DRI-152 for week of 12-21-14: The Greatest Movie Mogul of Them All

An Access Advertising EconBrief:

The Greatest Movie Mogul of Them All

The yearend holidays are traditionally a time for looking backward, with nostalgia and veneration. They are also a time to enjoy movies, which have provided some of our most treasured shared memories. What better time, then, to honor the memory of the greatest movie mogul of them all – one of the greatest of all American entrepreneurs?

As a group, the moguls who built Hollywood and created the studio system of making movies wrote an unforgettable chapter in the history of American business. David Llewelyn Wark Griffith resuscitated his sputtering career as an actor by becoming a director. He founded a production company, Triangle Film Corporation, and co-founded a movie studio, Reliance-Majestic Studio. His pioneering feature film, Birth of a Nation, was made in 1915 for a five-figure investment and turned the nation upside down with excitement. It returned an estimated $10,000,000 in box-office receipts – an incredible fortune a century ago. D.W. Griffith either invented or refined most of the basic techniques still used today in shooting movies. He made other classic films like Intolerance (1916) and Way Down East (1920) before gradually losing touch with public tastes and eventually dying broke.

Hollywood as we know it was born when Cecil B. DeMille turned a barn into a production facility where the first Paramount Pictures film, The Squaw Man (1914), was produced. In his forty-plus years as movie producer and director, DeMille became synonymous with movies in the public mind. His epic movies made millions and his weekly radio show was heard by millions. He remade his silent success, The Ten Commandments (1956) into a mid-century blockbuster that has been a longtime Thanksgiving Day mainstay. His King of Kings (1927) retold the story of Christ’s Crucifixion and Resurrection and remains one of the most-often seen movies of all time.

The classic American success story is one of rags to riches – the entrepreneur starts out with nothing and ends up on easy street. The Hollywood moguls were living embodiments of this dream. Several of them did it the hard way, by arriving in America on a boat from abroad with empty pockets and fire in their bellies. Louis B. Mayer was a Russian immigrant who started out as a scrap-metal junk dealer before rising to command Metro Goldwyn Mayer. In the 1930s and 40s, Mayer was the highest-salaried American. His eponymous predecessor on the studio’s masthead, Samuel Goldwyn, was a Polish immigrant who began by selling gloves. He generously allowed his name to remain on the studio’s byline, but left in the 1920s when the clash of powerful personalities at the top led him to form his own studio, Goldwyn Productions. This became the leading independent studio in Hollywood, producer of imperishable classics such as The Best Years of Our Lives (1946).

Harry Cohn’s Columbia Pictures made its Gower Avenue location known as “Poverty Row” of because Cohn’s skinflint reputation and tightly budgeted movies. But thanks to the genius of director Frank Capra, Columbia produced a series of Oscar-winning movies and eventually engaged almost all of Hollywood’s top talent under Cohn’s reign.

Darryl F. Zanuck started out as a teenage writer whose story sense brought him to prominence in the studio system. He rose to become a studio boss before merging Fox Pictures with Twentieth Century to form Twentieth Century Fox, whose famous fanfare is a part of movie lore. Zanuck’s “message pictures” and epics won him prestige, Oscars, corporate and personal wealth.

Which of these legendary moguls stands head and shoulders above the others? None of those named above. Walter Elias Disney began his business career in Kansas City, MO, as an artist and animator. He opened a studio a few doors east of 31st and Troost Avenue in the early 1920s. Disney created a popular cartoon shorts called “Laugh-O-Grams” that gave his studio its name. He sold his cartoons to local theaters. Unfortunately, he impulsively paid his co-workers too much money and went broke.

Disney might perhaps have followed the lead of another contemporary Kansas Citian named Harry Truman, who opened a haberdashery shop after serving in World War I and also went bust. Truman allowed himself to be discouraged and forsook business for politics. In contrast, Disney gathered up his new bride, Lillian, his brother, Roy, and headed for Hollywood. He opened up Disney Brothers Studio there and produced animated cartoon shorts.

Over the next forty years, Walt Disney would carve out a career than put every other Hollywood mogul in the shade. He became the greatest movie mogul of them all.

