Other Free Encyclopedias » Online Encyclopedia » Encyclopedia - Featured Articles » Contributed Topics from P-T

Surviving the Great Depression - The Exhibition Market, The Recovery, The Paramount Case

million theaters pictures picture

More than a year after the great Wall Street crash of 1929, conventional wisdom had it that the movies were immune to the Depression. The motion-picture business had been improving yearly since 1927. The public had welcomed the talkies enthusiastically and unequivocably, which seemed to justify the enormous expenditures required to wire the nation’s theaters and to convert Hollywood’s studios to sound. Looking back over 1929, Variety reported that in New York City the talkies had “driven legit shows to the side streets and [had] given filmdom a command of Broadway with an array of pictures unexcelled numerically and in quality.” 1 In 1930, motion-picture attendance reached a then all-time peak of 80 million patrons a week.

But beginning in 1931, Hollywood felt the effects of America’s disabled economy. Describing the magnitude of this disability, one historian said that during the Depression, “the statistics of unemployment read like casualty figures in the great battles of the world wars. In three years following the crash an average of 100,000 workers were being discharged every week.” Unskilled laborers, particularly blacks, were the shock troops, followed by white-collar workers and technicians. By the end of 1932, an estimated “34 million men, women, and children, that is 28 percent of the total population, were without any income at all.” (These figures did not include the 11 million people living on farms—which is to say, 25 percent of the population—who were trying to live off the land.) Correspondingly, national income dropped from $81 billion in 1929 to $68 billion in 1930, to $53 billion in 1931, and to $41 billion in 1932, which was rock-bottom. Stated another way, during the first three years of the Depression, eighty-five thousand businesses failed, five thousand banks closed, and 9 million savings accounts were wiped out.

Looking back over 1931, Variety said, “The outstanding market lesson of the year…is the exploding of the ancient dictum that low-priced amusements are depression-proof.…The current bear market has demonstrated that nothing is depression-proof, including Government bonds.” Theater admissions fell to around 70 million per week in 1931, a drop of more than 12 percent. The price of a theater ticket also fell—from 30 cents to 20 cents on the average. To make matters worse, Hollywood saw production costs for the new talkies more than double and revenues from foreign markets dwindle. Film rentals reflected the times; in 1931, hit pictures grossed at most between $400,000 and $500,000 but cost between $300,000 and $800,000 to make; profits, when there were any, were slim.

By 1932, all of show business was a shambles. Motion-picture attendance dropped another 15 million to 55 million a week. On Broadway, two-thirds of the playhouses had been shuttered, throwing the Shubert theater organization into receivership, leaving producers stranded, and forcing actors into penury. The road for touring legitimate theater virtually ceased to exist. Vaudeville was on its last legs; troupers, extras, stagehands, and musicians were especially hard hit. Tent shows, with the exception of Barnum and Bailey, had collapsed.

Radio was the only diversion to prosper during the Great Depression. Audiences had time to kill. Radio manufacturers had huge inventories, creating a buyer’s market. And as the average price of a radio fell from $90 in 1930 to $47 in 1932, 4 million families purchased receivers. 5 By 1934, radio was reaching 60 percent of all American homes and had become a common habit. Many small local stations suffered or closed down, but the two major networks, NBC and CBS, consolidated their position by earning profits even in the most abysmal years of the crisis.

As his decisive first move to attack the Depression, newly elected President Franklin Roosevelt declared a four-day national bank holiday in March 1933. In closing the banks, FDR prevented further panic withdrawals and gave the Treasury Department time to draft emergency legislation. The effect on the motion-picture business was catastrophic. During the moratorium, box-office receipts fell about 45 percent, crippling theaters all over the country. To stay open, some operators were accepting IOUs, and others, produce, groceries, or almost anything in lieu of cash. Said Variety, “The decline was such that it leaves an open question whether the moving picture will ever again know the popularity of those peaks it reached in the silent era and then again with sound.”

