Entertainment: New Gold in the Hollywood Hills

One reason that there was no business like show business was because show business was hardly a business at all. The flamboyant, self-made movie moguls of the past had little understanding of ledgers or cost accounting; they made money almost despite themselves, a feat no longer possible under the pressures of TV and increasingly selective audiences. Nowadays, there is an acute awareness that the movie industry is big business—and that it must be run like one.

Hard evidence of that fact emerged on two fronts last week. Columbia Pictures, immersed in a taut fight with dissident stockholders, won a pledge from the Banque de Paris et des Pays-Bas, which had recently acquired a 20% interest in the company, that it would stand by the present management. That beat off the challenge of the takeover-minded dissidents, at least for the time being. At the same time, small but glowing Seven Arts Production Ltd., headed by ex-Tire Executive Eliot Hyman, announced that it would purchase 1,600,000 shares of Warner Bros., giving it one-third of the stock and control of the company. Seven Arts will pay $32 million for the shares to Jack Warner, last active brother of the four who founded the studio 43 years ago. Warner will now retire, and it seems all but inevitable that Seven Arts and Warners will eventually merge, with Seven Arts the surviving company.

Old-Film Bonanza. Mergers to gain new management, more operating cash and some diversification are today’s fashion. Last month Paramount Pictures became part of Gulf & Western Industries, which has grown into a widespread company with $317 million in sales. United Artists, though enjoying robust health after its Bond and Beatles bonanzas, is nonetheless looking for further monetary security as well as diversification. A proposed merger with Consolidated Foods was recently turned down by stockholders. But the company is still looking, with Transamerica Corp., a financial holding company, currently said to have the inside track. Such hardheaded business decisions may not please Hollywood’s art lovers, but the trend has mightily impressed Wall Street’s moneymen. Variety reported that during the last month movie stocks have risen a phenomenal 40% .

Part of the newly strong financial position of Hollywood is due to an old nemesis—TV. It was TV, coupled with a 1948 Supreme Court action which ultimately caused the studios to divest themselves of theater chains, that put the skids under the movies’ fat years. Attendance in 1946, 1947 and 1948 was at an alltime high of 90 million a week; by 1958 it had plummeted to 40 million. Since then it has slowly climbed to 46 million; that was not enough. But TV had discovered movies, and suddenly the storehouse of old films was the studios’ gold mine.

Ironic Help. Some studios now derive as much as a third of their income from TV. Not only do they produce TV series, but to satisfy insatiable TV they are selling off rights to more and more recent films. Movies fill prime time five nights a week and will soon fill six. After ABC bought rights to Columbia’s The Bridge on the River Kwai for $2,000,000 and scored a ratings blitz, the networks were convinced, if they had had any doubt before. Within days, three studios had been paid $92,500,000 for 118 films. Among them was 20th Century-Fox’s Cleopatra, perhaps the most wildly unbusinesslike spectacular ever produced. Originally budgeted for $2,000,000, it wound up costing $40 million. It was only the $5,000,000 paid for TV rights that finally made the near-disaster into a moneymaker.