As the chairmen and co-CEOs of Warner Bros., Bob Daly and Terry Semel are used to having their movies talked about. What they’re not used to is having their movies sniped about. But business has been anything but usual since last November, when Time Warner chairman Gerald M. Levin rewarded their 15-year stewardship of Warner Bros. by entrusting the team with the troubled Warner Music division. The promotion was all the sweeter because they replaced a longtime rival, former HBO chief Michael Fuchs, whose tumultuous six-month tenure atop Warner Music ended with his dismissal. 1996 should have been a banner year for the duo and may still end up that way. But in recent months, as their sphere of influence has expanded, their studio has stumbled.
The decline has been all the more surprising following a year in which the sequels Batman Forever and Ace Ventura: When Nature Calls powered Warner into second place behind Buena Vista in market share. Daly and Semel have watched Warner fall to fifth this year, behind Buena Vista, Sony, Universal, and even the resurgent MGM. That’s quite a comedown for a team that’s used to finishing first or second. So far this year, the usually prolific division has released just four movies — three dismal duds (Sandra Bullock’s Two If by Sea, Tom Arnold’s Big Bully, and Sharon Stone’s Diabolique) and one modest but costly hit, Executive Decision.
In separate interviews, Daly and Semel insist that the recent slowdown is strategic and point to the record first-quarter earnings of Warner’s Filmed Entertainment division to support their belief that the studio will remain one of Hollywood’s most successful and profitable. ”The marketplace [this spring] looked much more crowded and tougher,” says Semel. ”We both felt it was a good time to go a little bit more cautiously.” So instead of the 9 films that Warner released in the first half of 1995, just 6 will open in the first six months of 1996, followed by 18 in the second half of the year.
But while the performance of the past few months may look like a statistical blip by year’s end, it has unsettled many on and off the Warner lot who have come to expect a more predictable performance from Daly and Semel. Moreover, some analysts note that the record first-quarter earnings include stellar results from the company’s TV division and late-1995 hits (including Heat and Grumpier Old Men).
The film studio ”has had a down year; they have been operating in a difficult environment,” observes Michael Wolf, a partner and management consultant with Booz, Allen & Hamilton who specializes in entertainment companies. ”There is a huge glut of product.” But while an oversupply of movies may have led to flop upon flop this spring, films like Two If by Sea probably would have bombed even if they were competing with Mystery Science Theater 3000 rejects.
Daly and Semel have always thrived on their complementary styles. Daly, 58, is a buttoned-down executive who avoids the Hollywood limelight; Semel, 52, is a skilled charmer whose friends include MCA president Ron Meyer and producers Peter Guber and Joel Silver. But both are bottom liners who have run Warner by keeping the pipeline full, the press at a distance, and their own troops in line. And both argue that critics who say they’re overextended don’t understand the way they work.