GoodTimes Entertainment Ltd.

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GoodTimes Entertainment Ltd.

16 East 40th Street
New York, New York 10016
U.S.A.
Telephone: (212) 951-3000
Fax: (212) 213-9319
Web site: http://www.goodtimes.com

Private Company
Employees: 500
Sales: $475 million (2000 est.)
NAIC: 512120 Motion Picture and Video Distribution

Operating out of New York, GoodTimes Entertainment Ltd. is primarily a video distributor, producing many of its own titles while also acquiring programming from third parties. Since its foundation in 1984, the company has constantly adapted to changing conditions: reliance on inexpensive public domain movies gave way to the development of fitness videos, then original animation and live action features, a foray into book publishing, and eventually a video game software distribution operation that resulted in the spin-off of GoodTimes Interactive. The company has also sought to branch out into a wide range of tie-in products connected to celebrities such as Richard Simmons and Naomi Judd. In recent years, GoodTimes has sought to find niche video markets, becoming heavily involved in Christian product as well as Broadway shows.

The Cayre Brothers in 1969

The founders of GoodTimes are brothers Kenneth Cayre, Joseph Cayre, and Stanley Cayre, the offspring of Syrian immigrants. Their father was a small-time businessman, who during the 1940s sold whiskey and cigarettes on a Caribbean pleasure boat, then later owned a souvenir shop in Miami Beach. Rather than attend college, the Cayre brothers went into business together and moved to New York, where in 1969 they started a record label, SalSoul Records, which licensed and distributed Latin music. Because of their Miami background, the brothers had a better sense of the popularity of Latin music than the major record labels. Over the next several years, helped in large part by staging concerts of imported Latin stars, SalSoul gained a 70 percent share of the Latin record business, issuing eight to ten records each month and generating nearly $50 million in annual revenues. The majors eventually took notice and entered the market. That development, along with a general malaise in the record industry, led the Cayre brothers in 1979 to sell most of their catalog to their distributor, RCA, for $100 million.

Joe Cayre then began searching for a new business for the family, narrowing down the possibilities to cell phones and videos. The brothers chose the latter, since the video business was more in keeping with their experience in records. In the early 1980s, VCRs were just beginning to make serious inroads with consumers, and movies available for sale on video were priced extremely high, from $40 to $90. Visits to video stores revealed to the Cayres that customers would be attracted to a price point in the $10 range. The only way to satisfy that market was to turn to public domain titles, movies on which the copyright had lapsed and no royalties were due. In 1984, the Cayre brothers created GoodTimes Home Video with a list of 25 public domain movies to which they purchased the masters, then made copies. The company unveiled its titles at the Consumer Electronics Show in a prepack with each tape priced for consumers at $14.95. Retailers were so impressed that Good-Times sold 5,000 prepacks. As important as this initial sale was, it would pale in comparison to a relationship GoodTimes forged with retail giant Wal-Mart when Joe Cayre visited its Arkansas headquarters in 1984. Wal-Mart buyers were impressed by the low-priced videos but skeptical about Caryre’s claim that Wal-Mart would be able to sell $10 million of the product in the first year. To back up his claim, he offered to pay for shipping, including return freight on unsold product, as well as purchasing choice shelf space at the front of the store. Moreover, a wholesale price of $7 per tape meant that Wal-Mart stood to realize a healthy profit. In the end, Cayre left town with a $1 million order from Wal-Mart. With a steady customer in hand, GoodTimes then invested $18 million to create a tape duplicating plant in New Jersey, which would ultimately grow into an operation capable of producing 150,000 tapes a day, and double that amount if necessary. From the beginning, Good-Times opted to control its tape duplication, rather than rely on third parties and take a chance of missing deadlines or providing poor quality products to its customers. In addition, GoodTimes rejected poorer quality SLP, 6-hour mode taping, in favor of LP, 4-hour mode, and it even dubbed at SP, 2-hour mode, if customers requested it.

Wal-Mart sold $3 million worth of GoodTimes videos in its first year, far less than the $10 million Joseph Cayre projected, but still a healthy business. Revenues then soared in the second year of the relationship after a chance meeting between Cayre and Wal-Mart’s Sam Walton. According to Forbes, Cayre was sitting in the waiting room when Walton entered and struck up a conversation. Learning that Cayre sold videos, Walton took the vendor on a tour of one of his stores in order to learn more about the video business. Cayre was then able to pitch a new video rack, one that would offer enough space to feature the face of the box rather than just the spine. Walton agreed to the idea, resulting in a second year jump to $30 million in sales.

