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Media, Culture & Society
http://mcs.sagepub.com/content/3/2/135
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DOI: 10.1177/016344378100300204
1981 3: 135 Media Culture Society
Janet Wasko
The political economy of the American film industry

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135-
The
political economy
of the American film
industry
JANET
WASKO
*
Beginning very early
in the
history
of American film, there has been an
important
relationship
between bankers and filmmakers. From the
early entrepreneurs
who
formed alliances with a few
banking
friends,
to the substantial control exerted
by
the
largest banking groups
in the
country during
the
1930s,
banks have
played
an
important
role in the
development
of the American film
Industry.
I
This is not at all
surprising
in that film in a
capitalist economy
is a
commodity-a
rather
special commodity
because it is also an art
form,
a communications
medium,
and an
ideological
tool.
Nevertheless,
it is still a
commodity, produced,
distributed
and exhibited under market conditions that must in some
way
affect what
types
of
films are
made,
who makes them, and how
they
are distributed and exhibited to
the
public.
The
industry
is
capital-intensive by
nature in that there is a
continuing
need for
capital
to cover costs of
production
and
distribution,
which must be
expended long
before revenue
begins rolling
in-if, indeed,
it ever does. The risk is
high, yet
the
profit potential
is enormous. Thus,
film
production
has
always
attracted various
types
of
investors,
from
speculative entrepreneurs
to
wealthy capitalists
from other
industries. But these sources have been and continue to be
irregular
and un-
reliable, affected
by changing
tax and investment
laws, the
perceived profitability
of the
industry
or the
personal
whims and fancies of individual investors.
Yet,
certain investment and commercial banks have
consistently, although
at
first
hesitantly,
financed and have been involved with the film
industry
in various
ways,
not
only
in the
supply
of
capital,
but
through
other services and
relationships.
Their
participation during
the
early years
of the business was most
often op a
personal
and limited
basis,
or
through
standard
banking
functions, such
as
deposit
and
payroll
accounts,
etc. Because of the
unique,
and often
mysterious,
nature of the film
commodity
and the
relatively
low status of the film business and
its
entrepreneurs,
there was less bank
support
and interest than there was for other
more
clearly profitable
industries
developing during
the same
period.
It was not until the film business
proved
itself as an
industry-as
a
stable,
profitable
and
legitimate
business
enterprise
in the 1920s-that
banking
mstitutions
began
to
supply
substantial amounts of
capital
for the construction ot
theaters and film
production
and distribution. The
adoption
of sound attracted
*
School of Communications and
Theater,
Temple University, Philadelphia,
USA.
1
This article is based on a more extensive
study
of the historical
development
of this
relationship.
Sources used
for that
study,
but not
directly
cited here,
include
corporate
annual
reports,
interviews with bankers and
corporate
treasurers, and primary documentation collected from various historical archives in the US See Wasko (1980)
0163-4437/81/02013) + }l) $0200/0 (c-l 1981 Academic Press Inc.
(London)
Limited
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136
large, prestigious
bank
groups
whose
ownership
and
management
activities in the
film
industry expanded during
the late 1920s and
early
1930s.
Although
adjustments
occurred in these
relationships,
bank involvement in the
industry
continued
through
the transitional
period
in the late 1940s/ 1950s and into the
1960s/ 1970s,
as bankers continued to
supply capital,
as well as to
encourage
diversification and international activities
by
the
industry.
Generally,
then, bankers and financiers have been attracted to the American
film
industry
for reasons other than an interest in film or
filmmaking per se.
Film
as a creative art form or communications medium has been less
important
to
bankers than film as a
commodity.
Their interests have been not
only
in film as a
product
in
itself,
though,
but also in those valuable
properties
associated with film
companies (i.e.
real estate and other
assets),
in the film
industry
as a market for
other
products (i.e.
sound
equipment, etc.),
or,
in the film business as one
component
of the diversified activities of
large conglomerate organizations.
In other
words,
bankers attitudes towards film have been molded
primarily by
economic considerations. As one of the movie bankers from the Bank of America
has
recently
stated. The movie business is a business
(Geiger,
1974:
70).
Since the establishment of the film business as a
legitimate industry
in need of
outside
capital,
there have been various
types
of
relationships
with the
banking
community.
These
relationships
have
inherently
involved elements of
influence,
control
and,
ultimately, power.
And,
as
power
is relative and
relational,
it must be
viewed
historically. Certainly
the
history
of the banks/film
industry relationship
indicates that the
type
of control and influence has varied
during
different
periods
of American film
history,
as well as for different
companies
and banks.
At some
points,
control has been
obvious,
as
during
the
early
1930s when the
majority
of the
major corporations
in the
industry
were
owned, dominated,
and/or
managed by key banking groups
in the
country,
while the
participation
of banks in
the film
industry during
the last few decades seems-at first
glance,
at least-to
have been less
significant.
A more detailed look at this
relationship
and its
implications
is not
only necessary,
but
long
overdue. ,
The late 1940s and 1950s was a transitional
period
for the American film
industry,
as structural and
policy changes
as well as the
competitive challenge
of
other leisure-time and entertainment activities forced the
major
film
companies
to
develop
new
strategies
in order to maintain their domination of the film
industry.
Although
most of the
major production-distribution companies experienced
a
critical
period
in the late 1960s and
early
1970s,
their
adjustment
was
successfully
accomplished by
the
mid-1970s,
as the
majors
were
again strong
and
profitable.
The
development
of
independent production
contributed to this
adjustment
process
as the
major
studios were transformed from monolithic factories
producing
a
large
number of films
using
contract
players, producers
and directors into
conglomerate organizations financing
and/or
distributing
fewer films
produced
either
by
satellite
production companies
or
producers,
or
by independent
producers..
But the film
corporations
of the 1970s were not
only
involved in the
production
and distribution of feature films.
Following
a
general
trend in other
industries,
all
major production-distribution corporations
went
through
a
process
of
conglomeration,
in which business activities
completely
unrelated to the
production
and distribution of film were included under one
corporate
umbrella.
, ~ ), ~ ,. ,
I
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137
This was
accomplished
either
through
the
process
of
self-conglomeration
(Columbia
Pictures,
Disney
Productions and 20th
Century-Fox),
from
mergers
with
closely-related companies (MCA/Universal
and Warner
Communications),
or
by
the submersion of film
companies
into
already existing conglomerates
(Gulf +
Western/Paramount and Transamerica /United
Artists).
The
development
of new forms of distribution also
played
an
important
role in
the
changing strategies
of the
major
film
corporations. Although
antitrust action
stripped
the
majors
of their
ownership
of domestic
theaters,
new forms of
distribution became
possible
and
profitable.
While at first a
threat, various forms
of video distribution became new sources of revenue for the
major
film
companies.
