1. THE REVIVAL OF HOLLYWOOD:
Strategies behind the success of Hollywood studios since the 1970s
By: Yusuf Kurniawan
Abstract
The rise of television during the 1950s and 1960s
was seen as dealing a fatal blow to the film
industry, but along with the emergence of new
television systems and the video recorder, and
coupled with more deliberate and coordinated
marketing strategies, Hollywood has undergone a
major resurgence. This paper examines how
different media coexist and the way in which film
has been able to regain its prominent media
position on a global scale.
Introduction
I still remembered when Rambo burst in Indonesia’s film market in around the early
1980s. I was so vigorous in watching the blockbuster at the local cinema. As a young
boy who was fond of watching action movies, I was so impressed with John Rambo’s
actions in the movie. I think, nearly every young child during the time liked it. Since I
was still at elementary school, I never came across with questions such as who made the
successful film, who distributed it, how much money spent on that movie etc. What I
learned was that the movie had considerable impact upon audiences that were chiefly
dominated by teenagers. Even I myself was so crazy about Rambo, which was
represented in the forms of stickers and posters. My bedroom wall was full of posters
and stickers that predominantly featured Rambo and Sylvester Stallone.
That is a brief story of mine when I was a kid and my comment when I looked at
such phenomenon. Recently, when I watched the same movie on video I had different
comment, but the movie was still impressive. In fact, Rambo is only one of many
blockbusters produced by Hollywood studios that succeeded in the film market. There
are still hundreds of more successful blockbusters which made tents to hundreds of
million of dollars in compensation for their production cost, for instance Beverly Hills
Cop II that cost about $20 million to make and returned four times that. Back to the

2. 2
Future cost about $22 million but returned $104 million. The $14 million Top Gun
made about $80 million. 1
Those blockbusters emerged since the early of 1970, the year when Hollywood
managed to regain its success. Seen from the chronology of the monumental events, the
history of Hollywood can be divided into three major divisions, i.e. (1) Early period
between 1908-1918. It contains the history of Hollywood since it was firstly established
until it was settled and began developing. (2) Studio years: 1930-1950 (Golden Age I).
It tells about the first success of Hollywood as the American film industry, and (3)
Resurgence period (1970s – present), which explain the revival of Hollywood and the
return of Hollywood success after the long economic crises. However, in this essay I
will only focus on the latest period.
Low Admissions
When the long economic crises stroke the United States from about 1950s to 1960s,
Hollywood filmmaking industries were in very hard condition. The studio years totally
ended because of the soaring cost for maintaining the studios and the equipment, and for
paying the stars’, lawyers’ and studio executives’ salaries that skyrocketed. 2 In
consequence, the film production decreased significantly compared to the previous
years.
To survive from the crises, Hollywood major studios manufactured most of their
films outside of the United States. These so called ‘runaway’ films emerged as an
expression of deep concern about the financial condition and disadvantageous
atmosphere in the US film industries. The number of ‘runaway’ films increased
especially during the 1960s. For example in 1968 there were 232 films created by
Americans, of which 123 were manufactured outside the United States. In 1969 there
were 226 American-sponsored films, of which 118 were not produced in this country.
And in 1970, nearly 237 American films, of which 100 were made abroad. While in the
1950s, only 5 percent were manufactured abroad. 3
Since nearly all of the studios were worsened by the bad economic climate, they
merged themselves into some major studios. The smaller studios were absorbed by the
bigger ones. For instance, United Artists became the part of the Trans-America
Corporation (then it would be later absorbed by MGM, and MGM itself eventually was

3. 3
owned by Turner Broadcasting. 4 The situation was worsened by the more government
regulations on films, such as the regulation on labelling system and film content.
Interaction between media
TV in the US had lost its novelty since the early 1960s, so that the number of audience
turned normal. 5 It has become the characteristic of societies or audiences, when a new
technology is introduced there is always (usually) ecstatic acceptance. It is frequently
characterized with huge number of audiences or users and number of products sold. By
1970, 95 percent of all American household owned at least one television. 6 Still, what
TV offered was new for the audiences that they did not get at the movie theaters. It was
signified with the decreasing number of audiences in theaters.
Hollywood studios employed the phenomenon to approach TV broadcasters to
collaborate with them. They proposed to have a mutual collaboration between
Hollywood studios as the film producers and providers and TV broadcasters as the new
exhibitors. In addition, advertisers, attracted by the potential profits to be obtained from
this vast audience, increased their advertising 120 percent. It stands to reason, since
most of the cinema audience had shifted their attention to TV, the film producers
wanted to show their films on TV. The studios got revenues from the taxes and licenses
paid by TV broadcasters. In return, TV broadcasters gained profits from the
advertisement tax paid by advertisers, while cable TV broadcasters obtained the money
back from their subscribers. By 1963, 70 percent of American prime-time television
programming was coming from Hollywood, and the major companies were earning 30
percent of their revenues from telefilm production. The made-for-TV movie in the mid
1960s was a commercially logical development. 7
Hollywood major studios obtained more revenues from the invention of VCRs,
Video CD players and DVD (Digital Versatile Disk) players. New technologies mean
new outlets for Hollywood movies. Audiences of the 1990s experience mass-mediated
culture differently to earlier generations. VCRs, VCDs and DVDs have made viewing
time more flexible and convenient. Cable and digital TV have provided a range of new
programming possibilities with special interest channels intended to smaller audiences.
Undoubtedly, the technologies introduced in the 1970s, 1980s, and 1990s have provided
the film industry with some wonderful new outlets.

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For some time, the Hollywood majors did not depend solely on theatrical
exhibition. However, these latest distribution windows could be meant as diversified
revenues, which add even more power to the operation of the studios. Initially, many
film executives were worried about the emergence of these new technologies.
Hollywood executive Frank Rothman observed: “When television started in the 1950s,
there was a strong view that that was the end of Hollywood. When cable came, we
thought that would kill our sales to networks. None of these things happened. Every
time the market expands, the combination is greater than before.” 8
Vertical Integration II
Behind the success of the film distribution Hollywood in fact has applied the
vertical integration strategy in producing, distributing and exhibiting the films. It was
the strategy of classical Hollywood, as Hoskins points out:
During the ‘Golden Age’ of the Hollywood studios, in the 1930s, the industry was a
mature oligopoly (a small number of large interdependent firms, each controlling a
significant share of the market). Each of the majors (at that time Warner Bros.,
Loews/MGM, Paramount, RKO, and Twentieth Century-Fox) was vertically
integrated – controlling all aspects of production, distribution and exhibition. 9
The situation during the resurgence of Hollywood was quite advantageous. First,
the government loosened the regulation on movie studios. Second, they were permitted
to return to the exhibition business, on condition that they did not discriminate the films
which were released by other distributors or committed monopoly practices. In this
resurgence period the five major Hollywood studios –Cannon, Paramount, Tri-Star,
United Artists, and Universal ‘reverticalized’ in a grand way. This Vertical Integration
involves three key elements namely producer, distributor and exhibitor. The relation of
these three elements is inter-dependent. Producer has studios to make films, but the
films will not ever reach audiences if there are no distributors. Meanwhile, distributors
need a place to exhibit the films to public. In this case distributors need exhibitors.
Conversely, exhibitors need distributors and producers in order to be able to receive and
exhibit films regularly. And distributors also need producers. The mutual relationship
between distributors and exhibitors is probably the most dominant, because these two
elements are one of the key determiners whether or not a film will reach the audiences.

5. 5
The role of distributors is so important that their revenue is more than exhibitors’.
The comparison of income received by distributors and exhibitors is described by
Goldberg that the role of distributors is very important. Therefore, in order to be able to
exhibit the film exhibitors must agree to give the distributor a share of the ‘box office
gross’ (the term for the total ticket sales for the film) on the basis 90:10. The distributor
gets 90 percent and the 10 percent is for the exhibitor. The distribution and marketing
cost is very expensive. For some recent Hollywood blockbusters their budget is about
$50 million. 10 It stands to reason that the role of distributors is very crucial. This second
vertical integration was so solid that the expansion of business the Hollywood studios
have been expanding to all over the world.
Today, the phenomenon of Hollywood movies is found everywhere. Nearly every
country in the world import Hollywood movies. Simultaneously, it showed the
Hollywood hegemony as one of the world’s film industries. Based on the data from
Screen Digest, June 1999, USA (Hollywood) is respectively on the top rank among
other countries in the world that produced films in the four-selected-years: 1968, 1978,
1988 and 1998. In 1998 Hollywood made 661 films plus nine more films which were
co-produced. 11
Film content: 1970s - Present
The 1970s saw the re-emergence of the director as a major creative force. Hollywood
film’s themes were considered too monotonous since the 1930s. They were mostly
about comedy and non-fiction stories like warfare. Audience had been bored of such
film’s themes; especially the youths and children in which they did not get their portion
to have entertainment for their own. So, this stimulated the emergence of a few talented
film directors who were capable of manufacturing a new entertainment of motion
picture for the youths and children.
The sign of successful film emerged in 1972 when Francis Ford Coppola made
‘The Godfather’. 12 This blockbuster has commenced the resurgence of Hollywood. The
success of The Godfather was then followed by his next two blockbusters, Godfather II
(1974) and Apocalypse Now (1979). 13 Coppola’s success in manufacturing blockbuster
was then pursued by Steven Spielberg with his Jaws, manufactured in 1975; and also
George Lucas by manufacturing Star Wars in 1977. This movie reaped $193.8 million

6. 6
in a single year. 14 But Hoskins says it earned $325 million.15 These big films were
manufactured with big budget. Studios considered a film was successful if it made $10 -
$15 million. However The Godfather made $86.3 million in its first year. 16 This film
earned three Academic Awards and $142 million in world-wide sales. 17 The film
manufacturers learned that they could sustain themselves for several years with such
large sum of money.
The emergence of the blockbusters has really revolutionized the American movie
scene in general and Hollywood film industry in particular. The film content changed to
be more entertaining and provided more sensation to the audiences. It also thanked to
the advanced development of sound and filming technologies. The capabilities of the
movie experts in creating special effects have enhanced the quality of picture, sound,
and exhibition as a whole. The film manufacturers then knew the kind of film that the
American people wanted. They changed the target of the post-market segment from
adult to children and teenagers, because most of the audience of the blockbusters were
people aged 12-24 years old. 18
Product advertising and product placement
The other strategy of Hollywood film industry to revive since the 1970s was to include
product advertisement within a film. Obviously this business provides Hollywood new
tremendous revenues since every product placement in a successful movie costs
millions of dollars. This is pointed out by Twentieth Century Fox Licensing and
Merchandising Corporation that ‘the studio will charge anywhere from $20,000 to
$100,000 or more for a product appearance in a major motion picture. 19 The cost differs
in what way the product placement is set in the film. For example, if the product just
appears on the background, beyond the actors, --like Coca Cola vending machine or
McDonalds Restaurant--, the cost would be less expensive compared to the product
which is used, uttered or handled directly by the movie star. For instance in most of
James Bond films BMW cars always becomes the main vehicle of this character and
Rolex watch always decorates his wrist. This will push the fee high, because
psychologically audience will be more or less influenced by the appearance of a brand
of certain product directly worn by the actor. However, they do not realize that it is a
part of advertising business.

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Tie – in
The boundaries between tie-in and merchandising are getting more and more indistinct.
More often than not, these two terms overlap. In this paper, tie-in is regarded as
promotional campaigns tied to specific films, but associated with products not within
the movie, nor based on characters or objects in the movie. The best examples for tie-ins
are probably the inclusion of a 60-second Pizza Hut commercial and coupon book good
for $20 in food and Pepsi products at Pizza Hut restaurants on the Teenage Mutant
20
Ninja Turtles videocassette. We know that the Turtles (the characters in the movie)
have strong appetite for pizza.
The tie-in between Ninja Turtles and Pizza Hut is logical, but instances like this
are not always clear in their logical connection. We can look at George Luca’s film
Willow. It is estimated that over $50 million in marketing tie-ins is riding on this movie.
The companies involved in these joint promotions are among others: General Foods,
Hunt-Wesson, Kraft, Wendy’s International, Tonka Toys, Parker Brothers, and random
House. 21
It is apparent that most of the tie-ins came from companies, which had no literal
connection with the film –after all, no one in the movie actually eats Kraft Cheese or
Quaker oats.
Merchandising and licensing
Merchandise here is considered as commodity based on movie themes, characters or
images which are deliberately designed, produced and marketed for direct sale. While
licensing is described as a “legal mechanism by which one party legally obligates itself
to pay the holder of a copyright or trademark a specific royalty in order to use a name,
likeness or image.” 22 Thus, licensing is the legal act –the process of selling or buying
property rights to produce commodities using specific copyrighted properties. On the
other hand, merchandising can be thought of as “the mechanical act of making or selling
a product based on a copyrightable product.” 23
Hollywood has applied this strategy by making a special character of a film more
recognized and well remembered by people/ audience. When people are watching a

8. 8
movie, there must be a star or character that the audiences know and remember. For
instance Batman, Superman, Star Trek, Star Wars, dinosaurs in Jurassic Park etc.
Those characters are easily remembered by audience, especially children. Those main
characters are then transformed into other forms like toys, clothing, beddings, books,
cartoons, video games, soundtrack etc. Star Wars pioneered the successive blockbusters
to be mass-manufactured not only in the form of film. In fact this new marketing
strategy is proven successful world wide. The comic strip characters like Batman,
Superman are mostly loved by children. The toys resemble the real movie characters,
such as Batman, and dinosaurs.
The manufacturing of these products have given enormous additional revenues for
the Hollywood film manufacturers. Luca’s Star Wars Corporation, which was selling
film-related books and artefacts, earned around $200 million after the release of the
first feature and Steven Spielberg’s Spaceballs (1987), through his ‘Space Balls toilet
paper’ earned $105 million. 24 Other examples are the replica of Rambo’s knife
($2,250), Bugs Bunny greeting calls (1-900-VIP-BUGS), and Gone with the Wind
wine. 25
In addition, some of the larger entertainment companies now offer generic movie
or studio merchandise. For example Warner Brothers hats, jackets, and mugs, miniature
movie clapper boards, and mock Academy Awards. These items are sold through the
studios’ catalogues or “entertainment stores,” such as Suncoast Motion Picture
Company. The Hollywood Chamber of Commerce has joined in, marketing trading
cards based on stars featured on Hollywood Boulevard’s “Walk of Fame.” 26 Thus,
Hollywood increasingly has been selling itself in merchandisable forms.
Sequels making
Probably the most notable film trend of recent years is the popularity of the sequel—a
movie that continues a story started in an earlier film. Hollywood is very fond of
making sequels. There are many examples of such strategy, e.g.: after the release of
Godfather II, which began this recent trend, was quickly followed by Rocky II, III, and
IV. Star Trek II, III, and IV, Superman II, III, and I, and the latest, Jurassic Park which
was then followed by The Lost World. Some films were regenerated from the
predecessors which had been successfully released long time ago, e.g.: Jaws which was

9. 9
then reincarnated in The Deep Blue Sea. In 1983 a record sixteen sequels were released.
Then fourteen more followed in 1984. 27 Even some sequels were threatening to go on
forever, like Star Trek for instance. The most motivating factor behind the large number
of sequels released is an economic one. As films cost more to produce, Hollywood
financiers believe it is less risky to finance a story and a cast of characters that already
have proven box-office. 28
Conclusion
The disadvantageous filmmaking atmosphere during 1960s forced Hollywood
major studios to cooperate with one another in order to survive. The similarity that they
all had was that the studios believed in the synergy evoked from the vertical integration.
The emergence of new technologies i.e.: VCRs, VCD and DVD players, Cable and
Digital TV in fact have reinforced the income of Hollywood studios for more
diversified revenues. Thus, theatrical exhibition was not the mere outlet for Hollywood
movies.
More outlets more revenues has become Hollywood’s commercial aesthetic.
Product advertising and product placement in movies became more deliberate and more
organized compared to the previous period. In addition, Hollywood major studios even
have collaborated with other big companies that want to advertise their products in
Hollywood movies. This tie-ins strategy undoubtedly provides additional revenues from
tents to hundreds of thousands of dollars.

10. 10
Notes
1
Wasko, J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p.268.
2
As a depiction, in the 1930s and 1940s half the cost of film production was spent on salaries. It did set
standard and condition that potential competitors would find hard to match, and accordingly it preserved
the monopoly of the major companies. It was said that the annual salary of Louis B. Mayer, head of
MGM, in 1930s had been $1.2 million. See Maltby, Richard (2000) Hollywood Cinema. Oxford:
Blackwell Publishers Ltd, p. 79. While in 1990, Steven J. Ross (Time Warner) topped Forbes’ list of best
paid chief executives, receiving combined compensation of $302 million. See Wasko, J. (1996), p.248.
3
Fadiman, W. (1973) Hollywood Now. Cambridge: Cambridge University Press, p.9
4
Dominick, J.R. (1996) The Dynamics of Mass Communication. New York: Mc graw-Hill Publishing.
p.264
5
Dominick, J.R. (1996), p. 264.
6
Dominick, J.R. (1996), p. 264.
7
Maltby, Richard (2000) Hollywood Cinema. Oxford: Blackwell Publishers Ltd, p. 72.
8
Cited in Wasko J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p. 242.
9
Hoskins, C. et al. (1997) Global Television and Film: An Introduction to the Economics of the Business,
New York: Oxford University Press, p. 53.
10
Hoskins, C. et.al. (1997), pp. 57-8.
11
Cited in Thussu, Daya Kishan (2000) International Communication: Continuity and Change. London:
Arnold Publishers, p. 178.
12
Fadiman, W. (1973) Hollywood Now. Cambridge: Cambridge University Press, p.8
13
Dominick, J.R. (1996) The Dynamics of Mass Communication. New York: Mc Graw-Hill Publishing
Company, p.270.
14
http://www.cc.emory.edu/EMORY_REPORT/er…/2000/April/erapril.10/4_10_00cook.html.
15
Hoskins, C. et al. (1997) Global Television and Film. New York:.Oxford University Press, p.121.
16
http://www.cc.emory.edu/EMORY_REPORT/er…/2000/April/erapril.10/4_10_00cook.html.
17
Jacobs, Diane (1977) Hollywood Renaissance. London: The Tantivy Press, p.109.
18
Jacobs, Diane (1997), p. 122
19
Wasko, J. (1996), p. 189.
20
Wasko, J. (1996), p. 197.
21
Wakso, J. (1996), pp. 197-8.
22
Wasko, J. (1996), p. 203.
23
Wasko, J. (1996), p. 203.
24
Baughman, J.L. (1997) The Republic of Mass Culture. Baltimore: The John Hopkins University Press,
p.207.
25
Wasko, J. (1996) Hollywood in the Information Age. Cambridge: Polity Press, p.203.
26
Hoskins, C. et al. (1997) Global Television and Film. New York:.Oxford University Press, p.221.
27
Hoskins, C. et.al. (1997), p. 270.
28
Hoskins, C. et.al. (1997), p. 270.