Hollywood also felt the impact of the bank holiday. The cash flow dried up, which prevented the studios from meeting their payrolls. Production chiefs concluded that the studios could be kept open, temporarily at least, if employees earning $50 or more a week took a 50 percent cut for eight weeks. “Morale was already low,” said Variety, “and the 50% cut to men who had already taken two or three cuts, seemed the last straw.”

As the Depression wore on, studios laid off more than 20 percent of their work force. Paramount shut down its Long Island studio and laid off almost five thousand employees who had been earning between $35 and $50 a week. General salary cuts for executives, contract people, and those who worked on a week-to-week basis were put into effect on practically all the major lots. The number of unemployed and underpaid extras in Hollywood became a national scandal. Wages for those lucky enough to find work dropped from $2 a day to $1.25. As a result of such economizing, the annual payroll of major companies dropped from $156 million in 1931 to an estimated $50 million in 1933.

Exhibition was even harder hit. In 1930, more than twenty thousand theaters were operating in the United States. Two years later, an estimated four thousand had gone dark. The vast majority of these theaters seated an average of seven hundred and were owned by independents. The number of workers in this sector of the business dropped by a third, from 130,000 in 1929 to a low point of 87,000 in 1932.

The impact of these conditions on the bottom lines of the major motion-picture corporations was as follows: after registering profits of $14.5 million in 1929 and $7 million in 1930, Warners lost nearly $8 million in 1931; Fox’s earnings fell from $10 million in 1930 to minus $4 million in 1931; and RKO’s $3.4 million surplus from 1930 turned to a $5.7 million deficit in one year. Paramount remained in the black in 1931, but Adolph Zukor saw his company’s earnings fall from $18.4 million to $6.3 million and then, in 1932, to a record loss of $21 million.

The bottom fell out of the market in 1933. No longer able to avoid the ignominy of bankruptcy and receivership, RKO went down first, in January 1933, followed soon after by Paramount and Fox. Warners, battered by losses of $14 million in 1932 and $6 million in 1933, was fighting to stay afloat. Of the Big Five, only Loew’s had yet to show a deficit; however, its earnings plunged from $15 million in 1930 to $4.3 million in 1933. As for the Little Three, Universal had gone into receivership, and Columbia and United Artists were wounded, but not down.

Bankruptcies and receiverships were common enough during the Depression and enabled distressed companies to protect their assets for the benefit of investors while a court-approved plan was worked out to pay creditors in an orderly fashion. In the motion-picture industry, bankruptcies and receiverships occurred in the exhibition subsidiaries of the majors and not in the production and distribution ends and resulted from the ferocious battle for control of the nation’s theaters at the end of the 1920s. During 1929, “hardly a week elapsed but that two or more of the giant interests were not amalgamating or absorbing one another,” said Variety. Paramount, Warners, and RKO were particularly aggressive and built or acquired hundreds of theaters, thereby encumbering themselves with millions of dollars of debt. When the boom ended in 1931, the so-called deluxe theaters, built in flush times and at recklessly extravagant costs, became white elephants, at least for the duration of the Depression. In short, the major companies could not meet their fixed cost obligations, which simply meant they did not have the cash to pay their mortgage commitments, short-term obligations, and the heavy charges on their funded debts.

RKO, a newcomer to the industry, was the most vulnerable. Founded in October 1928 as a holding company, Radio-Keith-Orpheum Corporation was created nearly overnight by RCA to exploit its Photophone sound system. The company amalgamated the Film Booking Office, a small Hollywood producer and distributor, the Keith-Albee-Orpheum vaudeville theater circuit, and Photo-phone into a vertically integrated giant containing a national chain of three hundred theaters, four studios, and assets of more than $100 million. RKO’s receivership was caused by a 40 percent drop in attendance at its theaters and a paucity of successful films from Radio Pictures. RKO tried to compensate for its poor product by pushing vaudeville, but its circuit could not carry the burden.

