by Connie Bruck
In 1984 and again in 1985, Wasserman held merger talks with the electronics giant RCA, the owner of NBC. Recalling these talks, Sheinberg said that the RCA chairman, Thornton Bradshaw, had been eager for the merger. A management structure had been worked out in which Wasserman would be chairman of the executive committee of the merged companies, and Sheinberg would report to him. Then, after many meetings, Sheinberg continued, the RCA head took out of his pocket a table of organization that showed Sheinberg reporting through him. The sudden shift, Sheinberg felt, did not augur well for his future. “Lew put his arm around me,” Sheinberg said, remembering what was a somewhat rare physical gesture. ‘This isn’t going to happen,’ he said.” The merger talks ended. So, the template seemed to be set: Wasserman would make no deal where Sheinberg’s position was not protected.
Despite the fact that MCA had been a public company for roughly thirty years, it had so much the ethos of a family business that some who were close to it referred to it at times as Wasserman & Son. This old-fashioned sense of a company handed down was strong in Wasserman. “Who’s minding the store?” he would sometimes ask. And if Sheinberg was away, Wasserman made sure he was there. Still, the relationship between the two men was hardly uncomplicated. Wasserman knew that his choice of Sheinberg was not a widely popular one—beginning, of course, with Jules Stein. There were a number of MCA executives who thought of themselves as Wasserman people, and for most of them, Sheinberg would always be an inadequate student of the master. While Wasserman was smooth and polished, Sheinberg was rough and prickly. He leavened his acerbity with a remarkable candor, and sometimes odd, amusing behavior (in the late afternoon, if he was in a particularly good mood, he might open his office door and howl into the corridor). Few disputed his intellect, or his understanding of the business, or his fundamental decency. Still, none of his positive traits made Wasserman’s diehard followers warm to him. They even disparaged Sheinberg’s rages as a rank imitation—and they did not accept them as his rightful province. “It was one thing to be screamed at by the god of this company, another, by the pretender,” Ziontz commented. In the seventies, especially, some MCA executives believed that Wasserman realized he had made a mistake in his choice of a successor, and would rectify it. Wasserman heard the critics—they were numerous—but he never wavered in his support of Sheinberg.
For his part, Sheinberg seemed to revere Wasserman, and he certainly understood why people might view him in a different light. “There is only one Lew Wasserman,” Sheinberg would sometimes comment, with a trace of ruefulness. He also said, “Anyone who tries to measure up to him is destined to failure—as I, for one, can certainly tell you.” He suggested that there was a reservoir of deep affection beneath the cool, businesslike surface of their relationship, and he referred to Wasserman on more than one occasion as his “surrogate father.” Still, Sheinberg had considerable ego, and—as he was president, after all—he wanted to come into his own. Ziontz, who dealt a great deal with both men through the seventies and eighties, recalled that Sheinberg was extremely deferential to Wasserman in his early years as president. He tried so hard to emulate Wasserman that he went for several years without taking a single vacation. But, little by little, he began to assert himself. “My reporting lines were always to Lew,” Ziontz said. “With Lew, knowledge was power, and you would never run the risk that Lew would find out from a third party something that he could have found out from you sooner. But now Sid wanted me to report to him as well.” This posed a dilemma for Ziontz. On one occasion, he recalled, he had phoned Wasserman with important news about an acquisition they were attempting, and was relieved to find that Wasserman and Sheinberg were having lunch together in the commissary, as they did most days. Great! he thought. And when Wasserman picked up the phone at his table, he delivered the news, and—hearing Sheinberg’s voice in the background—was satisfied that he had met his dual obligation. But when he returned to his office, he received a call from Sheinberg, who upbraided him at length for not having communicated with him directly.
Naturally, Wasserman gave no public hint of any jealous retention of power. “Sid runs the company; the only time he will discuss an idea with me is if he wants my opinion,” Wasserman pointedly told reporter Geraldine Fabrikant of the New York Times in October 1985. But the fact that he never ceded the title of chief executive officer—Sheinberg remained, always, chief operating officer—revealed Wasserman’s unwillingness to relinquish control, and the tensions, however subliminal, that must have existed between the two men. And the titles reflected the reality at MCA; Sheinberg might have the operating responsibility, day to day, but when it came to any major strategic move, Wasserman had the decisive vote. “Sid seemed always so agitated and so frustrated for a guy who was one of the biggest in the business,” Michael Fuchs said. “Lew kept him down. Sid was the chained dog, Lew, the emperor, in the background behind those big glasses—every bit as nasty as Sid, but you didn’t see it.”