M-I-C-K-E-Y M-O-U-S-E

Disney’s acquaintanceship with bankruptcy had taught him a few practical lessons. He contracted with Universal Studios to create an animated character called Oswald the Rabbit. Oswald was a big success with the public. Disney was delighted with his success but displeased with his bosses, who reacted by proposed to reduce his compensation for producing Oswald cartoons. Disney noted that Universal owned the rights to the Oswald character. After trying in vain to purchase the rights, Disney decided to act.

Today, a disgruntled artistic innovator would probably do one of two things: either sue Universal or sic the government on them for discrimination. Disney did neither. Instead, he backed his faith in his talent with his money and his future – he dropped the Universal account and set out to create his own character.

Disney gradually realized that a new character really meant taking a new approach. In those embryonic, early days of cartoon animation, cartoons were short presentations featuring sketchily drawn and even more sketchily inhabited characters. The emphasis was wholly on action; the characters possessed little or no personality. Consequently, there was almost no basis upon which to build a story or plot analogous to that in live-action shorts or features.

Back in Kansas City, Disney had shared his Troost Avenue office with a mouse. Rather than exterminating the creature, Walt adopted him as a pet. Now he drew upon those memories for his new character – not a rabbit, but a mouse. The first two Mickey Mouse cartoons were silent, made immediately before the advent of sound in the movie business. In his third appearance, the sound cartoon Steamboat Willie (1928), Mickey Mouse made his effective debut. Walt Disney himself provided the voice – and continued to do so until 1947, when that role was assumed by voice-actor Jimmy MacDonald. Walt picked up the role again from 1955 until 1959; by that time, Mickey was in semi-retirement, making only cameo appearances.

Walt’s talent was not primarily artistic in the narrow sense; although he was a good cartoonist, he employed animators better than he was. This is a second key entrepreneurial trait – recognizing and exploiting talent. His genius lay in visualizing an animated character that audiences around the globe would take to their hearts. Within a few years, the Disney Studio had become the leading producer of animated cartoons in the nation. Mickey Mouse would be joined by other animated characters with unique personalities of their own – his wife, Minnie, his friend, Goofy, and later another character who would achieve stardom on his own – the inimitable Donald Duck. This may be the most vital, yet elusive, of all entrepreneurial skills – the knack for spotting what appeals to your audience.

The Disney Studios made animation what it became and remains today – the counterpart to live-action features rather than merely a crude, trivial time-passer. Soon, other competing studios entered the animation industry. When the major Hollywood studios started their own animation units, such as Leon Schlesinger’s “Looney Tunes” unit at Warner Brothers, this was the sincerest form of flattery that American business had to offer.

In the mid-1930s, Walt Disney was by far the biggest fish in the comparatively small pond of cartoon animation. He was prosperous. He had created a famous character that he owned outright. So what did he do? He did what every great entrepreneur does – he sought an impossible challenge.

 

The Dawn of Feature Animated Films

In 1934, Walt Disney resolved to produce and release an animated Technicolor feature-length motion picture. In other words, he would make a movie just like the movies made by Metro Goldwyn Mayer, Warner Brothers, Paramount Studios, Twentieth Century Fox and Columbia Pictures. His movie would be in color, a luxury afforded only a few Hollywood films at that point.

When word of his plans leaked out, everybody in Hollywood thought Walt Disney was nuts. In fact, even his friends thought he was crazy. His wife, Lillian, and brother, Roy, tried desperately to talk him out of the idea. Cartoons were short, five-minute lead-ins to feature films; there was no reason to suspect audiences would sit still for a feature-length animated film.

Once again, Disney trod the path of great entrepreneurs – he took his own counsel. He painstakingly put together his animated feature, called Snow White and the Seven Dwarfs (1937), over the next two years. After running up the nearly unprecedented production cost of $1.5 million, Disney ran out of money before finishing the project. At this point, some people advised him not to throw good money after bad.

Disney now revealed still another trait possessed by great entrepreneurs. He had never taken a course in economics, but he unerringly employed economic logic in choosing his course of action. He completely ignored the $1.5 million he had already spent, which constituted what economists call sunk costs. Sunk costs are irrelevant to subsequent economic decisions because they have already been incurred. Only prospective – marginal – costs should figure in future decisions. Disney correctly gauged that the additional costs of completing the project were tiny compared to the potential rewards and he arranged bank financing for the necessary funds.

