When Hollywood Had a King

by Connie Bruck

  For all their latent power, these currents created mere ripples on the surface. There was some public murmuring in 1981 that Wasserman’s control was less complete than it had been, and his company less strong (its earnings dropped precipitously that year, and Wasserman instituted a round of cost cutting). But the criticism was quieted for a time by the greatest movie triumph ever—E.T. the Extra-Terrestrial, which Universal released in 1982. Sean Daniel, who had joined the company as a young executive assistant in the movie division in 1976, and achieved early success two years later with a very un-Universal kind of movie, National Lampoon’s Animal House, recalled the preview of E.T. Spielberg, Edie and Lew Wasserman, Lorraine and Sid Sheinberg, Daniel, and a few other people traveled to Texas. “Lew didn’t believe in corporate jets, but he had leased one for that occasion,” Daniel said. “Steven had wanted the preview to be in his lucky theater, in Dallas—the Jaws theater—but it wasn’t available that night, so we went to Houston. No one in that group had ever seen a preview like that. The audience could not believe a movie was making them feel this way. There was such a level of cheering and exhilaration! I remember Lew smiling—beaming is the word—as he walked out to the lobby. It was a happy plane ride back.”

  E.T. broke all previous box office records, and retained its standing as the biggest movie ever for many years. The young director Wasserman had thought too untested for Jaws had become a phenomenon. And, though Spielberg would on occasion make a movie at another studio, he was, by and large, Universal’s phenomenon. Because Spielberg was grateful—not so much for the chance he’d been given on Jaws, but, more, for the one given him earlier by Sid Sheinberg. When he was head of television for MCA/Universal, Sheinberg had seen a prize-winning short film Spielberg had made and, on the strength of that, brought him into the MCA-TV stable with the seven-year contract. It was 1969, and Spielberg was just twenty-one. Now Sheinberg (not the head of the movie division) oversaw all Spielberg movies at Universal. Some in the Hollywood community, however, did not believe that Spielberg would continue to be undyingly loyal to Sheinberg and Universal. Hadn’t he already repaid his debt many times over, they wondered, and might he not switch his allegiance to another studio or, at least, play the field?

  Steven Spielberg, with Amy Irving and Warner Communications CEO Steve Ross—who was trying to woo Spielberg from MCA. James Smeal/Ron Galella Ltd.

  One who was desperate to win Spielberg away from his base at Universal was Steve Ross. Ross’s hopes of succeeding Wasserman as industry leader had been crushed by the government investigation of Warner Communications’ ties to the mob-run Westchester Premier Theatre. That investigation had resulted in a guilty plea from Ross’s closest associate at the company and the conviction of an assistant treasurer; and Ross himself had come perilously close to being indicted. Ross knew that Wasserman disdained him—which would have made his stealing Spielberg away from MCA all the sweeter. Terry Semel, president of the Warner Bros. studio and a good friend of Spielberg’s, arranged a four-day weekend for Ross and Spielberg at the Warner villa in Acapulco in early 1982. Interviewed in 1993, Spielberg recalled the encounter that gave rise to his long, close relationship with Ross: “I had typecast what a CEO was . . . and in my mind, they looked like J. C. Penney. And suddenly here was this older movie star. We quickly found out what we had in common: my favorite movies were made between 1932 and 1952 and those were his favorites, too. Steve to me was a blast from the past. He had silver-screen charisma, much like an older Cary Grant, or a Walter Pidgeon. He had style in a tradition that seemed to have bred itself out of society. He had flash. He was a magnetic host—eventually, that became his calling card. And at Acapulco, he was the weekend.”

