Ownership of movie studios is back in the spotlight – but once upon a time, Coke and the film industry got closer than ever…
If you look at the ownership of most of the major movie studios and streaming services, there tends to be some multinational conglomerate involved, one that didn’t necessarily begin its life as an entertainment company. Sony, for instance, owns Columbia Pictures, Amazon is now sniffing around MGM, telecommunications empire AT&T is the current owner of Warner Bros and Universal has similar owners with Comcast.
Go back some 40 years however, and having a studio owned by people outside the movie business was very much the exception rather than the norm. And that’s why it raised so many eyebrows when it was announced, all the way back in 1982, that The Coca-Cola Company fancied a try at making movies.
It’s no revelation to say that the expertise of The Coca-Cola Company lies in sticky brown sugar-filled cans and bottles of liquid. Said liquid is sold by the gallon it seems at cinema concession stands (have you seen the size of a large Coke recently?), but for a period of time the company was responsible not just for what you were drinking, but what you were watching.
In the early 1980s, The Coca-Cola Company was under the stewardship of Roberto O Goizueta, who had assumed the role of CEO and chairman in March of 1981. He’d done so with a promise to diversify the company away from just making soft drinks, and was on the prowl for interesting acquisitions.
Columbia Pictures meanwhile, one of the traditional Hollywood major studios, had been going through a bumpy time. A businessman by the name of Kirk Kerkorian was trying to get a sizeable stake in the studio, and it was going to court over accusations of ignoring the interests of its shareholders. What’s more, its movies were enjoying mixed fortunes. There were hits, such as 1980’s The Blue Lagoon and Stir Crazy, but also expensive investments that didn’t pay off, such as 1982’s Annie.
Furthermore, this was the era when films from other studios such as Raiders Of The Lost Ark, the original Star Wars trilogy and E.T. The Extra Terrestrial (a film that Columbia had a tiny stake in, but no more than that) had blown the roof of what was possible at the box office. Contrasting with those, Columbia was a long way behind the competition, but was still showing signs of making breakout profitable movies. The company itself was in the green too.
Against this backdrop, it became known that the studio was open to a possible sale, and bidders started swarming. The expected price was never disclosed, but it seems fair to assume that it was around the $500m mark. To give a flavour as to how much the movie business would change, the same studio would spend the best part of that on making and marketing the film Spider-Man 3 nearly 25 years later. That, and it wouldn’t cover a single season of Amazon’s upcoming Lord Of The Rings series.
Nonetheless, there were many interested parties, but it was an offer from The Coca-Cola Company that blew them all out of the water. It bid a-then astronomical $750m for the business, nearly double the stock price at the time. It would be a cash and stock deal that was too much for rival bidders.
The New York Times reported the deal in January 1982, noting that “in previous years, as the American market for soft drinks has leveled off, Coke has diversified into such fields as ocean farming and orange groves, but this would be its first big venture into entertainment”.
It would also be its last of this ilk.
To call The Coca-Cola Company’s ownership of Columbia something of a rollercoaster ride would be no understatement. It started promisingly, though. Within months, it had partnered with TV firms HBO and CBS to create Tri-Star Pictures. And while Annie would leave red ink on the balance sheet, by the end of 1982 Columbia had hit big with Tootsie, and released the next Best Picture Oscar winner, Gandhi.
If there was a year when things really went to plan though it was 1984. 1983 had given the studio one notable hit – The Big Chill – but for the first time the year after, it had a movie that was an absolute box office sensation. 1984’s Ghostbusters wasn’t just a gigantic hit movie, it was also a cultural phenomenon, and spawned a huge hit single too. It was the kind of massive movie Columbia had craved, and now it had one.
Unfortunately, plans for a sequel to follow up on its success would stall, in part due to management changes Coca-Cola introduced. Coming to that shortly.
Still, 1984 also gave it The Karate Kid as well, with more Oscar cachet arriving with the likes of A Soldier’s Story and A Passage To India in the same year, that both earned Best Picture Oscar nominations (although Columbia only had distribution rights for the latter). Its television businesses were booming too. So far, so good.