By the mid-eighties, though, Sheinberg began to exercise his operating powers more ambitiously. He changed the way divisions accounted for their profits, so that each one had a clear bottom line (before, their profits were sometimes intermingled, and only Wasserman could penetrate the corporate thicket). He hired several new division heads—among them, Tom Pollock, the lawyer whose deal papers had so enraged Wasserman that he’d hurled them across his office. Pollock was to run the Universal studio, and he said later that he believed that his job, among other things, was “to bring the film division into the modern world from an economic standpoint. Which meant, you attract the film-makers to make the movies—and if you have to make unusual deals, you do.” (Even after he joined the company, Pollock said, Wasserman and he never discussed the Raiders deal. “I mean, why would I want to have that conversation with Lew?”) During the next few years, Pollock brought Ron Howard, Brian Grazer, Martin Scor-sese, and Ivan Reitman to Universal. And Sheinberg made a very public, pronounced change in the company’s approach to acquisitions. In February 1987, he told Fabrikant in the New York Times, “Our view of acquisitions was not necessarily a proper one. I think we recognize that the price of passing on all deals is that history is likely to pass you by. In a sense, I think the world around us changed.” MCA acquired WOR-TV, a New York area independent television station; a toy-maker, LJN Toys; and a 50 percent stake in Cineplex Odeon Corporation, a Canadian theater chain with many theaters in the U.S.
However, its most aggressive acquisition by far was in the music business. MCA Records historically had been a weak division, but it became profitable in the mid-eighties under the leadership of Irving Azoff—though it was also plagued by scandal in a mob-related investigation by the U.S. Attorney’s Office in Los Angeles. In 1989, Azoff resigned. And in early 1990, Sheinberg was negotiating with his friend David Geffen, the legendary music producer, to acquire Geffen Records. The terms were set, Geffen recalled, and he was meeting with Wasserman and Sheinberg at the offices of MCA’s lawyers, Rosenfeld, Meyer & Susman. Now, all of a sudden, Geffen continued, “there were seventeen new things we had never discussed before. Lew screamed and got up and walked around, like he was going to leave the room. My lawyer was going through the roof. I said to Lew, ‘Let me understand this. Every one of these points is take it or leave it?’ He said yes.
“I went out to the corridor. I said to my chief financial officer, what does it mean in terms of dollars? He said he thought, at the most, $1 million. I went back in. I said to Lew, ‘Every single one of these is important to you?’
“ ‘Every single one.’
“ ‘And if I say yes, we’ve got a deal?’
“ ‘Yes.’
“ ‘Okay. I say yes.’ ”
In March 1990, MCA acquired Geffen Records, for 10 million shares of MCA stock, valued at the time at about $545 million. Geffen was willing to do a deal for stock, not cash, because he was convinced that the status quo at MCA would not be maintained for long. In the meantime, Geffen said, he felt comfortable be
ing with MCA. “I thought, I’ll be safe here—Lew and Sid would not do anything dishonest. That company was run honestly and decently.” Pleased as he was with the deal, he was convinced that if he had not made every concession at the very end, it would never have happened—and that Wasserman’s performance that day was emblematic. Pointing to all MCA’s abortive deals, Geffen said, “Sid wanted to make acquisitions, but he had to go to dad. And Lew was stuck in time. If you buy all of Decca-Universal, with some 400 acres, for $11 million, how do you buy anything else? Lew could say he didn’t do these deals out of loyalty to Sid—but he didn’t let Sid be CEO. I think he didn’t do them because of his unwillingness to be wrong. As long as he didn’t do these things, he wouldn’t be wrong.”