  Sheinberg could not compete; few would describe this abrasive, often bad-tempered executive as having “silver-screen charisma” or “flash.” But Spielberg evidently did not view it as a competition. He was devoted to both men. Spielberg—who for many years had a difficult relationship with his father and was fond of casting friendships in familial terms—once tried to differentiate his relationships with Ross and Sheinberg by saying that Ross was “a surrogate father,” while Sheinberg was “an older-brother figure.” In any event, he did not believe that Ross was courting him with any business purpose; Spielberg insisted that Ross’s had been a “friendship without agenda.” And for Spielberg, the issue of his loyalty was apparently as uncomplicated as his view of Ross; his first allegiance was to Universal. While he did make a number of movies at the Warner Bros. studio, Universal remained his home. That was made official for the first time in 1983, when Universal provided him a permanent office, built and decorated at his direction, for his independent production company, Amblin. A two-story adobe mansion, with cedar beams, Mexican tile floors, Navajo pottery, and Tiffany lamps, it featured a forty-five-seat screening room, outfitted with George Lucas’s THX sound system and Dolby stereo, and two cutting rooms. There was also a full kitchen, presided over by a permanent chef, and a game room filled with the latest video games. Perhaps it was a kind of Walter Mitty fantasy of Spielberg’s when he was wandering around the lot in 1969, often with not very much to do, that he would someday have such a studio castle.

  It was something MCA now was only too happy to provide. MCA was a strong company, with substantial assets in movies, records, and books, theme parks and real estate. But Spielberg was arguably the biggest asset of all. “There are very few things Steven could ask of us that he would not get,” Sheinberg said in an interview in 1984. “There is no one we are more anxious to please.”

  Perhaps the strongest sign of that desire was the deal that Sheinberg made with Spielberg after the triumph of E.T. It was to apply not just to his next movie at Universal but to all subsequent ones as well (it would, indeed, remain constant over the next twenty years). And it was a fifty-fifty partnership—essentially, the Raiders deal, reincarnated.

  Wasserman had entered the movie business with no illusions. He knew that movie production, with its endemic overruns in time and costs, and the unpredictability of box office success, was inimical to control. It was, therefore, a business for which Wasserman was temperamentally unsuited, but he was drawn to it nonetheless—how rule Hollywood, and not be in the movie business? So, while doing everything imaginable to exercise as much control as he could, he suffered its failures and deeply savored its triumphs. But television was his safe harbor. He had been there at its inception, had shaped its nascent form according to his desires, and had dominated it, with ease, essentially unchallenged, for decades. It was not a dominion he was prepared to lose.

  Through the seventies, the strength of Universal Television was undiminished. No other TV producer came close to MCA. In the fall of 1976, Norman Lear was MCA’s closest competitor—he supplied four hours of shows a week on prime-time network programming, and MCA supplied fourteen. Among MCA’s were The Bionic Woman, The Six Million Dollar Man, Emergency, Baretta, Kojak, The Rockford Files, and Columbo. Several of these had started out as World Premiere movies—illustrating yet another benefit to MCA in that historic deal with NBC. Selling a new series to a network ordinarily involved many time-consuming stages, but these movies essentially served as “backdoor pilots” for series, thus performing a dual function and dramatically accelerating the sales process.

  Long after Kintner had made that deal with Wasserman and then abruptly left his job in late 1965, MCA’s relationship with NBC had remained intact. The players changed, but the dynamics did not, and MCA continued to court key NBC executives aggressively. NBC executive Don Durgin recalled that after Sonny Werblin left MCA, it was the inimitable Jennings Lang who worked his wiles on NBC. “Jennings had this beautiful house,” Durgin said. “MCA had bought him the house—or, to put it more exactly, the company had given him an interest-free loan, never expected to be repaid. And all the art! He had the paintings like postage stamps on the wall. In the living room, the chairs swiveled and leaned back, the paintings would suddenly be lifted up on chains, and a screen cam
e down—and then there would be an MCA projectionist, to show the movies.” At NBC, Kintner had been succeeded by Walter Scott. “Walter was a very sensible man, but he was captivated by Jennings and his shameless schmoozing. Jennings was a great combination of Jewish Hollywood and street smarts, but with such warmth and generosity that you couldn’t resist,” Durgin continued. “One day at the Bel Air Hotel, Walter opened his door—and there was a live peacock [NBC’s logo], strutting about on his patio!”

