Metro-Goldwyn-Mayer Inc. History

Company Perspectives:

Metro-Goldwyn-Mayer Inc.--MGM--is a proud name synonymous with entertainment. MGM's famed roaring lion, one of the most recognizable logos in the world, has conveyed entertainment magic to audiences worldwide for nearly 75 years. Today, the company's operations represent a spectrum of entertainment product, a common thread being a base of content second to none: the largest modern (post-1948) library, and among the most honored film libraries in the world.

Company History:

Though it has undergone several name changes and owners, Metro-Goldwyn-Mayer Inc.'s legacy is as classic as one of its movies. Formed by the merger of Metro Pictures Corp., Goldwyn Pictures, and Louis B. Mayer Productions, the original MGM was responsible for some of the world's most beloved films. In 1981 MGM merged with United Artists Corporation and then 16 years later bought Orion Pictures, Goldwyn Films, and the Motion Picture Corporation of America. Rechristened Metro-Goldwyn-Mayer Inc., the new MGM went public in 1997 and once again has become a force to be reckoned with in the entertainment industry. Headquartered in Santa Monica and with offices in New York, London, Santiago, and Sydney, MGM's reach extends from hit films like Tomorrow Never Dies, The Birdcage, Get Shorty, Ulee's Gold, and others, to television series and original films, branded entertainment channels in Asia and Latin America, interactive CD-ROMS, and its one-of-a-kind film library with 4,000 titles, 186 of which are Academy Award-winning films, including 15 Best Picture Oscars.

The Early Days of MGM and United Artists: 1919-29

United Artists Corporation (UA) began in 1919 as a partnership between Mary Pickford, Charlie Chaplin, Douglas Fairbanks, and D.W. Griffith, four of the biggest names in motion pictures at the time. With the widespread disillusionment that followed World War I, motion pictures became a welcome source of escapist entertainment. America's fascination with movie stars had begun, movie houses sprouted up all over the country, and movies became big business. United Artists was created by these artists to wrest creative control of their own projects from the powerful Hollywood magnates. The new company could hardly keep up with America's voracious appetite for movies. UA was essentially a cooperative distributor of individual productions; there was no company studio, no stars or directors under contract, and each producer was required to finance his/her own project, giving United Artists a percentage of each film's revenues as the distributor.

Despite the resounding success of UA's first picture, His Majesty, the American, starring Douglas Fairbanks, financing new productions was difficult at times during the early years. Conventional bank loans were almost unheard of for such a risky investment as films. Whereas other motion picture companies offered stock to the public to finance expansion, UA remained private to retain control. Some assistance came in the form of advances from theater owners, who prepaid for upcoming features in weekly installments. In its first five years, United Artists scored a number of hits, but the studio's schedule was slow, producing an average of only eight films a year until 1924.

Unlike United Artists, MGM was a complete production studio from the start, with actors, writers, directors, and production coordinators all under long-term contract. MGM rarely had trouble finding financing, producing enough movies, or attracting audiences. MGM, symbolized by Leo the Lion's roar, was for years the king of the Hollywood jungle. It all began with Marcus Loew of Loew's, Inc., one of the nation's largest theater chains, and his 1919 purchase of Metro Pictures to help fill his theaters with a steady flow of quality motion pictures. By 1924 Loew was disappointed in both the quality and quantity of Metro's films. When approached by Lee Shubert, of Shubert Theater fame, to merge Goldwyn Pictures with Metro, it sounded like an excellent idea. Goldwyn Pictures had been plagued by personality conflicts, resulting in the departure of Sam Goldwyn in 1922. Meanwhile, filmmaker Louis B. Mayer, who had a successful production company of his own, heard of the pending merger and flew to New York to negotiate with Loew. When all was said and done, Metro, Goldwyn, and Louis B. Mayer studios became a subsidiary of Loew's, and Mayer was chosen to head the new studio.

Mayer had brought along the 24-year-old Irving Thalberg, the prodigiously talented "boy wonder" of Hollywood. Under the leadership of Mayer and Thalberg, the new company produced more than 100 feature films in its first two years. In 1925 MGM released the extravagant Ben Hur, which was a huge success, and MGM-Loew's recorded a $4.7 million profit in its first full year.

