Video: Fixing MGM

By Jerry Cobb Reporter
CNBC
updated 6/7/2006 1:34:49 PM ET 2006-06-07T17:34:49

Few studios have had as glorious a history or as many owners as Metro Goldwin Mayer. Now, under a new regime headed up by chairman and CEO Harry Evans Sloan, MGM is trying to stage yet another comeback.

And under Sloan’s direction. the company is pursuing a novel strategy: focusing primarily on distributing movies as opposed to making them. 

"Our model's a little different,” said Sloan. “We're going to try to skip the idea of losing money on development and production and instead focus on distribution where I think the major studios have an advantage on anyone else."

It's a change in plan for MGM.  When Sony, Comcast and a handful of private equity firms bought the 80-year-old studio for $5 billion in 2004, the idea was to keep minting money in the home video business with MGM's  legendary 4000-title film library. But as soon as the ink on the deal dried, home video sales hit a wall.

"I don't know where that business is going,” said Sloan. “If  five, six years from now, is this all going to be about little plastic discs, packaged goods, or is all going to be electronic downloads? 

Unable to rely on a slowing home video business for growth, Sloan is focused instead on filling MGM's distribution pipeline with new films, including new installments of the studio's classic "Rocky," "James Bond" and "Pink Panther" franchises.

But these and other films will primarily be made using outside production companies and other people's money.

"There's so much interest in investing in movies that outside production entities are able to raise money,” said Sloan. “They're willing to invest their own money and they're financing the films.  We also think that outside production entities, independent production companies, can make films much more economical than studios and can make good films."

But sloan says MGM's greatest growth potential is overseas, where new television channels and new video distribution technologies are exploding.

"You've got so many new opportunities internationally of so-called -- call it television -- but television in the broadest sense, channels into the home,” he said. “And they need content."

Sloan knows a thing or two about international television: he launched European broadcaster SBS with $5 million in 1990, selling it last year for more than $2.5 billion. He hopes to pull off an equally impressive payday for MGM's new owners. But whether that happens through a public stock offering or a private sale, sloan isn't saying.   

SLOAN: "What the exit strategy is for the investors, as long as there is one, I think that's what's important to me."
CNBC: "You're an important investor yourself. You've got your own skin in the game here, so to speak."
SLOAN: "Yeah, but I'm having a lot of fun.  I'd hate to see the thing get sold too soon."

The success of Harry Sloan's efforts at MGM will be visible relatively soon, with a slate of more than a dozen films hitting theatres this year and next.

© 2012 CNBC, Inc. All Rights Reserved

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