  Oddly—inasmuch as this was, after all, a business—such courtship was a meaningful part of the process. Larry White, who had been a TV executive at CBS, arrived at NBC in 1966, when the Wasserman-Kintner deal was still young; it would be renewed many times, he recalled. “The individual personal relationships between suppliers and buyers was a strong determining factor,” White said. “The quality of the material was almost secondary. If you weren’t in the loop and weren’t personally involved, you wouldn’t get the business. It’s very strange—there’s no other business like this that I can think of.” When White became head of programming at NBC, he decided to try to take a more rational approach. He believed that while the MCA movies delivered to NBC were by no means all bad, the MCA-NBC relationship was heavily weighted in MCA’s favor, and it effectively froze out other movie producers. “I went to Hollywood and had dinner with Frank Price [head of Universal Television],” White said. “I told him I was going to look at everybody’s submissions on an equal basis.” Shortly after that, Sid Sheinberg complained about White to Sheinberg’s good friend Herbert Schlosser, the president of NBC. Life at NBC was difficult for him from then on, White said, and he left in 1975.

  Even after Sheinberg was elevated to the MCA presidency, he continued to cast a proprietary eye on Universal Television, where he had been president, and where he probably spent his happiest years at the company. He had reported to Wasserman, of course, but the hugely successful division seemed more his, in a way that the larger company never fully would. Sheinberg had first come to Wasserman’s attention as a company lawyer—Wasserman said he brought the young attorney with him to a negotiating session and thought he was “brilliant.” Sheinberg had his early, sustained exposure to Wasserman, however, when he was an executive in the TV division. He recalled the time when Wasserman and Schlosser were negotiating one of the big TV movie deals, and they were stuck on a point that Sheinberg thought not nearly critical enough to be a deal-breaker. When Schlosser continued to balk, Sheinberg recalled, “Lew said, ‘You’ve just blown this deal, and you go tell them at NBC that you have no deal!’ Herb Schlosser fell backward into his chair. Afterward, Lew was driving me home, in his Bentley coupé (a gift from Jules Stein), and he said to me, ‘You look shaky.’ I said, ‘I’m troubled.’ He said, ‘I learned a long time ago that in every negotiation you have to decide whether you have the power to control it or you don’t. If you don’t, make the best deal you can and get out. If you think you do, then exploit that.’ A couple hours later, he called me at home. ‘They caved.’ And after that, in the course of Lew’s negotiations with NBC,” Sheinberg concluded, “it was, ‘Whatever you want.’ ”

  Frank Price succeeded Sheinberg as head of the television division, and remained in that post for five years. He sought to find new forms for MCA TV—for example, the serialized novel. Rich Man, Poor Man, based on Irwin Shaw’s novel, was a great hit as a twelve-part series on ABC. He also tried to break into the half-hour comedy business—but MCA’s efforts under his regime were no more successful than they had been before. “One of the things I did was develop some terrific young producers—Steve Cannell, Steve Bochco,” Price said. “It was an apprentice system that was working really well.” Price, who had a fractious relationship with Sheinberg, left MCA in 1978, eventually to head Columbia Pictures. After Price’s departure, a number of top TV writers and producers left as well. One of them, the producer Glen Larson, told BusinessWeek in 1981, “Price was a real innovator and knew how to handle people.”

  The exodus was about more than personal chemistry, though, according to the entertainment lawyer Kenneth Ziffren, who was representing many writers and producers in television. Just as the economic relationships between the talent and the studios in motion pictures were being redefined (thanks to the efforts of aggressive agents and lawyers), they were in television, too. “What happened was Lew and Sid were unwilling to make the back-ended deals I was able to make all over town,” Ziffren said. Universal insisted on a net profit definition so expansive in its application of costs and fees that there was little defined profit, in the end, to share with the talent. “My clients were getting nothing on the back end. Plus, Universal was getting an investment tax credit! I said, my guy wants to see some of the upside, and if you’re not going to give him any, we’re leaving.” Ziffren said he did this with a number of the writers and producers who had been Universal Television’s strongest performers. The result of their departure was not manifested immediately, but by the late eighties Universal Television had started to weaken noticeably.

