Jackson in $200M-plus recording deal

LOS ANGELES – The estate of Michael Jackson has landed the late King of Pop the biggest recording deal in history: a $200 million guaranteed contract with Sony Music Entertainment for 10 projects over seven years, according to a person familiar with the deal.

The record-breaking contract through 2017 could be worth up to $250 million if certain conditions are met. One of the albums will be of never-before-released Jackson recordings that will come out in November, the person said.

The person spoke on condition of anonymity because the official announcement is expected Tuesday.

Future projects may also include a DVD compilation of videos and a re-release of "Off the Wall," Jackson's fifth studio album, which first came out in 1979, accompanied by some unreleased material. Before his sudden death in June at age 50, the pop star had wanted to re-issue the album, people familiar with the deal said.

One of the projects already counted in the contract was the two-disc album that accompanied "This Is It," the film based on footage of concert rehearsals for what was to have been Jackson's comeback at London's O2 arena.

Including the more than 5 million copies of that special release, Jackson has sold some 31 million albums since his death in June, about two-thirds of them outside the United States.

"During his life, Michael's contracts set the standard for the industry," said John Branca, the co-administrator of the Jackson estate, in a statement prepared for release Tuesday. "By all objective criteria, this agreement with Sony Music demonstrates the lasting power of Michael's music by exceeding all previous industry benchmarks."

Rob Stringer, chairman of Sony Music's Columbia Epic Label Group, said in prepared remarks, "We're dedicated to protecting this icon's legacy and we're thrilled that we can continue to bring his music to the world for the foreseeable future."

News Corp to net $350-400 million from "Avatar": report

(Reuters) – Rupert Murdoch's News Corp will earn $350 million to $400 million from James Cameron's blockbuster "Avatar," once the movie is released on pay television and DVD, Bloomberg said, citing two people with knowledge of the financial performance.

The amount represents News Corp's about 40 percent share of as much as $1 billion that the film is expected to earn for its Twentieth Century Fox and "Avatar" investors, the people told the agency.

News Corp's share amounts to almost half of its average quarterly operating profit in the past year, according to the agency.

Fox's "Avatar," which ended up with three Oscars, fell two places to No. 7 with $6.6 million in its 13th week. Its North American total rose to $730 million and its worldwide tally to $2.6 billion.

In February, News Corp had said 50 percent or more of the profit from the James Cameron-directed film would show up over the next two or more quarters.

EMI says wants to hold on to Abbey Road studios

LONDON (Reuters) – Music company EMI wants to retain ownership of the Abbey Road recording studios, immortalized by the Beatles album of the same name, though it is talking to other parties about revitalizing the site, EMI said on Sunday.

A source familiar with the situation told Reuters last week that loss-making EMI had put the studios up for sale and was talking to a few interested firms, although no deal was imminent.

"EMI confirms that it is holding preliminary discussions for the revitalization of Abbey Road with interested and appropriate third parties," the company said in a statement, without elaborating on what exactly the talks were about.

EMI said it had been in discussions since November 2009 to find ways to regenerate the studios, which have been losing money for years, but had rejected an offer worth 30 million pounds ($46 million).

"We believe that Abbey Road should remain in EMI's ownership," the company said.

Millions of Beatles fans around the world are sentimentally attached to the studios, which are also popular with tourists who pose for souvenir snaps on the nearby pedestrian crossing where the Beatles are pictured on the album cover.

EMI said it welcomed reports that the architectural preservation body English Heritage planned to list Abbey Road, a step that would make it very hard for any developer to do anything radical to the site.

Such a listing could potentially lower the price EMI could get for Abbey Road if it did end up selling it.

The firm, owned by private equity group Terra Firma, said any plan it agreed for Abbey Road would involve "a substantial injection of new capital."

"When Terra Firma acquired EMI in 2007, it made the preservation of Abbey Road a priority," EMI said.

Last week's reports the studios were up for sale attracted a lot of interest, including from ex-Beatle Paul McCartney, who said the studios should be saved, and musical theater maestro Andrew Lloyd Webber, who signaled he was a potential buyer.

Lloyd Webber, the man behind blockbuster musicals "Cats," "Phantom of the Opera" and "Jesus Christ Superstar," has recorded some of his works at Abbey Road.

The 4-billion-pound acquisition of EMI has come to symbolize the difficulties caused by expensive buyout deals struck at the height of a private equity bubble. EMI's high debt and poor performance have become a burden for Terra Firma.

The private equity firm recently launched a lawsuit against Citigroup, claiming the U.S. bank had inflated the price of EMI during the sale process by failing to reveal that another bidder had withdrawn. Citigroup denies the allegation.

Hard-up EMI seeks buyer for Abbey Road studios

LONDON – Cash-strapped music company EMI Group Ltd. is seeking a buyer for Abbey Road studios, where The Beatles recorded some of their most famous songs, a person familiar with the situation said Tuesday.

The person said talks had been going on for several months, but a buyer had not yet been found. The individual spoke on condition of anonymity because the talks are private.

A spokesman for EMI refused to comment on the sale bid, which could raise tens of millions of dollars for the label.

EMI, whose artists include Coldplay, Lily Allen and Robbie Williams, has struggled financially since it was bought in 2007 for 2.4 billion pounds by private equity firm Terra Firma Capital Partners.

Several big-name acts, including Radiohead and the Rolling Stones, quit the label amid the cutbacks and restructuring that followed Terra Firma's takeover.

An audited report released last week revealed that Terra Firma needs a huge cash infusion by June to avoid defaulting on its loans from Citigroup Inc. and may require more than $165 million to last through this year.

If funds can't be raised and the loan goes into default, Citigroup could seize EMI and cause it to be sold or broken up.

Abbey Road is one of the company's most high-profile assets, as both a recording studio and a tourist attraction for Beatles fans.

EMI bought the Georgian town house in London's residential St. John's Wood neighborhood in 1929 and turned it into one of the world's most sophisticated recording studios.

Since the 1960s, it has been one of the world's most famous rock music studios. Albums recorded there include Pink Floyd's "Dark Side of the Moon," Wings' "Band on the Run" and Radiohead's "OK Computer."

It is most closely associated with The Beatles, who recorded most of their albums there. The crosswalk in front of the north London studio was immortalized on the cover The Beatles' final studio album, 1969's "Abbey Road."

Potential buyers beware: The famous black-and-white crossing is not included in the deal.

RIP Miramax

It sprang to life in 1979 as the brainchild of bullish movie producers Harvey and Bob Weinstein, and was named after their parents, but after a slow death from thousands of cuts, Miramax was officially closed today by Disney.

During its early years, the Weinsteins scrappily kept the ship afloat, shoved boundaries and helped bring the world the likes of Sex, Lies And Videotape, Clerks, The Piano, Reservoir Dogs, The Crying Game and The English Patient.

Rumours of the Weinsteins' bullying tactics and hard demeanor were rife, but they certainly seemed to have a keen eye for talent and an understanding of how to channel that into success.

Though it was bought for $70 million by Disney in 1993, the brothers continued to run Miramax with an enviable level of creative control, and pushed their already legendary Oscar-hunting style to new heights with the expanded funding offered by the Mouse House. Among the successes as winners or nominees were Shakespeare In Love, Chicago and The Talented Mr Ripley.

But money was also a constant problem, and the Weinsteins began to clash with Michael Eisner. In 2005, Bob and Harvey left the company, forced to let go of the Miramax named and formed The Weinstein Company, which currently struggles with financing issues.

"Miramax wasn't just a bad-boy clubhouse, it was a 20th century Olympus: throw a can of Diet Coke and you hit a modern-day deity," recalls Kevin Smith at The Wrap. "And for one brief, shining moment, it was an age of magic and wonders. I'm crushed to see it pass into history, because I owe everything I have to Miramax. Without them, I'd still be a New Jersey convenience store register jockey. In practice, not just in my head."

"I'm feeling very nostalgic right now," Harvey tells the site. "I know the movies made on my and my brother Bob's watch will live on as well as the fantastic films made under the direction of Daniel Battsek. Miramax has some brilliant people working within the organization and I know they will go on to do great things in the industry."

All that remains now is to think of the children - along with 80 people losing their jobs in New York and LA, the six movies still under the banner, including The Tempest and The Debt, face an uncertain future.

Miramax, then… Gone, but not forgotten.

NBC: Conan O'Brien reaches $45M exit deal

NEW YORK – NBC said Thursday it has reached a $45 million deal with Conan O'Brien for his exit from the "Tonight" show, allowing Jay Leno to return to the late-night program he hosted for 17 years.

Under the deal, which came seven months after O'Brien took the reins from Leno, O'Brien will get more than $33 million, NBC said. The rest will go to his staff in severance, the network said in an announcement on the "Today" show.

His final show will be Friday, and Leno will return to "Tonight" on March 1.

"In the end, Conan was appreciative of the steps NBC made to take care of his staff and crew, and decided to supplement the severance they were getting out of his own pocket," his manager, Gavin Polone, told The Wall Street Journal. "Now he just wants to get back on the air as quickly as possible."

O'Brien will be free to begin another TV job as soon as September, NBC said. There has been speculation on where he might go next. ABC (which airs "Nightline" and "Jimmy Kimmel Live!") has said it wasn't interested, while Fox, which lacks a network late-night show, expressed appreciation for his show — but nothing more.

O'Brien landed the "Tonight" show after successfully hosting "Late Night," which airs an hour later, since 1993. But he quickly stumbled in the ratings race against his CBS rival, David Letterman.

Under Leno, the "Tonight" show was the ratings champ at 11:35 p.m. Eastern, but he proved an instant flop with his experiment in prime time.

Last week NBC announced that the five-hour vacancy in prime time left by Leno will be filled by scripted and reality fare calculated to bring NBC affiliates a more robust lead-in audience for their local news than Leno had been delivering. A provisional slate of shows will include new and veteran NBC dramas, a comedy panel series produced by Jerry Seinfeld and "Dateline NBC."

It had been no secret that the 46-year-old O'Brien was scoring puny ratings numbers on "Tonight," averaging 2.5 million nightly viewers, compared with 4.2 million for Letterman's "Late Show," according to Nielsen figures.

It was even more obvious that "The Jay Leno Show," airing weeknights at 10 p.m. Eastern, was a disaster. Mostly justified by the network for its bargain-basement production budget, it not only was critically slammed, but also found a disappointing popular reaction. It has averaged 5.3 million nightly viewers since its fall debut — about the same number that watched Leno's final "Tonight" season, in a time slot when far fewer viewers are available. By comparison, the season's top-rated 10 p.m. network drama, CBS' "The Mentalist," has an average audience of 17 million.

But few observers expected the abrupt upheaval that erupted publicly just two weeks ago, when two Web sites posted unsourced stories that the 59-year-old Leno's show would soon be canceled or moved into O'Brien's late-night domain.

Days later, NBC executives unveiled a plan to restore Leno to 11:35 p.m. with a half-hour program, then slide O'Brien's "Tonight Show" to 12:05 a.m., followed by "Late Night With Jimmy Fallon," also pushed back a half-hour.

Disgruntled affiliate stations, which have lost viewers and advertising revenue for their late local newscasts since "The Jay Leno Show" premiered, appeared to spur NBC's sudden changes. The 210 local NBC stations saw their late news audience drop, on average, by 25 percent in November compared with the previous year among desirable 25- to 54-year-old viewers, with the Leno experiment costing the stations collectively $22 million over a three-month period, according to the research firm Harmelin Media.

In a clear vote of no confidence, some rebellious stations were threatening to drop "The Jay Leno Show" and air their own programming.

The network had been counting on O'Brien's cooperation, and wanted an answer quickly, so it could have the configured lineup ready to launch after the Winter Olympics, which will dominate NBC's schedule from Feb. 12-28. But O'Brien threw a wrench into NBC's plans, and triggered a public relations firestorm for the network, when he issued a statement rejecting the offer to delay his show to make room for Leno's return.

O'Brien said that shifting "Tonight" would "seriously damage what I consider to be the greatest franchise in the history of broadcasting," and he declared his disappointment that NBC had given him less than a year to establish himself as host at 11:35 p.m.

The escalating mess furnished plenty of material for jokes by competitors of Leno and O'Brien, as well as the two NBC hosts at its center, who bashed their network and each other.

In one monologue, Leno took note of O'Brien's complaint that NBC brass provided only seven months to establish himself at "The Tonight Show."

"Seven months!" Leno cackled. "How did he get THAT deal? We only got four!"

Returning volley in his own monologue, O'Brien said hosting "Tonight" has been the fulfillment of a lifelong dream and reminded all the kids in the audience, "You can do anything you want in life. Unless Jay Leno wants to do it, too."

Online, many leaped to O'Brien's defense and applauded his stand against NBC. "Team Conan" became a popular Twitter topic for viewers who pledged their allegiance to O'Brien.

An O'Brien portrait also circulated as a badge of support. Referring to the "Tonight" show host's playful nickname, it read, "I'm With Coco," and featured a black-and-white picture of a regal-looking O'Brien standing in front of an American flag. The only color: his shock of orange hair.

For many observers, this clash of talk-show hosts recalled the late-night follies played out by NBC in the early 1990s as the network wavered confoundingly over who — Letterman or Leno — should inherit "The Tonight Show" from Johnny Carson.

The current revival of the late-night follies was set in motion nearly six years ago, in what was hatched by NBC executives as a farsighted strategy to ensure an orderly transition.

In the fall of 2004, the network announced that O'Brien would take over for Leno in 2009. That move by NBC — and endorsed by Leno, despite his clear aversion to leaving "Tonight" — was designed to keep O'Brien from jumping ship when his contract expired. "Tonight" was the prize O'Brien felt he had earned. He joked that he was looking forward to being on an hour earlier, "at a time when people can see me."

As years passed and Leno strengthened his grip as the late-night ratings champ, NBC anguished over how to keep him usefully occupied on the network somewhere other than "Tonight," and safely out of reach of rival networks who were courting him.

In late 2008, the network caught the public and the industry by surprise with its virtually unprecedented scheme: a new Leno hour "stripped" in prime time from Monday through Friday.

"A lot of people were shocked," Leno joked to reporters when the plan was announced. "They didn't know NBC still had a prime time."

Film box office overtakes 2009 DVD, Blu-ray sales

LOS ANGELES (Reuters) – For the first time since 2002, U.S. consumers spent more to see Hollywood movies in theaters last year than buy them on DVD and Blu-ray discs, industry figures showed on Monday, and that trend is expected to continue.

In recent years, Hollywood has come to rely on the high profit margin from DVD sales to underwrite the large cost of producing and marketing films, but with DVD sales dwindling, the movie industry is reexamining its business models.

Adams Media Research reported on Monday that U.S. box office receipts boomed to $9.87 billion in 2009 and overtook DVD and Blu-ray sales of $8.73 billion.

Overall DVD and Blu-ray sales including films, television shows, concert videos and other content declined about 10 percent to $13 billion in 2009, Adams Media said.

The movie disc business peaked in 2004 with U.S. sales of $12.1 billion. With the film industry increasingly relying on the small but growing sectors of on-demand television and online distribution, movie disc sales are not expected to rebound to those peak figures from six years ago.

"It's going to be a more diverse marketplace with more ways of getting movies, therefore packaged sales aren't going to see the kind of growth that we saw with DVD," said Tom Adams, president of Adams Media Research.

The $8.73 billion consumers spent in 2009 to buy movies on DVD and Blu-ray was down 13 percent from the year before, Adams Media said. U.S. box office receipts for 2009 were up nearly 10 percent from the year before.

The last time U.S. box office receipts eclipsed disc sales was in 2002, Adams said.

Adams said the figures for 2009 are still preliminary, as late December sales had to be projected.

Hollywood would like to see Blu-ray sales pick up the slack from slumping DVD business, but that has been hampered by the recession and changing consumer patterns. Blu-ray uses advanced digital technology to produce a sharper picture than DVDs.

About $1.1 billion of the movie discs bought in 2009 were on Blu-ray, and the number of homes with Blu-ray players grew from 3 million to 8 million.

But even as Blu-ray has seen growth, sales of movies on discs have been undercut by the rise of low-cost rental options, such as Coinstar Inc's kiosk chain Redbox, which rents DVDs for $1 a day, and online subscription services such as Netflix Inc.

"Those two sectors of rental have really been growing, and causing people to hesitate about how many discs they're going to buy," Adams said.

Movie disc rentals in 2009 grew to $8.15 billion from $8.11 billion in 2008.
In 2009, the domestic box office reached a record high $10.6 billion, but that includes Canadian ticket sales that were taken out of the numbers compiled by Adams Media.

Doyle's executors threaten Holmes sequel

The executors of Sir Arthur Conan Doyle's literary estate have threatened to withdraw Guy Ritchie's rights to the Sherlock Holmes story if the director hints at a homosexual relationship between the lead characters in his sequel.

Robert Downey, Jr., who plays the supersleuth in Ritchie's new movie adaption, recently appeared on David Letterman's U.S. talk show and hinted at a homoerotic subtext in the relationship between his character and Jude Law's Dr. Watson.

During the interview the actor also asked the audience to decide whether Holmes is "a very butch homosexual."

But Downey, Jr.'s comments have infuriated Andrea Plunket, who controls the remaining U.S. copyrights to the Holmes story, and she's threatened to withdraw permission for a follow-up if Ritchie suggests the detective is more than just friends with his sidekick.

She says, "I hope this is just an example of Mr Downey's black sense of humour. It would be drastic, but I would withdraw permission for more films to be made if they feel that is a theme they wish to bring out in the future. I am not hostile to homosexuals, but I am to anyone who is not true to the spirit of the books.

Marvel shareholders approve acquisition by Disney

NEW YORK – Shareholders of Marvel Entertainment Inc., home of Spider-Man and the Hulk, on Thursday approved the company's acquisition by The Walt Disney Co., as expected.

Marvel said the $4.3 billion acquisition will close at the end of the day, bringing Spider-Man, Iron Man, and 5,000 other comic-book characters under the same roof as Mickey Mouse and Donald Duck.

Approval of the deal was expected. Marvel Chief Executive Isaac "Ike" Perlmutter, who owns 37 percent of Marvel stock, supported it. He will be overseeing the Marvel business after the acquisition.

Marvel shareholders will receive $30 per share in cash, plus 0.745 Disney shares for every Marvel share they own. Disney shares traded midday Thursday at $32.53, up 25 cents on the day. That values Marvel shares at $54.25, just above their trading price of $54.23.

The deal is Disney's largest since it purchased Pixar Animation Studios Inc., the maker of "Up" and "Cars," for $7.4 billion in stock in 2006.

Hollywood eyes record $10 bln box office for 2009

LOS ANGELES (Reuters) – Film box offices were poised on Wednesday to eclipse 2007's record $9.68 billion in U.S. and Canadian ticket sales with Hollywood eyeing more than $10 billion this year as audiences flocked to theaters during the recession.

Movie studios began the year with January crossing the $1 billion mark for the first time ever, and box offices this month are counting on help from highly anticipated films such as "Avatar," "Sherlock Holmes" and "It's Complicated."

So far, moviegoers had snapped up $9.67 billion worth of tickets at domestic -- U.S. and Canadian -- box offices through Tuesday, said tracking firm Hollywood.com Box Office.

The firm said 2007's record was expected to be surpassed on Wednesday, as Hollywood reaps returns during a recession that, as in past downturns, has seen consumers showing up in theaters for relatively cheap entertainment.

Last year's domestic box office came in at $9.63 billion.

"The global economy is taking a major hit, and when these conglomerates that own movie studios are having a tough time, it's at least one bright spot in the equation," said Paul Dergarabedian, president of Hollywood.com Box Office.

"People are still, in 2009, going to the movies in big numbers."

For the entire year, Hollywood.com Box Office expects movie ticket spending in the United States and Canada to hit $10.6 billion.

The year has been helped by major releases such as "Transformers: Revenge of the Fallen," the year's biggest hit with $402 million in domestic ticket sales, according to tracking firm Box Office Mojo.

At No. 2, so far, was "Harry Potter and the Half-Blood Prince," which made $301 million. Also, vampire romance "The Twilight Saga: New Moon" had the third biggest movie opening of all time for the United States and Canada.

Surprise hits have included Paramount Pictures' "Paranormal Activity" raking in $107 million. Warner Bros. put out two unexpected smashes, "The Hangover" ($277 million) and "The Blind Side" ($131 million and still counting.)

The 2009 total was aided by a 28 cent increase in ticket prices from the year before to an average $7.46.

The total number of tickets sold, or admissions, is expected to reach 1.4 billion, up from 1.34 billion in 2008. Still, that figure is not expected to break the record 1.6 billion tickets sold in 2002, said Hollywood.com Box Office.

The United States and Canada account for about 35 percent of the global box office total, making it the largest film market in the world, Hollywood.com Box Office said.

International figures were not available.

Sony offers `Cloudy' early to people with its TVs

In a bid to sell living room electronics and spur buzz for "Cloudy with A Chance of Meatballs," Sony Corp. is offering the movie for free to U.S. buyers of its Internet-connected TVs and Blu-ray players starting Monday.

People who buy that equipment will be able to watch the movie in any 24-hour window from Dec. 8 until it is released on DVD and Blu-ray disc on Jan. 5.

Sony's move highlights the way that movies are increasingly becoming available on TVs that connect directly to the Internet as the entertainment industry strives to come up with new business models.

Amazon.com Inc. and Blockbuster Inc. offer movies for rental or purchase on certain Internet-connected TVs, while Netflix Inc. will make its streaming catalog available to its subscribers with Sony Bravia TVs.

Those services, however, don't provide the early-release jump Sony is trying with "Cloudy with A Chance of Meatballs," which comes from the Sony Pictures movie studio.

"What we're doing is game-changing for TV," said Robert Jacobs, senior business development manager for Sony Electronics Inc.

Existing owners of Internet-connected Bravia TVs will have to pay $24.95 for the early rental, which will stream in 720p — a lower resolution than full high-definition 1080p on Blu-ray discs. Viewers will be able to fast-forward, rewind and pause but not record the movie.

Last year, Sony streamed "Hancock" to Bravia TV owners for two weeks before its home video release. The promotion created a "halo effect" helping electronics sales and the movie's DVD purchases and rentals, Jacobs said.

For now Sony's focus is on TVs and Blu-ray players, although the early home-release window eventually could come to owners of PlayStation 3 video game consoles, he said.

Blockbuster planning to close stores

SAN FRANCISCO - Blockbuster Inc. may close as many as 960 stores by the end of next year, shedding more dead weight as the struggling video rental chain tries to reverse its losses and fend off rapidly growing rivals Netflix Inc. and Redbox.

The cuts outlined in documents filed Tuesday would leave Blockbuster with about 20 per cent fewer U.S. stores. The previously confidential documents didn't identify the locations of the endangered stores.

Blockbuster hasn't made any final decisions on the possible store closures, Chief Executive James Keyes said in an interview Tuesday.

Keyes described the closures as something that Blockbuster is considering as it sets up more DVD-rental kiosks in the stores of other merchants. It's a concept that has been popularized by Coinstar Inc.'s Redbox.

By the middle of next year, Blockbuster hopes to have 10,000 kiosks scattered around the country. It had just 500 kiosks at the end of August.

"We could have fewer physical stores and still have more rental points for our customers," Keyes said.

Blockbuster's shift serves as another reminder of video stores' waning appeal as consumers buy and rent movies through the mail, on the Internet and through cable connections and standalone kiosks.

The shift has threatened to turn once-mighty Blockbuster into a dinosaur. The Dallas-based company has been trying to evolve by embracing kiosks and expanding into rentals delivered through the mail and the Internet.

But it hasn't been enough to justify keeping so many stores open, prompting management to consider cutting much deeper than it anticipated to save money and keep its lenders happy. About 18 per cent of Blockbuster's stores aren't making money, according to the documents filed with the Securities and Exchange Commission.

Blockbuster is thinking about closing between 810 and 960 of its U.S. stores before 2011, up from the 380 to 425 stores that normally would be closed during that time span, according to Tuesday's filing.

As of mid-August, Blockbuster had closed 276 stores so far this year.

Besides closing stores, Blockbuster indicated that it will convert at least 250 stores into smaller outlets.

If Blockbuster hits the high end of the new target for store closures, it will represent 22 per cent of its 4,356 stores in the United States.

Netflix's DVD-by-mail service, launched a decade ago, has hit Blockbuster particularly hard as more households have embraced the concept of picking out their rental choices online before the DVDs are delivered through the mail for a monthly subscription fee that usually runs from $9 to $17. In the last two years, Netflix lured even more customers by building up its library of movies available for instant viewing over high-speed Internet connections.

Netflix now has 10.6 million subscribers and, unlike Blockbuster, is becoming more profitable. The Los Gatos-based company earned $55 million through the first half of this year while Blockbuster lost $15 million.

Redbox also has been hurting Blockbuster with its red kiosks that rent DVDs for just a $1 per night. That low price has proven particularly compelling during the recession as more people pinched pennies.

In a Tuesday research note, Barclays Capital analyst Douglas Anmuth said Blockbuster's accelerated store closures should bolster Netflix. Investors seemed to agree as Netflix shares surged $1.69, or 3.9 per cent, to close Tuesday at $44.97.

Blockbuster's cost-cutting plans also pleased Wall Street as its shares gained 7 cents, or 5.2 per cent, to $1.40.

Royalty rates may silence bars

TORONTO - Canadian restaurants, bars and clubs are warning they may have to turn down the music if a proposed royalty increase becomes a reality, but the non-profit organization seeking the raise for performers says it's time they paid up.

The Neighbouring Rights Collective of Canada wants to increase its royalty fee for background music by more than triple the current rate, a move it says will properly compensate performers and engineers.

It also has a proposal before the Copyright Board of Canada that would change how venues pay to play music that customers dance to.

"It's about ascribing the proper values to music," said collective president Ian MacKay, who argues that songwriters and publishers have been getting paid better royalties for decades while performers and producers have been given short shrift.

"It's to compensate the performers for the use of their music. Imagine a dance club without music being played, people want music to dance to and that certainly adds value to the business of running a night club."

But the Canadian Restaurant and Foodservices Association says the proposals would force many business owners to reconsider whether playing music is worth the cost.

In particular, the association is highlighting the implications of higher fees for venues that feature dancing, which could result in annual fee increases between $6,000 and $30,000.

"It's exorbitant in the extreme and it will force many operators to consider dropping music altogether, or at least have them rethink the use of dance music," said association spokesman David Harris.

The proposed tariff is going before the Copyright Board of Canada and Harris said he will "vigorously argue that this proposal is unfair and that it is financially devastating."

But MacKay claims those figures are at the high end of the range and would only apply to mega-clubs, while smaller establishments would have fees in the hundreds, not thousands.

Businesses pay similar fees to the Society of Composers Authors and Music Publishers of Canada, which collects about $1.4 million in royalties every year for background music from around 31,000 businesses, including restaurants, hotels, shopping malls, banks, retail stores, factories and professional offices.

In releasing its reasons for certifying SOCAN's most recent set of tariff rules, the Copyright Board of Canada stated "background music touches practically every aspect of our daily lives, from the tunes we hear in the elevator, to the jazz we listen to over dinner at a restaurant."

An expert who testified as the proposed tariff was being debated said research suggests background music "favourably impacts customers' mood and perception of their environment."

"As a result, they are likely to stay longer in a store, to buy more and to have a positively enhanced perception of merchandise and customer service," said Prof. Richard Michon of the Ted Rogers School of Retail Management at Ryerson University in Toronto.

"The right background music can even foster a stronger sense of customer loyalty."

MacKay said businesses should be budgeting for music just as they budget for other expenditures.

"A restaurant has many suppliers of food, flowers, decor - all these things that go into the dining establishment," he said.

"Well one of the things that definitely goes into the value of a dining establishment is the music they're playing in the background, which sets the mood as much as the decor."

BBC announces plan to share archives

The BBC has launched a massive program to share its film, audio and document archives with other arts institutions in Britain, marking a new direction for the public broadcaster.

Alan Yentob, the BBC's creative director, announced Saturday the new initiative will provide archival access, historic materials and even technical assistance in collaboration with the Tate art gallery, the British Film Institute and the British Library.

"As an organization we have to make the most of the downturn by responding to it … the BBC has an obligation to share what we have got," he told the Guardian newspaper. Yentob said the corporation was also in talks with the Royal Opera House and the National Theatre.

"I see the BBC as a broker in these times," responded Yentob. "It is the next stage for us. We must make sure culture remains confident in this country."

Yentob's news also has the BBC signing a three-year agreement with the Arts Council of England, which will provide wider access to the arts and support young talent.

The broadcaster is also expanding its collaboration with the British Museum, which is already working with BBC Radio on a 100-part series titled A History of the World in One Hundred Objects, presented by the museum's director, Neil MacGregor.

Yentob's announcement comes only a day after British media had a field day listing the spending practices of BBC executives, including Yentob who was revealed to have spent £1,500 ( $2,700) on a staff Christmas dinner.

Other executives were also exposed, spending hundreds of pounds on sending flowers to talent, lunches with colleagues or actors and presenters, or sending cases of Champagne to television stars.

Billy Joel drummer files NY lawsuit over royalties

NEW YORK – A former drummer for Billy Joel claims the Grammy Award-winning singer of hits including "Uptown Girl" and "Movin' Out" has stiffed him out of royalties for years.

Liberty DeVitto has filed a lawsuit in Manhattan's state Supreme Court demanding Joel pay him overdue royalties. The 58-year-old says he was Joel's drummer from 1975 to 2005 and helped the piano man craft some of his biggest albums.

DeVitto's lawyer says he doesn't know how much his client is owed. He says Joel's sales are subject to an audit.

DeVitto says he's working as a studio musician and teaching to support his family, including three children.

Joel has sold more than 100 million records worldwide. His spokeswoman hasn't returned a telephone message seeking comment.

Actor's union board endorses deal with studios

LOS ANGELES – The Screen Actors Guild's board of directors has voted to recommend that members approve a deal reached with Hollywood studios on movie and prime-time TV show productions.

The Guild says in a statement that the plan approved by board members Sunday would give members a 3 percent wage increase upon ratification and a 3.5 percent increase in the two-year agreement's second year. Members would also get a 0.5 percent pension and health contribution increase.

The new deal follows the Internet provisions earlier agreed to by writers, directors and another actors union. The Guild had waged a yearlong battle for better Internet compensation.

The Guild's interim national executive director David White says in the statement that the union is eager to get members back to work.

Global box office hits record $28 billion in '08

LOS ANGELES (Reuters) – The global movie box office rose 5 percent to a record $28.1 billion in 2008 as fans sought to escape tough economic times through the triumphs of superheroes in films like "The Dark Knight," and "Iron Man."

The Motion Picture Association of America on Tuesday said domestic ticket sales in the United States and Canada reached $9.8 billion, up 1.7 percent from 2007, and accounted for 35 percent of the worldwide total.

The box office in international markets, excluding Canada, climbed to a record $18.3 billion, up 7 percent from 2007, and accounted for 65 percent of the global total.

"Movies can still be counted on to boost people's spirits as well as the economy," said Dan Glickman, the chairman and chief executive of the movie trade group, in prepared comments for ShoWest, an annual convention held in Las Vegas.

Glickman said the domestic box office has remained strong in 2009, surging 11 percent in the first 10 weeks of the year.

David Miller, analyst with Caris & Co, said the lineup for the U.S. summer movie season looks exceptional with many big titles set for release, including "X-Men Origins: Wolverine," "Star Trek" and the newest "Harry Potter" installment.

"We believe the Street now has (a) little more comfort with the summer...lineup out of the studio system, which looks outstanding," Miller said in a report.

But strong ticket sales have not always helped Hollywood.

Citing strong box office trends, lawmakers recently stripped from the $900 billion U.S. economic stimulus plan a provision to provide $246 million in tax breaks for movie makers that would help fund production.

In his statement, Glickman said it was not only in Hollywood's interest, but in the U.S. interest, to have constructive policies that protect intellectual property and encourage the economic growth the industry can deliver.

"When folks talk about how well the box office is doing, it's nothing to apologize for," Glickman said in a statement.

"Whether we build cars or make movies shouldn't matter. What matters is getting folks back to work and reviving our economy," he said.

Unlike previous years, the MPAA did not provide data on the average cost to make and market films -- figures that mostly have been on the rise and have offset solid box office.

In last year's report, the MPAA said the average cost to make and market a film grew to $106.6 million in 2007 for the major studios, up 6.3 percent from $100.3 million in 2006.

An MPAA spokeswoman said the group did not track these figures in 2008 due to an evolving marketplace.

"The industry, the wide diversity of films produced, the labels used for distribution and a host of other factors are all changing so rapidly that year-to-year average cost comparisons are relatively useless and misleading," said the spokeswoman.

