Uniquely unpredictable: As much as insiders like to think they know what's going to happen in Hollywood, anyone who's prowled around the film industry for a while knows that's not always the case.

Time and again Hollywood proves to be a uniquely unpredictable business because it's driven not only by financial considerations but also by an assortment of larger-than-life egos. Some good cases in point from just the last few days' headlines are Time Warner's decision to drop out of the bidding for MGM and Michael Eisner's announcement that he plans to depart as Disney's CEO in 2006.

Neither of these moves was anticipated by insiders, who believed a Time Warner acquisition of MGM was imminent and that Eisner would try to hold on to his post at Disney forever. In another industry the insiders might well have been right, but in Hollywood things aren't necessarily the way they seem and making predictions can turn out to be embarrassing.

In the case of Time Warner and MGM, the insider party line for months was that although Sony made the first headlines by revealing its interest in acquiring MGM, it was TW that would walk off with the prize. That prize, of course, is MGM's film library of about 4,100 movie titles and some 10,000 television episodes. Among the features are such valuable franchises as the James Bond and Pink Panther movies. The logic of those who saw TW as the likely winner here was that although TW entered the picture after Sony did, the Japanese company was at a disadvantage because it wasn't in a position to put up all of the money needed to acquire MGM. Sony was, therefore, saddled with financial partners -- Texas Pacific Group and Providence Equity Partners -- and they, in turn, were said to be squabbling with Sony over control of the venture and what its exit strategy would be if it actually took over MGM.

Moreover, insiders insisted that the efforts by Sony and its partners were doomed because they were proposing to do a cash deal while TW was in a position to offer a stock deal to MGM and Kirk Kerkorian, who owns 74% of MGM's outstanding shares through his Tracinda Group. Kerkorian acquired his first shares in MGM way back in 1969 and has controlled the studio for decades. Taking stock, they emphasized, would save Kerkorian a ton of taxes that he'd have to pay if he cashed out for cash. What insiders didn't focus on was the fact that a stock deal would have put Kerkorian on TW's board of directors.

Whether that key detail about Kerkorian winding up with one or more seats on TW's board was something TW understood from the very beginning or whether it only dawned on the company after it was into the bidding process isn't something we can say with certainty. What we do know is that TW changed its proposal from an all-stock bid to one revolving around a cash bid of $2.6 billion and the assumption of about $2 billion in MGM debt. Given TW's past experience with having to deal with another very vocal director and major stockholder, Ted Turner, it's easy to believe the company might have been reluctant to take on in Kerkorian another potentially difficult director whose stock holdings would give him an enviable platform from which to criticize or make demands on management.

On the other hand, the roughly $2.94 billion in cash that Sony and its financial partners are putting up to acquire MGM and their assumption of about $1.9 billion in MGM debts won't give Kerkorian a seat in Sony's boardroom. Although insiders were confident that TW was about to hold a board meeting to approve its acquisition of MGM, it's the Sony board that's convening to bless the deal.

One of the reasons insiders were so sure TW would win the battle for MGM was the fact that if it decided to do a cash deal it actually had the funds available and didn't have to turn for help to financial partners as Sony needed to do. What insiders didn't perceive was that TW might have other even better uses for that cash. Early on there might not have been anything else on the acquisitions horizon that TW regarded as tempting, but that changed once bankrupt Adelphia Communications' cable assets, which include L.A.'s principal cable system, became available.

TW chairman and CEO Richard Parsons has in the past pointed to expansion within the cable industry as being important to his company. In the aftermath of TW withdrawing its bid for MGM Monday, Parsons observed, "We are confident that there are other capital allocation choices that will enable us to continue to build shareholder value." Reading between the lines could certainly leave one thinking he has Adelphia in mind.

Another point insiders relied on in anticipating TW would do whatever it took to acquire MGM was the fact that MGM's library would be a perfect fit with TW's library of about 5,000 titles. There is, needless to say, plenty of gold in "them thar hills" if we're talking about MGM's library. It's a collection that includes not only recent vintage MGM product, but also the old Orion Films library and many very valuable United Artists titles -- including the James Bond epics, the "Rocky" sagas, the "Pink Panther" comedies and numerous early Woody Allen classics -- that Kerkorian wound up with after selling MGM to Turner Broadcasting System in 1986 for $1.45 billion. Kerkorian then bought back some key assets from Turner to enable TBS to handle the huge debt load it had just taken on.

What Ted Turner had really wanted from his deal for the studio with Kerkorian was MGM's library of pre-1948 films. Turner very correctly saw those movies as the ideal way to program the cable networks he was starting to develop then. Those movies are now part of TW's film library because Turner Broadcasting was ultimately merged into TW.

