Journal of Strategic Management Education 1(1).

2003, Senate Hall Academic Publishing.

Chronicle of an Aborted Hollywood

Revolution: the Rashomon Case Study
Allgre L. Hadida1
Judge Institute of Management,University of Cambridge

Abstract. This empirical paper is neither a case study, nor a teaching note or a meta-analytical
explanation or justification of the case-based approach to lecturing on strategy. It does, however,
combine elements of these three approaches in order to discuss a major crisis in the recent
history of Columbia Pictures and Hollywood: the appointment, in October 1986, of British
producer David Puttnam as Vice-President and C.E.O. of Columbia Pictures, and his subsequent
resignation only eleven months after the beginning of his mandate. Around the central theme of
the relevant locus of change management in a network-based industry, the management issues
the paper hints at are those of the structural and institutional challenges of change and of the
close relationship between changing strategy, changing organization and changing formal and
informal rules of the game in a given economic sector.

Keywords: case study, change management, network, Hollywood, entertainment, David

Puttnam, Columbia Pictures.

1. Introduction

In his 1950 masterpiece Rashomon, Japanese filmmaker Akira Kurosawa

describes the same criminal act, the rape of a woman and murder of her
husband, from four different viewpoints. They complement as well as
contradict each other. At the end of the movie, the viewer is left with his or her
interpretation of which version, if any, of the crime is the truth. To a certain
extend, all case studies developed and used in the context of strategy courses
comply with the same relativist approach as Rashomon, as different readers,
be they students or instructors, interpret them in various ways according to
their agenda, past experience and knowledge of the concepts and issues they
specifically address. However, most of them do not follow the movies
narrative structure. Instead, the stories they tell often have a clear outcome, as
they trigger class participants to reflect on past strategic moves in one
organization, partnership or industry, current strategic issues and decisions
aimed at sustaining long-term competitive advantages. The paper-based case

1. The author wishes to thank Roland Reitter for his insightful contribution to this paper. She
is also indebted to Pierre-Jean Benghozi and four anonymous reviewers for their excellent
comments on earlier drafts of the manuscript, and to Ruth Newman for her first-rate
proofreading work. Her warmest thanks nevertheless go to Lord David Puttnam, whose
comments have considerably enriched her approach.
2 Chronicle of an Aborted Hollywood Revolution

study this article builds on has been developed both from archival data and
interviews. It is available from the European Case Clearing House and is
original in several respects.
First, it emerged from the willingness to create a pedagogic tool devoted
to the entertainment industry, which is still, in spite of its great interest,
scarcely used as a field study of the various disciplines of management. Indeed,
a search in the Harvard Business Online and in the European Case Clearing
House COLIS case study databases on 30 January 2003 highlighted a grand
total of 27 case studies (11 and 16 respectively without overlaps) on
audiovisual and film-related businesses registered between 1974 and 2003.
Although it takes into account several prior events in the life of David Puttnam
and of the corporate history of Columbia Pictures, the Rashomon Case Study
(RCS) focuses on the eleven months during which the British producer was
C.E.O. of Columbia Pictures (the studio). These data are nevertheless useful in
deciphering the events and attitudes that led both David Puttnam to resign less
than a year after he started as C.E.O. of the studio, and Columbia Pictures to
let him go.
Second, as in the eponymous movies narrative structure, the witnesses
and actors of the events that the RCS reports all give radically different
versions of them. David Puttnams management of Columbia Pictures is still
one of the shortest in the whole history of American cinema. However, it also
remains one of the most debated. The RCS aims at expounding its main
controversies and at pointing towards several frames of interpretation of the
events that took place inside the studio from October 1986 till September 1987.
By definition, a case study is a learning device, whose fundamental aim is to
give rise to discussion. As a consequence, it doesnt stand up for any party, and
must be sufficiently ambiguous in relating the facts to allow its readers to
ponder over the questions it raises. The application of these principles to the
RCS was facilitated by its subject matter.
Indeed, and this is the third originality of the RCS, it focuses on a
parenthesis in the life of the organization. As the title of this article indicates,
it chronicles an aborted revolution. Therefore, as is also reflected in its title, the
Rashomon case study deals more with the unseen than with the seen, and
does not lead to a clear-cut outcome and interpretation of the events. Although
its pedagogical aims are multiple, the most important of them all may be the
acknowledgement of the structural difficulties associated with organizational
change and the connection between changing strategy, changing organization
and changing industry as a whole. After David Puttnams disruptive eleven
months at the head of the studio, all was done internally to bring the
organization back to normal (Brown, 1988). The RCS consequently describes
what could be defined as an experiment that went wrong and traumatized for
long several of its key participants, and some of the reasons why it did.
Journal of Strategic Management Education 1(1) 3