While domestic admissions fell slightly to 1.4 billion in all of 2008, they remained relatively equal to recent years, with the exception being 2002's high of 1.6 billion admissions.

Admissions rose 7 percent in the fourth quarter of 2008 and eight percent in the first 10 weeks of 2009, the MPAA said.

The rise underscores an old rule in Hollywood that in tough times, people go to the movies for escape.

Average ticket prices in 2008 rose by about 30 cents to $7.18, a 4.4 percent increase roughly comparable to the consumer price index increase, the MPAA said.

The number of films released domestically in 2008 rose slightly from the previous year to 610 compared to 599 in 2007, but films produced in the U.S. dropped 20.7 percent in large part due to economic and labor issues, the MPAA said.

The MPAA said its major studio members released 27 fewer films, while non-MPAA-affiliated independent companies released 38 more new films in 2008, making up the difference.

The MPAA represents major studios like General Electric Co's Universal Pictures, Time Warner Inc's Warner Bros, Viacom Inc's Paramount, which distributes DreamWorks films, News Corp's Twentieth Century Fox, Sony Corp and Walt Disney Co.

Nirvana's music a flop for firm

Nirvana's music has proven to be a dud among advertisers and Hollywood studio executives - because few want to pay to use it in commercials and TV shows.

A company called Primary Wave Music Publishing bought a 50 per cent stake in Kurt Cobain's music publiching rights from widow Courtney Love in 2006 - for a reported $50 million - but bosses have had little luck making their investment pay off.

Business website Portfolio.com reports plans to place Nirvana songs in TV commercials, video games, ad campaigns and movies have backfired, and, as the 15th anniversary of the rock star's death approaches, Primary Wave chiefs have earned just over $2 million on their investment.

A source tells the website that one deal to license a number of Nirvana songs to TV bosses at CBS for an episode of CSI: Miami fell through when Love, Primary Wave bosses and Cobain's former bandmates asked for "twice the industry standard" in licensing fees.

Cobain committed suicide at his home in Seattle, Washington on 8 April, 1994.

Hollywood's happy, even without a record year

LOS ANGELES – Hollywood loves breaking box-office records, yet studio executives aren't griping that their 2008 lineup will fall a bit shy of the all-time high set a year earlier.

With the overall economy in the pits, movie moguls are just glad to have weathered the year with faithful audiences that continued to crowd into theaters.

"Last year was the record of all time. The economy's tough. Things are bad out there, and I think if we can have another record-breaking year or close to it, I figure we'll all be happy," said Dan Fellman, head of distribution for Warner Bros., which released the year's biggest hit with "The Dark Knight" ($531 million).

Through New Year's Eve, 2008 domestic revenues are expected to come in just shy of 2007's record of $9.7 billion, according to box-office tracker Media By Numbers. Factoring in inflation, the actual number of tickets sold in 2008 is running 5 percent behind last year's, when admissions totaled 1.4 billion.

Hollywood historically survives recessions better than many businesses because movies remain relatively cheap compared with sporting events, live theater and other forms of entertainment.

While consumer belt-tightening no doubt costs studios some cash, the list of 2008 blockbusters is a sign of a healthy business delivering the goods across every genre.

With a $158.4 million debut, the Batman sequel "The Dark Knight" shattered the record for best opening weekend and has put Heath Ledger on track for a possible posthumous Academy Award as the maniacal villain the Joker.

Paramount and Marvel Studios' "Iron Man" was the superhero runner-up with a $318.3 million haul. Old-school hero Harrison Ford cracked his whip again as Paramount's "Indiana Jones and the Kingdom of the Crystal Skull" followed closely with $317 million.

Among other smashes: Sony's Will Smith adventure "Hancock" and James Bond thriller "Quantum of Solace"; Universal's action tale "Wanted"; and a rush of animated comedies led by the Disney-Pixar charmer "WALL-E."

While young males remained Hollywood's core audience, girls and women flocked to theaters for the Warner Bros. comedy "Sex and the City"; Summit Entertainment's vampire romance "Twilight"; Universal's musical "Mamma Mia!"; and Disney's "Hannah Montana" concert flick.

Quality-wise, the summer blockbusters came in a cut above the usual lineup of silly action and lowbrow comedy. Critics liked "Iron Man" and adored "WALL-E" and "The Dark Knight," the latter heading toward Jan. 22 Oscar nominations with best-picture buzz.

The 2008 lineup showed that hit movies do not "have to be a mindless concept," said Rob Moore, vice chairman of Paramount, whose 2008 successes also included the comedy "Tropic Thunder," featuring fresh and wildly different performances from "Iron Man" star Robert Downey Jr. and Tom Cruise. "If you tell a compelling story, you can get an audience to show up."

With a huge Christmas weekend, Hollywood continued to serve up must-see movies, from 20th Century Fox's family tale "Marley & Me" to a surge of awards contenders such as "The Curious Case of Benjamin Button," "Doubt," "Revolutionary Road" and "Gran Torino."

When they see films they like, audiences tend to come back for more. So the goodwill gained from recent successes should help carry the movie business into 2009 — as long as the movies remain good, said Paul Dergarabedian, president of Media By Numbers.

"It's vitally important now more than ever that movies deliver, because people are careful about what they're spending their money on. So they have to be satisfied with the product," Dergarabedian said. "When audiences use the movies as a retreat from their everyday troubles, that retreat had better make them feel good."

It's Tom Hanks vs. Mel Gibson as SAG Splits Into Strike Camps

Los Angeles (E! Online) – All work and no contract has made members of the Screen Actors Guild a surly bunch.

While support for an actors' strike was already running thin thanks to the industry-wide burnout still being felt from the 100-day writers' strike in 2007-08, the current state of the nation's economy—not to mention the just-underway awards season—has Hollywood up in arms over what could be another potentially disastrous work stoppage.

A select group of A-listers is in favor of authorizing a strike, should SAG leadership choose to go that route, but nearly 150 big-deal actors have now gone ahead and publicized their avowed opposition to such a move.

George Clooney, Tom Hanks, Alec Baldwin, Cameron Diaz, Steve Carell, Jennifer Garner, Charlize Theron, Matt Damon, Morgan Freeman and Eva Longoria Parker are among the boldfaced names found on a petition that was sent to SAG national president Alan Rosenberg asking the board to cancel a strike-authorization vote scheduled for Jan. 2.

"We feel very strongly that SAG members should not vote to authorize a strike at this time," the petition read. "We don't think that an authorization can be looked at as merely a bargaining tool. It must be looked at as what it is—an agreement to strike if negotiations fail.

"We support our union and we support the issues we're fighting for, but we do not believe in all good conscience that now is the time to be putting people out of work."

David Boreanaz, Ewan McGregor, Sally Field, Michael C. Hall, Felicity Huffman, Rob Lowe, Kevin Spacey, Josh Brolin, Pierce Brosnan, Glenn Close, Donald Sutherland, Billy Crystal, Ted Danson, Kelsey Grammer, Edward Norton, Tobey Maguire, Bradley Whitford and Helen Hunt also lent their signatures to the document.

Then again, plenty of A- and B-listers are in favor of authorizing a strike, having signed a "Statement of Support" for Rosenberg & Co.'s studio-fighting tactics.

Among the 30 prominent thesps who will stand by SAG if it chooses to play even harder ball are Mel Gibson, Ed Harris, Holly Hunter, Martin Sheen, Sandra Oh, Jerry O'Connell and Rob Morrow.

SAG's contract with the studio-representing Alliance of Motion Picture and TV Producers expired June 30 and actors have been working under the terms of their own deal ever since.

As was the case with the Writers Guild of America, SAG continues to quibble over new-media residuals and other compensation-related issues.

The AMPTP's response to SAG's upcoming vote was as follows: "SAG members are going to be asked to bail out a failed negotiating strategy by going on strike during one of the worst economic crises in history. We hope that working actors will study our contract offer carefully and come to the conclusion that no strike can solve the problems that have been created by SAG's own failed negotiation strategy."

Actors Have Little Appetite for Potential SAG Strike

LOS ANGELES -- When Hollywood writers began a strike a little more than a year ago, movie and TV stars went out of their way to show solidarity with the mostly unheralded scribes who craft their lines. Former "Seinfeld" star Julia Louis-Dreyfus lugged a picket sign. Jay Leno passed out doughnuts to writers outside studio gates. Dozens of actors shot brief but stylish black-and-white Internet films supporting the scriptwriters.

Now the Screen Actors Guild is pondering its own walkout, possibly as early as next month. But the deepening recession has dampened the militant pro-labor sentiments many celebrities freely espoused last year. With the entertainment business and its tens of thousands of workers still reeling from the three-month writers strike -- and with the larger U.S. economy shedding more than half a million jobs last month alone -- many top performers show little enthusiasm for another smackdown with the studios.

The chill was palpable as Hollywood celebrated the Golden Globe nominations Thursday, setting up the Oscar race for such contenders as "Revolutionary Road" and " Frost/Nixon." Earlier this year, with stars bailing on the ceremony in the depths of the writers strike, NBC offered a truncated, little-watched Globes telecast.

Actors Set Date to Vote on Strike

Next month's Globes look safe to happen before any walkout could occur. But stars are nevertheless nervous about the long-term effects of a boomerang strike.

"You can't ignore what's happening in the economy," David Duchovny, star of Showtime's dark comedy " Californication," said Thursday after receiving a Globe nomination for best actor in a comedy or musical television series. Duchovny was one of many stars who showed up at picket lines last year to support writers. "Everyone wants to keep on working. Even with what little work there is, to have none would be disastrous."

Jimmy Smits, a longtime TV star who headlined CBS' since-canceled drama " Cane," said that an actors' walkout would not be "prudent," even though SAG and the studios are contending over "really serious" financial issues. "I don't see it happening," Smits said of a strike. "Middle America is going to have a hard time with a bunch of actors out there striking when there's so much hurting going on."

The A-listers' shift could highlight a split within SAG's 120,000-member union. For all their visibility, celebrity actors make up a tiny fraction of the union's membership, the vast majority of whom do not have regular employment on union-contracted shows. Because these nonworking members do not face the prospect of a lost paycheck from a strike, they are generally more receptive than busy actors to anti-studio rhetoric from SAG's leadership.

That rhetoric has ramped up in recent days. After months of negotiation, SAG and the studios have hit an impasse over a new deal that would cover such issues as residual payments for movies and TV shows streamed over the Internet. The union announced this week that it would mail out ballots to members Jan. 2 for a vote that would authorize a strike. Seventy-five percent of the membership must vote "yes" for a strike to proceed.

"SAG members understand that their futures as professional actors are at stake," SAG President Alan Rosenberg said in a statement. "A yes vote sends a strong message that we are serious about fending off rollbacks and getting what is fair for actors in new media."

To be sure, the recession hasn't made all the leading performers strike-averse. Some actors express frustration with studio negotiators who they believe are trying to give performers a raw deal by cutting back on current compensation.

"How can you exploit people's work and not pay them any money?," said Melissa George, nominated for her work on HBO's " In Treatment." "The myth is that we're asking for more. We're just asking to keep [the contract] as it is, not more. That's not being greedy."

Others are pro-labor on principle.

"I'm a union guy," said Blair Underwood, likewise nominated for "In Treatment." "So if the union decides to strike, I'm gonna have to be out there picketing. One or 2 percent of actors make a living in this game and we as union members need to be respected in terms of residuals and the ability to make a living."

"At the end of the day I will support my union, whatever they decide," said Anne Hathaway, an award contender this year for the film " Rachel Getting Married."

But top-tier performers are facing a much more awkward position than last year. Sympathizing with the writers during their walkout was relatively pain-free because the actors' own economic position was not directly at stake.

That helped many actors to walk hand-in-hand with the striking writers. As British actor Tom Wilkinson said last December, "If actors can't have solidarity with writers -- the people who put the words in their mouths -- then who can they have solidarity with?"

Now, however, the global economic meltdown has stoked fears that a SAG strike would deal a devastating financial blow not just to performers but also to everyday production workers still trying to recover from the work slowdown caused by the writers strike.

Indeed, with the stock market hammered and money from hedge funds and other private sources drying up, some worry that the survival of the entertainment industry, or at least a large portion of it, is at stake.

"The industry is in such a state of flux, because of the economy and because things are underperforming at the box office," said Irish actor Colin Farrell, Globe-nominated for the comedy "In Bruges." "A lot of films are falling apart ... I have a lot of friends who are excited to go to work on certain things and the gigs are falling apart. Some pieces are falling apart very close to principal photography. Climate-wise, it's a worrying time for the industry. I don't know that a strike at this time wouldn't be a counterproductive thing."

Wilkinson, like many of his peers who threw their support behind the writers last year, sounds much more circumspect this time around.

"I don't really know the ins and outs, since I'm over here in the U.K.," he told The Times Thursday. "But I don't think there'll be a strike. Actors don't like going on strike. And this financial climate will make it worse ... Everyone is hoping for a solution."

Hiring freeze, layoffs to come at CTV: memo

Layoffs, a hiring freeze and revisions or delays of new projects are in the cards at Canadian broadcaster CTV, according to a memo staff received Tuesday.

In the note, CTV CEO Ivan Fecan blamed both the global financial downturn and "the ongoing structural issues affecting conventional television" for the new operational plan.

Staff are slated to meet at a town hall with Fecan in Toronto on Wednesday to hear further details.

In the meantime, Fecan's message outlined several cost-cutting measures that were put into place Tuesday.

"Across all TV properties, there will be a hiring freeze," as well as a halt on travel and entertainment spending, he wrote.

"New projects, unspent capital plans will be revised, delayed or halted" and management has called on each department to "identify efficiencies — unfortunately, this will result in some layoffs."

However, organizational changes will not be the same across the board, he said.

"Each situation will be judged by its own circumstances … where there is strong revenue or competitive reasons, we may choose to add, not cut, resources."

The news comes a week after media giant Canwest announced it is cutting five per cent of its workforce, including 210 broadcast and 350 publishing jobs.

Canwest president Leonard Asper partially attributed the decision to the current economic climate and the current pressures facing conventional TV operations.

In July, Statistics Canada reported that revenue for conventional television fell by 5.3 per cent, slipping to $1.267 billion in 2007 versus 2006. By comparison, pay television revenue in Canada rose by 13.5 per cent for the same period, hitting $547 million in 2007.

Both Fecan and Asper also blamed the Canadian Radio-television and Telecommunications Commission's recent rejection of carriage fees to help traditional broadcasters, such as CTV, Canwest's Global television network and CBC-TV.

CTV Inc. owns and operates 27 conventional television stations across the country and has news bureaus across Canada and internationally, including in Washington, London and Beijing.

Its parent company, CTVglobemedia, also owns the Globe and Mail newspaper, 34 CHUM radio stations across the country, as well as TSN, Much Music, Bravo and more than two dozen other specialty TV channels.

Spielberg rejoins Universal in DreamWorks deal

LOS ANGELES - Steven Spielberg's DreamWorks studio has signed on with Universal Pictures to distribute its films as his company parts ways with Paramount.

Under the seven-year deal, Universal will distribute up to six DreamWorks movies a year domestically and overseas, except for India, executives for both companies said Monday.

Spielberg made his early films, including "Jaws," for Universal, and his Amblin Entertainment production company remained based on the Universal lot even after Paramount acquired DreamWorks in 2006.

"Universal has always been my home base so this agreement starts a new chapter in what has been a long and successful association," Spielberg said in a news release. "While it feels great to come home again, it feels like I never left."

Universal will handle distribution in exchange for an 8 percent fee on revenues.

The deal had been anticipated as DreamWorks broke off from Paramount, where there had been ongoing friction over the costs of keeping Spielberg and his outfit there.

In a partnership with Reliance Big Entertainment of India, DreamWorks has lined up $1.5 billion to finance its future film slate. Reliance is handling distribution of DreamWorks films in India.

Remaining in charge at DreamWorks is Stacey Snider, who became chief executive officer in 2006. Snider previously was chairwoman of Universal Pictures.

"I really feel like it is a homecoming for Steven and Stacey," said Marc Shmuger, Universal Pictures chairman.

DreamWorks films already finished or nearing completion at Paramount, such as the dramas "The Soloist" and "The Lovely Bones" and next summer's "Transformers" sequel, still will be distributed by Paramount.

About 30 other films in development while DreamWorks was at Paramount are being split between them. They will retain the option to co-finance and co-distribute those films.

David Geffen, who co-founded DreamWorks SKG with Spielberg and Jeffrey Katzenberg in 1994, negotiated the deal but is not joining the new incarnation of DreamWorks.

The deal does not affect films from Katzenberg's DreamWorks Animation, which was spun off as a public company in 2004. DreamWorks Animation's distribution deal with Paramount runs through 2012.

Is Hugh Hefner going bankrupt?

Hugh Hefner has fuelled reports he's facing bankruptcy after opening the doors of his infamous Playboy Mansion to the public - for a fee.

Last month, Hefner was reportedly advised to dismiss employees in his Los Angeles and New York offices to avoid financial ruin.

Hefner's spokesperson Elizabeth Austin would neither confirm nor deny the financial problems at the time, stating: "It is our policy not to comment on corporate matters such as employee issues."

The Playboy boss has since extended an invitation to the exclusive parties held at the mansion, charging $5,000 to $25,000 a ticket, depending on the celebrities in attendance.

Hefner, whose Playboy Enterprises owns the mansion, pays a reported $700,000 annually in rent for the pad.

A company spokesperson denies Hefner's recent split from girlfriends Holly Madison and Kendra Wilkinson are related to his finances, adding the girls "are not even on the payroll. So, they would be the last to go."

Superhero summer heads for $4 billion box office

LOS ANGELES (Reuters) - Hollywood studios are nearing the end of their summer of superheroes with domestic box office receipts expected to roughly match last year's record $4.18 billion sum despite lower movie attendance.

Led by the blockbuster Batman sequel "The Dark Knight," U.S.-Canadian weekend ticket sales since May 2 are running just ahead of last summer, up 1.2 percent, according to box office tracking service Media By Numbers.

But with the number of actual admissions down nearly 3 percent from a year ago, the gain in revenues is fueled mostly by higher ticket prices.

With no other huge hits on the horizon before the U.S. Labor Day holiday on September 1, the 2008 vacation season will likely draw to a close at about the same level as last year's summer tally, which crossed the $4 billion threshold for the first time, box office analysts said.

Brandon Gray of the Web site Box Office Mojo said Hollywood suffered in the second half of summer from a mediocre film slate propped up almost entirely by the record-breaking strength of "The Dark Knight," now closing in on $500 million.

"If 'Dark Knight' failed to perform way above expectations, this would have been a decidedly down summer," Gray said.

Paul Dergarabedian of Media By Numbers agreed, saying Hollywood was hard-pressed to repeat the success of last year, which was anchored by "threequels" "Spider-Man 3," "Shrek the Third" and "Pirates of the Caribbean: At World's End."

GAMES AND GASOLINE

Dergarabedian said keen interest in the Beijing Olympics may also have dampened moviegoing in August.

Economic woes and high gas prices cut both ways at box offices as cash-strapped families sought relatively cheap entertainment in the form of movies, but were more choosy about which films to see.

"They may not hesitate for one second to spend 10 bucks on a movie ticket to go see 'The Dark Knight,' but some of these other films, they may say, 'Oh, I'm going to wait,' or 'I'm going to be a little bit more careful with my spending."'

Comic book adventures with a twist proved to be the hot ticket of summer 2008, accounting for at least three of the top four films and nearly $1.5 billion in revenues.

"The Dark Knight," gained much of its notice from the menacingly edgy performance of Heath Ledger as the villainous joker, his last completed film role before he died of an accidental overdose of prescription drugs.

Likewise, "Iron Man" kicked off the summer season in robust fashion with Robert Downey Jr. winning praise for his role as a wealthy weapons executive and playboy going through a mid-life crisis as he invents a high-tech armor suit to fight bad guys.

Those films have been the two highest-grossing titles of the summer, amassing over $471 million and $317 million respectively in North American receipts so far.

Ranked fourth, with $225 million, was "Hancock," starring Will Smith as a hung-over, often reckless superhero.

Even the summer's No. 3 movie, "Indiana Jones and the Kingdom of the Crystal Skull," which grossed $315 million, could be classified as a superhero movie of sorts.

"The Incredible Hulk" was No. 10 with $134 million, while "Hellboy 2: The Golden Army," landed at No. 24 with nearly $75 million. Other bright spots included chick flick "Sex and the City" and the animated hits "Wall-E" and "Kung Fu Panda."

With the exception of "Dark Knight" and the musical "Mamma Mia!," the box office had cooled considerably by mid-July. Of the 16 summer weekends so far, nine were down year-to-year in overall ticket sales.

In 2007, Hollywood boasted 14 summer films grossing $100 million or more, compared with 12 this summer. Four films last summer cracked $300 million, versus three this season.

Rolling Stones switch recording deal to Universal

LONDON - The Rolling Stones, the world's top-earning music act last year, have signed a long-term, exclusive worldwide contract with Vivendi SA's Universal Music, dealing a major blow to the group's former recording company, EMI Group PLC.

Universal said on Friday that the new deal covered both future albums by the Stones and their back catalog including such albums as "Sticky Fingers" and "Black and Blue" and songs "Brown Sugar" and "Start Me Up."

Universal, the world's biggest recording company, did not disclose terms of the deal.

The Stones' departure from EMI, where they'd been for more than 20 years, is a low point in a bumpy ride for Terra Firma Capital Partners Ltd., the private equity firm that bought the London-based recording company last year.

New EMI boss Guy Hands failed to re-sign British band Radiohead. Other major artists, including Coldplay and Robbie Williams, have expressed unhappiness with some changes at the company since the buyout.

"Universal are forward-thinking, creative and hands-on music people," the Stones said in a statement. "We really look forward to working with them."

The British group has already had some experience of working with Universal after the company, a subsidiary of French media and telecommunication giant Vivendi SA, in March released the soundtrack album from "Shine A Light," director Martin Scorsese's film of the Stones' 2006 performance at the Beacon Theater in New York.

Universal will now release all new recordings by the group through its Polydor label and take over full digital and physical rights. It added that it will "begin planning an unprecedented, long-term campaign to reposition the Rolling Stones' entire catalog for the digital age."

The Stones topped Forbes magazine's list of wealthy music acts last year, reportedly earning some $88 million between June 2006 and June 2007, mostly from their "Bigger Bang Tour."

EMI, whose artists also include the Beastie Boys, Norah Jones and Kylie Minogue, announced plans this year to cut more than one-third of its work force to offset a drop in CD sales revenue and the departure of several major artists, including Paul McCartney.

EMI has struggled more than the other major labels — Universal, Sony BMG and Warner Music Group — as digital music downloading has gained in popularity.

The company blamed disappointing North American results for a series of damaging profit warnings, but industry experts also pointed to internal control problems and the company's lack of new music.

Nickelback signs 3-album deal with Live Nation

Alberta rockers Nickelback are the latest group to sign a global recording and merchandising deal with concert promoter Live Nation, according to the company.

Los Angeles-based Live Nation has previously signed deals with Madonna, Shakira, Jay-Z and U2.

Nickelback, fronted by Chad Kroeger, has signed a three-album, three-tour deal that industry sources valued at $50-$70 million, Reuters reported Tuesday. Live Nation did not release terms of the deal.

Live Nation has specialized in all-inclusive packages. This deal has it handling all of Nickelback's merchandising, licensing, sponsorship, endorsements, DVD and broadcast rights as well as fan club, website and literary rights.

Nickelback's last North American and Australian tour in 2006/07 grossed more than $67 million and its last album, All the Right Reasons, sold 10 million copies.

Three singles from that album — Photograph, Far Away and Rockstar — were top 10 hits on the U.S. charts.

The band still has two albums left to deliver to its Road Runner Records label before it makes any records with Live Nation.

Nickelback has announced a September 2008 tour of Germany, the U.K. and Ireland.

12 Smart Ways to Save on Gas

With gas prices going up and up, a year of weekly fill-ups now drains $2000 more from your wallet than just four years ago. Here are a few tips to help you squeeze more miles out of every tank.

DRIVE INTELLIGENTLY

Avoid aggressive driving. "Drive as if you had a hard-boiled egg between your foot and the gas pedal," says John H. Davis, host of PBS's MotorWeek. "It's OK to break the eggshell, but you can't squash it." By observing speed limits and avoiding abrupt starts and stops, you can increase mileage by 5% on city streets and up to 33% on the highway — that's $27 per 20-gallon fill-up.

Control your speed. Using cruise control automatically reduces the amount of fuel you burn on the highway. When you set your speed, keep in mind that gas mileage decreases dramatically when you exceed 60 mph. Stick to the right lane, and you can reduce your fuel consumption by up to 20%.

Lighten your load. An extra 100 pounds of weight reduces mileage by as much as 2%, the equivalent of 8 cents per gallon. In other words, you can save up to $50 per year simply by cleaning out your trunk.

Don't idle. If traffic is at a standstill, turn off the engine. An hour of idling can swallow a gallon of gas. Also, avoid long lines at drive-through windows. You'll save money by going inside.

GET YOUR CAR IN SHAPE

Tune up. Keep your spark plugs clean, your engine tuned, and your wheels aligned. Replacing a clogged air filter can improve your gas mileage by 10%, saving up to 40 cents per gallon. Ignore the hype about additives — from chemical mixes to mothballs — that claim to boost mileage. They're not worth the money and may even damage your engine.

Use the right motor oil. If the oil is too thick, your engine will have to work harder — burning more fuel. If it's too thin, you won't get the needed protection. Stick with the type recommended by your owner's manual for maximum fuel efficiency.

Take care of your tires. Keep tires inflated to the pressure recommended in your owner's manual. Soft tires use more gas, but overinflating your tires (as some mileage fanatics suggest) will mess with your car's handling.

If you have two cars, use the one with better gas mileage. If you drive 12,500 miles a year, switching half of your trips from a car that gets 20 mpg to one that gets 30 mpg can save more than $400.

CHEAT THE WIND

Roll up your windows. It may seem odd, but you'll get better summer mileage by cranking the A/C on the highway, since open windows create drag at high speeds. (If you're just running errands around town, fresh air is best.)

Maintain a sleek profile. Avoid accessories like luggage racks, which increase drag, and keep your tailgate upright. Fix any dents, especially to the front of the car. A high-gloss finish won't help your mileage much, but keeping the body straight will.

DELIVERING GAS SAVINGS

UPS squeezes every last drop of mileage from its fleet of 94,000 vehicles, saving 3 million gallons of gas a year. Some expert tips:

Plan ahead. Map out the most efficient routes and make single stops for multiple tasks in the same area. "Do all your work in one trip," says Jack Levis of UPS, "and time your trips so you don't run into congestion."

Keep moving. "Left turns waste time and energy," says UPS spokesperson Donna Barrett — you don't want the engine idling at a green light while you wait for oncoming traffic to pass. When you do make a planned stop, turn off the engine.

Actors' petition doesn't sway SAG board

LOS ANGELES - The prospects are looking dim for the proposal to limit which Screen Actors Guild members can vote in upcoming contract talks.

SAG's board of directors on Saturday referred the matter to committee rather than immediately act on it, as more than 1,400 guild members demanded in a petition. It sought to restrict voting to actors who work at least one day a year.

The proposal ran into strong opposition from board members who argued it would exclude most guild members.

The majority of SAG's 120,000 members don't work regularly. Supporters of the proposal reason that nonworking members would be more likely to favor a walkout.

Contract negotiations with studios begin Tuesday.

TV, film actors' unions sever ties

LOS ANGELES (AP) — Unions representing film and television actors will negotiate separately with producers in upcoming contract talks after board members of the TV actors union voted Saturday to sever a long-standing agreement between the two guilds.

The vote by the board of the American Federation of Television and Radio Artists came hours before a meeting with the Screen Actors Guild and just three months before the expiration of the contract covering movies and prime-time shows.

Despite a sometimes rocky 27-year relationship the unions had shown recent signs of peace as they prepared for the upcoming talks.

The two groups had hoped at Saturday's meeting to set a start date for negotiations. Instead of discussing strategies the sides swapped accusations.

"For the past year SAG leadership in Hollywood has engaged in a relentless campaign of disinformation and disparagement," AFTRA president Roberta Reardon said in a written statement.

SAG President Alan Rosenberg's written response: "AFTRA's refusal now to bargain together with us and their last-second abandonment of the joint process is calculated, cynical and may serve the interests of their institution, but not its members."

The AFTRA board said the vote to terminate the agreement, known as "Phase One," was "overwhelming."

Wary of repeating the damage wrought by the recently ended 100-day Hollywood writers strike, producers and several A-list actors including Tom Hanks, George Clooney, Meryl Streep and Robert De Niro had been pressing for negotiations to start as early as this week.

The 120,000-member Screen Actors Guild represents actors in movies, TV and other media. The 70,000-member TV and radio federation represents, among others, actors, singers, announcers and journalists.

The Alliance of Motion Picture and Television Producers, which represents studios, said in a statement that it looks forward to bargaining with AFTRA. It did not mention SAG.

Report: Strike Cost $2.5 Billion

Lesson learned from the recent writers' strike: The pen is costlier than the sword.

A report released Wednesday by Jack Kyser, the chief economist for the Los Angeles County Economic Development Corp., has revealed that the three-month walkout by film and TV writers took a heavier toll on Tinseltown's bottom line than predicted—$2.5 billion in lost show business.

The 71-page study, dubbed the Economic Forecast Report, concluded that the writers' strike, which started Nov. 5 and ended last week, resulted in millions of dollars in lost wages for the cast and crews of shuttered film and television productions.

The strike's impact alone on the Hollywood Foreign Press Association's annual Golden Globes Award ceremony cost the Industry upwards of $60 million, including lost advertising dollars and missed promotional opportunities by studios looking to boost their prestige pictures ahead of this Sunday's Oscars.

Despite solid gains at the domestic and global box office in 2007, as well as last week's deal in which scribes won concessions for royalties from content streamed over the Internet, Kyser and his analysts expressed concern that the devastating economic effect of the protracted strike could lead the Screen Actors Guild to dig in its heels when its own contract is up on June 30.

It's widely expected that the actors will follow the template forged by the Writers Guild of America and the Directors Guild of America in their new accords with the Alliance of Motion Picture and Television Producers.

However, Kyser's report said another strike wasn't out of the question, as SAG leaders are still "talking tough" about their negotiations.

Given how the work stoppage has thrown the scripted TV season for next fall into chaos, leaving many of its members scrounging for work, the union may hold out for a better revenue-sharing deal than the ones obtained separately by writers and directors.

The guild may seek to make up the shortfall in DVD sales, per the report. Sales remain flat this year, after suffering a steep 3.4 percent drop last year to $16 billion.

But with stars like Tom Hanks, George Clooney, Meryl Streep and Robert De Niro leading the charge, several key members of the Screen Actors Guild have urged the union to initiate early talks with the alliance to head off the possibility of another walkout.

While another strike would be grim news, the economic forecast for Los Angeles County for 2008 already predicts continued job losses in the manufacturing, information service and construction sectors due to the fallout from the strike.

Writers end strike; now they must write

LOS ANGELES - Hollywood writers' brief moment to savor the end of their 100-day strike gave way Wednesday to the cold reality of a blank page and networks and studios eager for new TV episodes.

"What we're all finding is there's a certain amount of, `OK, what are we going to do now?' said Shane Brennan, writer and executive producer for the CBS drama "NCIS."

"You go back to your desk, open your computer, look at the last thing you planned, the last thing you wrote," Brennan said, "and figure out how to go from there."

Cheryl Heuton, executive producer for CBS' "Numb3rs," has been making a flurry of calls to muster crew members, writers and others connected with the drama.

"We're just gathering everybody. The offices are pretty dark and lonely and will be for a couple more days," said Heuton.

Members of the Writers Guild of America members voted overwhelmingly Tuesday to lift the union's strike order, allowing the industry to jump-start stalled production of numerous TV sitcoms and dramas.

"It will be all hands on deck for the writing staff," said Chris Mundy, co-executive producer of the CBS drama "Criminal Minds." Actual production won't begin, however, until scripts have been completed, which could take days or even weeks.

For the Feb. 24 Academy Awards, the vote by East and West Coast guild members ended the threat of a boycott by writers and actors that would have robbed the ceremony of its celebrity luster.

Sid Ganis, president of the Academy of Motion Picture Arts and Sciences, which stages the Oscars, responded effusively.

"I am ecstatic that the 80th Academy Awards presentation can now proceed full steam ahead," he said, and without "hesitation or discomfort" for the nominees.

The writers' decided overwhelmingly in favor of ending the strike: 3,492 said yes, with only 283 voting to stay off the job. The number of guild members involved in the strike was 10,500, with countless other industry workers forced into unemployment because of the walkout.

