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Hollywood in the Age of Conglomerates

Hollywood in the Age of Conglomerates. CONGLOMERATES & CORPORATE TAKEOVERS. Box-office fell in 50-60s; stocks became undervalued, relative bargains Bought by conglomerates (large corporations with diverse interests) Manipulated the industry for profits (tax write-offs, etc.)

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Hollywood in the Age of Conglomerates

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  1. Hollywoodin theAgeofConglomerates

  2. CONGLOMERATES & CORPORATE TAKEOVERS • Box-office fell in 50-60s; stocks became undervalued, relative bargains • Bought by conglomerates (large corporations with diverse interests) • Manipulated the industry for profits (tax write-offs, etc.) • Also used various companies for coordinated marketing

  3. PARAMOUNT • Owned by VIACOM INTERNATIONAL • MOVIES: Paramount Pictures, Spelling Films • HOME VIDEO: Paramount Home Video, Republic Entertainment • TV: Paramount TV, Spelling Entertainment, MTV, M2, Nickelodeon, Nick at Nite, Paramount Stations Group (11 TV stations), et al • Jointly owned: USA Network, Sci‑Fi Channel, Comedy Central, et al

  4. PARAMOUNT • PUBLISHING: Simon & Schuster, Macmillan • RETAIL & RECREATIONAL: Blockbuster, Paramount Parks (6 theme parks), Theaters (Famous Players, United Cinemas International & Cinamerica), Bubba Gump Shrimp Restaurants • MISC: Viacom Consumer Products (Paramount toys, t‑shirts & games), Viacom Entertainment Stores, Hamilton Projects (Spelling stuff), Famous Music publishers, Viacom Interactive Services

  5. WARNER BROS. • Owned by TIME-WARNER INC • Merger of Time & Warner Communications, then merged with Turner, now AOL • TIME INC. • MAGAZINES: Time, Fortune, Life, Sports Illustrated, Money, People, Entertainment Weekly, Southern Living, Progressive Farmer, Weight Watchers, Asiaweek • BOOKS: Time Life, Book‑of‑the‑Month Club, Little, Brown & Co, Warner Books, Oxmoor House

  6. WARNER BROS. • OTHER PUBLISHING: Road Runner, Time Distribution Services, Warner Publisher Services, American Family Publishers, Pathfinder • WARNER BROS. • MOVIES & TV: Warner Bros., Warner Bros. TV, WB TV Network, Warner Bros. TV Animation, Hanna‑Barbera Cartoons, Telepictures Productions, Witt‑Thomas, Warner Bros. International TV, Castle Rock • TIME WARNER CABLE: Full Service Network, NY1, Road Runner, West Valley Studios, Primestar

  7. WARNER BROS. • STORES: WB Studio Stores, HBO Store • WARNER MUSIC GROUP: Atlantic Group, Elektra Entertainment Group, WB Records, Warner Music International, Warner/Chappell Music, WEA Inc, Ivy Hill Corporation, Reprise Records, Discovery Records, Rhino Records, Columbia House Records, Warner Music Canada • OTHER OPERATIONS: WB Domestic Pay‑TV, Cable & Network Features, Warner Home Video, WB International Theatres, WB Consumer Products, WB Recreation Enterprises (Six Flags theme parks), DC Comics, Mad Magazine, WB Online

  8. WARNER BROS. • HOME BOX OFFICE: HBO, Cinemax, HBO Pictures/HBO Showcase, HBO Independent Productions, HBO Downtown Productions, HBO Animation, HBO Home Video, HBO Sports, Time Warner Sports, HBO En Español, Cinemax Selecciones, HBO Brasil, HBO Hungary, HBO Asia, HBO Poland, HBO Home Satellite • CNN: CNN, CNN International, Headline News, CNN en Espanol, CNN Airport Network, CNNRadio

  9. WARNER BROS. • TURNER ENTERPRISES • TURNER ENTERTAINMENT NETWORKS: Turner Entertainment Group, TNT, TBS Superstation, Cartoon Network, Turner Classic Movies, TNT Latin America • TURNER FILM PRODUCTION: New Line Cinema (& its “art-film” subsidiary, FINE LINE) • OTHER TURNER OPERATIONS: Atlanta Braves, Atlanta Hawks, Atlanta Thrashers, World Championship Wrestling, Goodwill Games, Turner Sports, Turner Home Satellite, Turner Original Productions