But whilst this success was going on, there were changes happening behind the scenes. The head of the studio, Frank Price, had left his position in 1983 (not seeing eye to eye with his new soft drink supplier of choice), to be replaced by Guy McElwaine. He was at the helm when the greenlight was given to Ishtar, a film that remains infamous in Hollywood for being one of the costliest flops of the decade.
Starring Warren Beatty and Dustin Hoffman, the movie cost over $50m to make – at a time when that was regarded as an astronomical sum to spend on a film. It was nearly double the original production budget, and the film ran over schedule. The Hollywood trade press went to town covering the production, and not painting a very upbeat picture of it. When it only returned $14.4m at the box office, The Coca-Cola Company’s confidence in the movie business wobbled. A lot.
McElwaine was out of post by the time Ishtar was released in May 1987. He’d actually been replaced in 1986, a year that saw Columbia’s partners drop out of the Tri-Star venture, and left The Coca-Cola Company owning two studios rather than one. It nonetheless made a bold, leftfield choice for its new head of studio, hiring British producer David Puttnam to take the top job. And heck, would he made his mark.
Puttnam (now Lord Puttnam) who’d won an Oscar earlier in the decade for producing Chariots Of Fire, wanted to do things differently to the rest of Hollywood. He eschewed the idea of sequels and big budget movies, and instead tried to go lateral. He was ripping up the traditional Hollywood rulebook, on Coke’s dollar.
He didn’t do this quietly either, and many Hollywood creatives – including some of those involved in Ghostbusters – were rubbed up the wrong way by him.
David Puttnam lasted a year. By the time he either resigned from his post or was pushed from it (or, more likely, something inbetween), he’d put some good films into production, but the box office was lagging. In fact, Columbia’s ranking amongst the major studios was heading to rock bottom. The studio couldn’t buy a hit, and by the end of 1987, The Coca-Cola Company was regretting its decision to get involved in the film business altogether. Not, oddly enough, for financial reasons. Instead, shareholders were unhappy with the bad press surrounding Ishtar’s high profile failure. To a degree too, the expertise that Coke had built up in its more traditional field of business simply wasn’t transferring to cinema.
Restructuring of the film operations got underway, with a view to a sale, but in the interim it hired the late Dawn Steel to head up the Columbia film studio in 1987. Steel had just lost her job at Paramount Pictures, discovering the news as she was recovering from giving birth in hospital (she wrote about this candidly in her memoir, They Can Kill You But They Can’t Eat You). The Columbia offer followed a few months later, and she took it.
What’s more, she made a real impact. Steel turned the studio’s fortunes around to a large degree, repairing relationships with key talent, and putting back together sequels that had been stuck in limbo under Puttnam. Ghostbusters II and The Karate Kid Part III were swiftly greenlit, and would prove profitable. She also backed the likes of Awakenings and Flatliners, but little did she know that Coke boss Roberto O Goizueta was having serious second thoughts as she was going about her work.
It goes back to the point that the profile of the film business didn’t suit what Coke was after, and it wanted out. It didn’t take long to find a way to the exit either. Whilst overall the Columbia deal had been profitable, a sale was finally agreed to Sony in 1989. The price? $1.5bn. The Coca-Cola Company may have been burned to a degree by its venture into the movies, but conservative estimates suggested it had seen around half a billion dollars in profit from it.
Sony would replace Dawn Steel with producers Peter Guber and Jon Peters, and The Coca-Cola Company would focus its interests primarily on food and drink from that point forward. But also, The Coca-Cola Company would prove to be ahead of the game. Over the following years, the majority of the Hollywood majors found themselves part of bigger entities, snapped up by firms wanting a foot in the entertainment business. Infamously, Warner Bros found itself merged with internet service provider AOL at one stage, itself something of an infamous story.
But for Coke, it’d go back to where it was most comfortably in the cinema chain: in the foyer, overcharging you for sticky, fizzy water. Given the dramatic changes in the film business over the last year alone, it’s probably proven to be safer there…
- Want to write for us? We’re looking for the best British arts and the people that make it, from Land’s End to John O’Groats. Have a look at our pitching guidelines.