Fifty years after the demise of the studio system, Hollywood's back lots are busier—and grander—than ever.
Fortune ⎢ February 16, 1998
ANTHROPOLOGIST HORTENSE POWDERMAKER, in her 1949 book Hollywood, the Dream Factory, writes that for all their glamour, the movie studios of her era were not too impressive: "They combine a bungalow and factory in their appearance," she sniffed, "and many give the feeling of being temporary." Fresh from a sojourn among the headhunters of New Guinea, Powdermaker had settled in Tinseltown to study its folkways close up, and many of her observations could have been made yesterday—the primitive belief in the ritual sacrifice of money, the fear and self-doubt behind all those inflated egos, the insatiable need to stay glued to the action. But studios that look unimpressive and temporary? What a difference a half-century makes.
Fifty years ago the vertically integrated film companies that ruled Hollywood—Warner Bros., Paramount, Twentieth Century-Fox, et al.—were being dismembered by Justice Department trustbusters, pilloried in Congress as hotbeds of Communist subversion, and threatened with extinction by television. By the late 1960s falling box office and a vogue for location shoots had turned their studios into white elephants. MGM auctioned off Judy Garland's slippers; Fox sold most of its back lot to the real estate developers who built Century City. Yet today the dream factories have been reborn. What happened?
Megamergers and globalization. Film companies that were forced to sell off their theater chains 50 years ago have now been agglomerated with broadcast networks, cable systems, record companies, theme parks, magazine publishers, book publishers, newspaper companies, and, yes, even theater chains. Movies, which once seemed fated to compete with other forms of entertainment, have instead become the core business of media leviathans that view them as intellectual properties to be leveraged in a dozen ways. Meanwhile, the advent of multiplex cinemas and global television markets has upped the demand for product: Between 1988 and 1996, 121,000 jobs were created in L.A.'s entertainment industry, almost making up for the 140,000 aerospace jobs that were lost. And just as the unexpected triumph of Easy Rider encouraged filmmakers to abandon Hollywood in the late 1960s, the success of Star Wars lured them back. With intergalactic location shooting not yet feasible, producers needed earthbound facilities. Hollywood's sound stages, which as late as 1991 were dilapidated and 40% vacant, now run at full capacity.
All this has occurred at a time of rising costs and vicious competition. Studio execs shun smaller films in favor of action pics, whose $100-million-plus production budgets can be justified on the basis of their foreign appeal (nothing translates like a shoot-'em-up) and their tie-in potential. Unfortunately, one year's Independence Day, which gave Fox a worldwide gross of more than $700 million, leads inevitably to the next year's Speed 2, which barely managed a seventh of that. This helps explain why the movie business, on average, enjoys a return on investment of 3%. For a lot less trouble, the moguls of Hollywood could get the same results putting their cash into money market accounts—but don't count on that to happen. As Powdermaker observed, "The general atmosphere pervading the studios"—appearances notwithstanding—"is no more that of a factory than it is of a creative human enterprise. Rather it is that of the gamblers' den." Which is frequented, as we know, by people who can't stay away from the table.
The 102-acre corner of Burbank where Warner Bros. now stands was planted in alfalfa when First National Pictures, a major company of the silent era, started building there in 1926. The brothers Warner, flush with profits from The Jazz Singer, soon won control of First National and made it their West Coast headquarters. With 34 sound stages on the lot, plus another seven at the Warner Ranch nearby and seven more at the old Goldwyn Studios in Hollywood, their company—now a unit of Time Warner, parent company of Fortune's publisher—boasts the biggest facility in town. Warner keeps it 85% busy and rents the rest to outside productions; either way, the operation is expected to make its numbers. "All the studio lots are now profit centers," says facilities chief Gary Credle. "It's your factory—but your factory has to make money as well as your product."
The Fox lot in West Los Angeles was Tom Mix's property once, and his modest bungalow, with a stable for his horses, still stands on an out-of-the-way corner, near the new satellite uplink facility built to beam programming for the Fox TV network. Most of the 53 acres left after the development of Century City, however, have been given over to bulldozers that are transforming a 1920s movie studio into the operational hub of Rupert Murdoch's global media empire. Fox never had the facilities of MGM or Warner Bros., yet now its utilitarian structures must house not only Murdoch and other top execs but Fox's entire film, television, and sports operations. If only the previous management hadn't left them squeezed: "Believe me," says operations chief Gary Erlich, eyeing those Century City office towers rising above the trees, "I'd dearly love to have that land back."
