Foreigners Pose No Threat to Hollywood

The word from Hollywood is that MCA Inc., owner of Universal Studios, will decide this week either to sell out to Matsushita Electric Industrial of Japan or call off negotiations.

Whether MCA is sold or not, foreign interest in American movie studios remains intense. Rumors have cropped up in recent weeks that Samsung, the Korean electrical combine, wanted to buy Orion Pictures. Mitsubishi and Toshiba, of Japan, were likewise said to be interested in following a trail blazed in 1988 when Sony bought Columbia Pictures.

Buyers are paying big prices--and raising questions.

There's the business question: Why are foreigners so attracted at this time to film studios?

And there's a cultural question, subtle and troubled, that is being asked by serious people in the Los Angeles film capital and elsewhere around the nation: In selling movie studios, is there a threat to U.S. culture? Are Americans selling their birthright for a mess of pottage?

Business first. Interest is growing in film studios and all forms of entertainment programming because markets around the world have recently opened up. Where national governments or local monopolies used to control film and TV show distribution, that control is breaking down thanks to political change--as in Eastern Europe--and the pressure of technology. Videocassettes are ubiquitous; satellite broadcasting, such as Britain's Sky network, beams programming internationally.

Foreign companies weren't first to see the possibilities. Last year's high-priced merger of Time Inc. with Warner Bros. studios to create Time Warner set the pace that others are following.

"I could name you 15 potential buyers worldwide for U.S. movie studios," says Gordon Crawford, senior vice president of Capital Research, the Los Angeles-based investment management firm.

But only a handful of companies own major film studios: MCA, Time Warner, Sony (Columbia), Walt Disney, 20th Century-Fox, Paramount Communications, MGM-Pathe and Orion.

To be sure, there are many small film production companies and fine movie industries outside the United States. "But only Hollywood companies can make a $20-million-plus motion picture and distribute it throughout the world," says Crawford.

Also, potential buyers believe the grass is greener. Makers of televisions and VCRs--such as Sony and Holland's NV Philips--see higher profits to be made in the programs that bring their hardware to life.

Gerrit Jeelof, chairman of North American Philips, recalls how they came to that conclusion: "When we launched the VCR we thought it was a time-shift machine, but then we saw it was a playback machine. That's where the movie industry came in, making their films available on tape. It was a bonanza for them because they got to sell a lot of stuff they had sold before all over again in a new medium." Video sales and rentals can now bring in more than the box office on a movie.

So foreigners are buying in. Whether the movies--a notoriously hit-and-miss business--will prove as profitable as they think remains to be seen.

Cultural questions may be less precise than dollars and cents but they're no less real.

In one sense, questions of a threat to American culture cropped up with film investments from Japan and stem from perceptions of Japan's own culture, a society that prizes homogeneity. There's an inherent conflict, suggests author James Fallows, because the founding premise of Japanese society is "ethnic purity," while that of America is "ethnic democracy."

Quincy Jones, the American composer, arranger and film director, has cited remarks about American blacks by Japanese government figures--including a prime minister--and asked pointedly whether Japanese purchases of film studios pose a threat of discrimination.

A blunt answer on that score is that if there's a problem, it would be Japan's problem. Discrimination in hiring is against U.S. law. Subtle discrimination or censorship of films would be self-defeating, especially in a business where talented people are the assets.

A company that trimmed its product to meet national prejudices would lose out in a global market of diverse and demanding customers.

Fortunately, nothing seems further from the minds of the companies investing in Hollywood. Sony, for one, seems intent only on paying enormous salaries to executives and stars such as Michael Jackson--reportedly dropping a bundle today in hopes of building a global franchise for tomorrow.

But the other cultural question, about selling out the movie industry that America created and defined is merely one more example of the current national identity crisis.

A broader, healthier perspective would be to see the United States becoming part of the wider world-- gaining and growing, not diminishing. "American culture may be the last national culture to really take center stage as the world culture," says Paul Saffo, research fellow at Menlo Park's Institute for the Future. "From now on it will be global culture."

But that world will still be watching "Dallas." Hollywood's business is better than ever, as witness record exports of U.S. entertainment--perhaps $7 billion a year in records, TV shows and movies.

That, of course, is why foreigners want to buy in. They don't lack for film industries of their own--Japan's films are particularly excellent, from the classic director Akira Kurosawa ("Dreams") to the bright and satiric Juzo Itami ("A Taxing Woman"). But they see a market opportunity and want a stake in the market leader.

In truth, there is no conflict. Global business these days is global culture.

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