With a steady income from Wal-Mart, GoodTimes was able to expand beyond public domain movies, acquiring the licenses to more recent titles, such as Close Encounters of the Third Kind. In addition, the company ventured into the creation of original material, investing $25,000 to produce the “29 Minute Workout,” starring Miss Connecticut of 1985, a tape that would go on to sell 1 million units. In 1986, GoodTimes established a licensing deal with the Hearst Corporation to produce exercise and diet titles with the Cosmopolitan label. The company also produced children’s titles under the Good Housekeeping label. In 1989, GoodTimes tested the video magazine market with the production of two music-based products, one aimed at the audience for heavy metal and the other at consumers of rap music.

Great American Entertainment Established in 1990

GoodTimes not only supplied video products to record stores and major retailers like Wal-Mart, it also made inroads in placing its products in book stores, toy stores, drug stores, and even clothing stores. Out of these efforts resulted the 1990 launch of a rackjobbing operation called Great American Entertainment. This was a natural progression in vertical integration for GoodTimes, which already had a major duplication facility. To support its distribution network, GoodTimes invested heavily in technology to create a state-of-the-art automatic replenishment program. The company not only knew what kind of videos sold well in particular areas and could then supply an appropriate mix of titles, it knew which titles were sold each day and was able to instruct the duplicating unit to create replacements, which they provided overnight to stores. The result was that retailers were able to maximize revenues while maintaining a minimum amount of inventory.

GoodTimes success with low-price videos was not lost on larger media companies, as well as smaller rivals that offered even cheaper public domain titles. To maintain its momentum, GoodTimes adapted to changing conditions in the early 1990s as it evolved into a diversified entertainment company. In 1993, it established GoodTimes Entertainment to serve as a holding company for GoodTimes Home Video as well as the company’s new wide-ranging ventures. It also established a unit to sell B -movies to video stores for rental and created an international unit to distribute video overseas. GoodTimes looked to expand on its successful children’s video business by teaming with toymaker Fisher Price to create a Fisher Price label to produce videos and movies, as well as to publish books.

To supply product for both its domestic and foreign distribution operations, GoodTimes decided in 1992 to invest more than $70 million in the production of nearly 30 animated features in the direct-to-video market. Relying on standard children’s fare, GoodTimes was able to mirror Disney’s releases, offering less expensive alternatives to such features as Aladdin and Beauty and the Beast. Disney sued, maintaining that GoodTimes infringed upon its “trade dress,” essentially the look of its packaging. Although GoodTimes was required to print its name at the top of the box, the court sided with GoodTimes and allowed it to continue to produce its Disney alternatives. Good-Times’ Snow White featured dwarfs named Sunbeam, Toadstool, Fawn, Hedgehog, Robin, Cricket, and Tadpole. Even when Disney released original material like The Lion King, GoodTimes had a product ready to take advantage of Disney’s marketing efforts. Its Leo The Lion, King of The Jungle offered a main character with a Bronx accent. Both Disney and GoodTimes were major moneymakers for Wal-Mart, which may have led to the retailer’s decision in 1994 to create a special video floor display that granted each rival 40 percent of the shelf space. Too large for the usual electronics department location, the units were positioned in main traffic aisles. In addition to Disney, GoodTimes conflicted with MPI Home Video over the release of the public-domain John Wayne feature McLintock! MPFs version, promoted as a producer’s cut, was authorized by the estate of John Wayne. MPI sued GoodTimes, claiming that it held the rights to the music used in the film. The courts ultimately ruled that the music rights had been sold to United Artists, which in turn sold them to EMI, which had licensed them to GoodTimes, thereby making it possible for GoodTimes to sell its version of the movie.

Key Dates:

1984:: GoodTimes Home Video is formed.
1986:: The company enters into a licensing deal with Hearst Corporation.
1992:: The company begins production of original animation titles.
1993:: The holding company GoodTimes Entertainment is created.
1995:: GoodTimes Interactive is spun-off as a public company.
2001:: Bethlehem label is created for Christian-oriented videos.

