The 80’s ….just the mention of this decade will bring a smile to the face of the most jaundice entertainment professional. A time when the film industry was in full blush, the multiplex worked and many great of downtown theatres were still in operation. It was the generation that saw the rise of the homevideo revolution. Looking back at the 80’s it became evident that during this time, the seeds were sown that later would put the industry in the proverbial mud.
Cable TV networks, direct broadcast satellites, and 1/2 inch videocassettes in the 80s encouraged a wider and deeper distribution of films. Revenues from movies on videocassette and cable TV distribution contributed mightily to studios’ earnings – often box-office profits. In 1977, the first video-rental store opened. Located on Wilshire Boulevard in Los Angeles with a mere 600 square feet of space, George Atkinson, an LA based wild eyed entrepeneur launched the video store revolution, charging $50 for an “annual membership” and $100 for a “lifetime membership” the memberships allowed people to rent videos for $10 a day. Despite a more than wacky and unheard of business model, this little store was a huge success, growing to 42 stores in fewer than 20 months and resulting in numerous imitators.
Magnetic Video was a small video duplication company that was established in 1968. The head of the company, Andrew Blay, came up with up with unique idea at the end of 1977. He approached 20thCentury Fox about obtaining an unheard of licensing agreement to put 50 of their films on VHS and Beta. 20th Century Fox was in financial trouble at the time, agreed to license the films to Magnetic. Magnetic Video sold the movies through a mail order club and it became a success for the company. The titles included movie classics such as Sound Of Music, Patton, and MASH. Magnetic Video enjoyed great success the first two years and convinced other smaller studios to license some of their movies.
Looking back, Mr. Bay’s and Mr.Atkinson’s success represented the emergence of an entirely new market: home consumption of paid content. Of course the pitbull of the MPAA, Jack Valenti launched an assualt against this emerging industry with a series of co-ordinated attacks in both congress and the courts. In 1982 legislation was introduced in Congress to give copyright holders the exclusive right to authorize the rental of prerecorded videos. It was stopped. Then legislation was reintroduced in 1983, with the Consumer Video Sales Rental Act of 1983. This legislation would have allowed the movie industry to shut down the rental market, or charge huge licensing fees, by making it a crime to rent out movies purchased commercially. In effect, this legislation would have ended the new market of rental stores. With 34 co-sponsors, major lobbyists and significant campaign rose up to support it,
With probably one of the most shameless displays of dramatics ever launched on Capitol Hill, Jack Valenti president of the Motion Picture Association of America stood before a Congressional Hearing in 1982 and spun the following tale of horror . Jack Valenti: “We are going to bleed and hemorrhage, unless this Congress at least protects . .we cannot live in a marketplace. . . where there is one unleashed animal [referring to the VCR] in that marketplace, unlicensed. It would no longer be a marketplace; it would be a kind of a jungle, where this one unlicensed instrument is capable of devouring all that people had invested in…” Valenti attempted to use further scare tactics to force Congress into a decision which favored the major studios. In summation he spun the following allegory “I say to you that the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone.” Jack was not one to holdback.
Video stores saw the Consumer Video Sales Rental Act as an existential threat, and on October 21, 1983, in protest video stores across the country closed down for several hours. While the 1983 legislation died in committee, the legislation would be reintroduced in 1984. In 1984, a trial balloon in the form of The Record Rental Amendment was passed, which banned the renting and leasing of music. In 1990, Congress banned the renting of computer software.
Due to a massive public backlash from video retailers and customers, Congress did not pass the Consumer Video Sales Rental Act., only by one vote, the Supreme Court prevented declaring the home video revolution illegal. As more Americans bought this technology, the content industry’s ability to regulate it eroded. Given the popularity of the video cassette recorder and video stores, the movie industry was not able to intimidate Congress to regulating this fledgling industry out of existence.
It would soon become an $18 billion dollar in the domestic market even more foreign, while many predicted that it would obliterate theatreical distribution, there is a school of thought which actually thinks the synergy and momentum created by home video actually helped theatrical distribution. People had to go somewhere top pick up a movie. They would have to drive to the video store, cruise aisle after aisle of movies choices. The idea of movies being our prime form of entertainment rose again. Movies became cool again. Soon the rental business would overtake the existing movie theater market, and thereby become a massive revenue source for the industry.
The movie industry was now ladened with massive amounts of cash infused into it by the rise of cable revenue and the huge cash windfalls from home video. This brought the entertainment industry to the strong attention of the now exploding Wall Street. An industry once thought to be the domain of flaky leftist artists and immigrant exhibitors now had huge cash flow appeal.
Studios began to be taken over by multi-national public marketed engorged conglomerates as their entertainment divisions:
United Artists was bought and merged with MGM in 1981 to formMGM/UA; the company’s film library was bought out by media mogul Ted Turner in 1986 for his cable TV channel, Turner Broadcasting System, Inc.
20th (or Twentieth) Century Fox was taken over by oil tycoon Marvin Davis in 1981 and then entered into a 50% shared ownership with Australian publisher Robert Murdoch in 1985, becoming part of Fox, Inc.
