Credits Roll for Pair Who Run Warner Bros.

By CLAUDIA ELLER and JAMES BATES

July 16, 1999 12 AM PT

TIMES STAFF WRITERS

In a development that sent shock waves through the entertainment industry, Hollywood’s longest-reigning and most stable management team, Warner Bros. co-Chairmen Robert Daly and Terry Semel, abruptly resigned from the studio they jointly ran for nearly two decades.

The departures, announced Thursday, mark a seismic shift in the business and in many ways signal the end of an era at Warner Bros. and in Hollywood. Daly and Semel thrived during the days when studios lavished perks on top stars, directors and producers, routinely risking huge dollars on event movies.

Their exit comes at a time when studios are under enormous pressure to cut costs to bolster thin profit margins by making cheaper, lower-risk films rather than the kind of expensive gambles on star-studded vehicles that Daly and Semel were known for. While the two have had their share of box-office flops, the studio has rebounded with such recent hits as “The Matrix,” “Analyze This” and “You’ve Got Mail.”

Like other studios, Warner has tightened its belt, and the retrenchment is expected to accelerate with Daly and Semel’s departure.

“The entertainment industry has come of age, and this is a good indication of the passage of an era,” said PaineWebber entertainment analyst Christopher Dixon.

The two waited to announce their resignations until after parent company Time Warner reported solid quarterly earnings Wednesday and after Tuesday’s premiere of the late director Stanley Kubrick’s final film, “Eyes Wide Shut,” which opens in general release today.

At the premiere in Westwood, Semel remarked how he and Daly had opened more than 400 movies, and “I have a feeling this will be the one we remember for many, many years in the future.”

Only Semel and Daly knew how prophetic the words were.

In an interview, Daly, 62, and Semel, 56, said they had hit a point in their lives and careers when they felt it was time to move on to new ventures, though neither has a job lined up. The two have amassed large personal fortunes through stock options that are worth several hundred million dollars and salaries of as much as $20 million a year.

Both denied that they were leaving the company under pressure or as the result of any contract dispute. They said they had not started negotiating new contracts, which expire Dec. 31, and will help with a transition.

Daly and Semel had the most consistent track record of any executive team in Hollywood, with such franchises as the “Batman” and “Lethal Weapon” films and such lucrative television shows as “Friends,” “ER” and “The Rosie O’Donnell Show.”

As an inseparable team until the end, their business relationship was unique in that they willingly shared power without ego clashes. The two live on the same block in Bel-Air and still frequently drive to work together. In 1994, Daly voluntarily elevated Semel to his equal.

“These guys are the Mark McGwire and Sammy Sosa of movie executives,” said DreamWorks SKG partner Jeffrey Katzenberg. “They are the most successful executive team in the history of Hollywood. No one has done it better, longer and with more class than these two guys.”

Despite the success, in recent years their formula began aging as younger audiences became Hollywood’s favorite target. Expensive big star vehicles such as “The Postman” and “Fathers’ Day” flopped, prompting criticism from Time Warner’s largest shareholder and vice chairman, Ted Turner, who disapproved of the free-spending culture.

Daly and Semel were the last top executives tutored by legendary Time Warner Chairman Steven Ross, who died in 1992. Ross relished the glitz of Hollywood, cultivating top stars, directors and producers with gifts and perks--a tradition Daly and Semel carried on. When the film “Lethal Weapon 3” debuted as a hit in 1992, Daly and Semel surprised the stars, director and producer with keys to their own Range Rovers.

After a two-year box-office drought and uncharacteristic executive turmoil, the film division only recently began to turn around. However, the studio’s current big-budget release, “Wild Wild West,” starring Will Smith, is a disappointment expected to lose money.

The movie unit is only one piece of the $10-billion empire that Semel and Daly preside over. Warner Bros. also comprises TV, including the WB network; consumer products; and music.

Daly and Semel took on Time Warner’s music group in 1995 amid skepticism that they lacked experience and were spread too thin. Although they stabilized the division, Warner’s music unit has yet to regain its leadership status.

Gordon Crawford, senior vice president of Los Angeles-based Capital Research & Management Co., one of Time Warner’s large shareholders, said he had mixed emotions about the pair’s departure.

“They did a great job for the last 19 years,” Crawford said. “On the other hand, from a Time Warner perspective, they weren’t going to take the company forward for the next 20 years, so it was inevitable that the Bob and Terry show would come to an end at some point. The company can discuss restructuring now, because it was never going to happen with Bob and Terry there.”

Some analysts believe Warner needs to bring in a top music executive, separate music from the studio and combine its cable networks with Warner Bros. But Time Warner Chief Executive Gerald M. Levin said in an interview he has no plans for any major restructuring.

Semel and Daly said the time was ripe for their departure. “As a result of knowing that we had to make a decision about our future contracts and that both the movie and music companies were looking great, it was a perfect time to be more serious about turning over the reins,” Semel said.

They had been considering leaving for about six months but decided while flying back from Europe on the corporate jet Sunday night.

“We had 12 hours on the plane together, and it was a highly emotional experience,” said Semel, who was in Venice attending the wedding of longtime Warner Bros. producer Joel Silver. “We decided we were not going to stay.”

Said Daly: “This was the toughest decision Terry and I have ever made in our lives.”

Daly, a Brooklyn native, spent his entire career with just two companies: He was at CBS for 25 years before joining Warner Bros. in 1980. Semel, also a New York native, spent virtually all his career at Warner, starting as a trainee 29 years ago.

Reflecting on his decision, Daly said he always envied the entrepreneurial move that mogul Barry Diller made when he left his post as head of Fox in 1992 at age 50.

“I always thought there was another chapter I wanted in my life,” Daly said.

Semel too said he believes he has one more career move ahead.

“There’s never been a moment in my life when I didn’t have a contract in front of me. I never had a moment to take a long walk on the beach in Malibu and say, ‘What now?’ ” he said.

Daly and Semel flew to New York for a long-scheduled 5 p.m. meeting Wednesday at Time Warner’s corporate headquarters, where they broke the news to a surprised Levin.

“I didn’t know they were going to step down. . . . It was a deeply personal decision,” Levin said.

Although Levin said he has no candidates in mind, Hollywood was already abuzz with rumors of possible successors, including Home Box Office Chief Executive Jeff Bewkes, Walt Disney Studios Chairman Joe Roth, DreamWorks’ Katzenberg and New Line Cinema chiefs Robert Shaye and Michael Lynne.

Levin said that any names being suggested are pure speculation. “It’s nice to hear there are a lot of names, but unless you talk to me it’s total [bunk].” However, Levin hinted that the company may look internally first. “We have terrific managers in place,” he said.

Music mogul David Geffen described Daly and Semel’s departure as a “huge loss” for Warner but said he was happy for the pair. “It’s like owning a boat. The two greatest days are the day you buy it and the day you sell it. The same goes for these difficult jobs.”

Reacting to the news, Time Warner shares fell $1.44 to close at $75.88 on the New York Stock Exchange.

* HOLLYWOOD SEA CHANGE: The long-established team of Daly and Semel was considered the last of a breed. C1

* KUBRICK’S FINALE: The late Stanley Kubrick’s long-awaited “Eyes Wide Shut,” a Warner Bros. release, opens. F1

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Studio Reigns

Some of Hollywood’s longest studio tenures:

Adolph Zukor, Paramount: 20 years

Sidney J. Sheinberg, MCA: 22 years

Carl Laemmle, Universal: 23 years

Louis B. Mayer, Metro-Goldwyn-Mayer: 26 years

Darryl F. Zanuck, 20th Century Fox: 31 years

Harry Cohn, Columbia: 34 years