Dynamic

By Christine Gorman

Since a typical feature film is a $20 million roll of the dice, Hollywood always wants to improve its odds. That's why studios are so willing to pay breathtaking sums to surefire stars. Now Hollywood's obsession with the talented few is fueling a billion-dollar personnel tug-of-war that pits Warner Bros. against Sony for the services of the two hottest movie producers to come along since Samuel Goldwyn met Louis B. Mayer.

The oddsbusters are Peter Guber and Jon Peters, whose penchant for producing such hits as The Color Purple and Batman has brought Warner hundreds of ( millions of dollars. When Sony announced its agreement to pay $3.4 billion in September for Columbia Pictures Entertainment, the Japanese firm impressed Hollywood with its savvy choice of executives to run the studio: Guber and Peters. But there was one major hitch: in March the two had signed a five-year contract with Warner, which the studio claims was an exclusive arrangement.

Warner Bros., which is controlled by Time Warner, is suing Sony, Guber and Peters in Los Angeles Superior Court for $1 billion, accusing them of breaching the contract. Warner has asked the court for a permanent injunction, on which the court is expected to rule this week, to prevent Guber and Peters from working for anyone else. Warner contends that Guber and Peters are responsible for more than 50 of the studio's current projects, including the film version of Tom Wolfe's Bonfire of the Vanities. Sony and the two producers are countersuing for $100 million, charging Warner with fraudulently denying that it had an oral arrangement to release Guber and Peters from their contract and with trying to sabotage Sony's Hollywood ventures.

At the center of this colossal custody fight is the most unlikely pair of partners in the film world. Guber, 47, an erudite native of Boston, holds a law degree from New York University. In 1968, while working on his M.B.A., he landed a job in the casting department at Columbia Pictures. Guber quickly became chief of production and, by the time he left in 1976, his credits included The Way We Were and Shampoo. Peters, 44, an Angeleno who spent a year in reform school, broke into the movie industry using a hairbrush and a blow dryer. After coiffing Barbra Streisand and then moving in with her, the hairstyling tycoon produced her 1976 hit movie, A Star Is Born. Eventually the talkative Peters produced two other Streisand vehicles, The Main Event and What's Up, Doc?, as well as the hit comedy Caddyshack.

Guber and Peters joined forces in 1980 to form a film-production company. Guber's nose for good script ideas and his flair for deal making meshed with Peters' hustle and tenacity. After several hits, including Missing and Flashdance, the partners signed their first, allegedly exclusive production contract with Warner, in 1983.

Six months after they agreed to this year's contract, Sony recruited Guber and Peters to head Columbia, designating the two as co-chairmen and Guber as chief executive. Under the agreement, Columbia would pay them annual salaries % of more than $2.75 million, plus 2.5% of all company profits in excess of $200 million. After five years they would split a $50 million bonus pool with no more than five other top executives. The sweetest plum of all: Sony agreed to buy their production company, Guber-Peters Entertainment, for $200 million, considered by some Hollywood insiders to be a premium price.

Just before the deal was announced, Guber asked Warner to let the two producers out of their contract. Warner refused. For two weeks, executives from both corporations tried to negotiate a settlement. Time Warner Co- Chairman Steven Ross reportedly demanded that Guber and Peters relinquish all rights to and profits from current projects. In addition, Ross asked for a big discount on two properties Warner had been trying to buy for some time: a stake in Sony's CBS Video and Record Club as well as Columbia's ownership in the Burbank lot it now shares with Warner Bros. "Ross asked for the moon in the hopes of getting half the moon," says an industry analyst. Ross was apparently in no mood to give up such valuable assets without extracting a high price, especially since the talent raid came so soon after Time Inc. had paid $14 billion to acquire Warner Communications, the studio's parent company.

The failed negotiations have produced some bitter behind-the-scenes finger pointing. An executive who is sympathetic to Warner attributes the discord in part to the involvement of Walter Yetnikoff, who runs CBS Records for Sony and helped woo Guber and Peters. "Reasonableness was made impossible by Yetnikoff's belief that he could push people around," said the executive. "Warner considers him a boor, a man with no manners." On the other side, an executive who favors Columbia blames Ross for the wrangle. "No one expected the venom of Ross's response," said the insider. "If it was anyone else but Sony, he would have let them out ages ago, but Sony is frightening to him. It's a company that's trying to become a global communications giant."

Most Hollywood dealmakers think a quieter compromise might have been reached if Guber and Peters had negotiated a formal separation with Warner before the Sony deal went public, which would have avoided bruising the egos of Warner's brass. The fracas has proved embarrassing as well for Sony, which is trying to make a graceful entrance into Hollywood. The two sides may yet settle, but if Warner has its way, Sony's entry into the film business will cost quite a bit more than the company expected.

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CREDIT: [TMFONT 1 d #666666 d {Sources: Variety, Hollywood Reporter, Baseline}]CAPTION: TRACK RECORD

With reporting by Elaine Dutka/Los Angeles