For decades Disney was Hollywood's odd man out: a hokey little company turning out cartoons and running amusement parks, not a major motion-picture studio. Then Michael Eisner arrived, and suddenly Mickey Mouse became a springboard into every area of show business. Former studio chief Jeffrey Katzenberg (now a partner in Dreamworks SKG) built Disney's movie division into a consistent leader at the box office; Roy Disney (Walt's nephew) revived its long-dormant animation division; the purchase of Miramax put it at the top of the "independent" movie business; ABC and ESPN made it a power in television; and with Beauty and the Beast, Disney even started a successful run on Broadway. Meanwhile, the theme parks are looking forward to their two-billionth guest.
All this has set off a building boom now in its 14th year. But with only 44 acres on its Burbank lot, Disney had little choice but to tear out vintage sets—the Pollyanna set, the western set, the Zorro set—to make room for offices. Architects like Michael Graves and Robert A.M. Stern, whose Feature Animation Building went up near the Pasadena Freeway, took their cue from Disneyland's forced perspectives and from the streamlined style of the company's 1939 headquarters, built with projecting bays to bring in light and air so that it could be used as a hospital should the studio go belly up. They also tried to respond to Eisner's challenge: "This is fine," Eisner said, when Graves came up with a new headquarters that resembled a bank. "But what can you do to make people smile?"
In 1989, when Sony bought Columbia and TriStar and moved them to the once grand MGM lot in Culver City, it found a studio that had been strip-mined of its assets: "This place was a dump," recalls Ken Williams, president of Sony's Digital Pictures Division. No longer. After a $110 million redo, the former home of Mickey Rooney and Judy Garland gleams with a polish Louis B. Mayer could scarcely imagine. Beyond the new front gates and the magnolia-shaded gardens and the art deco Thalberg Building, Sony's mammoth sound stages and state-of-the-art digital effects and post-production facilities are booked solid. "I wish all our facilities had as quick a payback," says Williams.
As usual in Hollywood, nothing is what it seems. What looks from one side like a turn-of-the-century bank and from another like a Midwestern Main Street is in fact Sony's High Definition Center, the biggest HDTV lab in the world. In one room workers are transferring New Line's Lawnmower Man from film to digital tape for its upcoming release on Sony's new DVD format; next door people are doing the same with Columbia's Guns of Navarone. Not far away, a team from a small, Los Angeles-based production company is working on a UFO ride for Suzhuo Amusement Land, south of Shanghai. Projected onto nine screens set up in a 360-degree array, their video is designed to give Chinese tourists the feeling that they're in an actual UFO. "How does it look when you're inside a UFO?" asks an engineer, a quizzical look on his face. "It looks the way we say it looks."
Tourists began coming to Universal City in the silent era, when Carl Laemmle, Universal's founder, set up bleachers so they could watch films being shot on his former chicken ranch. The idea was revived in the 1960s, when MCA bought the faltering studio with its sprawling hilltop lot, and an MCA vice president thought of busing people in to watch a shoot and eat at the money-losing commissary when the stars weren't using it. By 1995, when Seagram bought control of MCA from Matsushita, Universal's Hollywood theme park was the most popular tourist attraction in Los Angeles, drawing five million visitors a year and offering tie-in opportunities only Disney could match. It was also a chaotic jumble. To make sense of the sprawl, Seagram President Edgar Bronfman Jr. turned to Rem Koolhaas, whose approach to planning is summed up by his book Delirious New York. Bronfman's aunt, Phyllis Lambert, who'd commissioned Mies van der Rohe to design the Seagram Building in Manhattan, wasn't surprised by her nephew's choice: "After all," she says, "he grew up in the Seagram Building."
Forty-eight years ago, when Gloria Swanson rode through Paramount's wrought-iron gates for her close-up in Sunset Boulevard, the legendary entrance was off a dingy thoroughfare lined on one side with hash joints and apartments and on the other with mock-Spanish office buildings thrown up in the 1920s to the specifications of set designers. But after purchasing the property across the street in the 1980s, Paramount went on a building spree. Today, Marathon Street is the Marathon Paseo, a gracious promenade lined with topiary and birds of paradise. A fountain splashes before the front gate, while nearby, tourists are drawn to the bench from Forrest Gump, the studio's biggest hit. Except that it isn't really the bench used in Forrest Gump, any more than Tom Hanks is really a dimwitted cynosure for our era: just a stand-in. ■