Star Tribune from Minneapolis, Minnesota • Page 61

Star Tribune Industrials Up 32.42 to Sunday December 21990 last wmk 1WW WW Vvffl 1D Classified Advertising Sections Inside MCA sale overcame ego, culfcre clashes Personal finance Dow Jones II Some tips By Michael Cieply and Alan Citron Los Angeles Times Hollywood, Calif. For Lew R. Wasserman, the selling of MCA Inc. began with a phone call at home on Labor Day weekend. The caller was Michael S.

Ovitz, a 43-year-old talent agent with whom Wasserman had sometimes fought but whom many in Hollywood found to be cut from Wasserman's own mold: aggressive, hard and wildly ambitious. Ovitz suggested that he might have a buyer for MCA, the $4 billion-a-year entertainment conglomerate at which Wasserman, 77, had spent 54 years. Matsushita Electric Industrial a corporate behemoth based in Osaka, Japan, was interested. Wasserman said that he wasn't espe cially eager to peddle MCA, though close associates confirm what had become well-known in the business world that the aging mogul had been angling for some sort of rate alliance for at least five years. The two agreed to talk.

And so, with understatement and polite fictions, began a colossal poker game that ended three months later in a $6.59 billion deal, the largest purchase ever of an American company by a Japanese company. It promises to change the face of the entertainment industry as new investment fuels a likely wave of acquisitions by MCA, but it also puts ultimate control of that growing pyramid of assets in faraway Osaka. MCA produces music, movies and TV shows. Matsushita, approaching $50 billion in sales, makes, among other things, the equipment on which sell clients or command a premium price for his next film package. According to the rumors, Ovitz had grown restless with his role as a talent agent an exhausting profession, in which even the most powerful practitioner ultimately must answer to every client on his Rolodex and had begun to see himself as something more.

Some intimates believed that Ovitz, a Japanophile who had helped to match Sony with Columbia the year before, meant to recast himself as nothing less than a broker of whole companies a kind of investment banker to the stars. Others believed that he was gunning for Wasserman's job and, with it, the mantle of industry leadership. In fact, Matsushita was searching for an entertainment acquisition and MCA continued on page 3D people use much of what MCA manufactures. That two such companies should merge, just as Sony acquired Columbia Pictures last year, may only be natural. But the process of joining them had to bridge the wildly disparate cultures of Wall Street, Hollywood and industrial Japan and it will almost certainly be studied for years to come as a textbook illustration of the dealmaker's art.

If Wasserman wasn't aware that Ovitz had leveled his sights on MCA, it could only be because he had long tuned out of the breakfast and lunch-time table talk by which Hollywood keeps in touch with itself. For six months or more, the gossip circuit had been dimly aware that Ovitz, chairman of the powerful Creative Artists Agency, had developed an interest in the Hollywood company that went far beyond a desire to Lew R. Wasserman Electronic-game whiz deals in used fun to cushion the blow of a job layoff By Bill Sing Los Angeles Times In these harder economic times, more people are facing what may be their worst job-related nightmare: getting laid off. If that's a possibility for you or you're already a pink-slip victim be sure you know what's available to you in the way of out-placement help, severance pay, employee benefits and other assistance. Here are some tips and reminders to help soften the financial blow of a job loss: Bolster your "employability." If you're still working but fear you could be dumped, take steps now to boost your chances of getting hired elsewhere.

Call friends and colleagues about opportunities. Expand your network. Attend conferences and seminars. Update your resume. Also, perform well in your current job.

"If I do the best job, someone's going to give me a good recommen- dation," said Fred Sher, a partner in the Santa Ana, office of Hewitt -Associates, an employee benefits consulting company. Use your employer's job services. Many employers will help laid-off workers find jobs. Some provide job information and counseling. A grow-: ing number offer out-placement help, either in-house or through an outside agency.

Some employers might even ii cr. phones to findjobs. Review your health-plan options. PnmnnniM opnprnllv am rpniiired to allow departing employees wheth-; er laid off or leaving voluntarily to continue health coverage for. 18 months, provided employees pay for it themselves.

