Corporate Organization
3
Corporate Organization
1915–1917: World and Triangle1917–1919: Paramount, First National, and United Artists
1919–1927: Metro-Goldwyn-Mayer, Fox, Universal, and Warner Bros.
1915–1917: World and Triangle
In 1915 the "West Coast Number" of the Motion Picture News was filled with information on the new studios sprouting in California. But if an exhibitor leafing through this paper turned instead to the weekly release charts, he or she could find far more subtle evidence of industry turmoil.1
Available product was being offered in two distinct formats. The industry's oldest firms, and a few younger rivals, were marketing program releases of short films, one to three reels in length, which were issued like clockwork on a daily schedule. Another page listed the offerings of a half-dozen feature distributors, whose products were generally four to six reels in length and were not necessarily tied to specific release dates. If the birth of a new production system was being chronicled elsewhere in the News, these release charts plotted the end of a distribution scheme that was rapidly approaching irrelevance. Out of the dozens of producers listed, only a handful would survive three years hence, and most of those in significantly changed form. As for the daily change of program releases, its remaining tenure could be measured in months.
At the start of 1915, short-film programs were still being supplied by three major and two minor distributors. The General Film Company, the distribution arm of the old Motion Picture Patents Company, was still handling the product of Biograph, Edison, Essanay, Kalem, Lubin, Mina, Selig, and Vitagraph, with episodes of the Hearst-Selig newsreel available twice weekly. A few years earlier their "unlicensed " competition had offered their films through the Motion Picture Distributing and Sales Company, but that front had split into two competing programs, Mutual and Universal. Mutual now included the releases of American, Beauty, Broncho, Domino, Kay-Bee, Keystone, Komic, Majestic, Princess, Reliance, Royal, and Thanhouser, with an episode of the Mutual Weekly available each Thursday. Universal's line included the Big U, "101" Bison, Eclair, Gold Seal, IMP, Joker, Laemmle, L-KO, Nestor, Powers, Rex, Sterling, and Victor brands, with their newsreel available on Wednesday. Two minor services, Kriterion and United, were energetic but ephemeral.
The single page devoted to "Feature Releases—Current and Coming" was remarkably incoherent and incomplete for a journal of record. Nearly one-sixth of the space was devoted to the Pathé Exchange program, which did not even handle long films. Each week they issued an eight-reel program, of which the "feature" was a two-reel serial episode (here, The Exploits of Elaine) supported by various short dramatic, documentary, or cartoon subjects. This use of the word "feature" to describe the main item on a program, not simply a film of four or more reels, dated from the nickelodeon era and was already disappearing by 1915. Five other distributors made up the balance of the page. Alliance Films Corporation was a loosely knit grouping of minor independent producers, among them the Masterpiece Film Company and the Oz Film Company (Frank Baum's operation, which that week was offering The New Wizard of Oz). Continental Features was the feature arm of the Mutual program, handling the longer product of Reliance-Majestic, Thanhouser, and the rest. Fox Film Corporation offered their own productions, including A Fool There Was, Anna Karenina with Betty Nansen, and The Nigger, a miscegenation melo-drama with William Farnum that was currently doing big business at the New York Hippodrome. Paramount Pictures handled the Bosworth, Famous Players, and Lasky Feature Play Company releases, as well as the product of the Blazon Film Company and Oliver Morosco. World Film Corporation distributed its own productions as well as those of a few small independents.
Metro Pictures Corporation is nowhere on this list, although their full-page advertisement appears on page 9. Vitagraph, Lubin, Selig, and Essanay were also releasing and advertising features, but the calendar omits them as well. These four firms were about to combine their distribution operation into the VLSE organization.2 The Birth of a Nation was still being road-shown by the producers and was not available on the open market. The Motion Picture News, in trying to adapt its program-release calendar to cover features, as yet had no way to account for much of this product.