These forms included network and
syndicated
television
distribution, cable,
pay-
cable,
video
cassettes,
video
discs,
etc. In addition to these new distribution outlets
for
features,
film
corporations
became involved in the
ownership
of some of these
channels,
i.e. TV
stations,
cable
systems,
video cassette and disc
systems,
etc.,
as
well as in the
production
of new
products
for these
markets,
i.e. television
programs,
made-for-television
movies, commercials,
etc. A few of the
major
distributors also maintained
ownership
of
foreign
theater circuits.
Other leisure and media activities were
placed
under these
corporate
umbrellas,
including publishing,
amusement
parks,
ski resorts and other tourist attractions,
mechanized
games, sports
centers and
sports
teams,
etc.
Although
diversified
activities,
such as record and music
publishing
and distribution, had
previously
been
part
of film
companies
activities,
this diversification
process
was intensified
during
the 1960s and 1970s. Thus,
by
the end of the
seventies,
the
production
and
distribution of feature films for theatrical release
was,
more than
ever,
only
one
part
of the business of the
major corporations
in the American film
industry.
Geographical expansion
of markets also occurred
during
the sixties and
seventies. The international market for
American-produced
features,
as well as the
distribution of other countries
films,
has been a traditional and
important
source
of
profits
for the American film
corporations. Early
in the
1960s, however,
international locations became more common for the
production
of American-
backed feature films,
which
consequently
became
eligible
for certain subsidies in
foreign
countries. In
addition,
there was an
increasing
number of
co-productions
abroad and
joint
efforts
by
the American
majors
in international distribution
(see
Guback,
1969).
Thus,
production
as well as distribution became
increasingly
concentrated at an international level as well as on a domestic basis.
So while the
changes
of the late 1940s and
early
1950s increased the risk of
producing
and
distributing
feature
films,
by
the 1970s the
major production-
distribution
corporations
had
successfully spread
this risk
by
the intensification of
the industrial
processes
of
conglomeration,
diversification and internationalization.
Concentration continued as the
majors
were able to dominate the
marketing
of
feature films in the United States even without theater
ownership
or
through
the
actual
production
of feature films at their own studios as in
previous
eras.
This
adjustment process
involved some
changes
in the methods
by
which films
and film
companies
were financed,
and
consequently,
affected
relationships
with
banking
institutions. The
financing
trends in the film
industry
after World War II
were
comparable
to
corporate financing
activities in other industrial sectors of the
American
economy.
While investment banks became less
important
in
providing
capital
for
major
American
corporations, important
sources of external
corporate
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138
funds were the
great
institutional investors: investment and life insurance
companies,
and
pension
and mutual funds
(Carosso,
1970; Kotz,
1978).
The
importance
of commercial
banks, however,
did not diminish. Several
studies of
banking
conducted
by
the US House Committee on
Banking
and
Currency (the
Patman
Committee)
concluded in the
1960s
that the
banking
industry
was
becoming increasingly
more concentrated. The
findings reported
that
in
1964,
the 100
largest
commercial banks in the United States held 46% of all
deposits
in the 13,775
commercial banks in the
country,
while the 14
largest
banks
held
one-quarter
of all commercial bank
deposits.
Furthermore,
the size and
concentration of stock
ownership by
commercial banks trust
departments
had
increased
substantially
since World War
II,
as
only
49 banks held 54% of all bank
trust assets
(US
House, 1968:
2-3). Although
the Patman Committee referred to
bank
minority
control of the
largest
non-financial
corporations,
other researchers
have concluded that commercial banks were at the center of control over
large
corporate empires (see
Kotz, 1978; Menshikov, 1969; Perlo, 1957;
also
Herman,
1979).
While there have been
challenges
to the claims of centralized and direct control
by
commercial banks over
large corporations,
there is still
general agreement
that
commercial banks have indeed
expanded
their trust
holdings,
as well as the services
offered to
corporations. During
the
1970s,
especially,
merchant
banking
services
were extended and included
private placements,
financial advice on
investments,
merger arrangements,
etc.
<
Perhaps
more
importantly, though, corporate lending by
commercial banks
continued to be
important during
this
period. Long-term
debt
during
the 1960s,
for
instance,
generally
increased for all
corporations,
and
especially
for
large
corporations, despite
the
self-financing
thesis claimed
by
various social scientists
(see
Fitch and
Oppenheimer,
1970).
As noted
previously,
the film
industry
followed these
general corporate
financing
trends. After World War
II,
there was a small decline in debt
financing,
a
significant drop
in
preferred
stock and a small decline in the use of bonded debt
for the
major
film
corporations.
The decline in
long-term
debt continued with a
tendency
towards
relatively greater
utilization of
equity capital . During
this
period
there were cutbacks in
lending by
banks due to
problems
with
independent
film
production,
inflation and various other factors.
Expansion programs
were curtailed
and the
major
film
corporations experienced
a
period
of
adjustment
with less need
for
capital.
However,
debt
financing
increased
considerably
from the mid-1950s
through
the
1960s,
and
by
1962,
represented
over 50% of the
majors
total liabilities
(Perry,
1966:
131). Although
there were differences
among corporations,
debt
financing
continued into the 1970s and
generally
exceeded
equity financing.
Most
of these
corporations experienced
a decline in
profits
and increased debts in the
early
1970s,
as there were sizable losses on
expensive pictures
and numerous
inventory write-ups.
But
by
the
mid-1970s,
many
of the
majors
had
paid
off their
bank debts and were
claiming
to be
self-financed,
or at least to be
generating
film
production
funds
internally.
All of the
majors,
however,
maintained their established
relationships
with
commercial banks, either through revolving loan agreements. lines of credit, or
2
Debt
financing
includes various
types
of
loans,
credit lines, notes, debentures and bonds.
Equity financing
involves the
issuing
of common
(and
sometimes
preferred)
stock,
or
shareholdings.
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139
commitments for funds, as well as
through
other associations.
Thus,
in order to
understand the banks/film
industry relationship
in the
1970s, attention must still
be
given
to these debt
financing
activities.
Bank
lending
to the American film business started at the turn of the
century
on a
personal
level when individual bankers made loans to film makers on the basis of
character because little collateral or
capital
were available. But as the film business
developed
and became another
industry
dominated
by large corporations,
banks
became involved more often on a
corporate financing
level rather than
through
personal
or individual
lending. Although production
loans were extended
continually
to well established
producers,
the bulk of bank
financing
was extended
through
those
corporations
that dominated the
industry through
their control of the
total
production process,
from film
production
to exhibition. This situation existed
generally through
the end of the
1930s,
when
independent production
and
individual
picture financing began
to
expand.
There was
only
a brief
period
in the
mid-1940s when
truly independent production financing
took
place,
as banks re-
adjusted,
but continued
corporate financing
of the film
industry through
the 1970s.
Movie bankers in the 1970s remembered the losses and foreclosures of the late
1940s and
many
claimed
they
never lost
money lending
to the film
industry, except
from
financing
individual
pictures during
that
period.
After credit
tightened
in
1947
and
1948,
some banks discontinued
lending
to
independent
film
producers
and individual films
completely.
