Universal Studios Inc.

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Universal Studios Inc.

FOUNDED: 1912

Contact Information:

HEADQUARTERS: 100 Universal City Plz.
Universal City, CA 91608-1014
PHONE: (818)777-1000
FAX: (818)866-1402
URL: http://www.universalstudios.com

OVERVIEW

Universal Studios is the world's largest film and television production company, although in late 1997 it spun off much of its television operations. The Universal umbrella covers a multitude of entertainment ventures, including the production and distribution of motion pictures and music. Other Universal operations include book publishing, concert promotion, two Universal Studios theme parks, management of six amphitheaters, and the licensing and marketing of products inspired by its films. Additionally, Universal operates the Spencer Gifts retail chain with more than 500 stores across the country and has a 25-percent stake in Loews Cineplex Entertainment, which operates about 450 movie theaters.

The alliance between Universal Studios and its parent, Seagram, has been somewhat uneasy at times, with Seagram's "bottom-line" mind-set being more than a little alien to the world of filmmaking. Seagram's CEO Edgar Bronfman at one point suggested that movie ticket prices should be tied to production costs, a notion that most in Hollywood found laughable.

COMPANY FINANCES

As a privately held company, Universal does not report the full details of its financial operations. However, the company's revenue for fiscal 1997, ending June 30, 1997, was estimated at $6.5 billion, compared with estimated revenue of $5.9 billion in fiscal 1996. Revenue in fiscal 1995 was estimated at $5.8 billion, compared with$5.7 billion the previous year. Filmed entertainment brought in about $3.9 billion, or about 60 percent of total revenue in fiscal 1997. The company's music business contributed $1.5 billion, or 23 percent of revenue, while the remaining 17 percent of revenue was generated by recreation and other businesses.

HISTORY

Universal Studios was founded in Chicago in 1912 by Carl Laemmle. In 1914 he bought a 230-acre ranch at the east end of the San Fernando Valley for $165,000, which was to be the world's first film studio created expressly for the production of feature-length films.

Lankershim Township presented Laemmle with a solid gold key to open the gate of Universal City on March 15, 1915. For this grand opening Laemmle invited thousands of guests to Universal City. It marked the emergence of Hollywood as America's premier center of filmmaking. It was also the beginning of an industry that would have an incredible and overwhelming impact on the world.

The first of Universal's films were silent and were made popular largely through the talent of one of Hollywood's all-time great actors, Lon Chaney. The dollars Chaney brought in at the box office were instrumental in putting Universal on its feet. He was the most popular figure of the Silent Era and is most acclaimed for The Hunchback of Notre Dame.

A reproduction of the great Notre Dame Cathedral was built on the Universal lot, along with sets depicting wild west towns and street scenes that had an illusion of being anywhere in the world. For the first 50 years Universal hardly ever shot film outside of its own 230-acre lot. In November of 1946 Universal merged with International Pictures to become Universal-International, with Universal Pictures Company remaining as the parent organization.

Decca Records acquired 28 percent of Universal-International in 1950 for $3.8 million. Within two years Decca had won controlling interest of the film company.

In 1961 MCA bought up Decca, which by that time held about 90 percent control of Universal-International. The following year, under MCA, Universal-International reverted to its old name of International. The studio had by this time expanded its back lot to more than 400 acres. By the middle of the 1970s MCA had turned the back lot into one of America's largest tourist attractions. More than 4 million people a year were coming to the hotel, restaurants, amphitheater, sets, and sound stages where movies were being made.

During this time Universal was also producing blockbuster movies, including Airport, Earthquake, Jaws, National Lampoon's Animal House, and Coal Miner's Daughter. The success of these films provided the money for Universal to speculate with the Hollywood theme park and other markets.

In 1990 Universal began operation of the Universal Studios Florida theme park in Orlando. By 1994 Seagram's diversification into entertainment had already begun with the purchase of a 15-percent stake in Time Warner Inc. In 1995 Bronfman persuaded his father, Edgar Bronfman Sr., and his uncle, Charles Bronfman, to sell Seagram's 25-percent stake in DuPont Co. for $8.8 billion to finance Seagram's acquisition of an 80-percent stake in Universal (then called MCA Inc.) from Matsushita Electric Industrial Co. Ltd. Since that $5.7-billion deal, Bronfman has been under the gun to turn Universal into the earnings generator he promised. But while Universal generated $6.5 billion in revenues, it only yielded $242 million in operating income in fiscal 1997. Furthermore, DuPont shares have more than doubled in value, while Seagram American Depositary Shares (ADS) have gained about 38 percent, leaving many investors angry over the deal.

FAST FACTS: About Universal Studios Inc.

Ownership: Universal Studios Inc. is privately owned by Seagram Co., which controls 84 percent of the company, and Japanese electronics giant Matsushita, which owns the remaining 16 percent.

