Hollywood: A Decade Driven by Dollars, Not Dreams : Movies: In a decade marked by nationwide entrepreneurial fervor, major studios were determined to maximize profits on all fronts.

The 1980s began with the election of a feel-good President who espoused the entrepreneurial ethic. They ended with the conviction of hotel heiress Leona (“Only little people pay taxes”) Helmsley--capitalist zeal carried to the max.

It was a decade marked by synergy, deregulation, acquisitions and mergers; one in which yuppies, Donald Trump, Michael Milken and Ivan Boesky competed with politicians for headlines. “Greed is good,” said financier Gordon Gekko in Oliver Stone’s “Wall Street,” a dictum that, perhaps more than any other, summarized the thinking of the day.

Hollywood wasn’t immune. The repository of American dreams, creator of one of our greatest national exports, was also on the auction block. Strip away the glitz, we found out, and show business is a business like any other. Films and TV shows, like cars and TVs, were up for grabs to the highest bidder. And there were many.

With a proliferation of media outlets--pay cable, foreign TV, home video--the need for “software,” or programming, increased. Far better to own the pie than to pay top dollar for a mere slice.

In the TV world, such once-sacred bastions as NBC, ABC and CBS fell to General Electric, Capital Cities Communications and Laurence Tisch. Britain’s Television South bought MTM Enterprises. In film, 20th Century Fox was sold to Rupert Murdoch for $575 million in 1985, Columbia Pictures to Sony for $3.4 billion this September. Those unwilling--or unable--to buy a whole studio were not turned away. Individual assets were parceled off and sold piecemeal--like MGM’s film library and landmark studio complex, for instance.

Just as studios have come to be regarded as a collection of “assets,” movies are referred to as “product”--analyzed in terms of demographics and market-tested (for casting and story line) to ensure customer satisfaction.

Despite protests from actress Glenn Close, a crowd-pleasing psychotic ending was tagged on to “Fatal Attraction.” MCA/Universal president Sidney Sheinberg got locked in a nasty public squabble with film director Terry Gilliam over the ending of Gilliam’s dark 1985 satire, “Brazil.” Sheinberg wanted the film re-edited to include a happy ending and Gilliam refused to cooperate. Eventually, the Los Angeles Film Critics Assn., whose members saw “Brazil” at clandestine screenings, voted “Brazil” the best movie of 1985, and Sheinberg reluctantly released the director’s cut. It was a rare victory of art over commerce.

To studio chiefs, job security has become an alien notion. From Day 1, there’s pressure to show earnings to support the price of the stock--a goal that discourages risk-taking. “The industry is a hit-driven one,” says David Geffen, chairman of the independent Geffen Films. “Everyone is trying to hit a bull’s-eye every time. Each year, box office goes up and quality goes down. It used to be that movies were high-quality and TV was low-quality. Now they’ve met at somewhere less than the middle.”

Mere hits aren’t enough. Ever since “Jaws” and “Star Wars” ushered in the Age of the Blockbuster, the tendency has been to swing for the fences. Trying to beat the odds, studios are on the lookout for “franchises,” follow-ups to films like “ ‘Crocodile’ Dundee” and “Lethal Weapon”--seeming sure-shots around which the rest of the release schedule can be built. Sequels have surfaced ad nauseam (“Police Academy 6,” “Friday the 13th VIII”) in an effort to clone what has worked before.

To be fair, things have improved since the mid-’80s, when teen-age sex comedies tended to dominate the screens. Studios woke up to the fact that, while 44% of the movie tickets are sold to people younger than 25, there’s a large untapped audience of Baby Boomers eager for intelligent adult fare.

In theory, home video and cable should be encouraging more adventurous film making because they can zero in on segmented audiences. In practice, though, the money to be made from exploiting a blockbuster across all the media outlets is so great that few entrepreneurs are willing to settle for the modest returns from more specialized pictures.