Now, MCA had done a major deal, finally—but that still did not resolve the existential questions hovering about the company. Geffen was hardly alone in his assessment that change at MCA was overdue. The market’s view had been illustrated quite dramatically in June 1987, when Wasserman was hospitalized for colon surgery—and the stock rose from $48 a share to more than $60 on the speculation that he might die or be forced to retire. (Though it did not become public at the time, Wasserman nearly did die; a nurse inserted a thermometer in his mouth when he was groggy, and he bit down so hard that he broke it, ingesting shards of glass.) Several corporate raiders were rumored then to be buying the stock—among them, Ronald Perelman, who had accomplished his hostile takeover of Revlon with the help of Milken’s financing; Nelson Peltz, another Milken protégé, who had taken over Triangle Industries; and Denver oilman Marvin Davis, former owner of Twentieth Century-Fox. Even after Wasserman had recovered and returned to work, heavy trading in MCA’s stock continued, causing some observers to predict that a battle for control was inevitable. In U.S. News & World Report in September 1987, Harold Vogel, entertainment analyst for Merrill Lynch, predicted that skirmishes over control of MCA would continue until some major change occurred. He also remarked that if Wasserman wanted to avoid MCA’s being taken over by a raider (who would find it more profitable to break it up than keep it whole), he might “place it in long-term hands the same way Leonard Goldenson did when he merged ABC with Capital Cities.”
For Wasserman, the idea of MCA being raided was anathema. MCA had adopted the usual takeover defenses; but even after that, MCA stock rose another 13 percent. Over the next couple of years, however, the takeover mania cooled somewhat; Milken, its preeminent financier, went off to jail, the over-leveraged acquisitions he and others had backed began to take their toll, and the poor economic climate made it more difficult to finance transactions of size. So the threat of a hostile takeover of MCA was not as serious for the moment; but it would probably become so again upon Wasserman’s death. Wasserman continued to explore his options. One prospective partner with whom he had discussions was Capital Cities/ABC. And in the summer of 1990, he had merger talks with the company that had been MCA’s longtime ally and partner, Gulf & Western, now renamed Paramount Communications. Paramount was a recently spurned suitor, having tried and failed to break up the Time Warner merger and win Time, Inc., the year before—and it was eagerly on the rebound.
Paramount’s CEO was Martin Davis, who had succeeded Bluhdorn after he died in 1983. Davis had joined Paramount as a publicity man in 1958, and Eddie Weisl had shepherded his rise. Weisl had introduced Davis to Wasserman; Davis recalled accompanying Weisl to late-night, high-stakes poker games in Los Angeles with Wasserman, prominent attorney Martin Gang, and tax expert Sylvan Oestreicher—all so numerically inclined that Davis could not hope to compete. “They gave me a pad, and my job was to keep score,” Davis said. By the time Davis and Wasserman began their merger talks, they had been friendly for decades; that long familiarity, in Davis’s view, made it easier for the two of them to forge an agreement for a stock-for-stock merger of the two companies. “I had an understanding with Lew,” Davis said. “We would share MCA and Paramount. There was no documentation of these talks, because we were afraid of antitrust. But the plan was that I would have dropped the Paramount studio. And we would use the construct of CIC as the model for the domestic entity.” They were to be co-CEOs, Davis said, which suited him—“I felt I could only learn from Lew.” They were ready to bring in the teams of investment bankers and lawyers. “But then—it wasn’t just the eleventh hour, but after the eleventh hour—Lew said that he would be chairman of the executive committee, and Sidney [Sheinberg] and I would be sharing power, under him, as co-CEOs. He thought it was so late that I would just agree. But I knew it was a way to get me in there and then slice my head off. I would have been gone in six months.
“Lew had awesome power,” Davis continued. “He’d draw this cloak of superiority around him and you’d bow to him—I don’t know if out of respect or fear, it’s hard to draw a line between the two.” Reflecting on the merger agreement that he thought he had with Wasserman, Davis added, “You think you’re close, but that was because he was one of the great manipulators of all time. We were all his toys.”
While Wasserman was negotiating with Davis in 1990, he knew that there was an interested suitor in the wings—the Matsushita Electric Industrial Company, one of the world’s largest consumer electronics manufacturers. Like its sometime rival Sony, which had acquired Columbia Pictures a year before, Matsushita was interested in making a “software” (film, television, and music) acquisition to complement its consumer electronic “hardware” products. To that end, Matsushita had engaged Michael Ovitz, the agent, to initiate its executives in the mysteries of Hollywood and to broker a suitable match. Considering Ovitz’s longtime fixation on Wasserman and MCA, it was not surprising that he would steer his Japanese clients in its direction. What was surprising, though, was that Wasserman, industry leader, would seriously consider selling his company to a foreign owner. It was a highly sensitive issue; five of the seven major Hollywood studios had been sold or merged into larger companies in the last several years, and four of the new owners had come from abroad. And as it had become increasingly clear that Japanese companies were prospecting in the entertainment industry, the conventional wisdom in Hollywood was that Wasserman, of all people, would never sell to the Japanese—because he saw the industry as a national asset, whose control and profits, especially at a time of declining United States competitiveness, ought not to be surrendered to foreign hands. Indeed, it may well have been Wasserman’s discomfort on this score that encouraged him, rather, to seek the deal with Paramount. But when that foundered—once again, apparently, on the issue of Sheinberg’s role—the path was cleared for Matsushita.