No matter which version of the story the reader ultimately subscribes to,
issues of organizational change and its interference and often conflict with
established structural and institutional constraints are at the core of the RCS.
They are also particularly relevant in the context of network-based and arts and
cultural industries. Real-life examples of such managerial dilemmas taken
from those economic sectors therefore provide fascinating grounds for
discussion. They can be used in a core strategy or organizational behavior
course as well as in a specialized seminar on networks or arts and cultural
management. In addition to the managerial issues it addresses, any case study
can also be designed to give readers and users an introductory insight into the
industry upon which it is based. My experience of testing the RCS in the
context of a core MBA strategy course, a specialized postgraduate program on
arts management and an undergraduate elective on strategy in arts and cultural
organizations in three different top-ranking European business schools is that
the participants, regardless of their age and of the nature and amount of their
previous professional experience, relate very easily to the American
entertainment industry, if only as repeat consumers of its products. This
considerably enriches in-class discussions, with the instructor acting as a
facilitator of the intuitive knowledge of participants on industry specific topics
and issues, as well as being a source of complementary knowledge and a
challenger of any preconceived and often ideological rather than fact-based
notions.
This paper first aims at briefly introducing the events related in the RCS
and those that led to its genesis. It then focuses on providing directions for
theoretical interpretations and in-class discussions of this teaching material, in
particular on issues of organizational and structural conditions that can help
promote or force resistance to change, of power locus inside the organization
and outside of it, within its professional network, and of industrial
disaggregation and its consequences in terms of transaction costs and
governance structures. Finally, it discusses the balance of the eleven months
during which David Puttnam ran Columbia Pictures. It is neither a case study,
nor a teaching note or a meta-analytical explanation or justification of the case-
based approach to lecturing on strategy. It does however combine parts of
these three dimensions in an attempt to open new paths for discussion along
each of them on the specific issue of change management in a network-based
industry. It ultimately aims to provide an illustrated example of a case study
developed in the context of the American entertainment industry in order to
illustrate issues of relevance to the strategy and management community and
to the education mission in the field of strategy.
4 Chronicle of an Aborted Hollywood Revolution

2. Abridged Version and Genesis of the Rashomon Case Study

David Puttnam, the British producer, among other theatrical hits, of Midnight
Express (directed by Alan Parker, 1978), Chariots of Fire (Hugh Hudson,
1981), for which he won the Oscar for Best Picture, The Killing Fields
(Roland Joff, 1983) and The Mission (Roland Joff, 1986), epitomized
through the eighties the renewal of the British film industry (Pilard, 1989). In
1986, he was awarded the prestigious Palme dOr at the Cannes Film Festival
for The Mission. That same year, he voiced concerns about the collapse of
Goldcrest, the leading British production firm, and the arrival of the American
giant Cannon on the British exhibition market. He then also decided that it was
time for him to place new bets. The 45 year-old self-made-man first considered
auditing in philosophy during one academic year at Harvard University, but
accepted instead a radically different endeavor. Fay Vincent, the Chairman of
the Entertainment Division of the Coca-Cola Company, offered him to start a
new career as Vice-President and C.E.O. of Columbia Pictures. David Puttnam
accepted this challenge and therefore became the first European producer ever
to rule a major Hollywood studio2.
When negotiating the terms of his contract with the top managers of the
Coca-Cola Company, David Puttnam produced a Declaration of Principles in
hard-copy. It highlighted his early fascination for American movies, the
predominant influence of cinema on the forging of social attitudes, and his
dedication to produce, within Columbia Pictures, morally honest films, likely
to contribute to the progress of mankind. Don Keough and Roberto Goizueta,
respectively C.E.O. and President of the multinational firm, enthusiastically
endorsed this statement. They also asked David Puttnam to reduce the studios
production costs, which had risen by 400% in ten years, and to bring Columbia
back into the Oscar race. The British producer committed himself to restoring
the power of the studio, which had drifted over the years towards independent
producers, stars and talent agents, to turn it more towards its foreign markets,
and to increase the percentage of first films produced. His contract granted him
an annual salary averaging one million dollars, as well as almost total
autonomy on his film projects.
In July 1986, before taking his position in October, David Puttnam met
with Ray Stark, a former talent agent who had successfully moved into film
production several years before. He was also a close acquaintance of Herbert
Allens, chairman of Columbia Pictures, and of Michael Ovitzs, president of
Creative Artists Agency (CAA). His relationship to Columbia Pictures was
ambiguous, in as much as he sat on its advisory board while being also an

2. The Major Studios are the most important film production and distribution firms in the
USA. In 1986, they consisted of Paramount Pictures, MGM, 20th Century Fox, Warner
Brothers, Universal Studios, Columbia Pictures and the Walt Disney Company.
Journal of Strategic Management Education 1(1) 5

