All American Communications Inc.

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All American Communications Inc.

808 Wilshire Boulevard
Santa Monica, California 90401-1810
U.S.A.
(310)656-1100
Fax: (310) 656-7410
Web site: http://www.aacom.com

Public Company
Incorporated : 1991 as All American Television
Sales: $236.5 million (1996)
Employees: 321
Stock Exchanges: NASDAQ
SICs: 7812 Motion Picture & Video Tape Production Services; 7922 Television Program Producers; 7389 Recording Studios

All American Communications Inc. is a major global producer and distributor of television programming and other entertainment media including music and motion pictures. An outgrowth of the Scotti Brothers record label and record production company, All American rose to prominence in the competitive U.S. syndicated television production industry in the early 1990s when it began producing and distributing a little known one-hour action show named Baywatch after it had been canceled by NBC. Soon a hugely popular and profitable television property around the world, Baywatch generated the income to allow All American to diversify into game and talk shows, movies, and other syndicated television productions through the acquisition of U.S. and international entertainment companies. In 1996 an estimated 100 million viewers watched Baywatch each week in more than 110 countries around the world.

In 1996, All American ranked as the 15th largest firm in the U.S. motion picture and video production industry, behind industry leaders Sony USA, Walt Disney, Time Warner, and Universal Studios, among others. All American is the world’s largest supplier of game show programming in terms of variety of formats and number of local language versions, and it is the owner of The Price Is Right, the longest-running game show in the U.S. television history. Its portfolio includes some 32 television series, about 30,000 game show episodes, 145 motion pictures, and many children’s and special documentary television shows. In 1996, its recorded music and merchandising segment, whose major artists included James Brown and “Weird Al” Yankovic, contributed about 11 percent of the company’s total revenues. In 1996, All American maintained administrative offices in California, New York, London, Athens, and Germany as well as production studios in Marina del Rey, California, and Hurth and Koln, Germany.

From Valley of the Dolls to All American Television: 1967-1990

In 1967, Anthony J. Scotti was a struggling actor whose claim to fame was an appearance as ’Tony Polar,” the heartthrob protagonist of the popular film version of Jacqueline Susann’s bestseller The Valley of the Dolls. For all the boost the part gave his Hollywood career, Scotti found the actor’s life dull—long hours of waiting punctuated by a few moments of real work. As he later told Forbes magazine, “I had come to the conclusion that acting was the most boring God-awful thing a human being could do.” Acting on that sentiment he abandoned his film career in 1971 and joined the record production arm of film studio MGM as a senior vice president.

With three years of entertainment experience under his belt in 1974 he joined forces with his brother Ben to form Ben Scotti Productions, a music marketing firm that went on to handle such artists as the Electric Light Orchestra, Eddie and the Cruisers, and Survivor. In 1979, the brothers branched out into the television business, producing a pop music show called America ’s Top Ten, which featured Casey Kasem in the emcee role. In 1981 the show’s success led the Scottis to enlist Joseph E. Kovacs, a seasoned entertainment industry executive, to form a new entity, New York-based All American Television (AATV), to distribute television shows and sell commercial time to advertisers (the company’s name derived from Anthony Scotti’s success as a football hero during his high school days). In 1982, the team was expanded to include George Back, the founder of a small but profitable television syndicator in New York City, and Sydney Vinnedge, a veteran of television and radio advertising with the J. Walter Thompson and Grey Advertising agencies.

In 1985 Kovacs spearheaded the company’s decision to go public, and AATV began trading as a “pink sheet” on the overthe-counter (OTC) market and then the New York Stock Exchange. By 1986, the firm was posting a net income of $485,000 and—after a loss of $850,000 in 1987—enjoyed another profitable year in 1988. By 1989, All American’s net income had risen to an all-time high of $635,000, and the Scottis decided to merge AATV and their still privately held Scotti Brothers Entertainment Industries.

“Baywatch” and Ratings Heaven: 1991-92

In early 1991 Scotti Brothers Entertainment Industries and AATV finally merged in a stock swap that created the television/music recording core of what would eventually become All American Communications Inc. Anthony Scotti became CEO, and in January 1991 he recruited Myron Roth, a former executive with MCA Records and CBS Records West Coast, to become All American’s president and chief operating officer. Syd Vinnedge was named senior executive vice president and Ben Scotti was named executive vice president of the records group. In 1990 the Scotti Brothers record operation signed an agreement with the Bertelsmann Music Group (BMG) for the worldwide distribution of its recordings until 1996, but despite sales of $8.8 million All American’s net income for the year fell to $255,000.