Paramount’s bankruptcy was the second largest the country had ever known and one of the most complicated. During the 1920s, Paramount’s theater chain, known as Publix, expanded to fifteen hundred houses. Most were acquired with money raised with bond issues underwritten by Kuhn, Loeb & Company. But according to Fortune, some theaters “were acquired in what seemed a shrewder way: exchange of stock, with a guarantee to repurchase at $80 a share. (Paramount stock never sold above 78.)” The repurchase agreements matured when Paramount’s stock sold below $50 and when credit was tight; and when theater attendance plummeted, “not all the managerial resolution in the world could nick the fixed charges [that the company] had been so sanguinely accumulating. It required the judiciary ax.”

Fox’s troubles began in 1929. The company was fully extended; by then, Fox had acquired extensive theater holdings, had become a leader in the innovation of sound, and had invested heavily in the construction of Movietone City, an all-sound studio facility in West Los Angeles. But in an audacious move, founder William Fox purchased a controlling interest in Loew’s, Inc. from the estate of Marcus Loew and from Loew’s management for $28 million. Fox borrowed the money from AT&T and Halsey, Stuart & Company, the La Salle Street investment firm. Fox’s strategy was to merge his company with Loew’s and create the world’s largest motion-picture enterprise. But the Justice Department of the new Herbert Hoover administration blocked the move as a violation of the antitrust laws. As a result, Fox was forced to sequester the Loew’s stock.

Meanwhile, William Fox had been hit hard by the crash. To stay afloat, he sold off assets to AT&T and Halsey, Stuart, but in return for the cash, he had to relinquish control of his company. Dethroned from the company he founded, Fox sold his majority interest to Harley C. Clarke, the president of General Theatres   Equipment, in 1930. The takeover was financed largely by AT&T and the Chase National Bank. In 1931, Fox divested himself of the Loew’s stock. As will be discussed later, Harley Clarke did not possess the know-how to revive a distressed film company. Fox Films lost nearly $11.5 million in 1931 and 1932, which pushed it to the brink.

Universal Pictures, the only member of the Little Three to seek protection in the courts, entered the Depression with a chain of more than three hundred theaters. Unlike the Big Five’s theaters, Universal’s were mainly small neighborhood and rural houses. During the conversion to sound, Universal did not have the money to wire its houses and sold off most of its circuit. The remainder of the theaters were placed into receivership in 1933 and were soon sold. 16 Universal was chronically short of cash afterward. To raise production financing, Carl Laemmle, Sr., borrowed $750,000 from J. Cheever Cowdin’s Standard Capital Company in 1935. As part of the loan agreement, Laemmle granted Standard a ninety-day option to purchase a majority interest in the studio for $5.5 million. Cowdin exercised the option in March 1936 and took over operating control of Universal Pictures. After selling his stock in the studio, Laemmle, who had founded the company in May 1912, retired from motion pictures.

The motion-picture companies that escaped the Depression unscathed—which is to say, weathered the Depression without bankruptcy, reorganization, or shake-up any kind—were Loew’s, Inc., Warner Bros., Columbia Pictures, and United Artists. Of the group, Loew’s was the strongest. Considered by Wall Street as the Tiffany’s of motion-picture corporations, Loew’s earned profits every year of the Depression. Two factors were responsible for Loew’s outstanding achievement. The first was the company’s fiscal conservatism. Loew’s had branched out into production during the 1920s by absorbing Metro Pictures, Goldwyn Pictures, and Louis B. Mayer Productions to form MGM, but stood pat with its chain of 125 high-class theaters, which founder Marcus Loew had earlier acquired. The second was MGM’s singlar success in gauging public tastes. During the thirties, MGM produced more hits than any other company. Of the twenty-four films that made it to Variety’s annual list of top-grossing films from 1930 to 1933, MGM produced nine, or more than a third. As Fortune put it, MGM was “encrusted with more stars and triumphs than Hollywood had seen in one place.”