independent producer under a first look contract with the studio (Loiseau,
1988a). When Puttnam explicitly asked him to choose between the two
positions, Stark opted for the second one (Yule, 1988; Brown, 1988; Loiseau,
1988 a; Kipps, 1989). However, the latter sent the former two scripts shortly
afterwards, acting thus as a producer rather than an advisor. Against all
expectations, David Puttnam refused to green light them unless substantial
work was done on them.
From October 1986 to April 1987, David Puttnam read some 200 pending
scripts and started restructuring the studio. He became one of the first
Hollywood C.E.O. to keep all his employees, from the top executives to the
janitor, informed of the activities of their firm, and to ask their opinion on the
quality of the slate of films produced. He also communicated his personal
phone number to the press. Being very much in demand, he gave a tremendous
amount of interviews, during which he didnt mince his words about
Hollywood and its existing power structure. The internal promotion system of
the studio shifted more towards meritocracy, and its working atmosphere was
reported as hard working but relaxed (Yule, 1988). David Puttnam appointed
to assist him several persons he had previously worked with in England. He
created a new department in charge of the development of scripts based on true
stories to remedy the lack of films produced internally, i.e. at the studios
initiative, during the previous years. He also created a European creative
affairs department, as well as the Discovery Program to allow professionals
of the film industry to direct their first movie. In April 1987, he officially
presented a slate of 25 films produced for costs down 26% on average from the
previous year. He also fought for the U.S. rights to a film he deemed very
promising, although only 40 minutes of it had been edited so far: Bernardo
Bertoluccis The Last Emperor.
The top managers of the Coca-Cola Company declared themselves very
satisfied with David Puttnams management. The studio employees were also
extremely receptive to his style and the changes he introduced. However,
outside the studio, skepticism reigned. Other C.E.O.s and independent
producers understood neither the need for the new departments he had created,
nor his unusual and outdated habit of communicating in writing. Having
noticed that he principally resorted to UK professionals to assist him, some of
them accused him of organizing, from his position at Columbia, the British
invasion of Hollywood. His good relationship with the press was also
questioned, especially as he became reputable for his frankness and his talent
for sensational phrases. All of Hollywood learnt soon enough from his public
statements that his efforts to restore the power of the studio would put an end
to the hegemony of independent producers, stars and agents (Brown,
1988;Yule, 1988; Loiseau, 1988 a & b).
Over the eleven months of his mandate at the studio, David Puttnam
therefore placed himself at the centre of several conflicts and
6 Chronicle of an Aborted Hollywood Revolution

misunderstandings with influential Hollywood players. As an illustration of

such issues, convinced by a beginner actresss video tests, he refused to
dismiss her from the casting of a movie, as was demanded by its chosen
leading actor and his agent in CAA. The British producer finally decided to
replace the actor, who refused to discuss the matter with him, with another star
performer. Columbia Pictures employees acclaimed this decision. Indeed, it
was extremely rare that a studio dared raise itself against the decisions of a star
and his agent. A month later, the New York Times accused David Puttnam of
having been heard by several witnesses violently criticizing Bill Murray
during an official dinner, which the producer firmly denied. Bill Murray was
then an important asset of the studio, with whom he was about to shoot a sequel
to the 1984 blockbuster Ghostbusters. Following this incident, the press also
reproached David Puttnam for slandering Michael Ovitz, which he again
denied.
Puttnam also raised the angst of Dustin Hoffman and Warren Beatty.
Because his relationship with both actors had been relatively tense in the past,
the British producer refused to have anything to do with the production of
Ishtar, their latest release. He even rejected an invitation to the films
premire, claiming that he didnt want to have an opinion on it, for fear, be it
negative, of not being able to keep it to himself after the screening. Ishtars
total cost, after running six months over schedule, had gone from $32 million
up to $49 million. Upon release, the movie was a huge commercial failure.
Warren Beatty and Dustin Hoffman held David Puttnam responsible.
According to them, the poor reviews and box-office results were due to his lack
of enthusiasm, and to his sabotaging the film by telling the press about its
production and post-production problems. Possibly, if he had trusted the two
stars ability to pull the film out, he may have attended the premire. The
television comedian and incidentally, Coca-Cola spokesman Bill Cosby also
held David Puttnam responsible for the failure of his first feature film, the
spectacular Leonard Part VI, even though he contractually had total control
over its production and had insisted that he be cited several times in the film
credits. He consequently joined the anti-Puttnam campaign exercised in the
rival studios, in the press and at the Coca-Cola headquarters in Atlanta (Brown,
1988;Yule, 1988; Loiseau, 1988 b).
As early as September 1986, David Puttnam publicly asserted his intention
not to renew his three-year contract with Columbia Pictures. This statement
immediately provoked a general uproar amongst the other studio C.E.O.s and
indeed the whole entertainment business. However, according to a number of
sources (Brown, 1988; Yule, 1988), the first dispute between David Puttnam
and his directors only dated back to May 1987. They then reproached him with
alienating too many people and with tampering with the franchises and
strategic assets of the studio, which were due to last longer than his
management: namely, Columbia Pictures library of films, the sequels to its
Journal of Strategic Management Education 1(1) 7

