In many respects, Hollywood after the 1970s ran along grooves laid down in previous decades. The major companies—Warner Bros., Columbia, Paramount, Twentieth Century Fox, Universal, MGM/UA, Disney—held power by controlling distribution. Television production was their bread and butter, but feature films were still the high-stakes side of the business, where tens of millions could be made or lost in a week. In order to have twelve to twenty movies to distribute, each Major might acquire films in a finished or nearly finished state (the negative pickup), originate films themselves, or fund a package assembled by an independent producer or talent agent.
These business routines were profoundly affected by two new moving-image technologies. The first was cable and satellite television, which emerged in the late 1970s and increased the number of channels available to the viewer. Studios began selling rights to recent films to HBO, Showtime, and other cable channels. Cable showings became another window, following in-flight airline screenings and preceding network playoffs. Cable firms also began financing productions and buying rights before a film was made.
A second new technology increased the viewer’s choices many times over. Japan’s Sony corporation began marketing the Betamax home videocassette recorder in 1976, and Matsushita introduced its Video Home System (VHS) soon after. Sales took off in the early 1980s, and by 1988 most U. S. households, nearly 60 million, had a VCR.
At first Hollywood was suspicious of the videocassette. If people could tape movies from television, wouldn’t they stay home instead of going out to see new movies? Worse, if videotapes were sold or rented, wouldn’t people just wait until the newest movie was available more cheaply than in theaters? Thus, in 1976, MCA and Disney sued to stop the sale of VCRs on the grounds that taping infringed copyright laws.
While the case was winding through the courts (where it ended in a victory for the VCR makers), it became clear that videotape did not hurt U. S. theatrical attendance. Just as sales of films to broadcast television proved an unexpected blessing in the 1950s and 1960s, so movies on tape became another way for studios to earn still more money. Studios established divisions to make and distribute cassettes. Sales to rental stores, particularly the growing national chains, proved very lucrative. Although a few “budget theaters” might play a film after its initial run, cable showings and cassette rental generally took the place of the theatrical second run. In addition, video enhanced the value of the studios’ libraries, so that old films could be reissued on tape. The studios woke up and found themselves in a new era, called by one historian “the ancillary eighties.” '
The Majors also discovered that many viewers would buy video copies. Between 1982 and 1983, Paramount began offering selected titles at $40, half the normal price. Sales were brisk. Top Gun was the theatrical hit of 1986, and the sale of videocassettes a year later brought in an astonishing $40 million in the first week, nearly half of what the film had earned in its entire theatrical run. Sell-through tapes yielded much fatter returns to the studios than did rentals.
By 1987, over half of major film companies’ domestic revenues were flowing from videocassette rentals and sales. Soon video income was twice that yielded by theatrical releases. Since even an average film could count on several million dollars from video sales, there was a burst of independent and low-budget releases. Although the big studio pictures garnered the bulk of theatrical revenues, the independents could do reasonably well on income from cable, satellite, and videocassette markets.
In the mid-1990s, as stores were glutted with more than enough titles to fill demand, the video market slowed down and rental chains began to suffer losses. At the end of the decade, however, prospects brightened thanks to another innovation, the DVD (Digital Video Disc, or Digital Versatile Disc). With VCR sales dwindling, perhaps a new technology could spur fresh cycles of consumption. To coax people into buying players, the format had to guarantee higher picture and sound quality than VHS could provide. Consumers could appreciate the value of upgrading home video by drawing an analogy to the music CD, which in the 1980s replaced LP vinyl discs. Moreover, studios wanted a format that was more difficult to copy and pirate than videotape. The solution was the heavy encryption that could be programmed into a digital medium. And by establishing different regional DVD formats, the studios could protect themselves from discs being shipped to countries where the film had not yet opened theatrically.
After several years of quarreling over standards, Sony-Philips and Toshiba-Time Warner merged their research to produce a five-inch digital disc that could hold a two-hour movie. Introduced in Christmas 1 997, the DVD found a warm welcome. By the end of 2001, nearly 30 million hardware units and over $9 billion of discs had been sold. Customers bought their favorite movies on DVD, and the new format perked up the stagnant rental trade as well. Consumers found that they could watch movies on their computer or on portable DVD players. Hollywood loved the format because discs were cheaper to manufacture and ship than tape cassettes, and retail sales yielded the studios a higher percentage of income than did rentals.
DVDs attracted movie fans with bonus features like trailers and voice-over interviews. Studios began compiling DVD-friendly materials during production: “making-of” documentaries, omitted scenes, alternate endings, storyboard images, alternate camera angles, and script pages. The DVD of Shrek (2001) boasted eleven hours of extra material and allowed home viewers to provide the voices for characters—a strategy that blurred the line between a film and a videogame.
In the 1980s, film buffs had begun to fashion “home theaters” that played 12-inch laserdiscs (a high-end forerunner of the DVD) on expensive video projectors and multichannel decoders. Prices on big-screen monitors, projectors, and sound systems began to come down just as the DVD appeared on the market. The new format launched a more affordable home cinema. No wonder, then, that many in the industry began to imagine digital projection in theatres as well. A digitized film could be sent out to theatres on disc, via satellite, or on the Internet. No more costly lab work, no more worn or spliced copies, and no prints falling into the hands of a pirate who would use it to strike video copies.
The DVD demonstrated that a movie could be acceptably stored as a string of tightly packed ones and zeros (p. 701). Digital presentation, at home and at the multiplex, was becoming a reality. Film had taken a step closer to merging with video and computer-based software.
By 2000, home video was yielding the studios an annual $20 billion worldwide, three times the North American box-office income. Video penetration was virtually complete: two-thirds of all U. S. households subscribed to cable or satellite services, and nearly 90 percent had at least one VCR. At the same time, cable companies and broadcast networks were paying record sums for rights to blockbuster films. As movie channels proliferated in Europe, studio libraries were reopened, for hefty prices. The DVD, the most swiftly adapted consumer electronics appliance in U. S. history, was also taking off internationally. Not everything that happened in American cinema during the 1980s and 1990s can be traced to the rise of video, but this technology had powerful and pervasive effects on business practices, film styles and genres, and culture.