Officers: Frank J. Biondi Jr., Chmn. & CEO, 52, $6.8 million; Ron Meyer, Pres. & COO; Bruce L. Hack, Exec. VP & CFO; Kenneth L. Khars, Sr. VP, Human Resources

Employees: 14,000

Chief Competitors: Universal Studios' major competitors in the entertainment business include: AMC Entertainment; Anheuser-Busch; LucasArts; MGM; News Corp.; Regal Cinemas; Sony; Time Warner; United Artists; Viacom; and Walt Disney.

Seagram CEO Edgar Bronfman Jr. made a couple of important moves to restructure Universal Studios in the late 1990s. In October 1997 most of Universal's television operations were sold off to a new company owned by Barry Diller, the executive who helped to put the Fox television network on the map. The new company, to be called USA Networks Inc., would be created to operate the Universal television assets along with others accumulated by Diller over the years, including the Home Shopping Network. The new company would be one of the largest television companies in the country. The assets it would control include the USA Network and Home Shopping Network cable channels, some prime-time television programming, including such shows as Law & Order, a dozen television stations, and the Ticketmaster Group. The estimated value of the transaction was $4.1 billion.

In the spring of 1998 Seagram CEO Edgar Bronfman Jr. successfully negotiated the acquisition of Poly-Gram NV, the world's largest music company. Seagram paid $10.6 billion to Philips Electronics to acquire Poly-Gram.

STRATEGY

The goal of Universal Studios in the late 1990s was much the same as when the company was launched in 1912: to provide family entertainment that touches upon all aspects of human life. As it has done since its birth, Universal has tried to ensure a great margin of success for its motion picture productions by contracting the most talented and popular actors.

As the year 2000 neared, it appeared Universal's strategists were putting their money on the company's film production and music businesses, spinning off most of its television operations to USA Networks Inc. The company's intention to expand its investment in the music business was underscored when Seagram announced an agreement to acquire PolyGram. PolyGram joined Universal's Music Division, already home to MCA Records, Geffen Records, and Universal Records.

INFLUENCES

The entertainment industry has always been an incredibly volatile and unpredictable business. After the emergence of Universal and its subsequent mark on the world, the company evolved with time, experiencing failures and successes in turns.

In the late 1930s the actress Deanna Durbin almost surely saved the studio from bankruptcy. She was a great box-office draw with a series of films featuring her as a wholesome youth. Apart from Durbin, in the years immediately preceding World War II, Universal produced films that were dull and listless. The story lines often involved a hero accused of a crime, with much of the film being spent in proving his innocence.

The World War II years saw the studio producing an increased volume of films, but still lacking in quality. The U.S. public began going to the movies less frequently. After the war people turned to movies again, but with a more discriminating taste. The price of a movie was up to $.40 and to meet the demands of the public, Universal merged with International Pictures in 1946 and became Universal-International. This new company would outlaw the "B" movie, and would not make any films with a running time of less than 70 minutes. Serials were discontinued and programmer westerns were also abandoned.

Universal-International decreed that more movies were to be shot in Technicolor and many Universal-International programs offered two features for the price of one. The studio also increased its number of British imports in 1947 by teaming up with British distributor J. Arthur Rank, who helped Universal-International acquire U.S. rights for many popular British productions.

CHRONOLOGY: Key Dates for Universal Studios Inc.

1912:: Carl Laemmle founds Universal Studios
1915:: Universal City opens—the first film studio created just for production of feature length films
1946:: Universal and International Pictures merge to form Universal-International, with Universal Pictures Company as the parent
1952:: Decca Records acquires a controlling interest of the company
1961:: MCA buys Decca
1975:: MCA turns the back lot of the Studio into a theme park: Universal Studios Hollywood
1990:: Universal opens a Universal Studios theme park in Orlando, Florida
1995:: Seagram purchases an 80 percent share of MCA
1997:: Most of Universal's television operations are sold to USA Networks

In 1949 a Supreme Court divestiture decree forced Warner Bros., Paramount, MGM, and Twentieth Century Fox to give up their theater chains. Universal-International owned no theaters and obtained a much greater market share for its product when its competitors had to realign their distribution policies.

CURRENT TRENDS

Twentieth Century Fox discovered a new market with the re-release of Star Wars, and Universal followed suit with a completely restored version of Alfred Hitchcock's 1958 thriller Vertigo. Pay-per-view was introduced as a way for consumers to pick movies from cable television and watch them when they wanted. In order to squeeze the last dollars from new releases, Universal's pay-per-view cable channel was designed to air movies before premium cable channels.

PRODUCTS

In 1996 MCA/Universal launched a makeover for its Hollywood theme park. When completed, the new attraction will shift Universal's public appeal from the studio tour to a full-scale destination resort. This will be the first resort of its type in Los Angeles County. Universal's announcement of its plan triggered an announcement from Disney that it would develop a similar resort in nearby Anaheim. This was another step in the war between the two companies that began in Orlando, Florida, where Universal put in a theme park in 1990 to compete directly with Disney World.

The megaresort plan for Universal City is to include 4 or 5 hotels with 2,200 rooms and a new entertainment area with more rides for children. This expansion is part of a master plan that will take more than 25 years and will add more popular attractions to the back lot, which is already the biggest in Hollywood.

