Universal Studios, Inc.

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Universal Studios, Inc.

100 Universal City Plaza
Universal City, California 91608-1002
U.S.A.
Telephone: (818) 777–1000
Fax: (818) 866–91402
Web site: http://www.universalstudios.com

Wholly Owned Subsidiary of Seagram Company, Ltd.
Incorporated: 1912 as Universal Film Manufacturing Company
Employees: 14,000
Sales: $7.5 billion (1999)
NAIC: 512120 Motion Picture and Video Distribution; 512220 Integrated Record Production/Distribution; 513210 Cable Networks; 713110 Amusement and Theme Parks; 453220 Gift, Novelty, and Souvenir Stores

Universal Studios, Inc. is active in a variety of entertainment enterprises. Its Universal Studios Group division offers production facilities in Universal City, California, and Orlando, Florida, to independent producers of filmed entertainment and commercial advertising. The company’s motion picture distribution operation includes residual video and DVD distribution. Universal also produces syndicated televisions shows and airs its archive of television shows and motion pictures on international and domestic cable networks. Much of Universal’s studio facilities are open for public tours and offer attractions and rides based on motion picture and television themes. Movie theme parks are also in operation in Spain and China. Other business activities involve licensing for consumer products, such as apparel with movie and television characters, the chain of Spencer’s Gifts stores (located on theme park properties and in shopping malls), online shopping and archives, and interactive electronic games. Universal Music Group, the largest music company in the world, includes over a dozen recording labels and related publishing and technology operations. A wholly owned subsidiary of Seagram Company, Ltd. since 1995, Universal has a rich history dating back to the early days of motion pictures.

Early 20th Century Origins

Carl Laemmle’s entry into the motion picture production began in the industry’s infancy. In 1905, while Laemmle searched for a place to open a clothing store in Chicago, he stumbled onto a line of people waiting to see a nickelodeon. Intrigued by the popularity of moving pictures, Laemmle changed careers and opened The White Front Theater. In one month Laemmle recouped his investment and opened a second theater with Robert Cochrane, a business associate. Laemmle expanded further with the Laemmle Film Service, which became the largest movie distributor in the country. By 1909 Laemmle and Cochrane were grossing $10,000 a week doing business in the Midwest and in Canada.

Laemmle and Cochrane’s production of motion pictures stemmed from a dispute with the Motion Picture Patents Company, which had attained monopolistic power at the time. Finding himself with no motion pictures to exhibit, due to the rift with the patent company, Laemmle decided to make movies himself. The first effort of the Independent Motion Picture Company (IMP) involved a one-reel film entitled Hiawatha. Eventually, production would increase to an average of one film per week. The Universal Film Manufacturing Company was formed in 1912 when IMP merged with five other companies; Laemmle became president and Cochrane vice-president of the new concern.

Universal offered a variety of motion picture packages which allowed an exhibitor to show a different film every day. The Complete Service Plan, for example, included a two-reel comedy, a serial, and a feature film. In 1913 the company began to offer a regular newsreel titled The Universal Animated Weekly. Universal’s first full-length feature film, Traffic In Souls (1913), grossed $0.5 million; the movie’s real significance was in innovative editing and plot lines which gave the impression of simultaneously occurring events, a concept never before conveyed in film.

Universal expanded its movie making capacity with the opening of Universal City in 1914. Laemmle acquired the 230-acre Taylor Ranch north of the Hollywood Hills for $165,000, envisioning a studio as a city. Laemmle’s promotion of the grand opening of Universal City, aimed primarily at theater owners, attracted thousands of people from the general public as well. The promotion stated that everyone should come to see how movies are made “to make the people laugh or cry or sit on the edge of their chairs the world over.” The public was so fascinated with film making that Universal City offered organized tours for 25 cents apiece, which included a box lunch, and the company erected bleachers near the sets. About 500 people visited Universal City daily until the advent of sound movies required enclosed stages.