Columbia Pictures was purchased by the Coca-Cola Company in 1982; Tri-Star Pictures bought Loew’s Theaters in 1986.The Sony Corporation of America purchased Columbia Pictures Entertainment, Inc. and Tri-Star Pictures from Coca-Cola for $3.4 billion in 1989, re-naming itself Sony Pictures Entertainment.
In 1966,Paramount became a wholly owned subsidiary of Gulf + Western Industries, Inc; in 1989, Gulf + Western was reconfigured and renamed Paramount Communications, Inc.
Walt Disney Productions remained as one of the few studio-era survivors, with Michael Eisner as chairman and CEO beginning in 1984; it set up Touchstone Pictures in 1984 to make feature films that appealed to adult audiences.
Warner Communications merged with Time, Inc. – announced in 1989 (and completed in 1990) to become Time-Warner, Inc.
Because now the major studios were subjected to the rules and whims of the public money markets, movie decisions were now of the hands of accountants and lawyers….not filmmakers. Movies were made only if they could bring immediate cash flow and financial success. Intelligent screenplays were ignored, in favor of a perceived international star system.
Movies began to get stupid.
With bigger financial players involved, movie stars began demand higher salaries up front, and well as a percentage of the movie’s gross, often earning well past over $20 million per movie. Budgets and actors salaries skyrocketed out of control, and powerful agents for agencies such as CAA and William Moris negotiated outrageous deals and began a decades long plunder the production side of the business .
Hollywood in service of their new masters began to go on a quest armed with demographic research and a “bottom line mentality,” for the one large “event film” that was a must see by a global audience. Smaller production were deeemed no worth doing .They began to pander to the lowest common denominator. Independent movies that from 1985 -1990 had seen a glorious bloom now found it harder to find a market and financing. Most big-screen event movies, scheduled to be released at summer and Christmas would take expensive fortunes to produce. The Wall Street driven companies were looking for several large hits and were no interested in independent picture which could only return 30% profit. They got greedy, very greedy and in their greed began to sow the seeds for this industry’s downfall.
In 1983, in amidst the jockeying in the courts and on Capital Hill, Fox commisioned a secret study asking if they could pipe the latest version of Star Wars directly into homes…how much net revenue could they see in their coffers the very first day of release. A number came back from the analysts which was backed by volumes of graphs and chart. The amount was $130 million. Hollywood now had a direction it wanted to head in.
Looking back on many of the blockbusters from the mid 80s, were well-constructed films with strong characters and plots not entirely built upon the number of really cool explosions. In 1987, when home video was at its height the following films could be deemed blockbuster;
Three Men and A Baby, $81 million
Beverly Hill Cop II, $80 million
Fatal Attraction, $70 million
Good Morning, Vietnam, $58 million
The Untouchables, $36 million
Today , all these films would be deemed failures by the current bar being set by Wall Street.
In 1983 Paramount decided to try a new strategy following the results of the secret Star Wars study. In order to test the strategy of going direct to the consumer, Paramount decided release a few big theatrical titles at a reduced price on VHS. Paramount rolled out Raider Of The Lost Ark and Footloose at a lower price to entice customers to buy instead of renting. Warner decided to release Purple Rain in the fall of 1984 at 29.95 retail. This began the video sell through market.All releases were a huge success and studios now adopted a two-part pricing strategy. They wanted to cut out the middleman at all costs. To movie busines, the rental stores and the theatres were becoming nuisances.
Studios decided to releases their biggest hits at $29.95 and other lesser known titles at $79.95. Eventually the price gap would widen. Some new releases came down to $19.95 and the other onscure titles would start to climb. By the early 1990’s, the retail on some titles had risen to over $105. This meant that the wholesale cost to video stores would be in excess of $77 per tape. The video stores complained, but the market rose so fast, that everyone was still making money.
In 1987, a paradigm shift occured. With some help from Diet Pepsi, Paramount Video announced that it was releasing “TOP GUN” for a retail price of $24.95. The video sell through release brought in $30 million into Paramounts coffers and the die was cast for the quick erosion of the home video store and the slower erosion of theatrical distribution.
When DVD was introduced, the Studios decided to price DVDs from $19.95 to $29.95. As price of players fell, the number of players sold rose rapidly. VHS was done and the nature of the movie business had changed forever.
The studios had begun their march into a direct relationship with the consumer, ignoring both the rental store and the movie theatre. Windows began to get shorter, theatrical split rose in the studios favor and the head long fall into video on demand had begun.The smugness from the major studios was almost palpable.
Fast forward to the present.
The movie buyars have built an industry on large pictures. Picture which could bring in massive profits but at the same time also represent massive risk. Only Universal seems to realize this with their movement back to the smaller picture. Taking a lead from their Comcast parent they realize that the long promised riches from video on demand is failing to materialize. Video binging and new series promoted by the Netflix and Amazon of the worlds is quickly eroding the long promised nirvana for the studios. Short form entertainment is on the rise and is rapdily changing viewing habits.
Due to the seeds and misconception sown during the 80’s, Hollywood has firmly fallen on it’s own sword.
Somewhere George Atkinson and Andre Blay are smiling.