Other banks
(especially
the Bank of
America,
Security
Pacific and
Chemical)
resumed
single picture lending,
but with even
stricter
policies
that demanded
risk-free,
fully guaranteed
loans.
Although
there
were variations in the
availability
of credit and interest
rates,
these
general policies
for individual
picture financing
continued
through
the 1970s.
More
specifically,
individual
picture lending
was not based on the
proposed
picture,
but relied on either the
guarantee
of a
major production-distribution
company
or other forms of
security
or collateral. Without a
majors backing,
bankers were interested in a bankable
package,
with a combination of
backstops.
All of the various elements in a film
package (such
as
script,
stars,
budget, etc.)
were still
important
to a
lending
bank. However, most movie banks
of the 1970s
emphasized secondary
sources of
payment
as more
important
criteria
for
extending
credit than the
bankability
of a creative film
package.
As one movie
banker noted: Pictures are not bankable risks. No sane banker can make loans for
the
production
of a
picture
where the sole source of
payment
is revenue from that
picture (Howe,
1972:
59).
Again,
each
picture
loan was different and
complex.
But various forms of
security
considered included
any one
or a combination of the
following:
outside
investors
(or angels)
funds;
tax shelter funds
(domestically, prior
to
1976,
and
foreign sources); foreign
subsidies;
various
types of pre-sales, including foreign
and
television advance
sales;
residual values in other film
properties;
stock or bond
portfolios;
or various other sources of
income,
such as
personal property,
etc. If a
picture
loan was
accepted,
most loan
agreements
were
arranged
so the
lending
bank was in an
unquestioned
first lien
position
over other
participants
in
financing.
If the loan was
arranged
and the
picture completed,
the unaffiliated
independent producer
confronted the
problem
of distribution.
Pick-up
deals were
possible
when
major
distribution
companies agreed
to distribute a finished motion
picture
and also
pick-up production
costs,
including
bank loans and interest. But if
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140
a smaller distribution
company
handled the
independents picture
without
picking
up production
costs and the
picture
did not
recoup enough
to
pay
the bank
loan,
then the bank looked to the
secondary
sources to
pay
the loan. This was also true of
completed pictures
for which no distributor was found. The
following
case was
cited
by
a Boston banker whose bank has not
traditionally
made
single picture
loans:
I can think of one instance where we lent to a
producer
for a
single picture,
but he had an awful lot of
securities as marketable collateral. This
particular
individual-it was he and his wife-were bound
and determined to make a movie, and
they
were warned ahead of time that the securities formed the
only
basis
upon
which we were
making
our loan, because we knew, if the roof fell in, we could still
come out. Well,
the fact is that that movie never saw the
light
of
day They
took the
completed
film
from
company
to
company,
from the
big
ones down to the small ones, and
nobody
would even invest
advertising money
It has never been released
Nobody
would take it on for distribution and we had
to resort to the collateral
(McGilligan,
1976. 22)
Yet,
if a
picture
did
succeed,
a
producer
could
develop
a track
record,
an
important
criterion for future
financing by
banks and / or
backing by major
distributors. The
track record
philosophy-as
in the
past-continued
to be
important
in
determining
which
producers
were
consistently
backed
by
the
majors
and / or
by
the
movie banks in the 1970s. Some banks extended credit
only
to well established,
successful
producers,
without even
considering
new entries to the field. Others
considered loans to new
producers
or directors
(only
with the
appropriate security
for the
loan, however),
but also noted that
they
were interested in
backing
those
who ... will be a factor in the
industry.
Thus,
well known and
proven producers,
such as Dino
delaurentils, Norman
Jewison,
Peter
Guber,
Martin Ransohoff and
others,
were able to
arrange funding
for their films with little
difficulty.
As
might
be
expected, though,
these
producers
were also
supported
and
closely aligned
with the
major production-distribution
corporations.
Thus bank loans were
either,
(a)
not
always necessary
or less crucial
for the
production
of their
films,
or
(b)
more
easily arranged
due to a
majors
backing.
In
summary,
a movie bank of the 1970s would lend less often to an unaffiliated
and
truly independent producer
than to a
dependent independent
or successful
independent producer.
But how often do the
major production-distribution corporations actually
back
production
loans
arranged
at banks? In the late
1960s
and
early
1970s,
Al
Howe,
of
the Bank of Americas motion
picture lending
division,
estimated that the
distributors backed
90%
of
production
costs for the
industry (Howe,
1972:
12).
And in
1976,
Variety
estimated that
guarantees
to
independent producers
were at
least
$/2
billion a
year
for the entire
industry.
It is difficult to
verify
these estimates
because the total amount
spent by
the
industry
on
production
itself is unavailable.
In
addition,
each distribution
company supports production
in
ways
that
vary
for
each
picture.
Nevertheless,
it
might
be concluded that
during
the
1970s,
more than
ever,
the
major part
of
independent production financing depended
on the
production-
distribution
companies support
in one form or
another,
whether
by partial supply
of
production
funds,
by guarantees
of
producers
bank
loans,
by pick-up
guarantees,
or
through
the
supply
of
completion deposits
or
guarantees.
Consequently,
the
strength
of the distribution
companies inevitably
became an
important
factor for the movie
banker,
even in
independent financing
or
single
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141
picture lending.
As one banker
observed,
the movie
industry
is a
sophisticated
business and a distribution
company
must have a lot of muscle. With weaker
distribution
companies
a bank loan became more
complicated
and often
required
additional
security.
In
summary,
then,
when
extending
credit for
independent
film
production,
movie banks in the 1970s were most often concerned with and
depended
on the
dominant and
strong production-distribution companies.
More
often, however,
major
movie banks still
provided
funds to the film
industry through corporate
financing arrangements
and the
major corporations
financed film
production.
Peter
Geiger,
of the Bank of Americas Entertainment
Division,
stated in the
1970s that,
The
majors
have become bankers for the
industry (Geiger, 1974).
Although
the
majors
financed
film-making
activities in the
1970s,
it
might
be
argued
that
they
have done so
during
most of the
history
of the
industry using
bank funds
provided through corporate financing arrangements,
as well as
through
various
types
of
guarantees
and
support
for
independent production.
What
may
be
different, however,
is the structure of the
industry,
the nature of the
major
corporations
and the
ways
in which
they arrange financing
with the movie banks of
the 1970s. In other
words,
we must ask where the
majors get
their
money
and who
are their bankers?
As observed
earlier,
debt
financing
remained as one of the most
important
sources of
capital
for the
major
film
corporations
in the 1970s. How much loan
capital
was
provided by
banks to each of the
major
film
corporations
and how was
this debt
arranged?
A
comparison
of six
major
film
corporations
debt structures in
1978 is
presented
in Table 1. Not
only
are these debt structures different for each
corporation,
but loans
arranged
also have individual characteristics.