Over at network giant NBC, however, a little appreciated one-hour “action drama” show named Baywatch was reaching the end of its first—and, it appeared, last year in prime time. Led by David Hasselhoff, the 42-year-old star of the mid-1980s TV hit Knight Rider, Baywatch dramatized the adventures of a well-chiseled team of co-ed lifeguards on a southern California beach who were regularly assaulted by gunmen, boating mishaps, near drownings, predatory sea life, and troubled lovers. As AATV executive Syd Vinnedge later recalled, “The [Baywatch] property was recognizable and distinctive, whether you liked it or not.... There was a buzz about it and we built on that.”

Unhappy with the show’s ratings, NBC canceled it in 1990, but All American, noting the canceled show’s already remarkable popularity overseas, decided the sandy soap held promise as a first-run syndicated vehicle and acquired its rights in late 1990 through LBS Communications Inc., an advertising barter sales company. A traditional “strip” syndicated television show is a previously seen block of network shows (with at least 65 total episodes) that is distributed by companies like All American to independent broadcasting companies around the nation for airing on a five-day-a-week schedule. The independent distributor or “syndicator’’ tries to sell the show to enough local television stations so 70 percent of the entire U.S. television market is covered. Once this “clearance level” is achieved, the syndicator can sell national advertising time to big sponsors like MCI, Kellogg Company, or Proctor & Gamble. The syndicator may receive cash from the local TV station for the block of shows or—in a “barter syndication” arrangement—it may receive the advertising time allotted to the program, which it can then sell for a profit to national advertisers.

Baywatch would have been a typical syndicated product for All American except that with only 23 episodes already shot new episodes had to filmed before the start of its first syndicated season in September 1991. As an NBC commodity, Baywatch had been an expensive item. Produced for the network by Grant Tinker/Gannet Entertainment, a typical episode took seven to eight days to film at a cost of $1.2 million, an all too typical price for most network programs in the 1990s. To ensure that the new syndicated version would be profitable, All American insisted that it be produced quickly and cheaply. Its ace in the hole was the show’s star, Hasselhoff, who had been named one of the show’s four executive producers and, like the show’s other actors, offered a cut of its profits. Hasselhoff immediately became one of the most fervent supporters of the show’s new stripped-down production strategy, which included less wastage of film, the use of cheap locations and accommodations, the streamlining of the approval process for changes and decisions, the use of smaller production staffs, and the agreement with industry labor unions to permit flexible work rules.

All American and the Baywatch Production Co. were also helped in no small part by having raised $10 million in presales production, advertising, and distribution revenue from overseas broadcasters. Between May and November 1991 the 22 episodes of the show’s first syndicated year were shot at a cost of $775,000 an episode. By November 1991 Baywatch had already become the most popular American show in Great Britain and had been sold to every major TV market in the world (except Brazil) under such names as “Alerte a Malibu,” “Guardianes de la Bahia,” and “Mishmar Ha-mifratz.” At home, All America’s Baywatch partner LBS Communications had sold it to 147 U.S. stations, or 90 percent of the total market.

Company Perspectives:

All American’s principal business strategies are to develop, produce, and distribute quality television programming on a worldwide basis; increase its library of programming for television distribution by both internal production and’acquisition of rights from third parties; acquire assets or business complementary to its current operations; and develop its recorded music operations through both new and established artists and increasing sales from its catalog.

With its sales moving briskly toward $35 million, in March 1991 AATV officially changed its name to All American Communications Inc. (All American) and pursued the acquisition of its Baywatch distribution partner, LBS Communications, which, bloated by debt, had declared Chapter 11 bankruptcy. As Baywatch’s first successful syndicated season wound down, All American attempted to demonstrate its independence from its beach-centered cash cow by airing its own two-hour documentary on the JFK assassination, “The JFK Conspiracy,” the first of many attempts to establish an identity independent of bikinis and surf boards. To raise capital it made a 750,000-share public offering of stock in May, generating some $6 million, and in October announced its long-awaited merger with LBS Communications. Anthony Scotti decided to name LBS’s founder, Henry Siegel, All American’s new president, and Henry’s brother Paul Siegel became All American’s new president of international and ancillary markets. The distribution rights of Baywatch and the game show Family Feud reverted to All American in the agreement, and with All American’s sales plowing ahead to almost $60 million, Baywatch began filming its second season with a new cast member, a young Canadian blonde named Pamela Anderson, who became a global sexual icon and helped lift the show to even greater popularity. By the end of 1992, All American’s Scotti had been profiled in Forbes magazine and the company’s first big attempt to clone its Baywatch success—an action series called Acapulco H.E.A.T. —had been sold to half the U.S. independent television market.