blockbusters, and the artists and agents the studio intended to do business with
in the future. David Puttnam nevertheless denied jeopardizing the making of
major sequels to existing blockbusters. He specified that he only wanted the
studio, which was financing these movies, to derive profits from them, which
seemed highly unlikely to him under the terms of the contract proposed by
their authors. Several days later, he participated in the popular television
program 60 Minutes without Coca-Colas top managers prior knowledge.
This was contrary to the firms communication policies.
Events started to move faster in the fall of 1987. On September 1st, David
Puttnam learnt from the press about Coca-Colas spectacular decision to
proceed with the merger of Columbia Pictures and Tri-Star, a mini-major in
which it held stakes, in order to overcome the huge losses of Ishtar and
several other potential commercial failures yet to come. Tri-Star general
manager, Victor Kaufman, replaced Fay Vincent as chairman of the new firm,
which was renamed Columbia Pictures Entertainment. However, David
Puttnam noted then that his contract stipulated that he only reported to Fay
Vincent, and only worked for a wholly owned subsidiary of the Coca-Cola
Company. That was no longer the case in the new structure. Victor Kaufman
refused the concessions he proposed and confirmed that he wanted to return to
the talent packages developed by CAA and other talent agents before
October 1986. On September 16th 1987, David Puttnam announced his
resignation to the studio personnel. He also maintained that the new
management had committed to giving the members of his team enough time to
prove their worth in Columbia Pictures Entertainment. In the meantime,
rumors began to spread (Brown, 1988; Loiseau, 1988 b). They asserted that the
British producer had not resigned, but was given the sack, with a substantial
golden parachute, at Ray Starks and Herbert Allens instigation. David
Puttnam denied these stories, and maintained that he resigned because Coca-
Cola breached his contract. They also accordingly compensated for the breach.
After Puttnams departure, Stark announced that he had started production
at Columbia Pictures of the two scripts that had previously been refused. One
of them never got made. Dawn Steel replaced David Puttnam as chairwoman
and C.E.O. of the studio. One of her first decisions was to green light the
production of Ghostbusters II and Karate Kid II as is. The studio announced
in March 1988 a $105 million loss, and a three-year operating plan that implied
severe lay-offs at its core. Puttnams most ardent supporters and closest
colleagues were among those dismissed. Sixteen of the twenty-five films
produced by David Puttnam for the studio were released during the summer of
1988. They accounted for a further $105 million loss (Kipps, 1989). However,
some Hollywood analysts claim that this result was due to the fact that the
studio considerably reduced the launching costs of these films after David
Puttnams resignation, hence sabotaging their theatrical release, even though
most of them received critical acclaim (Yule, 1988). In 1988, Columbia
8 Chronicle of an Aborted Hollywood Revolution

Pictures Entertainment established a historical record number of Oscar

nominations for a single studio. In particular, John Boormans Hope and
Glory and Bernardo Bertoluccis The Last Emperor, two of the projects over
whose American distribution rights David Puttnam had fought, were
respectively nominated in six and nine of the award categories. And yet the
new studio management did little for these films after his resignation. By
obtaining nine Oscars out of nine nominations, The Last Emperor established
yet another historical record.
The RCS obviously provides more detailed and controversial accounts of
the events summarized above and of their complexity. It also expands on
David Puttnams background and career up to 1986. Most data used to write it
came from contemporary archival sources. Facts were further explored
through a thorough interview of David Puttnam carried out in London in
February 1997. It was later completed using several interviews with other
major protagonists of the RCS, carried out in Los Angeles in spring 1998. All
primary data were hence collected more than ten years after the events reported
in the case study. Such an important time lag should not be recommended, if
only because it reduces the availability of primary data collection and increases
the risk of dealing with ex-post rationalizations of historical events, rather than
fresher and more objective recollections. The decision to write the case study
in spite of these obvious difficulties stems from the extraordinary resilience,
more than fifteen years on, of the events it describes, and on their exemplarity
in illustrating change management issues.
We do not, as strategy scholars and research scientists, have the power or
ethos to create corporate crises at will, nor to control for their occurrence.
There is a tough trade-off between the time when the events of interest took
place and their relevance to the understanding of fundamental strategic and
managerial issues, especially as MBA students increasingly tend to consider
that the best case studies are those that anticipate events or deal with them
almost in real time. Privileged access to companies and the use of new
technology in the classroom allow us to increasingly follow this pedagogic
pattern. However, when they have something to say, the good old paper-based
historical case studies should not be entirely discarded, if only because our
discipline and the populations of organizations that it investigates have a
history, of which major aspects at least should remain acknowledged. The
second part of this paper provides general elements of interpretation of the
Rashomon narrative. They are by no means comprehensive, and only illustrate
potential uses of the material introduced by the RCS.
Journal of Strategic Management Education 1(1) 9

