But again, Laughlin thought salvation was in sight. A financial angel from New Jersey appeared, offering $3.5 million from money made in the real-estate business, but when it came time to sign the check, the guy backed off. Good-bye $3.5 million.
And so it went. Several times during the ensuing months, interested investors shuttled through Laughlin's Brentwood workroom, all promising the moon but delivering only disappointment. To hear it from Laughlin, the ersatz financiers were all aware of his past successes, impressed by his nearly completed picture, and intrigued by his unconventional ideas about reaching audiences and attaining larger profits for the motion-picture industry. And then nothing: no calls, no explanations, no money.
Anyone who studies Laughlin's career might well ask at this point how it is that a successful filmmaker, who had made millions from earlier movies, now found himself so thoroughly broke. Laughlin, however, says this should not be all that hard to understand. He then proceeds to inventory a long list of expenses, among which he includes the $5 million per year it cost him to operate his production company; the $3.5 million he invested in his non-Billy Jack film, The Master Gunfighter, which was a box-office hit but not a financial success; and the $7.5 million he put into Billy Jack Goes to Washington, which was never released at all; and additional millions in film-print costs, advertising costs, distribution fees, and legal fees. Even though Laughlin's analysis seems to fit the end result well enough, the overarching impression upon hearing it is that while this man's conceptual skills are of a very high order, his financial-management abilities are rather poorly developed.
Whatever the actual blend of personal limitations and just plain hard luck, it was enough to beach Laughlin in his Brentwood workroom -- broke, his comeback stalled, his film stillborn, his house in jeopardy, and forced to ponder the mercurial vicissitudes of filmmaking.
So, the early summer of 1987 had not gone as planned. But the Lord works in mysterious ways. After all, it was dealing with the difficulties of the moment that now led him to the idea for what he hoped might finally allow him to realize his revolutionary and commercial dream of a new studio.
Laughlin's first acquaintance with the home-video industry came during negotiations for the sale of the videocassette rights to The Return of Billy Jack. He was amazed by what he found. Here was a socioeconomic phenomenon, a riot of growth and profit the likes of which had seldom been seen in the history of film entertainment. In 1980, only 2.4% of households owning televisions also owned a videocassette recorder, but by late 1987 the figure had grown to 54%. During the same period, according to Video Marketing, a newsletter publisher and research group, rentals and sales of prerecorded videocassettes had increased from $264 million to an estimated $7.2 billion -- almost twice the size of the total domestic box-office take of the motion-picture industry. Not surprisingly, people were falling all over themselves trying to get in on the action. In addition to some 27,500 specially videocassette retail outlets, racks of cassettes were also turning up in all sorts of odd places, including convenience-store chains, florists, card shops, dry cleaners, and liquor stores. Indeed, many observers had come to think that the whole thing had gotten a little top heavy and that soon the business was going to slow down and shake out.
Superficially, the obvious clutter within the industry did seem to suggest that the window of entrepreneurial opportunity had long since slammed shut. Laughlin, however, did not see it that way. Although the industry's growth had been explosive, it had also been haphazard, pulled forward more by a seemingly insatiable consumer demand than by any comprehensive planning or forethought on the part of manufacturers, distributors, and retailers. As a result, the landscape was littered with thousands of uncoordinated free-lance initiatives. Laughlin felt certain that the first dedicated and vertically integrated production and marketing company with a nationally recognizable name and its own retail outlets was almost guaranteed to capture a hefty market share.
In addition, recent studies had identified a growing interest among consumers to buy rather than rent cassettes, particularly if retail prices continued to drop from $60 to $80 per tape to less than $20. Retailers had, as a group, been somewhat reluctant to sell tapes because rentals were far more profitable. But their reluctance had particularly severe reprecussions for the motion-picture producers, who, under current arrangements, receive a cut of the sales proceeds but not a dime from the rentals that now account for 63% of the industry's revenues. On several occasions, the studios had tried to correct this stupendous irony, and on several occasions they had failed. If a company could be established that offered a way around the video stores so that tapes could be sold to consumers directly, Laughlin believed that the studios would adopt that company instantly.
There were also indications that the video retailers were vulnerable from other directions. Laughlin's studies, for example, indicated that 85% of the people going into a video store cannot get the title they prefer to rent and leave the store with nothing or take a title they really don't want. These same studies showed that 70% of new VCR owners rent only occasionally after the first six months because they find the hunt for tapes too inconvenient.
