MCA
Music Corporation of America
Summary
MCA was Hollywood's biggest corporation, extending its reach to many different branches, but mostly known for its ultra-powerful talent agency and for owning Universal Studios.
It started as a one-night band booking business and when future company perspectives were no longer promising, it reshaped itself into a Hollywood talent agency, mostly mediating between actors and studios.
By doing so, they shifted the balance of power to their advantage, becoming a powerhouse - they made money impossible to earn in the band-booking business. The company was known for its ruthlessness and determination, but actors didn't mind it at all - their payslips became better the moment MCA established itself in Hollywood.
The company dominated this market just like their first one, and this time it also meant change. Major movie studios, whom MCA fought vigorously to improve contract terms of their clients, were making money an agency even as powerful as them could only dream of. They acquired Universal and switched to mostly being a studio and selling all the agency assets (they had to due to antitrust laws).
With MCA behind its steering wheel, Universal challenged other major Hollywood studios for the throne, and even though not much quality came out of that stable (in any period of its existence, frankly), financially they became the top dogs. That was a huge achievement, as Universal was always the small brother in the studio family.
The company founder was Jules Stein, son of Jewish immigrants with a keen eye for business since his early years. With little help from anyone, he masterminded everything until MCA's Hollywood era.
There, Lew Wasserman started working for the company. Even more talented than his boss, he quickly took over most of the active duties and lead the company to its glory, becoming its de facto face, even if just being Stein's employee.
As Stein died and Wasserman grew old and more errors in judgement began creeping in, MCA started losing money. The final straw which ousted Wasserman and marked the beginning of company's transformation was the streak of acquisitions in the 1990s.
Today, no section of MCA remains intact. Universal Studios, their contracts and rights have been bought and rebought by many companies over the years.
Beginnings
The company started from scratch. The young and extremely ambitious Stein began by learning to play violin and then finding a band to perform with. To get more gigs, he continued to perfect his craft while adding saxophone to his menu.
One-night bands were a big thing at the time. Back in the 1930s, live bands were accompanying parties much more frequently. There was no such thing as headphones available commercially yet, radios were just beginning their quest to reach every home and venue. If people wanted music (and people always did), live performers had to be hired.
The way things worked in those times was that bands were constantly changing venues; some in just one city, others traveling around the whole country. Hotels, clubs and other subjects that hired were mostly not willing to sign prolonged contracts, so bands were living on a day to day basis, not sure what the next week will bring.
From playing, Jules switched to managing his band, and from that position he saw clearly: there is a big need for managers, agents, people who will look out for the interest of musicians.
In response, he extended his reach and started absorbing more and more bands under his wings. Musicians now were often guaranteed extended contracts, things like travel, accommodation, and food were also taken care of, so they didn't have to worry about all that stuff.
Small-time bands were also covered - Stein quickly established a system of package deals, where venues had to sign minor groups to get access to the popular ones. It was a win for musicians, but even more so for MCA who was expanding insanely fast.
This is how Music Corporation of America was born, and just few years into their activity, the company controlled 90% of the one-night band management business.
Enter Hollywood
With time, the market changed. The earlier mentioned radio was getting immensely popular and there were other reasons which were crippling the business. MCA was doing great, but it became clear that if they don't find something else as their source of income, a decade from then they will become history.
Jules Stein thought hard on where to go from there and he decided to get into the movie industry. Big players were already in it, but it was still a boat that could be swinged to their advantage. It was growing rapidly and there already was a lot of money in it!
The company's first steps in Hollywood were in no way humble. The Beverly Hills office was decorated so elegantly as if some important politician was working inside on critical issues. Thanks to this, the agency was quickly put on the map. Many people ridiculed the office and a popular opinion was that the force-fed eliteness will only hurt the company as they will achieve an opposite result to expected - nobody will treat them seriously.
It took some time and huge effort from Stein to get the first client. It was Bette Davis who he managed to convince to sign with the company. This wasn't the perfect news though - Davis was known to constantly change agents, she could say goodbye after five minutes. But it was a start.
Soon, more followed. Few popular names that got signed in MCA's early years: Frank Sinatra, Joan Crawford, Joan Fontaine, Errol Flynn, Marlene Dietrich, Clark Gable, Ronald Reagan, Jimmy Stewart, Boris Karloff, Betty Grable. As you can see, cream of the crop already.
One of the forces responsible for luring all that talent in was Lew Wasserman, a young man who established himself as a vital asset for the company in a very short time after joining. Rough, tough, extremely intelligent and with mob connections, he was the biggest thing that happened in Hollywood since his boss arrived to open the MCA office in Los Angeles.