Many
bankers
dealing
with the
industry,
however, consider
motion-picture lending
not unlike
other
types
of
corporate lending.
As William
Thompson
of the First National Bank
of Boston observed :
_
Lendmg
to movies is
really
no different than
lending
to a chemical
company
or
paper company
in
terms of credit
principles although
each industry.
obviously
has its own
particular
characteristics
(McGilligan, 1976).
The criteria set
by
bankers for
corporate lending
to other industries are also
applicable
to the film
industry,
then,
and include a
companys strength,
assets,
track
record,
profitability,
diversification and
management (Geiger, 1974).
It
might
be
helpful
at this
point
to review the various
types
of
corporate
loans to
the film
industry
that are similar to other
types
of
lending.
Short-term loans are
technically
those to be
repaid
within one
year
and are
consequently
considered
current liabilities.
Generally
this
type
of loan is unsecured and either seasonal or for
specific purposes. Long-term
loans are those that extend over one
year
and can
range anywhere
from three to ten
years.
This
type
of loan involves
explicit
repayment
dates and restrictive
covenants,
thus
allowing
the lender continued
control over certain
aspects
of a
corporations
activities.
A line of credit is often
arranged
to
provide
both of these
types
of funds. This
involves an advance credit
analysis, providing
an
approved
amount of
money
to be
available for
lending
over a stated
period
of time.
Although
these
arrangements
are
not
legally binding,
a firm
may
still be asked to
keep
a certain amount of
deposits
with the
lending
bank in the form of
compensating
balances,
as well as
paying
a
commitment fee to the bank.
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142
A firmer commitment is often
arranged through
a
revolving
loan
agreement.
This
type
of
lending
instrument is
important
in that it
provides general corporate
financing,
and thus allows continued influence
by
the
lending
bank
(or banks)
over
an entire
corporation.
It is a
legally binding
contract with a fixed commitment
by
the bank and numerous restrictive covenants or
requirements
for the
company.
A
bank consortium
usually participates
in these loans due to
legal
restrictions that
limit funds that can be loaned
by any one
commercial bank to 10% of reserves. A
lend bank will
usually
act as
agent
and
arrange
the loan
agreement (for
an extra
fee)
between the
group
of banks and the
company.
Table 1. 1978 debt
strut/ures for
six
major motion-picture corporations (in
million
S)
.
Incudes deferred income, income taxes, and advance Lollections on contracts.
Sources 1978 annual
reports
to stockholders for each
corporation
Revolving
loans have been used
by
the film
industry
at least since the
1930s,
and
have been favored for the film
industry
since around
1950,
when
general corporate
support
of the
major production-distribution corporations
took
precedence
over
individual
production
loans. As
revolving
loan
agreements
are
important
in
considering continuing relationships
between banks and
corporations,
as well as
delineating legal
restrictions
placed
on a
corporation by
banks,
it
might
be useful at
this
point
to discuss these
types
of loan
agreements
for the film
industry
in more
detail.
Although
there are variations in the
major
film
corporations revolving
loans
and lines of
credit,
generally
certain standard
provisions
are included in most of
these loan
arrangements.
In addition to the amount to be loaned or
committed,
the interest rate
(based
on
the
prime rate),
and
repayment
schedule,
the loan
agreement
includes
specific
restrictions on how
money
is to be
used,
specifying
either
general corporate
use,
individual
picture
or
production financing,
or
producer guarantees.
The
agreement
specifies
how much
money
is to be
kept
on
deposit
at each
participating
bank in
the form of
compensating
balances,
as well as
specific penalties
if these balances are
not met.
General covenants deal with the
operation
of the
corporation along
standard
business lines and include the fulfillment of all contractual
obligations, payment
of
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143
taxes, insurance
coverage
and the use of an
acceptable
form of
accounting.
The
bank maintains the
right
to
request any
information from the
company,
to
examine the
companys
books and to make
independent
examinations to
verify
the
companys compliance
with the banks terms.
Generally
these covenants are included in most
revolving
loan
agreements.
Further restrictions
vary according
to the
company,
its
strength
and the banks
involved,
but most often include limits on
indebtedness, liens, investments,
mergers,
consolidations,
distribution of dividends and
assets,
limits on
working
capital,
current assets and
liabilities,
etc. Limits
may
also be
placed
on the amount
that
may
be
expended
for film
production, including
the amount of
participation
in
co-productions, producers guarantees,
and restrictions on the number of
pictures
at
specific budgets.
For
example,
20th
Century-Foxs Revolving
Loan
Agreement
of
June
1975,
limited the
company
to a
budgeted negative
cost of
$5
million
per picture.
The
company
was not allowed to
produce
or
participate
with
others or
acquire rights
to
completed products
in excess of this amount until
1976
when
production
or
participation
was allowed in two feature films with
budgeted
negative
costs between
$5
million and
$10
million
(US
SEC, 1975:
15).
Revolving
loan
agreements
also include standard
provisions
for events of
default.
one of which is
especially important
in
considering
bank
relationships
with the
management
of the
company.
As stated in the
previously
cited 20th
Century
agreement,
an event of default occurs when:
The executive
management
of the
Company
shall
change
and become
unsatisfactory
to the
Agent
[the lead bank] (it being
understood that the
present
executive
management
is
satisfactory)
and such
condition shall continue for 30
days
after written notice thereof bv the
Agent
to the
Company..
(US
SEC, 1975: 19).
This clause is included in most of the
revolving
loan
agreements
for the
major
film
corporations (Further
comment on the
importance
of this
provision
will
follow).
As well as variations between the
major
film
corporations revolving
loan
agreements,
there are variations over time for each
corporation depending upon
the
strength
of the
company
and its financial
position.
As
might
be
suspected,
however,
the more
profitable
a
company appears,
the less restrictive are loan
requirements,
the lower the interest rate and the less
security required.
In addition to
revolving
loan
agreements
and lines of
credit,
other
types
of
long-
term debt are utilized in the
corporate financing
of
major
film
companies. Long-
term loans are often used for diversification activities or for
subsidiary
activities.
Examples
include MGMs hotel
investments,
20th
Century-Foxs broadcasting
activities and Warner Communications cable subsidiaries.
In the late
1970s,
debentures and notes
(especially
to insurance
companies)
were
utilized more often than those funds available
through
established lines of credit or
revolving
loans. This
type
of debt amounted to
nearly
$478
million in 1978 for
Columbia, MGM, 20th
Century-Fox
and Warner Communication. With increased
profits
and
rapidly rising
interest rates,
the use of these sources of funds was
apparently preferable
to the more restricted funds of
revolving
loan
agreements
at
constantly rising
interest rates. Nevertheless,
it should be noted that all of the
major corporations
maintained their
revolving
loans or lines of credit at commercial
banks,
even with the added
expenses
of commitment
fees,
compensating
balance
requirements
and other restrictions. But there were other
types
of affiliations
between commercial banks and the film
industry
that need to be considered.