One of GoodTimes’ ventures in the early 1990s that proved to be especially successful was GT Interactive, a unit devoted to video and computer games. The concept behind the new business was simple but effective: use GoodTimes’ reputation and infrastructure to acquire shelf space and provide distribution in order to become an attractive partner for the best game developers. GT Interactive quickly established itself as a viable business when in 1993 it was able to secure the rights to publish Wolfenstein, a three-year-old action game created by id Software. Even though sales were considered to be tapped out, GT Interactive was able to sell 100,000 units. In short order, the unit was asked by Wal-Mart to take over its software display (a move echoed two years later by Target), and it also gained the rights to Doom II, the follow-up to the immensely popular shareware game Doom. Although the Cayre brothers were generally averse to making GoodTimes a public company, they elected to spin-off GT Interactive and take it public in order to raise the capital and provide the flexibility needed to acquire game developers. The initial public offering, held in December 1995, raised $150 million.

A Challenge in the 1990s

In the mid-1990s GoodTimes was faced with a highly competitive video market. With public domain essentially a dead sector—as larger entertainment companies distributed low-price, newly released movies on their own—and with sales of fitness tapes falling off, GoodTimes had to scour for licensing opportunities. To develop its own material, in addition to animation, GoodTimes looked to produce some live action movies, although the Cayres were wary of becoming too involved in the expensive and risky business of movie production. A $5 million production of Pocahontas: The Legend, which offered a theatrical-release and direct-to-video family version, failed to produce the kind of results that warranted further investment in live-action features.

GoodTimes searched for other niche opportunities. It signed a ten-year deal for the rights to Late Night with David Letter-man. In 1995, it created GoodTimes Publishing, a children’s book division aimed at toddlers to eight year olds. The company also pursued licensing opportunities for one of the stars of its fitness videos, Richard Simmons, whose Sweating To The Oldies was a high selling title for GoodTimes. Special units such as GoodTimes Licensing and Merchandising and GoodTimes Foods sought to extend the Simmons brand to low-fat snack foods as well as fitness apparel and footwear. Just as it had vertically integrated its video business, GoodTimes hoped to do the same with celebrities that worked with the company. In this vein, country singer Naomi Judd was signed to a licensing and merchandising deal intended to take advantage of a talk show she was set to begin hosting in the fall of 1997. Again, GoodTimes contemplated a wide array of products under the Naomi Judd name, including cosmetics, skin-care products, apparel, and packaged foods. The talk show, however, proved unsuccessful.

These ventures outside of the video business failed to establish GoodTimes as a diversified entertainment company. In the late 1990s, the company struggled to find a suitable business mix for a changing environment. There was speculation that GoodTimes was preparing to go public in 1998, stoked by the implementation of cost-cutting measures that led observers to conclude the company was dressing its balance sheet in preparation of an offering. Because the video business had peaked years earlier, however, any attempt by GoodTimes to go public was never realized.

GoodTimes narrowed its focus and looked for profitable niches to exploit in the video industry. In 2000, GoodTimes became heavily involved in the Christian market, distributing the video of The Omega Code, a low-budget Christian film that in 1999 showed surprising strength at the box office. After grossing $14 million at the box office, it sold over one million units for GoodTimes in videotape. In 2001, GoodTimes signed a ten-year deal with the producers of The Omega Code, Gener8Xion Entertainment, to produce and distribute at least four movies a year. With a steady source of product in hand, GoodTimes then established the Bethlehem label for Christian-oriented videos. To serve as president and lead GoodTimes into a new era, the former president of PolyGram Video, Bill Sond-heim, was hired. The company then entered another niche market when in the summer of 2001 it signed a five-year deal to distribute videos and DVD’s with the Broadway Television Network, which had been created to produce pay-per-view broadcasts of popular Broadway shows. Because the broadcasts attracted relatively few viewers and were limited to a single showing, the upside for video sales appeared promising. Good-Times planned to release four to five titles each year. Sondheim was already well familiar with this type of programming, having distributed Cats, Lord of the Dance, and The Three Tenors during his time at PolyGram. GoodTimes even used the Broadway connection with Richard Simmons, producing Broadway Sweat/Tone-Up on Broadway, while at the same time repackaging his earlier fitness titles. Whether the new niche businesses would prove profitable for GoodTimes remained an open question. What was certain, however, was that the company had the entrepreneurial spirit to continuously adapt and search out new niche opportunities.