In 1915 Universal produced over 250 films, primarily two reel shows and serials, but also feature length films of over 70 minutes long. The company classified films according to budget and status. A Red Feather film and a Bluebird film received low and midrange budgets, respectively. A Jewel film involved a large budget and prestigious stars of the time, such as Harry Carey, Carmel Myers, and Rudolph Valentino, and directors such as Erich von Stroheim. John Ford helped to define the genre of American Westerns in the numerous films he directed after joining Universal in 1914.

Motion Pictures in the 1920s and 1930s

Renamed Universal Pictures Corporation in 1922, the company continued to focus on short, low budget serials, westerns, and melodramas through the 1920s and 1930s while other studios shifted to feature films. The company did produce two feature films in the 1920s, however, which became silent film classics. The Hunchback of Notre Dame (1923), starring Lon Chaney and directed by Wallace Worsley, achieved critical acclaim and financial success. Phantom of the Opera (1925) starred Chaney as well as a large cast of the studio’s popular stars.

Dynamics of the film industry troubled Universal in the mid-1920s; the company did not have the advantage of affiliation with a theater chain where most first run movies in major cities were shown. Universal contracted with independent theaters which tended to be in rural areas, so movies at this time catered to rural audiences. Universal also accessed European markets where American westerns and action movies found an audience.

When Carl Laemmle, Jr., became general manager in charge of production in 1929, Universal adopted a more sophisticated approach. Laemmle, Jr., cut the studio’s output by 40 percent in order to allow for longer films of higher quality. His interest in novels led to several prominent productions. For the sound motion picture All Quiet on the Western Front, Universal received its first award from the Academy of Motion Picture Arts and Sciences, for Best Picture, in 1930. Laemmle, Jr., was also the driving force behind the studio’s production of Dracula (1931), starring Bela Lugosi. In fact, Universal would gain renown for its horror movies, with eight films produced between 1931 to 1935, including Frankenstein (1932) and The Mummy (1932), both starring Boris Karloff.

Most of the higher quality films that Laemmle, Jr., initiated did not engage the audiences of their day, however, and box office receipts did not compensate for the high cost of feature film production. When Laemmle, Jr.’s, production of the Broadway musical Showboat went over budget in 1935, his father offered his controlling interest as collateral for over $1 million in debt to fund the project. When the investors called their option in 1936, Standard Capital acquired Laemmle’s interest in the company for $4.1 million, ending the Laemmle era at Universal.

Renamed New Universal, the company consolidated its resources by reducing production and closing European operations. In 1936 Universal completed two films begun before the change in ownership; My Man Godfrey and Three Smart Girls, received nine Academy Award nominations between them. Deanne Durbin, the 15-year-old soprano star of Three Smart Girls, became one of the studio’s biggest stars, making 21 movies during her 12 years at Universal. In 1938 Durbin received a special Oscar for bringing youthfulness to the silver screen.

With the arrival of two RKO executives at Universal, Nate Blumberg as president and Clifford Work as head of production, the company hoped to entertain the masses on a lower budget. Universal recovered from its losses with the popularity of Durbin’s movies as well as the success ofDestry Rides Again (1939), starring Marlene Dietrich and James Stewart. From a net loss of $1.8 million in 1936, Universal garnered a net profit of $1.5 million in 1939.

Shifting Fortunes from World War II through the 1960s

The onset of World War II increased public demand for escape through motion pictures. Youth-oriented productions included Sherlock Holmes, Inner Sanctum mysteries, and the Bud Abbott and Bud Costello comedy team, whose debut in One Night in the Tropics (1940) featured the famous skit, “Who’s on first?” Universal produced monster movies, low budget westerns, movie sequels, and desert dramas, also know as “sand ‘n’ sex” movies. War-themed movies included 13 films featuring the popular Andrew Sisters released between 1940 and 1945. Mature movies included the genre of film noir, which had not yet attained its appreciated status. Some of Universal’s notable films included Shadow of a Doubt (1943), directed by Alfred Hitchcock, The Suspect (1944), directed by Robert Siodmark, and Scarlet Street (1945) by Fritz Lang. Wartime production peaked in 1945 when Universal averaged one feature length motion picture per week; from 1940 and 1945 production neared 350 movies.