3. Elements of Analysis of the Rashomon Case Study

This segment focuses on three of the topics raised by the case study. They all
relate to the overwhelming issue of the connection between changing strategy,
changing organization and changing formal and informal rules of the game in
a given industry. The first one puts the events described in the RCS into their
historical perspective. It is that of the disaggregation, caused by a major
institutional event, of the classical Hollywood studio system and its
consequences in terms of transaction costs and governance structures. The
second issue is central: through the depiction of some of the changes
introduced by David Puttnam and their implementation or lack thereof, it deals
with the confrontation between an individual and a system. It unaffectedly
leads to the third issue, which relates to the influential powers resistance to
change inside and outside of the organization, and to its dismissal of a
disruptive element.
One of the strategic intents clearly asserted by David Puttnam as soon as
he accepted Fay Vincents offer to run the studio was to turn it back into a
sovereign power, as in the golden age of Hollywood. This change in
Columbias strategy was likely to have a tremendous impact on the studios
internal organization and, be it implemented successfully, on the whole
American entertainment industry. Provided of course that the stakeholders it
primarily affected let David Puttnam get away with it. As shown in figure 1
below, during the Golden Age of Hollywood everything, from production to
distribution and exhibition, was decided internally by the Major Studios. There
were no intermediaries between them and the artists and technicians. Even the
biggest stars were bound to a studio by a seven-year exclusivity contract,
which allowed the producers to decide their parts and salaries. As they were on
a studio payroll, the risks associated with spiraling fees, which are now part
and parcel of the industry, hardly existed.
Congress finally voted the antitrust Consent Decrees in May 1948 after
several years of lobbying by independent distributors and exhibitors. They put
an end to the Major Studios forward integration by preventing them from
owning movie theatres. Paramount was the first Major to implement them in
1949, soon followed by MGM in February 1952 and Warner Bros. in 1953.
Oddly enough in the context of the RCS, Columbia Pictures was the only
Major Studio without any exhibition arm in the 1950s. As such, it was hardly
affected by this institutional change. New leisure activities, in particular
television, also appeared during the fifties, and intensified competition inside
the film industry. Instead of managing, as the other studios did, the shift from
vertical integration to disintegration, Columbia Pictures therefore started
investing in television programs as early as in 1951 though its Screen Gems
subsidiary (Quigley Publications, 1998). Under these new competitive
conditions, casting a star in a movie was no longer sufficient to guarantee its
10 Chronicle of an Aborted Hollywood Revolution

box-office success. Even though the major studios still retained power as film
financiers, soundstage lenders and distributors, the film sector became more
and more fragmented, as shown in figure 2 opposite. Of all the newly
externalized stakeholders, independent producers, talent agents and movie
stars gained most influence. All quickly became the new key players in
Hollywood. In this redefined and mostly external network of creative
activities, talent agents secured a privileged relationship with the studios. They
began to negotiate one-shot contracts for the artists they represented according
to their job description and involvement in the movie and to the box-office
results of their previous releases.

Figure 1: Restoring the Power of the Studios: Hollywood Studio Organization in the Golden
Age (1929 - 1949)

STUDIO
Artists under Soundstages
long-term contracts
Integrated distribution
In-house Technicians
Networks of theatres

FILM
Figures 1 and 2 evidently oversimplify an otherwise complex reality. They
only serve here as illustrations of the two ideal types David Puttnam used to
make his mission statement clear to Coca Cola and Columbia Pictures
executives. They can be used in class to exemplify dimensions of the
disaggregation of the American film industry in the nineteen-fifties and the
resulting governance issues and structural changes that emerged in
entertainment firms from the application of the Consent Decrees. Robins
(1989, 1993), Sadoul (1976), Balio (1985), Gomery (1987) and Vogel (1998)
in particular provide excellent references to these issues. The role and impact
of institutional change on firm strategies and structures, as developed most
notably by North (1981, 1990, 1991 a & b), Williamson (1997) and Scott
(1995) provide good grounds for discussion of the institutional dimensions of
Journal of Strategic Management Education 1(1) 11

the RCS. Parallels can also be drawn between the American film industry and
its European counterparts (Barker, 1989; Ghertman & Hadida, 1998), and
between the former and other industrial sectors having experienced similar
shifts in recent years. Works by Yoffie (1988), Eggertsson (1996) and Alston
et al. (1996) are of particular interest in terms of providing empirical examples
of such evolutions. The nature of the specific resources and capabilities valued
and developed in Hollywood before and after the Consent Decrees, as
discussed by Miller & Shamsie (1996), can also be debated here. Their
distinction between having and knowledge resources can be further linked
to transaction cost issues of internal production versus outsourcing of part or
all of the production and commercialization processes.

Figure 2: Restoring the Power of the Studios: the New Structural Arrangements Adopted in
Hollywood after 1949

Independent Producers:
pitch projects
to the Major Studios

Artists (actors, directors, Technicians:

scriptwriters): work sporadically for the
represented by Agents Major Studios (just like
who negotiate their fees the artists)
on a film by film basis.
STUDIO
Soundstages

