With Out-Of-The-Blue CEO Firing, Did a For Sale Sign Just Get Slapped on MGM?
The surprising news that MGM had fired its long-time CEO Gary Barber, five months after he had signed a new deal, and amid some of the storied studio's best times in decades, said one thing to me: they're getting the For Sale sign ready.Variety reported that Barber's ouster Monday night came at the behest of company chairman Kevin Ulrich, who is chairman of one of the privately held company's major shareholders, Anchorage Capital Group. The company gave no reason for the firing, but said Barber had led MGM "with distinction for eight years."Indeed he had, taking over amid the wreckage created after a previous sale, by Kirk Kerkorian to a group that included Comcast, Sony and several private equity firms including TPG and Blackstone. That 2005 sale for $4.9 billion (including debt) was great for then-owner Kirk Kerkorian and MGM employees such as me. For the new owners, it didn't work out so well.The deal had been predicated on the value of MGM's prodigious library, then something like 4,000 films and 10,000 hours of TV. The library included 18 Best Picture Oscar winners and all the James Bond, Rocky and Pink Panther movies, as well as a piece of the Lord of the Rings franchise.The new owners were counting on continued growth in the DVD and nascent Blu-Ray business. What they didn't anticipate was the rise of Netflix and online streaming, which flattened sales growth of physical products (it's still a nice little business, but...) and ultimately sent MGM into bankruptcy.Barber came in after the bankruptcy filing, and helped clean up the mess considerably. He extricated MGM from unprofitable international TV channels, and invested in streaming video. The company expanded TV production, spent $1 billion to buy premium channel Epix, and launched digital broadcast channels such as Comet TV with partners such as Sinclair Broadcasting. That investment paid off most notably with last year's Best Drama Emmy for "The Handmaid's Tale," produced for Hulu.But Barber's out. And the company gave no reason, even saying nice things about him on the way out the door.Given everything else happening in media mergers & acquisitions, it's impossible to read this as other than a play by Ulrich and other private equity owners to cash in. MGM may never have a higher value in the market, or more potential buyers.For now, there's some uncertainty around what may happen with the Department of Justice efforts to block the Time Warner-AT&T merger. But if the DOJ loses, expect the market for entertainment assets to warm up to white hot.AT&T arch-rival Verizon almost certainly will look for other content deals to compete. MGM might be worth only one-tenth to one-fifteenth the value of Time Warner, even in a superheated market, but it's clearly one of the easy gets. Comcast may want to make another run, or John Malone's Charter/Spectrum cable operation.And maybe a player such as Sinclair, especially if it can close its Tribune deal, may want to add some content to its local broadcasting holdings, particularly because it already has that Comet relationship with MGM.Barber's departure, in this regard, may lop off a few million dollars in salary and other expenses from the MGM P&L, prettying things up a bit more just in time for what may be a summer of wheeling and dealing. The only shame: the guy who put MGM back on track, and helped make it an asset worth buying, won't be there to enjoy the party.