Company Perspectives:

Universal Studios is all about experiences that bring excitement and exhilaration into people’s lives. Our businesses and products create special moments, unforgettable experiences, and lasting memories.

Universal’s 1946 merger with International Pictures stemmed from the desire to improve the quality of motion picture productions. Two new production heads, Leo Spitz and William Goetz, eliminated short serials, “programmer” westerns, and low budget movies to concentrate on feature length films. They dropped several stars but retained Abbott and Costello, Durbin, and Donald O’Connor, star of Francis the Talking Mule and its sequels (1955-56).

Universal Pictures made several higher quality movies, but these did not bring high returns at the box office. One exception, The Egg and I, was the top grossing movie of 1947 at $5.75 million. Operating at a loss in the late 1940s, Universal Pictures exploited the popularity of the low budget Ma and Pa Kettle movies with ten productions.

Ownership changed again in 1952 when Decca Records acquired controlling interest in Universal Pictures. With Milton Rackmil as president and Ed Muhl as vice-president of production, gross receipts increased $7 million by 1954. Muhl sought lesser known independent producers to make movies at the studio’s facilities. The company succeeded with Albeit Zugsmith, known for The Incredible Shrinking Man (1954) and Touch of Evil (1958), Aaron Rosenberg, who produced The Glenn Miller Story (1954), and Robert Arthur, producer of Operation Petticoat (1959) which grossed $9.5 million.

Universal’s most successful producer at this time was Ross Hunter, the so-called “King of the Weepies.” Hunter collaborated with director Douglas Sirk on ten films between 1953 and 1959, including romantic dramas, such as the remake of Imitation of Life (1959) with Lana Turner. Hunter’s production of Pillow Talk (1959), starring Rock Hudson and Doris Day, grossed $7.5 million and prompted a surge in the romantic comedy genre. The studio’s stars at this time included Audie Murphy, Kirk Douglas, Tony Curtis, Maureen O’Hara, Charleton Heston, and Jane Wyman.

Despite the quality of movies being made, television proved quite a competitor, and movie audiences began staying home. In 1957 Universal leased 550 movies, made before 1948, to Screen Gems for airing on television. After profits of $4 million in 1956 and 1957, Universal lost $2 million in 1958, while the motion picture industry experienced a 12 percent decline in ticket sales. As a result, Decca cut production and sold Universal City to the Music Corporation of America (MCA) for $11.25 million.

In 1962 MCA acquired controlling interest in Decca, thus obtaining the Universal studios, which MCA wanted for television production. MCA renovated studio facilities and reinstituted tours of Universal City in 1964. Early movie productions under MCA included Alfred Hitchcock’s The Birds (1962), which grossed $4.6 million, and To Kill a Mockingbird (1962), which won three Academy Awards, including Best Actor for Gregory Peck. Ross Hunter continued to be the company’s most successful producer with Thoroughly Modern Millie (1968), followed by the all-star blockbuster Airport (1970), which grossed $45.3 million.

The Blockbuster Years: 1970s and 1980s

The year 1973 unfolded as a high watermark year for Universal. Richard Zanuck and David Brown’s production of The Sting, starring Robert Redford and Paul Newman, grossed $79 million at the box office and won seven Academy Award nominations, including Best Picture. In fact, Universal films competed with each other that year for the Oscars, as George Lucas’s production of American Graffiti, which grossed $56.7 million, received four nominations. Other highly acclaimed and financially successful movies included The Day of the Jackal and High Plains Drifter. The year was also notable as Lew Wasserman became chairman and CEO of MCA, while Sheinberg, responsible for bringing Steven Spielberg to Universal, became chief operating officer and president.

Universal made its share of the succession of Hollywood blockbusters. Jaws (1975), produced by Zanuck and Brown and directed by Spielberg, drew the largest movie audience to date, grossing $133.4 million, only to be topped by Twentieth Century Fox’s Star Wars two years later. While Universal suffered huge flops, such as Gable & Lombard, the company produced several popular films, such as Smoky and the Bandit (1977), National Lampoon’s Animal House (1978), and The Blues Brothers (1980).