The “Baywatch Franchise” and After: 1993-94

The Baywatch juggernaut continued to almost singlehandedly propel All American’s revenues and stock price throughout 1993 and 1994. By July 1993, All American was marketing a special new Baywatch package for a strip (Mondaythrough-Friday) rerun syndication for the 1995-96 season that would include the first 23 NBC episodes of 1989-90 and the 88 new episodes already filmed or to be shot through the end of the 1994-95 season. By the beginning of its third syndicated season, Baywatch’s ratings had climbed from a respectable 4.4 in 1990-91 to a very healthy 7.7, and All American’s revenues were eclipsing the $70 million mark.

Baywatch was among the top three syndicated first-run action dramas in the United States by early 1994, and at an industry conference in France in April, All American executives announced that Hasselhoff had signed a multiyear, multiproject contract with the company to star in Baywatch through the end of the 1995-96 season and to develop a son-of-Bay watch action series that he would star in and produce. Whenever—if ever— Baywatch ceased production, the show’s international distributor estimated it would continue to earn money for All American for at least another 10 years.

All American management continued to attack the widespread Wall Street perception that the company was wholly dependent on Baywatch for its rising position in the entertainment industry. Thus, in December 1993 All American’s Scotti Brothers Records operation announced a new urban/rap subsidiary named Street Life Records that in later years would feature such African American urban artists as Skee-Lo, Comrads, and Craig Mack. In television, the popular Family Feud game show was being readied for its sixth season of syndication in early 1993, and in July All American announced the impending rollout of a live-action animated children’s show named Bots Master for the 1994-95 season.

Moreover, production of the Baywatch spinoff Acapulco H.E.A.T. began in Mexico in July 1993, and in September All American announced another Baywatch offshoot: a beachbased athletic competition show named BeachQuest that would pit four athletic young men and women each week against a team of “Hard Bodies” in a series of events staged on the beaches of California. Universal Television immediately protested that the BeachQuest name was an infringement of the seaQuest DSV TV series produced by Steven Spielberg. All American’s Paul Siegel called the resemblance “purely coincidental” but within a year the show had been renamed BeachClash. Finally, in November 1993, All American announced that—in hopes of repeating its good luck in rescuing Baywatch from NBC’s cancellation bin—it was acquiring the 13 episodes of a canceled “femme fatale police show” named Sirens from ABC for syndication beginning in September 1994.

Branching Out: 1994-96

Despite sales of almost $115 million in 1994, All American found itself once again fighting its image as a “one-show wonder” when it was forced to pull the plug on Acapulco H.E.A.T after half a season and Sirens after a disappointing first year. Amid rumors that Henry and Paul Siegel were being shown the door because of their dissatisfaction with All American’s decision to drop Acapulco H.E.A.T., in July 1994 All American acquired a stake in international game show producer Fremantle Group from New York-based advertising giant Interpublic Group for $63 million in cash and stock. (Fremantle had handled the overseas distribution and format sales of All American’s Family Feud for several years.) In exchange for a 20 percent interest in All American, Interpublic would give All American some of the programming rights to Fremantle International’s 93 game shows, which included local language versions of American game show stalwarts like The Dating Game, Family Feud, Divorce Court, The Honeymooners, The $25,000 Pyramid, The Price Is Right (called Le Juste Prix in France), and Let’s Make a Deal (Geh Aufs Ganze in Germany)—all highly popular in their foreign markets. As an All American executive told Forbes magazine, “In markets where programming is scarce, nothing sells better than game shows. They are cheap, easy to produce and outrageously popular.” Although the formats of the shows followed the basic formats of the American originals, the hosts and guests were all natives of their country, and the shows were so closely tailored to their markets that viewers of the French version of The Price Is Right were sometimes known to express outrage that the Americans had tried to copy the show for American TV audiences. The move opened large profit opportunities in the growing international game show industry and finally gave All American another revenue leg to stand on.

A month after the deal was struck Fremantle International’s former chairman, Larry Lamattina, replaced Henry Siegel—the man who had rescued Baywatch from oblivion—as president and CEO of All American Television. Siegel was invited to stay on in a nonpresidential role but later left to form Seagull Entertainment Inc., while his brother Paul remained at All American as president of international and ancillary operations. Anthony Scotti’s determination to lessen All American’s reliance on Baywatch continued in July 1994 when All American announced that 52 episodes of its new childrens’ series, Superhuman Samurai Syber-Squad, would be available for distribution to TV stations. Similarly, in November it launched two “reality strips” (nondramatic series for five-day-a-week broadcast)— The Richard Bey Show and Thanks a Million —and announced that it was considering developing an animated version of Baywatch for Saturday mornings and a movie network to feature first-run made-for-television movies. Meanwhile, 32 foreign countries were negotiating for the broadcast of All American’s BeachClash show, which had also reached the 70 percent clearance level in the U.S. market.

