Universal appeal: Twenty years ago, an unprecedented joint venture between three entertainment giants gave rise to universal international pictures -- now the world's biggest, most successful film distributor

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Date: Nov. 27, 2001
From: Hollywood Reporter(Vol. 371, Issue 2)
Publisher: Prometheus Global Media LLC
Document Type: Company overview
Length: 4,427 words

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In the late 1960s, two entertainment-industry titans -- Lew Wasserman of MCA/Universal and Charles Bluhdorn of Gulf & Western (Paramount Pictures' parent company) -- came up with a revolutionary idea: What if they merged their foreign-distribution assets into one by combining their offices, slashing their staffS and, hopefully, cutting their operating costs in half?

This revolutionary thinking would eventually lead to the formation of Cinema International Corporation (CIC), a towering entity whose logo was almost as familiar to foreign audiences as the Paramount mountain or the MGM lion.

"The whole idea of mergers wasn't new, but they usually didn't last long because someone was always getting the short end of the stick," says Fred Sill, publicity coordinator for Latin America and a Universal International Pictures (UIP) veteran. "But what they said was, 'We'll form a separate third company.' We all said, 'We'll give it two years, maybe three -- these things never last,' That was 30 some odd years ago. But the secret was, they shared in the profits. Each one (Paramount and Universal) had 49%, and the other two shares were owned by CIC."

CIC showed Hollywood that two studios could work in tandem with enormous success, vastly adding to their profits. More than a decade later, MGM had acquired United Artists, which became the third studio to join the venture; and out of that three-headed entity, United International Pictures was born.

Today, UIP stands as the most dominant force in film distribution in the entire world. Under the leadership of Paul Oneile, chairman and CEO, and Andrew Cripps, president and COO, the company has developed a reputation for the successful release of such diverse films as "Schindler's List," "Shrek," "American Beauty" and "La Belle Epoque." It has handled vast franchises such as James Bond and Universal's "The Mummy" and has distributed small, foreign-language releases over one or two territories -- sometimes in just one country or a city-state such as Singapore.

Speak to almost anyone in the business, and they will tell you that Oneile and Cripps have managed the impossible task of transforming this lumbering giant into a well-oiled machine ready to take on the digital challenges of the 21st century.

It is ironic that today, 20 years after UIP was created -20 years during which it became the preeminent distributor of Hollywood product around the world -- MGM is no longer a part of that equation.

It is also ironic that, two years after MGM left and struck a deal that has Twentieth Century Fox releasing MGM's movies abroad, UIP is having its best year ever. Indeed, Oneile -- a veteran who first started with CIC in the mid-1970s then returned to run UIP five years ago -- predicts that UIP will top its previous 1996 high of $1.8 billion with a record-breaking $2 billion in international revenues this year.

Those revenues come from offices in places as far flung as Turkey, Hungary, Spain and Japan, and they have been helped by UIP's individual campaigns, which are targeted to extraordinarily diverse markets. Also helpful are the company's executives, who are known for their experience and longevity.

But it is not just the top level of UIP's managers that has given the company its reputation -- it is also the experienced players in all of its branch offices.

Michael Wilson, producer of the long-running James Bond franchise that was distributed for many years by UIP before Fox took it over, notes just how important this kind of experience can be.

"For instance," Wilson says, "in the United States, you wouldn't show Bond wearing a tuxedo, but you always do that in Europe. In France or Germany, the posters show him as clean shaven, whereas in Italy and Spain, they put a slight five o'clock shadow on him. [UIP] always knew how to tailor it; and everybody was onboard."

Other films can be even more dependent on local knowledge. Michael Williams-Jones, who served as UIP's CEO for 13 years, remembers being puzzled that "Raiders of the Lost Ark" did not do better in Japan - until he discovered that postwar Japan associated Indiana Jones' hat and whip with the prewar generation. For the sequel, the hat was removed from posters, and the film fared much better at the boxoffice.

Similarly, UIP execs were dismayed to learn that the rounded index-finger-to-thumb gesture that Eddie Murphy used in "Beverly Hills Cop" had a sexual connotation in some countries and a rude one in others. That sign was minimized in the film's trailers.

Such attention to detail requires skill and finesse, and an organization that listens carefully to its staffers, which, in turn, requires a corporate atmosphere of comfort and ease. But that impression of ease belies some of the considerable struggles UIP has had to deal with since its formation in 1981.