During the 1980s Universal released several award-winning movies. Coal Miner’s Daughter (1980) grossed $38.5 million, and Sissy Spacek won an Oscar for Best Actress. On Golden Pond (1981) grossed $63 million and won three often Academy Award nominations, including Best Actor for Henry Fonda and Best Actress for Katherine Hepburn. Universal’s success peaked with Spielberg’s production of E.T.-The Extra-Terrestrial, which broke box office records within three months and grossed $300 million by the end of 1982. Among Universal’s 16 Oscar nominations in 1982, E.T. won four of eight nominations, while Meryl Streep won Best Actress for Sophie’s Choice. Sidney Pollack’s production of Out of Africa (1985) won seven Academy Awards, including Best Picture and Best Director for Pollack. Other popular movies included Back to the Future (1985), Dragnet (1987), Field of Dreams (1989), and Back to the Future II (1989).

Wasserman’s expansion of studio facilities, completed in 1982, included the addition of 220 acres, making Universal City the largest studio lot in Hollywood. New facilities included 36 sound stages, a Technicolor film processing laboratory, and a 14-story administration building. A 200,000 square foot office complex housed independent producers in “bungalows.” When Spielberg started his own production company, Amblin Entertainment, Universal installed him in a bungalow with editing facilities, a screening room, and other facilities not typically provided.

Key Dates:

1913:: Traffic in Souls, Universal’s first feature length film, is produced.
1930:: Studio’s first Academy Award for Best Picture for All Quiet on the Western Front.
1945:: Wartime motion picture production reaches rate at one film per week.
1952:: Decca Records acquires Universal.
1962:: MCA acquires Decca Records.
1975:: String of hit movies topped with release of Jaws.
1982:: E.T.-The Extra-Terrestrial grosses $300 million.
1995:: Seagram Co. Ltd. acquires majority interest in Universal.

With Tom Pollock as president of Universal Pictures in 1986, the company adopted new procedures to reduce capital outlay. For the production of Twins (1986), Universal contraded with the two stars, Arnold Schwarzenegger and Danny DeVito, to accept a smaller salary balanced by a percentage of the gross. The strategy succeeded as Twins grossed $57.2 million in domestic distribution in less than a year. Pollock’s philosophy involved a mix of “A” and “B” quality movies to lower production costs. Fried Green Tomatoes (1991) proved a sleeper hit among the company’s “B” movies. Pollock also helped Ron Howard and Brian Grazer form Imagine, whose award-winning production Apollo 13 (1995) grossed $162 million within the first ten weeks.

In 1988, Universal Studios Florida opened in Orlando for television, motion picture, and commercial advertising production. Two years later, the facility would open for public tours. The movie theme entertainment complex, a joint venture between MCA and Cineplex Odeon Corporation, included rides and attractions. The backlot and facilities accommodated small film and television projects, and some major motion production also took place there, including Imagine’s Parenthood. Long-term agreements involved Unitel Video’s television and mobile production facilities and Century Ill’s all-digital edit bay. Hanna-Barbera Productions opened an animation studio and an attraction based on its popular cartoon characters at Universal Studios Florida, while cable network Nickelodeon produced most of its shows at its facility, including game shows which sought contestants and audience among studio visitors.

New Owners, New Directions in the 1990s

Matsushita Electrical Industrial Company of Japan acquired MCA in November 1990. Matsushita was the largest manufacturer of home electronics in the world under the Panasonic brand and had created the VHS format. The new owners did not understand the dynamics of filmmaking, however, as they did not agree with the idea that the $40 million failure of a film like Havana would be compensated through successful films. During Matsushita’s ownership, Universal released Jurassic Park, Schindler’s List, and We’re Back! A Dinosaur’s Story. The Amblin productions grossed $548.7 million; 60 percent of Universal’s movie revenues derived from three of 18 movies released in 1993.

