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Los Angeles Daily News, CA
Sept 26 2004
A movie mogul without a studio
Is Disney next for MGM's CEO?
By Andrew Ross Sorkin
The New York Times
LAS VEGAS -- Alex Yemenidjian, the chairman and chief executive of
Metro-Goldwyn-Mayer, was sitting at his private pool outside his
high-roller villa at the Bellagio Hotel and Casino here on Monday.
He had just struck a $5 billion deal to sell MGM, the Hollywood
studio famous for its roaring-lion mascot and film franchises
including James Bond, to Sony and a group of investors after an
agonizingly long auction.
But he wasn't interested in talking about the deal. He wanted to
discuss why he never wanted to sell the company in the first place
and why his boss, elusive billionaire Kirk Kerkorian, who controls
MGM and has now bought and sold the studio three times since 1969,
did not especially want to give it up, either.
"There is a perception out there that Kirk is a seller if somebody
gives him a good price," said Yemenidjian, cutting a 007-like figure
in a double-breasted blue blazer with a yellow silk handkerchief
protruding from the breast pocket. "That isn't true. I think it
bothers him that Hollywood thinks that he treated MGM as an
investment toy. Not one time did either Kirk or the board tell me, 'I
want you to clean this company up and prepare it for sale.' Not
once."
Yemenidjian, 48, has been dogged by his reputation as MGM's
flipper-in-chief ever since Kerkorian installed him as its boss in
1999. Back then, the company was beaten and battered, written off as
a has-been, a debt-laden stepchild of the studio that once produced
films like "Gone With the Wind" and "The Wizard of Oz." And when
Yemenidjian arrived on the scene, he was a virtual unknown in
Hollywood. If anything, he was considered Kerkorian's henchman, an
accountant by training whose experience was in deal making, not movie
making.
Yet within five and a half years, Yemenidjian turned around the
business by drastically scaling back the studio's productions,
scoring a few unexpected hits like the comedy "Barbershop" and the
documentary "Bowling for Columbine," and by milking its library of
more than 4,000 films for every last dollar of sales.
He won respect on Wall Street, if not fans among the Hollywood elite.
Then he performed the final scene of the script that had been written
by critics the day he arrived: He sold the studio. In doing so, he
made a bundle for Kerkorian -- who banked at least $2 billion -- as
well as a small fortune for the company's minority shareholders.
"Bringing an outsider's viewpoint to Hollywood may not have
necessarily endeared him to the agents, movie stars and the rest of
the quote-unquote Hollywood community, but from a shareholder's
standpoint, he's exactly what you'd want in the CEO of a publicly
held company," said Jack Liebau, the principal at Liebau Asset
Management, one of MGM's largest minority shareholders.
But as Yemenidjian leaned back in his faux 17th-century Tuscan chair,
he said he still wished he could have ordered a rewrite and made his
own blockbuster acquisitions instead of selling. "We tried to acquire
other companies and they weren't available," he said in a rare
interview. He ticked off a list of targets that he said he had
pursued vigorously: Vivendi Universal. Sony Pictures. Paramount
Pictures.
"There was nothing left to buy," he said with a shrug. "And we are
not fully integrated like Viacom and Time Warner and Disney and all
these companies. There was no place for us to go." So he negotiated
himself out of a job.
How Yemenidjian, who, like Kerkorian, is of Armenian descent, came to
become Kerkorian's top lieutenant, to run the last independent studio
in Hollywood and to sell it in a heated auction between Time Warner
and Sony could be its own dramatic release. There is even a potential
sequel: for all the sniping by critics in the movie industry,
Yemenidjian is being talked about as a possible successor to Michael
D. Eisner, who will step down as chief executive of the Walt Disney
Co. in 2006.
Yemenidjian was born in Argentina; his father was a shoemaker who had
fled Armenia. The family moved to Los Angeles when Alex was 13. He
did not speak English, but he was already brokering deals. When the
principal of the private Armenian school where he enrolled told him
he would have to be held back and start in seventh grade rather than
eighth grade because of a lack of English, Yemenidjian returned with
a counterproposal.
