Hollywood's Top Gun

By George Russell.

The story line could easily support a high-tension adventure thriller: call it Indiana Jones and the Temple of the Celluloid Gods. A major Hollywood motion-picture studio dangles over a financial precipice. Suspense mounts. The studio's grip is slipping. Will a rescue come in time? Yes! No! Wait! A dark and dashing film executive comes running! With amazing speed and savvy, he and a band of executive sidekicks fashion socko new feature films and perform brilliant marketing acrobatics. Finally, the studio swings across the threatening void. On the other side it finds -- what else? -- a king's ransom!

That spine tingler of a script is, with a certain amount of cinematic license, akin to sweet reality at the 55-acre Hollywood studios of venerable Paramount Pictures, a subsidiary of Gulf & Western. A year ago, the company that distributed one of the first Hollywood feature-length movies (The Squaw Man, 1914) was close to the ropes, its revenues sagging and its film larder practically bare. Today, in the words of Gordon Crawford, senior vice president of Capital Guardian Research, a Los Angeles investment-management firm, "they're having the greatest year of any company in the recent history of the movie business."

Indeed they are. As Paramount prepares to celebrate its 75th anniversary in 1987, the studio's The Golden Child, starring Comedian Eddie Murphy, is the hot Christmas movie, raking in $11.6 million in its first weekend at 1,667 theaters -- despite mixed reviews. Paramount's astonishing Australian import, "Crocodile" Dundee, has just finished its twelfth week as a top grosser, having earned more than $103 million at 1,495 theaters. Headed in the same direction is Star Trek IV: The Voyage Home, which has earned $47.5 million in three weeks. Well ahead of them all is Paramount's Top Gun, which has taken in $168 million since its May 16 release, making it the year's best seller. With only a week or so left in 1986, Paramount has grossed $569 million at the box office, almost 21% of the North American movie market. The studio's closest rivals, Columbia Pictures, Walt Disney Productions and Warner Bros., have each won only about half that.

Paramount's triumph comes at a time of sharply increased competition in Hollywood. After a slow start, 1986 turned into a solid box-office year for mainstream cinema; receipts are expected to hit $3.1 billion. Those dollars have been spent on an unusual number of widely released movie offerings: 130 features in 1986, vs. 105 in 1985.

Overall, studio profits reflect the general bounty, and nowhere is that more true than at Paramount. The company's earnings for 1986 are expected to exceed $110 million on estimated revenues of over $925 million. That compares handsomely with an anemic $75.1 million profit on revenues of $864 million in 1985. Paramount's television business is also booming, along with "follow- on" sales of movies to cable TV and other outlets. The company's overall prospects have helped Gulf & Western's stock rise from its year low of 47 3/4 to last week's close of 65.

Paramount's moviemaking renaissance is a tribute to the painstaking teamwork and sales know-how of Chairman Frank Mancuso, 53, the marketing whiz who took over the studio's top job in September 1984. A 25-year Paramount veteran, Mancuso worked his way up through the company's marketing and distribution ranks. Along the way, he became an important ingredient in Paramount's success over the years. Mancuso, says one of his superiors at Gulf & Western, "has an extraordinary sense of what is going to work in the * marketplace and how to position it." As Paramount chief, he has clearly outdone himself in that department by leading the studio back to the top. His reaction to Paramount's renewed high standing, though, is modest. Says Mancuso: "We have gone to No. 1 in 1986 with great style. But we're not going to overreact to this."

Mancuso has painful memories to bolster his caution. He became Paramount chairman after the departure in 1984 of tough, abrasive Barry Diller, 44, who suddenly skipped over to become head of 20th Century-Fox. The reason for Diller's departure: differences over management style with Gulf & Western CEO Martin Davis. Diller was followed out the door by Paramount President Michael Eisner, 44, who accepted an offer to become chairman of Disney. A number of senior Paramount production executives departed in the duo's wake. Recalls Ned Tanen, 55, currently head of Paramount's motion-picture group: "Frank (Mancuso) and I felt like we were in Beau Geste, defending the fort."

Before the Diller-Eisner team left, it had already moved Paramount neck- and-neck with Warner for Hollywood's No. 1 studio slot with such hits as Flashdance, An Officer and a Gentleman and Raiders of the Lost Ark. In Diller's final year, Paramount's profits hit what was then an all-time peak of $109 million on revenues of $986.6 million. The duo left behind one monster hit, Beverly Hills Cop, which subsequently brought in $235 million. But the Paramount stable also included such nags as King David ($5.1 million) and Explorers ($9.9 million). Paramount's market share, which had climbed as high as 19.1% in 1984, plummeted to 10% during Mancuso's first year as chairman. In one week last February, the studio's share of the market sank to 1.5%. Says Variety's box-office analyst Art Murphy: "I don't think any major studio has been that low before. The warehouse was empty."

