Paramount Pictures Corporation

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Paramount Pictures Corporation

5555 Melrose Avenue
Los Angeles, California 90038
U.S.A.
(213) 468-5000

Wholly owned subsidiary of Paramount Communications, Inc. (formerly Gulf & Western)
Incorporated: 1916 as Famous Players-Lasky Corp.
Employees: 2,500
Sales: $1.86 billion

Adolph Zukor, the founder of Paramount Pictures, spent most of his life establishing and supervising one of the largest and most successful motion picture companies in the history of the entertainment industry. Zukor was born in Hungary in 1873, but emigrated to the United States at age 15. He arrived in New York with $40 hidden inside his waistcoat, and got a job sweeping floors in an East Side fur store. By the turn of the century, he was the owner of a prosperous fur business in Chicago.

Eventually Zukor returned to New York in search of new investment opportunities. There he met Mitchell Mark, an owner of penny arcades. These arcades, where customers paid pennies to see a short moving picture, were both popular and profitable. Zukor and Mark soon formed the Automatic Vaudeville Arcades Company with Zukor’s friend Marcus Loew. A short time later, they were operating their own separate companies as owners of nickelodeons, where for a nickel customers could see a short movie.

It was a short step from nickelodeons to full-scale variety shows for Zukor and Loew. Combining movies and vaudeville acts, the men pooled their resources and established Loew’s Consolidated Enterprises in 1910 with Loew as president and Zukor as treasurer. By 1912 they controlled a growing number of theaters, including New York’s Crystal Hall on 14th Street. But Zukor became intrigued by the possibilities of film production, particularly for longer shows (until that time, films had been arbitrarily kept to one reel, or ten minutes, by a consortium of the largest film distributors and licensers). He sold his interest back to Loew for a handsome profit and bought the American distribution rights to a four-reel French production of Queen Elizabeth, starring Sarah Bernhardt.

After a tremendously successful opening of Queen Elizabeth at New York’s Lyceum Theatre, Zukor founded a new company, Famous Players in Famous Plays (later shortened to just Famous Players), to begin producing movies. The company’s first four releases—The Count of Monte Cristo, The Prisoner ofZenda, His Neighbor’s Wife, and Tess of the d’Urbervilles —were moderately successful, but it was not until Zukor signed Mary Pickford that Famous Players started producing hits and making money. By 1913, his firm had increased its production to 30 pictures a year.

In 1914, Zukor met Jesse Lasky. Lasky had established the Jesse L. Lasky Feature Play Company in 1913 with himself as president and Cecil B. DeMille as director general. The firm’s first production effort was The Squaw Man, directed by DeMille, and was soon followed by Rose of the Rancho and The Virginian. In its second year, the company released 36 pictures. When Zukor offered a 50-50 partnership in a joint Famous Players-Lasky company in 1916, Lasky didn’t hesitate to accept the opportunity. Flattered by the offer and foreseeing a lucrative future for the combine, Lasky allowed Zukor to appoint himself president; Lasky, vice president in charge of production; and Cecil DeMille, director general. Samuel Goldfish (later Goldwyn) was made chairman of the board.

Two months later, Zukor bought a majority of the Paramount Company, the film-distribution company that both Zukor and Lasky had signed with in 1914. Meanwhile, the creative tempo was so great at Famous Players-Lasky that an average of more than two pictures emerged every week between 1916 and 1921. The awkward name of Zukor’s firm was soon replaced with Paramount, the distribution company’s name and trademark. One of the most familiar slogans in the film industry—”If it’s a Paramount Picture it’s the Best Show in Town”—was created soon after.

Paramount’s large organization began to expand rapidly in the early and mid-1920s. At first Zukor began to build a large theater chain by buying or building showplaces for the company. In 1924 he went overseas and opened the Paris Paramount and the London Plaza. At the same time, Paramount developed a worldwide distribution network and opened studios in London, Berlin, and Bombay, in addition to its American ones.

The studio reached its peak in the field of silent-film making with DeMille’s blockbuster The Ten Commandments in 1923. Yet scandal cast a shadow over Paramount and the movie industry in general when one of its stars, Fatty Arbuckle, was accused of rape and manslaughter and then acquitted in a much-publicized trial. This and several other events caused a public outcry against immorality in the movies, and DeMille’s spectacular productions came under criticism. After an argument with Zukor over artistic differences and rising production costs, DeMille left the company.