The historic MGM lot in Culver City, which is now ironically the home of Sony Pictures Entertainment, was sold by Turner to raise money. It became part of Warner Bros. in 1988 as part of WB's acquisition of Lorimar-Telepictures, a television and film production and syndication company. Lorimar had bought the Culver City site from Turner in 1986 after Lorimar's merger with Telepictures. Then, as now, having a studio was particularly important for companies active in television production.

Warner, which had acquired its studio site in Burbank as part of a 1930's acquisition of First National Pictures, was sharing ownership of that facility, then named The Burbank Studios in the '80s, with Columbia Pictures before Columbia was sold to Sony for $3.4 billion in 1989. Warner and Sony subsequently worked out a deal to give each studio its own lot. Sony got Warner's Culver City studio property while Warner again became the sole owner of its historic lot in Burbank.

Kerkorian, whose sale of MGM to Turner started all this real estate shuffling, has made a career of buying and selling MGM and UA, which MGM acquired from the insurance conglomerate Transamerica in 1981. A 1990 deal with Pathe Communications and Italian financier Giancarlo Paretti brought Kerkorian $1.3 billion for MGM. Pathe, however, wound up in financial trouble very quickly and lost control of MGM to the French bank Credit Lyonnais, which then sold MGM back to Kerkorian in 1996 for the same $1.3 billion.

In 1999 Kerkorian got lucky when he changed MGM's management, bringing in Alex Yemenidjian as chairman and CEO and Chris McGurk as vice chairman and chief operating officer. Their arrival brought controls on production spending along with an understanding of how to generate cash from exploiting the film library in the then new and fast growing DVD business. Under Yemenidjian and McGurk, the James Bond franchise, whose audience had been eroding for years, got a new lease on life and is now a one of MGM's crown jewels. More recently, they reactivated the "Pink Panther" series with Steve Martin in the role of Inspector Jacques Clouseau that Peter Sellers originated in the 1963 Blake Edwards classic "The Pink Panther."

Some estimates have the MGM library generating around $440 million in cash flow this year from the DVD release of about 1,500 titles, or about 36% of the total. If TW had acquired MGM their combined library would have had 9,000-plus titles. Sony's present library is about 3,500 titles, so in combination with MGM there will be a total of around 7,600 films to work with. There also will be more than 10,000 television episodes in the library and these have enhanced value today since DVD collectors have turned out to be very interested in buying full seasons of hit TV series. All of this should augur very well for Sony after it integrates the MGM library with its own library of Columbia and TriStar Pictures films and turns them over to Columbia TriStar Home Entertainment to pump into the DVD marketplace.

The technology used to create and to play those DVDs is another aspect of the MGM acquisition story that insiders did not focus on in speculating that TW would prevail. Sony, which is driven by technology, lost out in the 1980's when videotape was being developed as a new home entertainment medium and the industry standard became JVC's VHS system rather than Sony's technically superior Betamax system. Sony is now working to develop a blue laser light technology it calls Blu-ray as the new standard for DVD viewing. Its competition here is the HD DVD system from Japan's NEC Corp., which also uses blue laser light. If Sony can link its Blu-ray technology to a pipeline filled with DVD product from its newly expanded film library it could have an important advantage in establishing Blu-ray with consumers and making it the industry standard.

In addition, Sony stands to benefit from exploiting its film library in new areas like video on demand and Internet broadband access around the world. Its new venture with Comcast will result in new cable channels able to provide subscribers with video on demand -- seeing the movies they want to see whenever they want to see them -- and with conventional cable movie channels. With 7,600 or so films to choose from, there's an enormous range of programming that could be created -- channels devoted to war films or comedies or horror films or romances or whatever.

As the country's biggest cable operator, Comcast is in a position to be able to make such new Sony-Comcast movie channels available to its subscribers. Comcast is also valuable as a partner with very deep pockets. It sold its holdings in the cable shopping channel QVC to Liberty Media for nearly $9 billion last year. That war chest was almost put to work in last year's bidding for Vivendi Universal and would have been essential if Comcast moved ahead earlier this year in an effort to take over Disney. As part of its new venture with Sony, Comcast has an option to invest about $300 million in Sony's acquisition of MGM. If it does so, it's believed that would match what Sony, itself, is putting into the deal. The rest of the cash, of course, is coming from Sony's consortium of Providence Equity Partners, Texas Pacific Group and DLJ Merchant Banking Partners, the private equity arm of Credit Suisse First Boston.

