Going public on the New York Stock Exchange is a risky move for even the most successful business. There is clearly staggering money to be made by going public, but one can lose their shirts with just one bad move on the stock market. That is why some fear that the risks far outweigh any possible advantages and gains.
A perfect example is the saga of independent film distributor New World Pictures. Despite the strong urging of staff and counsel to take the company public, Roger Corman famously refused to do so. In his autobiography, Corman did admit that he might have considered it had the company been losing money, but since he was seeing multi-million dollar returns, he chose not to take the risk. Wisely, as it turned out. In 1983, Corman sold New World to entertainment lawyer (and current Trump supporter) Harry Sloan and pals. Immediately after, the new owners proceeded to take the company public, grossly overestimating its IPO valuation and raising hundreds of millions in capital. By 1989, New World was no more after a string of costly financial failures, a failed attempt at taking over Marvel Comics and a mountain of debt. (Incredibly, Sloan would go on to ruin two other Hollywood studios, most recently MGM. But that's another story for another day.)
So you can see the risks of going public. In 1985, Vestron Video was flying high. They were the most successful and the largest of the independent home video labels, with an annual net worth of $300 million. So the time seemed right to take the company public and reap the rewards. What they wound up reaping was the slow protracted death of the mighty Vestron Video.
Vestron went public in 1985 with an excessively overpriced IPO valuation of $440 million, which was $140 million higher than their current net worth. This kind of overvaluation on the stock market wound up being one of the root causes of the financial meltdowns that have repeatedly plagued the US, but that’s another article for another day.
What Vestron Video didn’t foresee prior to going public was that the home video market was changing. And not for the better.
By 1985, the major studios finally realized that home video was not the enemy, but a viable revenue source. Selling off the video rights of their product to an outside firm made no sense anymore. In the search of easy coin, the major studios were also aggressively pursuing video rights to the various independent, foreign and low-budget films that Vestron thrived on, driving the prices up sky high.
Another sting was the loss of the near-exclusive distribution deal with Orion Pictures. HBO wound up entering the home video business in 1985, purchasing a half-stake in Thorn EMI Video. Some questioned what HBO brought to the table. What they brought were some very attractive connections with cable television and lots of money. The company, now rechristened Thorn EMI/HBO Video, poached the Orion contract from Vestron in late 1985, taking with them many of Orion’s higher profile titles, such as the Oscar-winning drama Amadeus, Woody Allen's Hannah and Her Sisters and Radio Days and the Rodney Dangerfield comedy Back to School. (In 1988, after a massive cash infusion from media outlet Metromedia, Orion would form Orion Home Video, retaining the video rights to their own studio product.)
So to make up for the loss of consistent product, Vestron Video decided to enter film production and distribution. Vestron Pictures was launched in 1985, with the idea of producing enough product to keep the video arm humming along. Borrowing the successful Corman model of mixing up exploitation fare with higher quality art pictures wasn’t a bad idea, but Vestron failed to take into account three things that Corman did when facing the same problems.
For starters, Vestron spent far more money producing their films than Corman ever did on his, so it was harder to recoup the money spent in a timely fashion. The major studios had started making genre films and highbrow stuff with far greater production value and better distribution means than the upstarts ever could. Most important of all, Corman had the savvy and ability to adjust his business model to survive; Vestron didn’t.
Vestron Pictures began with the creation of a new corporate logo, which was also adopted into the video company. As far as late 80s logos go, it wasn’t bad at all. However, many still preferred the classic “future lines” logo from 1982-86. The cool reception accorded the logo was not a good omen for things to come.
The movie division launched with a pair of foreign films intended for Oscar contention and a grade-zilch horror flick called Slaughter High. The intended Oscar nominations never came through as the Academy chose to snub both foreign pictures while Slaughter High was heavily cut to appease the MPAA, which initially slapped the film with an X rating. So an inauspicious start to what was hoped to be a competitive film division.
Of the 54 films released theatrically by Vestron Pictures, they only had one big blockbuster hit: Dirty Dancing. Grossing $214 million worldwide against a $6 million production cost, it was massively profitable. Unfortunately for Vestron, it couldn’t offset the millions lost with one flop picture after another. They often ran afoul of the MPAA, forced to make cuts to such pictures as Cat Chaser, Waxwork, Catchfire, And God Created Woman and The Majorettes to receive the more attractive R rating, but wrecking the movies in the process.
Sometimes the financial problems became so severe that Vestron had to sell off movies they intended to distribute to other studios: Little Monsters and Blue Steel were sold to MGM/UA Entertainment, Co.; Young Guns and The Princess Bride were sold to 20th Century Fox; Some of their later films stayed on the shelf for several years before finally getting a very low-key video release.
Not helping was the general public’s increasing apathy towards independent, low-budget films. The theatrical market had shifted from the willingness to attend any movie to being prejudiced towards big-budget major studio fare. Vestron found themselves with ironclad commitments to over 20 low-budget films and no ability to budget more expensive fare. Desperate for cash, Vestron sold off the video rights to a large chunk of their 3,000 film library to the budget-priced home video label Video Treasures. These tapes often used cheap VHS tape that was recorded on the lower-speed LP or EP mode since shorter tapes were cheaper to reproduce. It was a depressing final chapter to a once mighty giant.
All further attempts to gain an infusion of outside cash and capital failed. Vestron filed for Chapter 11 bankruptcy by the end of 1990. On January 11, 1991, LIVE Entertainment purchased Vestron for a surprisingly cheap $24 million, gaining the 3,000 film Vestron library in the process.
LIVE was a conglomerate whose specialty was absorbing video labels in financial trouble. Vestron was just one of the labels consumed by this growing beast. Also found within its’ bowels were Family Home Entertainment, IVE (the successor to U.S.A. Home Video) and Carolco, Inc. By 1992, all remaining vestiges of the Vestron Video name were no more. By 1997, LIVE itself would be poached by a growing beast that preyed upon the misbegotten and unfortunate: Mitt Romney’s Bain Capital. Romney and his goons renamed the company Artisan Entertainment. A merger with Lion’s Gate Home Entertainment in the mid-2000s would lead to the Lionsgate, Inc. company of today.
It is often a staying that what’s old often becomes new again. Sure enough, 25 years after its’ death, Vestron Video made a surprise return to the video market. Incredibly, it was born from a random musing between Red Shirt Pictures executive Michael Felsher and a friend over what a modernized Vestron Video logo would look like. Lionsgate executives were looking for a good boutique horror sublabel to launch and took Felsher’s musing seriously. This October, we’ll be able to witness the rebirth first hand, with the Blu-Ray release of Blood Diner, a 1987 Vestron Pictures release that has long been out of circulation in the home video market.