"The first single challenge was to construct a team of the very best in sales, marketing and the creative areas Out of the existing United Artists (UA) and CIC organizations," says Williams-Jones, who came to UIP after running UA's international operations.

"It was a very painful time," he recalls. "That first year, I spent 11 months out of the country. I went around the world, because UIP operates in every (major) country except the U.S. and Canada. We were putting in place new ventures and staff structures, buying or renting properties and forming what was to be the most successful international-distribution company in history."

When UA and CIC merged to form UIP, the new company had a bloated staff with more than 2,500 employees. The new management's first task was to create a cost-efficient structure. "The difficulties at the beginning were primarily within the company, because every country had two offices that had to merge into one," recalls Sill.

To do that, the company turned to what was then a relatively new office tool: the computer.

"Don't forget that in the late '70s and early '80s, hi-tech computer systems and information systems were relatively unsophisticated," Williams-Jones notes, "so the industry was more labor-intensive. We decided early that we'd use hi-tech information to streamline things and speed the decisions that would be made in the head office (in London)." Williams-Jones quickly reduced the workforce to less than 1,000 employees. With further improvements in modern communications, Oneile has since brought it down to around 650 employees as the mechanism of distribution has become even less reliant on labor.

But computerization wasn't everything. In the early days, UIP executives went to great lengths to pioneer market entry into such uncharted territories as Korea, Indonesia and Turkey.

"They had importers who would buy a film for a flat, derisory price," Williams-Jones remembers. "There were laws in these countries that prohibited local distribution. UIP was the first company in the late 1980s to challenge those lads and open up the industry for the entire film community"

In Korea's case, personal risk was involved. On one occasion, Williams-Jones' secretary opened the mail to find a book with a snake inside it. "It was some kind of message," Williams-Jones laughs. "The local importers were some kind of Mafia. But today, Korea is a much more vibrant market."

Equally important, UIP's management struggled to find a way to deal with having not one master, but three: Paramount, MGM and Universal.

"What we needed to do within UIP was to find a modus vivendi on how to deal with three studio partners, each one obviously interested in maximizing his particular studio's product line," says Williams-Jones. He adds, in what is perhaps classic British understatement, "One had to become a Metternich or Bismarck or Kissinger in managing the release and distribution patterns individually," to avoid his bosses' inherent rivalry.

A step toward unity was the introduction of weekly conference calls between each studio's top personnel and UIP's leading executives, during which they discussed strategies and recommendations. Those calls were attended by marketing, sales, finance and production executives, and they led to a high degree of mutual trust over the years. Oneile has furthered such communications.

"We have a formal videoconference call every week with Paramount and one with Universal, where we go over all their films," says Oneile. "But on an informal basis, I speak to each of the studios every day.

"Every studio is now much more acutely aware of the contribution that international makes to the overall boxoffice," continues Oneile, "and they try and take a much more active interest in that." (Oneile now sits on each studio's green-lighting committees.)

As UIP continued to refine its corporate mechanisms, its leading executives had to deal with a battle that proved enormously consuming of both money and time. The European Union (EU) began to assess whether UIP met the EU's legal requirements. (Under the Treaty of Rome, joint ventures between competitors have to be granted an exemption from antimonopoly laws.)

This was a battle that left Williams-Jones deeply resentful of government bureaucracies.

"Millions of dollars and hour upon hour of time were wasted before the EU finally and completely recognized that UIP indeed met the requirements that they had laid out," he says. "It was a grotesque waste of time -- executive time in building the case, enormous expenditure -- and then we ended up with a clean bill of health given by all the regulatory bodies in Europe. Every commission of inquiry finally concluded that UIP had to be given a clean bill of health."

That initial clean bill of health was given in 1989, but it had to be renewed five years later.

Philip Solomons, executive vp and general counsel for UIP, says that the company's relations with EU officials are now excellent, and he marvels at the general turnaround in the EU's attitude toward international corporations.

"The climate in 1993, when the proceedings were restarted, was very difficult, because the GATT (General Agreement on Trade and Tariffs) negotiations were in full swing," says Solomons. "Audiovisual issues between Europe and America were very polarizing. The UIP [case] became for some people a symbolic issue -- in terms of politics between Europe and America -- that went far beyond its own importance."

However, as soon as UIP resolved its tussles with Europe, it had to deal with a second major crisis: the withdrawal of MGM. From the very beginning of Alex Yemenidjian's and Chris McGurk's tenure as the two top executives at MGM -- they joined in 1999 -- they made it clear they were dissatisfied with MGM's continued participation in UIP. Finally, MGM gave its obligatory notice.