Snow White and the Seven Dwarfs was officially released in December, 1937, but did not get most of its play dates until 1938. It was by far the leading box-office-grossing movie of that year. By way of comparison, in the following year David O. Selznick’s Gone With the Wind took the movie world by storm by grossing roughly $150 million dollars, some 20 times more than any other movie of 1939. Over the years, after numerous re-releases, the movie would book over $200 million at the box office. Adjusted for inflation, this is still the highest total ever achieved by a motion picture. But Snow White and the Seven Dwarfs has racked up nearly $190 million in its initial and subsequent releases. Disney didn’t merely prove his critics wrong. He succeeded beyond even his own wildest dreams.

That was the beginning of the parallel presentation of feature animation films. The success of animation features was one thing; that astounded Hollywood, Disney’s friends, associates and family and even Disney himself. But the scale of that success is what cements Disney’s place as the leading Hollywood mogul of all time.

In 1940, Disney released two animation features, Pinocchio (another fairy-tale-themed story) and Fantasia (an ambitious compendium film that included symphonic and classical music). Both of these grossed around $80 million – 10 times more than the top-grossing live-action film that year.

In 1942, Disney’s Bambi grossed just over $100 million, about 9-10 times more than the leading live-action film that year.

In 1946, Disney’s Song of the South grossed “only” $65 million, a mere three times more than Samuel Goldwyn’s immortal Best Picture-winner The Best Years of Our Lives.

In 1950, Disney’s Cinderella grossed $85 million, outdistancing MGM’s King Solomon’s Mines by nearly a factor of 8.

In 1953, Disney’s Peter Pan racked up a box-office gross exceeding $87 million. That year, Twentieth Century Fox revolutionized motion pictures with the widescreen Cinemascope technique in its film The Robe, which was nonetheless trounced over 2-1 at the box office by the Disney film.

In 1955, Disney’s irresistible Lady and the Tramp brought in over $94 million in receipts. The new Cinerama process was a terrific box-office draw, and the live-action film Cinerama Holiday was so successful that it was beaten only about two-and-a-half to one by the Disney film.

In 1961, Disney produced 101 Dalmatians, which raked in a spectacular gross of $153 million. By this time, the combination of inflation, improvements in technology and the competition provided by television had led to higher revenue among the top-grossing live-action films, so the Disney film’s box-office advantage was only about 3-1.

This staggering record of box-office domination speaks for itself. Walt Disney was the Steven Spielberg of his day. Indeed, if we adjust Disney’s box-office grosses for inflation, we find that he far outpaced Spielberg in revenue and far exceeded him in relative advantage over contemporary, competing films. What accounts for this phenomenon? Children were viewing each Disney movie multiple times many years before Jaws initiated this practice for live-action films.

And Disney wasn’t done yet.

Walt Disney Makes the Jump to Live-Action Films

Given what came before, it seems inevitable that Walt Disney would make the jump to live-action films. By 1950, nobody was about to tell Walt Disney that he couldn’t do anything in the motion picture business. His first venture, an adaptation of Robert Louis Stevenson’s Treasure Island, was a modest success. In 1954, Disney chose to adapt a Jules Verne adventure novel to the screen and his 20,000 Leagues Under the Sea was narrowly edged out as the year’s top-grossing film by the blockbuster White Christmas.

In 1957, Disney’s Old Yeller made the top five grossers. In 1959, Disney’s animated film Sleeping Beauty and his live-action film The Shaggy Dog were relegated to the second and third spots by MGM’s remake of the silent hit Ben Hur, which became one of the top-grossing live-action films up to that point.

In 1960, though, Swiss Family Robinson gave Disney a live-action top-grossing film to match his many top-grossing animation features by pulling in over $40 million, easily outdistancing Alfred Hitchcock’s Psycho.

In 1964, Walt Disney undertook his most ambitious project when he finally persuaded P. L. Travers to allow her beloved character Mary Poppins to be incarnated on film. He was rewarded with $102 million in box-office receipts and the #1 position in the rankings, as well as five Academy Awards and 13 nominations.

Walt Disney died in December, 1966, six weeks after being diagnosed with lung cancer. The final film over which he had creative control, the animated film of Rudyard Kipling’s The Jungle Book, was released the following year. Fittingly, it topped the box office with a gross exceeding $140 million.

