Pathé Sa Business Information, Profile, and History

History of Pathé Sa

One of the most illustrious names in motion picture history, Pathé remains one of France's leading forces in film production and distribution. Led by Jerome Seydoux, whose younger brother Nicolas has long served as the head of another illustrious French name in cinema, Gaumont, Pathé operates its own network of some 300 movie theaters and multiplexes in France and Holland; produces and distributes films for cinema and for television; owns its own cable television and satellite television networks (the theme channel Voyage and a 51 percent share of AB Sports); owns the daily newspaper Liberation; and, in 1998 purchased a share of the Olympiques Lyonnaise soccer team.

Until 1999, Pathé also possessed a 17 percent share in BSkyB Television, one of the leading European satellite broadcasters, jointly owned by Rupert Murdoch, and a 20 percent share of CanalSatellite, the leading satellite television provider in France. These two holdings represented the largest part of Pathé's revenues, which reached FFr 1.18 billion for the company's 1998 year. In June 1999, however, Vivendi--in the process of reinventing itself as a major force in European communications--announced that it had taken control of Pathé and was merging the two companies' holdings with that of CanalPlus, parent of CanalSatellite and controlled at 34 percent by Vivendi. The merger agreement would group Pathé's satellite television holdings under Vivendi, while giving Seydoux full control of Pathé's film production, distribution, theme channels, and other communications holdings. Seydoux, who previously led the breakup of former Pathé parent Chargeurs International and who continues to control both companies, has chosen to keep Pathé off the public market.

Founding French Motion Picture History

Born in 1863, Charles Pathé became one of the first to recognize the potential of a new generation of inventions in the 1890s. Originally from the French Alsace region, Pathé had come to the Parisian suburb of Vincennes with his family in the 1860s. The Pathés owned a small delicatessen; Pathé's older brother Jacques would remain close to the family trade, operating a butcher's shop in Saint Sauveur. Charles Pathé came to work with Jacques, and proved so successful at building his brother's trade that Jacques gave him a gift of a thousand francs. Pathé looked toward founding his own business: a traveling butcher's serving France's fairs and markets.

Instead, Pathé traveled to Buenos Aires aboard a ship of the young company Chargeurs. In Argentina, Pathé attempted to sell laundry machines. A bout of yellow fever, which killed his partner, would send Pathé back to France soon after. By 1891, Pathé was back in Vincennes, now operating a family-owned bistro. A falling-out with his parents would set Pathé, now broke and newly married, on his own.

In 1894, however, Pathé would find his calling. A new invention--the phonograph, created by Thomas Edison--was making the rounds of the country's fairs and markets. Pathé quickly recognized the phonograph's potential. After borrowing 700 francs, Pathé bought his own phonograph and began traveling the market circuit. Pathé's traveling days were brief, however. In 1895 Pathé opened his own phonograph shop, not only selling the machines but also establishing studios for recording and selling rolls of music. The following year, Pathé added another Edison invention, the kinetoscope, which was then making a successful tour of the country's fairs.

By 1896, Pathé had convinced his brothers to join him in his growing business, and Pathé Frères was born. Brother Emile would take charge of the company's phonograph operations, and Charles Pathé would launch the company into motion pictures. Pathé was joined in this by Henri Joly, who, with Pathé's backing, invented a so-called "chronophotographique" camera-projector, one of the first of the true "motion picture" devices. Despite a falling out with Joly, Pathé would retain possession of the latter's machine. By then, the Lumière brothers had already realized the first film--its success would encourage Pathé to enter not only the filmmaking business, but also film distribution. Pathé soon recognized the potential of renting films, rather than selling them outright. This activity would later lead the company into establishing its own film houses.

The new entertainment form would quickly capture the attention of Parisian high society--and, after a devastating fire caused by the projection equipment, would as quickly fall out of favor. Facing financial ruin, Pathé was forced to accept the capital of leading industrialist Claude Grivolas. The company's name was changed to Compagnie Générale de Cinématographes, Phonographes et Pellicules. The company merged with another leading motion picture equipment maker, Continsouza et Bunzli, and Pathé acquired the rights to the Lumière projection machine. Pathé quickly improved the device and by 1898 was marketing his own "reinforced" projector, which would soon establish itself as the leading projector in the world.