Theater owners are a case in point. The number of screens proliferated in the last 12 years, up 50% to roughly 24,000 nationwide. But the increase hasn’t made for a wider choice of films. Many of them were “multiplexes”--built in malls--and shoppers, the reasoning went, were more likely to head for “Indiana Jones and the Temple of Doom” than “River’s Edge.”

Rather than chancing an “art” film in one of their 200-seat theaters, exhibitors would show a more popular film such as “Three Men and a Baby” on several screens at once. The movie glut of a few years back didn’t help. If a picture didn’t perform--and perform fast--it was quickly replaced by another. No time for a small film lacking a big ad campaign or a superstar to find an audience.

Garth Drabinsky, the flamboyant chief of the Cineplex Odeon chain, changed the face--if not the heart--of the exhibition arena. Calling his company “the Rolls-Royce of theater operators,” he upgraded sound systems and improved creature comforts, waking up what had been a Rip-Van-Winkle business. For $2.75 (on top of the newly inflated $7 admission price), one could purchase a country-fresh apple torte in the lobby cafe of the Century Plaza theater--or drink one of 14 different kinds of tea in Rosenthal china at one of his Toronto operations.

Gobbling up screens right and left, dabbling in production as well as exhibition, Drabinsky was even rumored to be the heir apparent at MCA/Universal. Earlier this month, however, he become the latest victim of the movie boom--stepping down as CEO of Cineplex Odeon, which is now $580 million in debt.

Though Universal has managed to squeeze a “Do the Right Thing” and a “Last Temptation of Christ” among its “Twins” and “K-9s,” the majors generally regard a “small” film as “prestige product”--luxuries they can ill afford. Take it from Paul Mazursky, whose “Enemies, a Love Story” (based on an Isaac Bashevis Singer novel) was shot down by every major before being picked up by little Morgan Creek.

“The old moguls were emotional,” says Mazursky, who just walked off with the New York Film Critics best-director award for “Enemies,” which is now flourishing in limited release. “They were immigrants and aspired to class. The only thing these guys get emotional about is a low budget. I pray the independents stick around. Without them, it would be Pap City.”

Given the current economic climate, Pap City might be the next stop. Though a number of quality independent films have surfaced in 1989 (“sex, lies, and videotape,” “My Left Foot”), many of the key players of yesteryear have fallen on hard times. Italian financier Giancarlo Parretti is now the majority shareholder in the Cannon Group. The De Laurentiis Entertainment Group is in Chapter 11. Weintraub Entertainment Group, after a series of box-office disappointments, has placed production on hold.

What went wrong? In an increasingly competitive market, they found it hard to compete for high-priced talent, for the good theaters, for advertising space. Some of the independents, heady with their small-scale successes, took on pricier projects with “A-list” stars and directors in the hopes of maximizing profits and gaining legitimacy. Rising costs (currently $18 million to turn out a film, almost half as much to open it) makes each roll of the dice that much riskier. Deep pockets (never the strong suit of the independents) have become a prerequisite of staying power.

Those independents that distributed their own films instead of going through majors found themselves in a hole: amassing massive overhead and forced to churn out a product to feed the monster they created. Pre-sales to networks and home video leveled off as each became more selective. Using pre-sales to cover costs also wiped out some potential revenue from the few hits that emerged.

Of the 30 U.S.-made pictures released by the independents in September, 1987, not one went on to score at the box office. That’s a killer, any way you slice it--a fact Wall Street learned the hard way. Burned by the assurance of the independents that pre-sales to ancillary markets provided ironclad insurance against losing your shirt, investors found themselves out hundreds of millions of dollars. The stock market crash of ’87 proved to be the final nail in the coffin. By 1988, the indie boom had gone bust.

“Independents were the victim of two diseases which often plague this business,” says entertainment lawyer Peter Dekom. “Ego disease and the failure-to-learn-from-the-mistakes-of-yourself-and-others disease. Between them, they’ve killed more people in Hollywood than drugs, alcohol and traffic accidents.”