The Depression hit Warner Bros, hard, but the company refused to seek protection in the courts. Warners was the only member of the Big Five still run by the original founders: Harry Warner was president of the company; Albert Warner, treasurer and vice-president; and Jack Warner, vice-president in charge of production. Warners entered the thirties having just completed a spending spree the likes of which had never been seen, even in the movie business. By being the first to innovate sound, Warners generated extraordinary profits, which it used to solidify its position in the industry. Beginning in late 1928, Warners acquired First National Pictures, the Stanley chain of three hundred theaters, music publishing houses, and other investments that boosted its assets from $5 million to $230 million. In a few short years, Warners had become a leading company in the industry. Forced to retrench during the Depression, the company sold or closed more than half of its theaters, cut wages, and pared production budgets to the lowest level among the majors. In 1930, Warners was $113 million in debt, but as a result of Harry Warner’s bloodletting, the debt had been greatly reduced (to $2g million) by 1938, and by 1943 it was fully retired.

Columbia Pictures, the healthiest member of the Little Three, was also a family-run business. Under the direction of brothers Harry and Jack Cohn, who held most of the equity and voting stock in the company, Columbia won the admiration of Wall Street for its restraint; the studio neither tried to acquire theaters nor encumbered itself with long-term contracts with high-priced talent. Columbia stayed afloat during the Depression by sticking to its strategy of producing and distributing shorts, programmers (low-budget films that could fill either the A or B position on a bill), and B pictures for the low end of the market. In 1934, Columbia won recognition as a full-fledged member of the Little Three by producing two surprise hits, Frank Capra’s IT HAPPENED ONE NIGHT and Victor Schertzinger’s ONE NIGHT OF LOVE .

United Artists, the smallest major, had always led a precarious existence. As a distributor of independent productions, UA’s livelihood depended solely on the ability of its producers to secure a steady flow of financing, which in turn would allow UA to keep its pipeline full. Without an adequate number of features to distribute, UA could not meet the fixed costs of operating an international sales organization. A decline both in box-office admissions and in the number of independent productions during the early 1930s forced UA into the red in 1932, but improved conditions thereafter stabilized the company’s business.

The Exhibition Market

In 1930 the domestic exhibition market consisted of twenty-three thousand theaters. The most important theaters in the group were the four hundred movie palaces located in cities of fifty thousand or more. According to government census figures, these cities contained 35 percent of the population or around 43 million people and were situated mainly in the large eastern states and in California. 33 (The vast majority of states outside these areas had fewer than ten such houses.) To take advantage of such concentrations of population, “deluxers,” as the palaces were called by the trade, offered an array of inducements, including large seating capacities, comfortable appointments, proximity to public transportation, and air conditioning.

In the largest cities—New York, Chicago, Detroit, and Boston—flagship theaters of Paramount-Publix, Loew’s, and Warners combined first-run movies and live entertainment consisting of presentations (comedy or musical skits) and top vaudeville acts, among them such stars as Al Jolson, Eddie Cantor, Maurice Chevalier, George Jessel, Kate Smith, and the Marx Brothers, and such bands as those of Cab Calloway, Duke Ellington, Paul Whiteman, Guy Lombardo, and Fred Waring. This combination policy of film and live acts put the last nail into the coffin of big-time vaudeville and paradoxically forced most deluxers, with the exception of the Radio City Music Hall, the Capitol, and the Roxy in New York, to switch to a pictures-only policy by 1934.

Fully 65 percent of the population, or nearly 80 million people, lived in small towns at the start of the decade. Hundreds of these towns had only a single theater, a house that changed bills as often as three times a week and charged 35 cents tops for a ticket. Individually such theaters yielded rentals of from $7 to $15 per film, but as a group, they could spell the difference between a profit or a loss for a picture.

Theaters were forced to close their doors during the Depression because most of the pictures in release neither drew nor held patronage. It was not long before neighborhood houses and even deluxers started shortening the length of the runs for pictures “without legs.” This practice consumed product so fast that even the largest chains had to forage around in the independent field for pictures. Contributing to the product shortage was the panic swing by exhibitors to double features.

