i know for instance with "stolen life," bette davis was the producer on that. warners had decided to give some of their top stars a chance to get capital gains and so they gave her a job of being the producer. they also gave it to errol flynn, he got a capital gains thing on a picture that i wrote called "cry wolf." he didn't care, but bette said, "okay i'm a producer, i'm going to act like one." they should have known this would be what she'd do. an agent named lew wasserman who represented mca, got the idea with jack benny on radio and then later jimmy stewart in the movies to incorporate the stars, one pillar of the system. (douglas gomery) he had them set up an independent company and then pay the company, rather than the star. hence, it would be taxed at approximately half the rate.

(narrator) with major company movies going to company cinemas first, independent theatres weren't able to compete. they could only show films after they were played out and forced by the studios to book their entire output, good or bad. although the majors controlled only 16% of the cinemas, they were winning 90 percent of the total cinema box office. (narrator) in the mid-30's, the national recovery act was declared unconstitutional but it took until 1948 for the supreme court to finally put its nail in the system's coffin. it ordered the majors to sell their cinemas and function as distribution and production companies only. the classic studio era was over. paramount was the first to consent and as a result, its profits dropped from $20 million

to $6 million in one year. the studios were so efficient that it was an oligarchy and the government came in and said, "no, no." it was much more efficient when the studios made movies, distributed the movies, and exhibited the movies. that ended in 1948 with the paramount decree. no more theatre holdings, no more cash flow, can't pay the overhead. (thomas schatz) you can't maintain and run the factory. when you own theatres, you knew that you had a seller. that a picture would go in and do so much money and you could depend on that. now without the theatres, you didn't have that insurance. so there was a tendency to cut back on production. when you cut back on production then you cut back on your list of stars, writers, directors and producers. the separation of the theatres, from the studios took place at the luckiest time for hollywood that ever could have happened, because it happened

when television was coming in and ruining theatre business. in the mid-40's, the movie theatres in america played to 90 million people per week. in the late 50's, it was down to 16 million per week. that's what forced the studios to cut back on production. kinda like the railroad business thinking they were in the railroad business, not the transportation business and stayed out of the airlines. the studios thought they were in the movie business, not the entertainment business. so when television came on they got very frightened. i can remember growing up, seeing ads, or seeing logos on rko theatres and loews theatres saying, "don't watch television, go to the movies." what the studios decided to do was since they had a lock on, literally, international movie distribution. (thomas schatz) they had an absolute lock on domestic in the u.s. and they continue to distribute movies, they would finance movies produced on their premises.

they would lease the premises to the "independent producer." now, obviously they would invest in the picture. that investment would be returned. we thought the independents were second-class people, because we were with the majors and we were with the big time. and little by little it sort of dropped off where the majors became the rental outlets for the independents and they became the big ones. a producer, harold mirisch, came into the company. a wonderful guy and a very good businessman. he made the first deal where an actor got 10 percent. i think it was a picture with burt lancaster i think, where he got 10 percent of the gross. and then jimmy stewart, who made a 10 percent of gross, deal with him from the first dollar. and that made the actors your partners. then in 1951, a couple of sharp new york businessmen, benjamin and arthur krim, took over united artists and set up a whole system just to do that. not to own theatres, but simply distribute

on a worldwide basis, productions done by stars, by directors, other independents. exclusivity was what made the studio system work. and once there were non-exclusive contracts, which was true by say, '55, the studio system was over. the actors were beginning to be appreciated by the people, not for their general appeal, but for their particularity. and every effort was made within this system to stamp out particularity, individuality. and the only reference was to successes in the past. well, since we're here on friendly conclave, how about the contract? come on now, it's growing whiskers. well i'm -- i'm having trouble with it. trouble, what sort of trouble? you tell me. i've got broad shoulders. charlie, people can speak frankly to me. you're in a position which entitles you to make the highest demands, so please, you tell me

your innermost thoughts. i don't want to sign the contract. when i first came here, i was completely ignorant of the movie business. i had never been in a studio. (harrison ford) about six months later i was under contract and lasted a year and a half. it turns out that they could have no respect for somebody that they paid $150 dollars a week. so they were really not willing to cast anybody that they caught on that kind of bait. who are you? are you some kind of special aristocracy because the female public wants to make love with you? who are you with your dirty, unmanicured fingernails? and what, what are you without hoff federated behind you? i built the studio, i, i with my brain and my hand, i ripped it out of the world. with my brains and my hands and who are you? i have some experience with these 40's throwbacks, and they were still attempting to do that.