Mob connections
Those gangster friends came handy with business in Las Vegas. The city of entertainment naturally had large market that musicians could fill. MCA opened an office there and made plenty of money, all with the mob's blessing. Wasserman did not shy away from gangsters. He was running a legitimate business, but his methods sometimes reminded those used by gangsters more than by anyone else. The difference was that he was trying to keep it legal.
One of the earlier-mentioned signings, Frank Sinatra, was hanging out with gangsters as well and he was even more indifferent to the public perception of it than Lew. He used them few times to solve his problems and MCA's signing might have been one of those occasions.
Like many entertainers who make it in the big world, Sinatra was tied to a burdening contract. He signed it before becoming the iconic voice of the 1950s. He was green then and had no clue how costly that piece of paper will be once the singer's career is transformed.
With this problem, Frank went to his mob friends. He supposedly offered them a big amount of money, which was still hugely beneficial to him in the long run, but most importantly: he was free now. The rumor, whose validity we will probably never find out for sure, was that Jules Stein provided him large percentage of that sum on the condition that he will sign to MCA.
Such agreement was of course totally illegal, so everyone had to cover their tracks. Sinatra temporarily went to General Artists Corporation - the second biggest agency in USA after MCA at the time. Two years later, he completed his obligation by switching to MCA.
Even without gangsters in the background, MCA themselves provided terror to some. Harry Sosnik was one of the artists who could testify to that. More on that in this article.
One person that has proven vital to the movie industry was Sidney Korshak. The mob fixer who had friends everywhere and could solve most problems in five minutes (for a substantial sum of money, of course) was a good friend of Wasserman. He was the direct connection between the gangster world and Hollywood. If not for him, MCA's life would be much harder. Korshak was especially useful with union dealings.
Transition to studio
Another turn for the company came not because they had to, but because they saw opportunities to make more money. Theoretically, they were in a favorable position, holding such grasp as an agency. Wasserman's appetite for gaining even more ground was never-ending though.
The firm's activity changed the balance of the movie industry just as their earlier efforts did for musicians. Actors now had better contracts, better pay and generally worked in a stable environment while studios were on the ropes and sweating. Now that MCA did everything they could as an agency, they were looking to change a weight class to look for a challenge. Plus, the big money was with making and owning movies, not by being the middle man between the studios and the actors.
In 1957, they made their first move in this direction and acquired Paramount's movie rights for the studio's pre-1948 films, so they can profit dearly from their emission in an already very popular young format - television. It wasn't the first attempt to buy rights in such way, but nobody before MCA was able to finalize the deal.
Barney Balaban, the long-reigning president of Paramount, asked for $50 million in exchange for those rights. Stein disagreed, but wanted Wasserman to continue negotiations.
The latter was able to improve the terms: $10 million payment up front, when they get that amount back from sales, a switch to percentage system until $25 million more gets paid, and the last $15 million is to be triggered when sales cross a specified sum.
Fifty million it was in both cases, but the stretched in time payment, with 30% not even guaranteed, made many people ask the question on whose side was Balaban on when he undervalued Paramount's catalog so much? It definitely wasn't his best day at work. Lew, on the other hand, made one of the best deals of his life.
Soon, Wasserman finalized an even more absurd deal. Did he use hypnosis at the negotiating table? And the person tricked was no slouch either this time. Milton Rackmil, who was making the deal, was the boss of Universal and Decca Records.
After renting studio lot for some time, MCA wanted to make the next step and get their own one. Lew was able to convince Rackmil to sell them all the studio property for $11,250,000 and Universal would then rent it from MCA for $1 million a year for 10 years. In other words, Universal almost gave itself away to MCA!
To finalize the transformation, the company name was changed, or rather shortened. As they were forsaking the live band business, the name 'Music' was inappropriate and misleading. In 1959, Jules Stein changed it to MCA.
In October of the same year, the company went public. The debuting first weeks proved how enthusiastic everyone was about the company's perspectives - very quickly the stock value more than doubled.
Mindset
MCA were masters at crossing the line without making it look like they did. And even when everyone knew that they did illegal stuff, nobody could prove anything. Wasserman was extremely secretive and had every angle covered. There were no surprises.
Numerous investigations were launched to find dirt on MCA, but to no avail. Most of those revolved around antitrust practices. The company was monopolizing the market, creating successful mirages of independence, but in reality executed full control from backstage.
Another thing was that they were often controlling employment and employees at the same time. For example, they had actors on contracts and gave them jobs in shows that they produced. They negotiated with themselves and everyone had to just accept it because they were at the heart of Hollywood.
