Marc Shmuger, David Linde out at Universal Pictures

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After a prolonged box-office slump, too many high-cost movies and executive turmoil, Universal Pictures chairmen Marc Shmuger and David Linde have been ousted after their 3 1/2 year run as the studio’s top movie lieutenants.

Rather than recruit an outsider for the top movie job, Universal Studios President Ron Meyer has promoted two insiders to succeed the duo. The studio’s marketing chief, Adam Fogelson, has been named chairman, and production president Donna Langley, co-chairman, reporting to Fogelson.

Meyer is banking on the pair to reverse the studio’s box office slump and end the infighting that’s disrupted the studio’s executive suites for several months.

Shmuger and Linde’s removal is the fourth senior-level shake-up to hit one of Hollywood’s major studios in the last few months, coming on the heels of the abrupt departure of Walt Disney Studios chairman Dick Cook two weeks ago. Earlier this month, Metro-Goldwyn-Mayer Inc. chief executive Harry Sloan was pushed out, and a few weeks earlier Paramount Pictures removed its two top movie executives, John Lesher and Brad Weston.

Such upheaval comes at a particularly treacherous time for the movie industry when studios can no longer rely on once-robust DVD sales to prop up their business, making it increasingly difficult for them to recoup costs on their flops and make healthy returns on their more expensive hits.

The long-rumored management changes at Universal come as the studio’s parent company NBC Universal and owner General Electric are engaged in talks with cable giant Comcast Corp. to sell a 51% controlling stake in the media company. A broader housecleaning at NBC Universal could come down if and when there is a change of ownership. This is the second major upheaval in recent months under the watch of NBC Universal chief executive Jeff Zucker following this summer’s departure of his hand-picked top television executive, Ben Silverman, who left after two tumultuous years

With the dismal box office year that Universal has had — capped by the poor showing of its current release “Love Happens” and this summer’s high-profile disappointments “Land of the Lost,” a costly misfire starring Will Ferrell, Judd Apatow’s “Funny People” starring Adam Sandler, “Public Enemies” with Johnny Depp, and Sacha Baron Cohen’s “Bruno” -- Meyer, Shmuger and Linde have been on the firing line of Zucker and NBC Universal’s owner General Electric

Universal currently ranks last among its rivals in market share so far this year, with just 8.6%, a poor standing also attributable to disappointing returns from such adult dramas as director Ron Howard’s “Frost/Nixon,” “State of Play” starring Russell Crowe, and “Duplicity” with Julia Roberts.

In light of the glaring downturn, the Universal executives were asked by NBC Universal chief executive Jeff Zucker and GE honcho Jeffrey Immelt to explain why their movies weren’t clicking with audiences and costing so much, and what plans they had to get back on course.

Meyer’s ultimate decision to dismiss Shmuger and Linde was months in the making, and had been met with some initial resistance from Zucker, according to several people close to the situation.

Zucker, these people explained, leaned toward giving the pair a chance to change course, especially since they were the same executives who presided over two of Universal’s most profitable years in 2008 and 2007 with such hits as “Mama Mia!,” “The Bourne Ultimatum” and “Knocked Up.” Shmuger and Linde were also each given four-year contract extensions in January, which would mean that GE will be looking at hefty settlements.

But, in recent weeks, the pressure on Meyer to make a change began to mount as some of Universal’s biggest producers, including Marc Platt, Brian Grazer and Scott Stuber, continued to lodge complaints and frustration about a leadership vacuum, the lack of a clear strategy and decision-making that they found untenable.

Shmuger and Linde have also come under fire for the high costs of some of their big event movies, including “Land of The Lost,” which cost some $200 million to make and market and will lose about $70 million, according to people close to the matter. A number of the team’s 2010 releases, among them “Robin Hood,” “The Wolfman” and the Iraq War drama “The Green Zone,” each have production budgets that exceed $100 million.

But, in the end, Shmuger and Linde’s undoing was not limited to their ill-fated movie picks and budget overruns.

Meyer privately told close associates that he would not fire the pair over a bad slate of films, since no studio is immune to the vagaries of the movie business and difficult-to-gauge audience tastes. People close to the studio said Meyer became unhappy with Shmuger and Linde’s inability to sustain a spirit of teamwork and put a stop to the turmoil that has roiled the studio’s executive suites.

In recent months, agents and producers who work with Universal privately voiced complaints that production and marketing executives were openly disparaging one another, assigning blame for movies that didn’t work and taking credit for those that did. Moreover, it was widely known that Langley and Shmuger did not get along.
People said that due to the infighting, Universal devolved into a counterproductive culture — something antithetical to the team-building environment Meyer had always insisted on both as a former partner at Creative Artists Agency and for the past 15 years at Universal.

Some blame Meyer for having put Shmuger and Linde in charge in the first place given their lack of experience at the difficult task of putting a slate of movies together and guiding them through the often arduous process of development, production and editing. Producers complained privately that they were sometimes frustrated by too much indecision at the studio. One filmmaker who declined to be identified said that he was put off by Shmuger’s “unsympathetic” bedside manner when, for example, the executive had to deliver bad news about a movie’s poor test screening.

Both Shmuger and Linde had been quite successful in their former roles at Universal. Shmuger was overseeing marketing and Linde was running Universal’s specialty film label Focus Features when Meyer paired them up in March 2006 to succeed movie chairwoman Stacey Snider when she left to join Steven Spielberg’s DreamWorks.

Initially, Meyer’s strategy to promote from within so he could maintain stability worked. Shmuger and Linde also moved quickly to shore up key relationships with Universal’s biggest movie suppliers Imagine and London-based Working Title Films and in short order helped build Universal’s international distribution organization into a profitable operation after the studio’s longtime partnership in the overseas distributor United International Pictures ended.
By promoting Langley and Fogelson into the jobs, Meyer is once again counting on two of his trusted executives to stabilize the studio and make some hit movies. The British-born Langley, who earlier this month returned from maternity leave, joined Universal in 2001 after seven years with New Line Cinema, where she oversaw and executive produced such films as “Austin Powers: The Spy Who Shagged Me” and “The Cell” starring Jennifer Lopez. Langley had a pre-existing contractual guarantee to become vice chairman. [Updated 10:49 a.m.: An earlier version of this post said Langley’s contract called for her to become vice chairman next year. It is not clear whether that agreement was for this year or next year.]

Fogelson, who’s known for creating innovative marketing campaigns for the comedy hit “The 40-Year-Old Virgin” and franchises “Fast & Furious” and “American Pie,” started at Universal in 1998 after working as a top marketing executive at Trimark Pictures.

-- Claudia Eller

Related stories:

Universal Pictures in the dark about Comcast talks with parent NBC Universal (Oct. 1)

Universal execs under fire for a flop-filled season (Q-and-A with Shmuger and Linde; Aug. 17)

Studio plans a summer without sequels (June 5)

How I made it: Adam Fogelson (April 19)

Two are named to head Universal Studios (March 17, 2006)