Conflicts between Matsushita and MCA’s executives over strategic expansion hampered the company’s tenure of ownership. Moreover, Universal lost its top producer when Spielberg formed a new studio company, DreamWorks SKG. In 1995, Matsushita sold an 80 percent interest in MCA to Seagram Company Ltd. for $5.7 billion. The Seagram board named Frank Biondi as CEO and chairman of MCA, which they renamed Universal Studios, Inc., thus consolidating the various entertainment companies, including the music recording companies, under one name.

Edgar Bronfman, Jr., chairman of Seagram led the company through decisions which the board, Bronfman family members, and many shareholders questioned. That Seagram sold 25 percent of its stake in DuPont to acquire MCA proved to be the first of several controversial decisions. Bronfman acquired Polygram for its profitable music business but was unable to sell the film division in one piece. In September 1997 he merged USA Network with HSN, the parent of the Home Shopping Network. Though Universal still owned 46 percent of USA Network, critics were wary when USA Chairman Barry Diller gained control of a business that generated cash for Seagram. Biondi, hired for his strengths in television, resigned as CEO after 18 months at Universal.

The Universal Studios Networks Division was created in August 1997 for the international marketing of branded televisions channels. USA Network licensed Universal’s library for domestic use, while Universal distributed internationally. The division successfully launched “13th Street-The Action Suspense Channel” in France, featuring dubbed versions of such American favorites as Miami Vice, Magnum PL, and similar shows. The station was launched in Spain and Germany in 1998, while some shows aired on USA Network Brazil and USA Network Latin America. Through eight international offices, the division attained program distribution in over 180 countries, including production of local talk shows in England and the Netherlands. Universal eventually integrated Polygram’s television division and began productions of domestically syndicated shows, such as Motown Live and Blind Date. A new version of The Woody Woodpecker Show debuted in 1999.

While Bronfman brought a traditional business approach to Hollywood, creativity waned in movie making. Bronfman streamlined management and implemented several cost saving measures, but Universal’s market share for movie tickets declined due to lower production, with only 12 films in 1997. Major failures included Fear and Loathing in Las Vegas (1998), which grossed $10 million. Nevertheless, Universal rebounded with the releases of Patch Adams, Notting Hill, and The Mummy, which together had grossed $790 million globally by mid-August 1999, while a joint release with Miramax, Shakespeare in Love, won box office success and seven Academy Awards. The Universal Pictures division lost $200 million despite revenues of $3.38 billion in 1999. The company expressed high hopes for Imagine’s late 2000 release of a feature length version of The Grinch Who Stole Christmas, starring Jim Carey.

Universal Studios succeeded in other areas. In 1999 The Mummy garnered over $1 billion in video and Digital Versatile Discs (DVD) sales. Universal sought to expand on this success with the release of its horror classics, such as The Invisible Man (1933) and Alfred Hitchcock classics on DVD. Universal Music Group carried the company with strong profits. In electronic video games the company expected positive returns on the summer 2000 launch of E.T. Interactive.

Universal also sought to improve its profits through theme park expansion. In 1996 Universal City in California introduced Jurassic Park: The Ride, a replication of the theme park in the popular movie. Universal acquired Port Aventura in Spain, and opened The Universal Experience in Beijing. Universal Studios Florida added the Islands of Adventure theme park, featuring five islands of attractions, such as one based on the children’s literature of Dr. Seuss and another on popular superheroes. Universal expected its studio theme park under construction in Osaka to open in 2001.

As the company headed toward a new century, some industry analysts speculated that Seagram might try to sell Universal. Though Seagram refused to comment on the rumors, critics suggested that board members at Seagram were pressuring Bronfman to consider a sale, as the Universal film studios continued to lose money. Still others alleged that the fair asking price for a company the size of Universal would be prohibitive, and that perhaps the successful theme park operations might be put on the block separately. Although its future ownership, size, and scope was perhaps uncertain, the Universal name in Hollywood had survived many such changes in parent companies, and if its illustrious history were any indication, it would likely continue as an innovator in one or more of its areas of expertise—film, television, music, theme parks, home video, and consumer products.

Principal Divisions

Universal Music Group; Universal Pictures; Universal Studios Consumer Products Group; Universal Studios Home Video; Universal Studios Recreation Group; Universal Television & Networks Group; Spencer Gifts.