THE REVIVAL OF HOLLYWOOD: Strategies behind the success of Hollywood studios since the 1970s

By: Yusuf Kurniawan

Abstract The rise of television during the 1950s and 1960s was seen as dealing a fatal blow to the film industry, but along with the emergence of new television systems and the video recorder, and coupled with more deliberate and coordinated marketing strategies, Hollywood has undergone a major resurgence. This paper examines how different media coexist and the way in which film has been able to regain its prominent media position on a global scale.

Introduction

I still remembered when Rambo burst in Indonesia’s film market in around the early

1980s. I was so vigorous in watching the blockbuster at the local cinema. As a young

boy who was fond of watching action movies, I was so impressed with John Rambo’s

actions in the movie. I think, nearly every young child during the time liked it. Since I

was still at elementary school, I never came across with questions such as who made the

successful film, who distributed it, how much money spent on that movie etc. What I

learned was that the movie had considerable impact upon audiences that were chiefly

dominated by teenagers. Even I myself was so crazy about Rambo, which was

represented in the forms of stickers and posters. My bedroom wall was full of posters

and stickers that predominantly featured Rambo and Sylvester Stallone.

That is a brief story of mine when I was a kid and my comment when I looked at

such phenomenon. Recently, when I watched the same movie on video I had different

comment, but the movie was still impressive. In fact, Rambo is only one of many

blockbusters produced by Hollywood studios that succeeded in the film market. There

are still hundreds of more successful blockbusters which made tents to hundreds of

million of dollars in compensation for their production cost, for instance Beverly Hills

Cop II that cost about $20 million to make and returned four times that. Back to the

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Future cost about $22 million but returned $104 million. The $14 million Top Gun

made about $80 million.1

Those blockbusters emerged since the early of 1970, the year when Hollywood

managed to regain its success. Seen from the chronology of the monumental events, the

history of Hollywood can be divided into three major divisions, i.e. (1) Early period

between 1908-1918. It contains the history of Hollywood since it was firstly established

until it was settled and began developing. (2) Studio years: 1930-1950 (Golden Age I).

It tells about the first success of Hollywood as the American film industry, and (3)

Resurgence period (1970s – present), which explain the revival of Hollywood and the

return of Hollywood success after the long economic crises. However, in this essay I

will only focus on the latest period.

Low Admissions

When the long economic crises stroke the United States from about 1950s to 1960s,

Hollywood filmmaking industries were in very hard condition. The studio years totally

ended because of the soaring cost for maintaining the studios and the equipment, and for

paying the stars’, lawyers’ and studio executives’ salaries that skyrocketed.2 In

consequence, the film production decreased significantly compared to the previous

years.

To survive from the crises, Hollywood major studios manufactured most of their

films outside of the United States. These so called ‘runaway’ films emerged as an

expression of deep concern about the financial condition and disadvantageous

atmosphere in the US film industries. The number of ‘runaway’ films increased

especially during the 1960s. For example in 1968 there were 232 films created by

Americans, of which 123 were manufactured outside the United States. In 1969 there

were 226 American-sponsored films, of which 118 were not produced in this country.

And in 1970, nearly 237 American films, of which 100 were made abroad. While in the

1950s, only 5 percent were manufactured abroad.3

Since nearly all of the studios were worsened by the bad economic climate, they

merged themselves into some major studios. The smaller studios were absorbed by the

bigger ones. For instance, United Artists became the part of the Trans-America

Corporation (then it would be later absorbed by MGM, and MGM itself eventually was

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owned by Turner Broadcasting.4 The situation was worsened by the more government

regulations on films, such as the regulation on labelling system and film content.

Interaction between media

TV in the US had lost its novelty since the early 1960s, so that the number of audience

turned normal.5 It has become the characteristic of societies or audiences, when a new

technology is introduced there is always (usually) ecstatic acceptance. It is frequently

characterized with huge number of audiences or users and number of products sold. By

1970, 95 percent of all American household owned at least one television.6 Still, what

TV offered was new for the audiences that they did not get at the movie theaters. It was

signified with the decreasing number of audiences in theaters.

Hollywood studios employed the phenomenon to approach TV broadcasters to

collaborate with them. They proposed to have a mutual collaboration between

Hollywood studios as the film producers and providers and TV broadcasters as the new

exhibitors. In addition, advertisers, attracted by the potential profits to be obtained from

this vast audience, increased their advertising 120 percent. It stands to reason, since

most of the cinema audience had shifted their attention to TV, the film producers

wanted to show their films on TV. The studios got revenues from the taxes and licenses

paid by TV broadcasters. In return, TV broadcasters gained profits from the

advertisement tax paid by advertisers, while cable TV broadcasters obtained the money

back from their subscribers. By 1963, 70 percent of American prime-time television

programming was coming from Hollywood, and the major companies were earning 30

percent of their revenues from telefilm production. The made-for-TV movie in the mid

1960s was a commercially logical development.7

Hollywood major studios obtained more revenues from the invention of VCRs,

Video CD players and DVD (Digital Versatile Disk) players. New technologies mean

new outlets for Hollywood movies. Audiences of the 1990s experience mass-mediated

culture differently to earlier generations. VCRs, VCDs and DVDs have made viewing

time more flexible and convenient. Cable and digital TV have provided a range of new

programming possibilities with special interest channels intended to smaller audiences.