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144
Although
the focus thus far has been on debt
financing, lending
is not the
only
activity
for commercial banks in the film
industry. Although prevented by
law
from
underwriting
or stock
ownership,
US commercial
banking
institutions
inevitably
become involved with the
capital acquired through equity financing
or
stock issues and stock
trading.
As
previously
noted,
the
large
trust
departments
of
the
major
commercial banks hold sizable blocks of
corporate
stock
(often
with sole
voting rights)
for
pension,
welfare and
personal
trust
funds,
and these
holdings
often include the stock of
major
film
corporations.
For
example,
a
government
study
in
1973
reported
that the trust
departments
of four banks held as much as
11. 2 % of the common stock of Columbia
Pictures,
while
only
three bank trust
departments
held 8.5% of 20th
Century-Foxs
shares
(US Senate, 1973:
165-172).
The disclosure of stock
ownership
remains a basic barrier in
determining
the
extent of influence
by
these commercial bank trust
departments
on
corporations,
industries and the
general economy.
The
present
Securities and
Exchange
Commission rules
require
disclosure of
any
beneficial
ownership
of over 5 % of a
companys
stock.
Yet,
in one of the Patman Committee studies,
it was concluded
that even 1 or 2
percent
of stock in a
publicly
held
corporation
can
gain
tremendous influence over a
companys policies
and
operations (US
House, 1968:
9).
Further disclosure
problems
stem from the use of nominee names
(or
street
names)
to
register
stock
ownership
and a central stock
clearing
service
(the
Depository
Trust
Company,
which uses the nominee name of Cede &
Co.),
thus
providing
banks with even further
anonymity (US
Senate, 1973: 6,
9).
Yet after
investigating
these
problems,
the Senate
report
on
corporate
disclosure
still concluded that:
... the stocks held in nominee accounts of banks trust
departments
and in other institutions do in
fact
put
these institutions in a
position
where
they
can exert
significant
influence,
through voting
and
otherwise, on
corporate
decisions and
policies (US Senate, 1973: 137).
Further
study
of the
interrelationship
of bank trust funds and other
banking
functions was
reported
in the Securities and
Exchange
Commissions Institutional
Investor
Study
in
1971,
which concluded:
Among
the securities that a bank can choose to hold are stocks in
companies
with which the bank has
commercial
banking relationships ...
increased demand
deposits by
a
company
at a bank
were,
to a
statistically significant degree,
associated with
larger holdings
of the
companys
stock
by
the banks
trust
department ... (US SEC, 1971:
138).
Director interlocks are another link between film
corporations
and commercial
banks.
Corporate
boards
may
include directors
representing lending relationships,
stock
ownership, primary
business
relationships,
or a combination of these rela-
tionships.
As indicated
by
a
study
of the
history
of those
relationships,
the
presence
of bankers and financiers on boards of directors has been common
throughout
the
history
of the motion
picture industry (Wasko, 1980).
The 1970s
presented
no
major change
in this situation.
But,
again,
the film
industry
is not
unique.
The SECs Institutional Investor
Study
in
1971
reported
a
strong
statistical correlation between bank
stockholdings
and
personnel
or business
relationships
in the
companies investigated.
And in the
Disclosure
of Corporate Ownership
in
1973,
the US Senate concluded that:
... interlocks
provide major
banks with levers
throughout
the industries in which
they
hold
major
blocks of stock
(US
Senate, 1973:
10).
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145
In addition to
lending
activities,
stock
ownership by
bank trust accounts and
director
interlocks,
commercial banks also become involved with these
companies
through
other
services,
i.e.
registrar,
transfer and dividend
dispersal agents,
deposit
and
payroll
services and
management
of
profit-sharing plans
and
pension
funds. In
addition,
commercial banks investment and
management
advice and
additional
foreign
and international services were utilized
by
film
corporations
in
the 1970s. Miscellaneous activities also linked commercial banks to these
corporations, including joint promotional
activities,
personal
loans to
corporate
executives,
stockholders
meetings
held at bank
headquarters,
as well as the
ownership
of financial institutions
(or,
in the case of United Artists,
ownership by
a
financial institution, Transamerica).
In order to assess
fully
and understand the
potential
for influence and control in
the
relationship
between the film
industry
and commercial
banks, then,
it seems
clear that a detailed historical look at each of the
major corporations banking
relations is
necessary.
Thus, Table 2
represents only
a
superficial
overview of the
actual
complex
bank
relationships
for six of the
major
American film
corporations.
. r
:
Table 2. l9%8 bank
relationshipi
16r
six
major film
corporations
.
Directors
swerving
on film
corporations
board of directors woh other dnect or
previous
affiliations to
banking
or other financial institutions, or with extensme financial or
banking backgrounds.
t
Indicatcs at least one
representative
on the tilm
lOrpOratlon~
board of directors or m a
management posmon
at the
corporation
Sources 1978 annual
reports
10 SIOL kholders and Form lOK ,lI1d 8K
report
tilrd with the Securmes and
Exchange
Commission.
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146
The
primary
banks active in
corporate financing
of the American film
industry
include the
largest
and most
powerful
banks in the
country.
Out of the
top
16 US
bank
holding corporations,
ranked
by
assets in
1979, 15 were active in
lending
to
the film
industry during
the 1970s. Most of these
banking
institutions were
involved with the
industry, although
in
varying degrees,
at least since the
1930s,
and some even earlier.
Thus,
nearly
all of these banks have
years
of
expertise
and
experience
with the film business.
Historically,
New York banks have been
important
for the film
industry
because
of their
key
location in the financial
capital
of the
country,
which thus
developed
as
the film
industrys
financial
headquarters.
However,
California
banks,
such as the
Bank of America and
others,
also have been
important, primarily
because of their
location near the
production capital
of the film
industry.
Other banks became
involved with the film
industry
due to the interest of individual bankers in
expanding
into areas where their
large
banks could
profitably
lend excess funds.
The latter
description
fits the First National Bank of
Boston,
perhaps
the most
important
bank connected with the film
industry
in the 1970s. First Boston served
as the lead bank for three of the
largest major
film
production-distribution
corporations (as
indicated in Table
2),
as well as for several other film
corporations,
including
General Cinema
Corp.,
ATV, Orion Pictures and other entertainment-
oriented
companies.
The earliest loans involved
Serge
Semenenko,
a Russian
immigrant
who
joined
the credit
department
at First Boston in 1926 and
eventually
served as vice-
chairman and a director of the bank until 1967. Semenenko,
known for his
innovative
banking techniques,
served on
corporate
boards and
played
a
significant policy-making
role in
many
of the
companies
financed
by
First Boston
(Mayer,
1975:
56).
In an effort to find new
borrowers,
Semenenkos
Special
Industries Division at First Boston looked to businesses both in the Boston area and
elsewhere,
eventually developing lending relationships
with the
film,
newspaper
and
recording
industries. As
explained by
First Boston banker William
Thompson:
... what made our
continuing
and
growing
involvement within the film
industry possible
was the
fact that the resources of the bank are far
larger
than New
England
can use One of our former
chairmen used to
say.
