Over the next few days, no shortage of pundits will push Edgar Bronfman Jr. into an undignified grave. Seagram's Boy King, they will say, wasn't up to the job. He looted a venerable and highly profitable franchise -- the world's biggest booze empire -- and squandered it in Hollywood. He was lousy at creating shareholder value, drove away an army of talent and was outmanoeuvred by the steely eyed corporate sharks that cruised the entertainment industry. He will be remembered as the Bronfman kid who dismantled what was probably Canada's first truly global company.
Mr. Bronfman is an open and easy target now that Seagram is officially for sale and is officially in talks to become part of France's Vivendi-Canal Plus group, a multimedia business with the ambition to become Europe's answer to America Online-Time Warner. The offer for Seagram, owner of Hollywood's Universal Studios, Universal Music, the world's largest music company, and the old Seagram liquor names, including VO, Chivas Regal and Captain Morgan, could be valued at more than $33-billion (U.S.) in stock. Seagram shares soared on the news, closing yesterday at $60.12, up $7.12.
Certainly, Mr. Bronfman, who is the grandson of Sam Bronfman, Seagram's bootlegging founder, deserves criticism. His foray into Hollywood, through the purchase of Universal Studios shortly after he became chief executive officer in 1994, was widely regarded as a disaster. The point was reinforced every few months when Universal churned yet out another box office flop, among them, Babe: Pig in the City, Dudley Do-Right and EDtv. The sale of a majority stake in USA Networks to Barry Diller was another dumb move and his Internet strategy was lacking. In the first three years or so of his reign, analysts would leave Seagram meetings with more questions than answers and investors got their kicks elsewhere. For years, the stock was about as exciting as a rerun of Meet Joe Black.
But writing off Mr. Bronfman as a complete loser is not entirely warranted. In fact, his biggest move, into music, has been a success. Seagram became the biggest music company in 1998 with the $10.2-billion purchase of PolyGram, which was financed through the sale of PolyGram's film library, Tropicana juices and a small chunk of Time Warner. Mr. Bronfman has delivered everything he promised on the music side. It has grown faster than the industry, produced strong cash flow and profit and helped to revive the stock. Early last year, Seagram shares, which had traded between $30 and $40 since the mid-1990s, shot up to a high of $62. Mr. Bronfman, if not in the penthouse, was no longer in the doghouse.
Then the content wars began. In the age of the Internet, it wasn't enough to own the pipes that led to the consumer, you had to own stuff -- music, video, film, news, phone and e-commerce services -- that made the pipes worth having. This strategy was driven home with a battering ram in January, when America Online announced its $160-billion takeover of Time Warner, the United States' biggest magazine publisher and, with EMI at is side, a music powerhouse to rival Seagram. To his credit, Mr. Bronfman realized that Seagram didn't have the size or reach -- it lacked a cable network, for example -- to compete with AOL-Time Warner and the other entertainment behemoths that hoped to imitate it. But he also realized that, with Universal Studios and Universal Music in his portfolio, he could offer buyers exceedingly valuable content.
In this market, you're either a buyer or seller of content. If you believe content is the key to unlimited riches in the era of "convergence," then you buy and don't fret about paying extortionist prices. If you've got content to sell, the timing couldn't be better because you can pretty much name your price.
The Bronfman skeptics say the lad just got lucky -- he just happened to own content when it became the hottest commodity on the market. But it was the lad who got Seagram into content in the first place. Until Mr. Bronfman landed in the executive suite on Park Avenue, Seagram was a low-growth booze company whose fortunes rose and fell with du Pont, the chemicals maker that was Seagram's biggest investment. Long before Edgar Jr. arrived, the Bronfmans realized that booze was not the future; they, in fact, had been pruning the drinks portfolio for some time. The champagne division disappeared last year.
Mr. Bronfman will not go down in corporate history as a great visionary or wealth creator. To write him off as a loser, though, is unfair. At least he's getting out at the top of the market.
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