1960s
The 1960s started with yet another attempt to affect the untouchable. Screen Actors Guild (Wiki) was ordering MCA to either leave TV production, or the agency business to avoid the mentioned dilemma. As usual, nothing came out of it.
Ronald Reagan was instrumental in getting rid of many obstacles for MCA before he became president of the United States. One example of his achievements as the president of SAG was solving the conflict between MCA and actors.
For his efforts, Wasserman awarded the actor by getting him into a profitable business with Revue Productions (now Universal Television). In the long run, the reward was helping to get Reagan into politics and even to some extent grooming him for presidency.
One year later, what seemed like just a matter of time was finalized - MCA bought Decca and Universal Pictures Company (which the company owned). Stein and Wasserman were now having their own studio.
Now, they were serious players on both sides of the fence, so antitrust policies coming into play were just a matter of time. They had to do something about it. After creating a band-booking empire out of thin air, it was no easy decision for Stein to just abandon his life's work. He was extremely attached to it, but MCA was dreaming big and agency then was already the less profitable side of the business. They had to let go.
The initial plan was to try and fight it by selling it to two MCA employees who would 'independently' run it - a bold move typical of Wasserman, a man convinced that he can make wild plays and find ways to get away with it (which, for the most part, he was able to achieve). Aware of the risks they are about to take, the men decided against it though.
The government brought the big guns anyway though and soon MCA were addressed with an antitrust suit. Screen Actors Guild, with which the company was making backstage deals on a regular basis, was rightfully indicated as partner in crime. The demands were drastic - nothing less than complete demolishment of MCA would satisfy the Justice Department.
Wasserman was sent to negotiations to clarify the terms of surrender and came back with very satisfying results: agency had to be dissolved and that's it. At the time, profits from it were only a small percentage of their overall earnings - there was simply no way that they could even get close to their production profits from collecting actor fees, even if every actor in Hollywood would be signed to them.
It was a tough decision, but financially it wasn't much to worry about. The future looked bright.
This was another phenomenal piece of bargaining from Wasserman. To those negotiations he was going trying to fight for survival and in the end MCA only had to give up a small fraction of their business. What's more, even though he tried to somehow make it work, it was clear from the start that the company will probably have to let go one of its branches. So, in a way they didn't make a sacrifice at all. The inevitable just happened as expected.
And to top all that, they still managed to get a piece of the agency pie despite promising not to! The initial price set for the agency was $10 million. Instead, they opted for 5% from every future transaction, which was the same thing they aimed for by selling it to MCA employees, only the percentage was smaller. They were 'selling', which earned them ten times the amount of what they would get by selling for those $10 million.
Soon, MCA started dealing with TV networks. The company worked with both CBS and NBC back when they were radio networks, but now a new era has emerged. Television was looked at with fear by major movie studios, but Wasserman loved it when the playground was changing. He always saw this as an opportunity to make money.
After negotiating with Robert E. Kintner, MCA agreed on a contract with NBC under which they were to provide dozens of movies that would debut on NBC, but outside USA would have usual movie premieres as normal films have, and after more time would also start screening in U.S. theaters as well.
It was a very weird deal that nobody had thought of before, but it worked well for both parties. MCA was especially satisfied with multiple income angles, but having cinema-grade movies debut in television certainly gave NBC bragging rights.
Most astonishing was the scale of the agreement - first rumored to be a $15 million deal, it was later confirmed by the company to be four times that, and even later it turned out that it was actually a $200 million deal! This set up an absolute record for the most expensive movie contract and it was held for quite some time.
Ironically, after making the mother of all deals, Kintner was soon fired. The reason wasn't deal-related though, but his drinking and terrible behavior that followed the addiction were responsible.
Despite so much money pouring onto MCA bank accounts, late 1960s weren't the best period for the cinema. The audience was getting smaller and smaller, and to make things worse, television was taking away more of it as more homes could afford a TV set. MCA was ahead of that process, in that they were dealing with TV themselves, but they made movies as well and that branch of business was dragging their profits down heavily.
Despite all the enormous deals Wasserman was making, fingers were pointed in his direction. He was the captain of that ship, so he was responsible for the company's condition.
Jules Stein tried to step in and solve the problem himself by initially agreeing (and going public about it) with Westinghouse Electric Corporation that the latter will buy over MCA and give Westinghouse stock in exchange.
Justice Department didn't need an invitation to quickly engage - Westinghouse had their own TV and radio station, so buying a studio to compliment that was a big no-go in light of the American law.
Stein didn't agree with Wasserman and the latter didn't like the idea, so before Justice Department was able to apply enough pressure, Lew sabotaged the plan from within so nothing comes out of it. It surely must have hit Jules hard, as it was his company and his decision, but his subordinate executed power to have it his way.
