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The Case for Kevin Tsujihara: Can He Take Warner Bros. Into the Digital Age?

With a track record in a time of transition, it was temperament rather than accomplishment dictating the choice of Kevin Tsujihara as CEO

The biggest news about Kevin Tsujihara’s appointment at Warner Bros on Monday may well be that the CEO job — hanging in the balance for months – was finally filled.

Getty ImagesThe bake-off between the studio’s head of home entertainment and his rival, Warner Bros. Television chief Bruce Rosenblum, had created a state of exquisite (or possibly intolerable) tension among Time Warner CEO Jeff Bewkes’ top executives, which also included the movie studio chief Jeff Robinov.

Also read: Kevin Tsujihara Named Warner Bros. CEO

A decision was necessary. And if in the end Bewkes has chosen the executive who understands the most about the challenges of the digital age, insiders within and outside the studio questioned whether it was temperament rather than accomplishment that dictated the choice.

One thing is certain: Tsujihara, 48, has demonstrably fewer wins on his resume than Rosenblum, 54, who has grown Warner Bros. Television into the most successful production studio in the TV industry.

The inside word at Warner Bros. was that Tsujihara would be a “unifier,” as one executive put it, and that Rosenblum was considered more divisive. Another way of interpreting that is that Tsujihara, who like Bewkes holds a Stanford MBA, would be more likely to hew to Bewkes’ directives than Rosenblum, a USC and UCLA-educated lawyer.

Tsujihara is hailed by some who have worked for him as a “visionary” — placing bets on future-looking technologies, such as the acquisition of social movie fan site Flixster in 2011 along with a number of gaming companies like Turbine and TT Games. The studio’s website credits him with pioneering day-and-date video on demand.  

As Tsujihara told TheWrap on Monday, "We need to constantly innovate to adapt to consumer needs, to use what technology is bringing to us." 

But as one insider put it, “The businesses he’s run have not been wildly successful.” That may be in part because of the secular declines in DVD sales, a challenge for any home-entertainment executive. 

Also read: Kevin Tsujihara: I'll Continue Warner Bros. Legacy in ‘Tough Environment’

But in an era of steep declines, Tsujihara has gambled on the future, notably by spearheading the launch of UltraViolet, a joint venture among Hollywood studios to convert customers to buying and storing their movies in the cloud. 

That is a move whose ultimate success is still undetermined. While starting slow, the service took a leap forward last year because of an alliance with Walmart. It  now has more than 5 million subscribers. (Update: The latest figures on UltraViolet from January 2013 show subscribers have grown to 9 million.) This is still a relatively low number compared to Netflix's 27 millionMore to the point, it is unknown how many movies those subscribers are buying for their digital lockers.

The Flixster acquisition has also yet to prove itself in a tangible way. The social movie site was presumably bought with an eye to turning its 20 million subscribers into customers for UltraViolet, a strategy that is not yet fully executed. 

Also read: Is UltraViolet Finally Ready to Save Hollywood's Day?

Another area in which Tsujihara has attracted criticism is his championing of high-definition DVDs over the Blu-ray format, which was embraced by rival studios in the mid-2000s. He also was a proponent of premium VOD, which has not taken off.

Said one insider: “He was a holdout on HD DVD because of his relationship with Toshiba. He tried to make a hybrid disc…. The momentum was killed with the dual formats.”

These supposed missteps are no doubt part of the trial-and-error process of an industry in transition. But one would be hard-pressed to point to a more successful digital pioneer at other studios. In other words, it’s a tough time all over.

“None of these guys know what they’re doing in the digital space,” another digital executive who has frequently worked with the studio said.

Easy enough to say, no doubt. What stands in Tsujihara’s stead is the legendary corporate culture at Warner Bros. that has produced remarkably stable teams of leaders and executives with decades of institutional knowledge, a unique asset in times of economic stress.

As Tsujihara said in an interview with TheWrap on Monday, "The life blood of Warner Bros is its creative content. As you think about creative content – whether film, television or video games – you have to maintain the quality and integrity of the teams and processes that we have in place in those business units." 

The studio has found a continual path to profitability and has remained either first or second in market share at the box office over the last decade. Last year, the studio was second in market share, with $1.6 billion taken at the domestic box office and a total of $12.63 billion in revenue in 2011 for the entire studio. 

Also read: Bruce Rosenblum 'Disappointed' at Being Passed Over for Warner Bros. CEO

As a newly-minted leader Tsujihara faces the tasks of holding on to the human capital of that culture – studio chief Robinov, and his first-in-class team that includes the formidable Sue Kroll, president of worldwide marketing, who will soon enough run distribution too.

As for the television studio, he faces his first challenge in his handling of the Rosenblum situation. Will he stay or go? “What will have to happen in the next couple weeks has to be a coming together between the two guys to see if they can figure out a way to make it work together,” one knowledgeable executive told TheWrap.

That would be a signal that even naysayers would have to acknowledge.