Sumner Redstone Part 2: Changing the Movie Theatre Industry

I’ve read two-thirds of Sumner Redstone’s autobiography, A Passion to Win. The intensity and drive that Sumner Redstone developed in his early life served him well when he transitioned from practicing law to being an entrepreneur.

Redstone joined his father’s company, eventually known as National Amusements, Inc. (NAI). His annual salary went from $100,000 as a lawyer to $5,000. The company was a drive-in movie theatre business, and Redstone rapidly expanded it. NAI was a smaller player with theatres outside urban areas. Getting allocation for popular films, or the right to play them as soon as they were released, was an issue that hampered the company’s growth. Redstone saw this as unfair. Wanting the right to show the most desirable movies just like his big-city competitors did, he pleaded his case to studios with no luck.

Refusing to lose and accept unfair business practices, he sued the studios in 1958. Redstone’s move was risky because he was suing his suppliers. It was a David-vs.-Goliath battle that other theatre owners refused to fight. If he lost, his suppliers could severely punish NAI for challenging entrenched business norms.

The studios gave in and settled, giving Redstone most of what he wanted. Winning this battle was pivotal for Redstone. It told him the legal system could help him change an industry that was set in its ways and level what he saw as an unfair playing field. Redstone had found his edge. He’d found a way to fight and win.

He used the law again to fight Disney over a practice of blind bidding. Movie companies made theatres pay large, guaranteed advances for the right to show a new movie though they couldn’t screen it to evaluate its quality. NAI lost $400,000 on one movie, a massive sum for the company, and Redstone sued Disney and other major movie companies for acting as an oligopoly. He wanted a fair marketplace with “asymmetry of information” eliminated; i.e., he wanted theatres to be able to evaluate the quality of movies before bidding for the right to show them. Disney settled with him, and over time the practice disappeared from the industry.

Redstone’s intensity, drive to win, and advanced understanding of the law made him a formidable opponent and a force to reckon with. His hard-nosed strategies paved the way for NAI’s growth for the next twenty years. But not even Redstone could fight the change sweeping the entertainment industry in the 1970s and 1980s. Cable television was a Goliath like nothing he’d seen before, and he would have to devise a new strategy for NAI to continue growing and for him to continue winning.

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