Writers did not vote on the tentative contract agreement that already has won approval from the union's board of directors. The contract ratification vote will be conducted by mail and at meetings and will conclude Feb. 25.

Approval is expected, given Tuesday's lopsided decision and the enthusiasm for the proposed contract expressed at guild meetings held last weekend in New York and Los Angeles.

"At the end of the day, everybody won. It was a fair deal and one that the companies can live with, and it recognizes the large contribution that writers have made to the industry," Leslie Moonves, chief executive officer of CBS Corp., told The Associated Press on Tuesday.

Moonves was among the media executives who helped broker a deal after negotiations between the guild and the Alliance of Motion Picture and Television Producers, which represents studios, collapsed in December.

Under the tentative agreement, writers would get a maximum flat fee of about $1,200 for programs streamed on the Internet in the deal's first two years and then get 2 percent of a distributor's gross in year three — a key union demand.

Other provisions include increased residual payments for movies and TV programs downloaded from the Internet.

"These advances now give us a foothold in the digital age," said Patric Verrone, president of the West Coast guild. "Rather than being shut out of the future of content creation and delivery, writers will lead the way as television migrates to the Internet."

Michael R. Perry, a writer for "Persons Unknown" and other TV dramas, said the deal made him hopeful the guild and studios could be "partners in a growing pie" of Internet revenue.

"I want them to be fabulously, filthy rich. I just want my piece," Perry said.

The strike that began Nov. 5 dealt a financial blow to a wide range of businesses dependent on work from studios.

It took a $3.2 billion toll in direct and indirect costs on the economy of Los Angeles County, the home of most of the nation's TV and film production, according to a new estimate from Jack Kyser, chief economist for the Los Angeles Economic Development Corp.

The last writers strike, a 153-day walkout in 1988, resulted in an estimated $500 million in lost wages.

Hollywood's labor pains may not be over: The contract between studios and the Screen Actors Guild is set to expire in June, said Jonathan Handel, an entertainment attorney with the Los Angeles firm of TroyGould and a former associate counsel for the writers guild.

"The signs are mixed whether this is going to be another difficult negotiation," Handel said. "The actors face all of the new-media issues that the writers and directors faced."

Hollywood writers to vote on contract

LOS ANGELES - TV producers say they expect writers to return to work as early as Wednesday now that the Writers Guild of America has moved to end its three-month-old strike.

On Sunday, guild leaders recommended a tentative three-year contract to members and asked them to vote separately on a quick end to the walkout.

Membership meetings will be held Tuesday in New York and Los Angeles, said Patric Verrone, president of the guild's West Coast branch.

"This is the best deal this guild has bargained for in 30 years," Verrone said.

The tentative contract secures writers a share of the burgeoning digital-media market, he said, including compensation for Internet-delivered TV shows and movies.

"If they (producers) get paid, we get paid. This contract makes that a reality," Verrone said. But, he added, "it is not all we hoped for and it is not all we deserved."

Still, the union's negotiating committee recommended Saturday that the contract be accepted, and the West guild's board of directors and the East Coast guild's council agreed. They called for a membership ratification vote, which will be conducted by mail over about two weeks.

Member approval of the contract and the strike's end appeared likely. At heavily attended membership meetings Saturday in New York and Los Angeles, there was resounding support for the proposed deal that could put TV and movie production back on track, salvage the rest of the TV season and remove a boycott threat from this month's Oscars.

Verrone thanked television viewers who "tolerated three months of reruns and reality TV."

The guild's major bargaining concession to studios was agreeing to take unionization of animation and reality TV shows off the table, Verrone said. The guild has said it still intends to pursue those goals.

The Alliance of Motion Picture and Television Producers, which represents the studios, said it had no comment Sunday on the guild's actions.

The strike's end would allow many hit series to return this spring for what's left of the current season, airing anywhere from four to seven new episodes. Shows with marginal audience numbers may not return until fall, or could be canceled.

A minimum of four weeks would be needed for producers to start from scratch with their first post-strike episodes of comedies and get them on the air, industry members said. A drama would require six to eight weeks from concept to broadcast.

"It will be all hands on deck for the writing staff," said Chris Mundy, co-executive producer of CBS' drama "Criminal Minds." He hopes to get a couple of scripts in the pipeline right away, and for about seven episodes to air by the end of May.

"It's a real balancing act," he said, "to get up and running as fast as possible, but not let the quality slip."

The strike, the first in 20 years for the writers guild, began Nov. 5 and included bitter exchanges between the guild and the producers alliance. Talks collapsed in December.

In January, the studios reached an agreement in separate negotiations with the Directors Guild of America. Top media company executives, including Peter Chernin of News Corp. and Robert Iger of The Walt Disney Co., asked the writers to resume bargaining.

What were termed informal talks between the executives and guild leaders led to the tentative contract that writers will be voting on.

Together, the East and West Coast guilds represent 12,000 writers, with about 10,000 of those involved in the strike. It has cost the Los Angeles area economy alone an estimated $1 billion or more.

Based on the guild's summary of the deal, it is similar to the agreement reached with directors.

It provides union jurisdiction over projects created for the Internet based on certain guidelines, sets compensation for streamed, ad-supported programs, and increases residual payments for downloaded movies and TV programs.

Writers would get a maximum flat fee of about $1,200 for streamed programs in the deal's first two years and then get a percentage of a distributor's gross in year three — the last point an improvement on the directors deal, which remains at the flat payment rate.

The writers and directors guild deals both include a provision that compensation for ad-supported streaming wouldn't kick in until after a window of 17 to 24 days deemed "promotional" by the studios.

Some writers have balked at that, saying Internet traffic is heaviest in the first few days.

Writers strike could see last chapter

LOS ANGELES - The now 3-month-old Hollywood writers strike could enter its final chapter Saturday when guild members gather in Los Angeles and New York to consider a proposed contract.

If writers respond favorably, the walkout that has devastated the entertainment industry could end as soon as Monday. Writers were wavering between hope and skepticism as they prepared to learn details of the deal for the first time.

"The feeling is relief and optimism and excitement," said Hilary Winston, a writer for the NBC sitcom "My Name Is Earl."

Still, she couldn't shake her lingering anxiety.

"I hope this deal made this three months worth it," she said.

Writer Erik Oleson, who watched a deal for a TV pilot fall apart during the strike, was reserving judgment.

"I'm not going to drink the Kool-Aid and accept a bad deal. I'd rather continue the strike," Oleson said. "We saw a press release but what matters is the fine print."

If members show strong support for the deal, the union could quickly lift its strike order, allowing dozens of TV shows to return to production and putting thousands of actors, crew members and others back to work.

An end to the strike might also salvage the Feb. 24 Academy Awards show, which is now facing a possible boycott by writers and sympathetic actors. The writers union has given a picket-free pass to Sunday's Grammy Awards.

The Writers Guild of America and the Alliance of Motion Picture and Television Producers, which represents studios, have not publicly commented on the proposed contract because of a joint media blackout.

Michael Eisner, a former Walt Disney Co. chief executive, told CNBC the proposed deal was good enough to end the strike.

"It's impossible the writers will turn it down," said Eisner, whose successor at Disney, Robert Iger, was among the studio chiefs who helped shape the proposal with leaders of the writers guild.

The most contentious issue in the talks was residual payments for TV programs and movies distributed on the Internet.

"Within the next five years, most American televisions will be connected to the Internet. The shows and movies you watch on your TV will be downloaded or streamed," the union said in its strike fact sheet.

Some accounts suggest the proposed deal involving the 12,000-member union and the world's largest media companies improves on a contract agreement reached last month by studios and the Directors Guild of America.

Directors won several key concessions on new media, including payments for downloaded TV programs and movies based on a percentage of the distributor's gross.

The writers guild, however, has been seeking 2.5 percent of distributor grosses from Internet-delivered projects — about three times what the directors guild got in its deal.

Writers also balked at the maximum $1,200 flat fee that studios agreed to pay directors for streamed, ad-supported programs.

Writers won't vote Saturday on the proposed contract but will have a chance to voice their support or opposition at the closed meetings.

An e-mail circulated by a strike captain urged pro-deal members to attend so union leaders wouldn't hear only from opponents.

Other e-mails to guild members said a favorable response by writers would be followed by a Sunday meeting of the guild negotiating committee to consider lifting the strike order and scheduling a formal membership vote by mail.

"I hope Monday is when this town gets going again," Winston said. "If it's not Monday, I'll take Wednesday."

Warren Leight, an executive producer in New York for NBC's "Law & Order: Criminal Intent," doesn't think writers will be swayed by high-profile colleagues who have trumpeted the directors deal as a solid template for writers.

"If the deal works, everyone is ready to go back to work. But it has to be discussed by 10,000 people, not by 30 show runners and wannabe A-listers," Leight said.

Among the show runners — industry slang for executive producers in charge of a series — who lauded the directors deal was John Wells, whose credits include "ER" and "The West Wing." He termed it, "Very good. For writers, for directors, for the future."

A quick end to the walkout might result in TV viewers seeing a more new episodes of their favorite shows this season. A script takes about three weeks to write and about 40 working days to produce, so it could take as long as two months for the first new shows to air, Leight said.

But once a production has scripts and is up and running, episodes are worked on concurrently and an hour-long show can be produced within eight days, he said. That could allow an hourlong drama to return with perhaps a half-dozen new episodes, and a half-hour comedy to squeeze in as many as seven new shows for the rest of the season.

Networks, however, are likely to pick and choose among shows, with low-rated newcomers less likely to get deals for more episodes than a series like "Grey's Anatomy," which has a big, faithful audience.

Furry critters abound in Super Bowl Ads

NEW YORK - It was an epic battle of the creatures in the Super Bowl ads, ranging from the cute to the menacing to the inexplicably rhythmic. A band of lizard-like reptiles cutting the rug to Michael Jackson's "Thriller"? Hey, it's the Super Bowl.

Much is riding on the ads, which are the most closely scrutinized of the whole year, as well as the most watched and the most expensive. This year's 30-second spots on News Corp.'s Fox network broadcast were fetching as much as $2.7 million. The price edges higher nearly every year.

Last year the game drew 93 million viewers, a level that many believe could be surpassed this year given the strong matchup between the New York Giants and the New England Patriots, as well as the Patriots' chance to go for a record unbeaten season.

Using critters is hardly a new trick in the ads for the big game, but this year saw some novel and clever uses of animals durinmg Sunday night's broadcast.

FedEx Corp.'s ad took a decidedly Hitchcockian turn when a corporate underling entrusts shipping operations to a huge squadron of carrier pigeons — eerily reminiscent of "The Birds."

When a tribe of giant pigeons winds up wreaking havoc by accidentally dropping huge boxes into traffic and picking up parked cars and hurling them through windows, a cool-headed supervisor decides that calling FedEx would be a good idea.

Toyota Motor Corp. took a stab at the critter theme with a clever spot for its Corolla model, boasting of the noise-blocking ability of the car by putting a young guy in the drivers seat next to a sleeping family of badgers that will gnaw his face off if awakened. The cannons firing around him aren't the problem, but he would have been better off putting his cell phone on vibrate.

PepsiCo Inc.'s Sobe Life Water brand brought out some dancing lizards to bop along with Naomi Campbell to Michael Jackson's '80s classic "Thriller," whose 25th anniversary edition is coming out later this month.

Elsewhere, job-search site CareerBuilder.com was back in the game — not with the cast of monkeys it used for several years — but with a jarring yet effective ad featuring a bored female office worker whose heart literally jumps out of her chest, struts down to the boss's office and jumps up on the desk with a little sign saying, "I quit." The lesson: Follow your heart, literally.

Anheuser-Busch Inc. was once again the largest advertiser in the game, with a series of humorous spots for its Bud Light brand and a heartfelt "Rocky"-inspired story of a Clydesdale horse that doesn't make the first cut for the carriage team, but succeeds after a year of training with an unlikely coach, a Dalmation dog.

Source: Breakthrough in writers talks

LOS ANGELES - A breakthrough in contract talks has been reached between Hollywood studios and striking writers and could lead to a tentative deal as early as next week, a person close to the ongoing negotiations said Saturday.

The two sides breached the gap Friday on the thorniest issues, those concerning compensation for projects distributed via the Internet, said the person, who requested anonymity because he were not authorized to speak publicly.

A second person familiar with the talks, also speaking on condition of anonymity because he wasn't authorized to comment publicly, said that significant progress had been made and a deal might be announced within a week.

The people did not provide specific details on the possible agreement. Major points of contention include how much and when writers are paid for projects delivered online after they've been broadcast on TV.

The studios have been insisting that programs be streamed online for a certain period, deemed promotional, during which writers would forgo residuals. When payment kicked in, the companies sought to limit it to a flat $1,200 fee, while the guild wanted a percentage of a distributor's revenue.

The Writers Guild of America did not immediately reply to a request for comment. The Alliance of Motion Picture and Television Producers, the trade group representing the studios, declined comment, citing a news blackout agreed to by both sides during the talks.

Guild leaders have said they are fighting for a piece of the future, reflecting the widespread belief that Internet-delivered entertainment fare would inevitably claim an increasing and perhaps even dominant market share.

Although work remains to be done on elements of the agreement, prospects for a deal appeared solid, said those close to the situation. The tentative agreement would have to be approved by a majority of guild members.

The guild, whose 3-month-old strike has brought the entertainment industry to a standstill, began informal talks with top media company executives Jan. 23 in an attempt to reach a new deal covering governing work for film, TV and digital media.

Negotiations between the guild and alliance negotiators collapsed Dec. 7 after the alliance demanded that proposals for unionization of animation and reality shows be taken off the table. The guild refused.

During the negotiations impasse, the Directors Guild of America began its own talks with studio chiefs and swiftly reached a tentative deal that was announced Jan. 17 and covered some of the digital media issues key to the writers guild.

Major studio executives called on the writers guild to begin informal talks, which essentially are standing in for formal negotiations, according to those familiar with the situation.

The guild extended its own olive branch before the informal talks started by withdrawing the reality-animation unionization proposal and by deciding to keep pickets away from the Grammy Awards. It has since decided to allow the music ceremony to proceed with full union support.

However, the fate of the Feb. 24 Academy Awards has remained in question, with the guild so far declining to grant its blessing to the show. A union refusal to cooperate with the Golden Globes decimated the ceremony, which was boycotted by supportive actors.

Oscar organizers and producers have vowed they will stage some type of show, with or without union support — but a writers guild deal would allow this ceremony to proceed in its full, star-studded glory, providing an invaluable promotional showcase for movie studios and their films.

Microsoft bids $44.6 billion to buy Yahoo

SAN FRANCISCO/NEW YORK (Reuters) - Microsoft Corp offered to buy Yahoo Inc for $44.6 billion, in a bold bid to transform two ailing Internet businesses into a worthy competitor for market leader Google Inc.

In what would be the biggest Internet deal since the ill-fated Time Warner-AOL merger, Microsoft Chief Executive Steve Ballmer sent a letter to Yahoo's board on Thursday night to offer $31 per share in cash and stock.

The price is a 62 percent premium over Yahoo's Thursday close, but only about a quarter of what the Internet company was worth at the height of the dotcom bubble in 2000.

Yahoo would give Microsoft dominance in Web banner ads used by corporate brand advertisers. It also attracts more than 500 million people monthly to sites devoted to news, finance and sports, and Yahoo Mail is the No. 1 consumer e-mail service.

The shares of Microsoft, which has a market capitalization of about $300 billion, fell 6.6 percent as some investors worried the world's top software maker may be overpaying for Yahoo and could have a hard time getting a return on its investment.

Critics say the two companies have too many overlapping businesses -- from instant messaging to email and advertising, as well as news, travel and finance sites -- and both are weak in the Web search market, where Google dominates.

"They have to do it because they've tried everything they can do to fix MSN. Yahoo is the most visited site in the world, so it goes without saying that, given the current valuation, this is the perfect time for them to buy it," said Piper Jaffray analyst Gene Munster.

But he added: "Google is running away with the search market and that's obviously the best part of the market. The likelihood that Google gets caught is slim to none."

Yahoo said on Friday its board will evaluate the unsolicited offer. Its shares shot up about 48 percent to $28.33. The shares of Google, which has a market value of about $160 billion, fell 8.58 percent to close at $515.90.

TRANSFORMATIVE OR CULTURE CLASH?

Speculation about a Microsoft-Yahoo deal has swirled through the markets for more than a year, as investors looked for a joint stand against the ever more powerful Google.

Google's share of the U.S. Web search market rose to 58.4 percent by December from 52.6 percent in January last year, while Yahoo's fell to 22.9 percent from 26.9 percent, and Microsoft's fell to 9.8 percent from 10.4 percent, according to comScore data.

Skeptics say Microsoft and Yahoo have very different corporate cultures and worry about a clash such as the one that marred AOL's $182 billion purchase of Time Warner in 2001, which is seen as the worst merger in recent history. Time Warner Inc is now valued at only $57 billion.

The perception is that Yahoo, an iconic Silicon Valley company with a free-flowing, fun-loving attitude, may not fit in with the button-up, competitive Microsoft, the world's biggest software maker.

"Culture is the big thing where people have some concerns," said Jupiter Research analyst Bobby Tulsiani. "If they have anything in common, they're both tired of losing to Google, so they can agree on that probably."

CEO Ballmer, in his most aggressive move to shape the future Microsoft, said the deal would transform its money-losing Internet division, which it sees as critical to growth, into a profitable pillar of its business.

"We have been losing money. Our plan here would be to not lose money in the future," he said on a conference call.

Ballmer said Microsoft has had on-and-off talks with Yahoo for 18 months, but was told by management a year ago that the timing was not right -- in an apparent reference to Yahoo's then Chairman and Chief Executive Terry Semel.

Semel was replaced by Yahoo co-founder Jerry Yang as CEO in June and resigned as chairman on Thursday.

"With the Semel roadblock now gone, there is reason to think this (merger) is now likely to happen," said RBC Capital Internet analyst Jordan Rohan, noting Yahoo is running out of options in the face of a weakening business climate.

RICH VALUATION

Under the proposal, Yahoo shareholders can choose to get $31 cash, or 0.9509 of a share of Microsoft common stock. The deal in aggregate must consist of one-half cash and one-half Microsoft common stock, the software maker said.

Microsoft's current stock price of $30.45 values Yahoo at around $30, or a rich 57 times forecast 2009 earnings, according to Reuters Estimates. In comparison, Google is trading at around 20 times forecast 2009 profit.

Some analysts said Microsoft was overpaying for a company that warned earlier this week it faced "head winds" in 2008, forecasting revenue below Wall Street expectations.

"To me, the premium seems exorbitant, for what is a dwindling business. I personally don't see how the synergies of Microsoft-Yahoo is going to take on Google," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC.

Global Equities Research analyst Trip Chowdhry said Yahoo is not worth more than $20 per share as its only worthwhile properties are Yahoo Mail, Yahoo Answers and Yahoo Finance.

But others said the price is low enough for rival bidders to emerge, noting Yahoo traded at $34.08 in late October.

"There could be a little more money on the table," said Laura Martin, an analyst at Soleil-Media Metrics. "The company is in play. Yahoo will not be able to stay independent. Other bidders will emerge before this is over."

Analysts cited Comcast Corp, Viacom Inc and General Electric Co among possible bidders, although they also said few companies had the balance sheet to compete with Microsoft or were as natural a fit for Yahoo.

As Yahoo shares are trading close to Microsoft's valuation, it indicates few investors expect a sweeter offer.

ANTITRUST CONCERNS

Microsoft General Counsel Brad Smith acknowledged other bidders could emerge, but said any attempt by arch-rival Google to acquire Yahoo would face insurmountable antitrust hurdles.

Antitrust experts said regulators would likely take a close look at a Microsoft-Yahoo deal, but as the two are dwarfed by Google, the deal will ultimately likely be approved.

Microsoft said the online advertising market is expected to reach nearly $80 billion by 2010 from over $40 billion in 2007. It paid $6 billion last year to buy online advertising services firm aQuantive as a bulwark against Google's growing position.

The software company forecast at least $1 billion in annual cost savings for the merged entity, from synergies in areas such as combining engineering talent.

Bernstein Research said the deal appeared to be less about expanded business potential and more about cost-savings that can be wrung out of shrinking redundant operations.

"We are relatively comfortable with (Microsoft's) estimate of $1 billion in annual synergies. It appears to us that the majority of the synergies are on the cost side," said the note from Bernstein analysts Charles Di Bona and Jeffrey Lindsay.

Morgan Stanley and Blackstone LP scooped the prize banking job of advising Microsoft on the deal, according to sources familiar with the matter, while Yahoo is being advised by Goldman Sachs Group Inc.

Directors, Hollywood studios reach deal

LOS ANGELES - Hollywood directors reached a tentative contract deal Thursday with studios, a development that could turn up the pressure on striking writers to settle their 2-month-old walkout that has idled production on dozens of TV shows.

"Two words describe this agreement — groundbreaking and substantial," said Gil Cates, chairman of the Directors Guild of America's negotiations committee. "There are no rollbacks of any kind."

Among other things, the three-year agreement establishes key provisions involving compensation for programs offered on the Internet.

That issue has also been a key sticking point between striking writers and the studios, which broke off talks on Dec. 7.

In announcing the deal with directors, the Alliance of Motion Picture and Television Producers, which represents studios, expressed hope that it would help end what it called an extremely difficult period for the industry.

It also called on the writers guild to engage in informal discussions to determine if there was a reasonable basis for returning to the bargaining table.

The Writers Guild of America said it would evaluate the terms of the directors' deal. It also reiterated that it has been calling on the studios to resume negotiations.

"We hope that the DGA's tentative agreement will be a step forward in our effort to negotiate an agreement that is in the best interests of all writers," the writers guild said in a statement.

Writers previously said directors do not represent their interests.

The deal with directors gives their union jurisdiction over programs produced for distribution on the Internet and sets a new residuals formula for some paid Internet downloads that essentially doubles the rate currently paid by employers, the guild said.

In addition, it sets residual rates for ad-supported streaming and use of clips on the Internet.

"Our industry's creative talent will now participate financially in every emerging area of new media," the studio alliance said in a statement.

The deal was welcomed by others in Hollywood.

"I'm very pleased with the new agreement and I hope it helps speed up the negotiations" with the writers guild, George Clooney said.

Clooney has often commented on the need to resolve the strike to put thousands of people back to work in Hollywood.

The directors guild was well-prepared when it started negotiations Jan. 12.

It had spent $2 million researching the potential value of new media over the next decade and held a series of meetings with key studio heads to establish a basis for the formal talks.

Cates, who's been involved in union contract negotiations for three decades, served as lead negotiator for directors.

He is also producing this year's Academy Awards program, which is imperiled by the writers standoff.

Sunday's Golden Globes were reduced to a news conference after actors refused to cross writers' threatened picket lines.

NBC lost millions of dollars in ad revenue, and award winners were deprived of instant publicity that could have provided a box-office bump.

New media issues also were expected to dominate negotiations with the Screen Actors Guild, whose contract expires in June.

The directors guild said late last year that it would delay the start of talks to give writers a chance to come to an agreement with studios.

But the guild clearly lost patience after negotiations between the writers and studios broke off last month and the strike dragged on.

Among other things, the studios' deal with directors says:

• Programs produced for the Internet will be directed by guild members, with the exception of low-budget shows.

• Residuals for downloaded movies will be increased by 80 percent over the current rate paid by employers. Those payments will be based on a distributor's gross, which the guild said was a key point in negotiations. (Distributors' gross represents the amount received by the company responsible for distributing the film or TV program on the Internet.)

• Companies are contractually obligated to provide the guild "unfettered access to their deals and data," the guild said, calling that unprecedented transparency.

• For ad-supported streaming of Internet programs, an initial 17-day free window will be followed by a requirement that companies pay 3 percent of the residual base — about $600 for a network prime-time drama — for 26 weeks of streaming. Companies can continue to stream for another 26-week period by paying an additional 3 percent, or a total of $1,200 for one year's worth of streaming. During a program's first season, the 17-day window is expanded to 24 days to help build audience.

In their talks, the writers guild and studios have clashed over using a percentage of a distributor's gross receipts to determine Internet compensation.

The guild said it sought that approach but was told by the alliance it was an unworkable and unacceptable formula. Instead, the studios offered a flat $250 payment for a year's use of an hourlong TV show on the Web.

The guild balked, citing the $20,000-plus residual that writers now earn for a single network rerun of a TV episode.

Also at issue for the writers guild is unionization of reality and animation writers.

Talks broke down after the alliance demanded the guild take that and other issues off the table, claiming there had been an agreement to drop it.

The guild's next move may be influenced by history.

There's a lingering resentment among members over what they considered raw deals in the 1980s involving what eventually became lucrative home-video and DVD markets.

The writers guild home-video deal was shaped by a deal made previously by the directors guild, following an industry practice of pattern bargaining.

That created resentment among some writers guild members toward the directors.

EMI faces 2,000 job cuts

LONDON (Reuters) - Guy Hands, the private equity owner of EMI, plans to cut up to 2,000 jobs at the ailing British music company, in a plan to rebuild the group which has sparked fury from some of its biggest acts.

Hands, previously best known for investment in waste management and pubs, on Tuesday unveiled his plan to make the home to The Beatles more artist-driven after it was hit by online piracy, falling CD sales and a poor release schedule.

In the list of Britain's biggest-selling albums in 2007, EMI's highest entry was Lily Allen's Alright, Still at 26.

The worldwide cuts will come at EMI's troubled recorded music division, which has some 4,500 staff of a group total of around 5,500. The shakeup, in which between 1,500 and 2,000 jobs will go, is designed to boost its roster of talent and increase Internet sales while reducing costs by 200 million pounds ($393 million) a year.

In a bid to allow EMI's labels such as Capitol and Parlophone to focus on finding new artists and promoting digital music, the company plans to bring its marketing, sales and distribution under a single division over the next six months.

But the plans have angered top-selling artists such as Robbie Williams, who questioned whether EMI would be able to devote enough time and money to promote his work.

"We have spent a long time looking intensely at EMI and the problems faced by its recorded music division which, like the rest of the music industry, has been struggling to respond to the challenges posed by a digital environment," Terra Firma boss Hands said.

"The changes we are announcing today will ensure that this iconic company will be creating wonderful music in a way that is profitable and sustainable."

UNCERTAIN FUTURE

The announcement follows a three-month review by Terra Firma which bought EMI last year for 2.4 billion pounds, or 3.2 billion pounds including debt, after years of speculation about the group's future.

At the time of the purchase, Hands said EMI would look to increase its digital sales, keep the company intact and securitize its more reliable music-publishing assets.

But that last proposal, which would have allowed it to borrow against revenue from the publishing division, has been put on hold due to the credit crunch. Terra Firm's management style has also drawn criticism from its artists and raised eyebrows within the industry.

British group Radiohead left last year, describing management as behaving like "confused bulls in a china shop," while Paul McCartney quit, saying the company was "really very boring."

And it has all been played out in the world's press, keen to see if Guy Hands and his "suits" can turn the company around. He had to be escorted by aides past a scrum of journalists on Tuesday morning as he went to meet staff in central London.

One employee of four a half years left the meeting saying it had been "inspiring" but the rest remained silent.

Most industry insiders and observers accept EMI has struggled more than other majors and that a new approach is needed. It has continually struggled in the United States, the world's largest music market, where it fell behind dominant Universal Music Group, Sony BMG and Warner Music Group in album market share.

"Everything in the music business right now is potentially risky," Mark Sutherland, global editor of trade publication Billboard, told Reuters.

"The industry is changing incredibly fast. Certainly this plan acknowledges those changes and attempts to address them. Whether that will be enough to turn around their performance remains to be seen," Sutherland said.

"If they can get the artists to buy in then they've got a good shot for success.."

Report: Studios cancel writers contracts

LOS ANGELES - Four major studios have canceled dozens of writers contracts, effectively conceding that the current television season cannot be salvaged, the Los Angeles Times reported Tuesday.

The move signals that development of next season's crop of new shows also could be in jeopardy because of the 2-month-old writers strike, the newspaper said.

January typically marks the start of pilot season, when networks order new comedies and dramas. But with writers not working, networks do not have a pool of scripts from which to choose.

20th Century Fox Television, CBS Paramount Network Television, NBC Universal and Warner Bros. Television each confirmed to the Times that they terminated development and production agreements. Studios typically pay $500,000 to $2 million a year per writer for them to develop ideas for new TV shows.

"I didn't see it coming," Barbara Hall, a writer and producer whose credits include former CBS series "Joan of Arcadia" and "Judging Amy," told the Times, which said ABC executives gave her the news Friday. "I am not entirely sure what their strategy is, all I know was that I was a casualty of it."

Overall, more than 65 deals with writers have been eliminated since Friday, the newspaper said.

Clooney's Bid To End Writers Strike

George Clooney has offered to act as a mediator between the Writers Guild of America (WGA) union members and Hollywood bosses in a bid to end the strikes.

The writers have been on picket lines since November, bringing production on Hollywood movies to a standstill and causing a number of TV networks to release staff and air repeat shows.

The strike also forced the organizers of Sunday's Golden Globes ceremony to cancel the event after actors threatened to boycott. But the Michael Clayton star has offered to set up a "mediation panel" to settle the WGA members' grievances - and plans to ask Steven Spielberg, Tom Hanks and ER producer John Wells to help him end the dispute, according to L.A. Weekly.

Speaking of the strikes earlier this week, he said, "When the strike happens, it's not just writers (affected)... Our hope is that all the players will lock themselves in a room and not come out until they finish. We want this to be done. That's the most important thing."

Idled Hollywood workers urge more talks

LOS ANGELES - The Hollywood strike is rewriting the holidays for idled workers.

With her income pinched, script supervisor Petra Jorgensen canceled an annual trip to Europe to see relatives. Set decorator Laura Richarz is bypassing pricey malls and fashioning gifts at home — framing photos, sewing a shirt for her niece.

With the holidays under way and the strike entering a sixth week, "It's going to be bleak for a lot of families," said Jorgensen, who's living off her savings.

The two were among hundreds of out-of-work employees and their supporters who marched down Hollywood Boulevard Sunday to call for a resumption of talks to settle the strike, which has sidelined many prime-time and late-night TV shows. Negotiations collapsed Friday between the Writers Guild of America and the Alliance of Motion Picture and Television Producers, with the sides pointing fingers at each other.

The march Sunday was intended to draw attention to the financial plight of workaday Hollywood — those employees whose jobs depend on ongoing productions, from caterers to set builders to hair stylists. With shows silenced, they too are struggling.

Marchers expressed growing frustration with the on-again, off-again talks, and fingers were pointed at producers and union writers. A central issue has been compensation for new-media distribution of work by guild members.

Pam Elyea, whose Los Angeles company, History for Hire, provides props for TV and movies, was forced to lay off six employees as expected work evaporated. If the walkout continues, she said, more could follow.

"I'm disappointed in both sides," Elyea said.

The writers guild represents 12,000 members, but not all are on strike. About 2,000 news writers and others are covered under a separate contract.

Studios believe they can hold out for months — a stalemate that could impact the regional economy along with the entertainment industry. Hollywood contributes an estimated $30 billion annually to the Los Angeles County economy.

Diana Valentine, a script supervisor for the FX drama "Nip/Tuck," said she has been off the job since Nov. 21 and her husband is an out-of-work actor. She said both sides need to be talking.

"You cannot come up with a deal if people are walking away from the table," she said. Without a paycheck soon, "I'm going to have to start renting out parts of my house."

Leno Agrees To Pay Striking Staff

Talk show "host" Jay Leno has agreed to pay laid-off members of his Tonight Show staff - after he was heavily criticized for not offering to pick up their paychecks amid the ongoing writers' strikes.

Unlike peers David Letterman and Conan O'Brien, Leno - who makes an estimated $27 million a year - had refused to cover the salaries of his show staff out of his own pocket after they were made redundant on Friday. But after facing a severe backlash from striking workers, the star has relented and agreed to pay his staff a week's wages, according to celebrity blogger Perez Hilton.

The lay-offs at the Tonight Show are the latest casualties in the ongoing battle between the Writers Guild of America and producers over royalties. The strike immediately shut down the late-night comedy shows and has gradually affected the production of many network-produced prime-time series, including Grey's Anatomy and Desperate Housewives.

'30 Rock' rolls ads into story lines

In the Nov. 15 episode of NBC's "30 Rock," Alec Baldwin and Tina Fey, in their roles as Jack Donaghy and Liz Lemon, sang the praises of Verizon Wireless before Fey looked right into the camera and asked, "Can we have our money now?"

At least in this case, art did indeed imitate life. Verizon said it handed over an integration fee to NBC, in addition to some marketing support, for the mini-commercial within one of the network's hottest shows.