Studios, faced with rising costs, also drew on outside capital. Limited partnerships (which proliferated in the early to mid-’80s after tax reforms of the late ‘70s essentially wiped out tax shelters) were one way the majors could raise money cheaply and cover their down side. Speculators would invest a minimum of $5,000 interest-free in a portfolio of films in return for a piece of the net.

Not surprisingly, in a business in which only three out of 10 films makes money, no one got rich. Disney’s Silver Screen Partners, bolstered by an incredible string of hits, was one of the few delivering a decent return. Even so, participants would have done far better investing in Disney stock. And, instead of selling off some of its considerable upside, cash-rich Disney would have been better off going into the marketplace, borrowing money at current interest rates.

Theater ownership was another attempt on the part of the majors to tighten their grip on the industry. A re-interpretation of the anti-trust doctrine over the last decade helped them along. When Columbia Pictures, in a benchmark case, was allowed to purchase part of the Walter Reade theater chain in 1981, other studios jumped in. Warner and Paramount went on to become partners in the Mann and Festival chains (which have since merged to become Cinamerica) and Tri-Star bought the Loews chain.

Money from abroad has increased the number of credible players (the Japanese, for instance, have recently provided backing for producer Lawrence Gordon, ex-Columbia chief David Puttnam and independent Morgan Creek), but it’s still a giant’s game. The majors took in more than 90 cents of every dollar earned from the distribution of movies last year and are expected to be even more dominant in the years ahead. For Hollywood has seen the future, and it’s called globalization and consolidation.

Short-term, that makes for business as usual. Despite a growing xenophobia in Hollywood, most analysts say foreign money need not spell disaster. In a business that trades on relationships, buyers have wisely opted to keep industry insiders in charge. Sony lined up producers Peter Guber and Jon Peters; Murdoch brought in Paramount’s Barry Diller. Says Jeffrey Logsdon, of Crowell, Weedon & Co.: “Murdoch’s fingerprints are all over Fox, but he’s less conspicuous than in most of his other efforts. Parretti is like a sewing machine, making lots of noise but not getting anywhere. There’s a very low probability that the creative community will ever be controlled by one segment of the international marketplace.”

Down the road, there will be changes, however, and not necessarily for the better. Expect the industry to be more cutthroat than ever before. Media pundits forecast that, when the dust settles, five to seven major media/entertainment companies (Bertelsmann, Murdoch’s News Corp., Time-Warner among them) will remain.

“There’s new pressure to bulk up, to diversify, to compete on all fronts,” says Sharon Armbrust of Paul Kagan Associates. “Size has great appeal. You want someone to have to cross your path in order to do business.” Battle lines will also be drawn between studios (intent on sidestepping the costly “packages” put together by talent agencies) and heavy-hitters such as Creative Artists Agency, ICM and William Morris who--with their lock on top-of-the-line directors and stars--are a path that must also be crossed.

The independents also have a toehold--if they play their cards right. For in the land of the titans, there is room for the little guy, for what producer Gordon calls “the boutique that does great.”

Doing great, of course, requires injecting a note of moderation into corporate aspirations: keeping a lid on overhead; balancing the risk-reward ratio; relying more on films in the $2-million to $6-million range so mass-audience acceptance is not essential; in short, finding a niche and staying in it.

The majors could use some reality checks as well. For spiraling costs took a large chunk out of profits in what should have been a banner decade. And overexpansion makes an industry traditionally unaffected by recession debt-ridden and more vulnerable.

If superstars continue to command salaries in the double-digit millions, if studio chiefs negotiate ever more lucrative deals in the wake of the $750-million Guber-Peters package, if box-office and blockbuster dreams continue to hover over each and every creative decision, then the ‘90s, no doubt, will be a rerun of the ‘80s: Gordon Gekko revisited.