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Universal Studios : company profile

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Universal Studios is one of the world's foremost movie and entertainment businesses. It enjoyed a spectacularly successful year in 2015 with megahits Jurassic World and Furious 7, the latest of the Fast & Furious racing franchise. Other hits included Minions, Pitch Perfect 2, 50 Shades of Grey, Trainwreck and Straight Outta Compton, earning a record-breaking $2.4bn at the US box office. In addition to the main movie studio, the company controls an extensive library of past movies as well as hugely popular theme parks in the US and Japan. The business was acquired in 2004 by General Electric, becoming part of that company' NBC Universal media division. Universal Studios and NBC Universal are now controlled by cable giant Comcast.

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Universal Studios is a unit of what is now Comcast's NBC Universal operating division. Universal Pictures is one of the world's best-known movie production and distribution studios, releasing between 15 and 20 movies a year. Yet despite its size and reputation, Universal has until recently been among the middle ranks of the major studios by box office takings. It hadn't topped the annual US rankings since the 1990s, generally ranking mid-table. In 2014, it was the #5 studio by US box office with a gross of $1.12bn. Its most successful movie that year was the Scarlett Johannsson action thriller Lucy, with a worldwide gross of almost $460m. Other sizeable successes were Neighbors ($268m worldwide), Non-Stop ($223m) and Dracula Untold ($216m).

However, all that changed in 2015, with a succession of spectacularly successful releases including three of the top five movies of the year, including global champion Jurassic World, which accumulated an astonishing $1.7bn at the box office, becoming the 4th most successful movie of all-time. The latest installment of the racing franchise Fast & Furious, Furious 7, was the global #2 at $1.5bn, while Minions, from the Despicable Me franchise was the overall #5 at $1.15bn. The latter series is managed by the animation subsidiary Illumination Entertainment. In April 2016, Universal agreed to acquire rival DreamWorks Animation, the company behind the Shrek, Madagascar and Kung Fu Panda franchises, for $3.8bn, or $4.1bn including debt. As a result of these and other hits like Pitch Perfect 2, 50 Shades of Grey and Straight Outta Compton, Universal was the #1 US studio with a record-breaking domestic haul of $2.4bn.

Universal's previous box office champs include Oblivion, Les Miserables, Illumination's The Lorax, Bridesmaids, Snow White & The Huntsman and Mamma Mia, a huge international hit in 2008 with total gross of over $600m (on a budget estimated at only around $50m). The studio's all-time greats still include Steven Spielberg's ET, Jurassic Park series and Jaws, as well as Meet The Fockers, and How The Grinch Stole Christmas.

Focus Features operates as its specialty or "arthouse" unit, and was responsible for releasing such critical hits as Lost In Translation, Brokeback Mountain, Atonement and Burn After Reading. Its most successful 2014 release was The Boxtrolls, the stop-motion animation feature produced by Nike boss Phil Knight. The Theory of Everything, about theoretical physicist Stephen Hawking, was a huge critical hit in 2014/15, and winner of numerous awards for its star Eddie Redmayne. However the unit's most successful releases in 2015 were horror flicks Insidious 3 and Sinister 2. Rogue Pictures was established in 2004 as a specialist unit for "genre" horror or comedy movies targeting a youth audience. The business was sold to independent rival Relativity Media at the end of 2008 for around $150m.

Until 2007 international distribution for all Universal releases was handed by UIP, a long-running joint venture with Paramount. However, the two partners agreed to go their own way from 2007, dividing UIP's existing offices between them and establishing their own offices in other countries.

Universal Home Entertainment operates what is now the world's second-largest film archive behind Sony/MGM with around 4,000 movie titles and 40,000 episodes of TV content.

Universal Studios also operates Universal Theme Parks and entertainment centres in Orlando, Florida; Hollywood, California; and in Japan. These have enjoyed considerable success in recent years following the launch of Harry Potter-themed rides under license from Warner Bros. The group also took full control of the previously franchised Universal Studios Japan park at the end of 2015.

The Universal Studios Consumer Products Group (USCPG) is responsible for global licensing and retail strategies for the company and its operating divisions.

Financials

Universal Studios enjoyed a banner year in 2015 as a result of the blockbuster success of Jurassic World, Furious 7 and other releases, with filmed entertainment revenues soaring to $7.29bn.

The still strong but less stellar 2016 slate resulted in a slide to $6.36bn. However, the weaker performance of filmed entertainment was offset by a surge in revenues from theme parks, which soared by 48% to $4.95bn as a result of higher attendance, the buyout of Universal Studios Japan and the immense popularity of the Harry Potter rides.

There was a rebound in 2017, with filmed entertainment revenues jumping 20% to $7.66bn - higher even than 2015 - while EBITDA soared by 83% to $1.28bn. Theme Parks also did very well, with revenues up 10% to $5.44bn, and EBITDA of $2.38bn.