(harrison ford) very few of the people that i was under contract with are survivors of that experience. i'll break you. i'll break you. i think one great aspect of hollywood is the genius that they could re-transform the system, as it's going on, despite government intervention despite a great social change in the society, in terms of suburbs and despite new technology, maintain their power based on distribution and production only. (narrator) the triumph of the t.v. in the 50's forced paramount to create vistavision. epic movie productions were designed to combat the 40 million small screens already in u.s. homes. behold his mighty hand. (strong winds blowing and dramatic music playing)

(narrator) the end of the 50's saw the death of ace showman, cecil b. demille at a time when it seemed inevitable that television would continue to steal the cinema audience. paramount had successfully expanded into t.v. production to cushion its movie losses. but the early 60's, produced few movie classics. this was a time of uncertainty and loss of direction. the great paramount tradition, whatever it was, was only what the executives who ran it at the time made it. (michael eisner) but that all ended when television came and you know for a while mgm was the company

that made movies that cost and did nothing. paramount was in deep trouble and the movie business kind of ended becoming a vestigial appendage of the entertainment business until the television group came in and realized entertainment is entertainment. (narrator) concern for future survival, rather than a glorious past prompted the studios to begin stripping assets they could. costumes, props and valuable memorabilia went to auction or were junked, also their reference libraries. paramount went as far as to sell all the movies it had made before 1949 to universal. outside business conglomerates who did see value in what the studios had and might still produce began shopping for the beleaguered companies. paramount became the first major film company to be bought by a conglomerate when gulf western industries purchased it in 1966.

the studios really were doing very badly on their own. they were simply out of money. i mean, paramount was broke. so if a conglomerate came in, that represented cash infusion. they come out of the harvard business school and they know pictures within six months, or at least they think they do. (peter bart) there was concern, what do these people know about the movie business? but the movie business was in the toilet, so what matter... what matter did it make, whether they knew anything about the movie business? people who were running the movie business in the 60's had screwed things up so badly that many people in hollywood felt: listen, new blood, irrespective of what it means, is welcome. (edward dmytryk) even way back, 70 years ago, i always thought the attitude of the executive, those who ran this business, was that it was going to collapse in two years, so d---- it, let's make the most we can out of it. let's get all the money we can right now and let's not waste any on things like research and all because it's down the drain.

and it still exists. they're still afraid that two years from now they'll be out. hold it! hold it! (michael eisner) economic parameters are often good in a creative sense. i have always believed you create a financial box, you put the creative people inside the box, including yourself, you run around the box as fast and as often and as crazy as you want, but when you break open the box and it falls apart, you have somebody come in and hammer the box back closed and continue. and if you don't do that, you may have a short career. fall down! (crash) or your company may go broke. (crash) or both. (crashing and screaming) (narrator) charles bludhorn, president of gulf and western so fell in love with the movie business

that in the first years of his control of paramount, budgets soared. (peter bart) he caused to be made some mind-bendingly expensive films such as, "darling lili," and "paint your wagon." those two pictures together were incredible flops and they'd break any normal person's heart. but he didn't give up. i mean, he decided, okay, i may not be a genius at filmmaking, let's see these hollywood guys, let's see what they can do. and all of a sudden, every time a picture opened up, like "love story," there were lines. every time you went to the movies in that era, it seemed like you were surprised. you were surprised by the look of the picture. what it said, like "midnight cowboy." the music, like "harold and maude." there was always something that was new. (peter bart) why? companies were disorganized, cause the staffs were so small. because in the late 60's and the early 70's,

all rules in our society have been thrown away. everything in "the godfather" was in some ways innovative. it looked different, it sounded different. we've changed the face of filmmaking, because it became the first of what is now an "event picture." now the success "the godfather" brought also was a portent of what was later to happen and that is that pictures that did well in the u.s., all of a sden would do well ovseas. and the picture of course became a blockbuster overseas. the casting was very unorthodox. everyone assumes well, al pacino, diane keaton, jimmy caan, obvious choices. i mean, when charlie bludhorn president of gulf and western first saw the test of pacino, he was screaming about, "get that out of the picture!" that's a terrific story and we have newspaper on the payroll, don't we tom? they might like a story like that. they might, they just might.

it's not personal, sonny, it's strictly business. i do tend to see that kind of '67, '68 to '75 as a charmed interval, kind of the last interval before the rise of "the new hollywood." (theme music to "saturday night fever") (narrator) new hollywood arrived with the video cassette, cable technology and the multiplex cinema. it was the decade of a younger than ever market. of the george lucas and steven spielberg family. powerful talent agencies emerged as power brokers and management at paramount addressed the need for change. (theme music to "saturday night fever")

we were t.v. guys. it was kind of worse than being a deprived ethnic group. we were t.v. we weren't invited anywhere, it was terrific. we just had to do what we did and we used t.v., in the pejorative sense, people like john travolta, john badham and barry levinson and all of the people today, major motion picture people, we used back then when they were all, like, in the ghetto with us. (shot fired) with the exception of "raiders of the lost ark," most of our successes were things like "elephant man" and "ordinary people" and "terms of endearment" and "saturday night fever" and i can name 10 others. (theme music to "jaws") all little movies made with new people, new directors and new actors.