The scene in question featured Jack saying, "These Verizon Wireless phones are just so popular. I accidentally grabbed one belonging to an acquaintance." Liz responded, "Well, sure that Verizon Wireless service is just unbeatable. If I saw a phone like that on TV, I would be like, 'Where is my nearest retailer so I can get one?' " She then broke the fourth wall and addressed the camera with the plea for cash.

"We talk with NBC on a consistent basis about opportunities," said Lou Rossi, director of media and sponsorships at Verizon Wireless. "We had engaged them to think about some ways we could help increase our presence in the marketplace, and they came back to us with the '30 Rock'-specific opportunity."

Rossi declined to disclose how much Verizon paid for the "30 Rock" integration but said that in addition to fees, it provided marketing support for the show with a co-branded ad in Maxim magazine and promotional content on VerizonWireless.com. "We want an integration to be as organic and natural to a show as it can be," he said. "Certainly with the '30 Rock' humor and writing, this type of integration just works well for them and for Verizon Wireless as well." NBC declined comment on the financial terms of the deal.

It's not the first time the irreverent NBC comedy has made a joke of the increasingly common practice of product integration while at the same time plugging a network advertiser. In fall 2006, there was a similar spoof with Snapple in the episode "Jack-Tor," which featured Lemon and the show-within-a-show's other writers protesting a directive from GE and Donaghy to write product placement into the show all while talking about how much they love Snapple. The dialogue included lines like "I only date guys who drink Snapple" and ended with Donaghy saying, "Yes, everyone loves Snapple. Lord knows I do." There was even a guy in a Snapple suit who walked out of the elevator asking for the human resources department.

Snapple's integration was part of its media buy on the network, a company spokeswoman said.

Despite the integration deals, "30 Rock" has made it onto Nielsen's list of the top 10 shows with product placement only one time since the fall season started. "The Office," another NBC show known for cutting major integration deals with advertisers in the past but which insists it no longer is involved in any such deals, turned up on the Nielsen top 10 list for four of the first five weeks of the fall season.

Through Nov. 18, Nielsen tracked 142 placements this season for a total of 779 seconds, or nearly 13 minutes, for "30 Rock," compared with 381 occurrences for a total of 2,505 seconds, or nearly 42 minutes, for "Office." From Sept. 24-Nov. 11, there were more than 80 brand mentions on "Office," according to Nielsen. But sources at Reveille and NBC insisted the placements were all scripted and viewed as adding to the humor of the show rather than emerging from any media buys or integration deals with NBC Entertainment or Reveille.

"Office" showrunner Greg Daniels has said that the show is no longer doing product integration because he "found it pretty impossible to balance the desires of the ad agencies and their clients with the creative needs of the show."

Among the brands with the most frequent or longest-lasting placements in "Office" this season are Hewlett-Packard, Boise Paper, Cisco Systems, Ever apparel, Microsoft, Vizio televisions, Toyota, Ford and Office Depot.

Staples, which cut a major integration deal with "Office" last season, had only three placements this season, lasting a total of nine seconds, compared with 56 occurrences lasting 334 seconds, or 5 1/2 minutes, in the full 2006-2007 season through Sept. 23, including repeats.

All of last season, including repeats, "Office" tallied 1,463 placements -- 427 verbal and 1,086 visual -- for a total of 9,110 seconds, or slightly more than 2 1/2 hours.

NBC Mulls Late-Night Replacements

Layoffs at NBC's late-night staples could begin this week -- or the network could keep at least "The Tonight Show" on the air with guest hosts later this month.

Those are two of the possibilities the networks is considering for its top-rated late-night lineup, which was in repeats last week as a result of the Writers Guild strike and will be again this week. "Tonight Show" host Jay Leno and "Late Night's" Conan O'Brien, both of whom also write material for their shows, have refused to cross picket lines. The same is true of CBS' "Late Show" and "Late Late Show" and ABC's "Jimmy Kimmel Live."

Because the shows are idle, NBC has informed the non-writing employees of both shows that layoffs could begin as soon as Friday. The folks at "Last Call" are in the same boat, according to a number of news outlets.

NBC is also, however, considering bringing at least "The Tonight Show" back onto the air, with guest hosts filling in for Leno, Broadcast & Cable reports. A guest-hosted show -- one still without writers -- could get on the air as soon as Monday, Nov. 19.

"All sorts of things are being discussed, including guest hosts," "Tonight Show" executive producer Debbie Vickers says in a statement. "Our preference is that we return to production of 'The Tonight Show' with Jay as host as soon as possible. We want to protect the staff, who have been loyal to this show for decades, in the same way that Johnny Carson reluctantly returned without his writers in 1988."

Carson returned to "Tonight" during 1988 writers strike, thereby providing work and a paycheck to the camera crew, grips and other staff members of the show. David Letterman followed suit, famously filling time during one writerless show by getting a shave.

If NBC does decide to go the guest-host route, the not-insignificant question will be who would cross the picket line to fill Leno's chair. No names have been floated yet.

Writers strike sends shows into reruns

LOS ANGELES - Americans may be getting more sleep after Hollywood writers went on strike Monday and forced the nation's late-night talk shows to start airing reruns.

NBC said the "The Tonight Show with Jay Leno" will immediately air repeats.

Still, Leno made an appearance at the Burbank studio, arriving on a motorcycle to visit strikers walking a picket line.

CBS said "The Late Show with David Letterman" will also offer repeats all week. The list of casualties included every other major late-night show.

The first strike by Hollywood writers in nearly 20 years got under way with noisy pickets on both coasts after last-minute negotiations on Sunday failed to produce a deal on payments to writers from shows offered on the Internet.

No new negotiations were scheduled, although the Writers Guild of America negotiating committee was set to meet Monday afternoon.

Nick Counter, chief negotiator for the Alliance of Motion Picture and Television Producers, said he expected a long standoff.

"We're hunkered down for a long one," he said. "From our standpoint, we made every good faith effort to negotiate a deal and they went on strike. At some point, conversations will take place. But not now."

The strike will not immediately impact production of movies or prime-time TV programs. Most studios have stockpiled dozens of movie scripts, and TV shows have enough scripts or completed shows in hand to last until early next year.

Disruptions by strikers ended filming at a Studio City cafe being used as a location for the CBS show "Cane."

Tom Hogan, a location manager for the show, said he had hired two off-duty Los Angeles police officers in addition to five private security guards to maintain order during the shoot.

He said the filming began hours before the 20 pickets arrived and involved a script that was finished several weeks ago.

No other major problems were reported at studios or filming locations.

At the CBS lot in Studio City, about 40 people hoisted signs and applauded when picketing began.

Robert Port, a writer for the TV show "Numb3rs," said he was as ready as possible for what could be a long walkout.

"We live in Los Angeles, your bank account can never really be ready for this," he said.

Only about half of the pickets wore their official red strike T-shirts.

"Writers aren't the easiest cats to corral," said Don McGill, another writer for "Numb3rs."

The first noisy strikers appeared outside the "Today" show set at Rockefeller Center in New York, where NBC is headquartered. The show is not directly affected by the strike because news writers are part of a different union.

A giant, inflated rat was displayed, as about 40 people shouted, "No contract, no shows!"

"They claim that the new media is still too new to structure a model for compensation," said Jose Arroyo, a writer for "Late Night with Conan O'Brien."

"We say give us a percentage so if they make money, we make money," Arroyo said.

Starting TV writers earn about $70,000 per season for full-time work on a show. Veteran writers who move up to a story-editor position make at least a low six-figure salary, with a "written by" credit on an hourlong script paying an additional $30,000 plus residuals.

Diana Son, a writer for "Law & Order: Criminal Intent," said she has three children and getting residuals was the only way she could take time off after giving birth.

"It's an extremely volatile industry," Son said. "There's no job security. Residuals are an important part of our income. There's no cushion."

Millie Kapzen of Memphis, Tenn., who watched the New York pickets from across the street, said she was "disgusted. ... I really think they should try harder to negotiate."

Kapzen said she sells advertising for radio stations. "We've already had cancellations of sweeps weeks ads" by the networks, she said.

Writers have not gone on strike since 1988, when the walkout lasted 22 weeks and cost the industry more than $500 million.

The battle has broad implications for the way Hollywood does business, since whatever deal is struck by writers will likely be used as a template for talks with actors and directors, whose contracts expire next June.

Talks began in July and continued after the writers contract expired last Wednesday.

Producers said writers were not willing to compromise on major issues.

Writers said they withdrew a proposal to increase their share of revenue from the sale of DVDs that had been a stumbling block for producers.

They also said proposals by producers in the area of Internet reuse of TV episodes and films were unacceptable.

In Los Angeles, writers planned to picket 14 studio locations in four-hour shifts from 9 a.m. to 5 p.m. each day until a new deal is reached.

Networks said other late-night show bound for reruns included "The Daily Show," "Colbert Report," "Late Late Show with Craig Ferguson," "Late Night with Conan O'Brien," "Jimmy Kimmel Live!" and "Last Call with Carson Daly."

Ellen DeGeneres was a no-show Monday for filming of her daytime talk show on NBC.

"Ellen did not go to work today in support of her writers," said Kelly Bush, her publicist.

New episodes of "The Ellen DeGeneres Show" that were filmed before the strike were set to air Monday and Tuesday. But it was unclear what might happen with the show later in the week, Bush said.

"Dancing With the Stars," one of the country's highest-rated prime-time shows, would air as planned on Monday, ABC said.

One key factor that could determine the damage caused by the strike is whether members of a powerful Hollywood Teamsters local honor the picket lines.

Local 399, which represents truck drivers, casting directors and location managers, had told its members that as a union, it has a legal obligation to honor its contracts with producers.

But the clause does not apply to individuals.

Steve Dayan, business agent of the local, said Monday he had heard of no problems on the picket lines involving his members.

He did not know if members were honoring the lines or crossing them.

"Our members have a choice whether they want to honor it or not," Dayan said. "I'm sure there are people honoring and some that are crossing. It's their individual right."

Hollywood writers begin strike

LOS ANGELES (AP) — Film and TV writers resolved to put down their pens and take up picket signs after last-ditch talks failed to avert a strike.

The first picket lines were set to appear Monday morning at Rockefeller Center in New York, where NBC is headquartered.

In Los Angeles, writers were planning to picket 14 studio locations in four-hour shifts from 9 a.m. to 5 p.m. each day until a new deal is reached.

The contract between the 12,000-member Writers Guild of America and the Alliance of Motion Picture and Television Producer expired Oct. 31. Talks that began this summer failed to produce much progress on the writers' key demands for a bigger slice of DVD profits and revenue from the distribution of films and TV shows over the Internet.

Writers and producers gathered for negotiations Sunday at the request of a federal mediator.

The two sides met for nearly 11 hours before East Coast members of the writers union announced on their Web site that the strike had begun for their 4,000 members.

Producers said writers refused a request to "stop the clock" on the planned strike while talks continued.

"It is unfortunate that they choose to take this irresponsible action," producers said in a statement.

Producers said writers were not willing to compromise on their major demands.

Writers said they withdrew a proposal to increase their share of revenue from the sale of DVDs that had been a stumbling block for producers. They also said the proposals by producers in the area of Internet reuse of TV episodes and films were unacceptable.

"The AMPTP made no response to any of the other proposals that the WGA has made since July," writers said in a statement.

The strike is the first walkout by writers since 1988. That work stoppage lasted 22 weeks and cost the industry more than $500 million.

The first casualty of the strike would be late-night talk shows, which are dependent on current events to fuel monologues and other entertainment.

Daytime TV, including live talk shows such as "The View" and soap operas, which typically tape about a week's worth of shows in advance, would be next to feel the impact.

The strike will not immediately impact production of movies or prime-time TV programs. Most studios have stockpiled dozens of movie scripts, and TV shows have enough scripts or completed shows in hand to last until early next year.

One key factor that could determine the damage caused by the strike is whether members of a powerful Hollywood Teamsters local honor the picket lines.

Local 399, which represents truck drivers, casting directors and location managers, had told its members that as a union, it has a legal obligation to honor its contracts with producers.

But the clause does not apply to individuals, who are protected by federal law from employer retribution if they decide to honor picket lines, the local said.

The battle has broad implications for the way Hollywood does business, since whatever deal is struck by writers will likely be used as a template for talks with actors and directors, whose contracts expire next June.

"We'll get what they get," Screen Actors Guild president Alan Rosenberg told The Associated Press.

The guilds have been preparing for these negotiations for years, hiring staff with extensive labor union experience, and developing joint strategies and a harder line than producers have seen in decades.

"We haven't shown particular resolve in past negotiations," said John Bowman, the WGA's chief negotiator.

Hollywood set for last-ditch labor talks

LOS ANGELES - A federal mediator was scheduled to meet with Hollywood writers and studio representatives at an undisclosed neutral location Sunday in a last-ditch effort to prevent a strike.

Both sides agreed to the meeting a day before writers say they will picket studios and movie locations. The writers' contract expired Oct. 31.

The writers want more money from the sale of DVDs and a share of revenue generated by the sale of TV shows and films over the Internet. The studios say the demands are unreasonable and would hamper attempts to experiment with new media.

The last time writers went on strike was in 1988. The walkout lasted 22 weeks and cost the industry about $500 million.

Writers Guild of America board members voted unanimously Friday to begin the strike at 12:01 a.m. Monday unless studios offered a more lucrative deal. The two sides have been meeting since July.

"The studios made it clear that they would rather shut down this town than reach a fair and reasonable deal," Patric Verrone, president of the western chapter of the guild, said at a news conference.

The union said it would stage its first pickets in New York and Los Angeles.

J. Nicholas Counter, president of the Alliance of Motion Picture and Television Producers, called the writers' strike "precipitous and irresponsible" in a prepared statement.

Producers believe progress can be made on other issues but "it makes absolutely no sense to increase the burden of this additional compensation" involving DVDs and the Internet, he said.

The first casualty of the strike would be late-night talk shows, which are dependent on current events to fuel monologues and other entertainment.

"The Tonight Show" on NBC will go into reruns starting Monday if last-ditch negotiations fail and a strike begins, according to a network official who spoke on condition of anonymity because the person lacked authorization to comment publicly.

Comedy Central has said "The Daily Show with Jon Stewart" and "The Colbert Report" would likely go into repeats as well.

Daytime TV, including live talk shows such as "The View" and soap operas, which typically tape about a week's worth of shows in advance, would be next to feel the impact.

The strike would not immediately affect production of movies or prime-time TV programs. Most studios have stockpiled dozens of movie scripts, and TV shows have enough scripts or completed shows in hand to last until early next year.

Talks between writers and producers will likely affect upcoming negotiations between the studios and unions representing actors and directors.

All those unions believe revenue from content offered on the Internet, cell phones and other platforms will grow tremendously in the years ahead, even though it's now minuscule compared to DVD sales.

Consumers are expected to spend $16.4 billion on DVDs this year, according to Adams Media Research. By contrast, studios could generate about $158 million from selling movies online and about $194 million from selling TV shows over the Web.

Studios argue that it is too early to know how much money they can make from offering entertainment on the Internet, cell phones, iPods and other devices.

Producers are also uncertain whether consumers prefer a pay-per-view model over an advertising-supported system. They want the economic flexibility to experiment as consumer habits change in reaction to technology.

Hollywood writers call Monday strike

LOS ANGELES (Reuters) - The union representing U.S. screenwriters called for a strike against film and TV studios starting Monday in a move giving negotiators one last weekend to reach a contract deal or shatter 20 years of Hollywood labor peace.

The strike deadline was issued on Friday, a day after a three-year contract covering the 12,000-member Writers Guild of America expired, and it follows months of talks that deadlocked over the union's demands for a greater share of DVD and Internet revenues.

Both sides have accused the other of stonewalling and refusing to budge from unreasonable proposals.

The union's negotiating panel unanimously urged a walkout during a boisterous membership meeting Thursday night, and the Writers Guild's governing board voted to ratify that recommendation.

No further contract talks were immediately scheduled, but union leaders said at a news conference there was still time to avoid a confrontation that, if prolonged, could cost hundreds of millions of dollars in lost revenues and wages.

"We have 48 hours, and what we really want to do is negotiate," said John Bowman, chairman of the union's negotiating committee. He said that while reluctant to go on strike, the Writers Guild felt it had to act decisively.

"We have to inflict as much damage as quickly as possible in order to get this thing over," Bowman said.

The Alliance of Motion Picture and Television Producers, the bargaining arm of the studios, offered only a brief, terse statement by group president Nick Counter.

"We are very disappointed with their press conference and the action they took," he said, accusing union leaders of "falsehoods, misstatements and inaccuracies."

He added, "We'll respond at an appropriate time."

Union officials said the strike would begin at 3:01 a.m. EST and picket lines would go up in Los Angeles and New York City.

$1 BILLION AT RISK

The last major Hollywood strike was a Writers Guild walkout in 1988 that lasted 22 weeks, delayed the start of the fall TV season and cost the industry an estimated $500 million. Los Angeles economist Jack Kyser said a strike of the same duration today could result in at least $1 billion in economic losses.

Movie and TV audiences would notice little impact at first. The screenplay pipeline of the film studios is well-stocked through 2008. And producers of prime-time sitcoms and dramas are said to have stockpiled enough advance episodes to keep their shows on the air until January or February.

But late-night talks shows will go off the air almost immediately since they rely on a daily supply of topical jokes. On his CBS show on Thursday, David Letterman described the producers as "cowards, cutthroats and weasels."

Prime-time schedules will start filling up with more reruns and game shows after the networks have burned through fresh episodes. The new shows fighting to hold viewers' attention in the first few weeks of the new season face a grim future if they have to leave the schedule for an extended period.

Negotiations on a new writers contract began in July and the two sides have remained far apart. They brought in a federal mediator this week to try to break the deadlock on the key issue issues of compensating writers for the reuse of their work in various digital formats.

The studios have said union demands for higher residuals on DVDs and Internet downloads would stifle growth at a time of rising production costs, tighter profits and piracy. They insist digital distribution of movies and TV remains largely experimental or promotional and new media is just developing.

The union accuses studios of pleading poverty and argues that writers have never gotten a fair deal on lucrative DVDs. They also see more film and TV migrating toward the Web and wireless platforms and want a bigger share of that revenue.

Do superstars still need record labels?

LOS ANGELES - Prince freed himself from record labels years ago. Paul McCartney, Radiohead and Nine Inch Nails have followed. Now the Material Girl appears to be kissing her big-name record company goodbye for a cool $120 million.

Could U2 be next? Justin Timberlake? Coldplay? Do superstars even need traditional multiyear album contracts when CD sales are plummeting and fans are swiping tons of music for free online, or tuning in to their favorite bands via YouTube, MySpace and other Internet portals?

"There's a prevailing wisdom that many established acts don't need a record label anymore," said Bruce Flohr, an executive at Red Light Management, which represents artists such as Dave Matthews Band and Alanis Morrissette, and ATO Records, home to David Grey, Gomez and Crowded House, among others.

"This is the new frontier. This is the beginning of a new era for the music business," Flohr said.

Executives at the four major record labels would not comment on the record for this story. But several noted privately that their companies are still the best at artist development, promotion and physical distribution of their product — something even big acts can't entirely do without.

The four majors are Warner Music Group Corp., Vivendi's Universal Music Group, EMI Group PLC, and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG. They accounted for more than 88 percent of all U.S. music album sales this year.

Still, some headliners are becoming convinced they have the clout to change the rules.

Madonna is said to be close to signing a recording and touring deal with concert promoter Live Nation Inc. after turning down an offer from her longtime label at Warner Music Group Corp.

Under terms of the new 10-year deal, Madonna, 49, would receive a signing bonus of about $18 million and a roughly $17 million advance for each of three albums. Live Nation also would have to pay $50 million in cash and stock to promote each Madonna tour.

Warner Music just couldn't afford to pay that much to re-sign Madonna, Michael Savner, an analyst with Bank of America, said in a research note.

Meanwhile, Radiohead created a stir — and plenty of publicity — when the British rockers disclosed last week they would bypass signing a new deal with a record label and make their new album available online, letting fans decide how much they wanted to pay to download it.

Earlier this year, Paul McCartney signed with Hear Music, a startup label launched by coffee retailer Starbucks Corp. and Concord Music Group, rather than going to a major.

Even the Eagles are going it alone with their upcoming album, "Long Road Out of Eden." The group, which has sold more than 120 million albums worldwide, will release the album exclusively through Wal-Mart stores.

The trend had Nine Inch Nails frontman Trent Reznor exulting over being "free of any recording contract with any label" in a recent post on his Web site.

"I have been under recording contracts for 18 years and have watched the business radically mutate from one thing to something inherently very different, and it gives me great pleasure to be able to finally have a direct relationship with the audience as I see fit and appropriate," he wrote.

Music industry insiders say the bids for independence only make sense for the most popular acts or those with devout fans who fill concert seats, buy T-shirts and seek out their music.

"These artists are in the position to basically set their own rules and set their own course," said Ted Cohen, managing partner of media consulting firm Tag Strategic and a longtime record label executive.

Meanwhile, social-networking sites and Internet distribution are making it possible for lesser-known and unsigned bands to boost their profiles and sell CDs.

"The game used to be really simple," Flohr said. "You get your record played on radio, you get your face on Rolling Stone (magazine), and you get on 'Saturday Night Live.'

"Now, it's you put your video on YouTube, you get your MySpace page happening, you do your deal with Facebook, you tour ... all these things add up, hopefully, to a successful record."

Some established major acts are using the same tactics as their new albums post lackluster sales but their concert tours keep selling out.

The strategy doesn't help record companies. The industry has seen a 14 percent drop in the number of CDs sold in the U.S. compared with the same time last year, according to Nielsen SoundScan.

Sales of digital tracks online are up 46 percent over the same period, but have yet to offset the industry's losses during the past decade.

To adapt, the major labels are trying to cut deals with artists that go beyond album sales and encompass income from concert tickets, T-shirts, music publishing and other sources.

New bands with their eyes on superstardom still need the deep pockets of the major labels to pay for the promotion, marketing and distribution necessary to get heard above the din of countless other acts.

Even superstars can use the boost.

Take Prince. Famous for scribbling "slave" on his cheek during a bitter dispute with Warner Bros. Records in the early 1990s, he has released most of his music over the Internet during the past 10 years while striking CD distribution and marketing deals with different major labels to get copies of his albums in stores.

Radiohead has said they want to get their latest album in stores in a few months and are said to be shopping for a possible major label distribution deal, if not a multiple album contract.

And it's widely expected that Live Nation will have to strike a distribution deal with an established label to handle promotion and get Madonna's upcoming albums in stores.

In theory, that could lead Live Nation back to Warner Music, home of Warner Bros. Records, where Madonna signed as a new artist in 1984.

"It comes down to, do you need a label? Possibly not. Do you need the expertise that a label traditionally brought? Absolutely," Cohen said.

Despite the turmoil in the industry, the major record companies continue to exert considerable influence in the marketplace.

Major labels are not likely to disappear or become irrelevant, although the role they play might change as digital music overtakes CDs and other physical formats, Flohr said.

"I don't think this is the death of anything," Flohr said. "I actually think this is the rebirth of all of us."

Hollywood studio rep sees 'disaster' after talks break off with writers

Negotiations have broken off again between the union representing Hollywood writers and the studios, with both sides blaming the other for the lack of movement.

"We have had six across-the-table sessions and have been met with only silence and stonewalling," said J. Nicholas Counter III, president of the Alliance of Motion Picture and Television Producers.

"We are farther apart … than when we started, and the only outcome we see is a disaster."

The Writers Guild of America has been in talks with the alliance since July.

The two sides are scheduled to return to the bargaining table on Tuesday but it remains to be seen whether they can continue talking, as Friday's meeting lasted only one hour.

In statements released Friday, both sides accused the other of inflexibility and expressed frustration at the slow pace of negotiations.

The guild mailed ballots to its members Oct. 1, asking them to authorize a strike. The union gave members until Oct. 18 to decide. The writers' contract expires Oct. 31.

Studios and networks have hastened the filming of shows and movies while also stockpiling scripts. The last strike was in 1988 and that lasted 22 weeks, costing the industry an estimated half billion dollars.

The two sides are far apart on issues such as pay for TV reality shows and work distributed over the internet and cellphones. In addition, the studios would like to delay paying residuals on shows and movies until producers have recouped their costs.

"The entertainment industry is successful and growing like never before. Writers, whose creativity is at the heart of that success and growth, are committed to sharing in it," said the guild in a statement released on Friday.

Hummingbird Centre renamed Sony Centre

TORONTO (CP) - Toronto's Hummingbird Centre, originally known as the O'Keefe Centre, has a new name and a new title sponsor - Japanese electronics giant Sony.

The storied arts centre on the eastern edge of Toronto's downtown theatre district has been renamed the Sony Centre for the Performing Arts in a $10 million, 20-year title sponsorship.

The 47-year-old building will undergo an interior renovation beginning in June 2008 that will transform it into "a state-of-the-art versatile, multimedia theatre and concert venue," the centre said Friday.

"Sony Canada's investment in our theatre signifies the importance of Toronto as a major centre for arts and creativity," centre chief executive Dan Brambilla said in a release.

"We strategically approached Sony as the naming sponsor of our venue because of their commitment to continually provide the very best entertainment experience. We see this partnership as a collaboration between a leading entertainment company and a live entertainment venue."

As part of the renovation, the centre will be fitted with "the most technically advanced audio and video Sony products" the company said.

"The Sony Centre for the Performing Arts will offer the highest quality live entertainment, performing arts and multicultural programming which will raise the profile of this unique centre for the City of Toronto," said Sony Canada president and CEO Doug Wilson.

The theatre, the brainchild of beer magnate E.P. Taylor who headed the O'Keefe Brewing Co. and Argus Corp. opened in 1960 with the pre-Broadway premiere of the Lerner and Loewe musical Camelot, starring Richard Burton, Julie Andrews and Robert Goulet.

Software company Hummingbird Hummingbird Ltd. bought naming rights to the theatre in 1996. Last year Hummingbird was acquired by rival Open Text Corp.

Jim Carrey Deal -- Unmasked

Jim Carrey, the first movie star ever to command a salary of $20 million per picture, has signed a deal with Warner Bros. in which he will receive no upfront cash and no percentage of the gross for the upcoming film Yes Man.

Instead, he will receive a so-called cash-break deal on 36.2 percent of the back end -- that is, the amount the studio holds onto after it recovers its production, prints and advertising costs.

In her Deadline Hollywood blog, writer Nikki Finke remarks that this "could just turn out to be the worst talent deal ever" for a major star.

"The conventional wisdom in Hollywood is always to get as much fixed compensation as you can upfront because you're never going to see the back end thanks to the studios' creative accounting," Finke wrote.

She quoted one unnamed talent manager as saying, "Let me put it this way: if his reps were a hospital, they would be shut down for malpractice. This is a new kind of Hollywood stupid."

EMI, Apple to sell DRM-free songs online

LONDON - Breaking from the rest of the recording industry, EMI Group said Monday it will begin selling songs online that are free of copy-protection technology through Apple Inc.'s iTunes Store. The deal, however, doesn't include music from the label's biggest act, The Beatles.

ITunes customers will soon be able to buy songs by the Rolling Stones, Norah Jones, Coldplay and other top-selling artists for $1.29, or 30 cents more than the copy-protected version. The premium tunes also will be offered in a higher quality than the 99-cent tracks.

EMI Chief Executive Eric Nicoli said The Beatles music catalog is excluded from the deal, but said the company was "working on it." He declined to set a time frame for negotiations over the catalog.

The announcement followed calls by Apple Chief Executive Steve Jobs earlier this year for the world's four major record companies, including EMI Group PLC, to start selling songs online without copy-protection software.

The technology, known as digital rights management, or DRM, is designed to combat piracy by preventing unauthorized copying or sharing, but it also can be a consumer headache. Some music players, for instance, support one type of DRM software but not others.

The DRM used by Apple does not work with competing services or devices, meaning that consumers can only download songs from iTunes to work on their computers or iPod music players. The lock between the download services and players has drawn criticism from European industry regulators, who argue that it limits buyer choice.

"Doing the right thing for the customer going forward is to tear down the walls that impede interoperability," Jobs told a London news conference.

He has previously argued there was little benefit to record companies selling more than 90 percent of their music without DRM on compact discs, then selling the remaining percentage online with DRM.

Some analysts suggest that lifting the software restrictions could boost sales of online music, which currently account for around 10 percent of global music sales.

Jobs said that he planned to offer around half of all music in the iTunes store under the premium package by the end of the year, but declined to say whether the company was in discussions with other leading record companies.

"Consumers tell us overwhelmingly that they would be prepared to pay a higher price for digital music that they could use on any player," Nicoli said. "It is key to unlocking and energizing the digital music business."

The iTunes music store will begin offering EMI's entire catalog — apart from The Beatles — without DRM software starting next month, he said.

EMI has acted as the distributor for The Beatles since the early 1960s, but The Beatles' music holding company, Apple Corps Ltd., has so far declined to allow the Fab Four's music on any Internet music services, including iTunes.

The situation was exacerbated by a long-running trademark dispute between Apple Inc. and Apple Corps. That legal feud was resolved in February when the two companies agreed on joint use of the apple logo and name, a deal many saw as paving the way for an agreement for online access to the Fab Four's songs.

Apple Corps was founded by the Beatles in 1968 and is still owned by Paul McCartney, Ringo Starr, the widow of John Lennon and the estate of George Harrison.

Shares of Apple Inc. jumped 72 cents, to $93.63, in Monday trading on the Nasdaq Stock Market.

Apple, Beatles label plan announcement

LONDON - Record company EMI Group PLC said Sunday it planned to unveil "an exciting new digital offering" with computer company Apple Inc., raising expectations that The Beatles' music catalog is about to be made available through Apple's iTunes online music store.

EMI said it would hold a news conference Monday at its London headquarters with its chief executive, Eric Nicoli, and Apple boss Steve Jobs "and a special live performance."

The company gave no further details.

EMI has been The Beatles' record label since the early 1960s.

The Beatles have so far been the most prominent holdout from iTunes and other online music services, and Apple's overtures to put the music online were stymied by a long-running trademark dispute with The Beatles' commercial guardian, Apple Corps. Ltd.

In February, Apple Inc. and Apple Corps resolved their legal feud over use of the apple logo and name, paving the way for an agreement for online access to the Fab Four's songs.

Apple Corps was founded by the Fab Four in 1968 and is still owned by Paul McCartney, Ringo Starr, the widow of John Lennon and the estate of George Harrison.

McCartney To Anchor New Starbucks Label

After weeks of speculation, Paul McCartney is now officially the first artist signed to Hear Music, a new joint label formed by Starbucks and the Concord Music Group. The as-yet-untitled album is due in early June; its release on Hear Music marks the end of McCartney's decades-long association with Capitol.

"This is something I’ve been working on for a little while now," McCartney said of the David Kahne-produced album during a Webcast today (March 21). "A lot of it’s very personal to me.Tthe songs are in some ways a little bit retrospective. Some of them are of now, some of them hark back to the past, but all of them are songs I’m very proud of."

As previously reported, Starbucks will primarily handle A&R for the collaborative initiative, while Concord will head up marketing, promotion and distribution of the label's product outside the coffee shops. The Hear Music name has been used since 1999 for compilations and co-releases at Starbucks; it will now apply exclusively to this partnership.

Starbucks' profile as a music retail outlet has jumped significantly in the past few years, especially following the success of Ray Charles' "Genius Loves Company," a joint production with Concord that scored eight Grammy awards. The company has also struck deals to release exclusive albums by Bob Dylan and Alanis Morissette.

McCartney's last studio album was 2005's critical favorite "Chaos and Creation in the Backyard," which has sold 533,000 copies in the United States, according to Nielsen SoundScan.

Movie Theaters To Sell Naming Rights

Borrowing a page from sports arenas and stadiums, movie theaters may be next to sell naming rights to advertisers.

Canada's Cineplex Entertainment, the country's largest exhibitor, announced Wednesday that it had sold naming rights to five theaters in Toronto, Montreal, Calgary, Edmonton and Vancouver to Scotiabank.

As part of the deal, movie patrons who use a specially branded Scotiabank debit card to make purchases at the theater will be able to earn free movie tickets and combos at concession stands.

CanWest, Goldman Sachs buy Alliance Atlantis for $2.3B

CanWest Global Communications Corp. and the private equity firm Goldman Sachs Capital Partners confirmed late Wednesday that they are buying Alliance Atlantis Communications Inc. — one of Canada's biggest entertainment companies.

The CanWest and Goldman Sachs groups will pay $53 for each Class A and Class B share of Alliance Atlantis. The companies say that values the deal at $2.3 billion.