Background

Universal Film Manufacturing Company was founded in Chicago in 1912 by German immigrant Carl Laemmle. In those days before modern studio lighting, filmmakers were largely dependent on sunshine to light their sets. There wasn't too much of it in Chicago, so Laemmele relocated three years later to a ranch in California, which he named Universal City. After a comparatively slow start, Universal became one of the best-known of the second-string Hollywood studios by the 1930s, bolstered by a series of hugely successful but comparatively inexpensive monster movies, including Dracula, Frankenstein, The Mummy and their many sequels. The company struggled on through the next two decades, but increasingly lost its way after World War II, and it was acquired in 1952 by the US arm of British music company Decca, then keen to establish a sideline in film. But Decca couldn't make the business work either, and in 1958 sold off the studio's large production lot to a fast-expanding talent agency called MCA.

Music Corporation of America had been formed in 1924 by Jules Stein. An ophthalmologist by trade, in his spare time he indulged a passion for swing music by booking bands into concert halls around the US. By 1930, MCA had grown to be the biggest musical agency in the country, and moved to Hollywood to begin representing film stars as well. Among its first clients were James Stewart and Greta Garbo. In 1946, Stein retired, and he handed control of the business to his second-in-command, Lew Wasserman, who quickly established himself as the most powerful talent agent in the entertainment industry. In order to give his artists even greater control of their output, Wasserman moved MCA into television production in the late 1940s, eventually scoring a huge hit with the Alfred Hitchcock Presents series, conceived and controlled by Wasserman on behalf of client Hitchcock. By the late 1950s, Wasserman's MCA had become a virtual movie studio in its own right. Winchester 73, a James Stewart movie western made in 1950, made history as the first "packaged" movie. Wasserman assembled the cast and creative talent from MCA's portfolio, then sold the entire project to struggling Universal to make and distribute. Stewart was rewarded for his participation with a percentage of the movie's profits, establishing another industry first.

It was a logical step forward for Wasserman to move from virtual film production via packaged projects to the real deal. Having acquired the Universal Studios production lot, he floated MCA in 1959. Keen to establish a presence in the distribution business also, MCA also absorbed Decca Records' US operations and the main Universal film library in 1962, and acquired Paramount's library of films made before 1948. As the mainstream movie business gradually declined in the face of competition from television, Wasserman was, along with Disney, one of the first of a new breed of studio boss willing to embrace the enemy. In particular he was arguably the first to understand the value of a library of past movie releases. Whereas most studios unlocked value from only a handful of these by selectively re-releasing them in theatres, Wasserman realised he could sell broadcast rights for his entire back catalogue to television stations desperate to pad out their schedules with comparatively low-cost content. At the same time, as the studio's production lot fell empty, he emulated Walt Disney's enormous success with Disneyland, and opened part of the lot to the public, allowing them to see behind the scenes of the movie business. This tour gradually evolved into what is now the Universal Studios theme park franchise.

In 1990, MCA became a takeover target for Japanese consumer electronics firm Matsushita Electric, which saw the company's film library as a way of establishing the VHS video format as an industry standard. MEI paid a staggering $6.1bn for the business, retaining Wasserman as its chairman. However the relationship between the two companies soured quickly, and just four years later the Japanese washed their hands of MCA/Universal, selling it on once again to drinks company Seagram, whose young CEO Edgar Bronfman Jr was also keen to get into the entertainment business. He dropped the MCA name in favour of the Universal brand.

A major force in the US, Universal Music still had only limited coverage of the potentially larger international market. However, in 1998, Dutch company Philips announced it was putting its own music business, PolyGram, then the world's largest record company, up for sale. Riding high on the success of Universal Studios' Jurassic Park and The Lost World blockbusters, Seagram grabbed the deal, establishing itself as the world's largest music company, as well as a leading film and television business. Unfortunately the following two years were marked by increasing pressure on the group's various divisions. Music companies worldwide began to feel a severe pinch that year from declining sales and the lack of new artists, and Universal's numerous labels were no exception. Worse still Universal Studios followed the enormous success of its Jurassic Park and Lost World movies with a string of expensive failures. In 1999, the film arm made losses of around $200m, and by early 2000 Seagram was reported to be seeking a buyer.

Having finally agreed a takeover by French group Vivendi, the Universal Studios entertainment group was effectively split in half. Universal Studios was transferred into the new Vivendi Universal Entertainment division, while Universal Music was established as a separate operating business within the Vivendi group. However Vivendi's rapid expansion led to mounting financial problems and it was gradually broken up. After several weeks of exclusive negotiations, Vivendi agreed to sell the Universal Entertainment division to NBC for $14bn. The deal was confirmed in October 2003, and closed the following May.

In summer 2005 reports emerged of talks to acquire the distribution and live action production division of mini-major DreamWorks SKG. However negotiations ended in September without agreement, and DreamWorks was bought by Paramount Pictures instead. Universal missed an opportunity to secure the DreamWorks executive team for a second time in 2008, after they left Paramount en masse.

Last full revision 27th May 2015

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