Integrated distribution

FILM
Theatrical Networks

However, the main focus of the discussion should be the feasibility as well
as the economic and symbolic relevance, after nearly forty years of increased
disintegration and network-based organizational arrangements, of a reverse
move towards increased forms of integration and control. Indeed, Williamson
(1997) argued that informal institutions such as culture, norms and values take
roughly a century to change while formal institutions can take as long as
twenty years to be modified. Inside the firm, strategic or structural change
12 Chronicle of an Aborted Hollywood Revolution

obviously requires much less time. In this respect, David Puttnam may have
been over ambitious in trying to erase nearly forty years of institutional and
industry history and to revert to the traditional Hollywood system in less than
three years. Disintegration also allows the major studios, including Columbia
Pictures, to limit their search and internal development costs. A major studio
is the first to know about the film projects of the independent producers it has
signed first look contracts with. It can then choose to finance or distribute all
or some of these movies. Should it turn them down, the independent producer
is subsequently free to pitch them to other studios. Resorting to such
contractual arrangements is therefore relatively less committing than
developing an in-house production facility, even accounting for the fact that
most studios accommodate their independent partners on their lot and pay part
of their fixed costs. However, by doing so, the major studios also run the risk
of becoming nothing more than financing and distribution units, or in the
words of David Puttnam himself, empty shells. This classic outsourcing
issue has been addressed in particular both by transaction costs economics and
the resource-based view of the firm. It can also lead to fascinating class
discussions, in particular when addressed in parallel with the above-mentioned
long-term constraints to institutional change.
David Puttnams solution to remedy the studios lack of creativity was the
creation of a department in charge of the development of scripts based on true
stories. He did not, however, invent this structure. Other Major Studios and
local production companies had implemented it for many years. The Walt
Disney Company, which develops all its animation projects internally, is a
prime example of such an organizational arrangement. Besides, it did not call
in question the existing first look contracts the studio had developed in the past.
As a consequence, this addition to the existing structure was more symbolic
than anything else, and did not provoke too much turmoil inside the studio nor
at the scale of the whole industry. Yet, in order to be efficient, it is necessary
that the independent producers under a first look contract with a studio not be
both judge and judged in their relationship with the latter, which seemed to be
the case with Ray Stark and Columbia Pictures in 1986 (Brown, 1988; Yule,
1988; Kipps, 1989).
The nineteen-eighties were also the golden years of the talent package.
Through this system invented by Michael Ovitz, the most influential talent
agents impose on each project they pitch to a major studio their choice of
clients, mainly directors and leading actors. The studio has then to agree to the
talent package as a whole or to reject it altogether: it cannot decide to
individually hire those artists that form it. However and even if talent agencies
have the power to impose artists to studios through the talent package, when
all is said and done it is the studio that has the clout and the money to make the
movie happen. In the end, the studio therefore always has the last word,
provided it fights for it. David Puttnams alternative to talent packages was to
Journal of Strategic Management Education 1(1) 13

redefine their role as intermediaries. In his system, both internal teams of

developers at Columbia Pictures and independent producers would pitch their
projects to the studio. If the latter decided to accept them, it would then set out
to look for the best available staffing and casting for the movie, and would
either approach selected artists and technicians directly or contact several
talent agents to facilitate this process by operating more as advisors than as
artistic decision makers.
This was therefore a much more substantial and outward-looking
managerial change than the creation of new departments inside Columbia
Pictures. It was aimed at overthrowing the existing rules of the game not only
inside the studio, but also in the Hollywood film industry as a whole. Thanks
to the initial disintermediation movement of the early nineteen-fifties, some
independent producers, the talent agents and the artists they represented had
created over the years several structural constraints and informal network
arrangements whose strength David Puttnam may have underestimated.
Instead of taking the time to recognize and acknowledge their importance, he
developed a strategy aimed at attacking them upfront and debilitating them. To
make it successful and systematic, he would have needed powerful allies in the
industry. However, other studio C.E.O.s, who would have presumably
benefited in symbolic as well as negotiating and financial terms of such radical
changes in the overall power structure of the industry, only paid lip service to
them. Not surprisingly, they also alienated those stakeholders of the studio
whose position they threatened most.
David Puttnam may have adopted a subtler approach, if only to strengthen
first his position in the local professional network. Instead, he failed to
acknowledge the fact that Ray Stark had powerful supporters in Columbia
Pictures Administrative Board. His alienation of Michael Ovitz and CAA as
well as other talent agents in Hollywood also clashed with Stark, a former
agent and a close friend of Ovitzs. These points illustrate a dimension of
change management that still remains rarely addressed in the dedicated
literature, which focuses almost exclusively on internal sources of resistance
to change. In the RCS, and this may be the major contribution to the field of
strategic learning of this monograph, the main sources of resistance to change
are not inside the organization, but are formal and informal institutional and
structural constraints rooted outside of it. In the same way, it is the embedded
culture of the industry as a whole rather than that of Columbia Pictures that
impeded the realization of the revolution that David Puttnam was promoting.
Most of the changes proposed by David Puttnam were widely supported by his
employees and managers. Not by the studios external stakeholders.
In such a networked system of activities as the American entertainment
complex, these points allow us to extend Croziers (1963; Crozier & Friedberg,
1977) actor analysis theory to the whole industry rather than the organization
alone. According to this approach, an organization is always a social construct
14 Chronicle of an Aborted Hollywood Revolution

