(FORTUNE Magazine) – Hollywood lore has it that Edgar Bronfman Sr., father of the bearded, 39-year-old high school graduate who now rules the Seagram liquor empire, long cherished a desire to buy the MCA movie studio. On hearing that Edgar Jr. was shelling out $7 billion for 80% of MCA, one prominent financier suggested that maybe it was a bad gene. That might explain why the younger Bronfman agreed to dump Seagram's huge, reliably profitable Du Pont stake for nearly $1.4 billion less than market value in order to pay MCA owner Matsushita 20 times cash flow for a second-tier Hollywood studio.

The spending isn't over. MCA's leaders rebelled last year, inducing Matsushita to sell, after the Japanese owner refused to match the aggressive investments of competitors such as News Corp., Time Warner (owner of Fortune's publisher), and Viacom. While others were muscling into ever more distribution channels for their entertainment products-particularly TV and cable networks worldwide-Matsushita quashed plans to buy into CBS. So to keep MCA from lagging even further behind industry leaders, Edgar Jr. could soon be bidding for CBS against Ted Turner of Turner Broadcasting System--for a price of $5 billion or more. That's on top of the $1 billion or so per year a major studio must routinely invest in motion pictures and the fat slice of equity likely to be demanded by Barry Diller or Michael Ovitz or whoever ends up running the place.

Bronfman has paid a ridiculously high price for his seat at the table, but that doesn't mean he can't win. Many others, notably Rupert Murdoch of News Corp. and Turner himself, have paid seemingly insane sums for prize assets, such as the Metromedia TV stations or the MGM film library, yet emerged winners. Content is a game of patiently building asset values, combining entertainment products with the means of distribution to maximize leverage. You may not produce impressive earnings along the way, but eventually you may get rich selling out to a bigger fool than you. Not everybody has the stomach to see a $100 million film investment wiped out on opening night. But roughly 10% of the world's billionaires made their money in content, and Bronfman could increase his riches if he plays his cards right.

Win or lose, Bronfman has altered the Hollywood balance of power, forcing other companies to scramble for position. A brawl in network TV seems inevitable. In one scenario, Turner might pull a Craig McCaw on Bronfman, bidding up the price of CBS, then pulling out with cackles of glee, leaving Bronfman to overpay once again; then, in theory, Turner goes into partnership with General Electric's NBC and starts competing against CBS on price. Where would all this leave Sony's studio? Or Tele-Communications Inc., a leader in cable TV systems, whose main program-production asset is its 23% stake in Turner? Or Disney, with plenty of great programming but one of the scrawniest distribution systems in town? Expect dominoes to start toppling soon.

Another potential victim is Time Warner. Seagram accumulated 15% of its stock and presumably will sell that stake soon. Time Warner shares, recently trading at $38, are already depressed, and grouchy investors could riot if Bronfman decides he really enjoys dumping stock at a loss. Alternatively, Bronfman could sell the block to an ambitious third party. Either way, Time Warner faces risks.

Maybe Bronfman will flop. That seems to be what investors expect, judging by the 6% dip in Seagram's share price since he became CEO. But give the kid credit. He's just arrived, and everyone in Hollywood knows his name.