The takeover offer is less than the price Alliance Atlantis stock closed at Wednesday. The Class A voting shares ended the trading day at $54.18, while the Class B non-voting shares closed at $53.61.

Shareholders owning 80 per cent of the Class A shares have committed to tender their shares to the offer, the companies said. Holders of the Class B shares will be asked to vote in favour of the deal at a meeting to be held in the spring.

"The combined expertise of CanWest and Alliance Atlantis will enable us to produce even better Canadian content, promote it more effectively, and provide greater access to more viewers across more platforms," said CanWest CEO Leonard Asper in a release.

A CanWest company will be the controlling shareholder of Alliance Atlantis once the deal is finalized by mid-2007. CRTC approval will be required for the deal to proceed.

The companies say Alliance Atlantis' specialty television business and CanWest's Canadian television business will be combined, but not before 2011.

A Canadian partner of Goldman Sachs Capital Partners will ultimately control Alliance Atlantis' Motion Picture Distribution business, which is a major distributor of motion pictures in Canada.

The GS group will also own Alliance Atlantis' stake in the highly lucrative CSI television franchise. Alliance Atlantis now co-produces the various CSI dramas with CBS.

Confirmation of a deal came just hours after the companies acknowledged they were in exclusive takeover talks. That acknowledgement followed media reports earlier in the week that said CanWest and Goldman Sachs had teamed up to make a run at Alliance Atlantis.

Toronto-based Alliance Atlantis said on Dec. 20 that it was exploring its "strategic alternatives," and said it had sought expressions of interest from selected potential buyers.

Alliance Atlantis owns 13 specialty television channels, including Showcase — which airs the Trailer Park Boys series. It also owns Discovery Health, the Food Network, HGTV, History Television and the Life Network.

Canada actors talking one more time before strike

TORONTO (Hollywood Reporter) - Canada's actors union and North American producers will return to the bargaining table Wednesday in a last-ditch attempt to forge a new labor deal and avert a planned industry shutdown next Monday.

On Friday, representatives for ACTRA, which represents 21,000 domestic performers, met informally with negotiators representing various producer groups, agreeing to resume talks Wednesday.

ACTRA (the Alliance of Canadian Cinema Television and Radio Artists) also agreed to delay plans for industrial action to back its demands. The current Independent Production Agreement expired Sunday, and the performers union is now in a legal position to strike in much of the country for the first time.

But Stephen Waddell, ACTRA's chief negotiator, said the actors union agreed to more talks after receiving assurances from producers that an increased-wage proposal was possible.

"(It is) only on the basis that there had been some off-the-record discussions and that it appears the CFTPA (Canadian Film and Television Production Assn.) is willing to ... put more money on the table, that we are agreeing to postpone the declaration of the strike," he said Friday.

Waddell added that ACTRA will serve 72-hour strike notice Wednesday and will carry through on its threat Monday at midnight should no agreement on a new production agreement be reached in time.

John Barrack, the CFTPA's chief negotiator, offered no details on the producers' latest bargaining strategy, but welcomed ACTRA's assurance that it will strike only if next week's crunch talks broke down.

The most recent round of talks between ACTRA and the producers stalled after the performers rejected a proposed wage increase of 4 percent over three years, subject to certain deferrals. ACTRA is demanding a 15 percent wage increase over three years and new-media residuals, among other demands.

Weinsteins Wonder What Would Have Happened If...

Miramax founders Bob and Harvey Weinstein have suggested that they might have remained with the Disney Co. had Robert Iger been running it while they were there instead of Michael Eisner. In an interview with the Wall Street Journal, Bob Weinstein said that they now "have a very good relationship with Bob Iger ... He's set a fantastic tone. There's no animosity. It's actually been good. We've wondered if we'd still be there." Weinstein said that what caused "friction" with the previous regime was that "we walked in every day with the attitude that we were running our own company." The Weinsteins also told the newspaper that their recently acquired Genius video distribution unit has already produced a profits bonanza for their company, putting it ahead of analysts' projections. "When people read Genius's profit statement next year, and the size of the company that we're building, I think they'll weep," Harvey Weinstein told the Journal.

Universal raises eyebrows with "Bruno" deal

LOS ANGELES (Hollywood Reporter) - Universal Pictures has won the intense bidding war for "Bruno," Sacha Baron Cohen's follow-up movie to "Borat."

Sources said that Universal is paying $42.5 million for the worldwide rights to the film. The price includes the production budget of the film, rumored to be in the $20 million-$25 million range. Also included is a significant profit-participation component for the film's participants, believed to be the 15% range.

The price has raised eyebrows in Hollywood because Baron Cohen's much-hyped "Borat" does not open until November 3. Despite much advance praise for "Borat," distributor Fox scaled back its Friday opening to about 800 theaters because it is concerned that the movie wasn't registering high enough in audience-awareness tracking.

With "Bruno," Baron Cohen is calling upon another of his comic alter egos, Bruno, a gay fashionista from Austria who fancies himself as "the voice of Austrian youth TV" and who sashayed from New York Fashion Week to Miami nightclubs in his previous appearance on HBO's "Da Ali G Show,"on which Baron Cohen also first introduced Borat to American audiences.

As in the case of "Borat," Jay Roach would produce with Baron Cohen. No director is on board, though it has been reported that Baron Cohen wants to shoot the movie during the summer.

Google buys YouTube for $1.65 billion US

Internet search leader Google Inc. made a giant leap Monday into the burgeoning online video industry by snatching up YouTube Inc. for $1.65 billion US.

The all-stock acquisition unites one of the internet's marquee companies with one of its rapidly rising stars.

The price makes YouTube, a still-unprofitable startup, by far the most expensive purchase by Google during its eight-year history.

"We are natural partners to offer a compelling media entertainment service to users, content owners and advertisers," said Eric Schmidt, Google's chief executive officer.

YouTube will continue to retain its brand, as well as all 67 employees, including co-founders Chad Hurley and Steve Chen. The site was launched in February 2005, using Macromedia Flash technology to display video content submitted by a growing community of members.

CBS, Universal, Sony ink separate deals

The deal comes on the same day as YouTube, one of the top video-sharing websites in the world, announced agreements with CBS, Universal Music Group and Sony BMG Music Entertainment to allow video clips and music to be featured on the site.

"YouTube is committed to balancing the needs of the fan community with those of copyright holders," YouTube CEO Chad Hurley said in a statement.

The arrangement with CBS allows for short videos from news, sports, primetime programs as well as Showtime to be shown. CBS said it will also offer brief clips from popular series such as Survivor and mini-previews for some of its new fall shows.

New technology

The network will also test new technology that will help it find copyrighted content on YouTube and remove it. CBS will retain the capability to keep the copyrighted material on the site and share revenue from advertising that appears alongside the content.

Universal Music Group confirmed that YouTube will have access to thousands of music videos, and artists will be compensated for any musical content that users decide to incorporate into their videos.

Sony BMG Music said it will also make video content available on the site and permit YouTube users to include some songs from its catalogue in their amateur videos.

Sony BMG Music will share ad revenue with YouTube for all videos that integrate any audio or video from the Sony library.

YouTube made a similar pact with Warner Music Group a month ago.

Paramount cuts ties with Cruise company

LOS ANGELES - It's Tom Cruise vs. Sumner Redstone in a case of I quit-you're fired at Hollywood's highest level. On one side is the chairman of Viacom, Inc., which owns Paramount Pictures. On the other is the industry's biggest and most bankable star, whose last seven films have each generated over $100 million.

Redstone said Tuesday that Paramount would sever its long and profitable relationship with Cruise/Wagner Productions, Cruise's company with producing partner Paula Wagner. Redstone told the Wall Street Journal that Cruise's "recent conduct has not been acceptable to Paramount."

But Wagner told The Associated Press that agents for Cruise/Wagner Productions stopped negotiating with Paramount over a week ago and since secured independent financing, effectively taking any contract-renewal deal off the table.

"For some reason, Paramount has chosen to negotiate in the press," Wagner said, calling Redstone's announcement "surprising."

"It's not really the most businesslike approach," she said. "We've had virtually no dealings with Mr. Redstone."

Paramount referred all calls on the matter to Viacom. Viacom spokesman Carl Folta had no comment late Tuesday.

"As much as we like him personally," Redstone is quoted as saying, "we thought it was wrong to renew his deal." He then cited Cruise's "recent conduct" as the reason.

In the past year or so, Cruise couch-hopped on Oprah Winfrey's talk show while proclaiming his love for Katie Holmes, criticized the use of antidepressants and claimed that postpartum depression doesn't exist. He also got into an angry exchange with Matt Lauer on the "Today" show while defending his opinions.

Cruise/Wagner Productions has been based on the Paramount lot since 1992.

"We viewed ourselves as partners with Paramount," Wagner said, adding that the collaboration has produced $2.5 billion worth of business.

With "War of the Worlds" and "Mission: Impossible 3," Cruise helped earn nearly $1 billion for Paramount this year alone, Wagner said. Cruise/Wagner Productions brought "M:I3" director J.J. Abrams to the studio, she said, which recently inked a five-year arrangement with Abrams.

She and Cruise had been considering independent financing for their company "for a long time," she said.

"For us, this is a very new and exciting direction. We look forward to working with all the studios."

Disney to cut 650 jobs, movie output

LOS ANGELES - The Walt Disney Co. is restructuring its studio division to emphasize blockbuster franchise films over more adult fare, a move that will mean slashing 650 jobs worldwide, the company announced Tuesday.

Among those who will lose their jobs is Disney's longtime head of live-action production, Nina Jacobsen.

The restructuring will cut Disney's output from about 18 films a year to about a dozen. Of those, about 10 will be released under the Walt Disney Pictures banner, a proven family-friendly brand that includes the successful "Pirates of the Caribbean" franchise.

Disney's Touchstone label, which is responsible for more esoteric fare by artists like Joel and Ethan Coen of "Fargo" fame, will be cut back to only two or three releases a year. Recent Touchstone films have included the box-office flops "The Alamo" and "The Ladykillers."

The shift, the company explained, will allow Disney films to bolster the resources of other divisions. A hit like "Pirates of the Caribbean," for example, can spawn video games, action figures, cable TV shows and, in the case of "Pirates," give new life to an old Disney theme park attraction.

"When we do it well, the lift it gives to the entire company is so significant," Dick Cook, chairman of Walt Disney Studios told The Associated Press.

The shift to more Disney-branded films has been expected for some time, as have staff cutbacks resulting from a reduction in the total number of films.

Surprising, though, was the loss of Jacobsen, who has been head of live-action production for more than a decade.

"Sometimes these things just happen," Cook said. "She is a fantastic executive, very talented, great taste, very smart. She is so capable, she did so many wonderful things at Disney that will be legacies that will last for years to come."

Last year, Disney bought longtime partner Pixar Animation Studios to bolster its animated film offerings. That move led to the departure of the veteran executive in charge of Walt Disney Feature Animation.

Getting Chummy

Already the biggest media outlet in Canada, Bell Globemedia will soon appear before the Canadian Radio-television and Telecommunications Commission with another order to “super-size me.” BGM owns CTV and the Globe and Mail, along with 17 TV specialty channels, including TSN, MTV and the Discovery Channel. On Wednesday, BGM announced it had agreed to pay $1.4 billion for control of national rival CHUM Ltd., which owns 33 radio stations and 12 TV stations, headed by the Citytv channels in Toronto, Vancouver, Calgary, Edmonton and Winnipeg. CHUM also owns 21 specialty TV channels and the Muzak background-music operation in Canada.

Will the CRTC approve the BGM acquisition? Industry observers believe so. It is widely assumed that Canada’s media gatekeeper is about to green-light Torstar’s recently proposed 20 per cent purchase of BGM (price: $283 million). This means that very soon, the country’s largest city newspaper (the Toronto Star) and national newspaper (the Globe and Mail), along with Canada’s most-watched TV network (CTV), one of our biggest radio chains, 38 specialty TV channels, and even the guys who select the songs we hear on elevators will all be affiliated.

The proposed acquisition looks to be an excellent move for BGM. The Wall Street Journal recently confirmed a widely held industry belief that advertisers are moving from network television; as an example, General Motors halved its network advertising between 2002 and 2005, spreading promotion dollars to TV specialty channels and the internet. By reducing rival CanWest Global Communications — which owns Global TV, the National Post and the Southam newspaper chain — to a speck in its rear-view window, BGM has created, in the parlance of industry annual reports, “a 21st-century multi-media platform” that can reasonably hope to lock up consumers and advertisers.

The BGM takeover of one of its biggest rivals may not turn out to be a chummy deal for Canadians, however. Wednesday's announcement came with the grim news that 281 CHUM jobs were to be “eliminated.” How will the TV channels survive with severely reduced staffs? One CHUM franchise, Ottawa’s A-Channel, simultaneously announced the implementation of “Overdrive Automation,” a system that would introduce wholesale robotic equipment to the newsroom. That’s great news for the currently unemployed C-3PO and R2-D2, but a bad omen for the journalism industry and TV viewers across the country.

In addition to an inevitable lowering of performance standards for existing CHUM affiliates, the emergence of a super-sized multi-media platform like BGM sucks all the air out of the tank of rivals who simply can’t compete with an automated conglomerate offering centrally generated programming. Some North American industry analysts believe that the money simply isn’t there for local TV anymore. Indeed, in the United States, where network affiliates experienced a nine per cent loss of revenues in 2005, stations in many cities, including Tampa Bay, Cleveland and Denver, have taken to running dating services and charging guests to appear on morning talk shows.

Here in Canada, there is the added danger of news and programming coming from increasingly monolithic content providers. When approving media mergers, the CRTC inevitably introduces “firewall” regulations to make sure businesses keep financial and editorial departments separate. Still, compromises are inevitable within media conglomerates.

If nothing else, their emergence makes a lie out of the adage that bigger is better. Just ask anyone old enough to remember when Winnipeg and Ottawa had two daily newspapers, with Winnipeggers enjoying equal access to the Winnipeg Free Press and Winnipeg Tribune, and Ottawa readers able to choose between the Ottawa Citizen and Ottawa Journal. Then, in 1980, in a widely controversial move that prompted the Kent Commission investigation into media monopolies, the Thomson and Southam news chains simultaneously closed down the Journal and Tribune, allowing the respective chains to feast on the profits of non-competitive markets: Southam took Ottawa, Thomson grabbed Winnipeg. The two businesses were bigger and more profitable as a result of the alleged trade, but both cities seemed somehow diminished. The papers became less vigorous in serving their communities.

Today, it is an accepted wisdom that the Globe and Mail became a better product after the arrival of a second national newspaper, the National Post. As in most businesses, competition is good for the consumer in the news and entertainment industries.

BGM’s acquisition of CHUM marks the disappearance of a major competitor in Canada’s shrinking media world. There could be more mergers in the near future. Allan Waters, the founder and chief of CHUM, died in December; the industry is rife with speculation that Canada’s aging, first-generation communication moguls — including J.R. Shaw of Shaw Communications in Calgary, and, in Central Canada, Ted Rogers of Rogers Communications and the Greenberg family of Astral Media — face similar estate pressures to put their radio and cable TV empires up for sale.

The manner in which CHUM gutted its operation to attract a buyer also represents a troubling sign for Canadian consumers. It seems apparent that truly local, commercial TV stations may be disappearing, with unique affiliates evolving into transfer points for content shaped elsewhere.

Sony BMG deal could be undone; EMI-Warner in doubt

LONDON/BRUSSELS (Reuters) - A European court annulled the European Union's approval of a 2004 merger between Sony Music and BMG in a surprise decision that could force a break-up of the world's second-biggest music company.

The unprecedented ruling by the European Court of First Instance on Thursday, upholding a challenge to the deal from independent record labels, also cast doubt on the viability of combining EMI Group and Warner Music, which are engaged in a duel to buy each other.

Warner's shares tumbled 15.2 percent to $25.24 on the New York Stock Exchange while EMI's closed down 9.2 percent at 277 3/4 pence in London.

The European Commission said it would have to re-examine the union of Sony and BMG, a 50-50 joint venture between Japanese electronics giant Sony Corp. and German media group Bertelsmann AG. It can also appeal against the ruling.

The decision means Sony Music and BMG, respective home to such artists as Bruce Springsteen and Kelly Clarkson, have seven days to submit the merger plan anew to the EC, which also would have to consider new industry conditions, including the rapidly growing market for online and mobile phone downloads.

The Commission would then have a month to decide whether to approve it, consider remedies or open a four-month in-depth probe, which could lead to a rejection of the deal.

"If we were to give a red light, then the joint venture would have to be reversed," Commission spokesman Jonathan Todd said during a regular briefing with reporters.

Sony and Bertelsmann said they would review the ruling.

Europe's second-highest court, overturning an EU-approved merger for the first time, said too cursory an examination was conducted into whether there was already collective market dominance in the music industry and whether that dominance might grow following the Sony BMG deal.

DEAL CHANCES PLUMMET

EMI and Warner, the world's third- and fourth-largest music companies, respectively, have each offered about $4.6 billion to buy the other, with both bids rejected.

Warner has offered 320 pence a share for EMI, and EMI $31 for each of Warner's shares.

Two people close to the deal, who asked not to be named, told Reuters that talks between the two companies were likely to be suspended because of the ruling.

"It seems to pile on regulatory risk for EMI and Warner, especially at a time when there was an increasing number of people that would have been backing the inevitability of this deal," Credit Suisse analyst Simon Baker said.

London-based EMI told shareholders at its annual meeting on Thursday it still believed buying Warner for $31 a share would be good for them, and that it was studying the court decision.

"I said we would not have made the proposal if we felt we could not receive regulatory approval," EMI Chairman Eric Nicoli said. "There is no reason at this stage to change that view."

Warner also said it was reviewing the decision.

The case against the creation of Sony BMG was brought by Impala, the umbrella trade group for 2,500 independent labels, which claimed that reducing the industry from five major players to four put too much market power in too few hands.

The EU approved the deal believing there was no monopoly among industry goliaths because of a lack of public fighting among them and the diversity of music available to consumers.

"The elements on which that argument was founded were incomplete and did not include all the relevant data that ought to have been taken into account by the Commission," the court said. "They were therefore not capable of supporting the conclusions drawn from them."

A third source close to the deal said the ruling may not be as bad a setback as it looks, and the EU could still clear the Sony BMG deal as well as pave the way for EMI and Warner.

"A merger between any of the players is possible as long as the Commission doesn't make mistakes in its analysis," the source said.

Along with Vivendi's Universal Music, the world's largest music company, Sony BMG, EMI and Warner account for about three of every four CDs sold globally.

The indies say they would accept a Sony BMG merger only if it included conditions that ensured a level playing field for radio advertising, manufacturing, distribution and other costs.

"The EC had the courage to scrutinize and correct its mistakes," said Hein van der Ree, Impala's vice president and the managing director of Epitaph Europe.

"This locks the door for an EMI/Warner merger, thankfully," he added, "and keeps the doors of market access open for the little guy."

CTV owner to buy CHUM for $1.7B

TORONTO (CP) - Canada's broadcasting industry is set to undergo a seismic shift, with the owner of CTV Inc. preparing to buy CHUM Ltd. in a $1.7-billion deal that has the potential to reshape the country's media landscape.

The friendly takeover offer was announced Wednesday by Bell Globemedia, which in addition to the main CTV network also owns The Globe and Mail newspaper, local conventional television stations and national specialty TV channels.

The bid coincided with the release of CHUM's latest financial results and announcement of plans to cut 281 positions at TV stations across the country - part of an efficiency drive company management has been working on for months.

Critics of media concentration were quick to lament the loss of so many jobs and the impact the takeover would have on the diversity of news and information sources in Canada.

But Bell Globemedia president and chief executive, Ivan Fecan, said in an interview that news operations at CTV and CHUM will remain independent.

"We'll have two separate news organizations, one at CTV and one in Citytv, and they won't report to each other in any way," Fecan said. "I don't think there's any upside in having them being the same. You actually want them to be different because they have different approaches.

"As well, we're going to do everything we can to maintain the energy and irreverence of the Citytv brand."

But the repercussions of the buyout could represent another blow to local journalism, which has been eroded over the past decade by private-sector mergers in print and broadcasting and cuts to the CBC.

"It seems to me that no matter how you look at it, it's going to mean that there will be fewer journalists involved in television coverage at the local level in many of our major cities, and it's started already," said Peter Desbarats, former dean of the journalism program at the University of Western Ontario.

"That's a serious development because it comes on top of a real deterioration of the daily newspaper in many of those same cities."

A combination of CHUM with Bell Globemedia would face the scrutiny of the Canadian Radio-television and Telecommunications Commission.

Fecan also suggested that the another media company could buy some of the CHUM A-channel and Access television stations that Bell Globemedia plans to sell and use them to create a third private-sector national network in addition to CTV and CanWest's Global Television.

"Because that will give a new player three big markets - Ontario, Vancouver-Victoria and Alberta. So I think there's a real opportunity for a new player to join into that was well as we divest those stations."

Although Fecan said it's too soon to identify a potential buyer, he noted that Montreal-based Quebecor Inc. and Toronto-based Rogers Communications already have major print and broadcast assets in some parts of the country.

Union leader Peter Murdoch warned, however, that the layoffs announced Wednesday by CHUM hit the parts of its operations that cover hard news, such as local politics and crime.

"It's that kind of hard news which tends to be more challenging to administration and to the interests of the public than what your local hockey hero has done," Murdoch said.

Murdoch, a vice-president of the Communications, Energy and Paperworkers union which has 2,000 members at Bell Globemedia and CHUM operations, said the proposed takeover should be stopped in the public interest.

He laughed when told of Fecan's suggestion that a third national TV network could emerge, saying: "We had another national network that was building and that was CHUM. I don't understand that logic. But I think it's going to be a serious question for both the regulator and for government."

The federal Liberal consumer affairs critic agreed.

"The absolute breadth of the dominance of this takeover would mean that there are very few players left, short of ones that fall under CBC-type establishments - CanWest would be the only effective rival," said Dan McTeague.

"Based on what is already a staggering level of concentration in old and new media in Canada to begin with. . . I think this particular proposal does little to give any measure of comfort to those of us who are already alarmed at the level of concentration in media in Canada."

Jay Switzer, CHUM's chief executive officer, told analysts in a conference call that joining Bell Globemedia will provide financial strength in "what is a rapidly changing media landscape."

Switzer said the job cuts are part of an initiative CHUM has been working on for months as it redeploys its resources "to areas where we can win."

Although CHUM remained profitable in its most recent quarter, albeit slightly less so than a year ago, the company maintains it faces tough market conditions for the later part of this year and in the longer term.

CHUM will increase local programming in certain areas, such as its Breakfast Television morning shows across the country, while reducing overhead in other parts of its news and information operations.

"We believe it's absolutely the right thing to do in terms of putting our resources where we can make a difference locally and it's where our advantage historically has been," Switzer said.

CHUM said it plans to cut 191 full-time and 90 part-time positions across the country as it undergoes a complete reorganization of its TV operations to "increase focus on service to local viewers."

The moves include switching Citytv stations in Calgary, Edmonton and Winnipeg from one-hour evening newscasts to a daily half-hour local news magazine show.

In addition, a morning show at a CHUM-owned A-channel station in Victoria will be discontinued. Citytv Vancouver will cease its traditional newscasts and add resources to Breakfast Television.

Before trading was halted on the Toronto Stock Exchange ahead of the announcement, CHUM had a market valuation of $904.3 million, with the non-voting shares worth $31.25 each and the voting stock at $35.

Bell Globemedia, currently majority owned by BCE Inc., is offering a premium of about 50 per cent above the pre-announcement market prices for the shares.

Apart from the conventional television stations, there is little direct overlap in the two companies' holdings.

CHUM owns 33 radio stations and 12 local television stations headed by the Citytv channels in Toronto, Vancouver, Calgary, Edmonton and Winnipeg. It also has 21 specialty TV channels including MuchMusic, Space and Bravo, and runs the Muzak background-music operation in Canada.

Bell Globemedia is 68.5 per cent owned by BCE, parent company of Bell Canada, with the remainder held by the Thomson family's Woodbridge private holding company.

BCE said in December it would sell 8.5 per cent to Woodbridge, raising the Thomson ownership to 40 per cent, 20 per cent to Torstar Corp. and 20 per cent to the Ontario Teachers' Pension Plan, with BCE retaining 20 per cent. This ownership shift awaits regulatory approval.

Under the deal, CHUM can accept a superior proposal if Bell Globemedia declines to match the offer, subject to break fee of $41 million.

Axe To Fall at Disney

Despite the back-to-back success of Pirates of the Caribbean: Dead Man's Chest and Cars, the Walt Disney Co. plans to announce within the next 10 days that it will slash the number of films it makes to eight per year from the current 18 and reduce its workforce accordingly, Daily Variety reported today (Wednesday). The trade publication also observed that in the future, all films will bear the Disney brand. Variety indicated that despite the recent successes of Pirates and Cars, they may not have offset some of the studio's "major misfires" this year, including Stick It, Annapolis, Stay Alive, and The Wild.

Canadians' entertainment spending on the rise

Canadian spending on entertainment outside the home is increasing faster than other household spending, according to a study by Statistics Canada.

The consumer market for movies, spectator sports, performing arts and visits to heritage institutions expanded from $2.3 billion in 1998 to $3.2 billion in 2003, an increase of 41 per cent, the federal agency reported on Tuesday.

Average household spending over the same period rose 19 per cent. But entertainment spending remains a low fraction of overall spending, about 0.5 per cent.

On average, Canadian families spent $273 on these entertainment services annually in 2003. The report was based on data from Statistics Canada's Survey of Household Spending from 1998 and 2003.

About 40 per cent of the money went to movies, 31 per cent on performing arts and 17 per cent on sports events.

The biggest increase came in spending on sports events. The average rose 44 per cent over the five years, mainly because of higher ticket prices for spectator sports.

Spending on performing arts was highest in Ontario and Quebec, the provinces with the largest number of dance and theatre companies, and lowest in the Maritimes, where there are fewer opportunities to see the performing arts.

The biggest spenders overall on entertainment were in Ontario, British Columbia and Alberta, where average family income is highest. Couples with children spent the most.

Residents of Ontario and Alberta were the most avid movie-goers in 2003, spending about $120 per household, compared with households in Saskatchewan that spent just $62 each at the cinema.

Same old Courtney - still sponging off Kurt

Courtney Love said she plans to sell part of her stake in Nirvana's catalog, according to NME.com. Love, in London last week for meetings about a new record deal, a TV documentary and a role in a stage production, said she's not sure exactly how she will proceed, explaining, "I have decided that I need some co-management and a strategic partner (to help me) as it's such a huge responsibility. This is the right thing to do for my family...whoever I do this deal with, I really have to like."

Love was quoted in this past weekend's (March 12) edition of the Sunday Mirror as saying she was possibly going to sell "25 percent of the catalog for quite a lot of money."

Love is the widow of Nirvana singer, guitarist and principal songwriter Kurt Cobain, who committed suicide in April of 1994. In recent years, Love has battled with the other surviving members of Nirvana over the use of the band's material in various box sets and reissues.

The former Hole frontperson has been in all sorts of legal and financial trouble herself in recent years, including various drug arrests and lawsuits. She recently sold a condo in New York City after failing to pay off her mortgage.

Viacom to Sell DreamWorks Film Library

NEW YORK - Entertainment company Viacom Inc. said Friday it agreed to sell the film library of the recently acquired DreamWorks studio to an investment group led by financier George Soros in a deal that values the library at $900 million.

The 59 films in the library include "Gladiator," "American Beauty" and "Saving Private Ryan."

Viacom, which recently split off its broadcasting and publishing assets into separately traded CBS Corp., said the deal will complete the second stage of its acquisition of DreamWorks SKG Inc., the studio founded by director Steven Spielberg, producer David Geffen and former Walt Disney Co. executive Jeffrey Katzenberg.

The buyers are Soros Strategic Partners LP and Dune Entertainment II LLC.

Soros and Dune will acquire all 59 DreamWorks live action films released through Sept. 15 of last year, while Soros will distribute the library through an exclusive five-year agreement with Paramount, the company said.

Viacom will retain ownership of music publishing and certain other rights related to the library, including sequel and merchandising rights. The company also will own a minority stake in the entity holding the library assets.

Viacom will have the right to reacquire the library, and Soros and Dune will have the right to sell it to Viacom, beginning at the end of the fifth year after the deal. The parties also may acquire the other's interest under certain conditions.

While full details of the deal were not disclosed, it's likely Soros and Dune will look to get a return on their investment through licensing the film library's content on DVDs, cable and worldwide television broadcasts, said Harold Vogel, media analyst and author of the book "Entertainment Industry Economics."

"They'll project how much each film can generate," Vogel said. "The difficulty is, probably only the top 10 films generate 80 percent of the income."

In December, Viacom's Paramount Pictures unit agreed to buy DreamWorks SKG for $775 million in cash, plus $825 million in debt and other obligations. At that time, the studio said it would finance the deal by immediately selling the DreamWorks film library, which Paramount valued at between $850 million and $1 billion.

Viacom said Friday it expects the net purchase price for DreamWorks to be about $600 million after converting certain commercial agreements from debt to advances.

The sale is expected to close in April, pending closing conditions, the company said.

The distribution agreement with Paramount will automatically renew if Soros still owns the library after the fifth year, Viacom said.

Dune Entertainment is an affiliate of Dune Capital Management LP.

Viacom stock rose 69 cents, or 1.8 percent, to close at $39 on the New York Stock Exchange.

Disney buying Pixar for $7.4B

LOS ANGELES (AP) - The Walt Disney Co. said Tuesday it is buying longtime partner Pixar Animation Studios Inc. for $7.4 billion US in a deal that could restore Disney's clout in animation while vaulting Pixar CEO Steve Jobs into a powerful role at the media conglomerate.

Disney will buy the maker of the blockbuster films Toy Story and Finding Nemo in an all-stock transaction that makes Jobs Disney's largest shareholder. Jobs, who controls more than half of Pixar's stock and also heads Apple Computer Inc., will also join Disney's board.

"With this transaction, we welcome and embrace Pixar's unique culture, which for two decades, has fostered some of the most innovative and successful films in history," Disney chief executive Robert Iger said in a statement.

Disney has co-financed and distributed Pixar's animated films for the past 12 years, splitting the profits. But that deal expires in June after Pixar delivers Cars.

Disney, the theme park owner that also owns the ABC and ESPN TV networks, and Pixar have been talking for months about a new relationship.

Pixar executive vice-president John Lasseter will become chief creative officer of the animation studios and principal creative adviser at Walt Disney Imagineering, which designs and builds the company's theme parks.

Pixar president Ed Catmull will serve as president of the new combined Pixar and Disney animation studios, reporting to Iger and Dick Cook, chairman of The Walt Disney Studios.

"Disney and Pixar can now collaborate without the barriers that come from two different companies with two different sets of shareholders," Jobs said in a statement. "Now, everyone can focus on what is most important, creating innovative stories, characters and films that delight millions of people around the world."

Under the deal, Disney said it will issue 2.3 shares for each share of Pixar stock. At Tuesday's closing price of $25.99 for Disney, Pixar shareholders would get stock worth $59.78, a four per cent premium over Pixar's closing price of $57.57. The deal was announced after the markets closed for the day,

With Pixar, Disney gains a company that has produced a long-running string of animated blockbusters, including The Incredibles.

Through Jobs, Disney tightens its link with Apple Computer, the innovative technology company behind music and video IPods.

Disney is not acquiring a direct interest in Apple. But Jobs could help Iger push his plans to marry films, TV shows, video games and other content to computers, IPods, handheld game consoles and even cellphones.

The deal will accelerate Iger's plans to strengthen Disney's animated features, the hallmark of the company since its founding and a steady source of characters for Disney's theme parks and other units.

Pixar has served as Disney's de facto animation unit for a decade. Two Pixar movies, Finding Nemo and The Incredibles, have won Academy Awards for best animated feature film.

Pixar films have been a financial windfall for Disney, which receives 60 per cent of the profits.

By contrast, Disney's own animation unit has struggled, producing some modest successes, such as 2002's Lilo & Stitch, and many flops, including Treasure Planet and Home on the Range.

Its first fully computer-animated effort, Chicken Little, grossed more than $100 million domestically since its release last year and will likely be profitable. But that figure falls well short of the more than $200 million domestic gross of 2004's The Incredibles.

Disney and Pixar had been discussing an extension of their distribution deal since early 2003. Last year, analysts said striking that agreement was Iger's top priority.

The talks stalled in 2004 after Pixar demanded that it own 100 per cent of all future films and pay Disney a straight distribution fee, similar to the deal Star Wars creator George Lucas had with Twentieth Century Fox.