While Mayer was heading up the new MGM, Joseph Schenck became president of UA and reorganized the company. He brought in stars like Buster Keaton, Norma Talmadge, and Gloria Swanson, as well as producer Sam Goldwyn. By the late 1920s Schenck had added a number of producers to the company's roster, and UA's production schedule had improved considerably. In 1927 a Howard Hughes film, Two Arabian Knights, garnered UA its first Academy Award. That same year, with the release of Warner Brothers' The Jazz Singer, sound came to motion pictures.

The Emergence of Sound and Change in the Industry: The 1930s and 1940s

The introduction of sound revolutionized the motion picture industry and brought the downfall of silent-screen stars who were unwilling or unable to adjust to the new technology. Millions were spent to upgrade film production facilities and buy new equipment for movie houses, many of which were affiliated with major studios. The sound revolution took place over a very brief span of time--by 1930 almost no silent films were being produced. UA's performance had been inconsistent in its first decade, showing a loss six out of ten years between 1920 and 1930, and the early 1930s were no better. The Depression took its toll on movie attendance in 1931 and 1932, and the five big Hollywood studios--MGM, Warner Brothers, Fox, Paramount, and RKO--dominated what market remained. UA struggled to survive, and did so in large part because of the talents of Schenck, who also formed an independent production company, Twentieth Century Pictures, with former Warner Brothers production head Darryl Zanuck. This company's success contributed greatly to UA's profits. Despite the fact that Twentieth Century Pictures accounted for almost half of UA's films, Fairbanks, Pickford, and Chaplin (Griffith sold his shares in 1933) would not give the production company a slice of their pie. In 1935 Schenck and Zanuck left and merged Twentieth Century Pictures with the Fox Film Corporation. Al Lichtman replaced Schenck as president of United Artists.

Throughout the 1930s many of Hollywood's greatest independent producers worked through UA, among them Walt Disney, Alexander Korda, Sam Goldwyn, Hal Roach, Walter Wanger, and David O. Selznick. The company, however, was plagued by low production, resulting in continued financial difficulties. MGM, on the other hand, was the most successful studio in Hollywood. MGM's long list of stars under contract and its reputation for excellence helped it survive the Depression, when theater attendance dropped to half of what it had been between 1927 and 1930. The guaranteed purchase of productions by Loew's theater chain also gave the studio much needed stability. By 1933 attendance began to rise again, and as MGM produced fine films, UA's mere existence was an uphill battle. Although UA managed to earn a profit in the latter part of the decade, one of its best and brightest, Sam Goldwyn, who had produced almost half of UA's pictures in the late 1930s, felt that he was not adequately compensated for his efforts. Disputes between Goldwyn and Pickford, Fairbanks, and Chaplin led to a number of lawsuits, and eventually Goldwyn left UA (just as he had left the company bearing his name, Goldwyn Pictures, years earlier).

As UA dealt with the departure of Goldwyn, MGM suffered the untimely death of Irving Thalberg in 1936. With his death, MGM productions turned away from the literary toward purely escapist entertainment, but it continued to pursue excellence, including such hits as The Wizard of Oz and Boys Town. While UA continued to struggle, MGM thrived with huge hits in 1939--including Gone With the Wind. Starring Clark Gable and Vivien Leigh, the film became one of the top moneymakers of all time. Interestingly, the movie was actually a David Selznick production and should have been released through UA, as were his other films. Yet Selznick had wanted Clark Gable to play Rhett Butler, who was under contract to MGM, and to use him (and acquire a $1.5 million loan from his father-in-law Louis B. Mayer), Selznick had to release the picture through MGM and give the studio half the profits. The film set attendance records worldwide and snatched up ten Academy Awards.

As MGM reveled in its triumph, UA became embroiled in lawsuits, when Chaplin and Pickford (Fairbanks had died in 1939) accused Selznick of breaching his UA contract by distributing a number of films through RKO and Selznick fired back that UA did a sloppy job of distribution. The producer went on to form his own distribution company, and UA lost another key contributor. By the end of the 1940s, plagued by poor-quality pictures and shrinking cinema audiences because of the emergence of television, United Artists was bleeding red ink. MGM, too, began to feel the sting, as its high overhead weighed heavily on the company. Loew's president Nicholas Schenck (brother of UA's Joseph Schenck) told Mayer to find a new "boy wonder" to snap the company's production back into shape. Mayer hired Dore Schary, formerly of RKO, as the new production head. Schary pointed MGM in the direction of spectacular musicals to give audiences what they could not get anywhere else and the release of such hits as Easter Parade, Annie Get Your Gun, Show Boat, Singin' in the Rain, An American in Paris, and Seven Brides for Seven Brothers gave MGM the necessary boost.

