Panavision Seen as Field’s Ticket to Hollywood

In most industries, the leading companies are supplied by hundreds of smaller ones that never become household names.

Not so in Hollywood, where credits roll at the end of every motion picture and television show. Panavision Inc., the dominant source of cameras and lenses for the film-making community, has become a commonly known name in just that way.

Operated as a subsidiary of New York-based Warner Communications Inc. for the past 17 years, Panavision is now being sold for $52.5 million to a consortium of investors led by Frederick Field, a Chicago newspaper and department store heir.

When the transaction is completed, the Tarzana-based company is expected to become the keystone for expansion or other acquisitions in Hollywood by Field’s private company, Interscope Group.

The 31-year-old Panavision is considered a technological gem. The company got its start by making innovative projection lenses, then revolutionized film making in the 1970s with the introduction of a hand-held studio camera capable of recording sight and sound simultaneously. Most recently, the company has introduced a new 16-millimeter camera line for professionals.

Panavision equipment is being used for more than 80% of the prime-time television shows recorded on film and an estimated 75% of the “quality” motion pictures, according to Jack Barber, Panavision’s executive vice president and director of operations.

Yet Panavision’s image, like a screen actor’s, looms slightly larger than life. Despite its wide name recognition, it generated pretax profits of just $3.4 million from operations in 1984 on revenue of about $35 million.

The numbers are modest by some industries’ terms, but they put Panavision at the top of the film-imaging business.

“Panavision is the most prestigious company in the hardware end of the entertainment industry; that is why we bought it,” says Peter Samuelson, one of Interscope’s two executive vice presidents and the man who spotted the acquisition.

Panavision holds a special attraction for Samuelson because his father’s company, Samuelson Group in London, is Panavision’s British representative, with a business relationship dating back at least 25 years.

The purchasing consortium does not include Samuelson Group, however. Interscope, which is 100% owned by Field, will have a 51% stake in Panavision, while Boston Ventures Ltd. Partnership has agreed to buy the remaining 49%.

The Boston group is headed by William Thompson, former head of First National Bank of Boston’s entertainment loan division, and includes Alan J. Hirschfield, former chairman and chief executive of 20th Century Fox Film Corp.

As part of the deal announced last Nov. 29, Warner will receive warrants giving it the right to acquire up to 15% of the company, in addition to a cash payment of $52.5 million.

The sale marks the third time that Panavision has changed hands since it was co-founded by film maker Richard Moore and Robert E. Gottschalk, the innovator who ran the company with an iron hand until his death in 1982.

Moore says that Gottschalk had no formal training in engineering but excelled in optics and underwater camera equipment. Panavision got its start by developing a projector lens for Fox’s wide-screen format called Cinemascope, then began making camera lenses in the late 1950s, Moore says.

The founders sold Panavision to businessman and film producer Sy Weintraub for $3.6 million in 1965.

Sold to Kinney National

When interviewed shortly after the sale, Gottschalk explained that he had a choice of “going public with stock or selling to another company. I haven’t time for the business management. . . . This way I can devote myself to my job.”

Gottschalk continued at the helm even when Weintraub sold Panavision three years later for $10 million to Kinney National Service Inc., one of the predecessor companies of Warner Communications Inc.

But in 1972, top Warner officials questioned whether they should keep the small technological company. Jac Holzman, Warner’s chief technologist at the time, was dispatched to California to assess the operation.

Gottschalk spent four hours educating Holzman on the technology at hand, then showed him his Panaflex project. Gottschalk’s new camera weighed about 30 pounds and was quiet enough to record synchronized sound, unlike the traditional 115-pound studio cameras that required massive “blimps” to silence the sound of their own machinery.

“I was just knocked out. It was clear that this man and this company had built by far the most advanced filming system,” Holzman says. “I called (Warner Chairman) Steve Ross the next day and told him that . . . he had to give them more money to finish the job.”

With Warner’s financial backing, Panavision revolutionized the industry in technology and business practices. Unlike its competitors, Panavision refused to sell its equipment, insisting that, by leasing the cameras and lenses, it could continually upgrade and maintain the equipment.

One by one, the major motion picture studios closed their camera departments as film makers opted to lease most of their equipment from Panavision. Walt Disney Productions, a less active producer during the last decade, kept its department, but even Disney is preparing to lease Panavision equipment for a television movie scheduled to begin shooting late this month.

For all of its success, Panavision did not generate large profits for Warner. Panavision used its cash “to build a tremendous amount of equipment, not all of it wisely,” Holzman says now, disclosing that more than $7 million had to be written off after Gottschalk’s death in 1982.

Gottschalk, 64, had not groomed a successor by the time of his slaying at the hands of a friend on June 3, 1982. The loss of the Panavision chief reverberated through the workshops and hallways of the Tarzana headquarters.

Holzman volunteered to run the company for six months and wound up staying 2 1/2 years. He is best known as the founder of Elektra Records, which he ran for 20 years until selling it to Warner, but Holzman calls his Panavision years “the most satisfactory work experience I’ve ever had.”

He authorized the development and introduction of a new 16-mm camera and became a vocal proponent for the employees’ interests after Warner decided to sell Panavision. Holzman says he once feared that Panavision might be sold to “asset strippers,” but he expresses great confidence in the new owners.

He resigned from Panavision last Dec. 31 but continues as a consultant to Warner.

Interscope expects to close the sale within three weeks and has narrowed its search for a new chief executive to two candidates, who have not been identified.

Samuelson says one individual is from the entertainment field and the other is from electronics.

Hope to Be ‘Major Force’

For the new owners, the challenge lies in retaining Panavision’s market share while expanding into new markets.

“Any area within our industry--whether it be cameras, lighting, grip--is wide open,” says Barber, Panavision’s director of operations, who has agreed to continue in his post.

“We hope to become . . . a major force in the entertainment and communications industries by advancing simultaneously on the hardware and software ends of the equation,” Samuelson says.

Field, 33, came to Los Angeles four years ago, intent on becoming “a force in entertainment and communications,” according to Samuelson, who in 1981 helped found Interscope Communications, Field’s movie and television production arm.

Although Samuelson stresses that Field is not spending money wildly on either acquisitions or film production, no one can question his resources. Field has liquidated a partnership with his elder half-brother, Marshall Field V, estimated to have a value of $500 million.

The two men sold assets that included the Chicago Sun-Times, the Field newspaper syndicate and five television stations to pursue their diverse interests.