Undoubtedly, the technologies introduced in the 1970s, 1980s, and 1990s have provided

the film industry with some wonderful new outlets.

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For some time, the Hollywood majors did not depend solely on theatrical

exhibition. However, these latest distribution windows could be meant as diversified

revenues, which add even more power to the operation of the studios. Initially, many

film executives were worried about the emergence of these new technologies.

Hollywood executive Frank Rothman observed: “When television started in the 1950s,

there was a strong view that that was the end of Hollywood. When cable came, we

thought that would kill our sales to networks. None of these things happened. Every

time the market expands, the combination is greater than before.”8

Vertical Integration II

Behind the success of the film distribution Hollywood in fact has applied the

vertical integration strategy in producing, distributing and exhibiting the films. It was

the strategy of classical Hollywood, as Hoskins points out:

During the ‘Golden Age’ of the Hollywood studios, in the 1930s, the industry was a mature oligopoly (a small number of large interdependent firms, each controlling a significant share of the market). Each of the majors (at that time Warner Bros., Loews/MGM, Paramount, RKO, and Twentieth Century-Fox) was vertically integrated – controlling all aspects of production, distribution and exhibition.9

The situation during the resurgence of Hollywood was quite advantageous. First,

the government loosened the regulation on movie studios. Second, they were permitted

to return to the exhibition business, on condition that they did not discriminate the films

which were released by other distributors or committed monopoly practices. In this

resurgence period the five major Hollywood studios –Cannon, Paramount, Tri-Star,

United Artists, and Universal ‘reverticalized’ in a grand way. This Vertical Integration

involves three key elements namely producer, distributor and exhibitor. The relation of

these three elements is inter-dependent. Producer has studios to make films, but the

films will not ever reach audiences if there are no distributors. Meanwhile, distributors

need a place to exhibit the films to public. In this case distributors need exhibitors.

Conversely, exhibitors need distributors and producers in order to be able to receive and

exhibit films regularly. And distributors also need producers. The mutual relationship

between distributors and exhibitors is probably the most dominant, because these two

elements are one of the key determiners whether or not a film will reach the audiences.

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The role of distributors is so important that their revenue is more than exhibitors’.

The comparison of income received by distributors and exhibitors is described by

Goldberg that the role of distributors is very important. Therefore, in order to be able to

exhibit the film exhibitors must agree to give the distributor a share of the ‘box office

gross’ (the term for the total ticket sales for the film) on the basis 90:10. The distributor

gets 90 percent and the 10 percent is for the exhibitor. The distribution and marketing

cost is very expensive. For some recent Hollywood blockbusters their budget is about

$50 million.10 It stands to reason that the role of distributors is very crucial. This second

vertical integration was so solid that the expansion of business the Hollywood studios

have been expanding to all over the world.

Today, the phenomenon of Hollywood movies is found everywhere. Nearly every

country in the world import Hollywood movies. Simultaneously, it showed the

Hollywood hegemony as one of the world’s film industries. Based on the data from

Screen Digest, June 1999, USA (Hollywood) is respectively on the top rank among

other countries in the world that produced films in the four-selected-years: 1968, 1978,

1988 and 1998. In 1998 Hollywood made 661 films plus nine more films which were

co-produced.11

The sign of successful film emerged in 1972 when Francis Ford Coppola made

‘The Godfather’.

Film content: 1970s - Present

The 1970s saw the re-emergence of the director as a major creative force. Hollywood

film’s themes were considered too monotonous since the 1930s. They were mostly

about comedy and non-fiction stories like warfare. Audience had been bored of such

film’s themes; especially the youths and children in which they did not get their portion

to have entertainment for their own. So, this stimulated the emergence of a few talented

film directors who were capable of manufacturing a new entertainment of motion

picture for the youths and children.

12 This blockbuster has commenced the resurgence of Hollywood. The

success of The Godfather was then followed by his next two blockbusters, Godfather II

(1974) and Apocalypse Now (1979).13 Coppola’s success in manufacturing blockbuster

was then pursued by Steven Spielberg with his Jaws, manufactured in 1975; and also

George Lucas by manufacturing Star Wars in 1977. This movie reaped $193.8 million

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in a single year.14 But Hoskins says it earned $325 million.15 These big films were

manufactured with big budget. Studios considered a film was successful if it made $10 -

$15 million. However The Godfather made $86.3 million in its first year.16 This film

earned three Academic Awards and $142 million in world-wide sales.17 The film

manufacturers learned that they could sustain themselves for several years with such

large sum of money.