A Change of Fortune: 1950-79

With a drastic reorganization needed for UA, Pickford and Chaplin finally brought in Paul V. McNutt, former governor of Indiana, as chairman and Frank L. McNamee as president. McNutt, however, did not have the expertise to solve UA's financial woes. Within a few months he turned over the reins to a group headed by Arthur Krim and Robert Benjamin. Krim had been president of Eagle-Lion Films, and Benjamin had headed the American operations of the Arthur Rank Organisation, a British filmmaker. The two made a deal with Pickford and Chaplin to give them control of the company for ten years with a guarantee of half the company if they could turn the debt-ridden distributor around. Krim and Benjamin secured a $3 million loan from Fox Film Corporation president Spyros Skouras. UA then scored two big box office hits with High Noon and The African Queen. Within a year the company was showing a profit, and Krim and Benjamin had begun a 20-year reign.

In 1952 the major studios were ordered to divest themselves of their theater holdings. Loew's held out for some time, but finally was forced to split from MGM. Without a guaranteed market for its pictures, filmmaking suddenly became a risky business. MGM faced the kind of pressures UA had known since its creation, and in 1955 theater attendance dropped to its lowest since 1923. During this crisis, Chaplin sold his UA shares, which amounted to 25 percent of the company, to Krim and Benjamin for $1.1 million. A year later Mary Pickford sold her shares for $3 million, giving full ownership to the Krim and Benjamin group, and the next year, 1957, UA went public with a $17 million stock and debenture offering. The company that had struggled so long and once had been chronically short of movies was now turning out 50 pictures a year. As UA prospered, MGM lost money for the first time in 1957; although it bounced back with a profit in 1958, MGM's profits were on-again-off-again for the 1960s and beyond.

By the middle of the 1960s major studios began catering to younger patrons; movies began to explore controversial topics and sex and violence became more acceptable. By the end of the decade MGM was no longer at the top and the industry was rife with takeovers and mergers. Paramount was bought by Gulf and Western, MGM diversified into real estate, and Warner Brothers merged with a television company, Seven Arts Limited. UA, meanwhile, was having one of its most successful decades, winning 11 Academy Awards, five of them for best picture. In 1963 Eon Productions released Dr. No, the first James Bond movie through UA, beginning what proved to be the longest-running series in cinema history.

In 1967 the Transamerica Corporation bought 98 percent of UA's stock and in 1969 brought in the Picker brothers, David and Arnold, to run the company. This was the same year Las Vegas investor Kirk Kerkorian began his reign at MGM. Kerkorian appointed James Aubrey, a former television executive, as president of MGM and then sold many of the company's assets, including a number of theaters owned overseas, the MGM record company, and parts of the company's Culver City lot. When UA lost $35 million in 1970, Arthur Krim and Robert Benjamin were brought back, and in 1973 the company purchased the domestic distribution rights to all of MGM's pictures for ten years, after Kerkorian decided to cut back on production and invest in the $120 million MGM Grand Hotel in Las Vegas. High budgets and unpredictable audiences combined to make film production more risky than ever.

In 1975 UA released One Flew Over the Cuckoo's Nest. The film was a smash, cleaning up at the Oscars, and earning more than $56 million. A year later UA's Rocky won the Oscar for Best Picture, and in 1977 Woody Allen's Annie Hall captured the same honor for UA for the third year in a row. In 1978 Krim split from UA after a dispute with Transamerica chief John Beckett and Krim, Benjamin, Eric Pleskow (then UA's president), and a number of other key executives formed Orion Pictures. One era had ended at both UA and MGM, but another was about to begin.