Were like the
hospitals
in Boston: we have
many
more beds than the
city
needs. As a
result,
to
keep
our
money profitably employed,
we have
long
had to look outside the
region,
both
nationally
and
internationally
for
interesting
situations where we could
plav a part
In
the course of
this,
we have
developed
certain
specialities
where we feel we have marketable
expertise
The film business is
certainly
one of them and its been
very good
to our bank
(McGilligan,
1976:
18).
It
might
be added that in addition to
lending
to the
industry,
Semenenko served
on the boards of several film
corporations (Columbia
Pictures for 25
years,
Warner
Brothers for 11
years),
as well as
arranging financing
deals
involving major
stock
ownership
in several
companies.
Between 1956 and
1967,
Semenenko and other
financiers maintained
ownership
control of Warner Pictures.
(See
Truscott, 1978:
25-26.)
It is difficult to estimate the amount that First Boston
may
have loaned to the
film
industry
over the
years,
as
complete
documentation is unavailable
publicly.
Time
reported
in 1956 that Semenenko loaned $2
billion to the film business in 20
years,
whereas Semenenko himself claimed in the
early
1970s to have loaned as
much as
$4
billion of First Bostons
money
to the
industry
without
any
losses
(Time,
1956: 96;
Mayer,
1974:
248).

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147
First Boston and Semenenkos
policy
was to lend on a
corporate
level with
very
few
(if any) single picture
loans. The Boston
style
of
lending
to the
industry may
have been due to the banks distance from
Hollywood
and its desire to
compete
with New York banks for new markets.
Nevertheless,
this
type offending,
which
continued after Semenenkos retirement from the bank in
1967,
foreshadowed the
type
of bank involvement that
predominated
in the film
industry during
the
1970s. It is
interesting
to note as well that the
major
film
corporations
backed
by
First Boston are those
having
survived
conglomerate
take-overs,
for the most
part,
and have
developed
their own diversified activities oriented towards the film and
entertainment industries in
general.
While the First National Bank of Boston
developed
this
strong relationship
with
the film
industry during
the
1970s,
the traditional
Hollywood
bank-the Bank of
America-maintained its claim as the
primary
bank for the
industry.
The Bank of
Americas
history
of interaction with the film business is
probably
more extensive
than
any
other banks. However, the California-based bank has
always
encountered
competition
from New York banks,
especially,
in that
they
offered
the
advantages
inherent with their location in the
major money-center
of the
country.
In the mid-1960s,
though,
the Bank of America
experienced
even more intense
competition
both from local Los
Angeles
banks
aggressively pursuing
business from
the
Hollywood
film
community,
as well as from
banks, such as First Boston and
First
Chicago,
which attracted
corporate
business from several
long-term
Bank of
America clients.
Although
the Bank of America was able to hold much of this
business due to its
experience
and
familiarity
with the
industry,
and its
strength
in
individual
Picture financing,
the bank still devoted
special
attention to
reorganizing
its entertainment division in the 1960s.
Special emphasis
was
placed
on more efficient
lending
to the motion
picture
business, as well as
developing
other entertainment fields.
In addition,
there was further
development
of the banks international
operations
in the field,
especially
due to increased activities
by
the film
industry
in
foreign
markets. This international orientation was
emphasized
in a
speech
delivered
by
Bank of America President,
Jess
W.
Tapp, commemorating
the
50-vear
involvement of the Bank of America in the film
industry. Reconfirming
the
recognition
of American films
ideological
and
marketing potential, Tapp
explained
that,
Hollywoods
boundaries are the world ...
selling
the American
way
of life and also
selling
some of our
products.
The international
emphasis
of
the Bank of Americas Entertainment Division was enhanced, then,
with revised
procedures
for
handling
international loans
(including co-production
deals)
and
the transfer and
handling
of overseas distribution revenues.
The Bank of America continued to
arrange
individual
picture
loans
during
the
1970s, but
only
under the strict restrictions and
requirements
discussed
previously.
The bank continued to serve as the
primary
bank for
Disney
and
MGM,
as well as
participating
with the First National Bank of Boston in
Warners,
Foxs and
(until
1977)
Columbias
revolving
loan
agreements.
Thus,
the Bank of America and First Boston still
represented
the
key
commercial
banks in the film
industry during
the seventies: the Bank of America because of its
involvement with
many companies
and
industry
leaders,
and First Boston because
of the intense involvement with a few
large, important corporations.
Other movie
banks
might
be
categorized
in two
ways: (1)
those
regularly participating
m
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revolving
loan
agreements
for the
major
film
corporations,
and
(2)
those
making
individual
picture
or
production
loans. ,
,
,
. :
One banker has noted that the film
industry
is ... incestuous and
very
personal.
This is not
only
true of
Hollywood,
but also of
Hollywoods
bankers.
Historically,
movie bankers have shared information and
strategies,
as well as
worked
together
on loans to the
industry, despite
their
competitive positions.
Advice from
experienced
movie bankers is
passed
on to new loan officers at
competing
banks, as well. Thus, there is a
relatively
small
community
of movie
banking experts.
But how do these bankers
actually
become involved in the film
industry
and
what does this mean for films and film makers?
Both bankers and
corporate
executives are
quick
to claim that banks do not
control the film
industry,
do not run film
companies
and do not become involved
in creative
decision-making
or the film
production process. Many
bankers have
consistently argued
over the
years
that
they
do not make artistic decisions or
exercise creative control in the
production
of motion
pictures.
But the movie
bankers of the 1970s insist even more
vehemently
that
they
are not involved in film
making
and do not become involved in choices made as to the
type
of
stories,
scripts,
stars,
or even
budgets
used in feature film
production. Many
movie bankers
boast of
having
never read a film
script, assessing
film
products
from box-office
figures.
A Boston banker
explained:
We dont want to read a
smpt
or tell
people
what movies to make. If the head of that studio canell
whether
something
will make a
good
movie or not, we shouldnt be
lendmg
him
money.
The
day
we
say
we want to see a
script
before well finance the movie, our shareholdcrs are in
grave
trouble
(Mayer,
1974:
248).
There are those movie bankers who even
express contempt
and disdain for
movies,
admitting
that
they
attend film
showings only
under
pressure.
Still others
are similar to earlier movie bankers,
expressing
their
passion
for movies
by
explaining
to those in the
industry,
Your banker is a film buff like
you
or There
will
always
be
pictures .
Most of the movie bankers
acknowledge
that the
industry
still has a
special appeal.
Even
Thompson
once noted that ... a movie business is
obviously
more
glamorous
than
stoves ,
while another movie banker stated
bluntly,
Movies have sex
appeal.
The
people
in the film
industry
are also
thought
to be different,
or
free-form,
individualistic and
crazy, unique people.
As one
banker
noted,
the
industry
is wild.