Night sports such as miniature golf, baseball, softball, boxing, wrestling, and dog racing also took their toll. Early in the decade, miniature golf provided most of the worry. In 1930 nearly every town between San Diego and Vancouver had at least two miniature golf courses. These places stayed open until well after midnight and charged as little as 25 cents. Night baseball competed for the entertainment dollar throughout the decade. Variety estimated that in larger cities, night baseball games cut into receipts only 10-15 percent, but in smaller communities, games affected the box office by as much as 30 percent.

The repeal of Prohibition in 1933 provided business a shot in the arm. As Variety explained, repeal drew people out of their homes: “In many cities there had been no downtown life to speak of for the 13 years of the Great Mistake, whereas repeal had the effect of immediately bringing life to hotels, restaurants and other places in such downtown zones where the larger theaters are located.”

To rekindle the moviegoing habit, exhibitors experimented with a “galaxy of appetizers” from stage shows to vaudeville. RKO tapped small-time vaudeville by presenting four-act bills along with motion pictures in some of its houses. This policy was credited with keeping the grosses up and the losses down in the circuit up to 1932. RKO played vaudeville out of necessity because of the weakness of the studio’s pictures. 38 To attract patrons to its small-town theaters in Pennsylvania, Warners roadshowed band acts complete with lines of chorus girls and comedians for one-to-three-day stands. Paramount-Publix introduced live acts in its theaters in New England, Pennsylvania, and the Southwest. By 1933, however, small-time vaudeville had lost its effectiveness and was dropped from all the circuits.

As a substitute for the lure of vaudeville, exhibitors cut ticket prices. Before the   Depression, the difference in admission price between a first-run affiliated theater and a subsequent-run house owned by an independent was around 20 cents a ticket on the average. When moviegoers tightened their purses, first-run theaters reduced the price of a ticket to within 5 cents of the scale charged by independents. Houses that once charged 25, 30, and 35 cents going into 1931 were charging from 10 to 15 cents by the end of the year. The number of 10-cent houses increased as well to around two thousand by the end of 1931.

But ticket prices could be lowered just so far. As a result, exhibitors resorted to other forms of price cutting, such as double features, two-for-one tickets, half-priced student tickets, free ladies’ matinees, and prizes. Prizes were particularly popular with independents who had already instituted double features and were in need of an additional lure. Since offering a third picture would have been impractical, some exhibitors initiated “premium nights” and gave away dishes, hams, and even automobiles as prizes. Testifying to the popularity of such gimmicks, a theater might announce on its marquee, “Tonight Is Dish Night—Also a Feature.”

The majors did not follow suit in the belief that such measures would soon lose their effectiveness. And they were right. Within months, dishes, food, and the like had lost their pull. Ever resourceful, independent theaters then offered cash prizes. The first cash prize game to sweep the country was Bank Night, the creation of Charles U. Yeager, a Fox West Coast theater manager. After trying out the scheme in a few small towns in the Rocky Mountains, he copyrighted the game and marketed it to other theaters. Time described Bank Night as follows:

In his lobby a theatre owner places a large book. Persons who wish to do so may enter their names in the book opposite numbers corresponding to which the box office keeps a book of tickets. On Bank Night, usually Monday, when receipts are normally lowest, the tickets are placed in a drum on the stage. One number is drawn from the drum and announced. If the person whose name is entered for that number in the lobby book appears on the stage within a specified time, usually three minutes, he receives a cash prize of, say, $150. (“Bank Night,” 3 February 1936, pp. 57-58)

Since Bank Night could increase box-office receipts several fold, more than four thousand theaters adopted the game by 1936. Bank Night and kindred contests, such as Prosperity Night, Movie Sweepstakes, and Treasury Night, were used throughout the decade and were generally believed to have kept more theaters open during the Depression than any other device.