With Baywatch continuing to generate millions a year, in October 1995 All American took another step toward balancing its sources of revenue by acquiring, for $50 million, the assets and library of Mark Goodson Productions, the producers of more than 40 classic game show formats, including Password, Match Game, Concentration, and To Tell the Truth (as well as The Price Is Right and Family Feud, whose foreign distribution rights All American had acquired through Fremantle). “The Goodson acquisition is an important element in our strategic plan to produce and distribute programming for every country in the world,” Scotti told the press. With 1995 sales of $228.8 million, All American could claim a revenue growth rate for 1991-95 of more than 60 percent, but its acquisitions had larded it with debt, and in October 1995 it announced a $45 million public stock offering. With Baywatch’s worth alone estimated at $74 million, however, some Wall Street analysts still wondered if All American, despite its diversifying moves, had truly escaped the “one-trick pony” label.

Hasselhoff’s new project had become Baywatch Nights, an action-oriented drama starring Hasselhoff as a kind of beach detective in a vehicle All American advertised as an “unbeatable blend of nonstop action and fast-paced humor” with a “strong appeal to [the] young adult audience.” Its ratings proved to be only adequate, however, and, more ominously, Baywatch’s own ratings in the 1995-96 season—its sixth— were 22 percent lower than the year before. Still, its sale into rerun syndication in 1995 had added a whopping $33 million to All American’s coffers, and the company had successfully licensed it to cable provider USA Network, ensuring even more future revenue. An agreement with the Gerber Company, headed by former Columbia Pictures television executive David Gerber, contracted Gerber to develop programming for All American, which hoped he would be able to deliver a blockbuster like the shows thirtysomething and In the Heat of the Night that had established his reputation. In August 1995, Gerber was named president of All American Television Distribution.

All American’s next attempt to capture the fickle interest of the TV market was a one-hour live action series named The Adventures of Sinbad, which hoped to duplicate the success enjoyed by such mythology-based action series as Xena: Warrior Princess and Hercules when it debuted in September 1996. Meanwhile, Baywatch was readied for its seventh syndicated season and Baywatch Nights won the go-ahead for its second season. In March 1996, Scotti Brothers, which since 1982 had released some 142 albums, officially changed its name to All American Music Group and announced a new distribution deal with Warner/Elektra/Atlantic that promised to increase its penetration of the crowded pop music market. “Weird Al” Yankovic, a parodist of pop hits, had emerged as the most lucrative of the 17 artists on its 1996 roster, but the label was also balanced by the recordings of Count Basic and Sara Vaughan as well as several soundtracks (including, naturally, that of Baywatch).

In April 1996, All American paid Interpublic Group $25 million for its stake in the previous year’s acquisition of Mark Goodson Productions, giving it total control over the Goodson library of game show formats and recorded episodes. Two months later Scotti expanded again, purchasing international talk show producer and distributor Orbis Entertainment Co., which was rechristened All American/Orbis Communications. The acquisition significantly bolstered All American’s shift into international television production and distribution and led to All American’s second domestic foray into the talk show niche in the fall of 1997, Arthel and Fred. Its first attempt, the lowbrow The Richard Bey Show, fell below the 50 percent national TV market “clearance” and was axed in November 1996. Further, in July, All American acknowledged the growing importance of the product spinoffs spawned by the popularity of its TV series by creating an in-house licensing and merchandising division, to increase its control of Baywatch and other merchandise lines.

In late 1996, The Adventures of Sinbad was displaying sufficiently positive ratings to encourage All American’s management to believe it had finally escaped the Baywatch limitation with a new vehicle that might survive on its own. In November, Tribune Entertainment withdrew from a short-lived partnership with All American to produce the game shows Card Sharks and Match Game for the U.S. market, and in December Pamela Anderson Lee disclosed she was leaving Baywatch at the end of the season to pursue other projects. All American announced that it intended to press on with domestic game show production for the 1997 season to exploit a perceived shift in viewers’ interest from daytime talk shows to game shows like Family Feud.” We’re committed to game shows,” Syd Vin-nedge announced, “our enthusiasm is undeterred.” Moreover, in January 1997, All American announced another new tack: a weekly “science-fiction anthology” series narrated by Rip Torn and featuring two stories per episode. All American’s long struggle to prove it was more than “just the Baywatch company” was finally winning the agreement of industry observers. In February 1997, the Wall Street Journal noted that the company “is quietly emerging as a diverse and disciplined international entertainment company.” “We have built a business,” CEO Scotti triumphantly commented, “right under the nose of Wall Street.”

Principal Subsidiaries

All American Television, Inc.; All American Television Production, Inc.; All American Entertainment, Inc.; All American Fremantle International, Inc.; All American FDF Holdings, Inc.; All American Goodson, Inc.; All American Orbis, Inc.; All American Consumer Merchandising Group, Inc.; All American Netherlands B.V.