Yet the dazzle of
Hollywood
tinsel is not so
bright
as to blind these movie
bankers. Their involvement with the movie
industry,
as
always,
is based on rational
business decisions and not
necessarily
on that vicarious thrill of
dealing
with show
business stars or creative film makers. As a
Chicago
banker noted: We dont do
crazy things .
This attitude is confirmed in
independent production financing policies,
as
bankers do not take risks,
but maintain a safe
position
in their
lending
arrangements.
As Bank of America executives have often
explained,
no one in the
industry
knows what will be
successful,
i.e.
profitable,
and a banker is
just
not
smart
enough
to be able to
predict
film successes
any
more than a movie
producer.
Thus,
the banker extends credit
by way
of risk-free
financing,
which is
not at all
dependent
on a films
potential profitability.
It
might
be
argued,
how-
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149
ever,
that these
policies inevitably
do influence who
may or may
not
produce
a film
because a
producer
without
major backing,
outside funds or
security,
will be
unable to
arrange
a loan. A banks insistence on various
guarantees
will influence
how and with whom a film is to be
distributed,
as well.
Furthermore,
the insistence
on a
profitable
film
package,
as discussed
previously,
will
inevitably
influence the
form and content of all films.
The
primary
customers in the film
industry
for the movie banks are the
major
production-distribution companies,
as
previously
noted,
and bankers
rely
on these
corporations
executives to make creative
decisions, i.e. to read
scripts,
to choose
stars,
to determine which
producers
to
support,
how much to
spend
and how to
distribute
completed
films. In other
words,
the movie bankers look to the
corpora-
tion and the
top
executives to
manage
the risk reward ratio involved in film
production
and distribution. In this
respect,
the film
company
executive is a
surrogate
for direct control
by
bankers.
Despite
claims of non-involvement in film
making, corporate
bankers still
express
concern over the
products
of the film
industry
and state definite
opinions
regarding
film
content,
stars and
budgets.
How often and to what extent film
company
executives and other
industry personnel
are influenced in
specific
creative
decisions
by
bankers
opinions, expressed informally
or
otherwise,
is not
only
difficult to
determine,
but
perhaps
less
important
than the
general
constraints
placed
on film
production. Specific
limits on
budgets
and total
production
acti-
vities,
as well as financial
expectations
for a
corporation,
are
required by legally
binding lending agreements,
and
corporate managers
are
depended upon
to make
the
pragmatic
and commercial decisions
necessary
to
stay
within these limits.
Bankers and
corporate
executives also stress that banks are not involved in the
day-to-day operations
or the
running
of a
corporation.
Indeed,
they
do not have to
be.
Nevertheless, banks
certainly
are involved in
general corporate policy-making
because loan
agreements specify
that
approvals
are
necessary
for
expansion
and
mergers,
as well as for the formation of financial
policies.
It is
argued by
bankers
and
corporate
executives that a bank
only
wants its
money
returned
(with interest)
and
consequently
must
protect
a loan
by demanding
that a
corporation
maintain
its
strength
and
profitability.
In such a
risky
field as the movie business, where
stability
is often difficult to
achieve, these demands become
particularly impor-
tant.
Thus,
restrictive covenants
provide
a
legal
basis for banks to
gmde
and
enforce
general policy objectives
and
strategies
of a
corporation, leaving
the actual
implementation
of these
objectives
to the
corporations management.
In this
respect,
the bankers are the
captains
of the
industry,
and their broad
strategies
are
executed
by
lieutenants in film
companies.
Consequently,
then,
bankers are
especially
interested in
capable, dependable
managers
who can and will co-ordinate creative
decision-making
and
operate
a
corporation according
to these
general policies.
The movie bankers
emphasize
the
importance
of
knowing
a
corporations management,
and some bankers feel that
this is the most
important
factor in
lending
to the film
industry.
The
age
of the
mogul
is
over ,
as one of these bankers observed. Former leaders
of the film
industry
are considered to have been
spendthrift, egocentric,
un-
businesslike and
unprofessional-lunatics,
as one banker called them. Even
though
the
industry
is still
glamourous
and
unique,
those who
actually operate
the
major
film
corporations
of the 1970s are considered
by
bankers to be
conservative,
professional
and solid businessmen. This is not at all
surprising
because most of
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150
these
top
executives have
backgrounds
in
banking,
finance, business
management,
or law. Therefore,
they
share the same orientation towards the film
industry
as the
movie bankers. The new breed of film executive is
praised
for the
ability
to
manage
the risk reward
ratio,
to select
profitable products
and to co-ordinate creative
people.
Bankers
generally
consider the
industry
as a
people
business where the
ability
to handle
personalities
and
egos
is
important. Interestingly,
the
analogy
of
an orchestra conductor is used
by many
bankers in
describing
a
particularly
success-
ful head of
production
or film executive.
Rather than an
adversary relationship,
then, these bankers and
corporate
execu-
tives describe
co-operative
and
co-respective
attitudes toward each other. One film
company
treasurer not
only expressed
confidence,
trust and
respect
for the
corporations key
bankers, but referred to them as
partners.
He also noted that
the
company voluntarily reported anything significant
to its banks, so there would
be no
surprises
and no embarrassment. Another movie banker referred to a
wedding
between bank and
corporation,
which seems
particularly applicable
in
considering
the
long-term, continuing relationships
between certain banks and the
industry
over the
years.
The
partnership concept
also is
applicable
in
considering
the
opportunities
for
reciprocal arrangements
that become
possible
when so few
corporations
deal with a
handful of banks. As activities become interlocked and
entwined,
both bank and
corporation
can benefit from certain
reciprocal
activities.
If
corporate policy
and
management
can be influenced
by banking
relations,
then there
may
also have been
consequences
for the structure of the film
industry.
Indeed,
the
previously
noted
conglomeration,
diversification and internationaliza-
tion activities of the
major
film
corporations
since the 1950s have
generally
im-
proved
the
stability
of these
companies,
and thus have been
supported
and
encouraged
in various
ways by
the
industrys
bankers. Most loan
agreements specify
that banks must
approve any
additional
major
financial commitments or
any
mergers attempted.
But some
mergers
receive more than
merely
bank
approval,
as
bankers
may
alert
corporations
to
merger possibilities,
assist in take-over
strategies
and
supply
funds for such activities. The most obvious case was Chase Manhattan
Banks active involvement in Gulf + Westerns take-over of Paramount Pictures
in the
early
1960s,
as detailed in the US House
Investzgation of Conglomerate
Corporations ( 1971 ).
Without access to such documentation and inside Informa-
tion,
it is difficult to ascertain how often and to what extent bankers become
involved in
corporate merger
activities.
Interestingly,
the movie banks have diversified their
activities,
as
well.
not
merely
to
support
diversified business within the
major corporations,
or to serve the
entertainment/movie
industry,
but for more
profitable
use of bank funds. As
William
Thompson
at First Boston
observed,
The act of
lending money
and
making pictures
are
really pragmatic,
in the sense
you
take what comes
along
at the
time,
dont
you? (McGilligan,
1976:
21).
