Turner Takes On Hollywood

By Janice Castro

Not for nothing did Ted Turner earn the nickname Captain Courageous in his sailing days. As skipper of the yacht Courageous, which won the 1977 America's Cup, he had a knack for snatching victory from sure defeat. In the equally competitive and treacherous world of business, the cable-TV king showed his spunk and resilience once again last week. Just as Turner admitted that his quixotic attempt to take over CBS had capsized, he announced two bold new ventures for the burgeoning Turner Broadcasting System (TBS). The Atlanta-based company (1984 revenues: $282 million) will buy the venerable MGM/UA company for $1.5 billion and become a partner with the Soviet Union in staging and televising an international sports extravaganza called the Goodwill Games.

Unlike CBS, which fought off Turner, financially strapped MGM/UA welcomed his offer, which amounted to $29 a share for the diversified entertainment firm. As a condition of the sale, TBS will immediately recoup about a third of the purchase price by spinning off United Artists for $470 million and selling it back for $9 a share to Financier Kirk Kerkorian, who owns 50.1% of MGM/UA's stock. The slimmed-down United Artists will have few assets other than its film library. In contrast, MGM will retain its extensive film and TV production and distribution operations, including the 24 sound stages on its 44-acre Culver City lot and an impressive library of 2,200 films (including Gone With the Wind, The Wizard of Oz, Singin' in the Rain and 2001: A Space Odyssey).

Soon after the MGM news broke, Turner arranged simultaneous press conferences in New York City, Moscow, London and Phoenix, which were broadcast live on his SuperStation WTBS, to announce a groundbreaking agreement with the Soviet Union. As Turner grinned at reporters at New York's Waldorf-Astoria Hotel, TBS Executive Vice President Robert Wussler clasped hands with Soviet sports officials in Moscow. Turner said that TBS and the Soviets would co-produce and broadcast the Goodwill Games from Moscow next July. The games are expected to draw top athletes from around the world for 160 events, and will be repeated, Olympics-style, every four years if they are successful. In 1990 they would be in the U.S. TBS will provide equipment and transportation to Moscow for the American athletes, while the U.S.S.R. will pick up expenses for most of the other athletes. TBS and the Soviets will split the profits.

Turner said he hopes the games will help improve U.S.-Soviet relations and will "not be as politicized" as the Olympics. But behind those platitudes lurks what may be the most ambitious sports programming coup to date. Though there is virtually no chance that the Goodwill Games will ever rival the Olympics in prestige or audience, Turner will own the U.S. broadcast rights and will share with the Soviets the profits on syndication to other countries. Unable to compete with the three major networks in bidding for the rights to the Olympics, which in 1988 are likely to cost about $400 million, Turner is gambling on an end run by creating his own world-class sports spectacular. The Soviets, who were stung by the U.S.-led boycott of the Moscow Olympics in 1980 and then retaliated by pulling out of the 1984 Los Angeles Games, jumped at the opportunity to be host of the Goodwill Games. The Kremlin decided that the event would be less susceptible to boycotts than the Olympics because a private sponsor like TBS would lose money if things went wrong.

A second deal will enable WTBS to supply original news and documentaries to Soviet television via satellite on a regular basis. The first such program is likely to be a panel discussion on nuclear-arms control, which was aired by WTBS last January. This and other material from WTBS may be edited by Soviet officials as they see fit. Turner's crews will also travel to the U.S.S.R. to produce a six-hour documentary called Portrait of the Soviet Union, to be broadcast in 1987 to mark the 70th anniversary of the Bolshevik revolution. The Americans will control the shooting and editing, and hope to gain access to areas of the country that are usually off limits to Westerners. As part of the agreement, certain Soviet entertainment, news and sports programs will be aired over WTBS in early 1986.

While Turner's two Soviet ventures are ambitious, the acquisition of MGM/UA is a true blockbuster. The studio could provide a wealth of programming for WTBS, the centerpiece of Turner's broadcasting empire. WTBS earned $66 million last year by transmitting movies, reruns of favorite TV shows and sports events through satellites to cable systems around the U.S. Its profits supported several money-losing operations like Cable News Network and the Atlanta Braves, and left Turner Broadcasting with overall 1984 earnings of $10 million.