Even though Paramount was making more money—a steady $5 million a year—than Warner, Fox, and Universal, Zukor was obsessed with maintaining his company’s supremacy in the industry. He began a theater-buying campaign that amassed single houses and entire circuits, paying for many of the acquisitions with Paramount stock. By 1930, the firm’s movie-house division had grown to include almost 2,000 units and was named Publix Theaters; that year the company’s name was changed to Paramount-Publix.

The significance of the Warner Brother’s 1927 movie The Jazz Singer, with its brief sequences of song and dialogue, was not lost on Paramount. Warner Brothers had used the Vitaphone sound system for this movie, but Zukor decided to go with Fox’s new development, sound-on-film Movietone, which was more technically reliable and easier to handle. Paramount used it in Wings and won the first Oscar for best picture, in 1929.

In 1930 the company’s stable of stars was one of the most impressive in Hollywood; it included Fredric March, Claudette Colbert, Maurice Chevalier, Kay Francis, Walter Huston, Gary Cooper, William Powell, Carole Lombard, Harold Lloyd, W. C. Fields, and the Marx Brothers. Over the next few years, Paramount also contracted Tallulah Bankhead, Marlene Dietrich, and the inimitable Mae West.

Prosperity and success at Paramount did not last long, however. In 1930 the firm recorded a profit of $18 million, but by 1932 the Depression was at its height and the studio ran a deficit of slightly more than $15 million. The main problem was the Publix theater chain. Many deals during its growth were made by paying owners of theaters Paramount stock, fully redeemable at a fixed price and fixed date. But too many redemption dates came in the middle of the Depression, and the company could not pay. Hundreds of company employees were forced to leave, while others accepted huge salary cuts. Paramount-Publix went into receivership in 1933. When in 1935 it emerged from bankruptcy as Paramount Pictures Inc., John Otterson assumed the position of president, Emanuel Cohen was named studio chief, and Adolph Zukor became chairman of the board. The one bright spot during these years was the return of DeMille.

Sustained by Bing Crosby musicals, DeMille spectacles, and sexy Mae West comedies, Paramount announced a $3 million profit in 1936, a profit of $6 million the following year, and $12 million the next. Despite this turnaround, both Otterson and Cohen were drummed out of the company; Barney Balaban became president in 1936 and Y. Frank Freeman took over as vice president in charge of production in 1938. They lasted until 1966 and 1959, respectively.

The stability that Balaban and Freeman gave Paramount led to a $13 million profit in 1941; by the end of the war, its profits had topped $15 million. The hits of Crosby, DeMille, and West in the 1930s had given way to the more sophisticated and elegant comedies of Ernst Lubitsch, Mitchell Leisen, and Preston Sturges. The number of Paramount releases also dropped, from 71 in 1936 to 19 in 1946 as the studio concentrated on quality over quantity. Leo McCarthy’s Going My Way won the Oscar for best picture in 1944—the company’s first win since Wings —and Billy Wilder’s Lost Weekend won it in 1945. These successes led to a phenomenal $39 million profit for 1946.

In 1948 Paramount, along with all the other major film companies, was found guilty of antitrust-law violations and ordered by the U.S. government to divest itself of all its theater holdings. Within a year, the company had sold the properties that Zukor had collected—and profits dropped from $20 million in 1949 to $6 million in 1950.

By this time, the company was feeling the effects of a growing television audience. The entire movie industry tried to fight back with visual inventions that the smaller screen couldn’t duplicate. Three-dimensional effects, Cinerama’s huge concave screen, and Twentieth Century Fox’s CinemaScope were some of the developments used to help increase box office receipts. Paramount came up with its own panoramic big-screen system, Vista-Vision, which was acknowledged to be a significant improvement over previous systems. But these technical innovations failed to increase revenues. Even though Paramount reported a $12.5 million profit in 1958 (the largest since 1949), it continued to suffer from a decline in theater attendance through the 1960s.

In 1965 George Weltner, the executive vice president of Paramount, led a group of dissident executives in a proxy battle to unseat the old management. (Freeman had retired in 1959, but Balaban had become chairman of the board in 1964.) While both sides were planning their strategies, Gulf & Western Industries (now Paramount Communications) offered to purchase the company at $83 a share, nearly $10 more than the market price. The offer was accepted at the annual stockholders meeting, and on October 19, 1966 Paramount became the first major film company to be owned by a conglomerate.