It is a move Oneile says is regrettable, but one he understands, given the reduced number of films on MGM's slate.

"There were emotional as well as financial links to MGM, and while it was something of a wrench when they left, at the end of the day, the volume of films MGM was contributing and the revenue those films were generating no longer justified their participating in a share of the UIP overhead," he says. "So on pure economic grounds, the decision was well founded. Whether MGM can get the same presence in the marketplace by going through a distributor that they don't own, time will tell."

Just as MGM was withdrawing, a new studio was entering the scene with a fresh supply of product: DreamWorks, which has been delivering some five to 10 titles a year to UIP as part of its worldwide distribution deal with Universal. (DreamWorks, however, is not a partner in UIP.)

Oneile says he is thrilled with DreamWorks' product, which has managed an exceptionally high batting average compared to most studios, furnishing such blockbusters as "American Beauty," "Gladiator" and "Shrek."

During the past year, DreamWorks had to make a decision whether to continue distributing through UIP. Its new five-year contract was a big show of support for the organization.

"In these last couple of years, Paul Oneile and Andrew Cripps have been very aggressive innovators in ensuring that UIP successfully moves into the 21st century," says Jeffrey Katzenberg of DreamWorks, "There arc new opportunities and new marketplaces that are opening up to all of us around the world, and this is the organization that is front and center."

Thanks to the combination of Universal-DreamWorks and Paramount, UIP managed to register its best year ever in 2001. And it did so by proving that it could handle "small" pictures such as "Bridget Jones's Diary" and "Billy Elliot," as well as the Bond-scale blockbusters with which it made its name.

"'Bridget' is still the No. i picture for the current year in the United Kingdom, and has taken in [pounds sterling]42 million ($60 million)," says Chris Hedges, managing director of UIP (U.K.). Of "Billy Elliot," he adds, "We released that last year, and it was a film that quintessentially needed tender-loving care -- it wasn't necessarily the kind of picture that automatically did [pounds sterling]18 million ($27 million) at the boxoffice, as it did. It isn't axiomatic that films will do the same in the U.K. as in the U.S., but there is still a strong correlation."

In its early years, UIP developed a reputation for being an excellent distributor of large-scale and event films. Smaller or more complicated titles were another matter altogether.

"An independent producer would always say, 'I want UIP to handle my product because they have so much power,"' says Sill. "And they would also say, 'But they are so big; my little picture will get lost."'

But UIP proved just how good it was at handling all sorts of films when it released one of its most-challenging titles: Steven Spielberg's "Schindler's List." Now that "Schindler" has become part of our modern cultural reference base, it is hard to recall the enormous marketing challenge it initially posed: a black-and-white film about the Holocaust featuring graphic violence and a womanizing alcoholic as its protagonist.

Williams-Jones still speaks with awe about the picture and the battles his company faced in releasing it -- a much more complicated task than Spielberg's earlier "E.T.," which received a 20-minute standing ovation during its opening night at Cannes.

"['Schindler'] was a labor of love by a very talented filmmaker," he explains. "But by no stretch was it ever considered by anyone to be commercially exceptional, as it became. This was not a film you indulged in hype -- it was an issue of great sensitivity. The film needed to be screened. It ultimately became the spokesperson for itself."

More recently, UIP proved again that it could take a relatively small, quirky picture and do wonders with it internationally as was the case with the Renee Zellweger-Hugh Grant comedy "Bridget Jones's Diary."

"We are absolutely thrilled with the results," says Oneile. "The film will pass $200 million in the international marketplace." Contrary to popular opinion, he adds, "UIP's track record in handling the small- and medium-sized films is actually the best of any studio distribution company."

To date, "Bridget" has earned more than $183 million internationally -- which does not even include France, where it was released through producer Working Title's ongoing deal with Studio Canal -- way ahead of its North American boxoffice take of $71.5 million.

Numbers such as these dwarf the revenues that UIP originally was dealing with when it started 20 years ago. "When I first joined UIP, international was regarded as the leftover bit, really," says Cripps. "The domestic release of a film went first, then it rolled out slowly internationally, and you took your time and were very careful in what you did. Now, we are totally interconnected with everything in the U.S. and very involved from the production stage to when a film is released domestically.