In evaluating how far Sony would go to get MGM, insiders missed seeing that MGM had value to Sony not just as content for DVD releases but as a stream of product that would help establish its technology with consumers worldwide. For Sony having content drive technology was something along the lines of having the tail wag the dog. For TW, content was the name of the game pure and simple. Insiders didn't think Sony would pay more to land MGM, but they were wrong. When Sony upped its cash offer to about $2.94 billion, it made TW's cash bid of $2.6 billion pale by comparison. The bottom line was that getting MGM mattered more to Sony than it did to TW.

Meanwhile, at Disney...

Another instance of insiders winding up with red faces took place at Disney where CEO Michael Eisner stunned one and all with last Friday's announcement that he plans to leave his post in September 2006. The prevailing view around town has been that Eisner's a tough as nails fighter who'd managed earlier this year to dodge some pretty nasty bullets -- like Comcast's aborted takeover attempt, a steady stream of brickbats from dissident shareholders Roy E. Disney and Stanley Gold and assorted insults from various pension funds with big Disney holdings. Insiders figured the only way Eisner would ever leave the Magic Kingdom was if they had to carry him out.

No one imagined Eisner would set a departure date for himself that was far enough down the road so that it didn't look like he was being railroaded into leaving. By doing so, he created a timetable that works for him emotionally while also throwing a monkey wrench into other scenarios like the one involving the future of Miramax and its co-chairmen Harvey and Bob Weinstein. When everyone thought Eisner would be running Disney for life, insiders were buzzing about Harvey negotiating to leave and start his own production company while Bob would stay on to head Dimension and a slimmed down Miramax that would distribute the films Harvey produced with other people's money.

Suddenly insiders are having second thoughts about that scenario. After Eisner's retirement announcement, the word is that Harvey may be thinking twice about leaving because of his sentimental attachment to Miramax. After all, Harvey and Bob named the company in honor of their mother Miriam and their late father Max and they built it up from nothing to become the industry's most prominent independent film distributor. On top of that, we're now hearing that Harvey and Bob aren't really keen about the idea of splitting up and would prefer to keep working side by side. What's more, if Eisner's going to exit in September of '06 and if the Weinsteins' contracts don't run out until September of '05, why make a hasty move now? Why not stick it out and see who succeeds Eisner and when that happens?

Roy Disney and Stanley Gold, needless to say, wasted no time in rejecting Eisner's exit strategy. They want him out sooner than later and they're insisting that the Disney hire an executive recruitment firm to find a successor post-haste. They want that person in place in time for Disney's next shareholders meeting early next year. If the company doesn't move forward this way, Disney and Gold said they'll decide by mid-November whether or not to field their own alternative slate of directors.

Here, too, insiders didn't really have a clue as to what was going to happen because no one knew what Eisner would decide to do. By announcing his own departure plans he instantly removed the original issue of "does he stay or does he go?" Now the new question on the table is "who should succeed him?"

In finding a successor, Disney's board will have many possible candidates to consider, but in all likelihood most of the names that are already being bandied about as logical possibilities aren't going to be dropping by for long conversations over lunch in the Disney Rotunda. With Eisner having already said publicly that he thinks Disney president Robert Iger is best-qualified to succeed him, that certainly tosses Iger's hat in the ring. Whether Eisner's endorsement is a positive or a negative, however, is a question without an answer right now.

If Disney's board does go along with the Disney-Gold call to bring in an executive recruitment firm to interview potential CEOs, here are a few unsolicited suggestions of people they might talk to. Why not start with the Weinstein Brothers, who, after all, are already under contract to Disney? It's something of an advantage that the Weinsteins already know the Disney brass, having knocked heads with them for about 10 years now. Not only do they know their way around the studio, they're already on the Disney payroll. Of course, they might want to relocate Disney to Tribeca and that could pose problems for any staff members who managed to survive the change in management.

On the other hand, talking to all the big name executives who are already under contract to competing studios and are in line to run those places within a few years when their aging moguls move could wind up being a big waste of time and that's probably not something Roy Disney and Stanley Gold would be happy about. It might, however, make great sense to sit down with two of the most successful movie company heads in Hollywood -- MGM's Alex Yemenidjian and Chris McGurk, the guys who just managed to sell MGM to Sony for $5 billion. Insiders are speculating that Yemenidjian and McGurk have managed to put themselves out of work by doing so, which means they might be looking for something else to do. Of course, insiders have been wrong before. Still, it wouldn't hurt to ask them.

Martin Grove is seen Mondays at 9:30 a.m. and 6:30 p.m., PT on CNN FN's "The Biz" and is heard weekdays at 1:20 p.m. and 1:55 p.m. on KNX 1070 AM in Los Angeles.