Before and After the Merger: 1980-88

MGM, once a major player in the production and distribution of motion pictures, was involved only peripherally in films during the 1970s. Kerkorian and his crew focused on other activities; by the end of the 1970s the MGM Grand Hotels in Las Vegas and Reno were bringing in more money than the film production unit. Over at UA, after the departure of Krim and Benjamin, a former vice-president and assistant of Krim's, Andy Albeck, was installed as president. In 1979 Rocky II, Manhattan, Moonraker, and The Black Stallion gave UA its most successful season ever. A year later the studio released Heaven's Gate, by Michael Cimino, known for such hits as Thunderbolt and Lightfoot and The Deer Hunter. But Heaven's Gate had grossly exceeded its budget, finally tallying $44 million, and the film was a debacle for UA. In the wake of Heaven's Gate, Albeck resigned and Norbert Auerbach took his place. In a surprising move in May 1981 at the Cannes Film Festival, Auerbach announced that UA had been purchased by MGM and the new company would be called MGM/UA Entertainment Corporation.

The new MGM/UA Entertainment Company was established at a time when the entertainment industry was going through many changes. Pay television and video offered new avenues for marketing old movies. Suddenly, MGM/UA's movie library was a vital asset; at the same time, theater audiences were growing. In 1983 the company launched a number of subsidiaries: the MGM/UA Home Entertainment Group, MGM/UA Classics, and the MGM/UA Television Group. Also in 1983, majority stockholder Kirk Kerkorian bid $665 million for the MGM/UA shares he did not hold already. The bid caused an uproar (and a lawsuit), which convinced Kerkorian to drop the idea of taking the company private, at least for the time being. MGM/UA scored a number of hits at the box office in the early 1980s, including War Games and Octopussy, but profits did not keep up with Kerkorian's expectations. In the mid-1980s the Las Vegas financier instigated a number of deals that eventually led to the formation of a different company with some of the same assets, and nearly the same name. The MGM/UA Communications Company was incorporated in 1986, but the complicated story of its formation began a year earlier.

In 1985 the MGM and UA production units of MGM/UA Entertainment were separated under a general corporate restructuring. Alan Ladd Jr. and Frank Yablans, who until then had run the combined studios together, each were put in charge of one unit. Analysts speculated Kerkorian was preparing to sell one of the studios, probably UA, to raise cash to take MGM private. That theory went out the window, however, when Yablans was fired shortly after the restructuring and Ladd was put in charge of both studios' production units. In August 1985 cable television magnate Ted Turner began negotiations with Kerkorian to buy MGM/UA Entertainment for $1.5 billion. Turner's key interest in the company was its 3,000-title MGM film library, which would provide an excellent source of programming for Turner's WTBS television station. By January 1986 Turner's buyout, at $20 per share and one new preferred share of Turner Broadcasting System stock, went through. At the same time, Turner sold the United Artists assets back to Kerkorian for $480 million. The MGM/UA Entertainment Company was now a subsidiary of the Turner Broadcasting System, but United Artists was a separate company.

In June 1986 UA, under Kerkorian's control, bought back many of the original MGM assets for $300 million, including the production and distribution units, the Home Entertainment Group, and the UA film library. Turner kept the MGM library and sold the original MGM Studios real estate in Culver City to Lorimar Telepictures for $190 million. United Artists changed its name to MGM/UA Communications Company and again restructured its operations. The "new" company grouped the two television production units together, but kept the film units separate. Alan Ladd headed the MGM group, while Anthony Thomopoulous took over at UA, and David Gerber presided over the combined TV unit. The company began a comeback during the next year. In 1987 Spaceballs, The Living Daylights, and Moonstruck were big hits for the studio; yet despite these successes MGM/UA recorded an $88 million loss for 1987.

In April 1988, frustrated by the company's performance, Kerkorian began shopping for potential buyers for his 82 percent holding in MGM/UA. By July he was planning to split the two companies again. Kerkorian struck a deal with investor Burt Sugarman and producers Jon Peters and Peter Guber to sell a quarter interest in MGM; the agreement fell through, however, and top MGM/UA executives, confounded by Kerkorian's unpredictable maneuvers, began to abandon ship. Chairman Lee Rich was the first to go, followed shortly by Ladd and Thomopoulous. At the zenith of this corporate crisis during the summer of 1988, production on many of the company's film projects was canceled.

