The LA Times ran an article the other day about how GE and Universal are still getting used to each other one year after GE purchased the studio from Vivendi. The Hollywood types sound a little above working for such an … industrial company:

“Last fall, Snider’s lieutenant, Vice Chairman Marc Shmuger, was the studio’s representative on a three-week GE leadership course. He traveled the country with other GE executives to study “global growth strategies” at an assortment of non-entertainment companies with ties to GE. When the visits were done, the team was required to write up its findings.

“It was definitely different,” recalled Shmuger. “I had to work hard to keep an open mind.”"

The article included complaints about purchasing policy, elimination of perks, cutbacks in Universal’s contributions to Hollywood’s pervasive gift giving culture, and budgeting (Universal must now — horrors — do quarterly projections). The sense one gets is that Universal staff are very convinced of their own specialness.

Universal, and Hollywood in general, need to get over over themselves. GE, with $152b in annual revenue, is about five times the size of the entire US filmed entertainment market (~$35b box office + home video). When GE bought Universal for $5.5b the acquisition was a blip on GE’s (current) market cap of $383b. Universal just isn’t a particularly important part of the GE machine.

Edward Jay Epstein, in his mostly tedious book “The Big Picture: The New Logic of Money and Power in Hollywood,” points out that Hollywood’s long-term loyalty lies not with its investors, but with itself. People know that their next job will not come from some other division of the conglomerate that owns them, but from a lateral to some other part of “the business.” In this insular business, executives will act in a matter that may not benefit their shareholders, but does improve their own long term prospects.

It sounds like Universal will prove this point yet again. Relatively insignificant to its new parent, it will keep seeing itself as part of Hollywood, not GE. GE, a very well managed company with many extremely smart people, may yet find itself where one-time studio owners Transamerica, Gulf + Western, Vivendi, Coca-Cola, Matsushita, and Seagrams are — out of the film business.

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This entry was posted on Monday, May 9th, 2005 at 11:12 pm by A Senior Administration Official and is filed under Brilliant, but uncategorizable, How Not To Succeed In Business. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.