Pixar also wanted ownership of all the films already produced as well as two that were remaining under the existing agreement at the time.

Personal animosity between Jobs and former Disney CEO Michael Eisner also contributed to the breakdown.

In 2004, Jobs broke off talks with Disney and said he would begin talking to other studios, including Fox and Warner Bros. Relations soured even more after Disney announced it would make the sequel Toy Story 3, a project strongly opposed by Pixar.

The relationship between the two companies goes back to 1991, when Disney agreed to finance and distribute three films from the fledgling company.

That deal led to the release of Toy Story in 1995 - the world's first fully computer animated feature film. It was a huge hit and became the highest-grossing film that year.

The same year, Pixar raised $140 million in an initial public offering.

Disney board okays takeover offer to Pixar: source

LOS ANGELES (Reuters) - The board of Walt Disney Co. has authorized Chief Executive Robert Iger to make an offer to buy Pixar Animation Studios Inc., and that is expected by Tuesday, a source familiar with the matter said late on Monday.

Pixar's board is expected to consider the offer on Tuesday as well, said the source, who did not disclose financial terms.

The Pixar board was expected to confer by telephone, the source said.

In the event a decision is reached, an announcement by Disney would be expected after the market closes, the source said.

Pixar shares closed at $58.27 on Monday on Nasdaq, putting its market value at just under $7 billion. The shares have risen about 12 percent in the last month, partly on speculation that Disney would buy the computer animation company that created such hits as "Toy Story," "Finding Nemo" and "The Incredibles."

Shares of Disney were up nearly 2 percent, or 48 cents, at $26.01 in morning trade on the New York Stock Exchange. Pixar shares were down 8 cents at $58.19 on Nasdaq.

The Wall Street Journal has reported that Disney is considering an all-stock offer, which would make Pixar Chief Executive Steve Jobs the company's largest individual shareholder.

The Journal reported late on Monday that the offer under consideration would give Jobs, who has a controlling stake in Pixar, a seat on the Disney board.

Disney, for decades the world leader in hand-drawn animated films such as "Pinocchio" and "Lion King," has struggled in recent years to maintain its position in an industry that has embraced computer-generated films.

Although Disney has not produced a blockbuster animated film on its own in years, the six films Pixar and Disney made since the 1995 release of "Toy Story" have grossed more than $3.2 billion.

Jobs had feuded publicly with Iger's predecessor, Michael Eisner, and broke off negotiations for a new distribution agreement with Disney about two years ago.

Iger, who succeeded Eisner as Disney's CEO in October, made a priority of smoothing over relations with Jobs and was in the midst of renegotiating the distribution pact, which expires in June with the release of "Cars," when takeover rumors surfaced.

Jobs, who is also chief executive of Apple Computer Inc., has already led a revolution in digital delivery of content by providing legal downloads of music through Apple's iTunes Music Store and by striking a deal with Iger and Disney to offer video downloads of ABC television shows.

A deal that would give Jobs a Disney board seat could also put him in a position to lead Hollywood's move onto the Web.

The Disney board may also approve a buyer for the company's ABC Radio assets, worth an estimated $2.6 billion to $2.9 billion, from among several bidders.

Sources familiar with the radio transaction said on Friday that Disney was within a week or two of deciding on a buyer.

Report: Disney in Talks to Acquire Pixar

LOS ANGELES - The Walt Disney Co.'s possible acquisition of Pixar Animation Studio could make Pixar CEO Steve Jobs a member of Disney's board and its single largest shareholder, a newspaper reported Thursday.

Shares of both companies rose slightly Thursday after The Wall Street Journal, citing unnamed sources familiar with the plan, reported Disney was in serious talks to buy Pixar.

Both companies declined comment to The Associated Press Thursday.

Pixar has made several hit movies, including "Toy Story" and "Finding Nemo." Jobs is its largest shareholder, with more than 60 million shares, or 50.6 percent, according to Pixar's filings with securities regulators last year.

At its current share price, his stake is worth about $3.44 billion.

Jobs also heads Apple Computer Inc., the maker of the hugely successful iPod music and video player.

"Investors may hope that Mr. Jobs' successful track record at Pixar and Apple will rub off more broadly on Disney," Richard Greenfield, an analyst at Pali Research, wrote in a report Thursday.

Greenfield estimated that Jobs could gain a 6 percent stake in Disney as the result of a merger. Disney's largest reported individual shareholder now is former CEO Michael Eisner, who owns 1.8 percent of outstanding shares.

Pixar shares rose $1.61 a share, or 2.81 percent, to close at $58.87 Thursday on the Nasdaq Stock Market. Disney shares gained $1.04, or 4 percent, to $26.24 at the close of trading on the New York Stock Exchange.

Disney CEO Robert Iger has made it clear that technology will be a cornerstone of Disney's success in the future. Having Jobs on Disney's board could strengthen the link between Disney's content and the technology that links TV shows, movies and music to consumers.

"In our view, no company understands both technology and the consumer better than Apple," analyst Kathy Styponias of Prudential Equity Group wrote.

Reports of a possible Disney-Pixar merger first surfaced several weeks ago after shares of Pixar jumped, leading analysts to speculate that Jobs might become Disney's chairman.

Disney and Pixar have been talking for months about a new relationship.

Disney has co-financed and distributed Pixar's animated films for the past 12 years, splitting the profits. But that deal expires in June after Pixar delivers "Cars."

The company, based in Emeryville, is already at work on its next several films but has yet to decide if Disney or another studio will distribute them. The studio makes one movie a year.

Many analysts expect a new distribution deal soon but dismissed the idea of Disney buying Pixar as so expensive that it would dilute Disney's earnings for several years.

Others said that if Disney paid only a slight premium for Pixar's shares, as the Journal report suggests, Disney could recover fairly quickly, especially if Pixar increases its production to two films per year.

"Despite dilution in the near-term and the likely negative impact Disney's stock would take should it acquire Pixar, we believe the deal would make sense both strategically and, eventually, financially," Styponias wrote.

DreamWorks Sale Highlights Studio Obstacles

LOS ANGELES - Steven Spielberg, Jeffrey Katzenberg and David Geffen tried to harness their collective star power in 1994 to do what hadn't been done in more than 70 years — start a Hollywood studio from scratch. They called it DreamWorks SKG, the letters standing for the last names of the founders.

Sunday, DreamWorks ended its 11-year run as an independent company by agreeing to be sold to Paramount Pictures, a unit of Viacom Inc., in a deal valued at $1.6 billion. The sale highlights the enormous, perhaps insurmountable, challenges facing an independent company with hopes of competing against massive media conglomerates.

"It's very hard for anyone to enter the business from the ground up," said Harold Vogel, author of the book "Entertainment Industry Economics."

"It's not the talent of the individuals. They were superb, they had a brilliant idea, they had connections. But the costs of running the business ran much faster than they expected."

DreamWorks accomplished much in its short life, including winning several Academy Awards, producing a hit TV series and making the most successful animated movie in history.

The company, under Geffen and Spielberg, will continue to make films that will be distributed by Paramount.

DreamWorks Animation SKG, under the leadership of Katzenberg, was spun off into a public company last year and is not included in the Paramount deal, although it will distribute its films through Paramount.

DreamWorks had grand plans to become a major player in music, film, television, video games and the Internet. But over the years, it scrapped plans to build a high-tech studio lot in Los Angeles, sold DreamWorks Records to Universal Music Group and curtailed its TV production.

"When Steven, Jeffrey and I started the company and had to put an entire infrastructure together from day one, we had hoped to be able to make enough films to rationalize the cost of being our own distributor," Geffen said Sunday.

"Sadly, we were never able to make enough films to make that economically sound."

Distributing is a fixed cost that runs into the tens of millions of dollars for a staff that can sell films to theaters in the U.S. and abroad.

A handful of independent film companies still remain, including the Canadian company Lion's Gate Films.

Lion's Gate has been able to build a substantial library of films, in part through acquisitions. An extensive film library from which to sell pictures on DVD and to cable and television is key to producing the kind of cash that can reduce the risks of box office flops.

"Library values are like real estate in Southern California — they generally go up every year," said David Miller, an analyst at brokerage firm Sanders Morris Harris.

DreamWorks was able to build a library of only 59 live-action film titles. Ownership of the more lucrative animated films was transferred to DreamWorks Animation.

A number of production companies make films but distribute them through third parties. Those companies include Pixar Animation Studios, which produces one film a year and distributes through The Walt Disney Co. Revolution Studios, which made such movies as "The Fog" and "Rent," distributes its movies through Sony Pictures.

One company trying to succeed where DreamWorks failed is The Weinstein Co., formed by brothers Bob and Harvey Weinstein.

The brothers formed Miramax in 1979 and sold it to Disney in 1993. Earlier this year, they left Disney to form their own company after disagreements with Disney's management.

The pair left behind their library of around 800 films and, like DreamWorks, is starting from scratch to make and acquire films and build their own distribution network.

The Weinstein Co. does have the right to make sequels of some of its Dimension films, including "Sin City" and "Scary Movie." And it just entered a joint venture to distribute its own DVDs, which will save it potentially millions of dollars in fees over the years.

The Weinstein Co. has raised about $500 million in cash and an equal amount in debt financing. That might not be enough. Vogel says a minimum of $2 billion is needed to comfortably finance both the production of a full film slate and distribution.

"The barriers to entry are high, which is why guys like the Weinsteins and anyone else who wants to go out and start this has to find external financing," Miller said.

"The risk remains very high that businesses like this will crash and burn," he said.

Cruise Control Shifts Gears

Tom Cruise is "restructuring."

Hollywood's leading leading man has dumped sister Lee Anne De Vette as his publicist and enlisted power publicity firm Rogers & Cowan.

The moves come in the wake of Cruise's endless summer in which he talked up War of the Worlds, vitamins and exercise, and Katie Holmes--not necessarily in that order.

In the tradition of Hollywood divorces, the Rogers & Cowan-for-De Vette swap was announced on Friday. And in the tradition of press releases about Hollywood divorces, the statement accentuated the positive.

Technically, the release wasn't about De Vette's dumping. Rather, it was about her being tapped to "exclusively oversee the day to day operations of Tom Cruise's philanthropic activities."

Cruise, 43, praised De Vette for having done a "wonderful job" as his personal publicist. De Vette, for her part, was "thrilled" with her new duties. There was no mention of Cruise and De Vette choosing to remain friends, but it was understood they would remain siblings.

As part of Cruise's staff "restructuring," as the statement put it, Rogers & Cowan also will handle publicity for the star's production shingle, Cruise-Wagner Productions. The company's upcoming projects include Mission: Impossible 3, due out next summer.

Rogers & Cowan, PR home to stars such as John Travolta, said on Monday it was not representing Holmes. Cruise's with-child fiancée recently ditched her own longtime publicist, Leslie Sloane, for De Vette.

De Vette succeeded Pat Kingsley as Cruise's publicist last year. Under Kingsley, Cruise cemented his status as the world's top movie star. With De Vette, Cruise enjoyed his biggest box-office hit ever (War of the Worlds) and suffered his worst publicity ever.

A recent report by Genius Insight, a New York-based marketing and research firm, found that Cruise's likeability sunk among 13- to 49-year-olds as the actor jumped on Oprah Winfrey's couch to declare his love for Holmes, took Matt Lauer to task for being "glib," prescribed vitamins and exercise for Brooke Shields and other women coping with postpartum depression, and generally became an outspoken advocate for Scientology. Per the study, Cruise went from the 11th most liked celebrity in the spring, to the 197th most liked celebrity in the summer. Worse, he joined David Spade, Pauly Shore and Tom Green as one of the five most polarizing stars. (Ashton Kutcher rounded out the group.)

To Ann Gabriel, a public relations expert who testified at Michael Jackson's molestation trial about the PR debacle the singer faced in the wake of the 2003 Martin Bashir documentary, Living with Michael Jackson, Cruise's summer was a 15 on the PR Disaster Scale of 1-10, with 10 supposedly being the most disastrous. (On the stand, she said Jackson's Bashir problem rated a 25.)

"I think it was off the scale," Gabriel said of Cruise. "I think if he's truly happy with his life there were probably some ways he could have better chosen to portray his newfound happiness."

Gabriel, who briefly worked for Jackson in 2003, said Cruise and the pop star are similar in that both lost touch with the public.

"I'm sure Michael didn't perceive his actions would be scrutinized the way they were or possibly misinterpreted," Gabriel said. "And I don't believe Tom Cruise believed his comments about postpartum depression would be as scrutinized."

Cruise's publicity firm shakeup is a sign to Gabriel, for one, that "he understands that he may have overstepped some of those boundaries."

In short, maybe next time sit on the couch.

Eisner leaves mixed legacy as Disney chief

LOS ANGELES (Reuters) - When Michael Eisner hands over the keys to Disney's Magic Kingdom on Friday after 21 years of running the media giant, he'll leave behind a stormy legacy -- brilliant early success mixed later with executive turmoil, an operational slump and a shareholder revolt.

But industry experts say that ironically, as Eisner says farewell as Disney's chief executive officer, the company has begun to return to the double-digit earnings growth that marked his first decade running Disney with late president Frank Wells.

Under new CEO Bob Iger, Disney will continue facing challenges settling issues at its movie studio -- including landing a new distribution deal with Pixar Animation Studios. But with a new park in Hong Kong open, and a turnaround at TV broadcaster ABC in progress, Eisner is leaving on a high note.

"His legacy is brilliance, mixed with turmoil," said Hal Vogel, a veteran Wall Street analyst and money manager who has tracked the media industry for years.

There is no doubt that Eisner's tenure has been successful. In the 21 years since he joined a then struggling Disney, the company has gone from $1.5 billion in annual revenues to nearly $31 billion today.

The stock price was $1.33 in 1984 and traded at around $24 a share on the New York Stock Exchange on Thursday. Disney has split its shares since 1984, and Disney said $10,000 of its stock 21 years ago would now be worth more than $200,000.

When Eisner ran the company alongside No. 2 executive Frank Wells, it seemed Disney could do no wrong. Along with studio chief Jeffrey Katzenberg, they reinvigorated Disney's vaunted film animation group, cranking out movies like "The Lion King."

SUCCESS TO MISSTEPS

The early successes peaked in 1995 when Disney agreed to acquire Capital Cities/ABC, which owned the ABC and ESPN TV networks, in a $19 billion deal. A year earlier, Wells died in a helicopter crash.

Katzenberg left Disney after failing to ascend to Wells' job. Eisner instead hired Hollywood superagent Michael Ovitz to be president, but he departed in 1996 after clashing with other Disney executives and his former friend, Eisner.

Katzenberg later sued Disney for bonus money and settled for an amount reported to be around $250 million, and Ovitz got a severance package with an estimated value at $140 million.

"After Frank died, you can't say the company did much of anything that was all that brilliant," said one former Disney executive who asked to remain unidentified.

Although ESPN has proven highly valuable, ABC stumbled badly until this past year when hit comedy "Desperate Housewives" and drama "Lost" sparked a viewership rebound and higher advertising revenues.

Wall Street viewed Disney as paying too much in 2001 when it agreed to acquire Fox Family Channel from Rupert Murdoch's News Corp Ltd. for $5.2 billion, including debt.

The company had been an ambitious player on the Internet, but in 2001, it shuttered its uncompetitive GO.com Web portal and took over $800 million in quarterly charges.

Like others, Disney's theme parks suffered from a tourism slump after the September 11 attacks on the World Trade Center and Pentagon, although they have since rebounded.

The missteps caused Roy Disney, nephew of company founder Walt Disney, to launch a campaign to oust Eisner. The board made many of the changes Roy Disney advocated, although Eisner leaves on his own terms.

Iger still faces issues ahead. ABC's recent hits need support from new shows like presidential drama "Commander in Chief" to keep ratings momentum going.

And the studio must rejuvenate its Miramax Films specialty division and its animated division, perhaps signing a new distribution agreement with Pixar Animation Studios Inc. after Eisner alienated Pixar CEO Steve Jobs.

Fantasy deal reunites Fogerty with his songs

LOS ANGELES (Billboard) - John Fogerty laughs when he says his next album of new material will be on Fantasy Records. "That's a phrase I never thought I'd say," he notes with glee.

In a turn of events almost impossible to believe, due to Concord Records' acquisition of Fantasy, the singer/songwriter has been reunited with the catalog of his rock band Creedence Clearwater Revival after a 30-plus-year battle. And he has signed a long-term deal for his future recordings with the label.

In a well-told tale, Fogerty fought for years with former Fantasy owner Saul Zaentz, who went so far as to sue Fogerty for plagiarizing himself. Fantasy owns the masters to such CCR classics as "Proud Mary," "Bad Moon Rising" and "Fortunate Son."

To buy his freedom from Fantasy, to which he owed at least 30 more albums, Fogerty struck a deal that meant he would never receive artist royalties from CCR recordings.

For years Fogerty was so embittered by the fight with Zaentz that he refused to perform the hits live, although he has for several years now.

When Concord first contemplated buying Fantasy late last year, Fogerty and his manager/wife Julie approached the label, initially just to say, "I'm the guy who wrote all the music you're thinking of purchasing," he says.

After the $80 million deal closed early this year, Fogerty's talks with Concord resumed, resulting not only in collaboration on his beloved catalog but on new material. Fogerty was without a label after Universal's purchase of DreamWorks a few years ago.

INVITED TO THE TABLE

"The folks at Concord really had respect for my work. That was quite different for me," he says. "For 35 years I've been treated like a hired hand that kind of snuck his way into the dinner table, and that wasn't very nice."

The reunion with his babies -- his songs -- has left him delighted and filled with many emotions. "I just had no reason to even dare hope this could happen," he says. "That's my first emotion. But No. 2 is that it shouldn't have been that way in the first place. But I'm not going to dwell on that one for very long because I spent so many years feeling like it was wrong. I'm just going to accept what it is and be very, very happy about it."

One of Concord's first moves was to offer to pay Fogerty artist royalties on his CCR material going forward. The checks should start rolling in after the release of his first complete career retrospective, "The Long Road Home," out November 1.

A live DVD, taped September 15 in Los Angeles, will follow. Then, Fogerty says, he will turn to writing new material.

Concord president Glen Barros says he knows his label cannot fix the past for Fogerty, but he believes it can create a happy future. "A big part of that was reuniting him with what he did with CCR. While we're looking forward to his new music, we also want to make sure we promote the great body of work. Now he can feel good about everything he can do with this music."

Union agrees BBC deal, job cut talks to begin

LONDON (Reuters) - The BBC can begin plans to cut 4,000 jobs after a technical workers' union voted on Monday to accept a revised offer put forward by the public broadcaster's Director General Mark Thompson.

About 92 percent of members of the Broadcasting Entertainment Cinematograph and Theatre Union (Bectu) voted to accept a one-year guarantee of no compulsory redundancies while talks move forward on how to reduce staff by 20 percent.

About 41 percent of Bectu members voted on the proposal. The other two BBC unions, the National Union of Journalists and Amicus, previously had agreed to the offer.

Talks are now set to begin at a divisional level to seek redundancy volunteers, according to Luke Crawley, Bectu's top BBC official. The union said it has reserved the right to strike if too many people are offered such packages.

"Managers with direct responsibility for day-to-day activities will be expected to explain how the BBC can continue to function properly with 20 percent fewer staff," Bectu said.

In addition to delaying any compulsory redundancies for one year, the BBC agreed to put off the sale of its BBC Resources unit for at least two years. It had been scheduled to be sold much sooner.

Staff at BBC Broadcast also were promised access to final salary pension scheme comparable to the BBC's and other assurances that terms will remain unchanged for at least three years.

The unit is being sold to Australia's largest investment bank Macquarie Bank Ltd. and investment fund Macquarie Capital Alliance Group. The group agreed to a one-year moratorium on compulsory job cuts.

The compromise deal with the world's largest public broadcaster came about after the unions had gone on strike for a day and had been planning more work stoppages.

TV commercials create the latest hip playlists

CANNES, France (Reuters) - You've seen the ads, now get the soundtrack.

Advertising firms are relying increasingly on the vast libraries of pop, rock and roll and dance tracks to accompany TV spots and commissioning less original music that can turn into an unforgettable jingle. The phenomenon has helped launch new bands like never before as artists have overcome a previous reluctance to have their music associated with corporate brands.

An iPod commercial featuring the song "Jerk It Out" catapulted Swedish band Caesars into wider recognition and British sensation Coldplay only got discovered in the United States after TV network NBC used "Yellow" in a promotion. Companies targeting younger consumers use independent music from around the world to make their products seem hipper.

"A major marketing move for bands has been getting on a commercial," Chris Milk, a TV commercial and music video director, said this week at the advertising industry's annual get-together in the south of France.

"In the past, a song on a commercial made you a sell-out, but now because the cool indie rock bands are doing it, it's opened it up for everyone," Milk said.

Indeed, everyone from James Brown and Led Zeppelin to Jimi Hendrix and Elvis have had their music used to flog cars, computers, beverages and soap. Important turning points for music in ads were Nike's use of the Beatles' "Revolution" in 1987 and Microsoft's Windows 95 launch to the tune of the Rolling Stones' "Start Me Up."

Techno star Moby licensed every song off his 1999 album "Play" for commercial use.

Apple's iTunes online music store now has a section devoted to popular songs used in advertising, making it easier for fans to buy something they have heard on television.

U2 recently changed its tune by agreeing to an iPod campaign to help launch its latest album, but rocker Bruce Springsteen and rapper Eminem are among the remaining few holding out.

GET RICH ON DOWNLOADS?

The increasing use of music libraries has made it even cheaper for ad firms and their clients to license a song, as has the perception that record companies and bands will get rich selling CDs and downloads after the commercial airs.

But that could just be a successful negotiating ploy.

"I think there can be a tremendous benefit to a new band, and when it works, it's fantastic, but it happens rarely," said Barbara Zamoyska, head of film, TV and advertising for Universal Music Publishing in Britain.

"A lot of new artists are used in commercials but it doesn't sell lots of records for most of them," she said.

Some in the ad industry are railing against the use of existing music and trying to persuade companies to get more creative and commission their own original songs.

The highly regarded Honda "grrr" ad for a cleaner diesel engine, which is widely favored to take the top prize this weekend at the International Advertising Festival, uses an original song by radio host Garrison Keillor with an infectious whistling refrain.

"Don't think because music doesn't come off a CD that it's less beneficial," said Michelle Curran, founder of Amber Music, which helps advertisers with sound design and who worked on the "grrr" commercial.

She said she is frustrated that advertisers are reluctant to pay the usually higher price to commission original music, even though it can make their ad stand out, and that they're willing to spend more on expensive locations and other facets of an ad.

"It also becomes something the client owns without it being seen as nasty and tacky," Curran said.

Another common problem that holds back the writing of an original jingle is that music is often left as an afterthought when creating a commercial, or at least relegated to the very end of the process when pressure is higher to finish it.

"Most advertising doesn't realize music's full potential," said Craig Davis, the chief creative officer for JWT Worldwide, a unit of WPP Group. "When done right, music packs emotional power and has a profound effect on the end product."

Garth Splits With Capitol

In a surprising move, Garth Brooks and Capitol Records Nashville have ended their longtime association. Capitol has been Brooks' only label home since his career began in 1989 and together the artist and label have sold more than 100 million albums, according to the Recording Industry Association of America (RIAA). He remained with the label even after he announced his retirement from the music business in October 2000. His last album, "Scarecrow," was released in 2001.

Calling it a "mutual agreement," Capitol parent company EMI said in a statement that while terms of the split are confidential, "no compensation was requested by Mr. Brooks or paid by EMI for the license termination."

Capitol released a total of 15 projects from Brooks including a box set, a hits package, a double live album, three holiday CDs and one pop album he recorded under the name Chris Gaines. Brooks' most successful album, 1990's "No Fences," is certified 16 times platinum by the RIAA.

"For nearly two decades, Capitol Nashville has had an extraordinary and fruitful relationship with Garth," said Capitol Nashville president and CEO Mike Dungan in a statement. "We wish him all the best for the future."

In 1992 Brooks, who recently became engaged to fellow country artist Trisha Yearwood, renegotiated his contract with Capitol. At the time, he told Billboard, "I'm not sure that this deal will ever be made again in this sort of fashion because it's not your typical deal. It's a full incentive contract where we start from scratch every time. If we don't sell any records, we don't get a cent; and if we sell a lot of records, we get a lot of money ... it's that black and white."

Since his renegotiation, Brooks' albums were licensed to EMI under his own Pearl Records label.

Bertelsmann buys Columbia House music club

FRANKFURT (AP) - German media company Bertelsmann AG said Tuesday it is buying the New York-based DVD and music club Columbia House.

Bertelsmann did not disclose the terms of the deal, under which the Guetersloh-based company's BMG division will acquire Columbia House. Citing people familiar with the deal, the Wall Street Journal reported it was worth approximately 312 million euros ($400.1 million US).

The U.S. retailer is 85 per cent owned by Blackstone Group. Sony Corp. and Time Warner each hold 15 per cent stakes.

"This move gives us strategic access to the growing business with DVDs, as well as broadening our customer base in the U.S. market," said Ewald Walgenbach, CEO of Bertelsmann's DirectGroup unit.

"In bringing together BMG Direct and Columbia House, we are combining two profitable businesses."

Columbia House has some eight million members in the United States, Mexico and Canada and sells music online and through the mail. BMG Direct operates its own mail order retail business, sending out 68 million catalogs annually and through its Web site.

Bertelsmann said Stuart Goldfarb, chief executive of BMG Direct, would be president and CEO of Columbia House.

Bertelsmann's reach encompasses nearly all forms of media, with publishing, music sales and broadcasting operations in approximately 60 countries worldwide.

The company, founded in 1835, owns the Random House publisher as well as a 50 per cent stake in Sony BMG Music Entertainment. It holds a 75 per cent stake in publisher Gruner + Jahr and has 90 per cent of broadcaster RTL. It also owns several book and music clubs, including DirectGroup.

Bertelsmann is not listed on the stock market. A majority stake is controlled by the Mohn family, directly and through a foundation. Group Bruxelles Lambert holds a 25 per cent stake.

Loews Goes Reel Time

Hate going to the movies and having a commercial-a-thon break out?

This might be the news you've been waiting for.

Coming soon to a theater near you: actual start times for feature presentations.

In response to gripes from customers about the increasing number of ads, PSAs, promotions and sneak previews running before a film, Loews, America's third-largest theater chain, has announced that it will soon start publicizing the real times that movies unspool.

But there's a catch. Beginning next month, Loews will include in its newspaper and Web listings a note alerting customers that "the feature presentation starts 10 to 15 minutes after the posted show time."

"It has been a long-standing tradition to show coming attractions and advertising before the feature, and we believe most of our customers understand this practice," Travis Reid, president and CEO of Loews Cineplex, says in a press release.

He added: "Recently however, some of our customers have suggested that we also publicize the start time of the movie. In response to those requests, we are pleased to communicate the start time of the overall show, as well as the approximate start time of the feature."

That's one way of putting it.

Traditionally, moviegoers would sit through cutesy "Let's All Go To the Lobby"-type spots attempting to coax the audience to concession stands, followed by a handful of coming-attraction trailers. In recent years, as local movie houses have expanded into megaplexes, exhibitors have begun to wring every ounce of revenue from each showing. First, more trailers were added. Then came the now standard slideshows of local merchants interspersed with lame-o trivia and Muzak-esque "movie tunes." There were also short films designed to hawk everything from Coca-Cola to the Los Angeles Times. Now, exhibitors routinely air long-form commercials that have little to do with the theatrical experiences, including spots for automobile manufacturers, perfume makers and credit card companies.

Loews isn't the only offender. Regal Entertainment touts what it calls "The 2wenty," a 20-minute block of advertising and "preshow entertainment" that mixes informercials for DVDs and TV movies with behind-the-scenes visits with stars--the idea being to make it entertaining enough that people don't notice they're being marketed to.

Audiences have finally begun to rebel, launching www.captiveaudience.org, a campaign petitioning theater chains to end the practice, and Commercial Alert, a Portland, Oregon-based nonprofit dedicated to reducing the over-commercialization of American culture.

"Stating when the actual movie starts is an improvement, but doesn't change our opinion that TV commercials have no place in movie theaters," Jason Thompson, director of Captive Motion Picture Audience of America, tells E! Online. "We don't get commercials on HBO, pay-per-view or other movie services that we pay for, so why should we tolerate them in theaters?"

Ditto Commercial Alert's executive director, Gary Ruskin, who points to a study by Connecticut-based research firm Insight Express that stated a majority of moviegoers don't want to see premovie ads.

"These premovie ads are very unpopular...We're talking about an industry that seems hell-bent on alienating its core customers," Ruskin says. "The moviegoing experience is turning into an infomercial experience."

Even politicians are now entering the fray. Andrew M. Fleischmann, a Connecticut state representative, made headlines last month when he introduced a bill calling for exhibitors to post the actual start times. Perhaps not so coincidentally, Loews will begin its reel time experiment in Connecticut. New York City Councilwoman Gale A. Brewer sponsored similar legislation.

Despite its new initiative, Loews still expects people to arrive well before the feature gets rolling.

"We still think people enjoy coming early, getting their popcorn, finding their sets, talking amongst one another," John McCauley, Loews' senior vice president of marketing, tells the New York Times.

And Madison Avenue will be there waiting.

Disney Wooing Pixar Again

The Walt Disney Co. "definitely" wants to renew its relationship with Pixar Animation Studios, Disney Studios chief Dick Cook has told the London Times. "This has been probably the most successful relationship in the history of Hollywood," Cook told the newspaper. "It's definitely our desire to further the relationship with Pixar for years to come, and develop it even more, and we're hopeful they feel the same way." It has been more than a year since Pixar Chairman Steve Jobs angrily broke off contract-renewal talks with CEO Michael Eisner. Although he has reportedly met with the heads of other studios, he reportedly has been taking a wait-and-see approach to determine whether the company's incoming CEO, Robert Iger, will be less intractable to his terms.

The Wiggles Named Australia's Wealthiest

SYDNEY, Australia - The Wiggles have sung and danced their way to the top of a list of Australia's wealthiest entertainers, edging out Hollywood heavyweights such as Nicole Kidman and Russell Crowe.

The four Australian performers topped BRW Magazine's list of Australia's 50 richest performers in 2004 with an estimated gross income of $34.5 million, up from $10.7 million in the previous year.

Kidman almost doubled her earnings and was Australia's second richest performer with $30 million, according to the magazine, which hit newsstands Thursday. She was followed by Crowe, who earned an estimated $20 million in 2004.

BRW managing editor Tony Featherstone said in an editorial that The Wiggles had topped the chart, which is based on the magazine's estimates of their 2004 gross income, thanks to a great product and marketing.

"They got into the market early, they took time to understand their audience, not only children but the parents who pay for everything," he said.

AC/DC were in fourth place, with an estimated income of $14 million.

Disney, Pixar Talks Seen Likely After Eisner Exit

LOS ANGELES (Reuters) - Pixar Animation Studios Inc. likely will reopen talks on a distribution deal with the Walt Disney Co. now that Disney CEO Michael Eisner is set to depart in September, analysts said on Monday.

Eisner, who will be replaced by Disney President Robert Iger, was seen as the main stumbling block for Disney to renew its lucrative partnership with Pixar because of his turbulent relationship with Pixar Chief Executive Steve Jobs.

Pixar, which produced such blockbuster films as "Toy Story," "Finding Nemo" and "The Incredibles" in its partnership with Disney, was also seen as holding a better bargaining position with Iger at Disney's helm.

"I just think this puts a lot of pressure on the Walt Disney Company," Fulcrum Global Partners analyst Rich Greenfield said. "Bob Iger, once he takes over, will be faced with this negotiation as one of his first acts as CEO ... Disney needs (Pixar) very badly."

Greenfield said Jobs would likely press his advantage to get better terms than he could have squeezed from Eisner. Pixar films have taken in about $3 billion at the box office worldwide, and Disney has had the bigger share of profit.

"The pressure is on Disney, not Pixar," Greenfield said.

Last month, Jobs told analysts that Pixar "likely ... will not forge a new relationship with Disney beyond our current deal," but did not elaborate about how far talks with Disney had progressed or where else Pixar might look for a partner.

Pixar has pushed back its target date for finding a new distributor a number of times and said that "musical chairs" in Hollywood was part of the reason, giving some hopes that a new Disney deal was possible.

Anthony Sabino, a business and law professor at St. John's University in New York, warned that Pixar would play an important part in helping Iger win the board's confidence.

"One of his top priorities and maybe his top priority has got to be to reach out to Pixar and negotiate with them again," Sabino said.

Lehman Brothers analyst Anthony DiClemente called the development at Disney "not ... a huge surprise to Pixar investors" and in a research note said a deal was "less likely" between the two companies.