The exhibition scheme that made the greatest impact on the industry was double features. Showing two pictures for the price of one was an old industry practice. As Variety put it, “every time theatre figures have lagged the two-forone has bobbed up in spots.” However, the shortage of talking pictures during the conversion to sound and the higher rentals they commanded would spell the death of the practice, predicted Variety in 1929. But the trade paper soon did an about-face: “Almost down and out six months ago, double features are suddenly staging a strong comeback. Houses everywhere, including important first runs in chains, are leaning toward two talkers for the price of one.” Double features established a foothold in New England in 1930. By the middle of 1932, six   thousand of the fourteen thousand theaters then operating, or 40 percent, had adopted the practice. In some situations, independents had combined a talkie or a silent produced by an independent producer with a sound picture produced by a major. In highly competitive situations, exhibitors even resorted to triple features.

The economic rationale of double featuring was simple enough. In essence, indies used the practice to break down the barriers of booking protection, which is to say, excessive clearances enjoyed by first-run theaters. Indies reasoned that if they could not present hit pictures in a timely manner to their patrons, they would offer quantity instead. Legally, a distributor could do nothing to stop them. Because double features would inevitably break open the market for independent producers, the MPPDA outlawed the practice in drafting its version of the NRA Code of Fair Competition. But independent producers and exhibitors fought back and convinced the NRA to legalize dual billing in August 1934, nearly one year after the industry adopted the Code. Variety called the decision “the Blue Eagle’s first truly revolutionary decree for filmdom.” 43 By then, nearly every theater in competitive situations—the markets that generated the bulk of the domestic box-office gross—had fallen into line.

And by then, the biggest users of double bills were the affiliated theaters. There were several reasons for this. The widespread acceptance of double bills made it awkward for a first-run house without a stage show to charge a higher ticket price for a single feature than a subsequent-run theater offering a double bill. Those theaters that still relied on stage shows found talent more expensive and increasingly hard to find in the waning days of vaudeville. And lastly, the overall reduction in quality of pictures made it necessary to offer “two pictures, even of poor quality … to satisfy a bargain-hunting public.” 44 Thus, in dealing with this practice during the days of the NRA, the majors adopted an anomalous position of fighting a policy that made a favorable impact on their own box office.

Legalizing double features had the direct effect of doubling the demand for product. Had the NRA mandated a single-feature policy, the eight majors could have easily satisfied the production demands of the market, even for theaters that changed bills three times a week. But double features doubled the demand: Variety estimated that a minimum of seven hundred features were needed each year. 45 Since the production facilities and talent even of the majors limited the number of pictures they could produce, a gap existed between supply and demand, which was quickly filled by Poverty Row.

Hollywood had always produced a full range of pictures in various price brackets. Budgets depended on the basic ingredients of the picture—the underlying property, the stars, the director, and the physical requirements, among other factors. Low-budget pictures often served as vehicles to break in young actors, new writers, and novice directors. In reacting to the new market conditions, studios divided production more or less into two groups—class A and class B—and formed special production units to handle the lower grade product. Class-B pictures cost anywhere from $50,000 to more than $200,000 to produce, whereas the average class-A picture cost roughly $400,000. 46 Producing more pictures did not necessarily generate more revenue for the simple reason that exhibitors could not afford to rent two expensive pictures for each double bill. The majors therefore used a differential pricing policy—flat fees for class- B   features and percentages for class-A pictures. Although flat fees were low out of necessity, producers could predict with great accuracy the amount of revenues B features could generate and so could scale production costs accordingly.

By the end of the decade, double features had become an institution, prevailing either all or part of the week in an estimated 60 percent of the nation’s seventeen thousand theaters. The practice, said Bosley Crowther, created “one of the most prolonged disputes ever to disturb the American public.” Women’s clubs, parent-teacher organizations, and the education establishment complained that double bills were too long for children, that they offered too much excitement for little ones, and that they were terribly hard on youngsters’ eyes. No one was willing to defend the double features. Why, then, did the practice persist? As Variety explained it, bitter experience had shown exhibitors that so long as one of them in a community offered two pictures for the price of one, double-featuring would persist in that community.