Coverage must be of; fered at the company's actual per-person cost, plus 2 percent This can be extremely valuable. You may not get another job right away, and when you do, your new employer's health plan may carry a "preexisting condition" clause that prevents you from getting coverage for certain health problems until a waiting peri od possibly six months to a year. has passed. Paying to keep your former employer's plan also will usually be cheaper than buying a new plan on your own. On the other hand, you may not need to continue your employer's plan if, you are included under your spouse's health plan.

But some employers will offer to continue subsidizing your life and health benefits for as long as you receive severance pay, Sher said. Find out about severance pay. tt i i uuci we lypiuu scvciuntc pamagc, you'll get one week of pay for each year of service, Sher said. In some cases, you may get a minimum of one month of pay, regardless of your leneth of service, he said. Higher-level employees often get more attractive packages as much as a month of pay for each year of mnmns nr a vear ni nav ne sain Most employers require laid-off workers to take severance pay in regular intervals, as with a paycheck! But some may offer the option to take it in a lump sum, Sher said.

You mioht hp Kpttpr riff with this rmtifin if you have the discipline to invest the money right away, instead of spending it all, or if you are worried about your former employer's finan- Layoff continued on page 8D but also was short of development capital. The solution had an agreeable sym- metry to it: Blue Earth sold a loan it had made earlier to Custom Food and received $57,000, which then was reloaned to Custom Food to help finance the expansion. The bottom line: 10 to 1 5 new jobs. Community Reinvestment is the brainchild of Frank Altman, presi- Youngblood continued on page 2D By Dan Wascoe Jr. Staff Writer Since they hit the market a few years ago, Arkanoids, Megaman I and Kid Icarus have discharged demons and high-speed electronic action like many another video game.

But in the fast-changing era of hightech entertainment, they're already golden oldies. Aficionados pay steep prices for such titles up to $99 for Arkanoids because they're out of production and therefore collectors' items. If there's anyone who knows how much each of hundreds of games will fetch, it's David Pomije. He can even tell you the story line behind "A Boy and His Blob" it involves jelly beans or about the legal struggle over Soviet-invented "Tetris." His two-year-old company, called Funco, buys and sells mostly used video games and equipment nationwide. From a low-tech warehouse-office in New Hope, Pomije and his employees place ads in newspapers and video magazines, take phone and mail orders from around the country and overseas, then unpack, sort, repack and ship new and used games, charging markups of 40 to 48 percent.

A year ago Pomije (pronounced PALM-uh-jay) and a few relatives were working out of his basement and struggling to cope with $120,000 in annual sales. This year he estimates Funco will finish with $1.5 million. Next year he's projecting $5 million. From an original staff of four Po-mijes, including his wife Penny, his father Ralph and his uncle Mike, Funco has grown to about 40 employees, including temporary workers at busy times. The company recently opened FuncoLand retail stores in Eden Prairie and Roseville and operates a will-call window at its New Hope headquarters essentially a retail store without display cases.

Funco also sells and leases games to video stores. Clearly, Pomije, 34, plans to ride the used-game bubble for all it's worth, although he's been chastened by the 1988 bankruptcy of his former company, Propechtronics, which sold Commodore computers. He said the company was able to pay its secured creditors, but that unsecured debts went unpaid. One problem, he said, was that a line of imported disk drives had a higher-than-expected defective rate, and a company that was supposed to fix, them went out of business. "I couldn't keep up.

It grew too fast," he said. Sales rose to $10 million in the company's second year, but cash flow and a $200,000 line of credit couldn't meet rising expenses. From the inventory of the bankrupt company, he bought about 1,100 On the other hand, if he wants to stimulate buying demand, he'll lower the price. The buying and selling price are linked for each title. Prices, which start at $4.95, can change every 10 days.

Orders are coded to note which price prevails. Pomije recalled one game called Side Pocket, a video version of pool, that sold new for $29. When the manufacturer stopped making it, Side Pocket's price soared to $99, Pomije said. Then the company re-released some of the games, and the price sank. Now it's back up to $69, he said.