Paramount was incorporated into Gulf & Western’s leisure-time group. Charles Bluhdorn, the founder of Gulf & Western, appointed himself chairman of the board at his newest subsidiary, and Paramount began to produce hits like True Grit, The Odd Couple, Romeo and Juliet, Love Story, Rosemary’s Baby, and Goodbye, Columbus.

In 1970 a deal of far-reaching significance between Paramount and Universal studios was made. Bluhdorn and Lew Wasserman, chairman of MCA, agreed to combine their companies’ distribution outlets everywhere but in the United States. That new firm was enlarged ten years later when MGM became a joint owner. Since MGM had bought United Artists, foreign countries that had been served by four distribution networks were now served by one, United International Pictures.

In 1974 Bluhdorn relinquished his position as chairman of the board at Paramount to Barry Diller, a change in leadership that in no way diminished the company’s good fortune. The Godfather movies, each an Academy Award winner, were joined by The Conversation, Chinatown, Nashville, and Grease in audience popularity. It was also during this time that Gulf & Western added publisher Simon & Schuster and New York’s Madison Square Garden to its leisure-time group. When Adolph Zukor died in 1976 at the age of 103, after having been chairman emeritus for 12 years, he had lived to see the rebirth of his company.

A 1980 Oscar winner for Paramount, Ordinary People, was critical as well as a popular success. In 1981, the new champion of box office profits, Raiders of the Lost Ark, raked in worldwide rentals totaling approximately $200 million. Raiders had been turned down by four other studios by the time Paramount president Michael Eisner decided to take the risk. The film’s success was a tribute to his and chairman Barry Diller’s instincts. Eisner told Business Week in 1984 that unlike other studios, Paramount did not believe in market research. “Everyone thinks they can find a magic wand. But I would rather fail on my own judgment than on the judgment of some man in Columbus, Ohio,” he said. “I think about what I like not what the public likes. If I ask Miss Middle America if she wants to see a movie about religion she’ll say yes. If I say ’Do you want to see a movie about sex,’ she’ll say no. But she’ll be lying.” Eisner and Diller had worked together for several years, first at the ABC television network, then at Paramount. Their instincts had brought the studio a consistent string of big successes.

In 1984, after the unexpected death of Gulf & Western Chairman Charles Bluhdorn, Martin S. Davis took the helm at the holding company. Davis clashed with Paramount chairman Diller, and in late 1984 Diller left to head Twentieth Century Fox. A day later Michael Eisner resigned to head Walt Disney Company. Half of the company’s top executives followed them, leaving Paramount with a serious management crisis. Frank Mancuso, the former head of the marketing department, who had been with the company for 24 years, became Paramount’s new chairman.

After a brief but severe slump in earnings (in 1985 the motion picture group took the biggest write-off in its history) the soft-spoken Mancuso rebuilt the company’s upper echelon and Paramount began churning out blockbusters once again. Hits like Beverly Hills Cop II and The Untouchables helped Paramount account for 22% of all box office receipts in 1986.

Paramount’s television division did extremely well in the later 1980s as well. “Entertainment Tonight” was a huge success breaking into the first-run syndication market for the company and was followed by “Star Trek: The Next Generation,” “War of the Worlds,” “Friday the 13th,” “The Arsenio Hall Show,” and “Hard Copy.” While a fourth network run by Rupert Murdoch’s Fox Broadcasting Company provided a new outlet for Paramount’s TV division, the company’s network fare included such hits as “Family Ties,” “Cheers,” “MacGyver,” and “Dear John.”

By the end of the decade Paramount was making consistently hefty profits on its TV and motion picture operations. Nonetheless, like many entertainment companies, Paramount was unsettled by the merger-mania which seemed to be sweeping the entertainment industry late in the decade. When Time Inc. announced its intention to merge with Warner Communications to create the world’s largest media company, Paramount made its own bid for Time. Paramount’s bid was rejected by Time, and after a brief court battle Time Warner was created.

Although competition is growing stiffer as Hollywood studios become larger and better diversified, Paramount is well positioned for further growth in the 1990s. The company that struggled to produce a hit in the 1970s held nearly 15% of the domestic film market at the end of the 1980s and was a close second to industry leader Disney. With its television and motion picture teams firmly entrenched, Paramount looks forward to a bright future.