  10. WALT DISNEY • MOVIES: Disney, Touchstone, Caravan, Hollywood Pictures, Miramax, Buena Vista International (distribution) • TV: Buena Vista Home Video, Walt Disney TV, Walt Disney TV Animation, The Disney Channel, Buena Vista TV, Disney TV International, ABC Television Network, ESPN, A&E Networks, Lifetime TV, Disney/ABC International TV, ABC‑Owned TV Stations (10 stations)

  11. WALT DISNEY • THEME PARKS: Disneyland, Walt Disney World, Tokyo Disneyland, Tokyo DisneySea (2001), Disneyland Paris • CONSUMER CRAP: Disney Interactive, Disney Magazine Group, Disney Store, Puppy Love • MISC: Mighty Ducks, Anaheim Angels, Buena Vista Home Entertainment (interactive), Walt Disney Theatrical Productions (The Lion King, New Amsterdam Theater), Hollywood Records, Radio Disney, ABC newspapers & consumer magazines

  12. UNIVERSAL PICTURES • Bought by Matsushita, sold to Seagram • LIQUOR, WINE & OTHER BEVERAGES • UNIVERSAL STUDIOS • TV PRODUCTION: Brillstein‑Grey Entertainment, Universal TV Enterprises, Universal Family Entertainment, Universal Cartoon Studios, Inc.

  13. UNIVERSAL PICTURES • UNIVERSAL MUSIC GROUP: MCA Records, Universal Records, MCA Nashville, Geffen Records, DGC Records, GRP Records, Rising Tide, Uptown Records, Curb/Universal & Interscope Records • THEME PARKS: Universal Studios Hollywood, Universal Studios Florida, Universal's Islands of Adventure, Universal Studios Japan (2001)

  14. UNIVERSAL PICTURES • MOVIE THEATERS: Cineplex Odeon Corp, United Cinemas International Multiplex, Cinema International Corp • MISC: hotels & office buildings, Spencer Gifts (525 stores), Universal Studios New Media (entertainment software)

  15. MGM/UA • Owned by KIRK KERKORIAN • Originally sold by Kerkorian to TED TURNER, then sold back to Kerkorian • Sold to PATHÉ, & became known as PATHÉ/MGM • CREDIT LYONNAIS foreclosed, sold it back to Kerkorian

  16. MGM/UA • MOVIES & TV: MGM Pictures, United Artists Pictures, Samuel Goldwyn Pictures, Orion Pictures, MGM Worldwide TV, MGM/UA Telecommunications Group, MGM/UA Distribution Co., MGM/UA Home Entertainment • MISC: MGM/UA Music, MGM Interactive, MGM/UA Licensing & Merchandising

  17. 20TH CENTURY-FOX • Owned by Australian newspaper magnate RUPERT MURDOCH’S NEWS CORPORATION • TV: Fox Broadcasting Company, Fox Entertainment, Fox Children’s Network, Fox Sports, Fox TV Stations (23 stations) • MOVIES: Twentieth Century Fox, Fox 2000, Fox Searchlight, Fox Family Films, Fox Animation Studios, Fox Studios Australia • NEWSPAPERS: The Times (UK), New York Post, about 125 others

  18. COLUMBIA PICTURES • Purchased from Coca-Cola by SONY • MOVIES: Columbia, TriStar, Sony Pictures Classics, Sony Pictures Releasing, Columbia TriStar Film Distributors International • TV GROUP: Columbia TriStar TV, Columbia TriStar TV Distribution, Columbia TriStar Int’l TV, Columbia TriStar Home Video • STUDIO FACILITIES: Sony Pictures Studios & Culver Studios • LOEW’S THEATRES: 1,018 screens in 142 US locations

  19. THE INDEPENDENTS • TROMA: Horror-comedies • CROWN INTERNATIONAL: Specializes in slightly sleazy movies • DreamWorks SKG

  20. HORIZONTAL INTEGRATION • Typifies structure of the industry today • A single corporation controls different but related products • Results in coordinated marketing strategies

  21. THE MAJOR STUDIOS' RELATIONSHIP TO TV • SUPPLIERS of Series Programming • Networks & cable companies serve as distributors • TV supplied by small production cos & the Majors • PRODUCTION BY THE STUDIOS • Industry realized that TV production is cost-efficient • Sets can be reused • Programs can be produced in factory style • Majors' films may become sources for TV series • Can use physical properties of the movies • Already have a pre-sold audience

