isn't enough to make you king of this particular jungle.
Grover is BusinessWeek's Los Angeles bureau chief
Edited by Patricia O'Connell