1970s
A break came in 1970, when Universal made Airplane (IMDb). Netting $40 million profit and an Oscar, it was the most successful movie to that point in Universal history.
Soon, Jules had to testify in court when investigation into Richard Nixon's laws that favored movie industry were opened. Those have largely been masterminded by another talented MCA executive Taft Schreiber, who arranged a sit down between the president and the movie industry.
That meeting resulted in Nixon agreeing on introducing antitrust against TV networks CBS and ABC, who were about to produce their own movies (if MCA couldn't, why would their competition be allowed to?) and improving 'traction' for U.S. movies in foreign markets by including film interests when negotiating trade deals.
The industry knew that they have to make it worth Nixon's effort, especially that soon he might become the president and having him as a friend could mean more benefits. Officially, little money was gifted (good move, foreseeing the investigation), but behind the curtains, it is certain that one way or the other, they paid their dues.
That investigation soon got closed, MCA again was safe.
Universal was always a small brother, looking with jealousy at the main gigants in the movie industry. Not only was it less successful financially, but its productions were artistically cheaper as well. On the verge of the 1970s, Wasserman's ambition was to change that situation and get some art out of his factory.
The movie that most successfully fit that profile was Easy Rider (IMDb. Besides great atmosphere that embodied the climate of that era so well, it was a huge financial hit. It netted 100 times the amount invested into it!
Another movie that successfully went into the cultural territory was George Lucas' American Graffiti (IMDb), released four years later. And the same year, another milestone for the company came when The Sting (IMDb) got an Oscar - Universal's first one! Forcefully injected slang of the times added extra comedic values to the production, but it was and still remains huge fun to watch.
All of those films did not prepare the audience for what was about to happen in 1975 though. Steven Spielberg was the young boy, whom Universal saw as the great prodigy that will bring them a fortune in the future, and so they cherished him and surrounded with paternal protection. Even though his debut The Sugarland Express was mediocre, they did not lose faith in him.
That faith he more than repaid in the form of Jaws (IMDb), one of the most grasping and terrifying movies ever made and arguably the greatest thriller ever made.
Ironically, fed up with contract burdens and the way studios treated artists, Spielberg left Universal some time later and co-founded DreamWorks. Double the irony, as the company currently operates from leased offices of Universal.
Always looking for new ways to maximize profits, studios experimented a lot with marketing. At some point, gadgets became a huge thing. Not only did they spread the news well, but also brought huge amounts of money while doing so! People could wear t-shirts sporting movie posters for everyone to see, kids could play with toys that represented main characters, video game spin-offs were made etc. etc. It all increased movie popularity while some of those were sold and therefore making extra money!
Back then, it was fresh and everyone loved it. An entirely different picture than the situation today, when anyone can print anything on a t-shirt for peanuts and every Western kid can have any toy he or she wants, and so it doesn't have that necessary impact that made people go crazy when using gadgets for movie promotion first became popular.
Of the main studios, Universal was particularly good at this. On many occasions, their marketers provided blueprints for others to follow.
In 1970, Charles Bluhdorn (of Gulf & Western, owners of Paramount), contacted MCA and offered cooperation overseas with distribution. Antitrust laws prohibited them from dealing with film distribution locally, but they didn't say anything what is permitted outside the country. MCA quickly agreed and together they created Cinema International Corporation
The 1970s saw Universal installing themselves as the dominant force in television.The quality might not have always been there, but they made up for it in numbers. Especially memorable were great shows frequently aired and enjoyed to this day: Kojak and Columbo. Both continued the detective angle that the studio was successful with in late 1960s with their Dragnet remake.
On August 4, 1976, the Kennedy’s amendment debate took place. The topic was potential removal of the 7% tax break for gear and machinery, which also included movie industry. Sneaky men have found a way for the taxpayers to finance making movies, despite the fact that no studio equipment could be classified as machinery even by very creative accountants. Kennedy made a very strong case for lifting the tax relief, but lost a battle against the movie industry. His amendment did not pass.
Another hugely important change for the industry was an exact opposite of what MCA did decade earlier. After company's efforts to give studios more power at the cost of directors, actors, staff and their agents (whom the company supported earlier when they were mostly an agency themselves), now came time the time for another shift of balance.
After the gigantic worldwide debut that the first Star Wars movie was, George Lucas became quite a celebrity. This improved his negotiating position enormously and he decided to took things as far as possible. The new deal he negotiated was extremely beneficial. For example, the studio was now forced to cover some costs which before he had to cover himself, or for which both parties were paying. This added up to substantial amount.