In addition to
supporting
the
majors
diversified activities and
diversifying
themselves,
the movie banks also
encouraged
the continued international
expan-
sion of film
corporations,
while American banks
expanded globally
as well. Services
abroad
through
international branches or
foreign-owned
banks
(such
as the Bank
of Americas Banca
d Italia)
include
deposit
accounts,
transfer of
funds,
letters of
credit and
foreign
loan
arrangements,
as discussed
previously.
In
summary,
then,
much the same as bankers
supported
the
integration
and
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151
expansion
activities of the film
industry
in the 1920s and
1930s,
the movie banks of
the
1970s stimulated the
development
of diversified
conglomerate
film
corpora-
tions and
strengthened
the
major production-distribution corporations oligo-
polistic
control of the American film
industry.
Towards the end of the
1970s
and into the
1980s, then,
the
relationship
between
banks and film
corporations
became smooth and harmonious.
According
to the
consensus of those involved in
banking
activities for the film
industry,
bank control
-while it
may
have existed in the 1930s-was no
longer
a characteristic of the
thriving
and
prosperous
film
industry
of the late 1970s.
But before
adopting Hollywoods
traditional
happy ending,
several
points
must
be added. This
rosy picture
of smooth and
equitable relationships may
exist on the
surface
during periods
when film revenues and
corporate profits
are
strong,
as in
the late 1970s. Yet the
cyclical
nature of the
economy
in
general,
and the film
industry
in
particular,
means that there will
inevitably
be those
periods
when
external
capital
is
necessary
for film
corporations, especially
as film costs and other
expenses
continue to rise. Most of the
major
film
companies
realize this and
therefore maintain credit with their banks even
during prosperous periods.
When
corporations experience particularly
difficult
periods,
overextend
credit, etc.,
banks
become more active and visible in
corporate
activities,
impose
more severe restric-
tions and
require
more
rigid
documentation and
approvals
for activities. The most
recent
example
is
obviously
Columbia
Pictures,
yet
there have been numerous
other cases
throughout
the
history
of the film
industry.
It
might
also be
argued
that the balance of
power
in the
banking/film industry
relationship
lies
inherently
with the
banks,
for these financial institutions hold
powerful positions
in the
economy
in
general,
as well as
maintaining
crucial
political
ties and affiliations. The film
industry
has
relatively
little
political
/
economic clout
compared
to these multinational
banking
institutions with their
extensive
political, military
and industrial
ties,
as well as their control over vast
sums of international
capital.
Furthermore,
large banking
institutions,
such as the Bank of America or the First
National Bank of
Boston,
do not
necessarily
need the film
industrys
business to
survive.
But,
the American film
industry
is
dependent
on
support,
in one form or
another,
from the financial
community
for its continued survival.
The movie banks of the 1970s have been most active in the film
industry
in a
lending capacity.
But, as noted
previously,
an often underestimated source of
potential power
and influence evolves from this
lending
role,
which includes not
only
the
right
to foreclose a
company
in event of default,
but the
right
to
approve
a
companys management.
For it is not
necessary
to hold direct
ownership
control
through stockholdings,
or to exert
operative
control or even to maintain director
representation
in order to influence a
corporation.
As
long
as
management
lives
up
to
expectations
and
stays
within established
parameters,
a
partnership relationship
may
indeed
exist;
if
not,
then bank
power
can be exercised.
One
might argue
that if
pressure
and influence is too restrictive at one bank,
then a
corporation
can
always
take its business elsewhere. While this is
certainly
possible,
film
corporations
must still find other bankers who are interested and
have the
expertise necessary
to deal with the film
industry. Inevitably,
similar
conditions exist at other banks,
especially
because the small film
banking
com-
munity
shares information, uses similar
lending
criteria and most often works
together
on
lending arrangements.
a
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152
It is
important
to realize as well that even
though
battles for control over
specific
corporations,
executive
management purges,
and other minor
squabbles may erupt
periodically, involving power struggles
between various individuals or
groups,
the
same class interests arc
represented
whether
banker,
large
stockholder or
corporate
executive is involved. In other
words,
these various
participants
are bound
by
the
general
interests of
capital,
and rather than an
adversary relationship developing,
a
community
of interests or
partnership involving co-respective
activities
eventually
prevails.
Otherwise,
corporate
and
banking operations
could not
reasonably
con-
tinue to function with
any degree
of
efficiency.
As
long
as business runs
smoothly
and
according
to
prescribed
financial
expectations,
there is no need for the overt
exercise of bank
power. Again,
bankers do not want
actually
to run
corporations,
and
especially, they
insist,
not film
corporations.
Nevertheless,
potential power
over these
corporations
still exists, and
during periods
of crises or
challenges
for
control,
this
potential power
can be unleashed,
revealing
the details of this
complex,
and often hidden,
power
structure.
It
might
be noted that the effect of the banks/film
industry relationship
on film
content,
style
and form is also an
important
and relevant issue which has not been
considered in
any
detail in this
study
in that the
power relationship
between
bankers and the
industry
must first be established in order to
identify
and
fully
understand
any possible
effects on the
production process.
Active
participation by
bankers or their studio
representatives
was
prevalent
in the late 1920s and
1930s,
especially,
and cases of direct banker influence can be cited in other
periods.
How-
ever,
this direct involvement has not been the
only way
that bankers and financiers
have influenced
filmmaking.
As noted
previously,
the
supply
of
capital by
bankers
has
provided banking
institutions with the
power
to determine
very
often who
produces
films.
But, also,
the amount of
capital
and the terms under which it is
provided (i.e. budget
limitations and other
restrictions)
have
inevitably
influenced
how films have been
made,
as well.
Furthermore,
direct involvement
by
bankers and other financial interests have
been
unnecessary
to a
great
extent in that basic
parameters
have been set
by
the
system
in which
filmmaking operates,
i.e. films as
products
that are
produced,
dis-
tributed and exhibited
by profit-making organizations.
Bankers do not have to
enforce these boundaries as
they
are either assumed
by
the
participants
involved in
the
process,
or
implemented by
bank
partners,
i.e.
corporate
executives and
managers
at film
companies.
While it has been stated
previously
that bankers viewed the film
industry
as
primarily
a
business,
it must also be
recognized
that there has been a continuous
awareness and
recognition by
bankers and financial elite that movies as entertain-
ment also offer a means of
reinforcing
dominant
ideology,
or
selling
a
specific way
of life. To the
banking community,
with a real stake in
perpetuating
this
ideology,
film and other media are valuable institutions to be
supported
for other than
purely
financial reasons. Thus, while
support
of the film
industry
has been
motivated
primarily by
economic
concerns,
there also have been
ideological
bonuses that have further enhanced the value of the film
commodity
for its
financial backers.
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153
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