The emergence of the blockbusters has really revolutionized the American movie

scene in general and Hollywood film industry in particular. The film content changed to

be more entertaining and provided more sensation to the audiences. It also thanked to

the advanced development of sound and filming technologies. The capabilities of the

movie experts in creating special effects have enhanced the quality of picture, sound,

and exhibition as a whole. The film manufacturers then knew the kind of film that the

American people wanted. They changed the target of the post-market segment from

adult to children and teenagers, because most of the audience of the blockbusters were

people aged 12-24 years old.18

Product advertising and product placement

The other strategy of Hollywood film industry to revive since the 1970s was to include

product advertisement within a film. Obviously this business provides Hollywood new

tremendous revenues since every product placement in a successful movie costs

millions of dollars. This is pointed out by Twentieth Century Fox Licensing and

Merchandising Corporation that ‘the studio will charge anywhere from $20,000 to

$100,000 or more for a product appearance in a major motion picture.19 The cost differs

in what way the product placement is set in the film. For example, if the product just

appears on the background, beyond the actors, --like Coca Cola vending machine or

McDonalds Restaurant--, the cost would be less expensive compared to the product

which is used, uttered or handled directly by the movie star. For instance in most of

James Bond films BMW cars always becomes the main vehicle of this character and

Rolex watch always decorates his wrist. This will push the fee high, because

psychologically audience will be more or less influenced by the appearance of a brand

of certain product directly worn by the actor. However, they do not realize that it is a

part of advertising business.

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Tie – in

The boundaries between tie-in and merchandising are getting more and more indistinct.

More often than not, these two terms overlap. In this paper, tie-in is regarded as

promotional campaigns tied to specific films, but associated with products not within

the movie, nor based on characters or objects in the movie. The best examples for tie-ins

are probably the inclusion of a 60-second Pizza Hut commercial and coupon book good

for $20 in food and Pepsi products at Pizza Hut restaurants on the Teenage Mutant

Ninja Turtles videocassette. 20 We know that the Turtles (the characters in the movie)

have strong appetite for pizza.

The tie-in between Ninja Turtles and Pizza Hut is logical, but instances like this

are not always clear in their logical connection. We can look at George Luca’s film

Willow. It is estimated that over $50 million in marketing tie-ins is riding on this movie.

The companies involved in these joint promotions are among others: General Foods,

Hunt-Wesson, Kraft, Wendy’s International, Tonka Toys, Parker Brothers, and random

House.21

It is apparent that most of the tie-ins came from companies, which had no literal

connection with the film –after all, no one in the movie actually eats Kraft Cheese or

Quaker oats.

Merchandising and licensing

Merchandise here is considered as commodity based on movie themes, characters or

images which are deliberately designed, produced and marketed for direct sale. While

licensing is described as a “legal mechanism by which one party legally obligates itself

to pay the holder of a copyright or trademark a specific royalty in order to use a name,

likeness or image.”22 Thus, licensing is the legal act –the process of selling or buying

property rights to produce commodities using specific copyrighted properties. On the

other hand, merchandising can be thought of as “the mechanical act of making or selling

a product based on a copyrightable product.”23

Hollywood has applied this strategy by making a special character of a film more

recognized and well remembered by people/ audience. When people are watching a

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movie, there must be a star or character that the audiences know and remember. For

instance Batman, Superman, Star Trek, Star Wars, dinosaurs in Jurassic Park etc.

Those characters are easily remembered by audience, especially children. Those main

characters are then transformed into other forms like toys, clothing, beddings, books,

cartoons, video games, soundtrack etc. Star Wars pioneered the successive blockbusters

to be mass-manufactured not only in the form of film. In fact this new marketing

strategy is proven successful world wide. The comic strip characters like Batman,

Superman are mostly loved by children. The toys resemble the real movie characters,

such as Batman, and dinosaurs.

The manufacturing of these products have given enormous additional revenues for

the Hollywood film manufacturers. Luca’s Star Wars Corporation, which was selling

film-related books and artefacts, earned around $200 million after the release of the

first feature and Steven Spielberg’s Spaceballs (1987), through his ‘Space Balls toilet

paper’ earned $105 million.24 Other examples are the replica of Rambo’s knife

($2,250), Bugs Bunny greeting calls (1-900-VIP-BUGS), and Gone with the Wind

wine.25

In addition, some of the larger entertainment companies now offer generic movie

or studio merchandise. For example Warner Brothers hats, jackets, and mugs, miniature

movie clapper boards, and mock Academy Awards. These items are sold through the

studios’ catalogues or “entertainment stores,” such as Suncoast Motion Picture

Company. The Hollywood Chamber of Commerce has joined in, marketing trading

cards based on stars featured on Hollywood Boulevard’s “Walk of Fame.”26

Probably the most notable film trend of recent years is the popularity of the sequel—a

movie that continues a story started in an earlier film. Hollywood is very fond of

making sequels. There are many examples of such strategy, e.g.: after the release of