  Ziffren was awed by Wasserman when he had first started practicing law, with his father, Paul, and he had dealt with Wasserman on the lease for the Center Theatre Group. But that had been more than a decade earlier, in a very different venue. Now, he said, “The rules of this game had started to change, and my major critique of Lew and Sid is that they were too rigid, and they did not keep up with the times.”

  One business opportunity MCA missed was pay television. By the late seventies, pay television—through which revenues came from showing theatrical movies, uninterrupted, on special channels—was becoming so popular that some believed it might be the prime method for viewing motion pictures by the end of the century. Its pioneer, however, was not MCA, king of TV, but Home Box Office, Inc., a fledgling subsidiary of Time, Inc. In 1976, the rather fusty Time, Inc. had invested $7.5 million to lease satellite time to transmit HBO’s signal to cable systems. That move had revolutionized the cable industry. There were other entrants to this new market of providing movies to be shown over local cable systems, like Showtime and the Movie Channel. But HBO was the dominant player by a large margin.

  Wasserman had always been alert to the nexus between movies and television—in his buying of the Paramount library of films, in his introduction of the made-for-TV movie, in his efforts to develop the Disco-Vision machine. (That last must have been a sore disappointment for Wasserman. He prided himself on seeing the future, as he had in television, and Disco-Vision would have been a great sequel. “I think its potential is literally mind-boggling,” he told Fortune magazine in 1976. But MCA withdrew from its manufacturing in 1982, after investing about $100 million in laser beam video technology.) Perhaps Wasserman had missed this opportunity for cable programming because of his shunning of the cable business itself. It was plain by 1979, in any event, that pay television was too big a phenomenon to ignore. Motion picture distributors were not happy with the gross revenues they were receiving from pay TV, as opposed to theatrical exhibition, and HBO was considered a particularly tough negotiator. Most of the major movie studios participated in discussions about starting a pay TV network, but it was MCA/Universal, Paramount, Columbia, and Fox, along with Getty Oil Company, that decided, in early 1980, to go forward. They formed a joint venture to start a network known as Premiere. And Premiere was to have a giant advantage, in that certain films distributed by the venture partners would be made available exclusively to Premiere for a nine-month period before being made available to other programming services, such as HBO.

  The U.S. Justice Department promptly filed an antitrust suit, charging the five defendants with price fixing and a group boycott. In December 1980, after extensive discovery, Federal District Court Judge Gerhard Goettel ruled on the government’s motion for a preliminary injunction. Essentially, the defendants were arguing that the (anti-competitive) steps they were taking were required to combat HBO’s monopoly power. It was an interesting argument for MCA, especially in light of its lifelo
ng history of seeking and embracing such power. Indeed, Judge Goettel, acknowledging that some HBO practices suggested monopoly power, described them in a way that was reminiscent of MCA. “Undoubtedly . . . HBO, by its pioneering efforts, has achieved a very substantial portion of the existing market. It has already obtained a substantial profit margin and a high return on investment, which it probably will be able to continue for some years to come. Its use of volume discounts has assisted it in obtaining affiliations with large cable systems. Certain of its practices, such as the obtaining of exclusive licenses, which it refuses to share with other networks, and its selective tactics in purchasing from motion picture producers, do suggest the exercise of monopoly . . . power. However, it is to be expected that the first entrant in the industry would have a substantial head start and that new entrants would have some catching up to do.”

  The judge seemed offended by the defendants’ rationale, and the conduct they sought to justify. “The construction of the Premiere venture is concededly very clever and would, almost certainly, gain the defendants a successful entry into the market. In structuring their venture, however, the defendants are arrogating to themselves one-half of the essential product of the industry.” And, he also wrote, “There are a number of ways of achieving product differentiation without cornering the market on one-half of the hit motion pictures being produced in Hollywood.” The government won its motion, and that was the end of Premiere.