Ten commandments and pacts that changed the nature of the biz
The fallout from the 10 deals that shook the entertainment industry continues to reverberate, whether it’s talents striking out on their own or the government hitting the studios where they hurt.Artists unite The name United Artists wasn’t just an empty catchphrase to founders Douglas Fairbanks, Mary Pickford, Charlie Chaplin, D.W. Griffith and William S. Hart. Back in 1919, they boldly envisioned a company that could single-handedly block the rise of the studio system that would dump “mediocre productions and machine-made entertainment” on the public and in its stead create a haven for the talents, united in their cause. The major studios saw it differently. “So the lunatics have taken charge of the asylum,” was Metro president Richard Rowland’s famous quip. And while they were more fractious than cohesive — Hart left for a rich deal, Griffith departed when his career declined and Chaplin failed to turn out much product for UA — they certainly proved they knew what made a studio successful. With no lot and no roster of star players, and thus no overhead, UA could crank out quality movies from independent producers. Griffith provided one classic, “Broken Blossoms,” and Chaplin contributed “The Kid” and “The Gold Rush.” Fairbanks (“His Majesty, The American”) and Pickford (“Pollyanna”) had a string of successes before talkies arrived. UA also provided a home for diverse talents such as Buster Keaton; Gloria Swanson; Rudolph Valentino; Mack Sennett; and Samuel Goldwyn, who became a partner. Its 1930s alums include Darryl Zanuck, Alexander Korda, Walt Disney and Hal Roach. After the founders departed, the company had numerous ups and downs — “Some Like It Hot,” “West Side Story,” “Annie Hall” and “Raging Bull” bore the UA logo — but it set a precedent for indie producers, actors looking to control their material and a studio like DreamWorks. Birth of the broadcasting net The early days of commercial radio, in the first two decades of the 20th century, saw broadcasters operate as discrete local stations. But even before radio had reached serious penetration in American households, AT&T saw that telephone-line technology could be used to create a national radio network, which could bring in advertising dollars. General Electric and Westinghouse, with their jointly owned RCA, tried to compete but couldn’t. So they did the next best thing — they bought up the AT&T ops in 1926 for a million bucks. They called their new network the National Broadcast Co. The AT&T operation was NBC-Red and RCA’s struggling system was NBC-Blue — it was later sold off and renamed the American Broadcasting Co. And so, on Nov. 15, 1926, NBC was launched, and Must Hear Radio became a national trend. Supreme Court hammers Hollywood It was a long time coming, but in 1948, after years of legal maneuverings, the Supreme Court delivered a decision that hit the major studios with the crisp finality of a Joe Louis right. The studios had long maintained their control over filmdom by acting as factory bosses — locking the talent under contract; owning the physical plant where movies were shot; and producing, distributing and exhibiting pics. Legal skirmishes revolving around antitrust issues based on the studios’ ownership of theaters dated back to the silent-movie era, but the final round began in 1938, when the Justice Dept. took the studios to court. Mavericks like Walt Disney, Orson Welles, Samuel Goldwyn, David O. Selznick and others who’d formed the Society of Independent Motion Picture Producers forced the government to reach a postwar resolution. The Supreme Court decision in the United States vs. Paramount Pictures Inc. (aka the Hollywood Antitrust Case of 1948) ultimately brought down the monopolies, empowered independent producers and studios, scattered the classic film libraries and shattered the economic underpinnings of the old studio system. Agents and actors break out James Stewart’s public persona was that of the common man standing up for the common good. During the Golden Age of Hollywood, an actor was indeed the common man, typically working on contract for the all-powerful studios. That had begun to change by 1950 — lawsuits had carved up the studios’ fiefdoms — but even actors big enough to break away and freelance were underpaid compared with what the moguls reaped off their work. Then Stewart and his increasingly powerful agent, Lew Wasserman, struck a deal that was a death blow for the studio system. Universal wanted Stewart to star in “Winchester ’73” and “Harvey.” But the struggling studio lacked the dough –Wasserman was asking $200,000 a film. Then the agent switched it up — Stewart would forgo his salary in exchange for a percentage of the profits and talent approval. When all was said and done, Stewart pulled in about $600,000 — just for the first film in the pact. The studios had given an inch and miles would be taken. Agents grabbed the reins –Wasserman even packaged client Anthony Mann with the “Winchester” deal as director — and actors broke free of the factory and headed down the path to becoming nearly as rich and powerful as the bosses who paid them. Ball rolls to top Lucy Ricardo was always desperately scheming to break into show business. Lucille Ball was far more pragmatic … and successful. To save her faltering marriage, Ball used her success in radio to insist that CBS cast real-life husband, Desi Arnaz, as Ricky Ricardo on “I Love Lucy.” Then she wielded her clout again, telling the network the couple would produce the show themselves through their production company. Arnaz utilized a new three-camera film format, which quickly became industry standard. More important, thanks to Desilu, the couple had creative control and reaped the financial benefits of the show’s phenomenal success in reruns and other subsidiary rights. Every other star that could soon would fight for their piece of the off-net pie. Meanwhile, Desilu became a major force in television, producing hits like “The Untouchables” and becoming the home studio for independents like Danny Thomas, who brought in more cash cows like “The Andy Griffith Show” and “The Dick Van Dyke Show.” After the marriage broke up, Ball bought out Arnaz and showed that a woman — even one with the ditziest of public personas — could successfully run a