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Paramount Pictures’s COO Frederick Huntsberry (CGS’82/SMG’84) talks about the business of Hollywood, from picking movies to leading large organizations

Earlier in the year, Frederick Huntsberry (CGS’82/SMG’84), COO of Paramount Pictures, spoke with John DiCocco, editor of the School of Management’s alumni magazine Builders & Leaders, on the Paramount lot, the last surviving studio actually situated in Hollywood.

Huntsberry was born in the United States, but moved to Germany with his mother when he was seven. After being raised and schooled in Germany and Switzerland, he entered Boston University, and upon graduation, went straight GE’s financial management program.

 

So how did you end up in Hollywood?   

Frederick Huntsberry: I spent twelve great years at GE. I learned a lot, and I made great friends. That being said, my wife and I had relocated six times during this period and there came a point when we decided that it was important to settle somewhere, and to invest in a life outside of work. Funny that it was at that time that I received a call from a friend who was working for Universal Studios. He asked me if I was interested in interviewing for a business development position with Universal Studios’ pay TV division in Los Angeles. The timing was opportune. Six months later, we moved to Los Angeles.

 

And ironically, seven years later, GE acquired Universal Studios and merged it with NBC to form NBC Universal. So there I was, once again sitting across from my GE friends and colleagues!

 

Your responsibilities included. . .?         

I held a series of financial management positions, first in television and later in film, where I was CFO for Universal Pictures. In 2001 Vivendi acquired Seagram which owned Universal Studios. The business underwent a series of structural changes which ultimately gave me the opportunity to become CFO of Vivendi Universal Entertainment, the parent company for Universal’s film, television and theme park businesses. As I alluded to earlier, GE acquired Vivendi Universal Entertainment in 2004 and merged it with NBC. For the next two years I had the opportunity to work for Jeff Zucker as his CFO and later as his head of television distribution. One of the highlights of my career was being responsible for NBC Universal’s syndication business, which included Access Hollywood, the Jerry Springer Show, and Maury Povich. Prior to leaving NBC Universal I had shifted my focus to building out NBC Universal’s international activities. In total I spent almost ten years at Universal before joining Paramount. Looking back I was very fortunate to have worked for so many great leaders in the business. This, combined with my years at GE, made it possible for me to become COO for Paramount, where I now work for Brad Grey. Jobs like this rarely come along in Hollywood. I’m very grateful.

 

Now that you’re in this job, what did you wish someone had told you before you walked in the door?

There’s almost nothing on this job that I’ve been unprepared for, and I think that’s why it’s been such a great fit for me. Again, I think it’s the combination of the multi-business experience that I acquired through GE, plus the ten years of industry experience while at Universal, that allowed me to step into this role. Now ask me again in twelve months.

 

Maybe I should describe my job. There are essentially three pieces to Paramount. One is the creative and production area, where we develop and produce films. The second is worldwide distribution and marketing of our content. And the third piece is what I call “support,” the engine that ensures that all the other pieces can operate effectively on a day-to-day basis. That includes finance, IT, HR, legal, business development, industrial relations, strategic sourcing, and the Paramount lot. My job is to ensure that my colleagues in production, sales, and marketing have the tools, the capital, and the organizations to accomplish their goals.

 

Tell me more about the business development part. Are you talking about acquisitions?

Not necessarily acquisitions. In order to understand the importance of business development at Paramount you need to understand what we [Paramount] are today and thus where we need to go from here. Viacom, which has owned Paramount since the 1990s, was split into two separate companies, CBS and Viacom, at the end of 2005. Paramount remained with Viacom, but as a result of the split, its portfolio of assets was trimmed, including Paramount’s television business, which was transferred to CBS. There are important synergies between the production and distribution of television and film content which require us — and you can argue CBS in the case of film — to find ways of how to reenter the television production business. In addition, Paramount is in the business of creating, producing, and marketing of content, regardless if it’s long or short format. It’s natural for an entertainment company to be in more than just film, because you have the ability to leverage talent, franchises, and resources across all these entertainment platforms. Thus business development for Paramount entails designing a road map as to how we enter some of these other businesses in a smart and capital-effective way.

 

What’s first?

The logical extension of our business would be television production. But there the question is how to enter the business? The network business is extremely capital- intensive and risky. An alternative for us is perhaps to produce for other outlets, such as cable. We’ll evaluate our options in the context of the capital needs of the film business.

 

Do you feel you’re behind the competition?

I’d say we’re in a rather unique position. Most other studios are wrestling with how to grow earnings in a mature DVD marketplace, given their broad portfolio of entertainment assets. Paramount on the other hand has the luxury of analyzing which businesses to invest in. We are also able to learn from what others have done before us. So, ironically, coming from behind provides us with growth opportunities. It was the combination of the management team led by Brad Grey and the ability as COO to shape the future of Paramount which attracted me here.

 

How do you do business where every product is one of a kind, you only make ten to fifteen items per year, you have no test marketing of your customer, and each one requires $50 to $200 million dollars upfront investment. How do you, the finance person, maintain your sanity? How does that work?

We actually produce and/or distribute more than twenty-five films per year. It is without question a business that one has to grow up in and first learn from the bottom up, before you can be given responsibility to manage these kinds of portfolios. There is only a relatively small pool of experienced labor in this industry that really has the qualifications to make these kind of crucial decisions. At the same time, all studios draw from the same pool. Therefore, it’s important to create a work environment conducive to creativity, that people enjoy working in. There’s a direct correlation between the morale of the people and the creativity and success of the films. Contrary to manufacturing, where irrespective of whose running the plant or the sales force, you can more easily replace an individual without necessarily disturbing the continued profitability of the business. In the entertainment industry, key management changes often have a significant impact on the future profitability of the business. That being said, you need to marry experience with good processes. There are processes that you can introduce to help manage risk, for example, a rigorous green-light process.   

