The triumphant return of HBO’s blockbuster series Game of Thrones has put the cable network back in the spotlight. As Scott Meslow wrote in The Atlantic,

No network makes bigger gambles than HBO, and Game of Thrones was a high-risk, high-reward gamble that has paid off bigger than anyone could have imagined. The grim, dense HBO fantasy series overcame its not-inconsiderable barriers to entry to become an unexpected phenomenon: In the year since Game of Thrones premiered, it’s been referenced in everything from The Simpsons to Major League Baseball, earned Peter Dinklage an Emmy Award, and set HBO records for DVD sales and digital downloads.

The success of HBO over the last two decades reaches back in Hollywood history to when the studios were all-powerful, vertically integrated companies that wrote, financed, produced and released films to theaters they owned. Known as “the Studio System,” the Big Five companies (MGM, Paramount, 20th Century Fox, Warner Brothers & RKO Radio Pictures) signed actors, writers, directors and producers to long-term (usually 7 year) contracts and simply ordered them to work together on various projects. An actor or director “under contract” was basically an indentured servant with little or no choices as to the films they made. The major studios were a monopoly; the talent could either take their contracts or find another profession. Richard Zanuck, the son of legendary 20th Century Fox boss Darryl, described how the old Studio System put together films:

I remember as a kid, under my father’s desk, under the glass on the top of his desk, was a big chart. And it had everybody that was under contract there. All the producers, and the directors, and the writers and actors and actresses. And it was so simple. I used to sit in on casting meetings, which would take all of about ten minutes. Not only casting, but putting the whole picture together.

While the Studio System mistreated the talent – major stars like John Wayne and Henry Fonda made millions for the studios, but didn’t share in much of the profits – great films emerged because of the organized production process. Talented writers were assigned to sit in a room and bounce ideas and dialogue off each other until the script was just right. Studio heads assigned actors and directors to appropriate material. For example, John Wayne made Westerns and war movies, Henry Fonda and Jimmy Stewart made earnest dramas, and Katharine Hepburn played smart career women, while Marilyn Monroe was the sex symbol, and so on. This was the “Golden Age” of Hollywood that produced such classics as Gone with Wind, Casablanca, The Maltese Falcon and the Bob Hope/Bing Crosby “Road” comedies.

As with so many aspects of American society, the Studio System broke up in the 1960s. An anti-monopoly lawsuit by the Truman Justice Department in 1948 began its decline and fall. By the early Sixties, the loss of massive costumers to television and the refusal of the next generation of stars to sign long-term contracts ended the Studio System. Soon, everyone – producers, writers, directors, actors – was a “free agent,” able to choose whatever projects they liked.

While the new free agent system was fairer to the talent, the problem was getting the creative to work together on good movies. Ed Mitchell, who worked for nearly a decade at the William Morris Agency, comments that in modern Hollywood, “the deal is more important than the movie….it’s almost a miracle these days when a good film gets made.”

Oscar winning scriptwriter William Goldman (Butch Cassidy and the Sundance Kid, All the President’s Men) wrote in his memoirs that most of the time, in looking for the right talent: “Well, you can’t get them… Just as you never get the director you want, you also don’t get the star.” Both Goldman and Mitchell are highly critical of the marketing departments of the studios that often interfere with film production to change scripts and endings, focusing on a film’s opening weekend box office numbers rather than its quality. (Did Orson Welles do a focus group on how to end Citizen Kane? Did the marketing department at MGM demand that Scarlett O’Hara and Rhett Butler live happily after in Gone With the Wind?)

On the other hand, HBO produces its content in a much different manner, a throwback to the old days when story meant more than marketing. HBO doesn’t have to worry about marketing their projects: their audience of paid subscribers is already there, so they can take more creative chances. They can hire a stable of writers whose only job is creating memorable stories and dialogue. The producers, directors, and special effects wizards they hire become cohesive teams that usually stay on for the life of a series. And the actors and actresses they hire — like James Gandolfini and Edie Falco of The Sopranos — are regular employees, albeit very well-paid. HBO uses a highly disciplined approach of using the same writers, directors, producers and actors to create consistent, coherent worlds that audiences apparently love.

http://www.youtube.com/watch?v=B909njPoX7k

And it appears to work: over the past decade and a half, HBO produced such Emmy Award-winning series as The Sopranos, Sex and the City, Entourage, Boardwalk Empire, and Deadwood.

And the quality of HBO programming has paid off financially for their parent company Time Warner: in 2010, HBO’s subscription fees earned $3.7 billion – and that was the year before Game of Thrones debuted.

So HBO has developed its own “Creative Haven” where its writers and producers don’t have to worry about instant gratification at the box office, don’t have to deal with marketing “geniuses,” and can gamble on finding exotic material like Game of Thrones. Modern Hollywood is always looking to put “stars” in what they hope will be the next big blockbuster, regardless of the quality of the idea. HBO develops the scripts first and then pencils talented character actors. It not only works artistically as their parade of Emmy nominations prove, but financially, too. Not every one of their gambles pays off – the recent horseracing drama Luck with Dustin Hoffman was cancelled after several horses died amid low ratings. (I actually liked the series). But amid the lackluster profits and mediocre products of current Hollywood, HBO stands out.

Perhaps there is a lesson there for the rest of the industry?