1980s
The 1980s started well for MCA. Universal got another hit on their hands and another one by their wonder child Steven Spielberg - E.T. the Extra-Terrestrial (IMDb) was a family movie that became an instant success. The movie costs were around $10 million and to this day, it has made more than $400 million! While that's nowhere near Spielberg's biggest earners, it's still an astonishing profit.
However, as the events unfolded, 80s became a nightmare for Universal. MCA was losing the grip over the market, Wasserman was seen as a much more vulnerable man than a decade earlier. The aura of invincibility was gone and so people were not afraid to cross him.
Many of their clients felt it and started looking around for more attractive contracts. Another fiasco was the laser beam video technology, the development of which costed $100 million and now they had to cancel it. As is often the case with new tech, the standard didn't catch, it had to be cancelled.
Yet another on the long list of nightmares in that decade for MCA was the pay-to-TV struggle. A concept born in the middle of the 60s, it started gaining traction in the 70s, but all the studios overslept when Home Box Office (known as just HBO) dominated the new market with a great offer.
In a panic response to a new cash-generating machine that all the big players failed to notice in time, they teamed up and founded Premiere. The government instantly saw through it and killed it in its inception. Had Wasserman be in top shape, maybe he would put another rabbit out of his hat, but these times were gone.
MCA was making deals with HBO by selling them licenses for TV emission (which they of course still do to this day just like all the other major studios), but this enormous market which enjoyed the most dynamic growth of all movie related branches they mostly had to watch from the backseat.
One ray of sunshine for the company was their music division. The 1970s were a mixed bag for the label and the 80s saw troubles that many saw as the beginning of their end. Irving Azoff, the chairman hired in 1983, was largely credited with turning the tides. He left the company after getting a better contract at Warner Music Group.
1990s
The 90s started with Paramount/MCA merger talks. Fearing for their safety from antitrust laws, they did it quietly. The man at the front of those negotiations on Paramount's side was their CEO Martin Davis. At the beginning, he was just part of staff servicing those games, but the man was ambitious and quickly rose in ranks.
After the talks, he praised Wasserman, saying that despite his age, he still is in top form as a negotiator. The two knew each other for decades thanks to the poker games that both attended.
Lew appraisals like that one were still common, but as opposed to the earlier MCA years, many people held a different opinion.
The alternative for going Paramount's way was Matsushita Electric Industrial Company (now Panasonic), who was also interested. Many people saw selling to a Japanese company an otherworldly perspective, but in November 1990, it happened!
For Michael Ovitz, it was a long time coming - the businessman was one of many people who idolized Lew Wasserman - he wanted to be as successful as him and leading an MCA merger was a dream come true for Michael. Matsushita wasn't the first company Ovitz tried to convince to buy MCA, but until 1990, he was unsuccessful.
Ovitz managed to go get both parties interested, but there was a bump on the road he probably knew little of: instead of $85-90 per share that Matsushita was thought to offer, they proposed $60. MCA was furious and quickly rejected the offer. Every employer of the company saw it as a slap in the face and could never see Wasserman selling it so cheaply.
In response, Matsushita upped their offer by the measly $2, but got rejected again. And then the unexpected happened: after another $2 rise (to $64) and added bonuses, MCA agreed!
Wasserman and his favorite Sidney Sheinberg (whom he was probably grooming for the heir to the MCA throne) did not enjoy the positions they were now in one bit. Especially Lew must have felt damaged, now required to seek approval with any bigger decision he was about to make. It was the opposite of what he was used to since he established himself as the leader of the firm.
This led them to threaten their new owners that they will leave if they don't receive more operational freedom. Not only did this not have a desired effect, but could even be desirable from Matsushita's perspective. Wasserman was seen as a person more in the way of transforming MCA into a company that can again stand strong and Sheinberg was his apprentice, skilled and intelligent, but probably not skilled enough and not intelligent enough for tasks Lew envisioned him for.
The company proved to be more than Matsushita could chew. Their internal problems were complex and went deep under the hood. The changes had to be global and shake MCA's foundation, otherwise it would be hard for it to rebound.
Five years after acquiring, Matsushita sold 80% of MCA to Seagram. The talks were started silently, so Wasserman was caught up by surprise. Interestingly, Ovitz again served as a mediator and even more interestingly, he again represented the buyer's side.
One year later, the name MCA was dropped in favor of Universal Studios, Inc., only their record company MCA Records kept its name.
Various MCA assets were divided and changed hands since then, but without the name and Jules Stein and Lew Wasserman as the masterminds behind it, it is a subject for another article.
