Falling attendance and the Paramount decision effectively disintegrated the studio system, depriving the studios of the economic controls that ensured regular revenues, paid the studio overhead, and thereby rationalized their factory-based operations. The major studios survived by effectively overhauling the system itself, fundamentally changing the ways they did business and establishing practices (still in use today) that dramatically reduced their controls of production and exhibition, and that reduced their out as well. This brought an end to the system of mass production that had dominated the movie industry for decades, but it was an eminently sound strategy, because the mass consumption of screen entertainment in the United States rapidly shifted from going to the movies to watching TV. Essential to the studios' survival was their collective control of distribution, the one aspect of their monopolistic operations not affected by the Paramount decision, and their willingness to share control of filmmaking with independent producers, top talent, and talent agencies. Simply stated, the studios became primarily financing-and-distribution entities, reviewing projects that were developed and packaged by the growing ranks of independent producers, then in the event of a green light, leasing their production facilities and providing a portion of the production cost in exchange for the distribution rights—and, frequently, for the eventual ownership of the completed film. The studios themselves began producing fewer, "big" pictures—biblical epics and big-screen westerns—during the 1950s, precursors of the blockbusters that now rule the industry. The studios shared control of film production not only with independent producers and freelance directors, but also top stars whose marquee value gave them tremendous leverage. And because most filmmaking talent operated freelance by the 1950s, talent agencies like William Morris and MCA (Music Corporation of America) also became a major force in postwar film (and television) production.
The major studios initially resisted but soon came to terms with television in the 1950s, selling or leasing their older films to TV syndication companies while revamping their factory-based production operations for "telefilm" series production. By the 1960s, movies were running nightly on prime time television and the studios were turning out far more hours of telefilm series than feature films. Meanwhile, movie attendance continued to erode, despite rapid population growth, and the studios gambled on high-stakes blockbusters like Cleopatra (1963) and The Sound of Music (1965) but relied primarily on television to pay the bills. Studio fortunes by the late 1960s were at an all-time low, rendering them prime acquisition targets, and many were swallowed up by large conglomerates like Gulf + Western (Paramount), Transamerica (United Artists), and Kinney Services (Warner Bros.), as well as real estate tycoon Kirk Kerkorian (MGM). The MCA-Universal merger in 1962 was the first and by far the most successful alliance at the time, due to its savvy integration of film and television operations and its maintenance of at least a semblance of the old studio-based mode of production.
Universal also spurred the movie industry's recovery with the phenomenal success of Jaws , a 1975 release that spawned a new breed of blockbusters like Star Wars (1977), Grease (1978), and Superman (1978), summer releases launched via nationwide marketing and saturation release campaigns that resulted in record box-office revenue and were the dominant, defining products of the emergent "New Hollywood." The success of this blockbuster syndrome reinforced an economic recovery in the industry that continues today, and it enabled the studios to regain some of their lost authority as well, as they became increasingly adept at transforming blockbuster hits into entertainment franchises—multimedia product lines comprised of movie sequels, TV spinoffs, video games, theme-park rides, soundtrack albums, music videos, and an endless array of licensed merchandise. Hollywood's recovery accelerated during the 1980s, fueled by a range of factors that complemented the studios' burgeoning blockbuster mentality. One factor was the rapid growth of new media technologies and new delivery systems, most notably home video and pay-cable television (i.e., subscription "movie channels" like HBO), which proved to be as hit driven as the box office. Foreign markets were equally receptive to Hollywood blockbusters, and thus the studios' international distribution operations grew steadily during the 1980s, going into high gear in the 1990s, when the fall of the Soviet Union and the concurrent economic reforms in China created a truly global market for Hollywood films.
Another crucial factor in Hollywood's continued recovery was Reagan-era economic and (de)regulatory policies, which generated a merger-and-acquisition wave that propelled the rise of global media conglomerates and fundamentally transformed the nature and role of the studio powers. The process began with News Corp.'s purchase of Twentieth Century Fox in 1985 and the launch of Fox Broadcasting (a fourth US television network) in 1986, and it accelerated in 1989 and 1990 with Sony's acquisition of Columbia, Matsushita's buyout of MCA-Universal, and the Time-Warner merger. This trend continued into the 1990s, highlighted by Viacom's purchase of Paramount Communications (formerly Gulf + Western) and Blockbuster Video, the Walt Disney Company's acquisition of "indie" giant Miramax and the ABC TV network, and Time Warner's purchase of Turner Broadcasting (with its myriad cable holdings, massive film and TV library, indie film subsidiaries, sports franchises, and theme-park operations).
In the wake of the Disney-ABC deal in August 1995, Neal Gabler, one of Hollywood's more astute observers, posited that this and other deals "mark[s] a fundamental shift in the balance of power in Hollywood—really the third revolution in the relationship between industry forces." Revolution I, he said, occurred nearly a century before, when the Hollywood studios first emerged and, in a heady churn of competition and collusion, created a system that enabled them to utterly control the movie industry for decades. Revolution II came with the post-war rise of television and the dismantling of the studio system by the courts. As the twentieth century drew to a close, deregulation, globalization, and new media technologies were ushering in Revolution III. "By combining movies, broadcast television, video, foreign video, foreign television, merchandizing, theme parks, sound-track albums, books and heaven knows what else, [Disney CEO Michael] Eisner has devised a new form of vertical integration," wrote Gabler, whose bottom-line assessment was rather simple: "The studios are back in power" (p. 15).
Gabler proved to be quite correct in terms of the latest media revolution and the return to vertical integration, but altogether wrong about the studios, which wield nowhere near the power that they did during the classical era. The conglomerate trend would continue with Time Warner's ill-fated merger with AOL, Viacom's purchase of CBS, General Electric's purchase of NBC and Universal, and countless other deals, all of which underscore the fact that power now resides not with the studios but with their parent companies, for whom "filmed entertainment" represents merely one of many entertainment divisions, along with publishing, music, television, theme parks, and the rest. The studios enjoy a privileged position in global entertainment's great chain of being because Hollywood-produced blockbusters are veritable launch vehicles for multimedia (and potentially multi-billion-dollar) entertainment franchises, and thus the key holding for any media conglomerate is a Hollywood studio. Moreover, these blockbuster films and the media franchises they spawn bring a certain logic and coherence to the parent company's far-flung operations and its diversified media divisions, creating a system of sorts in the global entertainment industry. But this is a far cry from the studio system of old, wherein the Hollywood studios themselves controlled all phases of the industry, when their chief concerns were the quality and currency of their films for a vast movie-going public and the capacity to supply (and control) the US movie market.
SEE ALSO B Movies ; Columbia ; Distribution ; Exhibition ; Independent Film ; MGM (Metro-Goldwyn-Mayer) ; Merchandising ; Paramount ; Production Process ; RKO Radio Pictures ; Star System ; Television ; Twentieth Century Fox ; United Artists ; Universal ; Warner Bros.
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