     

The approval-of-the-film-concept?        

Correct. A process that, in addition to production, seeks the input from marketing and sales at the time of conception. And yet, still there’s a lot of uncertainty. Yes, but you can greatly improve your odds this way, and there are additional means.     

    

How so?    

For example, by looking at comparables: meaning the actual box office performance of movies of comparable genre, or films produced or directed by the same talent. This information, combined with the knowledge of sales and marketing, can help you triangulate the approximate performance of a film’s ultimate profitability.

 

Is it my imagination, or are films going to DVD a lot faster now than they did, say, two years ago or a year ago?

Absolutely. The trend is that windows will continue to decrease, but we may also see new windows emerge. That means the time frame during which a market, such as theatrical exhibition, DVD, or pay and free TV, has exclusive rights to the product. And those windows have, over the last ten years, changed significantly. For example, studios discovered quickly that consumers embraced ownership of DVDs rather than renting. This created an incentive for the studios to bring product to market at a faster rate than compared to the traditional VHS rental model, thereby leveraging the franchise awareness with consumers from the theatrical release. I do think, though, we’re at a point where I don’t see the theatrical window decreasing further so soon. The window has shrunk from the traditional six months to about four and a half months. I think it’s going to take another revolution in technology or consumer behavior before that happens again.       

 

How do you determine how to release a new film — big splash or art house, or what other criteria?

Choosing the right date, or the number of screens that a film will open on, can make the difference between a loss or profit. Some of the variables that go into this decision include competition, holidays, school vacations, whether the film is a big franchise picture such as Transformers or an art house film such as Babel. There are movies that will we will open on a nationwide network TV ad campaign and others on a word-of-mouth basis.

 

Are there tough conflict points between the creative side and the management side?

That, I think, is a direct function of the ability of finance to demonstrate an appreciation of the creative business, and how to influence the creative process in a constructive way. That’s something I had to learn when I came out here. Finance was traditionally relegated to an accounting function. But in the last ten years, the studios have brought aboard a different breed, a different skill set of finance managers — people with a passion for the business, and an appreciation for the dynamics of the decision-making process.

 

To make a film is an incredibly complicated undertaking. If there’s anything I’ve learned here in these ten years, it is that the lobbying that needs to occur to motivate a group of high-powered individuals, all with different opinions, to align them in one way, to agree on one script, on one budget, on one timeline, is an incredible undertaking.

 

And for a finance person to show up after all that work has taken place, and to “criticize the numbers,” so to speak, is career damaging. So the challenge is to give early guidance that can be useful to the creative department. Supporting and participating in the green-light process is one way to do that. By giving creative a sense for the economic proposition early enough that they can influence the stake holders. That is a tremendous value-added.      

 

How do you choose the next piece of work?  

You have to have a controlled process for ideas or scripts to come to the studio, for efficiency and for legal reasons. Imagine what size of organization you would need if anyone in the world was able to send their script to Paramount and we actually reviewed and commented on each one. In addition, because we are in the business of developing intellectual property, we have to ensure that we have the legal right to own a property. The studios, therefore, have a policy of not accepting unsolicited ideas or scripts. Ideas and scripts are generally funneled to the studios via agencies and what we call “term deals.” Term deals are exclusive arrangements with producers or directors who will provide the studio with a first look right for their projects. And of course, we look for a diversity among the projects.

 

How would you describe your own personal management style?       

I’m today a different person than I was when I graduated. Back then it was about delivering results, come hell or high water. It was a little bit of a bull-in-a-china-shop mentality. But the more you grow in management, I think the more sensitive you have to become about how you motivate an organization. So today, I’m the product of half of my experience over the twenty years, and half looking to certain role models that I’ve worked for in the past. Today I’m still goal oriented, but I have a sense of how to calibrate and drive the resources that it takes to achieve that goal. I also believe very much in empowerment, and recognizing and rewarding talent. I also believe in continuous feedback, and I believe in quick and effective communication. And that means answering telephone and e-mails within a few hours, and tackling difficult issues immediately. Because the more you sit on them, the more difficult they become to tackle. That’s not to say that I can’t still improve. There’s still plenty of room to improve, trust me. The job that I have today does not allow me to operate in the detail unless there’s a specific requirement here and there. There’s just too much to do. So it’s very much about finding the best talent to operate inside these organizations and to set goals and expectations, and provide feedback and empower this team.

 

In evaluating new personnel, what do you look for?        

I have a template that I use to evaluate both new and existing employees. I break it down into technical skills, leadership skills, and interpersonal skills. I look for a balance in all of those areas.

 

How do you differentiate between leadership and interpersonal skills?

An interpersonal skill, for example, is the ability to provide great stewardship over the firm’s assets. It includes a high standard of ethics and loyalty. It is someone who gets along well with other people, is pleasant to people and treats staff well, and recognizes staff for good work. You can also argue that those are leadership skills. On the leadership side, I’d say my emphasis is on being results-oriented, being a change agent. I’m not asking for people to change things all the time. It’s more about finding the right opportunities and then understanding how to build a plan, and socializing that plan, and being able to implement it.

 

This article was originally published in the spring 2007 issue of Builders & Leaders.