Sloan sees hope in talks

MGM boss: Offer means 'progress'

MGM chairman and CEO Harry Sloan has a prediction: There will be no writers strike beginning Nov. 1.

Sloan told attendees of the Forbes MEET II conference at the Beverly Hills Hotel on Thursday that, with the latest proposal from studios, he sees "the beginning of a constructive discussion."

But while Sloan is predicting that WGA members won't strike the moment their current contract runs out Halloween night, that's not to say they wouldn't walk out later. The point he was making, he said, is that for maybe the first time there "are signs of progress."

"I really don't think that our side is as dark and anti-union as the studios are being portrayed," he said, adding that his mother was a member of a teachers' union and his father was a machinist.

He also encouraged sympathy for innocent bystanders. "If you've got one or two writers on the show, you've got 150 other people who would still have to pay their mortgages," he said.

That a sticking point in negotiations between studios and writers is digital download revenue isn't surprising, considering writers believe they did not get a fair slice from DVD revenue, Sloan said. But he added that digital downloads don't amount to much.

He used the example of the MGM movie "The Princess Bride," which he said was the No. 1 download at iTunes for two weeks, though it only sold 5,000 downloads at $9.99 apiece, of which $7 goes to MGM.

The studios proposed early on a study to determine, among other issues, the fair value of digital downloads, though writers viewed such a study as a delay tactic. "It wasn't such a terrible idea, but the writers hated it," he said.

Sloan also gave attendees other insights into MGM's business, including the decision to give control of United Artists to Tom Cruise and Paula Wagner.

About the time that Cruise was having his falling-out with Paramount and Sumner Redstone, Sloan was meeting with former MGM owner Kirk Kerkorian, who was considering buying UA from MGM.

After the Redstone-Cruise feud was made public, Sloan wanted to issue a statement saying that MGM would be glad to work with Cruise. That desire led to much more than a mere statement of support, though.

Sloan also said that MGM is typically the seventh-place studio among the seven majors. "We need to show that MGM can get somewhere in the middle of the pack," which he guessed would make MGM a $12 billion company. Sony and others paid $5 billion for MGM in 2004.

MGM missed several trends, like satellite and cable TV, though it won't miss upcoming opportunities. "There's going to be more change in the next five years than occurred over the past 35," he said.

He called franchises "the base of any studio," which is why he signed Daniel Craig to do four more James Bond films and he's planning on resurrecting the "Fame," "Death Wish" and "Thomas Crown Affair" franchises.

MGM has no in-house production, which means Sloan can have a film made for $25 million that would cost $40 million at a big studio, he said.

"There's just so much money wasted when the studio is telling the creative team what to do all the time," he said.

Earlier Thursday, speaking from the sidelines of the conference, investor Strauss Zelnick said he's on the hunt for specific kinds of media companies to put money into, including business-to-business publishing, market research, interactive entertainment and service businesses related to the film and TV industries.

What the venture capitalist is not interested in is making an investment in a movie company.

"We are very selective about the sectors in the media in which we'll invest, and the movie business is not among them," he said.

Zelnick, who runs ZelnickMedia after having been CEO at BMG Entertainment and COO of 20th Century Fox, predicted anemic growth in the movie business owing mostly to ticket price increases.

"The wallet share related to any one entertainment medium is getting compressed and then you have some growth businesses like interactive entertainment," he said. "When you have a business growing 15% to 20% a year, certainly that will pressure pre-existing industries."

Zelnick, contrary to the view of others in the investment community, also said he still likes the music business. He said a company ZelnickMedia took control of in 2001, Columbia Music Entertainment, is profitable, in part owing to the fact that 10% of its revenue comes from digital distribution.

"Will people still consume music? Yes. Are they willing to pay for it? Yes. This space just needed to get a lot more efficient," he said.

Others in the ZelnickMedia portfolio include ITN Networks, Naylor Inc., OTX and Take-Two Interactive Software.