Just as Washington's budget-cutters do constant battle with bureaucrats, so do Hollywood's creative artists forever feud with what they call "the money men." It's a war that began almost as soon as the first camera rolled, and it's the reason United Artists Corp. was born.
In 1967, UA, the studio known as a haven of artistic freedom for independent producers, became an ironic subsidiary of the huge conglomerate TransAmerica Corp. The ill-fated association came to an end last week when MGM Film Co. shareholders voted to approve the $380 million ($250 million in cash and a six-year promissory note for $130 million) that Leo the Lion needed to bag UA, the prey he had been publicly stalking since May. A Justice Department review into potential antitrust problems has been completed, according to MGM Film Co. chairman Frank Rosenfelt, who says, "It is our belief that we will be allowed to close the transaction."
In a town and a business that often appear more interested in the deal than what comes out of the deal, it is the ultimate package. In an industry reeling from steadily declining box-office receipts, it is hoped that UA, shaken by a series of management crises and the $43 million flop that was "Heaven's Gate," will recover its prestige and financial health.
If UA, under MGM auspices, survives and prospers, it will signal, at least for one movie maker, a return to the style of Hollywood's gilded age, when the industr5y was dominate by individuals and companies for whom movie making was a specialty rather than a sideline.
In the first days of film making, actors, writers and directors went without billing, and, to a great extent, without money. Producers were accustomed not just to supplying the money that made the movies, but to keeping just about every dollar to profit. A few popular actors in silent pictures began to realize that if the public could match up their names with their faces, they would have the power to draw audiences and thus the opwer to demand that producers share the wealth and the artistic decisions.
By 1919 the producers had had enough of sharing and decided to do something about it. Hollywood was rife with rumors about exactly what that something was, and actors who had begun to make money at their craft were worried.
Mary Pickford, Douglas Fairbanks Sr. and Charlie Chaplin, together with director D.W. Griffith, struck back with the formation of United Artists. The company was not a studio in the sense of sound stages and back lots; its purpose was to serve as a distributor, and later financier, for independent producers. After a rocky start, UA gained both prestige and a healthy ledger, attracting such independents as David Selznick, Alexander Korda and Walt Disney. Hollywood's Golden Era -- the late 1920s, '30s and '40s -- was especially golden for UA.
But by 1951 the studio built by stars was losing money as fast as it had once made it. Of the original owners, only Pickford and Chaplin remained. Depressed and anxious, Pickford sought help from two associates of Louis Nizer -- Authur Krim and Robert Benjamin, who specialized in entertainment law.
Max Youngstein, a former part owner and vice president at UA who joined the company along with Krim and Benjamin in 1951, recalls that Pickford and Chaplin "didn't get along too well. And thaths putting it mildly. The company was going rapidly downhill." It was, in fact, about to go jinto receivership. The lawyers worked out a deal with the actors that would give the attorneys 50 percent of the company at a nominal cost if they could put UA in the black at any time during the next three years. They did. Then they bought out the remaining shares. Under Krim and Benjamin, the studio flourished, and so did the actors, writers and directors they encouraged.
In 1957, UAk became a publicly held company, and in 1967 a TransAmerica subsidiary. Throughout the various financial transactions, the studio remained a money-making proposition. The desperation that spurred the Krim-Benjamin takeover was not an element in the acquisition by TransAmerica; the studio was making money and TransAmerica was viewed by studio executives not as a lifesaver but as a fairy godmother in the every rocky and unpredictable romance between America's moviemakers and moviegoers. Krim and Benjamin remained, respectively, chairman of UA and chairman of the finance committee.
Disharmony forst sounded in 1970, to the tune of a $43.3 million UA loss. The fiary godmother got tough. And back things went to the old war between the movie men and the money men. It wasn't a big surprise. Youngstein had left UA five years before the sale to TransAmerica because talks already had begun with other conglomerates, and, he says, "I couldn't see myself trying to explain the motion picture business to someone from the grocery business." Eventually, Krim and Benjamin were as unhappy under a conglomerate umbrella as Youngstein had feared he would be. They chafed under financial controls clamped down by the parent company, and resented TransAmerica's own declining stock value. The UA movie men wanted to break away from the parent company. TransAmerica refused to let the studio go. Unhappiness grew on both sides.
In January 1978, the feuding was aired publicly in a Fortune magazine piece in which TransAmerica chairman John Beckett was quoted as saying that, despite the "grousing" at the studio, the conglomerate did not intend to let go of its film subsidiary. "And," Beckette challenged, "if the people at United Artists don't like it, they can quit and go off on their own." With the Janurary issue of Fortune still on the stands, the UA people, in the persons of Krim, Benjamin, president Eric Pleskow, executive vice president William Bernstein, and UA vice president and West Coast production chief Mike Medavoy did just that. And they left UA in a management crisis from which it has still not recovered.
The sale to MGM, in which both companies will remain autonomous, competitive studios, is welcomed by almost everyone in the depressed, tight-moneyed film industry. The prevailing wisdom is that MGM will benefit just as much as will UA. MGM has a back lot and sound stages; UA, an MGM tenant for the last six years, has never owned a physical studio. United Artists is a film distributor; MGM went out of the distribution business in 1973 and has since been distributing through UA.
The two studios also will have a gold mine in their combined libraries. MGM's Rosenfelt says that in the mid-1970s, "The whole business began to move from the movie business to the entertainment software business." Rosenfelt is talking about the new technology -- cable and pay television, video cassettes and discs -- that is considered to be the future of entertainment. It is the new technology, and how it profits will be divvied up, that put the actors on picket lines last year, and had the Writers Guild on strike recently.
Just as everyone in the entertainment industry is anxious to buy into the profits of the new technology, so is the technology hungry to gobble up just about anything, old or new, that will entertain. MGM still owns all its old classics, from "Gone With the Wind" to "Singin' in the Rain" -- 1,600 films in all. The United Artists library holds not only its own films, which include the James Bond and Pink Panther series, but all the Warner Bros. Films made before 1948.
Kirk Kerkorian, MGM's controlling stockholder and the man whose decision it was to buy UA, leaves the running of the studio entirely in the hands of Rosenfelt, who is slightly reminiscent of the monguls of the past.
Rosenfelt, 60, has worked for MGM for more than a quarter of a century and has served as chairman since June 1980. An intelligent and candid New York-born lawyer who knows his business well, he is something of a rarity in a glittery and often unsubstantial milieu. yand he is determined to see both studios do well.
Rosenfelt is incredulous at the suggestion that MGM might swallow United Artists: "Would we buy UA, a company that earned, after taxes, $40 million a year under Krim, to liquidate it?"