Stephen Silbert briefly took Lee Rich's place as MGM/UA's chief executive in July 1988. By October he had stepped aside to let former Merrill Lynch executive Jeffrey Barbakow take the reins. Barbakow was experienced in packaging limited partnerships to finance film ventures. He set out to nurse the ailing studio back to health. In fiscal 1988 MGM/UA lost $48.7 million, considerably less than in 1987. The success of Rain Man (winning the 1988 Oscar for best picture as well as three others) promised improvement, but MGM/UA was debt-ridden and had only a handful of films in production.

More Troubles, New Leaders: 1989-94

In 1989 the media company Qintex Australia Limited agreed to acquire MGM/UA, but the questionable deal collapsed in October of that year and Quintex's owner, Christopher Skase, later disappeared amid a flurry of charges concerning financial misdeeds. While Kerkorian continued to look for a buyer, many wondered how MGM/UA would continue to fund the production of movies and TV shows--and the answer was "not easily." Kerkorian found another buyer for MGM/UA in 1990 with financier Giancarlo Parretti's Pathe Communications Corp. for $1.3 billion. The ink was barely dry when rumors swirled: Parretti was charged by the SEC for "materially false and misleading disclosures" during the acquisition, and Pathe had soon defaulted on loans and was in bankruptcy court. France's Credit Lyonnais assumed control of MGM/UA in 1992 and initiated two lawsuits against Kirk Kerkorian for stripping the company of its cash before selling it to Parretti and Pathe Communications Corp. Kerkorian, ever the mover-and-shaker, settled the lawsuits in 1995 for an undisclosed sum and turned his attention to a hostile takeover attempt of Chrysler Corp. But this was not the last of Kerkorian's maneuvering with MGM/UA.

MGM/UA and its many incarnations had been carved up, sold, repurchased, sold again, and involved in numerous legal imbroglios. Yet the venerable institution was given new life in 1993 when Credit Lyonnais brought in a crack management team, headed by Frank Mancuso, the former head of Paramount Pictures, to revive the slumbering company. Within months a resurgence was under way, including an agreement with Showtime to co-produce original programming, the establishment of MGM Animation, and a host of other innovations to bring the once golden company back to full tilt.

A Look to the Future: 1995 and Beyond

The dawn of 1995 brought much good news for MGM, as Consortium de Realisation (CDR) took control of the company from Credit Lyonnais. Throughout the year UA and MGM premiered several critical and box office successes, including Rob Roy, Species, Stargate, The Birdcage, Get Shorty, Leaving Las Vegas, and GoldenEye. The latter film, the 17th installment in the languishing James Bond series, became the highest-grossing Bond movie in history, and several of the year's films were nominated in various categories for Academy Awards. On the small screen, MGM Worldwide Television debuted "The Outer Limits," which soon earned its first Cable Ace award for Best Dramatic Series and would go on to win another the following year. MGM Online and MGM Interactive were launched, and the company entered into lucrative co-production agreements with Rysher Entertainment and Largo Entertainment.

In the first quarter of 1996 MGM was again on the selling block, this time put up for sale by CDR to the company's top management with the backing of Australia's Seven Network Limited and Kerkorian's Tracinda Corporation. The deal became official in October, and the new company made its first major acquisition in July 1997 for Orion Pictures Corp., Goldwyn Entertainment, and the Motion Picture Corporation of America, establishing the largest post-1948 film library in the world with more than 4,000 titles, 186 of them Academy Award-winners, including 15 for Best Picture, and television and animated classics as well.

MGM went public in November 1997 with an offering of nine million shares of common stock on the NYSE under the ticker symbol "MGM." The initial public offering (IPO) raised $235 million, and Tracinda Corporation went on to purchase another four million shares as well, placing Kerkorian once again in a well-powered position within the company. Meanwhile, MGM had continued to venture into unknown territory--first, in live entertainment, with the debut of The Magic of MGM, a touring ice show, and second, with the creation of MGM Gold, a branded entertainment channel in Asia, through its MGM Worldwide Television Group division. Next came another MGM Gold channel, this one in Brazil, followed by two subsequent channels and a joint venture called MGM Networks Latin America. Then the TV group signed licensing agreements for its library titles to North Africa and the Middle East and in the United States debuted its remake of 1957's 12 Angry Men, as an original made-for-television movie on Showtime. The film not only scored rave reviews, but was Showtime's highest-rated original movie and earned both a Cable Ace award and a Golden Globe.