"I said, 'I'll make you a deal,"' he recalled. " 'I will do the first
semester of seventh grade, and, if I get straight A's, I will jump to
the second semester of eighth grade.' He went for it because he
thought there was no way I could do it."
Of course, Yemenidjian made good. And at school he met his wife,
Arda. They have two children -- a daughter, 23, and a son, 19.
Yemenidjian graduated from California State University, Northridge,
in 1977 and founded his own accounting firm, focusing on taxation, in
1981. A workaholic by nature -- "I don't do vacation very well," he
said -- he went to school at night to get a master's degree in
business taxation from the University of Southern California.
He worked during most of the 1980s as an accountant for Hollywood
clients like the "Entertainment Tonight" anchor Mary Hart. But, in
1989, Yemenidjian went to a lunch that would change his life. A
mutual friend of his and Kerkorian's, George Mason, a managing
director of Bear Stearns, planned for them to meet. "For me, it was
my opportunity to meet my idol," Yemenidjian said. "I had no idea
that this would turn out to be a disguised interview."
Two days later, he recounted, "Kirk asked me if I would take a leave
of absence from my firm for six months to work on a special project."
"He never told me what the project was, and I never asked,"
Yemenidjian said. "When I showed up on Jan. 1, 1990, I found out the
project was selling MGM."
That was the second time Kerkorian would sell MGM. He had bought it
in 1969, sold it to Ted Turner in 1986 and bought back a large chunk
of it only months later, when Turner's financing fell apart.
The second sale, with the help of Yemenidjian, was to the Italian
financier Giancarlo Parretti in 1990. But Kerkorian would buy it back
again in 1996.
Yemenidjian, who acknowledged that he lacked "any extensive
experience negotiating deals," took fast to the role of deal maker.
"Being with Kirk for 10 minutes is like going to Harvard for four
years," he said.
The two hit it off immediately, creating what friends and associates
describe as almost a father-son relationship. "He was the perfect man
for Kirk. Just perfect," said Mason, who plays a doubles tennis game
at Kerkorian's house every Sunday with Yemenidjian and other friends.
"People say Alex would throw himself off a cliff for Kirk. He's
always had that attitude."
Mason hesitated for a moment. "I don't know how perfect it is for
Alex," he added, "because when you're that anxious to please and you
don't want to make a mistake and you care so much and you fret if you
do screw up, it is very hard on you."
Kerkorian, 87, who has not given an interview to the news media in
decades, said through a spokeswoman, "Alex is one of the most
accomplished CEOs I have worked with, and I am very happy with what
he and his team have achieved at MGM."
Throwing himself into the role of Kerkorian's right-hand man,
Yemenidjian worked on his mentor's attempted takeover of Chrysler, an
effort to rescue Trans World Airlines and a bid for Pan Am. In 1995,
Kerkorian sent him to Las Vegas to become the president and chief
operating officer of the hotel and casino company now known as MGM
Mirage, asking him to help turn it around with the chairman, J.
Terrence Lanni.
He leapt at the chance. "To me, as long as I was doing what I was
doing for Kirk and for the company, I was very much driven by the
opportunity and the adrenaline," he said. "It's one of those things
where you don't have time to worry about whether you like Las Vegas.
I could have been in Timbuktu."
Even now, as he gives a tour of his ornate 5,000-square-foot villa on
the grounds of the Bellagio, where he is staying for a board meeting
of MGM Mirage, he can recount innumerable details of that experience.
"Even though I was working very hard, six days a week and very long
hours," he said, "every single morning that I woke up I felt like I
was on vacation."
But his Las Vegas act was cut short in 1999. Kerkorian had assigned
him to run an executive search to help him find a replacement for
Frank Mancuso, who was retiring as MGM's chief. Kerkorian rejected
all the candidates and gave the job to Yemenidjian, who had never
worked in movies.
It was an audacious move, one that Hollywood questioned immediately.
Sir Howard Stringer, the chairman of Sony of America who led the
purchase of MGM, acknowledged the resentment that Yemenidjian faced.
"Hollywood is not very kind to those who have not spent a lifetime on
Sunset Boulevard," he said.