It was so fitting and ironic that it was Ovitz who was attempting to engineer the acquisition of MCA that it seemed almost a literary conceit. Ovitz had sought to create his agency, CAA, in the likeness of the old MCA. He had built a highly disciplined, intensely motivated workforce, young agents who were imbued with a sense of larger purpose, and who tended to worship their leader. He enforced a rigid dress code of somber suits, and forbade his agents to speak to the press. For many years, he had kept a very low profile in the press himself. He was intensely secretive. He planned long-range, and he planned big; in 1975, when he was starting his small breakaway from William Morris, he told the New York literary agent Morton Janklow, “I’m going to build the biggest agency the world has ever known in ten years.” By the mid-eighties, right on schedule, CAA had emerged as the dominant Hollywood agency. Ovitz commissioned I. M. Pei to design its headquarters—a landmark with a domed exterior and a soaring atrium—in the center of Beverly Hills (a building as overstated for what it housed as Jules Stein’s “White House” had been fifty years earlier). With a stable of about six hundred clients, including many of the most sought-after actors, actresses, writers, and directors, CAA had established considerable dominance. It controlled much of the best story material. It packaged these elements, in all-or-nothing deals, for movies as well as for television projects. And, since it controlled so much of the product, its agents were able to dem
and record-breaking contracts from the buyers—the networks and the studios. For Wasserman, it was like watching a rerun. Except that now, he was the aging studio head, and Ovitz the agent who was driving the deals that diminished Wasserman’s profits, and his control.
Wasserman, of course, had made it up as he went along, building on the foundation established by Stein. There was no mistaking now that Wasserman was the original, and Ovitz the knockoff. Indeed, there was an almost cartoonish quality to Ovitz as he mimicked Wasserman’s ruthlessness (according to the screenwriter Joe Eszterhas, when he told Ovitz he wanted to leave CAA, Ovitz said, “My foot soldiers who go up and down Wilshire Boulevard each day will blow your brains out”). Still, Ovitz had followed the blueprint and, thus far, achieved quite remarkable success. The next step was to transcend his role as a talent agent, as Wasserman had done many years before. Ovitz had begun to do that by operating as a corporate deal-maker; Sony had hired him as its Hollywood consultant when it made its acquisition of Columbia Pictures. He was quite focused, though, on moving from the agency business into production—like Wasserman. And Sony had ultimately given him the chance to do this, offering him the job of running Columbia Pictures. But Ovitz had found that insufficient. He had wanted to run not only Columbia Pictures, but Sony’s record division, too—and with a corporate structure that would have given him near autonomy. Sony had rejected his counterproposal.
Now, with Matsushita, Ovitz had the chance to achieve what he had not with Sony. He had tried, for example, to lead Sony to MCA. Other Sony advisers argued that MCA had been living on its legend in the last fifteen years or so—having not only missed opportunities in cable but, also, having blundered badly with its recently acquired toy unit, LJN, and its interest in the Cineplex Odeon theater chain—and that its value was not nearly the roughly $8 billion that Wasserman and its board thought it was. Ovitz, though, had been adamant. “Mike was in love with MCA,” one of the advisers recalled. “He said, ‘You have got to be able to see the potential. It has this great film library. It has mystique and magic. Wasserman is like royalty in Los Angeles—you don’t understand what that kind of clout and prestige is worth. And you can resuscitate the company.” Ovitz, in any event, had not prevailed—in part because he had just been one member of a team. Now he persuaded Matsushita that he alone should guide them through the treacherous shoals of Hollywood. He tutored the Matsushita executives, and led them successfully to the selection of MCA. And he persuaded them that they should invest him with the powers to hire the team of lawyers, investment bankers, and public relations specialists to represent the company in this transaction; and—most important—that Matsushita should communicate with MCA, and MCA with Matsushita, through him. Finally—though the stated premise of the deal was that MCA management should remain in place—there was certainly the possibility (amply foreshadowed) that Ovitz might end up running MCA. That he might, in effect, become Wasserman.