A Swift, Sad Ending for Hollywood Drama

It has become one of Hollywood’s most predictable scripts.

An outsider, usually a foreign company, spends billions of dollars to acquire an entertainment empire, full of dreams of meshing technology with the “content” Hollywood churns out in the form of films, TV shows and music. By the final act, the chastened buyer is in full retreat.

Add to the list 45-year-old French executive Jean-Marie Messier. He formally lost his job Tuesday as head of Vivendi Universal, known for “The Mummy” films, TV shows such as “Law & Order,” Universal Studios theme parks and a roster of top recording artists that includes Eminem. Messier told his staff in a message he stepped down “to restore peace and calm” at the company.

Vivendi joins a long list of scorched buyers, including Japanese electronics manufacturers Matsushita Electric Industrial Co. and Sony Corp., Canada’s Seagram Co. and Internet provider America Online Inc., whose oversized ambitions about entertainment and technological synergies crumbled because of bad planning, poor management or a failure to figure out Hollywood’s quirky business culture

“Plus ca change, plus c’est la meme chose--the more things change, the more they stay the same,” said New York money manager Mario Gabelli.

Or, as Kaufman Bros. analyst Paul Kim put it, “It’s another case of a foreigner coming in like a drunk and overpaying for every asset.”

The dramas usually play out for several years, which is why Messier’s downfall was unusually swift, coming just 19 tumultuous months after Vivendi consummated a deal to buy Universal parent Seagram. Indeed, until recently Messier insisted he would stay in the job for as long as 15 years.

At a May retreat in Orlando, Fla., Messier reminded executives that his boyhood home was nestled in the French Alps. Messier promised that even as company shareholders and directors were mobilizing against him, he would “stand tall in strong winds,” like the mountain climbers he knew growing up.

Instead, Messier was buried under an avalanche of blunders. In the message to his employees, Messier said, “Mistakes have been made, but they can all be corrected; and that’s what I had started to do.”

Messier talked a good game with his French-accented English. He would tell anyone who would listen how he planned to move the staid entertainment businesses of Universal Studios Inc. into an untethered wireless world in which people could download Shania Twain’s music or scenes from “The Scorpion King” as easily as they dial a friend’s phone number.

His decision to transform Vivendi, a staid French waste-management and water company, into a synergistic entertainment and technology company through a spending spree of more than $60 billion came the day in January 2000 he learned that America Online was buying Time Warner.

Universal’s entertainment operation of late has performed well, with a stellar box-office year in 2001 and a music business that dominates the charts.

But Messier’s larger vision required a huge leap of faith that few investors were willing to make. They beat down the company’s stock price from the beginning of the deal, expressing frustration with both the lack of a concrete strategy and the dearth of numbers that conform to U.S. accounting standards.

All the while, Messier continued to talk about telephones being used for entertainment and Internet venture Vizzavi, a portal that once was the cornerstone of his futuristic strategy but proved a financial dud.

Compounding Messier’s problems was a combination of hubris and an insatiable desire to promote himself.

Messier wrote a 247-page autobiography published in 2000 in France titled “J6M.com.” That stood for “Jean-Marie Messier, Moi-Meme, Maitre du Monde” or “Jean-Marie Messier, Me, Myself, Master of the World.” Although Messier insisted that the title was playful, critics nonetheless said it captured what they see as an oversized ego.

Messier continually irritated the French, once joking that his homeland was “a small exotic country.” He fired popular French TV executive Pierre Lescure, head of Canal Plus, making the firing an issue in France’s presidential election.

Last year, Messier moved to New York and began referring to himself as a New Yorker to tweak the French media.

He did indeed launch himself energetically into the cultural and civic life of his adopted city. In less than a year in Gotham, Messier joined the board of the Whitney Museum of American Art and reportedly is under consideration for a spot on the board of the Metropolitan Opera.

His wife, Antoinette Messier, is a new board member of the New York Philharmonic. Messier also became chairman of the media center of the Museum of Television and Radio in New York.

But Messier, like other corporate chieftains, was unable to conquer the economics of media conglomeration and the notion of synergies.

AOL Time Warner Inc. so far has yielded few synergies and rewards for investors. The company announced a $54-billion loss in its last quarter in what amounted to a dramatic concession that the deal hasn’t worked as planned.

Although Sony is having a successful year at the box office, the company has struggled for most of its 13 years in Hollywood to smoothly run entertainment operations that include Columbia Pictures. Sony has been burdened by management turmoil, big losses and gulfs in the corporate cultures of its American executives and their Japanese bosses. Sony’s predecessor, soft drink giant Coca-Cola Co., thought it could exploit its consumer marketing prowess with Columbia, but it also couldn’t make it work.

Still, nowhere is the issue of outsiders more problematic than at Universal, where three buyers in 12 years have owned the studio.

Matsushita Electric Industrial in the early 1990s failed to mesh its electronics operations with Universal’s films, TV shows and music.

When Seagram took over in 1995, it wanted to move from slow-growth operations such as beverages and investments in chemicals into entertainment, especially music, that it envisioned would prove a lucrative move when new technologies developed.

Seagram scion Edgar Bronfman Jr., who oversaw the entertainment operations as Seagram’s chief executive, grew so disenchanted with the risky, unpredictable entertainment business that he once called Hollywood “a dumb town” in an interview. The Bronfmans sold Seagram to Vivendi in 2000.

Messier also failed to show Wall Street he could mature from raw deal maker to the kind of chief executive who could run an operation. As he came under fire, Messier tried to appease investment constituents in the U.S. and Europe, despite their vastly different agendas.

U.S. investors were wary of Messier’s plunge into telecommunications. They wanted him to shed Vivendi’s waste-management and water utility to focus on the entertainment operations. European investors were skeptical of Messier’s plunge into Hollywood and the Americanization of his company, especially after he moved to New York.

“He was trying to straddle two worlds,” money manager Gabelli said.

Messier also proved better at buying assets than running them, adding such diverse holdings as publisher Houghton Mifflin Co. and the MP3.com online music service, both of which investors questioned.

What’s more, he failed to manage Vivendi’s increasing debt. That became even more difficult amid a slowing economy and a telecommunications industry free fall.

The company spent $34 billion to buy Seagram and gain full control of French TV giant Canal Plus. The debt level was exacerbated by the $11-billion acquisition of the film and TV assets of Barry Diller’s USA Networks.

“As long as the market was willing to lend, by buying bonds and stock, it was OK,” analyst Kim said.

“But when the music stopped, they went into a death spiral, which is where we are now.”