Carolco Pictures was an independent motion picture production company. Mario Kassar and Andrew Vajna found it in 1976. They purchased the name Carolco from a defunct company in Panama; the name had no meaning.
Carolco came to prominence in Hollywood with the release of its movie First Blood, starring Sylvester Stallone in 1982. Kassar and Vajna bought the film rights to the First Blood book for $385,000. There was no guarantee the film would do well, but it did great, making $120 million worldwide.
With the success of First Blood, Carolco made a sequel that was released on America’s 10 year anniversary of its withdrawal from Vietnam. The movie was also a success making $300 million worldwide and making Carolco a major player in Hollywood.
After the success of the First Blood films, Carolco transitioned into other entertainment outlets. They started a distribution deal with TriStar Pictures and entered the home video distribution market. Carolco then acquired television syndicator Orbis Communications for $15.4 million, to start a television production and distribution company.
Carolco developed a strategy of lavishly overpaying movie stars like Sylvester Stallone and Arnold Schwarzenegger. The company thought process was that the actors’ star power was well worth the excessive pay because of the consumers they would drive to movie theatres. The strategy worked with Stallone and the First Blood movies, so it only seemed right to keep the strategy going.
The company released a string of movies after First Blood, like Red Heat, Lock Up, Jacobs Ladder, King of New York and Mountains of the Moon. None of the movies reached the heights of the First Bloods, but they kept Carolco relevant in Hollywood.
The stories of Carolco’s lavish spending ways became a legend in Hollywood. There were many parties, private jets, generous dividends, firework shows announcing new movie deals and stretch limos all over LA with the company’s name plastered on them.
Vajna started disagreeing with the direction of Carolco. Vajna wanted the company to keep its independent roots, whereas Kassar wanted Carolco to morph into a major studio. The disagreement over direction made the partnership unworkable, and Vajna was paid 100 million to sell his shares of the company.
In 1990, Carolco released Total Recall. The movie was a worldwide smash that made $262 million worldwide. With the successes, Carolco ramped up the payout it gave for movie scripts and to secure multi-picture deals with actors. For Terminator 2, the company gave Schwarzenegger a $17 million jet and a $14 million dollar salary.
A recession hit the world in the early 90s, and it made borrowing enormous sums of money difficult. The companies home video and tv companies started faltering. Terminator 2 made $520 million worldwide, but because of the company’s extravagant spending, the company still posted a $91 million dollar loss for the first 9 months of 1991.
The company released a string of duds after Terminator 2 like Rambling Rose, Defenseless and The Dark Wind. It bounced back with Basic Instinct, which made $352 million in 1992. Unfortunately, the rest of the movies it made that year flopped or didn’t do as well as expected. Films like, Aces: Iron Eagle III, Universal Soldiers and Chaplin.
The company didn’t have enough money to produce Cliffhanger, and they had to make an unfavorable deal just to get the movie made. The deal required Carolco to give up its cinema and home video U.S. distribution rights. Cliffhanger grossed $255 million worldwide, but very little of that went to Carolco because of the deal.
Crusade was the next big blockbuster up for Carolco. The movie followed the Carolco blueprint, a big budget action film with a mega star (Schwarzenegger) attached to star in it. The budget for Crusade exceeded $100 million and Carolco had a decision to make. Carolco couldn’t afford to finance two big budget movies at one time, as it was also making Cutthroat island subsequently. Carolco dropped Crusade and kept developing Cutthroat Island as they figured it would be more crowd pleasing.
At this point in Hollywood, Carolco’s reputation had deteriorated so badly it had to settle on Matthew Modine as Cutthroat Island’s lead actor. The movie ran over cost, and Carolco’s only hope for survival was that Cutthroat becomes a huge box office success. Carolco sold off the rights to movies already in production like Stargate, Showgirls and Last of the Dogman, just to pay for Cutthroat Island. They released Cutthroat in December 1995, the movie only grossed 10 million. It cost $98 million to make the film. The film bombed and had one of of the highest losses in film industry at $147 million. Cutthroat Island was so bad, it made pirate genre movies unmakable until the Pirates of the Caribbean movies were made.
Carolco entered Chapter 11 bankruptcy and sold its assets to Canal+ for $58 million in 1996. Kassar and Vajna reunited in 1998 and formed C2 Pictures. The company would produce Terminator 3: Rise of the Machines and Basic Instinct 2. Neither film would reach the box office heights of its predecessors.
Mistakes were Made:
1. putting a sledgehammer to the market scale
Carolco had a simple strategy, they over paid to secure movie stars to star in big budget action films, hoping the movie would become a box office blockbuster and more than cover its costs. When the strategy worked with the First Bloods, Total Recall, Basic Instinct and Terminator 2, it paid off big time. The issue was when the film didn’t do as well, and that fee had to be paid regardless of box office success. Carolco upset the market and forced other studies to up the pay for star actors/ actresses in movies. This strategy was brilliant for actors but the studios had to be certain, the film would be a success to take on that type of financial burden.
In the NFL, teams got mad at the Rams when they paid Todd Gurley early and big and totally reset the running back market. There was no need to do this, and now other teams had to meet this standard. A few years later the Rams had to cut Gurley just to get out of the contract because he wasn’t living up to it. Carolco was YOLO about the whole thing and just assumed things would just work out. It’s good to believe in yourself, it’s also good to have contingency plans if things don’t go according to plan.
2. Money to blow
We see this type of story often in life. A newly rich and successful person or company just spends money like there is no tomorrow. The assumption is that the good times and money will just flow endlessly forever and there will be no setbacks. We know that’s not the case, there is always that unexpected storm, a recession, a setback, catastrophe, misstep, or disaster that is not accounted for. No movie production company makes endless blockbuster hits, there will be flops. It happens so much, they should account for it for when making the budget. When the recession hit and the movies flopped, Carolco had no safety net to keep it afloat during the hard times.
Carolco is like Icarus from Greek mythology. They lived fast and hard and then flew too close to the sun and died. If Carolco slowed down some and didn’t operate so lavishly, it probably would have had the movies Independence Day and Titanic because it had a close relationship with both film directors. Both films made a combined 3 billion dollars. Carolco burnt itself out so it couldn’t sustain itself to weather the storms to get to the next blockbuster film. Slow and steady always wins the race.