Yemenidjian accepts his reputation as an outsider. "I think I know
what they think about me, but I really don't care," he said.
"Hollywood is a very strange environment. There's a lot of
insecurity. The system sort of breeds that insecurity."
For him, his audience is his shareholders. "That's who I care about,"
he said. (He does care about how he looks, though. He designs his own
clothes, including his trademark shirts with rounded collars.)
Knowing that he was inexperienced in Hollywood's ways, he first
looked for a chief operating officer who knew something about the
town. He settled on Chris McGurk, president and chief operating
officer at Universal Pictures, who warmed to him despite some initial
skepticism.
"He clearly was different than what I was used to dealing with,"
McGurk said. "Everybody I had dealt with who was running a studio or
wanted to run a studio was wearing a T-shirt or a tattered sweater
and wanted to be the antithesis of a business guy. But at the end of
the day he wasn't motivated by the kinds of things that can really
steer you wrong in this business: Getting your name on the front page
of Variety; having the biggest big box office total and market share
total at the end of the year; doing big producer deals with big
splashy names that end up breaking the bank. All those things didn't
matter to him. That was music to my ears."
The two went about shaking up MGM's business model. Out went
high-priced, risky picture deals. "We were within $100 million of
running out of money; in this business, that's a movie," Yemenidjian
said. The James Bond films, which had been released every two years,
were moved to a three-year schedule. Production budgets were cut.
The centerpiece of the turnaround was a renewed focus on eking out
additional sales from the company's library, typically an
afterthought at other studios. Bonuses were attached to sales of
DVDs, and marketing was redesigned. By 2003, the plan had succeeded.
They may not have created the next Miramax, but the company was no
longer bleeding.
Yemenidjian's all-business, tough-love approach rankled some within
and outside MGM. There were back-lot denizens who said his management
style, his constant push for profit and Hollywood's questions about
the studio's future kept it from getting the best films and people.
McGurk seemed to say as much. "The biggest issue we have had to
contend with from a production standpoint is that we're
resource-constrained versus the competition," he said. "We spend a
lot less on development, a lot less on production and a lot less on
marketing than our competitors. Sometimes it feels like we're going
out there with peashooters fighting against howitzers.
"But the way we dealt with that was trying to be much more
disciplined and smarter in the way we spend our money," McGurk added.
"We've been profitable every year."
To Yemenidjian, what matters most is that his plan worked. And he
said he has no regrets about his approach. "I don't believe in
democracy; I believe in a benevolent dictatorship," he said. "The
process of making decisions by building consensus is for Washington."
In fact, he said one of his biggest regrets was that he did not
assert himself even more in the creative process. "I wish I had
followed my instincts earlier at MGM Studios," he said. "I want to be
very careful how I say this. I think I always had a very specific
creative point of view. During the beginning of my tenure I tended to
yield more to the consensus. Toward the end, the later half of the
past five years, I was much more comfortable with my creative
instincts. Does that make sense?"
Even though he says that "I love the movie business" -- his favorite
film is "The Godfather" -- and that "I love my job," there are some
who are not so sure.
"We never discussed this, but I think once he got into it, it wasn't
fun; it wasn't as rewarding as the other job," said Mason, referring
to Yemenidjian's job in Las Vegas. "There's so much luck involved in
the movie business, and a person who wants two plus two to be four
has a hard time with that."
What will Yemenidjian do next? Besides the talk about his being a
dark-horse candidate for Eisner's job at Disney, there are whispers
that he may eventually take over Kerkorian's casino empire,
especially if the current boss, Lanni, retires and runs for governor
of Nevada, as some have speculated. (Lanni says: "The only thing I'm
running for in my life will be for the hills. I don't know what Alex
will do.")
Then there is the possibility that Yemenidjian will leave Kerkorian's
nest.
"I am not a caretaker," he said. "I either have to be turning around
a mess or once something is turned around, growing through
acquisitions. But watching the grass grow is something I don't do
very well. Do I think there's another challenge for me to face? Yeah,
I think so. There'll be a third act. I just don't know what it is
going to be."
