Outside of Hollywood

Though many of the thematic changes which would resound through the American cinema of the 1970s would prominently feature heightened depictions of realistic sex and violence, those directors who wished to reach the audience which the old Hollywood once had quickly learned to stylize these actions in a way that made them appealing and attractive, rather than repulsive or obscene. However, at the same time that the maverick film students who would become the American new wave were developing the skills they would use to take over Hollywood, many of their classmates had begun to develop in a different direction. Influenced by foreign "art house" directors, (such as Ingmar Bergman and Federico Fellini) exploitation shockers (including Joseph P. Mawra, Michael Findlay, and Henri Pachard) and those who walked the line between, (Kenneth Anger, et al.) a number of young film makers began to experiment with transgression not as a box-office draw, but as an artistic act. Directors such as John Waters and David Lynch would make a name for themselves by the early 70s for the bizarre and often disturbing imagery which characterized their films.
When Lynch's first feature film, 1977's Eraserhead, brought Lynch to the attention of producer Mel Brooks, he soon found himself in charge of the $5 million film The Elephant Man for Paramount. Though Eraserhead was strictly an out-of-pocket, no-budget, independent film, Lynch made the transition with unprecedented grace. The film was a huge commercial success, and earned eight Academy Award nominations, including Best Director and Best Adapted Screenplay nods for Lynch. It also established his place as a commercially viable, if somewhat dark and unconventional, Hollywood director. Seeing Lynch as a fellow studio convert, George Lucas, a fan of Eraserhead and now the darling of the studios, offered Lynch the opportunity to direct his next Star Wars sequel, Return of the Jedi. However, Lynch had seen what had happened to Lucas and his comrades in arms after their failed attempt to do away with the studio system. He refused the opportunity, stating that he would rather work on his own projects.[8]
Lynch instead chose to direct a big budget adaptation of Frank Herbert's science fiction novel Dune for Italian producer Dino De Laurentiis's De Laurentiis Entertainment Group, on the condition that the company release a second Lynch project, over which the director would have complete creative control. Although De Laurentiis hoped it would be the next Star Wars, Lynch's Dune (1984) was a critical and commercial dud, costing $45 million to make, and grossing a mere $27.4 million domestically. The producer was furious that he would now be forced to allow Lynch to make any kind of film he wanted. He offered Lynch only $6 million, reasoning that it would be best to let it be a small flop and be rid of the director. However, the film, Blue Velvet was a resounding success. Lynch subsequently returned to his independent roots, and did not work with another major studio for over a decade.
John Waters, on the other hand, proved too hot to handle for the major studios. Distributing his films locally though a production company of his own creation known as Dreamland Productions, Waters defied the mainstream completely until the early 80s, when the fledgling New Line Cinema agreed to work with him on Polyester. During the 80s, Waters would become a pillar of the New York based independent film movement known as the "Cinema of Transgression," a term coined by Nick Zedd in 1985 to describe a loose-knit group of like-minded New York artists using shock value and humor in their super 8mm films and video art. Other key players in this movement included Kembra Pfahler, Casandra Stark, Beth B, Tommy Turner, Richard Kern and Lydia Lunch. Rallying around such institutions as the Film-Makers' Cooperative and Anthology Film Archives, this new generation of independents devoted themselves to the defiance of the now-establishment New Hollywood, proposing that "all film schools be blown up and all boring films never be made again."[9]