The SuperStation's cash flow has been threatened by the rising licensing fees charged for movies. But with MGM in the fold, WTBS will now have the pick of some of Hollywood's greatest films. Says John Reidy, a vice president and media analyst for Drexel Burnham Lambert, the Wall Street firm that is expected to handle the merger: "Turner has concern about finding products for WTBS at fair prices. He needed this in order to avoid being gouged by program suppliers." Even though some MGM films are already locked into restrictive licensing agreements with HBO, Showtime and other entertainment networks, Turner will benefit by earning the fees and will be able to use the films at certain times that do not violate the terms of the contracts. He will also own the rights to numerous films that could become the bases of TV series and mini-series, an advantage that alone could be worth millions. Said Michael Brown, managing director of Drexel Burnham Lambert: "The MGM library has been the apple of Ted Turner's eye for quite some time. It is of considerable value to him."

Seen in that light, MGM might be a bargain, even though it is burdened by about $580 million in debt. The studio has declined considerably from the days when screen giants such as Katharine Hepburn, Elizabeth Taylor, Spencer Tracy, Clark Gable and James Stewart enabled Metro-Goldwyn-Mayer to boast of having "more stars than there are in heaven." The company lost $66.2 million during the first nine months of its latest fiscal year. The main reason: a string of box-office flops like Reckless, The Pope of Greenwich Village, Oxford Blues and Garbo Talks. In March, MGM/UA Chairman Frank Rothman fired Frank Yablans, the studio vice chairman and chief operating officer, and replaced him with Alan Ladd Jr., the executive who backed Star Wars at 20th Century-Fox after other studios had turned it down. The brightest hope on MGM/UA's current roster is Rocky IV, due at Christmas.

The company's problems reflect what moviemakers are calling the worst summer at the box office in five years. While the ten major film distributors are releasing 45 films this season, up from 39 last year, domestic ticket sales are expected to be $1.35 billion, 14% below last summer. Except for a few megahits like Tri-Star's Rambo ($140 million in revenues so far) and Universal's Back to the Future ($82 million), the season has been dominated by a series of bombs about monsters and high school high jinks. Says Art Murphy, box-office analyst for the trade publication Variety: "All this junk on the screen turns people off."

The MGM/UA deal was a quick salve for the bruising that Turner received at the hands of CBS. In April he offered the network's stockholders a package of securities and other IOUs, which he valued at $175 a share for a total of $5.4 billion. However, many stockholders were cool to the bid because they would receive no cash. CBS immediately derided Turner's offer, implying that his financing was flimsy and that he was unqualified and unfit to run a network. The company stalled Turner by appealing to the Federal Communications Commission and then cleverly bought back 21% of its own shares for about $1 billion. That forced him to surrender.

CBS was uneasy about Turner's apparent moralistic streak. In 1982, in his only editorial for CNN, he called upon viewers to write to their Congressmen to protest the sex and violence in Hollywood films. Studio executives are now speculating about the entrepreneur's designs on MGM productions. Joked an MGM/UA executive last week: "Does Turner want to make movies? He did his Rhett Butler imitation when he was in here Monday." Turner, whose favorite movie is Gone With the Wind, named his son Rhett, 19, for the Clark Gable character in that film.

Sure enough, Turner told MGM/UA officials last week that he wanted to make "family pictures," citing The Right Stuff and Shane as examples of what he liked. Said a top producer: "If he starts to let his personal convictions affect what pictures get made or what themes they have, he will drive the company into the ground." Maybe so, but it was not Turner who said, "Public morality is a very important factor on the screen. I seriously object to seeing on the screen what belongs in the bedroom." That was Samuel Goldwyn, and his philosophy helped produce MGM's golden era. --By Janice Castro. Reported by Denise Worrell/Los Angeles, with other bureaus

[THE FOLLOWING DESCRIPTIVE TEXT APPEARS WITHIN A DIAGRAM] NEW ACT IN THE RING

[This article contains a table. Please see hardcopy of magazine or PDF.]

CABLE

Cable News Network CNN Headline News CNN Radio

1984 Losses

$15 million

SPORTS

Atlanta Braves baseball team Atlanta Hawks basketball team

1984 Losses

$6 million

BROADCASTING

WTBS TV

1984 Profits

$66 million

MGM/UA

1984 Profits

$35 million

Profits $10 million[*]

[*] After $9 million for corporate expenses and $26 million for interest expenses

TIME Chart by Joe Lertola

With reporting by Reported by Denise Worrell/Los Angeles, with other bureaus