By the turn of the century, Pathé provided not only the projectors, cameras, and motion pictures, but also its own raw film stock, breaking the monopoly then held by Eastman Kodak. In 1906 the company established its film laboratories in Joinville. The company also was making a name worldwide for its motion pictures--in particular, a Pathé innovation, that of filming current events. The Pathé Journal, the first newsreel, would long remain a fixture in the world's cinema programs. Many of Pathé's actors also would become world-renowned stars. Meanwhile, the company had introduced the first films in color--hand-painted frame by frame at the Pathé laboratories.

Changing Hands in the 1930s

Pathé, meanwhile, had begun to expand internationally, establishing branch offices in major cities around the world. During the First World War, the company moved its headquarters to the United States, where Pathé could continue its activities. By the end of the war, however, Charles Pathé had decided to rein in his growing empire, concentrating operations once again at the company's Joinville location. At this time, the Pathé brothers decided to break up the company into its two operations, with Emile taking over the phonograph business and Charles taking the lead of the film business.

Pathé would transform the company, now known as Société Pathé Cinéma, in the next decade. A decision to abandon manufacture of motion picture apparatus caused a national uproar. At the same time, Pathé shut down its U.S. and British branches, concentrating film and film stock production in France. By the end of the decade, the company would no longer operate under Charles Pathé's control.

In 1927, after more than two decades of an often bitter rivalry, Pathé and Eastman Kodak agreed to merge their film stock manufacturing activities to form Kodak-Pathé. This unit was absorbed formally as a subsidiary to the Eastman Kodak Company in 1931. By then, Pathé's cinema operations already had been taken by Bernard Natan, who had succeeded in buying up a majority of Pathé's shares. Charles Pathé remained on the company's board; one year later, in 1930, however, after disagreements with Natan over the company's direction, Pathé stepped down from the board, ending his association with the company he had founded. Charles Pathé would die in 1957.

Meanwhile, Pathé struggled into the Depression Era. The company's revenues were slipping; box office receipts were plunging. Pathé also was facing competition from the bustling Hollywood film industry and the arrival of the first "talkies," which quickly came to dominate the motion picture market. In addition, Natan had led the company into a series of financial investments and other activities that were doubtful at best. Charges of corruption brought an end to Natan's reign over the company in 1935, when Natan was arrested for embezzlement. By the end of the decade, Pathé was forced to declare bankruptcy.

The company passed into the hands of a consortium of banks and the French finance ministry, before being taken over by Adrien Ramauge in 1943 and having its name changed to Société Nouvelle Pathé Cinema. Under Ramauge, Pathé once again would combine its motion picture operations with the Pathé phonograph operations, which soon after merged with Marconi, and branched out into manufacture of televisions and phonographs under the Pathé-Marconi brand. In the film business, Pathé would score one of its greatest successes, with the release of 1945's Les Enfants du Paradis (Children of Paradise).

The Postwar Years

At the end of the Second World War, the world's cinema market had dramatically changed. The French film industry had seen its facilities devastated and its markets restricted. In the meantime, Hollywood--where many of Europe's film professionals had fled to escape the Nazis--had successfully imposed itself as the world's leading film production center, a position it would retain through the end of the century.

Pathé itself would never quite regain its position as a moving force in motion picture--and phonographic--development. Nonetheless, the company continued to play a leading role in French cinema. If French cinema could not rival Hollywood in box office figures, it nonetheless underwent a revival in the 1950s and 1960s, bringing international acclaim to a Nouvelle Vague generation of directors, actors, and films. Pathé, meanwhile, was attracting the financial interests of the Rivaud Group, which succeeded in taking majority control of the company by the end of the 1960s.

Film distribution also was becoming more and more important to Pathé's revenues. In the mid-1960s, the company's only true domestic rival was fellow film pioneer Gaumont. The two companies would end that rivalry before the end of the decade by forming a distribution alliance for the direction of the companies' combined 250 theaters. This alliance, in the form of a "grouping of economic interests" (GIE) would give Pathé and Gaumont a de facto monopoly over France's screens: by 1974, the Pathé-Gaumont GIE operated nearly 450 theater screens, a number that would top 600 before the end of the decade. By then, a new name had appeared on the French film scene--Nicolas Seydoux, one of the heirs to the prominent Schlumberger family fortune, had succeeded in acquiring majority control of Gaumont.

The Société Nouvelle Pathé Cinema became simply Pathé Cinéma in 1979. By then, however, the company's film production had sunk to a low point in the company's history, while the exploitation of theaters had risen to become its primary revenue source. Those revenues soon were threatened when the Pathé-Gaumont GIE was dismantled by the newly elected Socialist government of 1983. Pathé responded by building a federation of its own theaters with those of a number of independents. The company then reached a cooperation agreement with the Eveline family, then holder of more than 100 theaters in the Paris area. This cooperation would once again allow Pathé to claim the leadership of the French film distribution market.

