Businessweek Archives

Will Flipper Play In Estonia?


News: Analysis & Commentary

WILL FLIPPER PLAY IN ESTONIA?

Why John Kluge is on a buying binge in Hollywood

John W. Kluge didn't get to be one of the richest men in America by being stupid. A onetime Ford assembly-line worker, he invested in a Washington radio station in 1946 and later a string of TV stations. That made his fortune in a big way in 1984, when he sold the TV stations to Rupert Murdoch for $2 billion. He was among the first to jump into cellular, too--picking up a cell-phone operation in 1983, which he sold three years later for a cool $1.6 billion.

Yet for all his lucrative dealmaking, the 81-year-old Kluge has never managed to conquer Hollywood. He has lost an estimated $275 million on Orion Pictures Corp., the production outfit he began investing in during the mid-1980s--only to see it sink into bankruptcy. Orion emerged from Chapter 11 in 1992, but it still gushes red ink. So why would Kluge's Metromedia International Group Inc. swoop in on Dec. 21 to bid $115 million for debt-plagued Samuel Goldwyn Co.? Or, among other apparently oddball deals, agree on Nov. 30 to pay an estimated $533 million for Alliance Entertainment Corp., a distributor of golden-oldie music by the likes of Mel Torme and Rosemary Clooney? The answer: Eastern Europe.

PICK OF SHOWS. Since the Berlin Wall came down, Kluge and his aides have been aggressively buying up licenses to provide wireless cable TV, radio, and telephones in such places as Riga, Tallinn, and Nizhny Novgorod. Now, Kluge's troops are hustling to line up the programming they intend to sell to these new customers. If it outbids Dutch media giant Polygram for the Samuel Goldwyn studio, Metromedia will gain the rights to a library of 1,100 films, including such classics as Guys and Dolls and Pride of the Yankees, as well as some 700 episodes of TV programs such as Flipper and Gentle Ben.

Will they line up in Estonia to see Flipper? Hard to say. But Kluge and company certainly think so. In a flurry of deals since August, 1994, Metromedia has also snapped up two smallish film companies. If you add in Orion and Goldwyn, the deals would give Metromedia rights to more than 2,100 films and television shows.

One problem: Much of Kluge's new empire isn't making any money. In a recent filing with the Securities & Exchange Commission, Metromedia acknowledged that its collection of companies lost $51.2 million in the first six months of 1995, on sales of $179.9 million. Moreover, the company is clogged with $399 million in short-term and long-term debt.

Kluge isn't talking about how he intends to turn his money-losers around. And he shows no sign of altering his strategy. Associates say Metromedia continues to bid for licenses not only in Eastern Europe but also in Asia. The company already ships such U.S. programs as MTV, Country Music Television, and the Discovery Channel to wireless cable-TV subscribers in such cities as Moscow, Bucharest, and Tashkent. It also owns radio stations in Moscow, Budapest, and elsewhere, and is building wireless phone systems in other regions.

Looking for financial stability, last April Kluge merged Metromedia with Actava Group Inc., a mishmash of companies formerly known as Fuqua Industries. Its chairman, John D. Phillips, is a 52-year-old turnaround specialist who has sold off everything but Actava's Snapper Power Equipment unit. An executive whose tastes run to denim and Harley Davidsons, Phillips will act as CEO of Kluge's entertainment companies from from Actava's Atlanta headquarters.

As a source of new programming, Kluge is counting on Motion Picture Corp. of America (MPCA), a production house he agreed on Nov. 27 to buy for $32.5 million in stock and cash. MPCA, which produced such low-budget hits as Dumb and Dumber and Threesome, plans to turn out 14 to 16 films next year for Metromedia. If Metromedia wins Goldwyn, which specializes in art films such as The Madness of King George, it would get ownership of a dozen other films in the works, including American Buffalo with Dustin Hoffman.

Can a library of movies and some startup production help put Kluge's entertainment biz in the black? Possibly. More likely, they will keep him in the game long enough to make back the losses from his Orion debacle--and find another, bigger company to buy him out. After all, some of John Kluge's shrewdest moves have come from knowing when to sell.By Ronald Grover in Los AngelesReturn to top


Video Game Avenger
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus