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MGM

Overview

This page considers MGM (aka Metro-Goldwyn-Mayer).


It covers -

  • introduction
  • beginnings
  • the studio system
  • Kerkorian and UA
  • Skase and Parretti
  • Kerkorian returns
  • Metromedia and beyond
  • studies

Introduction

MGM epitomised the US studio system as a film factory under the control of East Coast financiers, integrating production (with extensive facilities and actors on long-term contracts) with distribution and large-scale exhibition interests.

Following dismantling of the studio system it came under the control of entrepreneur Kirk Kerkorian, with studio facilities and film libraries being sold, acquired and resold to figures such as Ted Turner and Australia's Christopher Skase and Kerry Stokes. The MGM 'brand' and lion logo was used to decorate casinos, hotels and even an airline.

In September 2004 MGM's acquisition by a Sony-led consortium was announced 'in principle'.

Beginnings

MGM was established in 1924 as Metro-Goldwyn Pictures through the merger of Metro Pictures, Samuel Goldwyn Picture Corporation and the Louis B. Mayer Pictures Company.

Metro, founded in 1915, brought together Loew family production, distribution and exhibition interests. Until the collapse of the studio system MGM served as the production arm for the Loews cinema chain, with executives such as Louis B Mayer and Irving Thalberg reporting to Loews bosses such as Nicholas Schenck (1881-1969) in New York.

Goldwyn had been founded in 1916 by Samuel Goldfish (1882-1974) in partnership with Broadway producers Edgar and Archibald Selwyn. Goldfish subsequently changed his name to Samuel Goldwyn. He had earlier been in business with Jesse Lasky and Louis B. Mayer in a precursor of Paramount Pictures. As a production house Goldwyn Picture Corp is primarily known for the 'Leo the Lion' trademark, later adapted by MGM. Goldwyn split from Lasky and Mayer, going on to establish Samuel Goldwyn Inc. and Samuel Goldwyn Studios (later acquired by Warner Bros) in West Hollywood. Apart from independent output he's most famous for malapropisms such as "Every director bites the hand that lays the golden egg" and "A verbal contract isn't worth the paper it's written on".

Louis B. Mayer (1885-1957) migrated from Minsk to New Brunswick, opening a movie theatre in Massachusetts in 1907. After disposing of what had become a major New England chain to Zukor's Paramount he founded his own production company in 1917. As production chief of MGM he served as the public face of the Hollywood movie colony, maintaining his position through skill in corporate in-fighting - Goldwyn commented that the reason so many people turned up at Mayer's funeral is "that they wanted to make sure he was dead" - and an ability to generate profits for the studio's owners on the East Coast throughout the 1920s and 1930s. His daughter Irene Gladys Mayer married film director David O Selznick.

The studio system

A takeover by William Fox - with the endorsement of Joe Schenck - collapsed in 1929.

Under Mayer's and Thalberg's management MGM Studios became the largest Hollywood film factory, responsible for classics such as Gone With the Wind and The Wizard of Oz. It expanded from features into animation in the late 1930s, with notable success for the Tom & Jerry series from William Hanna and Joseph Barbera.

Post-war it emphasised musicals - eg with Judy Garland and Gene Kelly - and other sticky confections but like the other major studios was affected by sagging revenue and profitability. Management disagreements saw the departure of Mayer and his replacement Dore Schary. In 1957 MGM closed its cartoon operations (with Hanna and Barbera founding their own company, later part of Taft and then of Time Warner).

Loews separated its exhibition and production operations in 1954 following the 1949 'Paramount Decree', with the cinemas forming the basis of the cigarette, hotels, cinema and insurance conglomerate that under Laurence Tisch acquired CBS. MGM enjoyed some success with a gaudy remake of Ben-Hur and television production but was affected by management uncertainty and difficulties with overheads.

Kerkorian

In 1969 it was acquired by raider Kirk Kerkorian, who had gained attention for successful trading in casinos, property and airlines. Kerkorian sold much MGM property and memorabilia. MGM's record operations were soly to Polygram in 1972.

In 1973 the Las Vegas Bonanza hotel was redeveloped as the MGM Grand; Kerkorian leveraged the MGM 'brand' through use in badging hotels (eg in Reno and Atlantic City), casinos and airlines.

MGM film operations increasingly centred on its library, distribution arm and provision of services for independent producers, rather than production. In 1981 it bought United Artists - including rights to much of Warner Bros back catalogue - from the Transamerica conglomerate (which earlier purchased Kerkorian's TransInternational Airlines) and made a substantial profit in Coca-Cola's acquisition of Columbia Pictures.

United Artists dates from 1919 with establishment of a distribution house by DW Griffith, Charles Chaplin, Mary Pickford and Douglas Fairbanks. It was acquired by Arthur Krim in 1952 and sold to Transamerica in 1967.

Kerkorian traded property assets during the early 1980s before selling MGM/UA to Ted Turner in 1986. Turner sold United Artists (subsequently rebadged as MGM) and the MGM trademark back to Kerkorian. The studio lot was sold to tv production house Lorimar (later acquired by Warner) and subsequently acquired by Columbia Pictures.

Skase and Parretti

In 1989 Kerkorian agreed to sell MGM to Australian television and property entrepreneur Christopher Skase.

Skase apparently planned to fund the purchase by 'sweating' the MGM assets in consumer markets - a strategy successfully followed by Kerkorian in licensing the library for VCR and DVD sales - and by pre-selling the rights to Japanese investors. It was the year that Sony bought Columbia Pictures and Tri-Star Pictures from Coca-Cola for US$3.4 billion, undeterred by Matsushita's painful experience with MCA and Universal (later part of Seagram and Vivendi).

He is reported to have reached agreement to sell those rights for $500 million, with the deal falling through when he sought an extra $100 million at the last moment. The extra money would presumably have been helpful, as Kerkorian appears to have raised his price to around $1.5 billion after eliciting interest from Rupert Murdoch.

In the words of subsequent legal action by MGM, Qintex was guilty of a "failure to consumate" the purchase and indeed apparently failed to find the $30 million deposit. The deal was off. Skase subsequently claimed that Kerkorian reneged on the deal when Sony bid three times as much for the 'comparable' Columbia Pictures.

One observer commented that Skase's business model

was to buy a company, sell the assets and then lease them back. It doesn't take long to burn up the assets that way. You need a progressively bigger takeover every two or three years to maintain the cashflow. It was the end when Christopher missed out on MGM/UA. He was gone and everyone in the places that counted knew it.

Qintex melted down in 1989, unable to satisfy demands by its bankers (exacerbated by delays in regulatory approval to sell further shares in the resorts) and with regulators questioning Skase. A year later Skase left Australia and failed to return, pleading bad health and persecution by authorities or the media. His personal debts were estimated at around $172 million.

From his exile in Majorca, where he successfully resisted extradition attempts by receivers and government agencies (including claims of Dominican citizenship), he was presumably able to observe the $3.15 billion failure of the State Bank of Victoria. The receivers bundled Qintex's broadcast interests into a discrete company - Seven Network - in 1991. It was listed on the stock exchange in 1993 and came under the control of Kerry Stokes in 1995 following disagreements about its involvement in pay television schemes promoted by Foxtel, OptusVision and other players.

MGM was sold to Italian financier Giancarlo Paretti in 1989 for US$1.3 billion. Parretti had acquired 46.5% of the European Pathé film production, distribution and exhibition group as the springboard for that takeover and had earlier acquired the Cannon Group, which he confusingly rebadged as Pathe Communications Corporation.

Kerkorian returns

Kerkorian continued property trading and in 1995 was involved in the Daimler Benz takeover of Chrysler.

Parretti's empire had collapsed at the beginning of the decade, after he was unable to repay borrowings. That default was one reason for the £9 billion collapse of French bank Credit Lyonnais, Parretti's primary creditor, in 1993.

MGM was sold to Kerkorian and Australia's Seven Network in 1996. During that year Kerkorian bought Polygram's film library for US$253 million.

Seven's involvement was apparently a mix of opportunism and the network's history of sourcing films from MGM. The network sold its interests for US$389 million in 1998.

Metromedia deal and beyond

In 1997 MGM acquired Metromedia's studio properties (Orion Pictures, Goldwyn Entertainment and the Motion Picture Corporation of America).

