Tale of the Tape : AME, 7 Years Old and Growing, Turns Film Into Videotape and Opportunity Into Gold

Andrew M. McIntyre is the first to agree that in business, bigger doesn’t necessarily mean better. But he is yet to be convinced that his AME Inc. can’t be both.

Since opening seven years ago, his Burbank company has become one of the biggest post-production service firms for movie and television studios, enabling McIntyre, 42, to turn his $90,000 investment into stock worth $25 million.

AME’s annual revenue has shot up from zero when it was founded in 1980 to $26 million for the fiscal year ended Sept. 30, 1986. The growth hasn’t stopped. This year, revenue for the nine months ended June 30 was $27 million, up 54% contrasted with the same period a year ago, whereas profit nearly doubled, to $2.8 million.

McIntyre isn’t stopping there. In the past year, AME (short for Andrew McIntyre Enterprises) bought two other post-production companies, TAV and Bluth Video, for $5 million. McIntyre also took AME public last April, selling 33% of its shares, which raised $16 million to help pay for more acquisitions.

‘We Have the Customers’

McIntyre said the acquisitions give AME a broader range of services and more capacity to meet the studios’ increasing demands. “We’re not buying size-38 pants when we have a size-32 waist and trying to fit into them,” he said in a recent interview. “We have the customers.”

“One premise he recognized was that there is an economy of scale in this business,” said Richard O’Hare, a vice president of 20th Century Fox. “The more you have, the more efficient you can be” in terms of equipment, he said. “It is a one-stop-shopping concept.”

AME’s principal business is taking movies and TV shows, which are usually shot on film, and transferring them to a master videotape so the studios that own the films can distribute them for syndication to broadcast or cable TV, or sell to the lucrative videocassette industry in the United States and abroad.

Recent movies such as “Beverly Hills Cop II” and “Dragnet” were transferred to videotape by AME. So are such hit TV shows as “Cheers” and “Miami Vice.”

The film-to-tape transfer can take 100 hours for a full-length movie and cost more than $50,000 for one videotape “master.” From that master, AME might then make 200 to 300 “submasters” for TV stations, and another submaster that would be used to print thousands of videocassette tapes for home viewing.

Converting film to tape requires a lot of attention to detail. A movie like “Dragnet,” intended for theatrical release, is shot on film with the understanding that a powerful light will project the image 70 feet to a big screen. If that picture were transferred to tape without any adjustment, the different light intensity of a TV set would not be able to reproduce the same colors, or at least the same richness of color. So AME adjusts the color frame by frame as it transfers the film to videotape.

AME might also narrow or slightly shrink the picture frame of a wide-screen movie to make it fit on a TV screen.

But any major adjustment is done only with approval from the studio. “We’re careful not to alter the artistic value of a film,” McIntyre said.

Other Services

Besides the film-to-tape work, AME also provides computer animation, graphics and conversion of videotapes to the electronic standards used in foreign countries.

At first, however, AME primarily made videotape “dubs,” or copies. Its timing was fortuitous. The company opened for business in 1980 just as cable TV and videocassettes were soaring in popularity. Other post-production houses enjoyed the same boom, but AME still grew like a weed.

McIntyre said the difference was AME’s service, backed by its low prices and investment in new equipment.

“In 1979 it took three or four days to get commercial duplicates,” McIntyre said of his rivals. “When we opened you could have them in four hours.

“We’re a 24-hour, seven-day-a-week operation,” he said. “We never say ‘no’ to a client. Never, under any conditions.”

Not surprisingly, executives of AME’s rivals--which include local competitors Compact Video, Post Group and Pacific Video--emphasized that AME does not have a monopoly on service. And Fred Rheinstein, chairman of Post Group, said McIntyre got rolling mainly by undercutting everyone else’s prices.

“In the beginning if somebody charged $775 for a dub, Andy would do it for $750,” Rheinstein said. “You keep doing it for $750 and you’re going to get work. But don’t forget, when he got the dub for $750 he had to do it right. It’s one thing to get it (the business) and another thing to keep it.”

The studios, although careful not to offend the other post-production houses, agreed that while AME’s prices might have snared their attention, its service keeps them coming back.

Michael Spiegler, director of operations for Paramount’s TV group, applauds AME’s “very quick turnaround, very attention-oriented” operation. “He’s the consummate service man,” said O’Hare of 20th Century Fox. “You ask for it, he gives it to you.”

McIntyre, a stocky man with a penchant for conservative suits, becomes less a corporate chieftain at AME’s office than a head coach urging his staff to excel.

During a recent tour of AME, he greeted dozens of workers by calling out their first names, and they in turn called him “Andy.” Any employee can phone him directly.

But there’s never any question who’s in charge. During the tour, McIntyre’s banter with his staff was interspersed with calm but direct orders to adjust a video screen or turn up the air conditioning that cools AME’s expensive machines.

McIntyre was AME’s sole owner until 1984, when he started a stock-ownership plan for the firm’s 335 workers, of which about half are unionized. The ESOP now owns 24% of the company.

McIntyre--despite selling 500,000 shares in the public offering, netting himself $6.3 million--retains 43%, worth about $25 million.

The stock, however, is one of the few slow-growth areas at AME. It closed Monday at $11.25 a share, down from its April offering price of $13.50.

The stock’s sluggishness might be due to its slim following among Wall Street analysts. Few analysts follow the post-production industry because most of the companies are privately held.

McIntyre’s humble start in the business came in 1962, when he was hired as a messenger at CBS television studios in New York City. But he spent “a lot of hours on my own time watching, learning” about television, which enabled him to get jobs in television production over the next few years at the United Nations and Reeves Communications in New York, and then at Technicolor in Los Angeles in 1969.

Started With Truck

Three years later, McIntyre bought a mobile television-production truck with a $5,000 bank loan and went into business for himself. He disbanded the mobile-TV business in 1976 to start Video Duplication, a maker of videotape copies, and sold that company two years later to DSI Corp. for stock that he sold for $600,000, he said.

He used most of the money to buy a house and pay bills, and had $90,000 left to start up AME.

Although McIntyre made millions from AME’s stock offering, the company had already made him rich.

McIntyre’s salary and other cash compensation totaled $1.15 million for the fiscal year ended Sept. 30, 1986. AME also rents its headquarters from McIntyre for $504,000 a year under a 10-year lease, and McIntyre has leased equipment to AME at cost, according to the stock prospectus.

In 1985 and 1986, he sold AME’s employee stock plan 1.3 million of his AME shares for $4.6 million.

McIntyre defended the transactions. AME needed new plant or equipment, he said, but had used up its bank credit lines, forcing him to use his personal credit to buy the assets and lease them to AME.

“Every possession I had has been hocked to the eyeballs” to build AME, he said.

“Basically, the money I pulled out was, I think, the reward for doing that. I’m not saying I didn’t make any money. I didn’t get out of bed this morning to lose money.”

AME INC. AT A GLANCE

AME Inc. in Burbank is the leading post-production company for the movie and television industries. Its services include transferring movies and TV programs from film to videotape for distribution to TV programmers and the videocassette industry. Founded in 1980 by Andrew M. McIntyre, who remains chairman and chief executive, AME went public last April by selling 33% of its stock. The company has 335 employees.

For fiscal years ended Sept. 30; In Millions