A Colorization Comeback?

Remember colorization? You know, Ted Turner turning hundreds of old black-and-white movies, including “Casablanca” and “Yankee Doodle Dandy,” into (often overly) vivid color? The colorization of “It’s a Wonderful Life” setting off protests by directors like Woody Allen and Steven Spielberg?

Following the headlong rush into colorization--which resulted in Turner, 20th Century Fox, Walt Disney Co. and others colorizing at least 600 movies--half a dozen companies sprang up around the U.S. and Canada specializing in the process. By 1989, the two largest concerns, New York-based American Film Technologies Inc. (AFT) and CST Entertainment Inc. (formerly Color Systems Technologies), both publicly traded, were together valued at close to a quarter of a billion dollars.

Today, neither company is producing anything. CST went bankrupt; its assets were sold for less than $1 million to a new entity, Santa Monica-based Cerulean, which is trying for a comeback for colorization.

AFT Chairman Gerald Wetzler still professes great hope for his firm, although it hasn’t produced anything since it declared bankruptcy four years ago.

For more than a year, Wetzler’s been promising that a deal is imminent to bring new cash into the company from a major media conglomerate.

The saga of colorization firms is a cautionary tale about investing in entertainment and technology start-ups. Just because something is hot doesn’t mean there’s much money to be made in the long term.

To be sure, millions have been made by the moguls: Rupert Murdoch-controlled 20th Century Fox Home Entertainment’s latest catalog calls its colorized line of 17 Shirley Temple videos “the most successful line in FoxVideo history.” Shirley Temple’s colorized “Heidi” alone has sold 26 times as many copies as its black-and-white version--1.2 million versus 46,000, according to VideoScan.

But the colorization firms haven’t enjoyed the same kind of success, despite many cheerleaders. In 1995, Lee Isgur, then an analyst with Jeffries & Co. in San Francisco, told The Times: “In vaults around the world, there is stuff that can be colorized that will have value. . . . There will probably be a great commercial market.” Today, Isgur, now a consultant to media and technology firms, says, “What’s left in the vaults is stuff that doesn’t have great commercial appeal.”

Other smart analysts and investors also made the wrong call; some still believe there’s unrealized potential in colorization. “I’m a huge proponent of colorization as something that’s going to break out at some point,” says Porter Bibb, an investment banker and author of the 1993 Ted Turner biography, “It Ain’t as Easy as It Looks.”

Bibb personally invested a “six-figure” sum in AFT. While not happy with its current non-performance, Bibb cites vast libraries of untapped black-and-white product in the U.S. and overseas.

Bibb adds: “Ted Turner and Rupert Murdoch made millions on colorization. So it is astounding that the companies that claim to have patented colorizing techniques are not more successful; you can only lay that at the feet of inept management.”

Certainly, bad management was part of the problem. At their height in the late ‘80s, the colorization firms overbuilt and carried far too much overhead. CST employed more than 200 full-time workers at one time.

Moreover, just about everyone who’s been involved with colorization says the real opportunity is in owning content, and critics say the colorizing companies weren’t aggressive enough about obtaining copyrights.

On pre-1986 films, if a studio neglected to renew copyright on a film, it could fall into the public domain as soon as its first 28-year term was up.

At that point, it may be fair game for a colorization company to colorize the film without paying the original filmmakers a dime. When a firm colorizes a movie, it can get a new, 75-year copyright on that colorized version. (That’s one reason Turner was so high on the process: He had a lot of movies that he was going to lose control of otherwise.)

AFT and CST both ended up having ownership of a handful of films, but it was too little too late. By that time, falling television ratings and diminishing returns on less-than-A-list movies were causing Turner, Fox, Republic Pictures and other companies to pull back from the then-expensive and controversial process.

“Basically, the novelty wore off and we ran out of good black-and-white titles,” says former Republic Pictures syndication executive Chuck Larsen.

Larsen, now an independent consultant, adds: “When we [colorized] ‘Sands of Iwo Jima’ and ‘The Bells of St. Mary’s’ [in the late ‘80s], we were getting 9 ratings in syndication. Three or four years later, we were dropping off to ratings in the 3s and 4s.”

This was at a time when colorizing a full-length movie cost $300,000 or so--a small sum compared with the cost of producing a new film but still a substantial investment. Today, thanks to new technology and much of the production being moved overseas, the same films could be colorized, with much higher quality, for less than $150,000 apiece.

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This leaner business model is what new colorization firm Cerulean is banking on. Its 5,000-square-foot offices above the Third Street Promenade hold only a dozen full-time employees, who work mainly on television commercials; “long-form” shows (movies and television episodes) are done primarily by sub-contractor Dynacs, which has a factory in India.

Cerulean has just launched a small marketing campaign, placing ads in industry publications such as Shoot and sending demo reels to ad agencies, directors and the like. Says Cerulean executive Tracy Pearce: “It’s this big secret. We’re trying to get the word out.”

You probably see colorized footage every day without realizing it. Commercials for products such as those of Gatorade, Mercedes-Benz and Twix feature colorization done by Cerulean. The effect can range from a subtle color tweak to an otherworldly effect. Candy maker Twix used colorization to replicate the look of old Technicolor film.

With the new digital process, Cerulean says, it can reproduce 16.7 million colors with astonishing clarity. In the early days of analog colorization, less than 10 colors were available.

CST and AFT did a number of music videos, for such artists as Nirvana, Green Day and Janet Jackson. You can still see many colorized movies and TV shows on various cable channels, though they’re not hyped as they were 10 years ago.

Current Cerulean projects include the colorization of a 1952 French film starring Gina Lollobrigida (“Fan-Fan la Tulipe”) and a just-shot film for New Line Cinema, “Pleasantville.” In the latter, director Gary Ross (who wrote the “Big” and “Dave” screenplays) is using colorization as a special effect throughout the movie to tell the story of modern-day kids who find themselves inside a ‘50s sitcom.

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Cerulean is redoing an earlier colorization of “The Absent-Minded Professor” for Disney, in anticipation of the release of the new film version starring Robin Williams later this year. Cerulean is also in advanced discussions with Sony about colorizing early episodes of “I Dream of Jeannie” and “Bewitched.” (Later episodes were shot in color.)

Another potential customer is Burt Leonard, a producer who owns the 1950s TV series “The Adventures of Rin Tin Tin.” Says Leonard: “Buyers have told me that they would definitely buy it if it were in color. . . . It would add tremendous value; it would be night and day.” Leonard says the series currently has virtually no value overseas.

Cerulean faces an uphill battle on several fronts. The first is just letting people know it’s there: “We’re not on fire. We’re trying to rescue this business from the abyss,” acknowledges Michael Burns, Cerulean’s lead investor.

In the meantime, bankruptcy trustees are seeking answers about the sale of former CST assets to Cerulean for what some former investors contend was a sub-fire-sale price.

Says Jennifer Golison, the attorney for CST’s bankruptcy trustee: “Last summer, CST’s assets were valued at $5 million [including intellectual property]. By the end of the year, they were only valued at $1.2 million, and a little under $1 million for quick sale.”

Burns dismisses any claims of impropriety as “patently untrue. . . . We paid a lot of money for CST.”

Wetzler, meanwhile, has sold about 600,000 of his 28 million AFT shares over the last few months; he says he’s using the money to keep the company going. In 1991, that many shares would have brought more than $5 million; at current pink-sheet prices--shares still trade over the counter in both CST and AFT--Wetzler got perhaps $160,000 for those shares.