MGM Says Reports of Its Demise Are Being Greatly Exaggerated

Frank Mancuso contends that MGM has gotten a bum rap.

Ever since he and his management group emerged with the winning bid for the studio last summer, there have been news reports about a potential cash crunch that could hinder future production. There have been reports of conflicts with owners Kirk Kerkorian and Australian broadcaster Seven Network’s Kerry Stokes about alleged bloated overhead at the Santa Monica-based studio.

Persistent rumors of possible massive layoffs and pressure to seek additional funding have dogged the company.

The studio’s abrupt parting with Metro-Goldwyn-Mayer Inc. President Mike Marcus this week didn’t exactly underscore a sense of stability to company insiders or the industry at large.

Mancuso claims that the negative press has not only hurt morale at the company but hurt business by creating an industrywide “misperception,” particularly among Hollywood’s talent agents, that MGM is an undercapitalized operation that shouldn’t be entrusted with the top stars and best scripts.

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In an interview with The Times on Wednesday afternoon, Mancuso and MGM Executive Vice President Bob Pisano insisted that MGM is financially solid, is not at odds with its new owners and is in a growth--rather than cutback--mode.

“The [1997] budget was unanimously approved by the board in December and was substantially higher than last year,” said Mancuso, who sits on the MGM board with three directors appointed by Kerkorian’s Tracinda Corp. and three from Seven Network.

Mancuso denied that there are any tensions between he and Kerkorian, who some sources say is upset about the size of the company’s overhead.

“It’s not true. I’m not fighting with Kirk. He shares the same vision for this company that I do,” said Mancuso.

Last week in Sydney, Australia, Stokes and Seven Network Managing Director Gary Rice told Reuters that the broadcaster had no intention of selling its $250-million investment in MGM.

“Our position is clear. We are not selling MGM, we are happy with our investment and the studio is performing according to its business plan,” said Stokes.

As for MGM’s current financial condition, Mancuso said, “We have not used a dime of our credit line,” referring to the company’s $350 million working capital allocated through its banker, J.P. Morgan.

That’s not surprising, since MGM doesn’t currently have a movie in production other than its James Bond sequel, which just began second-unit shooting in Spain. It also doesn’t address the issue of whether the company is well enough capitalized to cover its overhead--said to be close to $175 million a year--and fund a full slate of movies under its MGM and United Artists Pictures banners.

Mancuso contends that cash flow from operations and the credit line is more than sufficient to bankroll the company, which employs more than 750 people, at least for now. “Who knows what will happen two years down the line if the movies don’t perform?” he said.

MGM, like every other studio, including Paramount, Sony, Disney and Fox, is looking for ways to share the financial risk on movies. The company is in discussions with the London-based insurance firm C.E. Heath & Co. about a multiple picture “risk-reduction” deal.

Beyond that, Mancuso and Pisano said MGM is seeking no additional funding and is not cash-strapped.

“We have cash flow from all activities of the company,” said Pisano, which includes television, home video and other divisions, as well as from such recent releases as “GoldenEye,” “The Birdcage” and older titles in the company’s extensive film and TV library.

Mancuso said that not only are there “no massive cutbacks planned,” as some press reports have indicated, “We’ve increased staff in five divisions of the company--television, home video, telecommunications, licensing/merchandising and interactive.”

He attributes any other streamlining on the movie side, including some in marketing and distribution, to “the normal course of doing business.”

Marcus, a former talent agent who’s interviewing at other companies including DreamWorks SKG, is moving out of his office this week and is expected to be replaced shortly. Four months ago, MGM’s United Artists President John Calley left the company to become the new head of Sony Pictures and was replaced by former producer Lindsay Doran.

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Mancuso said that despite the loss of his top two original production executives, plans are on course to make the movies that were set up during their tenures. That includes expected spring start dates for “Red Corner,” starring Richard Gere, “Man in the Iron Mask,” with Leonardo DiCaprio, and later in the year “Ump,” likely to star Sylvester Stallone and be directed by Frank Oz, and “Mod Squad,” based on the TV series.

Meanwhile, the studio is starved for major releases between now and the end of the year.

It’s Mancuso’s belief that a lot of the “bad-mouthing” of MGM is not coming strictly from the studio’s usual competitors but from some of the losing bidders and their various legal and financial representatives bitter over not getting MGM.

“These are acts of terrorism,” said Mancuso. “These are vicious lies to create an environment which is meant to be destructive.”

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Hollywood was taken by surprise when Kerkorian, the billionaire recluse who had twice owned MGM, backed the management buyout. Kerkorian’s long-standing reputation as the guy who pillaged MGM no doubt compounded ill feelings toward the studio.

Nevertheless, MGM has been sputtering for more than a year, virtually shutting down production during the 11 months the company tried to sell itself. The studio is struggling to reinvent itself as a viable force in the industry after having done so once before with such hits as “GoldenEye,” “Get Shorty” and “Birdcage.”

And while it’s true that Hollywood’s top agents remain somewhat skeptical about the studio’s future prospects given the high cost of doing business without the benefit of diversification enjoyed by the bigger studios, they are rooting for MGM’s success because it’s good business for them.

“This agency is totally supportive of servicing the studio,” says Arnold Rifkin, head of the worldwide motion picture division of the William Morris Agency. “A company needs product and go-pictures and we’re going to do everything we can to help them.”