The defection of the Eveline family to rival distributor UGC in 1989 would, however, end this leadership. The company also was suffering from a malaise in the French film market, as box office receipts slumped dramatically into the new decade. Meanwhile, Pathé had become the object of a series of takeover bids, including moves by the Italian financier Paretti, that finally would see the company lose its independence.

In 1990 Pathé became a subsidiary of Chargeurs International. Led by Jerome Seydoux, older brother of Gaumont chief Nicolas, Chargeurs had been developing an audiovisual portfolio, including strong shareholdings in the proposed British Sky Broadcasting satellite television effort and the emerging subscriber-based CanalPlus television network. Seydoux quickly reorganized Pathé's operations. The Pathé-Marconi television and phonographic manufacturing was sold off as EMI France. Pathé's remaining operations were split into two divisions: Cinema, which operated the company's network of theaters, by then expanded to included a strong presence in the Dutch theater market; and Television, which provided programming for the French and international television broadcasting markets.

Return to Roots in the 1990s

In 1993 Pathé became the first to introduce a new cinema concept to the French theater market--that of the multiplex theater. The multiscreen theater concept caught on quickly with the French theatergoing public, and Pathé began converting a number of its theaters to the new format. Seydoux also stepped up Pathé's film production and financing activities--an effort that would meet with mixed results. The Chargeurs subsidiary recorded a number of flops--including the expensive Pirates and Showgirls--into the middle of the decade.

In 1996 Jerome Seydoux announced his intention to break up Chargeurs International into two separate, publicly quoted entities. Chargeurs would continue as operator of the group's manufacturing interests. The group's audiovisual activities, including its theater networks, film and television production, and holdings in the successfully launched BSkyB satellite network and the emerging CanalSatellite broadcasting service, were split off into the newly formed Pathé SA.

Jerome Seydoux continued to hold majority interests in Chargeurs. Seydoux, however, left leadership of Chargeurs to his long-time righthand man, Eduardo Malone. Seydoux, while remaining a vice-president of Chargeurs, took the CEO title of Pathé. The independent Pathé recorded nearly FFr 2.3 billion by the end of 1997. The largest part of these revenues, however, came from the company's nearly 22 percent holding in the BSkyB and CanalSatellite networks.

Through the end of the decade, Seydoux continued to build Pathé's theater network, with an ambitious program of new and converted multiplexes bringing the company's network to more than 300 theaters. Seydoux also began developing Pathé's holdings beyond France and The Netherlands, announcing new theaters for the Italian market in 1999. Pathé recorded success with the production of The Fifth Element, the most expensive French (and European) film ever made, which became a worldwide hit in 1997. The company continued to struggle with its film production and distribution arm, however, with flops (including the controversial remake of Lolita) contributing to a drop in revenues, down to FFr 2.18 billion in 1998.

Meanwhile, the company's satellite television holdings had begun to attract interest from outside investors. In 1998 French financier Vincent Bolloré announced that he had bought up some ten percent of Pathé's shares. Seydoux was forced to fight off the takeover attempt by looking for a white knight investor. In June 1999, Pathé announced its agreement to be purchased by the French Vivendi, pursuing its own multimedia development--particularly in the satellite television arena. Under the agreement, which also included television network and Vivendi holding CanalPlus, Vivendi would take over Pathé's stake in BSkyB; Pathé's CanalSatellite holdings were placed under control of CanalPlus.

The remaining Pathé operations included the theater network; its satellite television holdings, which included the specialist channels Voyage and a 51 percent stake in AB Sports; ownership of the daily newspaper, Liberation; and a share in the soccer team Olympiques Lyonnaise, purchased by Pathé in 1998. Jerome Seydoux would take full control of Pathé's operations; the company's listing was removed from the Paris stock exchange to continue its development as a private company. The French film industry was now more or less firmly in the control of the Seydoux family, with Nicolas Seydoux leading Gaumont and Jerome Seydoux holding Pathé. A combination of the family's interests into a single Gaumont-Pathé entity appeared inevitable--despite the continued denials of interests by both Seydoux brothers.

Principal Operating Units: AB Sports (51%); Voyage; Liberation; Olympiques Lyonnaise.