In keeping with the continued popularity of art-house films, MGM contributed to the field with the establishment of Goldwyn Films, which was backed by the marketing and distribution team shared by its siblings MGM Pictures and United Artists Pictures. The latter, United Artists, had a triumph of its own at the end of 1997, with the release of Tomorrow Never Dies, the 18th film in the enduring Bond series, with Pierce Brosnan reprising his role as Bond and Asian action star Michelle Yeoh as his partner rather than a standard "Bond girl." The movie broke all previous Bond records.

In the first quarter of 1998 MGM was riding high from the success of Bond film Tomorrow Never Dies and Peter Fonda's award-winning performance in MGM/Orion's Ulee's Gold. Next came the release of The Man in the Iron Mask, with an all-star lineup including Gerard Depardieu, Gabriel Byrne, and the immensely popular Leonardo DiCaprio (fresh from his Titanic triumph), which grossed $150 million by mid-year. MGM's television arm also continued its success, with several new series, including "LAPD: Life on the Beat," "Stargate SG-1," "Poltergeist: The Legacy," and animated children's shows "All Dogs Go to Heaven: The Series," "The Lionhearts," and "RoboCop: Alpha Commando." Another series, "The Magnificent Seven," debuted on CBS, and MGM scored longer-term programming agreements with both Showtime and USA Networks.

MGM's interactive division was picking up speed with The Ultimate James Bond: An Interactive Dossier and a fleet of children's CD-ROMs, including Babes in Toyland, Chitty Chitty Bang Bang's Adventure in Tinker Town, All Dogs Go to Heaven Activity Center, and others, with CD games of Wargames and Bond's Tomorrow Never Dies also slated for distribution. Although the MGM name was most associated with classic films and the biggest stars of a bygone era, the new MGM was carving a comfortable niche in the film, television, interactive, and even music industries. Major movie figures of the 1990s had graced MGM's and UA's pictures, just as many more were in production in late 1998, including Robert De Niro and Jean Reno in Ronin, Elisabeth Shue in Rescue Me, a theatrical original movie based on the hit TV series "The Mod Squad," and Val Kilmer, Nathan Lane, and Mira Sorvino in At First Sight.

Principal Operating Units: MGM Animation; MGM Distribution Co.; MGM Home Entertainment and Consumer Products Group; MGM Interactive; MGM Music; MGM Pictures Inc.; MGM Worldwide Television Group; Goldwyn Films; Orion Pictures Corp.; United Artists Pictures Inc.

Further Reading:

• Balio, T., United Artists: The Company Built by the Stars, Madison: University of Wisconsin Press, 1976.
• Berg, Scott, Goldwyn: A Biography, New York: Knopf, 1989.
• Bergan, Ronald, The United Artists Story, New York: Crown, 1986.
• Browning, E.S., and Bruce Orwall, "Heard on the Street: Kerkorian's Deals Have Often Drawn Fire," Wall Street Journal, October 26, 1995, p. C1.
• Eames, John D., The MGM Story: The Complete History of Fifty Roaring Years, New York: Crown, 1975.
• Easton, Carol, The Search for Sam Goldwyn: A Biography, New York: William Morrow, 1976.
• Hay, P., MGM: When the Lion Roars, Turner Publishing Inc., 1994.
• Marx, Arthur, Goldwyn: A Biography of the Man Behind the Myth, New York: Norton, 1976.
• Orwall, Bruce, "Tracinda Settles a Pair of Lawsuits with Credit Lyonnais Over MGM," Wall Street Journal, October 9, 1995, p. B2.
• Rundle, Rhonda L., "Marketing & Media: Pathe's Ex-Chief, Two Others Settle Fraud Complaint," Wall Street Journal, January 4, 1996, p. B2.
• Yemenidjian, Alex, "Letters to the Editor: Kirk Kerkorian Nursed MGM Back to Health," Wall Street Journal, April 19, 1996, p. A23.

Source: International Directory of Company Histories, Vol. 25. St. James Press, 1999.

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