Co-chair & CEO team will ankle after 20 years at top

In a move that jolted Hollywood awake from its summer slumber, Warner Bros. co-chiefs Bob Daly and Terry Semel announced Thursday that they were stepping down from the studio that they had headed for almost 20 years.

The execs, who both held the rank of chairman and co-CEO of the Warner studio and Warner Music Group, informed Time Warner chairman Gerald Levin in a letter dated July 14 that they had decided “not to pursue new employment contracts with Time Warner when (the) current ones expire at the end of the year.”

The two said they had been mulling the “extremely difficult decision” for some time. In a subsequent statement, issued July 15, they explained, “For some months now, we have been giving careful thought to the possibility of pursuing new challenges and opportunities. … As a result of all our many hours of shared thinking and discussion, we concluded that now is the right time for us to move on.”

Though Daly and Semel’s announcement stressed that the decision was theirs, some studio insiders painted a different picture. Protracted negotiations between Levin and Semel over the renewal of the latter’s contract had hit a wall, they said. As Semel’s doubts about the viability of further talks rose, Daly decided that he, too, would depart.

Whatever really happened, the duo’s departure from the Burbank lot marks the end of an era — one characterized by high-octane film franchises, star-producing deals and legendary perks such as private dining rooms and corporate jets.

Ross proteges

Daly and Semel were trained at the knee of legendary Time Warner chairman Steve Ross, and their lavish operating style always reflected Ross’ generosity to his senior executives and top talent.

In a Hollywood fraught with continual studio upheaval — not to mention frequent changes of ownership –Daly and Semel were a constant. And their strong batting average at the box office earned them the respect of both Wall Street and their competitors.

Around Hollywood, execs generally expressed surprise at the announcement, but lauded Daly and Semel’s achievements. “They have been Muhammad Ali to our business,” said one. “They are retiring as the champs.”

During their tenure, Warners evolved from a traditional movie distribution company, with revenues of $670 million in 1980, to the $10 billion film, television and music conglomerate of today. Its numerous hugely successful pics during the period included “Batman,” “Twister,” the “Lethal Weapon” series and “The Fugitive.”

Mulled decision for months

The two men said they had been mulling their future for months. Semel said they agreed to think about it separately, hoping that they “would come out with the same answer.”

Levin said that, ideally, he wanted them to stay, but as their working relationship was unique he believed “there was no way they would remain separately.”

“I was with Terry in Venice and I had lunch with Bob at the studio, and I asked them where they were at and what they would like to do — that was the tenor of the conversation,” Levin told Daily Variety.

“They have made this deeply personal decision (to quit), and I’m even slightly envious,” he joked.

Long history

Daly came to WB in 1980 as chairman and co-CEO after a 25-year stint at CBS. Semel, conversely, joined the studio as an entertainment industry trainee in 1966 and worked his way up the distribution ladder, becoming vice chairman of the board and chief operating officer in 1981. In 1994 Daly and Semel opted to share the CEO and chairman titles.

“I’ve been asked more questions about this relationship than any other in my life,” Daly said, referring to skepticism about the genuinely collaborative nature of his partnership with Semel. “We live four minutes apart from each other, we drive to work together half the time, we’ve been to a 1,000 sneak previews, 300 premieres, and made more than 500 movies together. If I’m not available, people talk to Terry, and if he’s not available, then they talk to me.”

Time Inc. bought Warner Communications in 1989, forming the world’s largest media conglomerate. In November 1995, Daly and Semel took on the additional duties of running Warner Music Group after the departure of HBO and Music Group chairman Michael Fuchs.

Spread too thin?

Some believe that this arrangement became the source of friction between Levin and the Warner chiefs, with Levin arguing that they were too thinly spread. But Levin said Thursday that he didn’t plan to make any changes to that particular structure. “The companies need to be run together,” he said. “I’m going to build on that.”

What isn’t in doubt is that the WB formula of expensive star vehicles is looking increasingly tired.

The costs of producing such pics as “Batman and Robin,” “The Avengers,” “Soldier” and “The Postman” has far outweighed the returns. Even this summer’s “Wild, Wild West” represents a roll of the dice for WB. Time Warner-owned mini-major New Line, meanwhile, has generated huge profits from lower-budgeted pics such as “Austin Powers: The Spy Who Shagged Me” and “Rush Hour.”

Drought drew rumors

It was during an uncharacteristic box office drought in 1997-1998 that rumors of a high level shakeup involving Daly and Semel first began to circulate. At one point, speculation was rife that Semel might ankle WB to join Universal, while Daly would remain at the studio.

Warners regained some box office luster in the first half of 1999 with “You’ve Got Mail” (a holdover from late 1998), “Analyze This” and “The Matrix.” The Daly/Semel announcement appeared carefully timed to come a day after Time Warner reported strong second quarter earnings of $593 million, and two days after the world premiere of Stanley Kubrick’s “Eyes Wide Shut.”

While the two men had already made their decision prior to the screening of “Eyes,” in their letter to Levin they said that they delayed informing him by 24 hours in order to “avoid a potential distraction from the world premiere” of the Tom Cruise-Nicole Kidman starrer.

‘Constructive situation’

In the wake of the execs’ departure, Levin said that he viewed the inevitable restructuring of Warners as a “constructive situation.”

“We’ve got to look at how things should be organized. It’s a unique opportunity,” he said. Emphasizing that Daly and Semel would “help out” in the process, he said that he alone would pick their successor: “I’ll make the decision — I’m the CEO of the company.”

While Levin would not be drawn out on specifics, he and Time Warner vice chairman Ted Turner are expected to take the opportunity to create a new operating ethos at the studio.

In the past two years, Daly and Semel had already made several major changes, among them increasing the number of pics that WB co-finances and broadening the range of genres.

Newer talent

Along with president of worldwide production Lorenzo di Bonaventura, they had started to ink production deals with newer talent, such as Andrew Lazar, Jorge Saralegui and Billy Gerber, and co-financiers such as Bel Air and Village Roadshow.

Of course, Warner still retains its share of long-serving stalwarts — the likes of Jon Peters, Jerry Weintraub and James G. Robinson — who have traditionally had strong links to Daly and Semel.

Village Roadshow Picture chairman Bruce Berman said Thursday that news of the Daly/Semel departure had a “profound impact on the lot. They ran this company brilliantly for 20 years. They molded this place and made it the most desirable place to work.”

As Sony chairman and former WB topper John Calley pointed out, Warners has only had four management regimes since the studio’s inception — the Warner brothers, Seven Arts, Calley/Wells/Ashley and Daly/Semel.

“The mood on the lot is very sad,” said David Wolper, who produced “L.A. Confidential” for Warner Bros. “There is a deep sense of loss and of shock. Continuity is a wonderful thing, and it is a very rare thing in show business.”

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