"It was a bit of a luxury in those days; it was easier on the lifestyle," Cripps continues. "I remember the days when we filled out a form with a pencil -- and those were the results for the week! Everything is instantaneous now."

This faster pace is providing a number of new challenges for the company.

"The next thing we have to face is piracy, which will be made easier by digitalization," says Cripps. "It will impact UIP in all the decisions we make as to how and when we release movies. In Singapore, Malaysia and Thailand, you can already buy DVD-quality copies of a film three or four days after it opens in the U.S. We had films this summer -- 'Jurassic Park III' and 'Tomb Raider' -- where the weekend they were released in America, there were quality DVDs being sent to us from the Far East. You've got to be very security conscious in this new world and release films pretty close to their domestic release date.

Rising to meet the demands of a rapidly changing global industry will be UIP's great challenge for the new century. Oneile, for one, is optimistic.

"The theatrical side of the business has confronted many challenges in the past," he concludes. "Now, we have piracy and digital issues. But I can't see any hurdles in the next 10 years that will pose any threat to a vibrant cinema industry going forward. The film business has withstood those challenges over many decades and in each case has come back stronger and better than ever."

RELATED ARTICLE: Jeffrey Katzenberg Principal, DreamWorks

"This past year, we stepped back to take a look at how best to continue to market and distribute our product in the international marketplace, and certainly, there was nothing more valuable to us than the strength and management of UIP's Paul Oneile and Andrew Cripps. What has allowed them to retain UIP's leadership position has been their ability to change as the markets have evolved and grown. They have had a number of extraordinary breakthroughs for DreamWorks: You have to look to 'American Beauty' as a remarkable triumph in terms of its success Internationally -- it did some $200 million internationally, even more than it did domestically, which is surprising for such an American film. But what's amazing is that they could also turn 'Shrek' into a blockbuster, when it's been so difficult for a (non-Disney animated film) to penetrate the international marketplace. They did it with skill and hard work."

Marc Shmuger Vice chairman, Universal Pictures

"UIP has shown an incredible ability to adapt to a changing world and marketplace over many years. This has been a golden year for UIP, in general, and Universal/UIP, in particular. We have had blockbuster result after blockbuster result. UIP has been a major part of this, If you look at the year to date, seven out of the Top 10 releases in the United Kingdom are from UIP Look at a picture like 'Bridget Jones's Diary,' which will do $200 million (outside the United States). I'm overwhelmed by (UIP's) success. We've watched UIP grow from a company that can handle blockbusters to one that has a terrific ability to handle almost any type of film."

Eric Fellner Producer, Working Title Films

"Our first film together was 'Billy Elliot,' and it did $80 million internationally, which, for a tiny $5 million film with no stars in it, was pretty good. It did $25 million of revenue in the U.K. alone, It gave us an awful lot of confidence in UIP. We then went onto do 'Bridget Jones's Diary' with (UIP), and it's hit the $180 million mark already. We have developed a very good relationship with Paul Oneile and Andrew Cripps and talk to them on a regular basis about all of our films and the best ways to increase their boxoffice. In the past, they weren't given the opportunity to get as involved as they would have liked in some of the smaller films, but now, they've shown they the blockbusters. All (of the company's) managers are so enthusiastic -- they come to previews in remote places in England; they come and see the movie as soon as we have a cut, They really do have a hunger to be as Involved as possible in all of the movies."

Michael Wilson Producer, the James Bond films

"Years ago, each territory was very individual, with posters and trailers that were unique to that place. Since then, there has been a consolidation and a sort of worldwide marketing campaign. But with the last couple of Bond pictures, we saw that this didn't work for some territories, especially Japan and Italy. UIP was excellent at taking those territories and helping to come up with new strategies. We had totally different posters and trailers and TV ads all done by local houses. In Japan, we appealed to the nostalgia for earlier Bond films; in Italy, it was a sort of high-concept comic thing based on the idea, 'you have to have a good excuse to miss Bond.' We'd show guys in jail or up to their necks in sand. (UIP's executives) were very responsive to this, and the people in their different territories always had a great sense of how to position Bond."