Walt Disney on Television

The advent of commercial television in the late 1940s sent Hollywood into a tailspin. The industry treated television as a mortal competitive threat – who would go to the movies when they could stay home and watch television for free? Hollywood filtered out word that traitors who sought work on this new medium could kiss their movie careers goodbye.

Today, this attitude seems astonishing because it implies that the industry was undervaluing its own product. We know that watching a movie on the big screen with an audience is not the same as watching it on the small screen; the two experiences differ significantly in obvious and subtle ways. Disney did not make this mistake. He treated television and movies as complements rather than competitive substitutes and used television as a way of enhancing and promoting his other products.

Indeed, Disney launched a new television series and a new theme park simultaneously, each intended to promote the other. The TV series, “Disneyland,” began in 1954 on the ABC network. In return for partnership in the series, the network agreed to help finance the park, which was completed in 1955 and opened with a celebratory episode in July of that year. Disneyland took the concept of an amusement park to new heights by coupling Disney characters and concepts with Americana on a large scale inside a park dedicated to fun.

In 1955, Disney hit upon another idea for promoting both park and TV program. Disneyland contained a section called Frontierland, and Walt felt that promoting an American folk hero was salutary. He commissioned a three-part series of hall-hour episodes on the frontiersman and Congressman, Davy Crockett. Crockett gained fame as a hunter and marksman in Tennessee before participating in the war against the Creek Indians in Florida under the command of General Andrew Jackson. Crockett was elected to two terms as Congressman from Tennessee, where he opposed (now-) President Jackson’s policy of Indian removal, contributing to his electoral defeat. He traveled to Texas, where he died in Texas’ fight for independence at the Battle of the Alamo in 1836. As usual, Disney closely supervised production of these programs. The result can only be described as a characteristic stroke of genius.

The country went wild for Davy Crockett. The programs set records for highest Nielsen TV-ratings. Their theme song, “The Ballad of Davy Crockett,” became a pop hit that was eventually recorded by dozens of leading vocalists. One version reached #1 on the Top-40 chart. Adolescent boys sported Davy Crockett coonskin caps and toy rifles – an early example of the merchandise tie-in that had been popularized on TV by Hopalong Cassidy a few years earlier. Fess Parker, the heretofore-struggling actor who portrayed Crockett, gained everlasting fame and a foothold in TV and movies.

Disney added two more episodes to the first three as a kind of “prequel.” They packaged the original three episodes into a theatrical movie, to which they added color as an inducement for viewers to spend money on what they had already seen for free. Sure enough, that movie was also a big hit.

The Disney producers knew a good thing when they saw it, and future programs exhumed other real-life American heroes like Frances Marion, the Swamp Fox of the Revolutionary War, Texas John Slaughter of Tombstone, AZ frontier fame and Elfego Baca, another frontier marshal. These had a moderate success, but never remotely approached the extravagant popularity of Davy Crockett. Undoubtedly this was because these men lacked the provenance of the original choice. Davy Crockett’s popularity in 1955 should have come as no great shock because he had been a national celebrity in the 1830s with the publication of his ghostwritten autobiography and a hit stage production about his life. During the remainder of the 19th century, rumors circulated that he had not perished at the Alamo after all and was still alive. Americans reserve this kind of treatment for their most cherished heroes. Crockett had lain fallow for over a half-century, waiting for historical resuscitation. Walt Disney saw this and deliberately chose Davy Crockett as his subject.

Over the years, “Disneyland” evolved into “Walt Disney Presents,” which morphed into “Walt Disney’s Wonderful World of Color” when color television became commonplace in the early 1960s. The program became, and remained, a Sunday-night staple for over 20 years. From an entrepreneurial standpoint, it is a case study in cross-promotion.

Walt Disney and the Future

A dyed-in-the-wool entrepreneur is always looking to the future. Walt Disney’s eye remained glued on the horizon to the end of his days. At the time of his death, his big project in the works was the Epcot Center, projected to locate in Florida. This later became Disney World in Orlando, FL. There are now Disney Parks located in Paris, Tokyo, Hong Kong and Shanghai. These are a tribute to the vision of the founder, Walter Elias Disney. We can argue about rankings in the pantheon of American entrepreneurship but not about Walt Disney’s belonging among the greats. And as to his rating in the Magic Kingdom of the movies, there can be no dispute. Walt Disney stands alone at the head of the table as the greatest movie mogul of them all.

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