By the time of that nadir, Mancuso had a restocking process well under way. Months earlier, Mancuso's first important moves had been to hire Tanen and lure Producer John Hughes (Sixteen Candles, The Breakfast Club) over to Paramount from Universal. Hughes' first feature for Paramount, Pretty in Pink, was released in February and has subsequently grossed $40 million. Hughes followed that up in June with Ferris Buehler's Day Off, which has since brought in $70 million.

The soaring success of Top Gun is typical of the shrewd marketing methods Mancuso had championed at Paramount even before he took over as chairman. Top Gun was originally scheduled to open in late May, at the same time as Warner's Sylvester Stallone shoot-'em-up Cobra and MGM's horror flick Poltergeist II. Mancuso instead elected to preview the Paramount entry a week early, then expand its showing in the beginning of June. By bracketing the competition, explains Barry London, Paramount's new distribution and marketing chief, "we got the film established in the marketplace." In the same vein, Mancuso decided to release Star Trek IV at Thanksgiving, rather than Christmas, leaving the way clear for the launch of The Golden Child. Says Mancuso: "We would rather compete with the competition than with ourselves."

The same canny marketing tactics have helped make "Crocodile" Dundee, the saga of an ingenuous Australian crocodile hunter on the loose in Manhattan, the sleeper film of the year. Serendipity alone explains Paramount's decision to buy rights to the film from its producer and star, Paul Hogan, for less than $4 million. But Mancuso and his executives made the crucial choice to release the Australian film as a full-scale commercial effort in 871 theaters, rather than as an art-house sideline. Paramount also shrewdly capitalized on the sunny charm of Hogan, sending him on a twelve-city tour to generate human interest in the film amid a television and print advertising blitz. The studio's $5 million p.r. investment has been returned manyfold. Says Paramount's Tanen: "We worked this poor man unmercifully. But Americans took a liking to him."

In climbing back to the top, Paramount has made more use than other studios of extra postproduction filming and so-called research screening: assessing the opinions of preview audiences to fine-tune movies for consumer appeal. Early audience reaction persuaded the studio to beef up the love interest in Top Gun and rework completely the ending of Pretty in Pink. In the past, extensive additional film work was regarded as a "stigma," says a former Paramount executive. "But Paramount has done it consistently on almost every movie this year, with the exception of Star Trek IV."

According to Steven Rosenberg, a senior analyst with Paul Kagan Associates, an investment firm based in Carmel, Calif., the key to any studio's continuing movie dominance is its ability to extract follow-up value from big hits. There, Mancuso and Paramount are acknowledged masters; one Paramount executive calls the studio's Star Trek rights a "family treasure." Mancuso is encouraging Paramount to sign exclusive contracts with proven money winners like Comedian Murphy, and to promote greater in-house production. Says he: "You can't leave the fortunes of the studio to outside forces." Concurs a former Paramount executive: "In a way, it's a return to the old studio system, on a much smaller scale."

Throughout Paramount's moviemaking vicissitudes, the studio's fortunes have always found solid support in what Mancuso calls the "tent poles," Paramount's other operating divisions. Paramount's television operation produces such small-screen favorites as NBC's Family Ties and Cheers, and ABC's Webster. Those shows go into syndication in 1987 and 1988 and are expected to bring in some $500 million in additional revenue. "People point to a Beverly Hills Cop and the fact that it grossed $235 million," says a former Paramount executive, "but syndication revenues from a hit television series could double that."

Because of a shrewd decision to involve itself heavily in the mass marketing of home videocassettes, Paramount has also become a major force in a new $3 billion market. Back in 1982, when most studios viewed cassettes as expensive products destined for sale to rental shops, Paramount saw the possibilities of an expanding home market, provided the tapes were cheap enough. By offering blockbusters like Flashdance for less than $25, the company has boosted its video revenues to a projected $225 million this year. As a Christmas special, the studio is now selling such titles as Raiders of the Lost Ark and Beverly Hills Cop for under $20.

Can Paramount continue its stirring performance? Mancuso says that "in this business, everything is cyclical." For all the rigorous testing and tinkering that now go into his product, the man who has so successfully marketed Indiana Jones and Mr. Spock knows that in the movie business, as well as in the movies, there is always the chance of another cliff-hanging episode.

With reporting by Jeanne McDowell/New York and Edwin M. Reingold/Los Angeles