LOS ANGELES — The historic MGM film studio, which made The Wizard of Oz and Singin' in the Rain on one of Hollywood's largest lots and for decades boasted that it employed "more stars than there are in heaven," is today housed on six floors of a nondescript Beverly Hills, Calif., office building.
Sent into bankruptcy last year after decades of dysfunction, the former home of Louis B. Mayer and Leo the Lion is now led by two low-key executives who have transformed the 87-year-old studio into, essentially, an international TV rights company servicing MGM's library of 4,100 movies.
Under chief executives Gary Barber and Roger Birnbaum, who celebrate their first anniversary on the job this month, MGM no longer releases or markets its own movies. The company's nascent film production business, which was kicked off this month with The Girl With the Dragon Tattoo, consists entirely of films on which other studios put in half or more of the money and are doing most of the heavy lifting, including an upcoming James Bond film and a pair of Hobbit movies directed by Peter Jackson. Its small internal development slate is mostly remakes of old MGM movies such as RoboCop and Death Wish.
To some, it's a tale of lost luster in corporate Hollywood. But others see it as the strategy that MGM has long needed.
"The strategy of focusing on international television rights is exactly what anyone running MGM should be doing, because it's the greatest source of revenue left in the library," said Harry Sloan, the studio's chief executive from 2005 to 2009.
Since the 1980s, bad management, ownership shuffles and crushing debt have left MGM a second-rate studio in the industry it once ruled. By last year, unable to make interest payments on $5 billion in bonds, it came under the control of a group of investment firms with little or no experience in entertainment.
Believing that purchase offers of up to $1.5 billion were too low — bidders included Time Warner Inc. — the debt owners recruited Barber and Birnbaum to take a stab.
Barber and Birnbaum are known as savvy dealmakers. Barber is an accountant from South Africa with extensive knowledge of the international entertainment business. Birnbaum moved from the recording business into film production, with stints at Fox, United Artists and Caravan.
The two industry veterans founded Spyglass Entertainment in 1998 primarily to invest in other studios' movies. One of their first was The Sixth Sense, director M. Night Shyamalan's hit 1999 thriller that the pair bought from a nervous Walt Disney Studios. In the next 12 years, Spyglass invested in more than 50 movies, including Memoirs of a Geisha, Seabiscuit and Star Trek.
During Chapter 11 reorganization last year, MGM's debt was eliminated and replaced with a $500 million credit facility. Barber and Birnbaum slashed the staff to fewer than 300 from more than 400 while bringing over about 25 employees from their prior venture, leading some to say the new MGM could also be called "Spyglass 2.0."
Before bankruptcy, the cash flow from MGM's library had declined by nearly half over a three-year period to about $250 million annually as the DVD market weakened, according to a person familiar with the numbers but not authorized to disclose them. But a growing percentage of revenue came from foreign TV sales and MGM-owned networks in countries including India and Italy.
And getting foreign distributors interested in MGM's collection of movies is a lot easier, experts note, when you can open the door with the newest James Bond or Hobbit film.