Goldwyn Entertainment traced its origins to Samuel Goldwyn Inc. The Orion Pictures production house had been formed in 1978 as a joint venture between Warner Bros and three former UA executives (inc Arthur Krim) after disputes with UA parent Transamerica. During 1982 Orion merged with tv producer Filmways, Inc. (which owned American International Pictures). Metromedia become majority owner in 1988, after initial investment in 1986. Orion went into bankruptcy in 1992, emerging in 1996.

In September 2004 a Sony-led consortium (inc Providence Equity Partners, Texas Pacific Group and DLJ Merchant Banking Partners) confirmed an in principle agreement to acquire the MGM production and distribution operations and its film library for US$5 billion.

Studies

For a grounding see the essential The Genius of the System: Hollywood Filmmaking in the Studio Era (New York: Pantheon 1988) by Thomas Schatz and Movies & Money: Financing the American Film Industry (Norwood: Ablex 1982) by Janet Wasko. They might be usefully supplemented with Tino Balio's Grand Design: Hollywood as a Modern Business Enterprise, 1930-1939 (Berkeley: Uni of California Press 1995), Christopher Anderson's Hollywood TV: The Studio System in the Fifties (Austin: Uni of Texas Press 1994) and Neal Gabler's An Empire of Their Own: How the Jews Invented Hollywood (New York: Crown 1988).

Overviews of the studio are provided in The MGM Story: The Complete History of Sixty-Five Roaring Years (New York: Portland House 1990) by John Eames & Ronald Bergen and MGM: When the Lion Roars (Georgia: Turner 1991) by Peter Hay. Different aspects are highlighted in The MGM Stock Company: The Golden Era (London: Ian Allan 1973) by James Parish & Ronald Bauers, The Making of The Wizard of Oz (New York: Limelight 1984) by Aljean Harmetz, The Golden Girls of MGM (New York: Carroll & Graf 2003) by Jane Wayne and MGM's Greatest Musicals: The Arthur Freed Unit (New York: Da Capo 1996) by Hugh Fordin.

For its record operations see in particular the three volume MGM Labels : A Discography (Westport: Greenwood Press 1998) by Michel Ruppli & Ed Novitsky.

Mayer is profiled in Mayer & Thalberg: The Make-Believe Saints (New York: Random 1975) by Samuel Marx, the insightful Hollywood East: Louis B. Mayer and the Origins of the Studio System (New York: Birch Lane 1992) by Diana Altman, Hollywood Rajah: The Life and Times of Louis B. Mayer (New York: Holt 1960) by Bosley Crowther and the problematical Merchant of Dreams: Louis B. Mayer, MGM and the Secret Hollywood (New York: Fine 1993) by Charles Higham. A perspective on Schenck and Mayer is offered in The Campaign of the Century: Upton Sinclair's Race for Governor of California and the Birth of Media Politics (New York: Random 1992) by Greg Mitchell.

Scott Berg's Goldwyn: A Biography (New York: Knopf 1989) is recommended. Other accounts include Carol Easton's The Search for Sam Goldwyn: A Biography (New York: Morrow 1976) and Michael Freedland's The Goldwyn Touch: A Biography of Sam Goldwyn (London: Harrap 1986)

There has been no recent major biography of Kirk Kerkorian. Insights are offered in Fadeout: the calamitous final days of MGM (New York: Morrow 1990) by Peter Bart, Taken for a Ride: How Daimler-Benz Drove Off With Chrysler (New York: HarperBusiness 2001) by Bill Vlasic & Bradley Stertz, the upbeat Kerkorian, An American Success Story (New York: Dial 1974) by Dial Torgerson and The Players: The Men Who Made Las Vegas (Reno: Uni of Nevada Press 1997) edited by Jack Sheehan.

He is a figure in The Money and the Power: The Making of Las Vegas and its Hold on America (London: Pimlico 2003) by Sally Denton & Roger Morris and Suburban Xanadu: The Casino Resort on the Las Vegas Strip and Beyond (London: Routledge 2003) by David Schwartz.

For Skase see the bibliography in the discussion of the Australian Seven Network and Qintex elsewhere on this site.

Pointers to writing about Sony are also featured in this site.