Sept 26 2004
A movie mogul without a studio
Is Disney next for MGM's CEO?
By Andrew Ross Sorkin
The New York Times
LAS VEGAS -- Alex Yemenidjian, the chairman and chief executive of
Metro-Goldwyn-Mayer, was sitting at his private pool outside his
high-roller villa at the Bellagio Hotel and Casino here on Monday.
He had just struck a $5 billion deal to sell MGM, the Hollywood
studio famous for its roaring-lion mascot and film franchises
including James Bond, to Sony and a group of investors after an
agonizingly long auction.
But he wasn't interested in talking about the deal. He wanted to
discuss why he never wanted to sell the company in the first place
and why his boss, elusive billionaire Kirk Kerkorian, who controls
MGM and has now bought and sold the studio three times since 1969,
did not especially want to give it up, either.
"There is a perception out there that Kirk is a seller if somebody
gives him a good price," said Yemenidjian, cutting a 007-like figure
in a double-breasted blue blazer with a yellow silk handkerchief
protruding from the breast pocket. "That isn't true. I think it
bothers him that Hollywood thinks that he treated MGM as an
investment toy. Not one time did either Kirk or the board tell me, 'I
want you to clean this company up and prepare it for sale.' Not
once."
Yemenidjian, 48, has been dogged by his reputation as MGM's
flipper-in-chief ever since Kerkorian installed him as its boss in
1999. Back then, the company was beaten and battered, written off as
a has-been, a debt-laden stepchild of the studio that once produced
films like "Gone With the Wind" and "The Wizard of Oz." And when
Yemenidjian arrived on the scene, he was a virtual unknown in
Hollywood. If anything, he was considered Kerkorian's henchman, an
accountant by training whose experience was in deal making, not movie
making.
Yet within five and a half years, Yemenidjian turned around the
business by drastically scaling back the studio's productions,
scoring a few unexpected hits like the comedy "Barbershop" and the
documentary "Bowling for Columbine," and by milking its library of
more than 4,000 films for every last dollar of sales.
He won respect on Wall Street, if not fans among the Hollywood elite.
Then he performed the final scene of the script that had been written
by critics the day he arrived: He sold the studio. In doing so, he
made a bundle for Kerkorian -- who banked at least $2 billion -- as
well as a small fortune for the company's minority shareholders.
"Bringing an outsider's viewpoint to Hollywood may not have
necessarily endeared him to the agents, movie stars and the rest of
the quote-unquote Hollywood community, but from a shareholder's
standpoint, he's exactly what you'd want in the CEO of a publicly
held company," said Jack Liebau, the principal at Liebau Asset
Management, one of MGM's largest minority shareholders.
But as Yemenidjian leaned back in his faux 17th-century Tuscan chair,
he said he still wished he could have ordered a rewrite and made his
own blockbuster acquisitions instead of selling. "We tried to acquire
other companies and they weren't available," he said in a rare
interview. He ticked off a list of targets that he said he had
pursued vigorously: Vivendi Universal. Sony Pictures. Paramount
Pictures.
"There was nothing left to buy," he said with a shrug. "And we are
not fully integrated like Viacom and Time Warner and Disney and all
these companies. There was no place for us to go." So he negotiated
himself out of a job.
How Yemenidjian, who, like Kerkorian, is of Armenian descent, came to
become Kerkorian's top lieutenant, to run the last independent studio
in Hollywood and to sell it in a heated auction between Time Warner
and Sony could be its own dramatic release. There is even a potential
sequel: for all the sniping by critics in the movie industry,
Yemenidjian is being talked about as a possible successor to Michael
D. Eisner, who will step down as chief executive of the Walt Disney
Co. in 2006.
Yemenidjian was born in Argentina; his father was a shoemaker who had
fled Armenia. The family moved to Los Angeles when Alex was 13. He
did not speak English, but he was already brokering deals. When the
principal of the private Armenian school where he enrolled told him
he would have to be held back and start in seventh grade rather than
eighth grade because of a lack of English, Yemenidjian returned with
a counterproposal.