Brian Grazer Chairman. Imagine Entertainment

"Domestic comedies traditionally haven't done very well in the international marketplace, often because they are very verbal. But Paul Oneile and the rest of the team at UIP did uniquely well on both the first 'Nutty Professor' and 'Liar, liar,' which were very difficult films to figure out, 'Nutty Professor' was difficult, because it showed Eddie Murphy in a bodysuit, and in a lot of foreign territories, you don't have as much time or as much access to media as you do here in order to prepare audiences, 'Liar, Liar' came at a point where Jim Carrey hadn't yet reached his full potential as an international star. UIP not only had to acclimate audiences for the movies, but in some cases, dub them or redesign the dialogue or the context, so that they had the same impact on audiences abroad as they did here -- all of which is based on understanding the marketplace really well and working really hard. Paul and his team work really, really hard. Paul is a great leader, and he understands the world market better tha n anybody,"

Robert Friedman Vice chairman, Paramount Pictures

"UIP is the preeminent international sales company in the world. What makes it unique is that -- as far as the rest of the world is concerned -- it is an independent entity, even though it's made up of Universal and Paramount as partners. It needs to be that when it deals with governments, producers and exhibitors. But more importantly, UIP has built up a tremendous amount of goodwill with local governments, exhibition partners and local communities, which it invests in not only through business but also through charitable work Last year, Paramount reupped its deal for another six years. We are very comfortable with our partnership with Universal, and I Think Paul (Oneile) and Andrew (Cripps) make up the best one-two punch in the international industry, combining diplomatic savvy, political awareness and, most importantly, knowledge of marketing and distribution to maximize all of The partners' profits. They are uniquely suited to run UIP for many years to come."

Beyond Blockbusters

UIP steps up efforts to find audiences for locally produced indie features.

While UIP is best-known for handling major studio films, it has also had considerable success with carefully targeted independent films -- including "Teenage Mutant Ninja Turtles," "Sliding Doors" and the Spanish Best Foreign-Language Oscar winner "La Belle Epoque."

After MGM pulled out of its deal with UIP UIP's CEO Paul Oneile and president Andrew Cripps decided to boost their acquisitions still further, hiring executive Marion Pilowsky as head of international acquisitions. "When MGM left the company, UIP was structured to deal with an output greater than Paramount and Universal were delivering to us," Cripps notes, "and we felt that rather than deal with one-off acquisitions, it was better to have long-term relationships and output deals."

UIP has signed significant output deals with Spain's Planeta 2010, the U.K's Axiom, Germany's VCL and Advanced Medien, Australia's Beyond, Italy's Cattleya, Singapore's Raintree and Scandinavia's Scanbox. Through these deals, UIP has had major local hits with pictures that often don't even receive a U.S. release,

Thus the Singaporean comedy "Liang Popo" -- described as a sort of Asian "Mr. Bean" -- earned a phenomenal US$2.3 million when it played there, while another Singaporean movie, "The Tree," earned US$900,000. UIP has hod equal success with local product in very different parts of the world, such as "Flickering Lights," a Scandinavian title which has brought in US$2.7 million, and Spain's "El Gran Mardana," which did US$525,000 this year. "La Belle Epoque" brought in US$7.2 million in its Spanish release alone.

But it is not lust local product that has drawn UIP's interest. The company has also been involved with a number of American studio releases made through "split rights" deals with other companies -- among them, "Heartbreakers." for which MGM hod North American rights, while Germany's Advanced Medien owned the rest of the world rights. UIP handled that film in Australia, where it reaped US$4.8 million.

In the past, UIP has also turned some American disappointments into surprising international hits. Its Japanese and South African release of "Malcolm X" generated an impressive US$9.8 million in those two territories alone -- and it did mast of that business in Japan, where director Spike Lee has had a strong following for many years.

With pictures such as these. UIP's total international releases have numbered anywhere from 60 to 70 per year. But finding the right product to release can be quite a challenge. "Theatrical-only acquisitions, by their very nature, are difficult," says Pilowsky. "If we just want to buy a film for a particular territory we are often competing against people who wont to buy all worldwide rights -- and with independent films, generally that is what their producers are searching for -- they want prebuys that can be cash-flowed into production."

To find the right product. UIP frequently gets involved at the scrip stage, making the most of long-standing relationships with individual producers.

"We start from the premise: Will the films work in their local territory?" adds Pilowsky. "And then we see what happens. Often. we will release the film in one territory, then one of our studio partners will pick it up for other territories."

The result of all this is not just an increased number of releases, but also increased revenues -- indeed, Cripps put revenues generated by indie releases at some 5% of UIP's total earnings, Which is quite something in a year of "Jurassic Pork III," "Shrek" and "The Mummy Returns."

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Gale Document Number: GALE|A80617754