Studio CEO: Imagination key to gaming, movie success

David Strow

Thursday, Oct. 4, 2001 | 9:01 a.m.

Alex Yemenidjian, chairman and chief executive of filmmaking giant Metro-Goldwyn-Mayer Inc., might have seemed to be an odd choice to deliver a keynote address at the Global Gaming Expo in Las Vegas.

Yet Yemenidjian is as familiar with casinos as he is with Hollywood -- until December 1999, he served as president of casino giant MGM Grand Inc. (now known as MGM MIRAGE).

There are differences between the two, Yemenidjian acknowledged. He discovered that quickly while learning to deal with actors and film industry executives.

"In Las Vegas ... slot machines work all the time, they never ask for a raise, and each one isn't represented by a lawyer," he joked.

But in a Wednesday address to hundreds of gaming executives, Yemenidjian argued there's little difference between entertainment industries, be they housed in Hollywood or the Las Vegas Strip.

"There is no difference between gaming and what we consider as traditional entertainment," Yemenidjian said. "It's all about entertainment that engages the customer in a profound way.

"The most valuable commodity in the gaming and entertainment industry will always be the human imagination."

The boundaries between the two industries are blurring and will continue to do so, Yemenidjian said -- each faces similar challenges and similar business trends.

The enemies of Hollywood and Las Vegas are often similar as well.

"Las Vegas and Hollywood are under the unceasing (attack) of the self-proclaimed morality police," Yemenidjian said. "The religious right ... they're often to the right of Archie Bunker, and they oppose anything that's fun. I'm surprised they haven't gone after chocolate yet."

But there's also pressure from what he called the "confused left" -- those that believe it is the government's job to protect citizens from the negative effects of gambling and popular culture.

Yemenidjian acknowledged there are those that have gambling problems. "I often wonder, however, how many of them have a daily drink ... and realize there is a very small portion who drink and drive ... and have serious problems with alcohol," Yemenidjian said.

Would gambling opponents therefore support a ban on alcohol, he asked.

And controlling what content reaches and influences children is the job of parents, not movie studios, he argued.

"The movie industry is the only industry in the nation that voluntarily turns away revenue at the box office," Yemenidjian said, referring to the movie rating system. "Teenagers say the No. 1 sense of anxiety comes from bullies. Where are the parents and the teachers? It doesn't matter ... let's blame the movies."

Another challenge the two industries face is financial. In both industries, the cost of playing has risen dramatically.

"Today, unless you have a billion dollars and a great concept, you just can't play this game (on the Strip)," Yemenidjian said.

But the same is true in Hollywood, he said; expenses are rising at an average of 8 percent a year, while revenues are rising at only 4 percent annually. Only one out of every 10 movies make money, he said.

"It's even worse in Hollywood (than on the Strip)," Yemenidjian said. "The movie business is the only business where you can do everything right and still fail."

Yemenidjian said the same factor is causing this trouble for the two industries: trying to impress a jaded audience that always demands something a little more impressive than what's come before. And that costs more and more money.

"The (casino) customers have seen it all, so what do we get for an encore?" Yemendjian said. "(With films), it had better be something we haven't seen before. We need a new special effect, strategy or gadget that's really cool, something that's never been seen before.

"Today, just telling a good story isn't enough. It must be fresh and different."

Business sense is also starting to fall by the wayside in both Las Vegas and Hollywood, Yemendjian said.

"Too many (casino) properties are being built for the wrong reasons," Yemenidjian said. "Today, we have too many slot machines and too many table games."

New casinos must be so compelling that they create more demand than they can meet, Yemenidjian said. Many new casinos do little to create new demand, he said, and merely throw more supply into an already tough market. That cuts into everyone's profit margins, Yemenidjian said.

"Casinos must be built because they serve a specific market niche or need," he said.

The same applies in the movie industry, Yemenidjian added. Two hundred thirty-three movies were released in 1980; last year, the number was 478.

"That's an average of nine movies each weekend, and the average American sees only five movies a year," he said.

But Hollywood faces the added challenge of irrational competition. He painted the picture of a market where actor costs are escalating out of control, where many executives care as much about making competitors fail as they do about their own success.

He described the experience of giving one actor a $12.5 million advance on a movie -- and then losing $3 million during production because the actor often refused to leave his trailer, simply because he didn't feel like working at the time.

Now that many actors receive a portion of a movie's gross receipts as part of their compensation, "except for the studio, no one really cares whether the movie makes money or not," Yemenidjian said. "Today, after each movie, everyone's a free agent. The inmates have officially taken over the asylum."

To survive and thrive in the future, Yemenidjian said both industries must restore financial discipline, but without destroying the creativity that is essential to both.

"We must strike a balance," Yemenidjian said.

Yemenidjian's company already has ties to casino giant MGM MIRAGE. Both companies have the same controlling shareholder (billionaire Kirk Kerkorian), and the companies have joint venture and marketing ties.

For example, MGM MIRAGE President Jim Murren said, MGM once gave MGM MIRAGE several BMW convertibles used in a James Bond movie to give to its high-rollers. MGM themes are sometimes used in slot machines and parties, Murren said. And there has been thought given to theming part of an MGM MIRAGE casino floor after James Bond, Murren said.

While a direct merger of the companies isn't being contemplated, more opportunities for the companies to work together exist, Murren said.

"We definitely believe our brands (MGM and MGM MIRAGE) are not utilitize to their potential," Murren said. "We feel we have extremely strong brand equity that can be leveraged into more profits."