The Recovery

The U.S. Department of Commerce indicated that the recreation and amusement industries started to revive in 1934, although nearly all their employment, payroll, and earnings figures were still below 1929 levels. Motion pictures, the last business to feel the pinch of the Depression, was “in the vanguard of industries emerging the earliest,” said Variety. “Thus, although severely struck when it was hit, the picture industry was bedridden a much shorter spell than many other members of big business.” Box-office receipts and theater admissions rebounded in 1934, and one thousand theaters were said to have reopened. During 1935, Paramount and Fox had undergone reorganization and were clear of debts, although RKO was not stabilized until 1940. In 1936, Universal, after selling off the last of its theaters, came out of receivership. The majors had survived the Depression intact.

The media attributed the turnaround to quality pictures that had struck the public’s fancy. The Magazine of Wall Street, for example, stated that as a result of the Legion of Decency’s drive for cleaner pictures in 1934, “the industry awoke to the fact that the public was much more interested in quality films which neither offended its taste or intelligence.” 49 The type of picture the magazine referred to was the prestige picture—a big-budget film, based typically on a popular novel, a standard classic, a stage success, or an opera. Examples of such pictures would be Columbia’s ONE NIGHT OF LOVE (1934), MGM’s DINNER AT EIGHT (1933), RKO’s LITTLE WOMEN (1933), MGM’S DAVID MGM COPPERFIELD (1935), and Warners’ A MIDSUMMER NIGHT’S DREAM (1935).

The Magazine of Wall Street also reported that in 1936, motion-picture patronage “now equals within a few thousand a week its peak of six or seven years ago when over 100,000,000 persons per week pushed their silver across the glass slides of the box offices, and there is little competition on the horizon.” The magazine grossly exaggerated the number of weekly admissions. Not even the film industry itself ballyhooed such inflated figures. The Film Daily Yearbook, for example, stated that average weekly attendance rose from 60 million in 1933 to 70 million in 1934, to 80 million in 1935, and to 88 million in 1936. However, a Gallup poll in 1940 indicated that weekly attendance at films had been averaging only   around 54 million. Regardless of the actual figures, a turnaround of sorts did occur. Box-office receipts rose steadily after 1934. Motion-picture stocks, led by Loew’s, Paramount, and Warner Bros., “assumed something like their old positions as trading favorites,” said Variety. And 20th Century-Fox, Loew’s, and Paramount, among other companies, started earning hefty profits, although no company earned in one year as much as it had in 1930.

Widespread unemployment continued throughout the decade: by 1937, an estimated 7 million workers were still without jobs, and of those in the work force, 60 million received less than $1,000 per year. 51 Since motion pictures were not luxuries, they did not depend on “great general prosperity for profitable operation.” It took America’s entry into World War II to break the back of the Depression, and then conditions on the home front created the best market Hollywood had ever seen.

The Paramount Case

The industry’s monopolistic trade practices remained in force without significant alteration after the demise of the NRA. But the debate over these practices continued unabated and culminated in the historic antitrust case United States v. Paramount et al. The suit was filed personally by trustbuster Thurman Arnold, the chief of the Department of Justice’s Antitrust Division, on 20 July 1938. The government charged the majors with combining and conspiring to restrain trade unreasonably and to monopolize the production, distribution, and exhibition of motion pictures. The bill of particulars contained charges that were nearly identical to those heard during the days of the NRA. So were the remedies: the government’s petition asked for the divorcement of production from exhibition, the elimination of block booking, the abolition of unfair clearance, and the quashing of many other producer-distributor trade practices.

The case was scheduled for trial in the Southern District Court of New York in June 1940, but after a period of negotiation, the government entered an amended complaint providing for the entry of a consent decree that was to run for three years. The majors again succeeded in warding off an attack on their industrial structure. During the war, the majors earned record profits. When the case was finally adjudicated in 1945, the decision was appealed all the way to the Supreme Court. In 1948, when the Court handed down its decision, which went against the defendants, the remedies were too little, too late, to help the supposed beneficiary of the case—the independent exhibitor. An era of motion-picture history had ended and, along with it, a place for the small businessman.

Susanna [next] [back] Survival of Dana

User Comments

Your email address will be altered so spam harvesting bots can't read it easily.
Hide my email completely instead?

Cancel or