A UNIVERSAL MONSTER

On a stormy night, in the summer of 1816 in a Swiss villa on the shores of Lake Leman, a creature was born out of the frenzied dreams of a 19-year-old woman. This "hideous phantasm of a man" would terrify generations of faint-hearted folk right up to the present day. The creator of this bogeyman: Mary Wollstonecraft Shelley. And the bogeyman's name? Frankenstein's monster. Shelley's original version, though, is a far cry from the version imbedded in the popular imagination: the creature portrayed in Universal Picture's Frankenstein (1931), the monster with the flat-top head, caveman brow, sunken eyes, and bolts sticking out of its neck. When Shelley brought forth her manmade man, she bid her "hideous progeny go forth and prosper." And indeed it has, although in a different form than what Shelley envisioned.

The great Frankenstein movie is based not on Shelley's novel, but on those plays that were based on the novel. In the book, the creature is an intelligent, talkative fellow. He is made into a mute in the play versions. The plays also added a laboratory assistant, Fritz, as well as an elaborate creation sequence. The Universal movie picked up on all of these changes.

In Universal's film, the monster is played to perfection by Boris Karloff, who portrays it as a sympathetic, childlike being, a being tortured and mocked and driven to a frenzied fury by those that could only react to his menacing appearance. The movie was a smash hit and left the audience wanting more. And Universal gave them more—much more.

First came The Bride of Frankenstein (1935), which many critics feel is superior to the original. A female companion is created for the creature, but she spurns him, just like humanity has spurned him. The creature, earlier taught speech, exclaims "We belong dead," and pulls the laboratory lever that blows the pair into oblivion.

But not to worry—Universal was to make sure that Shelley's hideous progeny continued on and on. Frankenstein became a franchise for the studio. Next came The Son of Frankenstein, the last film in which Karloff plays the monster. After this movie, at least according to the purists, the series went steadily down hill. In 1943, Bela Lugosi, who had previously played Dracula, was cast as the monster, and Universal had him meet up with the Wolfman. The last Universal Frankenstein movie was Abbot and Costello meet Frankenstein, where Shelley's creation is reduced to playing a straight man to the comedy team's antics. Hardly a fitting end for Mary's phantasm of a man.

But the Frankenstein story was carried on by other studios—most recently by Kenneth Branaugh in a version relatively faithful to the original book. It is a movie, though, that is based more in gore than horror. It does not, to quote Shelley, "speak to the mysterious fears of our nature and awaken thrilling horror." For that, one must go back to Universal's original Frankenstein, the masterpiece of the man-made monster movies.

The resort project can be expected to generate $2 billion a year for the Los Angeles County economy. More than $75 million will be brought in annually in new tax revenues for the county, state, and the city of Los Angeles. Expansion at Universal Studios will result in 23,000 construction jobs and a doubling of Universal's 14,000-person payroll.

Additionally, in 1996, branching out from traditional media, Universal Studios and Intel introduced a World Wide Web-based story from its "Online Entertainment" site. Madeline's Mind, a serial fantasy adventure psycho-drama, debuted in the fall of 1996 and continued into 1997. Universal Interactive Studios advertises console-style video games, Crash Bandicoot and Disruptor, over the Internet. These infused the moviemaking technology and Hollywood production values that Universal Studios had on hand with 50 years of video game production experience. These games might develop plotlines and could potentially become movies, television shows, and musical events.

CORPORATE CITIZENSHIP

In late May 1998 Universal Studios held its fourth on-line auction at its web site (http://www.universalstudios.com) of entertainment memorabilia. A portion of the auction's proceeds went to Stand for Children, a nonprofit organization that improves the lives of children through a variety of local projects. Universal accepted on-line bids ranging from $10 to $7,500 for original items from feature films, television shows, and memorabilia from the personal collections of show business personalities. Among the items auctioned were Brandon Lee's leather outfit from the movie The Crow; a crew jacket and two crew hats from the making of Godzilla; a number of items from Titanic, including a violin signed by both Gloria Stewart and Celine Dion; and items from the wardrobes of Beverly Hills 90210 heartthrobs Jason Priestly, Luke Perry, and Brian Austin Green. Earlier in 1998 Universal had held another on-line auction benefiting the Entertainment Industry Foundation and the Motion Picture & Television Fund.

GLOBAL PRESENCE

MCA has announced plans to open its first Universal Studios theme park outside the United States in Osaka, Japan. The $1.6 billion park is set to open in 2001 and will feature attractions such as "Jurassic Park," "Kongfrontation," and "Beetlejuice Graveyard Review."

EMPLOYMENT

As of early 1998 Universal Studios employed about 14,000 people. The company's planned development of a mega-resort in Universal City, California, and the Universal Studios theme park in Osaka, will eventually almost double that number. Assessing the outlook for job seekers at Universal Studios, John Sprouls, Universal's vice president for human resources, was quoted in Time as saying, "I've got opportunity everywhere."