and a bundle of structured games. In order to play them, actors cooperate and
are interdependent. However they sometimes also pursue contradictory
objectives. As a consequence, if the organization is to be economically viable
in the long run, it has to set up a power system to help regulate and select
solutions susceptible to leading to an improvement of its returns (Crozier,
1963). At the level of the industry as a whole as well as that of the studio, the
RCS confirms the existence of such a power system, and shows that it is not
always hierarchical. It depends rather on the actors levels of control over
uncertainty zones (Crozier, 1963; Crozier & Friedberg, 1977). Obviously, Ray
Starks and Michael Ovitzs were much higher than David Puttnams, even
though he was the official head of one of the seven majors. They were both
well-established Hollywood players with strong networks of professional as
well as social relationships. Their position in Columbia Pictures and
Hollywoods professional network and informal power structure was much
higher than the British producers, who was both a newcomer and a foreigner.
MBA students are generally extremely talkative and eager to share their
experience as foreign executives or students in the USA and any other country
they have lived and worked in. Particularly when the case is taught to
international cohorts, this dimension of management, although having recently
become increasingly blurred by the globalization process and improvements in
information technology (dAveni, 1994), should not be neglected. The
instructors can fully exploit it in their teaching plan, for instance by addressing
the issues raised by the case study in the context of a role-play. Such a
pedagogic setting allows reinforcing the parallel between the RCS and the
eponymous movie, as students are asked to focus on and to represent the major
stakeholders of the case, e.g. David Puttnam, the top management of Coca
Cola, Ray Stark, CAA and some of the stars it represents. The RCS provides
enough information on the part of each of those players and is complex and
ambiguous enough to allow for such a scenario. Alternatively, information
asymmetries can spice up the session, and details specific to those different
roles (e.g., financial results of CAA, Columbia Pictures and the Coca Cola
company for the year 1986) can also be handed in on top of the original case
study exclusively to those students who are asked to undertake them.
Journal of Strategic Management Education 1(1) 15

4. David Puttnams Management of the Studio: a Disputed Balance or

an Aborted Revolution?

David Puttnam may have failed to take into account the actual ripple effects of
his words and actions because he was in a hurry to do as much as he could
during the time he had decided to spend in Columbia Pictures. After a violent
round of controversy, he shot himself in the foot when he told journalists about
the three-year duration of his contract and his intention not to renew it. Instead
of voicing out loud in newspapers and on national television their discontent
with the British producerss management, several of the above-mentioned
experienced Hollywood players directly channeled their grievances to Don
Keough and Roberto Goizueta. The two top managers soon found themselves
in a quandary. Should they keep supporting David Puttnam, or publicly admit
to surrendering to those powerful external constituents?
As has been already highlighted, David Puttnams agenda clearly included
changing not only the operating mode of Columbia Pictures, but also, by
extension, of the whole Hollywood studio system. Even if his September 1987
resignation was actually, as he asserted, due to a breach in his contract, Coca-
Cola did nothing to retain him in spite of his statement that he was ready and
willing to make substantial concessions. As much as they were a potential
threat to the existing structural arrangements in the industry, an alternative yet
complementary explanation of David Puttnams failure to reform the studio
and the Hollywood system lies with the way he chose to promote most of the
changes he was advocating and impose them on the studio and its business
partners.
Beyond the canonical framework of organizational change introduced by
Lewin (1960), more recent works by Kanter (1983, 1999; Kanter et al., 1992)
and Nadler (1998) outline the importance of taking into account the
organizations culture in order to successfully change its processes and
strategies. David Puttnams reference to Frank Capra and the heydays of the
studio in the thirties obviously werent enough to acknowledge his
understanding of its cultural heritage. He also failed to achieve political
support at the core of the local professional network, and his reforms made
several key players, most notably external to the studios official power
structure, lose face, feel threatened and act in self-preservation towards his
eviction (Kanter, 1983). Lastly, the change champions chosen by David
Puttnam inside the organization were either too low in the power structure to
really have an impact or had the same problems with which he himself was
faced. Indeed, most of them were also newcomers to Hollywood and as such,
were probably not fully aware of the existing rules of the game. The ones he
chose outside of the studio were journalists, and were consequently at the
periphery rather than at the nexus of the Hollywood professional network.
16 Chronicle of an Aborted Hollywood Revolution

