It was definitely deserved, but it was a VERY close race that year.
Minnelli's previous loss in a year that she "deserved it" gave her the edge.
I don't think you're remembering how close Diana Ross came to winning that year. She was most definitely a front-runner, neck-and-neck with Minnelli going into the voting and awards season. The "buzz" going into that night was that Ross was going to win, at least according to the press. But it was her first film, and Minnelli had already been award-worthy previously.
It's interesting to note that Diana Ross was in the "Drama" category for the Golden Globes that year. Today, she would have competed with Minnelli in their Comedy Or Musical category. They think of bio-pics with singing actors as "musicals," like La Vie En Rose or Ray. Back then, they didn't.
"Jaws is the Citizen Kane of movies."
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