  22. DISTRIBUTION in the Electronic Age • Modern distribution includes TV, videocassettes, cable, etc. • US THEATRES • FOREIGN THEATRES: 6 mo. after debut • VIDEOCASSETTES, LDs, DVDs: 4-10 mo. after debut • PAY TV: 12 mo. after debut • NETWORK TV: 24+ mo. after debut • SYNDICATION: clearance varies

  23. THE PACKAGE-UNIT SYSTEM • THE PACKAGE-UNIT SYSTEM replaced earlier systems of management • The Paramount Case • Tax laws favoring independent production • Changing demographics • The advent of TV, etc.

  24. THE PACKAGE-UNIT SYSTEM • DECREASE IN PRODUCTION • Studios no longer had theaters to supply • Attendance was decreasing • Studios made fewer, more expensive films, making more money on each (through longer runs in theaters) • THE DECREASE • # of films fell 80% from 1930s (50 feature films/year/studio) to 1970s (10/year/studio) • Increased in 1980s to 18-25 films/year/studio

  25. THE PACKAGE-UNIT SYSTEM • PRESENT STATUS OF THE MAJORS • Studios all parts of conglomerates • Contract system no longer in practice, films now the results of negotiations & packaging • Primary function of Majors today is distribution

  26. THE PACKAGE-UNIT SYSTEM • SCRIPT: professional scriptwriter, or provided by a free-lance, well-known author • PERSONNEL • Contracts negotiated for cast & director, involving agents • Contracts negotiated for technical crew, involving unions • Arrangements must be made for feeding, transporting, etc., the personnel

  27. THE PACKAGE-UNIT SYSTEM • DISTRIBUTOR • Usually, a distributor must agree in advance • Distributor should be 1 of the Majors • FACILITIES: Sets, costumes, cameras, lights, etc. must be rented, usually from the distributing studio

  28. THE PACKAGE-UNIT SYSTEM • FINANCING THE INDEPENDENT PRODUCTION • 1ST MONEY • About 60% of the budget • Obtained from high-finance banks • REPAYMENT; Principal plus interest (20-22%) • 2ND MONEY • About 40% of the budget • Direct investment & sale of stock • Outside investors • Producer, director, etc. • Distributing studio • Deferred salaries (POINTS of the film's gross income) • 2nd money earns a share of the profits

  29. THE PACKAGE-UNIT SYSTEM • 3RD MONEY • Completion guarantee; covers costs over projected budget • Provided by an insurance company, finance company, or the producer • 3rd money earns a share of the profits • Terms “1st, 2nd, & 3rd money” refer to order in which money is PAID BACK, not order in which it is obtained!

  30. THE PACKAGE-UNIT SYSTEM • COMMERCIAL RELEASE • Average negative cost: • US$9.3 million in 1980 • US$39.8 million in 1996 • Average cost of advertising & prints: • US$4.3 million in 1980 • US$19.8 million in 1996 • Movies must gross 2.5 - 4 times initial investment to be profitable

  31. THE PACKAGE-UNIT SYSTEM • DISTRIBUTION OF THE BOX-OFFICE $ • 50¢ goes to the exhibitor • 25-30¢ to the distributor (prints, advertising & the DISTRIBUTION FEE) • 20-25¢ to the producer • Most films lose money in theatrical release, but may make money from TV & video, etc.; blockbusters make up for losers

  32. THE PACKAGE-UNIT SYSTEM • THE ROLE OF THE MAJORS • FINANCE: Help finance independent production (provide 2nd money) • TECHNICAL FACILITIES: Rent these to independent producers • DISTRIBUTION: the most important aspect

  33. THE PACKAGE-UNIT SYSTEM • DISTRIBUTION SYSTEM • Sophisticated, nationwide system of offices & personnel • Since each film is independently sold, it is prohibitively expensive & complicated for independents • ADMISSION CHECKS • Checks on admissions at certain theaters • Cheating is easiest at the box-office

  34. THE PACKAGE-UNIT SYSTEM • ADVERTISING CAMPAIGN • Designs the advertising campaign • Each film’s advertising designed individually • DISTRIBUTION SCHEDULE • SLEEPERS are booked in 2-3 theaters, booked in more as word-of-mouth spreads • TURKEYS booked into as many theaters as possible with much advance publicity before word-of-mouth spreads

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