The Evolution of Hollywood: From Studio System to Conglomerate Era
The Changing Industry Structure in the 1980s
In terms of the structure and conduct of the studios, the most significant development in the 1980s was the concerted move toward “synergy” or “tight diversification” – a key aspect of the film industry for the next two decades. This was a function of the studios’ efforts to become more efficient multi-faceted media corporations, focusing on their filmed entertainment divisions while taking full advantage of new delivery systems and revenue streams. The quest for synergy was spurred by multiple factors, notably the dramatic growth of home video and cable, the Reagan-era policies of deregulation and free-market economics, and the obvious impulse to enhance and exploit the value of their blockbuster hits.
Some cases involved radical expansion via acquisition (Coca Cola’s purchase of Columbia in 1982 and News Corporation’s purchase of 20th Century Fox). Although Coke-Columbia failed, News Corporation-Fox proved to be one of the most important mergers in industry history. They created Fox TV, and it was soon competing successfully with ABC, CBS, and NBC. They also highlighted the importance of the Reagan administration’s free-market economic policies and media deregulation campaign and the deregulation of the Paramount decree that prohibited buying theaters since 1948. Another key regulatory concern was the FCC’s Financing and Syndication (Fin-Syn) rules (1970) that prohibited the networks from owning and syndicating their own programs, as well as the cross-ownership of film studios and TV networks.
During the 1980s, new studios rapidly emerged. The most important were Orion and TriStar, rising to “mini-majors.” A few other companies also rose, like Carolco, Vestron, Cannon, DEG, and New Line.
The 1990s and Beyond: The Studio System in Conglomerate Hollywood
Ovitz’s role (from CAA talent and leading agency) in the Sony-Columbia and Matsushita-MCA deals underscored the power of Hollywood’s top agents and talent agencies. These two acquisitions, and the 1989 merger of US media titans Time Inc. and Warner Communications, marked a watershed in Hollywood’s history, as the logic of synergy and tight diversification met the larger forces of globalization, digitalization, and US media deregulation. In five years (1990-1995), the New Hollywood rapidly transformed into Conglomerate Hollywood. Four of the eight original Hollywood studios were foreign-owned.
At that point, all of the US broadcast TV networks were directly aligned with a Hollywood studio, and all were owned and controlled by global conglomerates. Indeed, they had attained oligopoly status by the early 2000s, with six companies: News Corporation, Sony, Time Warner, Viacom, Disney, and General Electric.
The strategic view was bolstered enormously by the foreign market surge during the 1990s, as media conglomeration and globalization proved to be mutually reinforcing phenomena, with Hollywood-produced blockbusters as a principal catalyst.
The “Indie Film” Movement
While studio-produced blockbusters are the prime movers in the global movie marketplace, the domestic US market since the early 1990s has become increasingly split between major studio releases on the one hand and low-budget “indie” films on the other.
The acquisition of successful independents like Miramax and New Line was one of the two key strategies deployed by Conglomerate Hollywood to commandeer the indie movement. The other was to launch indie divisions of their own. The first of these conglomerate-owned indies was Sony Pictures Classics, created in 1992.
This market has been dominated by genuinely independent producers who were responsible for their own financing, although these companies invariably relied on the studios for distribution.
As these trends indicate, the indie film movement by the early 2000s had developed into a highly complex industry phenomenon due to the proliferation of new players, many of which gained instant status and leverage thanks to breakthrough hits, as well as the conglomerates’ multiple indie film divisions.
Reconciling the “Two Hollywoods”
Some major fault lines have developed in Hollywood during the conglomerate era, most notably the rift between the conglomerate-owned companies and the true independents, as well as the rift between the blockbuster-driven mentality of the major studios and the indie-film ethos of all the other Hollywood producer-distributors.
“Independent cinema has quickly become a victim of its own success, a success that has made the independent film game look more and more like a microcosm of the studio.” – Schamus 1998
Payne: “Cinema is independent only to the degree that it reflects the voice of one person, the director.”
The two Hollywoods could not exist without one another in structural and economic terms, and Conglomerate Hollywood provides a remarkable range of creative opportunities for filmmakers with the talent, clout, inclination, and audacity to pursue them.
New Millennium – New Equilibrium
Besides bringing welcome new funding into the studio coffers, this massive infusion of studio production financing signaled two other key aspects of Conglomerate Hollywood’s development. First, large investors were satisfied enough with the conglomerates’ fiscal “transparency” and responsibility to tolerate the byzantine nature of motion picture accounting and the studios’ reputation for financial chicanery. Second, the worldwide movie marketplace was now so lucrative that it is difficult for Hollywood-produced blockbusters not to make money.
Edward Jay Epstein, among the most thorough and insightful industry analysts of recent years, notes that the “relentless marriages” between film studios and TV networks have been a defining feature and ultimate outcome of media deregulation and conglomeration, and “the union between Hollywood and TV has paid off handsomely.”
Conglomerate Hollywood reached a new equilibrium in the early 2000s, whereby a balance and integration of its overall media operations generated record revenues and profits while enabling the Big Six media giants to enjoy collective dominion over an ever-expanding entertainment market.
Although a format war over next-generation DVD technology may prove troublesome to Conglomerate Hollywood, it is not likely to upset the new equilibrium enjoyed by the media giants.
News Corporation acquired three internet companies.
The rise of Google is but one indication that Conglomerate Hollywood faces serious changes in terms of media distribution and digital delivery, which could lead to yet another revolution of the magnitude of those described by Glaber.