we went after the little movie that became the big movie. (dramatic music playing) our philosophy was, do what nobody else was doing. stewardess? hmm. how soon do we land? oh, it won't be long now, try not to worry. (explosion) (phillip noyce) nowadays, a director like me gets hired for a project. so it's much more of a free-for-all. what this means of course is that that talent, whether it's acting, writing, directing, or whatever that's in demand is able to demand more money. but it also means that there's not necessarily a continuity of style that comes out of one studio, because there are so many diverse talents working.

and i think that as a result of the discontinuity, there's probably more onus on the creators of the picture than there was in the old days. the degree of independence that one achieves at a certain amount of success is the true reward, the most important issue is to have that freedom to choose your projects. to be independent of a studio's conception of what you should do might be. now, i'm getting a million to direct a picture. and the actor's getting $14 million. was he going to listen to me? no, i mean, i say to him, give me a little feeling here, he says, i don't feel like it today, let's do it tomorrow. (howard koch) everybody's too independent.

the directors are the auteur, you can't even talk to them. they're the boss and you've got to talk to them, it's tough. i don't care who you are, who the studio head -- and in zanuck's day, they couldn't, cause zanuck would tell them that they're going to kill 'em. process is depersonalized. there is no one voice speaking for the studio, too often. (peter bart) when you consider a script, it's tested and researched. the newspaper, pick a story, any story. all right. "immigrants protest budget cuts in literacy program." human spirit overcoming economic adversity. sounds like horatio alger in the barrio. jimmy smits makes it a sexy "stand and deliver." (peter bart) committees are not very satisfying entities to work off for a filmmaker. and they're not conducive to creative decisions. how about "mud slide kills 60 in slums of chile"? that's good. triumph over tragedy. sounds like a john boorman picture. you slap a happy ending on it, the script will write itself. i was just thinking what an interesting concept

to eliminate the writer from the artistic process. just get rid of these actors and directors, maybe we got something here. i know every studio chief in hollywood, personally. and if you have dinner with any of them the one thing they'll say is, "look, business is bad, we're making lousy pictures. product is mediocre." part of the reason, the key reason it's mediocre is because of the committee system. never existed in the studios until this moment in history. (music playing) (thomas schatz) i see paramount and disney, particularly, as trying to get back to something more systematic.

something more efficient, more industrially integrated. did we just see the beginning of a new life form? yes, captain. we've witnessed a birth. possibly a next step in our evolution. (captain) i wonder. well, it's been a long time since i've delivered a baby and i hope we got this one off to a good start. i think we gave it the ability to create its own purpose, out of our own human weaknesses. and foolish human emotions, right, mr. spock? quite true, doctor. unfortunately, it will have to deal with them as well. there's a return to integration but it will never be that vertical integration of production, distribution, exhibition. the fact that a "batman" or a "star trek" is as liable to be experienced by people as a video game, or action toys, or comic book, or a novelization, the way the system can be integrated now is more complicated. paramount owns the largest publishing company

in the world, simon and schuster. one of its largest subdivisions is devoted exclusively to "star trek," exclusively to "star trek." and on that score, one wonders whether the system could ever be as systematic, as efficient, as productive as it once was. take us out. (theme music to "star trek") (narrator) in '94 paramount was purchased, this time for $10 billion by viacom and blockbuster entertainment. now a global media powerhouse of enormous proportions, the takeover shows new confidence by big business

in the major studios' ability to reassert power, influence. they created a giant cultural imperialism where they've managed to make -- where one town virtually has managed to make its cinema ... world cinema. hollywood system is the best system to screen your movie. it may not be the best system to make your movie in, but it certainly is the best to deliver it to an audience with one of those stamps stamped on the front of it. (mace neufeld) you have to have the kind of resources that a paramount has, or a warners, or a universal to weather a period of what could be big losing films. and with a consolidation of power with the major studios i think it's inevitable that the studios will begin to put more people under contract

so that they're in a better competitive position. that they don't have to bid on the open market. in looking back on it now, we had it good in those days, because now it really is a rat race. and i'm glad i'm not connected with it. the new system demands success. it rewards it, but it also punishes failure. that's the answer. that's the sound byte. (sounds of film projector) nice job of cutting, tom. thank you, mr. shields. nice work. thanks.

beautiful production. beautifully written, jim. beautifully produced. harry, tell chapman his photography's perfect. wonderful wasn't it? and congratulate walter on his sets, lucienne on her costumes and boris on his score. yeah, i liked the music. and tell the director he should have his head examined. he shouldn't have shot the picture, he should have shot himself.