These preferences appear to go against the classic recommendations to use

change champions holding key strategic posts in the organization to support
reforms (Kanter, 1983, 1999). Maybe David Puttnam thought that he had
found them in Don Keough, Roberto Goizueta and Fay Vincent. This was
counting without the external pressures inherent to the network-based nature
of the Hollywood film industry. It made external stakeholders of the studio as
important, if not more, than its internal staff members. One of the important
contributions to strategic education of the RCS is consequently to remind
students not to focus exclusively on the internal organization in their
identification of potential change champions or impediments to change, of
structural constraints and informal network arrangements and of uncertainty
zones and most importantly of who is controlling them. When appropriate,
they shouldnt neglect finding most of them outside of the organization. This
is true in particular of network-based industries, such as entertainment or
biotechnology. However, in an era of increased ease and speed of
communications, these conclusions can also be extended to more conventional
industry contexts.
At the end of the day, David Puttnam undoubtedly tried to reform the
operating mode and the structure of the studio, most notably by increasing the
level and frequencies of internal communications, by involving more of the
lower-ranking staff members in these interactions, and by creating and staffing
several new creative departments. Yet nothing was that exceptional or
revolutionary about those strategic decisions. At all times, studio employees
had been invited to film previews, and not all production companies in
Hollywood totally outsourced their creativity and internal development to
smaller independent producers and writers. The long-lasting impact that David
Puttnams management made on most of his then employees, business partners
and opponents probably lay more with his personal management style and
charisma than the actual strategic moves towards which he tried to gear the
studio. The British producer is a man of the people, whose down-to-earth and
congenial management style seemed to be appreciated by most of Columbia
Pictures employees (Yule, 1988). David Puttnam also claimed, more than ten
years after he left Hollywood, that the greatest satisfaction that he derived from
his experience at Columbia Pictures stemmed from the team he put together
there. After the events of September 1987 and their subsequent eviction of
Columbia, many of its members went on to become senior managers in several
of the most influential Hollywood studios.
However, several stars have too often perceived David Puttnam as
someone who didnt hesitate to settle his accounts with them in front of the
journalists cameras and microphones, and who consequently sacrificed the
economic interests of the studio and the career of the movies they were starring
in for the sake of his own publicity and image. Likewise, he was also seen by
some of his detractors as a foreigner who would not refrain from overtly
Journal of Strategic Management Education 1(1) 17

criticizing his rather generous employer and the whole Hollywood system
(Kipps, 1989). The financial results of the films David Puttnam produced over
his eleven months as C.E.O. of Columbia Pictures, as well as the total number
of Oscar nominations they obtained, provide objectives factors against which
his overall performance can be assessed. But whereas this second result is
unquestionable, the first one remains fairly litigious. Indeed, several sources
(Brown, 1988; Yule, 1988; Loiseau, 1988 b) argue that most of the films
released by the studio after his departure had their release sabotaged by its new
top management. This would partially explain the major discrepancy between
the critical acclaim and the record number of Oscar nominations and awards
received by some of these movies and their overly poor box-office
performance. Several studies clearly show a strong positive correlation
between the number of screens on which a movie is released and its
commercial success (see for instance Sochay, 1994; De Vany & Walls, 1997;
Eliashberg & Shugan, 1997; Boschetti & Marzocchi, 1998; Neelamegham &
Chintagunta, 1999). And yet, after David Puttnams departure, Columbia
Pictures effectively suppressed 150 of the cinemas anticipated for the release
of The Last Emperor. The studio later justified this action by arguing that it
was just seeking to reduce the total losses incurred on David Puttnams slate
of films.
Although it seems hard to believe that a firm could voluntarily add to its
problems with the sole purpose of discrediting one of its former members
(Kipps, 1989), it would make sense to do so in order to reduce the cognitive
dissonance (Festinger, 1957) caused by David Puttnams management style
and production and distribution decisions. As in any highly competitive
professional environment, there may be an almost maniacal desire in
Hollywood to defend ones decisions and to preserve ones position. One
relatively easy way to do so is by placing safe bets, most notably by green
lighting the production of sequels to highly successful films and of low-risk,
non-controversial and star driven movies. David Puttnam obviously
challenged this mindset. In this context, after he was gone, more conformist
production executives looking to protect their position and to restore their
bland security may have sabotaged his slate of films3.

3. The author is grateful to an anonymous reviewer for suggesting this explanation.

18 Chronicle of an Aborted Hollywood Revolution

5. Conclusion

This paper used the Rashomon case study to provide real-life illustrations of
crucial managerial and strategic issues related to the definition and scope of
change management inside a network-based industry. In order to do so, it also
dwelled into the questions of the reversibility or rather lack thereof of
institutional changes leading to industrial disaggregation as well as their
consequences in terms of transaction costs and governance structures for
incumbent organizations. It also suggested theoretical paths for discussion and
interpretation of these. More than fifteen years after the events described in the
case study and briefly related in the second part of this paper, several of the
questions raised above remain in abeyance. Perhaps the most troubling of them
all is the formidable resilience of David Puttnams management of Columbia
Pictures, which although it effectively lasted less than a year, is still to this day
one of the most passionately debated and discussed in all of Hollywoods
hundred years of history.
This paper attempted to provide elements of interpretation and explanation
of such resilience. The latter is all the more surprising as everything, from early
winter 1987, seems to have been done in order to return to the previous status
quo and to erase the Puttnam era as quickly as possible from Hollywood
memories. Most of the measures he had taken were immediately called off, the
studio went back under the stars, their agents and some independent
producers control, and many of the people David Puttnam hired were laid off
after his resignation (Brown, 1988; Loiseau, 1988 b). In the long run, the
British producer may have had the means and will to reform the whole
American studio system. But he ran out of time. Maybe was he also too eager
for reform, and consequently failed to efficiently identify the change
champions he would have needed inside and most importantly outside of the
studio to make his revolution possible. As a consequence, as in other cases of
organizational change which have also been too sudden and hence nipped in
the bud, it became necessary to the very survival of the organization and of the
whole system that he be excluded from them both.
Journal of Strategic Management Education 1(1) 19

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