"I said, 'I'll make you a deal,"' he recalled. " 'I will do the first
semester of seventh grade, and, if I get straight A's, I will jump to
the second semester of eighth grade.' He went for it because he
thought there was no way I could do it."
Of course, Yemenidjian made good. And at school he met his wife,
Arda. They have two children -- a daughter, 23, and a son, 19.
Yemenidjian graduated from California State University, Northridge,
in 1977 and founded his own accounting firm, focusing on taxation, in
1981. A workaholic by nature -- "I don't do vacation very well," he
said -- he went to school at night to get a master's degree in
business taxation from the University of Southern California.
He worked during most of the 1980s as an accountant for Hollywood
clients like the "Entertainment Tonight" anchor Mary Hart. But, in
1989, Yemenidjian went to a lunch that would change his life. A
mutual friend of his and Kerkorian's, George Mason, a managing
director of Bear Stearns, planned for them to meet. "For me, it was
my opportunity to meet my idol," Yemenidjian said. "I had no idea
that this would turn out to be a disguised interview."
Two days later, he recounted, "Kirk asked me if I would take a leave
of absence from my firm for six months to work on a special project."
"He never told me what the project was, and I never asked,"
Yemenidjian said. "When I showed up on Jan. 1, 1990, I found out the
project was selling MGM."
That was the second time Kerkorian would sell MGM. He had bought it
in 1969, sold it to Ted Turner in 1986 and bought back a large chunk
of it only months later, when Turner's financing fell apart.
The second sale, with the help of Yemenidjian, was to the Italian
financier Giancarlo Parretti in 1990. But Kerkorian would buy it back
again in 1996.
Yemenidjian, who acknowledged that he lacked "any extensive
experience negotiating deals," took fast to the role of deal maker.
"Being with Kirk for 10 minutes is like going to Harvard for four
years," he said.
The two hit it off immediately, creating what friends and associates
describe as almost a father-son relationship. "He was the perfect man
for Kirk. Just perfect," said Mason, who plays a doubles tennis game
at Kerkorian's house every Sunday with Yemenidjian and other friends.
"People say Alex would throw himself off a cliff for Kirk. He's
always had that attitude."
Mason hesitated for a moment. "I don't know how perfect it is for
Alex," he added, "because when you're that anxious to please and you
don't want to make a mistake and you care so much and you fret if you
do screw up, it is very hard on you."
Kerkorian, 87, who has not given an interview to the news media in
decades, said through a spokeswoman, "Alex is one of the most
accomplished CEOs I have worked with, and I am very happy with what
he and his team have achieved at MGM."
Throwing himself into the role of Kerkorian's right-hand man,
Yemenidjian worked on his mentor's attempted takeover of Chrysler, an
effort to rescue Trans World Airlines and a bid for Pan Am. In 1995,
Kerkorian sent him to Las Vegas to become the president and chief
operating officer of the hotel and casino company now known as MGM
Mirage, asking him to help turn it around with the chairman, J.
Terrence Lanni.
He leapt at the chance. "To me, as long as I was doing what I was
doing for Kirk and for the company, I was very much driven by the
opportunity and the adrenaline," he said. "It's one of those things
where you don't have time to worry about whether you like Las Vegas.
I could have been in Timbuktu."
Even now, as he gives a tour of his ornate 5,000-square-foot villa on
the grounds of the Bellagio, where he is staying for a board meeting
of MGM Mirage, he can recount innumerable details of that experience.
"Even though I was working very hard, six days a week and very long
hours," he said, "every single morning that I woke up I felt like I
was on vacation."
But his Las Vegas act was cut short in 1999. Kerkorian had assigned
him to run an executive search to help him find a replacement for
Frank Mancuso, who was retiring as MGM's chief. Kerkorian rejected
all the candidates and gave the job to Yemenidjian, who had never
worked in movies.
It was an audacious move, one that Hollywood questioned immediately.
Sir Howard Stringer, the chairman of Sony of America who led the
purchase of MGM, acknowledged the resentment that Yemenidjian faced.
"Hollywood is not very kind to those who have not spent a lifetime on
Sunset Boulevard," he said.