Kid Icarus was issued more than two years ago and last fall sold for about $19, he said. "Then one Monday we got a flood of calls, and within a month we were paying $70" for the title. The reason was a new cartoon featuring Kid Icarus as the hero. "It's analogous to the auto industry," he said. Carmakers "don't go back and remake" yesteryear's models, creating inflated values for highly prized autos.

Besides dealing with the public, Funco buys overstocked titles from manufacturers' licensees, who don't mind selling at a discount, Pomije said. "They use us (as an outlet) so they don't upset the apple cart" with their usual merchants. The hottest title these days is Nintendo's Super Mario III, introduced last spring and selling through Funco at $44.95. By comparison, the original Super Mario is selling for $4.95. Pomije said many popular new games cost more than $40.

Funco also sells $14.95 cleaning kits said to remove oxidation and dust from the games; the company extends the games' warranties from 90 days to a year if buyers order the kits. Except for some games that require batteries, Pomije said the merchandise is relatively trouble-free and should last 25 years. "Our customers perceive no difference" in used games' performance, he said. Dick Crandall, Funco's vice president of sales and marketing, said other companies that sell used games carry greater supplies of par ticular titles, but Funco claims more titles. Funco advertises that it has more than 500 titles, most made by Nintendo's many licensees, but it also carries Sega Genesis titles and Nintendo Gameboy, a growing line of handheld video games.

It also sells new and used game hardware. Pomije said competitors such as Toys 'R' Us sometimes refer customers to Funco if they ask for older games the bigger store doesn't Games continued on page 8D The key: The city peddled five existing loans to Community Reinvestment for the $200,000 it needed to complete the package. Until Bufflao threw in its bid, it appeared that the target company Von Ruden Manufacturing, once a division of Washington Scientific Industries in Long Lake would be heading out of state. Then there was Blue Earth, which wanted to help promote an expansion by one of its major employers, Custom Food Processing, 4 a r9 Staff Photo by Mike Zerby Funco founder David Pomije, with controls an electronic game. Nintendo games he used to start Funco.

This time he is expanding more deliberately through current profits. He's seeking a store location in Apple Valley or Burnsville and dreams of selling 240 franchises nationwide in five years, building customer loyalty through "friendliness, honesty and quick delivery" before competitors move in. Funco is sponsoring Gopher hockey game broadcasts on Minnesota has given the world Wheaties, Scotch tape and the enclosed shopping mall, not to mention taconite tailings and the windchill index. But these contributions to human -progress pale alongside the imagination that went into creating the nonprofit Community Reinvestment Fund, a Minneapolis outfit bent on offsetting the cutbacks in government support for community development imposed by Ronald Reagan and George Bush. Vi i 1 he buys, wore a power glove that operation to computers next year.

"It's taken a year to find the equilibrium point for each individual title" in his inventory, he said. Offer too much for a used game and he's flooded with inventory; set a selling price too low and demand rapidly outstrips supply. "We control inventory levels by what we pay for games, not by what we sell them for," he said. and pension funds. It is a strategy that in its first year has given a dozen Minnesota cities $1.5 million in fresh capital for new projects.

For example, Buffalo, was able to put together a financing package attractive enough to lure a manu-. facturing company and 75 new jobs to town last fall despite the fact that its development funds were fully loaned. some of the posters for the games KITN-TV through Christmas and is planning its own video game magazine a year from now. The company's nerve center in New Hope is a room whose grease-board walls are marked with the names of hundreds of games. Prices and supply symbols next to the names change frequently, making the place look a bit like the trading floor of a primitive commodity exchange.

Pomije plans to convert the ordering The idea is to recycle the private, state and federal money tied up in existing community development loans by making those loans available to private investors. Think of it as the Fannie Mae of community development: Community Reinvestment Fund buys development loans at a discount from local governments or nonprofit groups and pools them into a single fund. Then it sells bonds backed by that loan pool to such institutional investors as banks, insurance companies Innovative fund recycles community development loans Dick Youngblood.