Pixar's partnership with Disney expires with the June 9, 2006, release of its seventh film, "Cars," and it must have a new distributor in place before its eighth film is released in summer of 2007.

Pixar spokesman Tom Sarris on Monday said the company had no further comment on the distributor search or about developments at Disney. Sarris would not say whether Jobs and Iger had ever met.

Shares of Pixar closed up $1.98, or 2.2 percent, at $90.96 on Nasdaq.

Iger to Succeed Eisner as Disney CEO

LOS ANGELES (Reuters) - On Sunday the Walt Disney Company ended its contentious search for a new leader without leaving the house that Mickey Mouse built, naming current company president Robert Iger to succeed chief executive Michael Eisner, who will step down a year before he planned.

The company also said that Eisner -- once the highest paid chief executive in the United States -- will end his more than 20-year reign on Sept. 30, and turn over control of the vast entertainment conglomerate to his preferred successor, a former TV weatherman who worked his way to the top of Disney.

However, two former directors who led a 2004 shareholder protest, including namesake Walt Disney's nephew Roy, were furious with the board's choice, saying investors had been "conned." They also accused the board of failing to find major outside candidates.

Eisner began his reign in glory, revitalizing a company whose business had turned flat. But he now leaves against a backdrop of embarrassing lawsuits from former Disney executives and a bitter shareholder protest that saw a 45 percent vote against him at the 2004 annual meeting.

The 63-year-old Eisner will remain on the Disney board until the company's 2006 annual meeting.

Disney Chairman and former U.S. Senator George Mitchell said: "We definitely had choices -- we made the right choice."

On a conference call, Mitchell told reporters that Iger deserved partial credit for the company's recent stock market gains and financial improvement after Disney hit a rut in the late 1990s.

Mitchell also said the process was thorough and the vote for Iger was unanimous despite "vigorous discussion" by directors.

LOYAL SUCCESSOR

Iger, 54, is a longtime media executive who began his career as a weatherman before starting a steady advance at television network ABC and then Disney.

The dapper Iger is credited with helping turn around ABC and managing much of Disney's day-to-day operations, as well as a new focus on technology and expansion into Asia, where Disney is building one theme park and considering others.

But he has also been Eisner's loyal lieutenant and hand-picked successor, and dissident shareholders Roy Disney and Stanley Gold have said Eisner influenced the process heavily -- a contention the board has denied.

Iger had been the frontrunner, but the timing of the announcement came sooner than expected since the board had set a June 2005 target date to find a new chief. Eisner himself had said he would step down as CEO in September 2006.

Charles Elson, director of the Center for Corporate Governance at the University of Delaware, said the board decision was not as transparent as he would have preferred and would not silence critics.

"Having gone within the company to someone closely associated with the current CEO, and that the current CEO will be there a bit longer, will only fuel dissent," he said, referring to Eisner's presence on the board for another year.

Eisner said on Sunday he would not seek to be renominated to the board after the 2006 annual meeting or seek the job of chairman and Mitchell said he would take Eisner at his word.

Disney shares fell between 1998 and 2002, but soared 43 percent in 2003 and another 19 percent in 2004. The shares are off about 1 percent so far this year.

DISSENT SIMMERS

Investors have no direct means to change management since that is the job of the board. Dissident shareholders could try to change the board, although not for another year, and analysts say the process would be long and expensive.

A spokesman for Gold and Disney declined to elaborate on their statement, which said, "(Disney) shareholders should seriously consider replacing this board and starting anew."

But among other things, analysts say Iger had the potential to mend fences with Pixar Animation Studios Inc., the maker of "Toy Story" and "The Incredibles," which is ending its profitable partnership with Disney.

"This was not a broken situation," said Larry Haverty, a portfolio manager at Gabelli & Co., who has supported management for the last year or so. "I think that the board did the right thing."

Iger has been president and chief operating officer of the company since January 2000. His career at ABC started in 1974 in New York as a studio supervisor. In 1996, he joined Disney after the company acquired Capital Cities/ABC.

Rivals for the Disney job apparently included Meg Whitman, eBay Inc.'s chief executive, who bowed out of the race, according to media reports.

Others considered as potential candidates included Peter Chernin, the chief operating officer of News Corp.; Viacom Inc. co-presidents Tom Freston and Leslie Moonves, and Yahoo Inc. Chief Executive Terry Semel.

Miramax's Weinsteins, Disney Near Break-Up

LOS ANGELES (Reuters) - Brothers Bob Weinstein and Harvey Weinstein will meet with executives of Walt Disney Co. this week to iron out the details of their exit from Oscar-winning powerhouse Miramax Films, a source with knowledge of the talks said on Tuesday.

The brothers founded the Disney unit and guided it to best film Oscars -- the top U.S. movie honors -- for the likes of 2002's "Chicago," but have for years had a contentious relationship with Disney chief executive Michael Eisner.

The pair have been in talks to exit Miramax since last year, and it appears the Oscar ceremony this coming Sunday, Feb. 27, will be their swansong with Miramax, which is backing best picture nominees "The Aviator" and "Finding Neverland."

"They are continuing negotiations this week," the source said, "A deal is imminent."

A Disney spokeswoman was not immediately available. Miramax would say only that there was nothing new to report in the ongoing negotiations.

Under plans being considered, the Weinsteins would leave their posts as co-chief executives but remain as consultants to help market certain upcoming films, the source said.

Some of those titles include comic book themed "Sin City" and kids' movie "The Adventures of Shark Boy & Lava Girl" -- both from director Robert Rodriguez -- as well as drama "Proof," starring Gwyneth Paltrow.

The Weinsteins would be free make their own movies and find a new distribution partner.

Disney would pay the Weinsteins around $100 million to settle their contract, which expires on Sept. 30, 2005, although a final amount has yet to be determined.

WHAT'S IN A NAME?

Disney would retain the Miramax library of some 800 films with titles that include 1998's Oscar winner "Shakespeare in Love," starring Paltrow, and director Quentin Tarantino's popular "Pulp Fiction" and "Kill Bill: Vol. 1" and "Vol. II" titles. Libraries are a highly lucrative means of generating cash from sales of DVDs, videos and television rights.

Disney would retain the Miramax brand name, which the Weinsteins had sought to keep because it is based on their parent's names, Miriam and Max.

Miramax would become a slimmer unit with an annual budget around $300 million, far less than the $700 million Miramax under the Weinsteins but closer to the budgets of the art-house movie wings of Hollywood's other major studios.

Staff, which now numbers less than 300 people, would be cut, although a final number has yet to be determined, the source said.

The employee count has fallen steadily since Miramax said in August of last year it was laying off 13 percent of its then 485-member staff. Just last month, Miramax Chief Operating Officer Rick Sands left to join DreamWorks SKG.

The Weinsteins have been a major film force in New York, where Miramax is based, and in Hollywood for more than two decades. Based on the success of low-budget hits like "sex, lies and videotape," the brothers sold their company to Disney in 1993 for around $75 million.

Since then the Weinsteins have increasingly pursued more expensive films like last year's Oscar contender "Cold Mountain," while Disney wanted the unit to stay closer to its low-budget, independent roots.

Tension between the Weinsteins and Disney came to a head last May when Disney refused to release Michael Moore's controversial anti-Bush documentary, "Fahrenheit 9/11," which Miramax had backed. The Weinsteins acquired the film from Miramax and found an independent distributor to release it.

Jay-Z Takes Over

For most people, retirement means a chance to kick back and take it easy. For Jay-Z, it means picking up a brand-new career where the old one left off.

The rapper turned impresario was officially dubbed president and CEO of Def Jam Records Wednesday by Island Def Jams Music Group chairman Antonio "L.A." Reid.

Jay-Z, whose real name is Shawn Carter, will also continue to head up Roc-A-Fella Records, which he cofounded with Damon Dash in 1995.

Def Jam announced Wednesday that it had wholly acquired the label, which includes acts such as Grammy shoo-in Kanye West, Cam'ron and the recently jailed Beanie Sigel.

"After 10 years of successfully running Roc-A-Fella, Shawn has proven himself to be an astute businessman, in addition to the brilliant artistic talent that the world sees and hears," Reid said in a statement. "We are fortunate that he has agreed to take over as president and CEO of Def Jam Recordings.

"I can think of no one more relevant and credible in the hip-hop community to build upon Def Jam's fantastic legacy and move the company into its next groundbreaking era."

Jay-Z, who is scheduled to take up the reins at Def Jam on Jan. 3, created shock waves when he announced that the Grammy-nominated The Black Album would be his final solo production.

The album debuted at the top of the charts, a feat Jigga made look easy during his tenure as a hip-hopster.

Jay-Z's ongoing musical acclaim didn't end with the success of The Black Album. Since cutting his solo career short, two of Jay-Z's collaborative efforts have debuted at number one--Best of Both Worlds: Unfinished Business, with sparring partner R. Kelly, and the current number-one album, Collision Course, with Linkin Park.

To complete Jay-Z's going-out-on-top extravaganza, he has been nominated for three Grammys--Best Rap Album for The Black Album and Best Rap Solo Performance and Best Rap Song for "99 Problems."

Beyoncé's beau was upbeat about the next stage in his career.

"I have inherited two of the most important brands in hip-hop, Def Jam and Roc-A-Fella," Jay-Z said in a statement.

"L.A. Reid and the Universal Music Group have given me the opportunity to manage the companies I have contributed to my whole career. I feel this is a giant step for me and the entire artist community."

U2 Talk iPod Strategy

Band's partnership with Apple has deep roots

For two weeks before MTV debuted U2's video for the new single "Vertigo," fans had a chance to see the band perform the song on TV -- in an iPod commercial. The members of U2 are passionate proponents of Apple's iPod -- "It's the most interesting art object since the electric guitar in terms of music," says Bono -- but the band's new partnership with Apple Computer still qualifies as a surprise. In their twenty-five-year history, U2 have never licensed their music for commercial use or even accepted tour sponsorship.

With radio playlists strictly formatted and MTV showing more reality-TV shows than videos, many bands are looking for new ways to bring their music to the public. And so U2 launched the first single from their upcoming album, How to Dismantle an Atomic Bomb, with an iPod ad rather than a video. Apple is also releasing a special black U2-edition iPod for $349 with band autographs laser-engraved on the casing. Buyers get a fifty-dollar discount on The Complete U2, a $149 iTunes download package that includes more than 400 songs. "I see this as the beginning of a new era in the distribution of music," says U2 guitarist the Edge. "We're happy to be part of history and the future."

The U2-Apple partnership has deep roots. In early 2003, when U2 first heard that Apple was planning to launch an iTunes music store, the band met with Apple founder Steve Jobs at the home of Jimmy Iovine, the co-chairman of U2's label, Interscope Records. "Jimmy is a visionary and believes artists should meet with technologists," says Bono.

iPod ads have been helpful in album sales before, most notably for Jet, whose single "Are You Gonna Be My Girl" garnered widespread TV exposure before storming radio. U2 manager Paul McGuinness says, "The commercial was an attractive idea because iTunes was already selling our music, and the amount Apple will spend for airtime is out of reach for the record business." The band accepted no money for the ad but will get royalties on the U2 iPod.

And music execs are eager to see more of these partnerships. In September, the industry held its first-ever "upfront" -- a conference where the major labels showcased upcoming albums for representatives from corporations such as Procter & Gamble, Pepsi and Mercedes-Benz. "Target your brands with our bands," said Atlantic chairman Jason Flom, showing a video featuring bands on his artist roster that might appeal to baby-boomers (Phil Collins, the Doors) or soccer moms (Matchbox Twenty, the Corrs).

Commercials aren't the only route. Shows including The O.C. and One Tree Hill put music from new bands in every episode. When video-game maker Electronic Arts featured songs from Good Charlotte and Blink-182 in its sports games, it helped to break those bands. "We know there are other avenues to talk to consumers about music and other places to market to them," says Phil Quartararo, executive vice president of EMI Music North America. "Kids hear music on the radio, phone, iPod, video game and the Internet, so we have to go to where the consumers are."

As for U2, it's unclear whether their partnership with iPod will result in significantly increased exposure. After all, the band has already sold more than 120 million records worldwide. "U2 is an established act for radio and video, which is still the main driver," says Quartararo. But some think that the glow from Apple's hot product will reflect well on the band. "Whenever you're the first to do something, there's a hipness factor," says Bob Chiappardi, president of Concrete Marketing, a music-promotion firm. "It's a win-win situation." If it goes well, look for other bands to beg Apple for their own iPods too.

Wal-Mart Wants $10 CDs

Biggest U.S. record retailer battles record labels over prices

Wal-mart wants every CD you buy to cost less than ten bucks. And the nation's largest retailer -- which moved a quarter of a trillion dollars' worth of goods last year -- usually gets its way. Suppliers who don't accede to Wal-Mart's "everyday low price" mantra often find their products bounced from the chain's stores, excluded from being sold to the 138 million people who shop at a Wal-Mart store every week.

In the past decade, Wal-Mart has quietly emerged as the nation's biggest record store. Wal-Mart now sells an estimated one out of every five major-label albums. It has so much power, industry insiders say, that what it chooses to stock can basically determine what becomes a hit. "If you don't have a Wal-Mart account, you probably won't have a major pop artist," says one label executive.

Along with other giant retailers such as Best Buy and Target, Wal-Mart willingly loses money selling CDs for less than $10 (they buy most hit CDs from distributors for around $12). These companies use bargain CDs to lure consumers to the store, hoping they might also grab a boombox or a DVD player while checking out the music deals.

Less-expensive CDs are something consumers have been demanding for years. But here's the hitch: Wal-Mart is tired of losing money on cheap CDs. It wants to keep selling them for less than $10 -- $9.72, to be exact -- but it wants the record industry to lower the prices at which it purchases them. Last winter, Wal-Mart asked the industry to supply it with choice albums -- from new releases from alternative rockers the Killers to perennial classics such as Beatles 1 -- at favorable prices. According to music-industry sources, Wal-Mart executives hinted that they could reduce Wal-Mart's CD stock and replace it with more lucrative DVDs and video games.

"This wasn't framed as a gentle negotiation," says one label rep. "It's a line in the sand -- you don't do this, then the threat is this." (Wal-Mart denies these claims.) As a result, all of the major labels agreed to supply some popular albums to Wal-Mart's $9.72 program. "We're in such a competitive world, and you can't reach consumers if you're not in Wal-Mart," admits another label executive.

Tensions are not as high now as they were last winter, but making sure Wal-Mart is happy remains one of the music industry's major priorities. That's because if Wal-Mart cut back on music, industry sales would suffer severely -- though Wal-Mart's shareholders would barely bat an eye. While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. "If they got out of selling music, it would mean nothing to them," says another label executive. "This keeps me awake at night."

Wal-Mart would not directly comment on tensions with the labels, but Gary Severson, Wal-Mart's senior vice president and general merchandise manager in charge of the chain's entertainment section, did allude to the dispute about music prices. "The labels price things based on what they believe they can get -- a pricing philosophy a lot of industries have," he says. "But we like to price things as cheaply as we possibly can, rather than charge as much as we can get. It's a big difference in philosophy, and we try to help other people see that." Virtually no industry executives would publicly comment about their company's relationship with Wal-Mart. But off the record, many record-industry executives shared their concerns. "I don't think there is a music supplier in America who really enjoys doing business with Wal-Mart," says one major-label rep.

No one in the music business ever expected Wal-Mart to become the most powerful force in record retailing. In the past, the business was shared among smaller local and regional chains such as Musicland, which once had an estimated ten percent of the market. But as Wal-Mart and other national discount operations such as Target and Best Buy have grown -- approximately half of all major-label music is sold through these three -- an estimated 1,200 record stores have closed in the past two years, according to market-research firm Almighty Institute of Music Retail. Last February, Tower Records, with ninety-three stores, declared bankruptcy and is now up for sale; Musicland has already changed owners, with many local outposts shuttered.

Wal-Mart is like no traditional record seller. Unlike a typical Tower store, which stocks 60,000 titles, an average Wal-Mart carries about 5,000 CDs. That leaves little room on the shelf for developing artists or independent labels. There's also scant space for catalog albums, which now represent about forty percent of all sales. At a Wal-Mart Supercenter in Thorton, Colorado, for example, there were no copies of the Rolling Stones' Exile on Main Street or Nirvana's Nevermind. While most of the latest hits were priced at $13.88, some records -- from the O Brother, Where Art Thou? soundtrack to the latest by Yellowcard -- were displayed for $9.72. Says Severson, "Paying fifteen dollars for a piece of music is a difficult value equation for customers."

For the music industry, having such a dominant retailer is like being stuck in a bad marriage. Whereas traditional music retailers took advertising money from the labels to push new releases in Sunday newspaper circulars, Wal-Mart barely advertises locally. It relies on national campaigns, where it promotes its own low-price policy. "Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner," says one former distribution executive. "At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space."

In the same way that Wal-Mart made it difficult for local mom-and-pop retailers to compete with its low prices, it has hurt smaller music stores. "When you're buying CDs for twelve dollars and selling them for ten like Wal-Mart, it makes the rest of us look like we're gouging the customer, when we're not," says Don Van Cleave, head of the Coalition for Independent Music Stores, a retail consortium. "It's supertough to compete with that price point." Even online, Wal-Mart sells songs for eighty-eight cents, compared with ninety-nine cents at the market leader, Apple iTunes Music Store.

Getting Wal-Mart excited about carrying a record is at the top of every label's to-do list, but it's harder than it sounds. There is an immense cultural chasm between slick industry executives and Severson's team of three music buyers at Wal-Mart headquarters in Bentonville, Arkansas. Only one of the three had ever worked in music retailing -- until that person moved to a new division in August and was replaced by someone who previously bought Wal-Mart's salty snacks. (Wal-Mart also relies on buyers at its two distribution companies, Handleman and Anderson Merchandisers, who purchase records as well as stock the Wal-Mart stores.)

"Content-wise, Wal-Mart is limited about what they sell," says one label chieftain. "Wal-Mart is Middle America's shopping headquarters, with different buying habits and consumer tastes than those who live in Manhattan and L.A." When founder Sam Walton christened the first Wal-Mart in 1962, music was never a priority -- it wasn't an everyday, easy-to-stock product like light bulbs, since the Top Ten changed so much. The chain also had specific objections to music. Walton wanted all stores to remain family-friendly, and in the rural South, rock & roll had the potential to turn away many customers. In 1986, the Rev. Jimmy Swaggart led one such campaign to ban music from Wal-Mart, saying rock fostered "adultery, alcoholism, drug abuse, necrophilia, bestiality and you name it." Albums and magazines about rock (including Rolling Stone) were temporarily pulled from the Wal-Mart shelves.

Wal-Mart's wariness about music ended once the music industry adopted a voluntary advisory sticker on albums deemed to contain adult language or sexual content. Today, before any new album is released, someone at each label is charged with asking, "Do we have any Wal-Mart issues?" If an advisory sticker is placed on an album, the label will put out a clean version about ninety percent of the time. Since the edited version of a hit record usually averages only about ten percent of a record's total sales, they do it mostly to keep Wal-Mart happy.

Wal-Mart has loosened up a bit, too. Eminem's albums, stickered or not, are not carried by the chain, but it does sell the 8 Mile soundtrack. And it carries an edited version of 50 Cent's debut. Since the labels are so adept at self-policing, though, censorship controversies are now rare. "There have been examples in the past, but it's not a current issue," says Severson.

Wal-Mart has also urged the labels to create exclusive new products that would lower music prices. In a short-lived test, Universal excerpted seven songs from existing albums by acts such as Sum 41 and Ashanti and sold them at Wal-Mart for $7. Few other labels wanted to participate. "They proposed it to a bunch of artists and managers, but everyone was worried that we are sending a message that instead of the sixteen-track album we sold, those nine extra songs were filler," says a label executive.

Some record executives think they can survive Wal-Mart's push. They argue that the hottest acts will always command a premium price. "50 Cent sold 7 million copies," says one rep, "and I guarantee that many of those sold for fifteen, sixteen dollars." And they believe that Wal-Mart will want to carry those hits because they draw customers. "If they can't find a record at Wal-Mart, people will go elsewhere," says one executive. "We should play hardball." But each label is watching the others to see if any make major concessions to Wal-Mart's demands for lower prices. A label that gives in could gain shelf space at the expense of another. "If you lose an account, one of your rivals could get more product in the store and get one up on everyone else," says a major-label rep. "You have to tread cautiously."

The tug of war between the labels and Wal-Mart isn't going away soon. The chain is aggressively opening new stores -- fifty-seven in October -- including some in urban areas. So unless it makes good on its threat to cut back on its music section, it will continue to grow as the top record store and become even more powerful. Laments one industry rep, "There is some impending doom associated with us not helping them."

Price War: Does a CD have to cost $15.99?

Major labels insist that the low prices mass retailers such as Wal-Mart and Best Buy demand are impossible for them to achieve. But Best Buy senior vice president Gary Arnold counters, "The record industry needs to refine their business models, because the consumer is the ultimate arbitrator. And the consumer feels music isn't properly priced." Labels point to roster cuts and layoffs as evidence that they can't sell CDs cheaper.

This breakdown of the cost of a typical major-label release by the independent market-research firm Almighty Institute of Music Retail shows where the money goes for a new album with a list price of $15.99.

$0.17 Musicians' unions
$0.80 Packaging/manufacturing
$0.82 Publishing royalties
$0.80 Retail profit
$0.90 Distribution
$1.60 Artists' royalties
$1.70 Label profit
$2.40 Marketing/promotion
$2.91 Label overhead
$3.89 Retail overhead

Sony Closer to Content/Gadget Vision with MGM Deal

TOKYO (Reuters) - With its acquisition of Hollywood film studio Metro-Goldwyn-Mayer, Sony Corp is one step closer to its vision of linking hardware and content, and to winning the key battle for the next generation DVD.

Sony's acquisition of MGM will create the world's largest film library of about 7,600 titles and would appear to fit nicely into Sony's overall strategy of creating synergies between its consumer electronics and movies, music and games.

A group headed by Sony Corp of America has agreed to buy MGM, the 80-year-old studio that owns the James Bond, Pink Panther and Rocky movies, in a deal worth about $4.85 billion including the assumption of about $2 billion of debt.

Analysts and investors are worried about the potential damage to Sony's balance sheet and have doubts about when and how the synergies between movies and electronics will be achieved. But they say the reasoning behind the acquisition was sound.

"The MGM library is a rich source of content and potential profits for Sony," said Kiyoshi Yamanaka, a fund manager at T&D Asset Management.

Sony also announced on Tuesday that it had reached an agreement with U.S. cable TV operator Comcast Corp. to offer Sony and MGM movies over Comcast's video-on-demand systems and on new cable channels that it would form with the Sony group.

This means Sony will also be able to generate cash flow by selling the Sony and MGM library of films on cable TV, in addition to the revenues produced by retail sales of DVDs.

Sony does not provide a breakdown of its DVD sales, but the company's music division recorded an operating profit of 35 billion yen ($318 million) in the previous business year to March 31, on sales of 756 billion yen, or about 10 percent of the group's total.

DVD FORMAT BATTLE

Sony acquired Columbia Pictures in 1989 for $3.4 billion, which at the time was the largest ever acquisition by a Japanese firm. That deal caused numerous headaches for Sony due to losses from large budgets and box office duds.

The MGM purchase could help stabilize earnings in its movie division, and may also advance Sony's cause in the battle to establish a format called Blu-ray as the industry standard for the next generation of DVDs.

"One of the important aspects of this deal with MGM is that it may help Sony prevail in the DVD format war," T&D Asset's Yamanaka said.

Sony knows how important formats are, having lost out to Victor Co. of Japan Ltd. (JVC) in the famous fight over videotape formats more than two decades ago, with JVC's VHS system becoming mainstream at the expense of Sony's Betamax.

Sony's consortium is up against a format called HD DVD, which is endorsed by Japan's NEC Corp. and others.

Both HD DVD and Blu-ray technologies use blue laser light, which, with a shorter wavelength than red light used in conventional DVD recorders, can read and store data at much higher densities needed for high-definition recordings.

Sony would also look to use its larger library to capitalize on the spread of broadband Internet access worldwide, UFJ Tsubasa Securities analyst Kazuya Yamamoto said

"Delivering movie content to the home online could become a lucrative business in the future as broadband access expands. Holding movie contents will become more valuable in that light," Yamamoto said.

Charlize Theron to be new face of Christian Dior's fragrance J'adore

NEW YORK (AP) - Add Christian Dior to the list of Charlize Theron fans. The company announced Thursday that the Oscar winner will be the new face of J'adore, the designer's fragrance that debuted in 2000.

Theron will start appearing in print ads and TV commercials next month -about the same time that ads for Chanel No. 5, featuring another Oscar winner, Nicole Kidman, debut.

"Ms. Theron was chosen because she represents modern femininity and embodies the spirit and energy of Dior. She is a classic beauty," said Pamela Baxter, president and CEO of LVMH Perfumes and Cosmetics, Dior's parent company.

The advertising deal with Theron is the first one between the beauty brand and a celebrity. Dior's artistic director John Galliano oversaw all aspects of the ad campaign.

Sony, BMG Combine Their Music Businesses

LOS ANGELES - Sony Music Entertainment and BMG, the music unit of the German media conglomerate Bertelsmann AG, said Thursday they have formally combined their music businesses.

The new company, Sony BMG Music Entertainment, will rival Vivendi's Universal Music Group for market share.

Sony BMG, which will be headquartered in New York, instantly becomes home to a stable of hit-makers, including Britney Spears, OutKast, Aerosmith and Travis Tritt. The company also now controls a catalog of works by music veterans like Elvis Presley, Miles Davis, Johnny Cash and Stevie Ray Vaughan.

Sony Corp. and Bertelsmann each own half of the new combined company. The deal did not include the parent companies' music publishing, manufacturing or physical distribution businesses. Sony Corp.'s recorded music business in Japan, SMEJ, was also not part of the new joint venture.

The Federal Trade Commission approved the merger last week.

Andrew Lack, Sony Music's former chairman and chief executive, was named chief executive of the new company. Michael Smellie, the former chief operating officer of BMG, and Kevin Kelleher, Sony Music's former executive vice president and chief financial officer, were also retaining their positions.

A Sony BMG spokeswoman said executives were not available for interviews late Thursday.

As it integrates operations, Sony BMG Music Entertainment might cut as many as 2,000 jobs, according to published reports. The cuts would save about $350 million.

Sony, BMG Combination Gets U.S. Antitrust Approval

WASHINGTON (Reuters) - U.S. antitrust authorities on Wednesday approved a deal for record companies Sony Music and BMG to merge, creating a rival to market leader Universal Music.

The U.S. Federal Trade Commission said it would not oppose the combination of Sony Music, a division of Japanese electronics giant Sony Corp., and BMG, a unit of German media conglomerate Bertelsmann AG.

"Upon further review of this matter, it now appears that no additional action is warranted by the commission at this time," the agency said in a letter to each of the companies.

BMG said in a statement that the reviews by U.S. and European antitrust officials had been "diligent."

"We now look forward to creating a global recorded music company comprising many of the world's most successful artists as well as a vast catalog of recordings," BMG said in its statement.

Combining the Sony Music and BMG creates a company with revenues of as much as $5 billion and brings under one roof such artists as Britney Spears, Usher, Elvis and Beyonce.

The FTC approval comes a week after the European Commission endorsed the deal. The EC imposed no conditions, but warned that it would look closely at any further proposed consolidation in the industry.

Sony-BMG merger approved by EU

BRUSSELS -- Independent record companies Tuesday threatened to go to court to challenge Sony and Bertelsmann's creation of the world's second largest music company after failing to convince European Union antitrust regulators to block the deal.

The European Commission unconditionally approved the 50-50 joint venture between Japan's Sony Music and BMG, the German media giant's music unit, late Monday after finding insufficient evidence the deal would harm consumers.

The deal is expected to win U.S. antitrust clearance within days, bringing Sony artists like Aerosmith, George Michael and Barbra Streisand and BMG's Avril Lavigne and Elvis Presley under one roof.

In its decision, the commission indicated it believed its initial concerns about competition in the market were not entirely unfounded.

"The commission will keep a close watch on the music sector as it becomes even more concentrated and would very carefully scrutinize any further major concentration in the industry," it said.

The deal will reduce the number of music "majors" from five to four. Sony and BMG argued they needed to join forces to deal with declining CD sales and the threat from illegal downloading on the Internet.

But independent labels fear the merger will make it even tougher for their artists to gain exposure and shelf space in a market increasingly dominated by mega-stores.

Martin Mills, chairman of the Beggars Group label and board member of Britain's Association of Independent Music, noted BMG posted record operating profits of around $37.2 million US in the first half of this year.

"This merger is not about economic necessity in a changing market, as BMG's stellar figures demonstrate," he charged. "It is about the desire to dominate and to control the outlets at media and retail through which news of wonderful new music is disseminated."

Impala, a group representing 2,000 smaller labels, is considering challenging the deal in court, said spokesman Jean-Luka Monte.

But antitrust lawyers noted such challenges by third parties are extremely rare, with very little likelihood of success.

"It's about as close to zero as you can get," said Stephen Kinsella, an international business expert with the Herbert Smith law firm in Brussels.

Universal Music holds the top spot in Europe, with Sony-BMG pulling ahead in the United States. The rivals control about a quarter each of the $32 billion US global music market.

The other two majors are EMI and Warner Music, with about 30 per cent of the global market between them.

Four years ago, EMI and Warner scrapped a proposed hookup in the face of EU charges that fewer majors could reduce competition and lead to higher prices and less choice for consumers.

A renewed courtship was cut short last year when former Universal Music chief Edgar Bronfman Jr. stepped in to buy Warner for $2.6 billion US.

Similar concerns emerged in the EU's initial appraisal of the Sony BMG deal, with antitrust chief Mario Monti's team suggesting "tacit collusion" in setting CD prices among the five majors.

But after closed-door hearings and an internal review, the commission backed down, saying it "had to conclude . . . that the evidence found was not sufficient to demonstrate in a successful way that co-ordinated pricing behaviour existed in the past."

Reducing the number of majors to four "would not yet create a collectively held dominant position" in recorded music, it said.

The reversal of the EU's position on the merger reflects new hurdles instituted by the commission since European courts overturned three merger-blocking decisions in 2002.

Sony, BMG to Lay Off 2,000 Staffers -Sources

LOS ANGELES (Hollywood Reporter) - About 2,000 staffers worldwide will be let go as a result of the upcoming merger between recording industry giants Sony Music and Bertelsmann Music Group (BMG), sources said.

The combined company is expected to reap cost savings of $300 million-$360 million a year, according to industry insiders.

The European Union's antitrust division is expected to announce approval of the merger as soon as Tuesday. The international restructuring of Sony BMG is expected to be complete by June 2005 and will mostly affect back-office operations, sources said.

Representatives from Sony and BMG declined comment Friday. Sony's artist roster includes Jessica Simpson, Destiny's Child and Audioslave. BMG acts include recent U.S. chart-toppers Usher, Avril Lavigne and Velvet Revolver.

The board of directors of the combined Sony BMG will comprise members of both companies. Andrew Lack, chairman and CEO of Sony Music Entertainment, will helm the merged company as CEO, with BMG chairman and CEO Rolf Schmidt-Holtz serving as the chairman of the board.

News that EU antitrust chief Mario Monti would approve the merger leaked last month. The EU's main concerns, according to the antitrust office's sealed 51-page statement of objections, have been fixed pricing on CDs and market collusion. Only four years ago, the EU opposed a deal between EMI and Warner Music Group for the same reasons.

Insiders said Monti's decision to allow the union of Bertelsmann AG and Sony Corp.'s music divisions came after the commission concluded that the evidence of price collusion and market dominance was not solid enough to justify blocking the merger.

If the merger is passed by U.S. regulators, the combined Sony BMG would be the world's second-largest music company, behind Universal Music Group.

The new entity will be 50%-owned by both groups and based in New York. The merger includes both companies' recorded music businesses but not music publishing, physical distribution or manufacturing operations. Sony's recorded music business in Japan also would be excluded.

New trade terms see cost of EMI CDs rise $2 to $10 at HMV stores in Canada

TORONTO (CP) - A dispute between music label EMI and retailer HMV is hitting music fans and indie artists like Sum 41 and Oh Susanna in the pocketbook.

Experts say the price increases - between $2 and $10 - for CDs by artists such as Nickelback, Janet Jackson, Norah Jones, Radiohead and Sarah McLachlan, are just the latest manifestation of the industry's woes.

The increases, which took effect in early April, are due to a squabble over the wholesale price of EMI's CDs, and all the indie labels it distributes.

Both sides have been guarded about discussing the issue saying "trading terms" between the companies are confidential. However, each concedes that money is at the heart of the problem.