Godfather II, which began this recent trend, was quickly followed by Rocky II, III, and

IV. Star Trek II, III, and IV, Superman II, III, and I, and the latest, Jurassic Park which

was then followed by The Lost World. Some films were regenerated from the

predecessors which had been successfully released long time ago, e.g.: Jaws which was

Thus,

Hollywood increasingly has been selling itself in merchandisable forms.

Sequels making

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then reincarnated in The Deep Blue Sea. In 1983 a record sixteen sequels were released.

Then fourteen more followed in 1984.27 Even some sequels were threatening to go on

forever, like Star Trek for instance. The most motivating factor behind the large number

of sequels released is an economic one. As films cost more to produce, Hollywood

financiers believe it is less risky to finance a story and a cast of characters that already

have proven box-office.28

Conclusion

The disadvantageous filmmaking atmosphere during 1960s forced Hollywood

major studios to cooperate with one another in order to survive. The similarity that they

all had was that the studios believed in the synergy evoked from the vertical integration.

The emergence of new technologies i.e.: VCRs, VCD and DVD players, Cable and

Digital TV in fact have reinforced the income of Hollywood studios for more

diversified revenues. Thus, theatrical exhibition was not the mere outlet for Hollywood

movies.

More outlets more revenues has become Hollywood’s commercial aesthetic.

Product advertising and product placement in movies became more deliberate and more

organized compared to the previous period. In addition, Hollywood major studios even

have collaborated with other big companies that want to advertise their products in

Hollywood movies. This tie-ins strategy undoubtedly provides additional revenues from

tents to hundreds of thousands of dollars.

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Notes

1 Wasko, J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p.268. 2 As a depiction, in the 1930s and 1940s half the cost of film production was spent on salaries. It did set standard and condition that potential competitors would find hard to match, and accordingly it preserved the monopoly of the major companies. It was said that the annual salary of Louis B. Mayer, head of MGM, in 1930s had been $1.2 million. See Maltby, Richard (2000) Hollywood Cinema. Oxford: Blackwell Publishers Ltd, p. 79. While in 1990, Steven J. Ross (Time Warner) topped Forbes’ list of best paid chief executives, receiving combined compensation of $302 million. See Wasko, J. (1996), p.248. 3 Fadiman, W. (1973) Hollywood Now. Cambridge: Cambridge University Press, p.9 4 Dominick, J.R. (1996) The Dynamics of Mass Communication. New York: Mc graw-Hill Publishing. p.264 5 Dominick, J.R. (1996), p. 264. 6 Dominick, J.R. (1996), p. 264. 7 Maltby, Richard (2000) Hollywood Cinema. Oxford: Blackwell Publishers Ltd, p. 72. 8 Cited in Wasko J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p. 242. 9 Hoskins, C. et al. (1997) Global Television and Film: An Introduction to the Economics of the Business, New York: Oxford University Press, p. 53. 10 Hoskins, C. et.al. (1997), pp. 57-8. 11 Cited in Thussu, Daya Kishan (2000) International Communication: Continuity and Change. London: Arnold Publishers, p. 178. 12 Fadiman, W. (1973) Hollywood Now. Cambridge: Cambridge University Press, p.8 13 Dominick, J.R. (1996) The Dynamics of Mass Communication. New York: Mc Graw-Hill Publishing Company, p.270. 14 http://www.cc.emory.edu/EMORY_REPORT/er…/2000/April/erapril.10/4_10_00cook.html. 15 Hoskins, C. et al. (1997) Global Television and Film. New York:.Oxford University Press, p.121. 16 http://www.cc.emory.edu/EMORY_REPORT/er…/2000/April/erapril.10/4_10_00cook.html. 17 Jacobs, Diane (1977) Hollywood Renaissance. London: The Tantivy Press, p.109. 18 Jacobs, Diane (1997), p. 122 19 Wasko, J. (1996), p. 189. 20 Wasko, J. (1996), p. 197. 21 Wakso, J. (1996), pp. 197-8. 22 Wasko, J. (1996), p. 203. 23 Wasko, J. (1996), p. 203. 24 Baughman, J.L. (1997) The Republic of Mass Culture. Baltimore: The John Hopkins University Press, p.207. 25 Wasko, J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p.203. 26 Hoskins, C. et al. (1997) Global Television and Film. New York:.Oxford University Press, p.221. 27 Hoskins, C. et.al. (1997), p. 270. 28 Hoskins, C. et.al. (1997), p. 270.