business, greenlighting such unusual fare as “Mission: Impossible” and “Star Trek.” Crazy like a Fox Rupert Murdoch has spent a lifetime amassing an unparalleled media empire while silencing naysayers each step of the way. But no move was riskier and seemingly destined to failure than his decision to create a fourth television network in 1986 by buying stations and a production company, and rounding up as many affiliates as he could. Murdoch had grand ambitions: “We’re building a loosely integrated global communications company and it would be nonsense without a very firm foot in television.” Although that foot stood on shaky ground early on, losing so many tens of millions that by 1988, internal forecasts at Murdoch’s News Corp. was that Fox would not make it to 1989. But “21 Jump Street,” “America’s Most Wanted” and, most significantly, “Married … With Children” found an audience. “The Simpsons” and Fox’s deal with the National Football League –snatching up CBS affiliates along the way — drove the net into maturity. Its success spawned the WB and UPN, while Fox has strengthened its small-screen grasp with Fox News, FX and Fox Sports. Television as sport Launched in 1979, upstart cable net ESPN was largely a low-budget joke, home to full-contact karate, slow-pitch softball, women’s billiards, rodeos, college swim meets and tractor pulls. College sports and the National Hockey League got the network out of the bush leagues and profitable by 1985, but ESPN knew that if it wanted to be major leaguer, it needed to land a major league. In 1987, the National Football League, which had proudly avoided cable — still in less than 50% of the nation at that time — found itself facing a pay cut from the Big Three networks. Needing to keep its cash flowing, the league finally called a play for cable. ESPN scored the contract for $47 million a year. the sports cabler was a player at last. The deal changed television forever. Suddenly, ESPN (which added baseball two years later) was driving cable subscriptions — which operators and affiliates loved — and then jacked up its prices — which operators and affiliates loathed — expanded to new networks, original programming, a magazine and restaurants. Japan invades Hollywood The tone was ominous, the warnings dire. America was about to be overrun by foreigners as Japan used its dollars to do what its kamikaze pilots couldn’t. That was the breathless chatter back in 1990 when Matsushita shelled out $6.1 billion for MCA Entertainment, which included Universal Studios. Coming on top of Sony’s multibillion-dollar purchases of CBS Records in 1988 and Columbia Pictures in 1989, along with smaller deals like JVC’s launch of Largo Entertainment, plenty of doomsayers fretted that Godzilla had donned a business suit and would soon stomp Hollywood and with it the American dream. Never mind. Turns out Matsushita’s invasion was a big deal without the ramifications that everyone feared. While the Japanese companies wanted American product (software) to help sell their electronics (hardware), running a movie studio was hard and the movies remained as American as apple pie no matter who was in charge. The Japanese companies started out hands-off then took more control, but for years spilled plenty of red ink. Although Sony learned its lessons and turned things around, the bottom line at MCA/Universal looked so bloody that Matsushita eventually bailed. Perhaps the true lesson lies in Sony’s long-term vision or perhaps it lies in the idea that the biggest and most foreboding of deals might not foretell the future so precisely. Just ask the folks at AOL and Time Warner. Mouse finds niche It was hard to imagine anyone more independent than indie film czar Harvey Weinstein. So if squeaky-clean Disney could bring Weinstein’s feisty Miramax to the altar in 1993 and live happily ever after (well, it always seems that way until the divorce), why shouldn’t every other studio grab a piece of the prestigious arthouse pie, particularly if there was a way to make it profitable? Universal snatched up Gramercy, October Films and Polygram. Others started from scratch, begetting offshoots like Sony Pictures Classics, Fox Searchlight and Fine Line Films (from New Line). It was a boon for the studios but a good news/bad news kind of situation for indie film proponents: Most of these divisions remained relatively autonomous and had more financial stability and bigger budgets for production and marketing, allowing indie filmmakers to reach a broader audience. Most directors still felt they had creative freedom. On the other hand, these “indies” inadvertently squeezed the true independents, making it more difficult to get financing, distribution and theater runs. And, of course, these divisions reported to mainstream, bottom line-oriented corporate bosses. That inevitably created conflict — Disney wouldn’t let Miramax release movies like “Kids,” “Dogma,” and, most infamously, “Fahrenheit 9/11″ through it and blanched at the huge budgets for alleged indie pics like “Gangs of New York” and “Cold Mountain.” So, in the long run, Miramax ended up the corporate property of Disney, while the Weinsteins are, well, independent again. The big bang How big is too big? Americans have always loved living large — from the wide open spaces of the West to the skyscrapers of Manhattan to the big-budget blockbuster movies of Hollywood — then came the America Online-Time Warner megamerger. Time Warner was, of course, already a behemoth wrought by the blending of old-school media companies covering print, TV (from cable systems to networks to production) and the movies. AOL, the computer powerhouse, represented the digital future, the star everyone was trying to hitch their wagons to. The combination was, quite frankly, terrifying to some. When AOL chief Steve Case proclaimed the new company would “encompass the full spectrum of media and content” there were rumblings of Big Brother. But then the dot-com stock bubble burst and AOL — which reigned supreme in this “merger” — found itself unable to successfully impose its computer technology and its management vision on the “old media.” (AOL couldn’t handle all the computer needs either, and many divisions went back to their original providers.) If anything, this deal was a telling reminder that some deals provide not synergy but bloat and distention.