Yemenidjian accepts his reputation as an outsider. "I think I know
what they think about me, but I really don't care," he said.
"Hollywood is a very strange environment. There's a lot of
insecurity. The system sort of breeds that insecurity."
For him, his audience is his shareholders. "That's who I care about,"
he said. (He does care about how he looks, though. He designs his own
clothes, including his trademark shirts with rounded collars.)
Knowing that he was inexperienced in Hollywood's ways, he first
looked for a chief operating officer who knew something about the
town. He settled on Chris McGurk, president and chief operating
officer at Universal Pictures, who warmed to him despite some initial
skepticism.
"He clearly was different than what I was used to dealing with,"
McGurk said. "Everybody I had dealt with who was running a studio or
wanted to run a studio was wearing a T-shirt or a tattered sweater
and wanted to be the antithesis of a business guy. But at the end of
the day he wasn't motivated by the kinds of things that can really
steer you wrong in this business: Getting your name on the front page
of Variety; having the biggest big box office total and market share
total at the end of the year; doing big producer deals with big
splashy names that end up breaking the bank. All those things didn't
matter to him. That was music to my ears."
The two went about shaking up MGM's business model. Out went
high-priced, risky picture deals. "We were within $100 million of
running out of money; in this business, that's a movie," Yemenidjian
said. The James Bond films, which had been released every two years,
were moved to a three-year schedule. Production budgets were cut.
The centerpiece of the turnaround was a renewed focus on eking out
additional sales from the company's library, typically an
afterthought at other studios. Bonuses were attached to sales of
DVDs, and marketing was redesigned. By 2003, the plan had succeeded.
They may not have created the next Miramax, but the company was no
longer bleeding.
Yemenidjian's all-business, tough-love approach rankled some within
and outside MGM. There were back-lot denizens who said his management
style, his constant push for profit and Hollywood's questions about
the studio's future kept it from getting the best films and people.
McGurk seemed to say as much. "The biggest issue we have had to
contend with from a production standpoint is that we're
resource-constrained versus the competition," he said. "We spend a
lot less on development, a lot less on production and a lot less on
marketing than our competitors. Sometimes it feels like we're going
out there with peashooters fighting against howitzers.
"But the way we dealt with that was trying to be much more
disciplined and smarter in the way we spend our money," McGurk added.
"We've been profitable every year."
To Yemenidjian, what matters most is that his plan worked. And he
said he has no regrets about his approach. "I don't believe in
democracy; I believe in a benevolent dictatorship," he said. "The
process of making decisions by building consensus is for Washington."
In fact, he said one of his biggest regrets was that he did not
assert himself even more in the creative process. "I wish I had
followed my instincts earlier at MGM Studios," he said. "I want to be
very careful how I say this. I think I always had a very specific
creative point of view. During the beginning of my tenure I tended to
yield more to the consensus. Toward the end, the later half of the
past five years, I was much more comfortable with my creative
instincts. Does that make sense?"
Even though he says that "I love the movie business" -- his favorite
film is "The Godfather" -- and that "I love my job," there are some
who are not so sure.
"We never discussed this, but I think once he got into it, it wasn't
fun; it wasn't as rewarding as the other job," said Mason, referring
to Yemenidjian's job in Las Vegas. "There's so much luck involved in
the movie business, and a person who wants two plus two to be four
has a hard time with that."
What will Yemenidjian do next? Besides the talk about his being a
dark-horse candidate for Eisner's job at Disney, there are whispers
that he may eventually take over Kerkorian's casino empire,
especially if the current boss, Lanni, retires and runs for governor
of Nevada, as some have speculated. (Lanni says: "The only thing I'm
running for in my life will be for the hills. I don't know what Alex
will do.")
Then there is the possibility that Yemenidjian will leave Kerkorian's
nest.
"I am not a caretaker," he said. "I either have to be turning around
a mess or once something is turned around, growing through
acquisitions. But watching the grass grow is something I don't do
very well. Do I think there's another challenge for me to face? Yeah,
I think so. There'll be a third act. I just don't know what it is
going to be."