HMV wants EMI to maintain its volume discount on CDs so the chain can sell new releases at a cheaper price and get music lovers into its stores - rather than big-box competitors like WalMart and Costco.

"EMI chose to reduce the level of support that they had previously offered HMV," Humphrey Kadaner, president of HMV Canada, said in an interview with The Canadian Press.

As a result, Kadaner said HMV can't give EMI distributed products the same level of "value-added" support it gives other labels.

That means EMI artists don't get priority placement near the front of stores, their songs don't get played inside the stores and they're not listed on HMV's chart wall - often the first place a consumer will look when entering a music shop.

Kadaner said under the new trade terms, EMI passed on a higher price to HMV. Subsequently, the chain had to pass the hike on to the consumer, he said.

"We passed it on proportionally. We've maintained the same margin as before. We have not tried to use this as a vehicle to drive any incremental profitability," said Kadaner.

For its part, EMI Canada says it can't afford to capitulate to the chain's demands because sales at the chain dropped about 25 per cent last year.

Further, label head Deane Cameron says the label did not raise its CD prices.

"It's not fair for us to have trading terms that reward HMV for their volume if their volume is not there," he said. "HMV is selling a lot more DVDs these days. That's why we're getting elbowed out."

He added: "We asked them to consider different trading terms. That wasn't received too well and we appear to be in the penalty box. It's disappointing for artists to be punished to this extent."

It's far from the first time HMV, which holds the leading market share of pre-recorded music in Canada, has fought to increase its bottom line. Two years ago a messy dispute with Warner over wholesale prices pushed HMV to pull all Warner CDs from its stores.

It's no secret the CD market has been troubled in recent years. The Canadian Recording Industry Association says that on a per-capita basis, the Canadian music industry has been one of the hardest hit of any country in the world by illegal file swapping. Retail sales have decreased by more than $425 million since 1999, says the organization.

To stay afloat, HMV started selling DVDs a few years back, which some say saved the chain from bankruptcy.
 
"When this whole downloading thing happened their music business tanked," said Maureen Atkinson, senior partner at J.C. Williams Group, a retail and marketing consulting firm. "They really struggled, as did the recording industry."

But this latest ripple has more victims than just EMI. The label consists of 70 music labels representing over 1,500 artists around the world. In Canada, EMI distributes CDs for smaller independent labels, including Nettwerk, Popular, Marquis and Aquarius.

It's these smaller Canadian indie labels - which support home grown talent like Sum 41 and Broken Social Scene - that find themselves the biggest victims of EMI and HMV's trade fallout.

They have the most to lose because their artists aren't sold in big box stores like Future Shop and WalMart - which mostly only carry Top 40 CDs with very little back catalogue - and rely on specialty stores to sell their stuff.

"It's just not fair. Do they care that by raising the Oh Susanna disc to $28 they make it impossible for people to buy her CD in their store," said Terry McBride, CEO of Nettwerk. "That hurts the artist. That artist is a person. They're not a corporate entity."

Customers have already said the price of CDs is too high, added McBride.

"It's extremely short-sighted because people are already buying less and less CDs. The reason why HMV and EMI are having this little tussle is because EMI margins have been shrunk, the marketplace is shrinking and every player in this business needs to come to terms with that and be part of the solution - not get into these stupid little trade wars. Nobody wins."

Rocker Courtney Love Owes Millions - Report

LOS ANGELES (Reuters) - Add financial woes to the long list of worries bedeviling rock star Courtney Love.

The trouble-prone musician claims in the upcoming issue of Blender magazine that she has been swindled out of $40 million, while a former business associate says she is in debt to the tune of at least $4 million.

Love, the 39-year-old widow of late Nirvana frontman Kurt Cobain, is already dealing with a stack of legal and health concerns, and her music career suffered a recent blow when her long awaited debut solo album bombed.

"I'm covered with loser dust," she was quoted as telling Blender, whose May issue featuring the Love cover story will hit newsstands on April 20.

Love told Blender that "... $40 million has been stolen from me and (11-year-old daughter) Frances by a fiduciary institution."

She added, "I found out that our dog walker was making $100,000. One person put a BMW on my credit card. My daughter's trust fund has been stolen from to the point where she may have, like, nothing. I can't let this happen to Frances."

Blender said "multiple parties close to Love agree that a large sum of money is unaccounted for," while a former business associate who had access to her accounts in the past six months told Blender she is at least "... $4 million in debt."

Love faces two separate trials in Los Angeles, one for misdemeanor disorderly conduct and being under the influence of a controlled substance, and the other for two felony counts of unlawful drug possession. She also temporarily lost custody of Frances, her only child with Cobain, who shot himself in the head 10 years ago.

Love's album "America's Sweetheart," released by EMI GroupPlc's Virgin Records unit, spent just four weeks on the Billboard Top 200 chart.

ABBA Says 'No' to Reunion - at Any Price

LONDON (Reuters) - Nothing -- not even $2 billion -- could tempt ABBA back together again. After 30 years, the Swedish supergroup might even have trouble remembering the words of its pop classics.

The sight of the group's outrageous stage outfits is enough to make its 58-year-old songwriter Bjorn Ulvaeus cringe nowadays.

Thirty years to the day after ABBA won the Eurovision song contest with "Waterloo," the bearded Ulvaeus is fiercely proud of its music -- but the group will never strut its stuff again.

Four years ago, ABBA was offered $1 billion to reunite. The answer was 'No.' But what if that figure doubled?

"No, not even if you did that," Ulvaeus told Reuters.

"It is never going to happen again. I think it is a bit too long now. We split up in 1981. People haven't seen us as a group since then and it would come as such a disappointment to them."

As for the spangly jumpsuits, Ulvaeus said: "I haven't squeezed into them for years. I still had a couple of them in the wardrobe and would get into them on a Saturday evening -- but not any more. They are in a museum now."

Tuesday marked another ABBA milestone -- the musical "Mamma Mia," which is based on their hit songs, celebrated five years playing to packed houses in London.

ABBA songs may be staple fare in karaoke bars around the world but songwriter Ulvaeus would need prompting.

"I cannot remember a whole lyric of any that I have written," he confessed.

"I am translating them into Swedish now for the first time because we are doing a production in Sweden at the beginning of next year. I find that I don't know them by heart -- not one of them."

ABBA once ranked alongside Volvo as Sweden's most famous export. The "Mamma Mia" show could prove even more profitable than the 350 million ABBA albums sold around the world.

"It's possible," Ulvaeus said." "'Mamma Mia' is going to run for a longer time than ABBA did. So who knows? We will see."

With 11 productions running and six more in the pipeline, it has grossed over $750 million worldwide and has been seen by more than 10 million people.

The musical weaves in ABBA music to tell the story of a single mother living on a Greek island with her daughter, who is getting married.

Reading her mother's diary, she finds any one of her mother's three lovers could be her father. All get invited to the wedding.

Ulvaeus reckoned the timing was perfect.
 
"I think the world perhaps was ready for something happy, a comedy. The big musicals in the '80s and the beginning of the '90s were rather somber - like "Phantom of the Opera" and "Les Miserables" -- wonderful musicals but of a different kind."

Ulvaeus still shakes his head in wonderment.

"I am fiercely proud, amazed and astonished. I thought this would be a little show running for perhaps a year in a small theater in London."

The two couples who made up the group's acronym -- Agnetha, Bjorn, Benny and Anni-Frid -- have long since divorced but all is sweetness and light between them now.

"We do indeed stay in touch," he said. "I met Agnetha last week. We have a grandchild who is 3. We meet much more often these days than we did perhaps 10 years ago."

Disney Film Studio Hopes for Texas-Size 'Alamo'

LOS ANGELES (Reuters) - Walt Disney Co. is hoping its new movie "The Alamo" will put up a good fight at U.S. box offices this Friday after a quarter in which it failed to deliver a hit and lost a lucrative film deal with the makers of "Finding Nemo."

The $98 million "Alamo," a re-telling of 1836's legendary battle in Texas' fight for independence from Mexico, is a huge bet for the studio. Movies have fueled Disney's earnings for the past several quarters with hits like "Nemo," which it co-produced with Pixar Animation Studios Inc.

In January, Pixar walked away from renewing a long-term film deal with Disney that had produced five smash hits with $2.5 billion at box offices globally. Last week, Disney debuted its animated "Home on the Range" to poor ticket sales of $14 million and No. 4 placement at domestic box offices.

"A lot is riding on the Alamo," said Paul Degarabedian, head of movie-tracking service Exhibitor Relations. "This is a movie that they have a lot invested in. They've really been pushing it on the marketing side." The Alamo debuts April 9.

Degarabedian said Disney's box office results so far this year are similar to 2003 except for one crucial bit. Last year, it released comedy sensation "Bringing Down the House" in the first quarter to $132 million in domestic ticket sales.

Disney's six movies this year had brought in $197 million in ticket sales by April 4, while the five films last year had grossed $286 million by the same point, he said. He added that most of the studio's fortunes rested on the summer.

SOME HOT, MOST NOT

In a teleconference with investors last week, Disney's chief executive officer Michael Eisner said the movie studio group "is on fire," but the heat has been lukewarm at best through 2004's first three months.

"Range" cost $80 million to $100 million to produce and may lead Disney to take a financial charge, some analysts said -- although others expect it to gain speed overseas.

Western-style epic "Hidalgo" cost $85 million to $90 million to make, and its box office is only at $60 million.

Disney's top-grosser so far this year is ice hockey movie "Miracle" with a comparatively small $63 million in ticket sales, but it was made on a relatively low budget.

Eisner said last week word-of-mouth and expected reviews for "Alamo" looked good. "I won't oversell it because I don't want to disappoint," he told investors on a conference call.

Studio chief Dick Cook told Reuters at the "Alamo" premiere in San Antonio that "No one movie makes or breaks a studio ... that is crazy."

But a poor performance by "Alamo" would put pressure on Eisner, Schwab SoundView analyst Jordan Rohan said in a research note.

Moreover, poor performance could also nudge the board toward negotiating with Comcast Corp., the cable company eager to buy Disney, Rohan said.

"With or without Eisner, if Comcast takes over Disney at a premium, the stock will go up," Rohan added.

Beyond "Alamo" the bottom line may look less black this year partly because 2003 was so good.
 
"Last year was just a phenomenal year," said David Miller, financial analyst at Sanders Morris Harris.

In 2003 the studio had an internal rate of return on its movies of 25 percent, excluding "Nemo," Miller said, quoting chief financial officer Tom Staggs. This year, Miller expects between 9 percent and 13 percent.

'Simpsons' Stars Strike for More D'oh - Report

LOS ANGELES (Reuters) - The actors who provide the voices for the cartoon characters on the long-running TV show "The Simpsons" have stopped work in a bid to force a settlement of lengthy contract renewal talks, Daily Variety reported in its Thursday edition.

The Hollywood trade paper said the six actors have not shown up for two script readings in the past few weeks, holding up production on the hit satire's upcoming 16th season.

It quoted insiders as saying each cast member is asking for about $360,000 an episode, or $8 million for a 22-episode season. Each member currently earns $125,000 an episode. The highest-paid star in TV is Ray Romano, who reportedly earns between $1.7 million and $2 million per episode of his Emmy-winning series "Everybody Loves Raymond."

The three-year contracts for Dan Castellaneta (Homer), Hank Azaria (Moe, Apu, Comic Book Guy), Harry Shearer (Mr. Burns and others), Yeardley Smith (Lisa), Julie Kavner (Marge) and Nancy Cartwright (Bart) expired several months ago, and their representatives have been negotiating new ones to no avail, Daily Variety said.

The last "Simpsons" work dispute was in 1998, at a time when the actors were making $30,000 per episode. The show's producer, Twentieth Century Fox TV, hired casting directors in five cities to replace most of them before both sides worked out a new deal and resumed production.

"The Simpsons" airs in the United States on the Fox network. Both Fox and Twentieth Century Fox TV are owned by News Corp. Ltd.

TIGERSHACK

Tiger Woods to spoof the movie Caddyshack in an upcoming American Express commercial. The ad will feature Woods battling the movie's gopher, and finally using his American Express card to hire an exterminator.

PUTTING OUT THE FIRE

Johnny Cash's family quashing an ad campaign for hemorrhoid-relief products set to the tune of "Ring of Fire."

Polaroid Warns Film Users Not to 'Shake It'

LONDON (Reuters) - Outkast fans like to "shake it like a Polaroid picture," but the instant camera maker is warning consumers that taking the advice of the hip-hop stars could ruin your snapshots.

Outkast's number one hit "Hey Ya" includes the "shake it" line as a reference to the motion that amateur photographers use to help along the self-developing film.

But in the "answers" section on the Polaroid Web site, the company says that shaking photos, which once helped them to dry, is not necessary since the modern version of Polaroid film dries behind a clear plastic window.

The image "never touches air, so shaking or waving has no effect," the company said on its Web site.

"In fact, shaking or waving can actually damage the image. Rapid movement during development can cause portions of the film to separate prematurely, or can cause 'blobs' in the picture."

A Polaroid spokesman added: "Almost everybody does it, thinking that shaking accelerates the development process, but if you shake it too vigorously you could distort the image. A casual shake typically doesn't affect it."

Polaroid said its film should be laid on a flat surface and shielded from the wind, and that users should avoid bending or twisting their pictures.

Of course, "lay it on a flat surface like a Polaroid picture," doesn't sound nearly as cool.

Bowl Sponsor AOL Seeks Refund

LOS ANGELES (Hollywood Reporter) - The controversial Super Bowl halftime show, in which Janet Jackson bared a breast to the chagrin of the NFL, CBS and show producer MTV, has touched the world's largest Internet service.

America Online has canceled plans to stream on-demand the halftime show that it reportedly paid $7.5 million to sponsor. The Time Warner-owned firm is reportedly seeking a refund for all or some of that money. Although AOL issued a statement distancing itself from what some government officials are calling a crass halftime performance, a representative declined comment on TW's desire for compensation from Viacom.

"While AOL was the sponsor of the Super Bowl halftime show, we did not produce it," the company said. "Like the NFL, we were surprised and disappointed with certain elements of the show. In deference to our membership and fans, AOL and AOL.com will not be presenting the halftime show online as originally planned."

The $7.5 million AOL paid to sponsor the halftime show included several ads for its new TopSpeed service. The sponsorship, therefore, represents a significant discount to the $2.3 million CBS reportedly charged per 30-second Super Bowl ad.

Pixar Ends Disney Talks, Seeks New Partner

LOS ANGELES (Reuters) - Pixar Animation Studios Inc. on Thursday ended talks with Walt Disney Co. to renew a lucrative movie distribution deal that has produced such blockbusters as "Toy Story" and "Finding Nemo."
 
Pixar, the pioneering computer animation house founded by Apple Computer Inc.'s Steve Jobs, said it would look for another studio partner to distribute its films starting in 2006, when its current deal with Disney expires.

Shares of both companies fell 6 percent after hours.

Observers had expected Pixar and Disney to renew their partnership, which has generated five mega-hits since 1995 that have collectively earned $2.5 billion at the box office.

The Pixar deal has accounted for a large share of Disney Studios' operating profit in recent years, but Disney said Pixar's final offer on a renewed contract would have cost it hundreds of millions of dollars.

The move was an unexpected blow to Disney, which pioneered feature animation with 1937's "Snow White" but has seen its traditional hand-drawn films like the 2002 flop "Treasure Planet" eclipsed by Pixar-style computer-animated hits.

Chief Executive Michael Eisner is also under fire from an heir of founder Walt Disney, Roy Disney, who claims Eisner has mismanaged the company and sapped its creative energy.

Analysts and investors said Pixar could be using its announcement as a negotiating tactic and some observers did not rule out a resumption of talks.

PIXAR 'MOVING ON"

"After 10 months of trying to strike a deal with Disney, we're moving on," said Jobs, Pixar's chief executive.

"We've had a great run together -- one of the most successful in Hollywood history -- and it's a shame that Disney won't be participating in Pixar's future successes."

Disney Chief Executive Michael Eisner issued a statement wishing Pixar success.

"Disney management could not accept Pixar's final offer because it would have cost Disney hundreds of millions of dollars... under the existing agreement" without giving Disney enough return on new collaborations, the company said.

A source close to Disney's side of negotiations said that Pixar had also wanted copyright to the valuable library of previous films by the partnership.

Disney now owns the copyright and can make sequels and other works based on the films in the current deal, which includes two upcoming titles -- "The Incredibles," set for a November release and "Cars," due in 2005.

Pixar had been expected to close a deal by the middle of this year and had said it would prefer to renew with Disney.

Roy Disney, the former chairman of Disney's animation department, said that the breakup would be bad for Disney shareholders long-term and accused Eisner of failing to nurture the relationship with Pixar.
 
"It makes it look like Eisner did something wrong again, but we shouldn't jump to conclusions. This could be a negotiating tactic by Pixar as well," said Patrick McKeigue, an analyst at Independence Investment, which holds Disney shares.

"It's not a happy thing when two long-time partners break apart and Disney, of course, will survive. However, psychologically, the market was hoping there would be an agreement shortly," said Hal Vogel, a New York-based media analyst who runs Vogel Capital Management.

Other studios that have expressed an interest in a Pixar deal included Warner Bros., a unit of Time Warner Inc., Sony Corp., 20th Century Fox, a unit of Fox Entertainment Group Inc. and Metro-Goldwyn Mayer.

Banc of America Securities analyst Michael Savner said Pixar had set itself up to compete at the box office with Disney's future family-friendly offerings.

"Disney could put out its movies at the same time as Pixar," he said. Many investors had already assumed Pixar would get a much-improved deal, including on the two pictures in production, he added.

Staffing at Disney's animation department has shrunk by more than 70 percent since 1997. Disney is set to release its first in-house computer-animated film, "Chicken Little," in 2005.

McGuinty defends spending $1 million to bring U.S. talk show to Toronto

TORONTO (CP) - Spending $1 million to bring NBC's Late Night with Conan O'Brien show to Toronto for one week is a "great investment," says Ontario Premier Dalton McGuinty.

"Given the media coverage that we're going to get and the viewing audience, given the fact they're going to provide some great exposure to some Canadian talent, I think it's a great investment," McGuinty told reporters Thursday.

The federal and Ontario governments each kicked in $500,000 to relocate the cast and crew of the popular talk show to Toronto for the week of Feb. 10.

The provincial money is coming from a special fund to help the city's tourism industry recover from the impact of last year's deadly SARS outbreak.

"This city has gone through one heck of a year," said McGuinty, referring to the devastating impact on tourism from SARS, mad cow, a higher dollar and even the Iraq war.

An official of the Canadian Taxpayers' Federation had criticized the use of taxpayers' money to pay some of the costs to relocate the NBC show to Toronto, rhetorically asking if the governments would want O'Brien to go out west next to help with the mad cow crisis.

Ontario's Tourism Ministry expects the expenditure will help boost tourist visits to Toronto because of the five hours of American TV network exposure for the city.

"There's going to be 20 million U.S. viewers there, and we look at that as a pretty good investment," said ministry spokesman Jim McPeak.

DISC-ORD AHEAD

(Variety) HOLLYWOOD --- Writers and studios are on a collision course over the red-hot DVD market.

The Writers Guild of America, responding to rising ire among members over their slim slice of the revenue pie, has elevated DVD to its top issue as it heads into bargaining.

That move is going to hit a rock-solid wall of studio resistance, and that impasse undoubtedly will complicate already complex labor negotiations.

Should the issue spiral out of control as writers become angry over the studios' perceived intransigence, a strike would become a possibility. The WGA struck three times during the 1980s and nearly went on strike three years ago.

Despite that threat, budging even a millimeter on DVDs is out of the question for studios.

Here's what they'll argue:

Moviemaking costs have continued to escalate sharply, with the MPAA estimating in March that the average price of a major studio film had risen to nearly $90 million. Negative costs for 2002 films rose by almost 25% to an average $58.8 million and marketing expenses dipped 1.25% to $30.6 million.

DVDs aren't ancillary income; they essentially keep studios afloat. Only one in 10 features recoups its costs from domestic box office; only four in 10 recoup after all revenues come in --- foreign B.O., TV and DVD.

The future profitability of DVDs could vanish, given the already massive pirating of the discs. The MPAA is already claiming the losses amount to $3.5 billion annually.

If the WGA's contract is adjusted upward, the studios probably will have to adjust the DGA and SAG contracts as well, meaning even higher costs for them.

The looming battle comes at a time of sizzling DVD sales for titles such "Finding Nemo," "Pirates of the Caribbean: Curse of the Black Pearl" and "Seabiscuit" during this Christmas season. Those results have fanned the fires of discontent among the scribes.

The writers are stuck with uncommonly small residuals amid the current DVD bonanza because the payout is based on a formula unchanged since it was set in 1985.

With WGA member earnings remaining flat or increasing only marginally for the past five years, writers are clearly in no mood for the studios' likely poor-mouthing about how agreeing to the guild demands will bankrupt Hollywood.

Here are the key points in the WGA's argument as it heads toward negotiations:

These are boom times in worldwide box office and TV advertising.

Those gains pale in comparison with the DVD sales, which rose from $11 billion last year to $15 billion this year --- an "astronomical" revenue stream, according to WGA East president Herb Sargent. The WGA estimates writers earned $18 million out of last year's $11 billion in DVD revenues.

The 1985 formula, tilted toward studios to help the fledgling videocassette technology, doesn't reflect changing showbiz economics in the years since then.
 
The economics of DVD are enormously attractive. Wall Street analyst Jessica Reif Cohen of Merrill Lynch has estimated the 2002 profit margins for DVD at 66%, compared with 45% for videocassettes; average wholesale unit price is $16 with $2.75 for marketing, $1 for duplication, 90¢ for packaging and 80¢ for distribution, leading to a $10.55 gross profit per unit. A hit selling 11 million DVDs equals a $121 million profit.

Under the WGA's contract, which expires May 2, about a nickel per DVD sold goes to the credited writers. The rate --- set at 0.3% of wholesale revenues on the first $5 million, then 0.36% after that --- has been in place since 1985, even though the standard WGA residual rate is four times higher, or 1.2% of revenues.

For a moderately successful film selling 1 million DVDs and generating $15 million in wholesale revenues, the credited writers would split a payout of around $50,000 --- pretty tiny compared with the $10 million in profit the studio will see.

Even more aggravating to the WGA is how the revenues are calculated under this particular formula.

Unlike its other residual agreements, video/DVD revenues are based on producers' gross receipts rather than distributors' gross. The producer figure can be significantly less at major studios, since distributor costs can be subtracted.

"The residual formula for homevideo in the guild agreement is one of the worst formulae we have," said Charles Slocum, assistant exec director at the WGA West.

The guild pushed hard on the video/DVD issue in the 2001 negotiations, asserting the 1985 costs of videocassette manufacturing were $14 per unit, but had dropped to $3 per unit with DVD manufacturing costs at $2 per unit.

The WGA asked first for a 100% hike, scaled that back to 25% after the first month of talks and then settled for no hike with a one-time $5,000 fee for the right to include the movie script on the DVD.

The WGA's major gains in 2001 came from hiking residuals for foreign TV, the Fox net and pay TV. The potential strike threat was taken seriously enough that studios spent several months speeding up production to create a stockpile; negotiations went three days after expiration before a deal was hammered out.

Currently, no talks are scheduled, but the future looks rocky and the May 2 contract expiration is only four months away.

The WGA began polling its members last week on a 25-point "pattern of demands," which highlighted DVD and gave special notice to healthcare and jurisdiction over reality TV and animation.

And in a notable change from 2001, the WGA isn't demanding elimination of "A film by" credit, which provoked anger from the Directors Guild and proved to be something of a PR headache three years ago.

One of the 25 points simply asks that the Alliance of Motion Picture & Television Producers address "usage and validity of credits in film and TV, with special attention to the 'A film by' credit."

The WGA will release the voting results Jan. 14, then craft its opening proposal to the AMPTP, the negotiating arm for studios and nets.

But during the past year, fuild leaders have stressed that members want a change in the DVD formula more than any other issue, since that area is clearly where the major revenue growth is occurring.

"What is clear to everyone --- writers and employees alike --- is that we are negotiating in an exceedingly prosperous new atmosphere," Sargent and WGA West president Victoria Riskin wrote in the "pattern of demands" letter.

"What is also clear to us is that writers did not participate in this bonanza and, in spite of these boom times, were even forced into widespread rollbacks in important areas."

Those comments went over like a lead balloon.

AMPTP prexy Nick Counter, chief negotiator for the studios and nets, immediately blasted the demands as "excessive" and "a disaster waiting to happen."

Both sides are likely just warming up.

Before negotiations started in early 2001, studio execs accused the WGA of seeking increases that would add $2.4 billion over three years in entertainment union costs; the WGA called that number "hyperinflated" and said the three-year costs for writers, directors and actors would be $725 million.

Back in 1985, no one could have expected the shiny DVD discs would be the rage of the 2003 holiday season.

When the WGA learned in 1984 that 80% of videocassette revenue was being excluded by studios, it filed an arbitration suit, and that trial was going on when its negotiations with the AMPTP on a new contract fell apart.

The WGA, which had struck for 13 weeks in 1981 and delayed the start of the fall TV season, struck for two weeks in 1985, with the key issue being video residuals.

Under pressure from members who feared a repeat of the long '81 strike, the WGA agreed to accept the same formula that had been worked out the year before by the DGA, which allowed studios to exclude 80% of revenues in order to give those studios a chance to recoup their investment.

In 1988, the WGA struck for five months, again delaying the start of the fall TV season. The stoppage had a profound impact on Hollywood as writers lost hundreds of millions of dollars and the Big Three nets never recovered all of the audience share lost to cable and local TV.

Partly because of those three strikes, the WGA carries a reputation for being the most assertive Hollywood union.

And though it has not struck since then, it came close in 2001.

HMV asks Competition Bureau to review Rolling Stones deal with Best Buy

TORONTO (CP) - The fight over rights to sell a new four-disc Rolling Stones DVD has been sent to the Competition Bureau of Canada.
 
Retailer HMV Canada made a formal application to the independent body asking it to review the Four Flicks DVD retail exclusivity deal the Stones made with Best Buy and its Future Shop subsidiary. The company took the step after trying to convince TGA Entertainment, the Stones' management company, to make the DVD available, said Humphrey Kadaner, president of HMV Canada Inc. TGA never responded to the formal request, he said.

"There's the risk that this could become a common practice and make the playing field unlevel," Kadaner said. "At the end of the day all we're asking is for artists, especially major artists, to make their product available to everybody, not just HMV, and let the consumer decide."

The application, filed Wednesday, claims the exclusivity deal breaches Competition Act regulations over denial of access to supply of product as well as a reduction in competition at the retail level. It also argues that exclusive deals are objectionable to other retailers and most harmful to music speciality retailers.

The Ottawa-based Competition Bureau evaluates every application received to see if any laws have been violated, said Madeleine Dussault, assistant deputy commissioner. If the bureau suspect a law's been broken, the case will be brought to a tribunal. The process can take about a year.

"Any industry representative can come to the bureau and raise concerns with us," she said. "There's a provision that says that under certain conditions exclusivity could be the subject of review . . . but just the fact that it's an exclusive agreement may or may not be anti-competitive."

The Competition Act is over 100 years old. The exclusivity provisions have been around since 1978.

HMV, Music World and Sunrise Records pulled everything by the Rolling Stones from stores shelves on Oct. 28. The Stones responded saying the deal was made with Best Buy because that chain offered the cheapest sale price for the set. It retails for $39.99 at the 16 Best Buy and 107 Future Shop stores across Canada.

"We have always believed in having the widest range of products available to our customers," said Kadaner. "When we saw this exclusive deal we vehemently objected to it and hence pulled all the product from the stores to reinforce how strongly we felt about this."

Kadaner said the company has yet to hear any fallout about pulling all the Stones' material.

"The feedback at store level has been outstanding," he said. "Canadian consumers don't like to be told where to buy their product."

The Four Flicks DVD is a unique collection of concert footage and backstage antics.

One disc is a documentary which takes viewers from the very beginning stages of organizing the world tour to opening night in Boston. Canadian fans will particularly enjoy the footage from Toronto rehearsals and from the surprise gig the band performed at Palais Royale. There's also intimate footage of the band members with their children and spouses as well as a glimpse of Mick Jagger's workout schedule and dance rehearsals.

The 2002-03 Licks tour played three types of shows: stadiums, arenas and theatres. Each type is showcased on a separate DVD - from New York City's Madison Square Gardens, London's Twickenham Stadium and Paris's Olympia Theatre - providing fans with a wide range of songs from the band's career. There's also a five minute mini-documentary of the Toronto Rocks concert which the Stones' headlined to help the city shed its SARS-tarnished image.

Hayek Gets Her Coke and Drinks it Too

LOS ANGELES (Zap2it.com) -- Following in the footsteps of another Latin beauty, Penelope Cruz, actress Salma Hayek is lending her talents to the Coca-Cola Co's. new ad campaign.

Directed by big-screen director Bryan Singer ("The Usual Suspects," "X-Men"), the new advertising spot, "Hollywood Restaurant," was produced in both English and Spanish and will run on national general market and Spanish-language television.

"As someone who is known to be true to herself and her roots, Salma Hayek personifies the spirit of the Coca-Cola Real campaign idea," said Esther Lee, chief creative officer of Coca-Cola North America. "This spot is also reflective of Salma's cross-cultural life as an actress who has made it in Hollywood and, at heart, a Hispanic who embraces the traditions of her Mexican homeland."

Shot on location at the trendy West Hollywood restaurant Koi, Hayek sneaks away from a dinner meeting to the kitchen, where she orders a taco and a Coca-Cola while laughing with the chef and wait staff.

Warner, BMG Close in on Merger - Sources

LONDON (Reuters) - Warner Music and BMG, home to pop diva Madonna and queen of soul Aretha Franklin, have entered the home stretch in talks over a joint venture and could wrap up a deal next month, sources familiar with the negotiations said.

In a deal that would create the world's second biggest music company, the industry heavyweights are still negotiating the nuts and bolts of combining their recorded music empires but are getting closer to an agreement, the sources said.

"If there is a deal, it will be done by the end of September, but it could be sooner than that," said one source.

"The two sides are working hard to finalize key issues such as valuation right now, but progress is being made."

Warner Music and its U.S. parent AOL Time Warner and BMG and its privately owned German parent Bertelsmann all declined to comment.

With rampant piracy tearing into global music sales, Warner Music and BMG see a tie-up as their best bet for beating the industry blues by offering the prospect of cost savings of $250-$300 million between them each year, the sources said.

Warner and BMG, which rank as the world's fourth and fifth biggest music companies respectively, see eye-to-eye on the broad structure of a deal that would take the shape of a 50-50 joint venture of their recorded music arms, one source said.

But the two sides are still hammering out the details of a deal, which could see one of them put up some money or additional assets to reach a 50-50 split, the source said.

"Size is one issue, but profitability is another, and we have to evaluate both as well as cash flow. The difference is not very big though," the source said.

Last year, Warner had revenue of $4.2 billion while BMG racked up $2.7 billion. Those figures include music publishing and Warner's CD/DVD manufacturing business, which would not be part of the venture. Analysts estimate a joint venture could be worth somewhere in the low single-digit billions of dollars.

UP AGAINST THE REGULATORS

Regulators could present the biggest obstacle to a deal.

Two previous deals hit the rocks -- one between EMI GroupPlc and Warner, and another between EMI and BMG -- two years ago after anti-trust authorities made clear they would not accept the world's five big music companies shrinking to four.

Warner and BMG are optimistic a joint venture of just their recorded music companies, excluding music publishing, would have a better chance of success. But they are prepared for regulatory investigations to last a good eight months, one source said.

"People say we have a good chance of getting permission. We might have to make some divestments in some markets if the market share is too high, but it's easier doing a deal that just involves recorded music," said one source.

The two sides see industry giant Universal Music as their prototype. Universal Music, part of Vivendi Universal, has dominated the global music scene since its merger with Polygram in the late 1990s, boasting a market share in 2002 of 24.5 percent and artists ranging from U2 to Eminem.

Warner Music and BMG would have a combined global market share just less than Universal Music's but would leapfrog current number two, Sony Music.

The two companies would bring together Warner Music's artists REM, the Red Hot Chili Peppers and Alanis Morissette with BMG's Avril Lavigne, Carlos Santana and Barry Manilow.

Talks between the companies gathered pace after Warner Music agreed to sell its CD/DVD manufacturing business last month.

But who takes what management roles is another issue yet to be finalized. Both Warner Music Chief Executive Roger Ames and BMG CEO Rolf Schmidt-Holtz are expected to take top roles.

"Clear leadership is key for this to work. But the management of both companies want this deal," said one source.