Out of this hodgepodge, an industry analyst might have been most attracted by the growth of two new firms quite characteristic of the early feature period: the World Film Corporation and the Triangle Film Corporation (formed that September out of the remnants of Mutual). Janet Wasko, in her study of American film-industry financing, names these two organizations as the first motion-picture companies financed through securities issued by prominent Wall Street investment-banking firms. Prior to this, individual financiers such as Otto Kahn or Crawford Livingston had dabbled in specific projects with their own money, but industry conditions were still too chaotic to interest the banking community at large. Whatever funds could not be generated internally were raised from individual investors, but the motion-picture business was an attractive nuisance for would-be capitalists, trapping many by pointing to the example of a successful few. "Thousands of people are being led to invest in these companies, which will either fail outright or go into the hands of receivers, and will never return a fraction of the money that was paid into the treasury," wrote one analyst in 1915. "It were best to investigate the picture company that would make love to your money as you would the qualifications of a young man who comes to marry your daughter, for there are no greater returns to be gotten from the film business than shrewd investment may discover in other lines of industry."3
The World Film Corporation had originally been organized by Cleveland theater owner Emanuel Mandelbaum, who, with the financial backing of two Wall Street bankers, W. A. Pratt and Van Horn Ely, set it up as a distribution agency for independent features in 1914. Within a few months, Mandelbaum was out and World
was involved in production on its own, following a merger with the Equitable Pictures Corporation, recently created to produce films for former Vitagraph star Clara Kimball Young. Equitable's president, mail-order magnate Arthur Spiegel, had arranged financing through Moritz Rosenthal with the Wall Street firm of Ladenburg, Thalman, and Company. As vice-president and general manager, Lewis J. Selznick, an aggressive jewelry salesman with minor film experience, was in overall charge of operations; it was Selznick who induced theatrical producer Lee Shubert to become a major investor in World. In addition to the Equitable line, World also handled the product of Peerless (owned by Eastman raw-stock agent Jules Brulatour), Daniel Frohman's Frohman Amusement Company, and Broadway impresario William A. Brady. Most of World's product was produced at Fort Lee, New Jersey, in either the Peerless or the Paragon studio. Here, Selznick and Brulatour, taking advantage of the collapse of French filmmaking activities in the United States in 1914, assembled an amazing group of French directors, designers, and cameramen. Eclair and Pathé had stopped production in America, and Solax ceased operating as an independent producer-distributor, with the result that many French technicians were thrown onto the U.S. market. Selznick snapped up the best, including directors Maurice Tourneur, George Archainbaud, Émile Chautard, and Albert Capellani, cameramen René Guissart and Lucien Andriot, and the great designer Ben Carré. Technical conversation on the sets was often carried on in French, although World employed a good deal of domestic talent as well.4
When combined with the acting talent and literary properties available through the Shubert connection, the result could be extremely sophisticated, as Maurice Tourneur's The Wishing Ring (1914) still demonstrates. The Ballet Russe, then appearing as a Shubert stage attraction, was worked into the plot line of The Dancer's Peril (1917), while Barry O'Neil directed a version of Frank Norris' novel McTeague in 1915 (called Life's Whirlpool) that prefigured von Stroheim's Greed of a decade later.5
Nonetheless, friction with some of the same bankers he had brought into the company in 1914 forced Selznick out of World in 1916, and he was replaced by William A. Brady. Under Brady's tenure, the studio seemed to lose its competitive edge by holding too closely to the theatrical line that its more aggressive rivals, especially those on the West Coast, had begun to abandon. The studio's films were beginning to seem a little old-fashioned, although a picture such as Maurice Tourneur's lovely A Girl's Folly (1917) remains extremely valuable today for its view of filmmaking activities in this era.
In 1918 Brady went into independent production, and the following year Selznick was able to purchase the remnants of the company, now a fiscal wreck, and merge it with his own Selznick-Select organization. As Wasko suggests, the collapse of World, and the loss of considerable sums to its investors, acted to intensify Wall Street's aversion to motion-picture securities.6 But the disintegration of the Triangle Film Corporation was even more damaging.
Harry Aitken, a Wisconsin insurance man, had been instrumental in forming the Mutual Film Company in 1912, largely by attracting the interest of two Kuhn, Loeb bankers, Felix Kahn and Crawford Livingston. The main independent rival to Laemmle's Universal, Mutual was in the process of flying apart just at the time the Motion Picture News issued its West Coast survey in April 1915. As president of Mutual, Aitken had been under constant pressure from two of Mutual's other corporate
heads, Samuel Hutchinson and John Freuler, owners of the American Film Manufacturing Company, while Adam Kessel and Charles Baumann, whose New York Motion Picture Company controlled the product of Mack Sennett and Thomas Ince, generally supported Aitken's policies. Aitken's major coup was the signing of D. W. Griffith for his own Majestic label in 1913, but he soon came under increasing attack from Freuler and Hutchinson, who felt that he was favoring Griffith's product over other Mutual releases, namely their own. The final break came when the Mutual board forced Aitken to cover, out of his own pocket, $40,000 that Mutual had invested in the production of The Birth of a Nation. This personal investment not only made Aitken a fast fortune but convinced him that the future lay in the production of lavish features. Freuler and Hutchinson somehow talked Kahn and Livingston into withdrawing their support from Aitken (despite the ongoing success of The Birth of a Nation), and at the May 1915 annual meeting Freuler ousted him as president.7
Taking Kessel and Baumann with him, Aitken then abandoned Mutual and made a financial agreement with Smithers and Company. He was able to guarantee the continued participation of Griffith, Ince, and Sennett, the industry's three most noted producers, who would form the nucleus of the new concern, to be called the Triangle Film Corporation. Smithers underwrote a $5 million stock offering, and Triangle, introduced at $5 per share in July 1915, reached $8.75 by September, when the first Triangle program opened at New York's Knickerbocker Theatre.8
Aitken's idea now was to acquire showcase theaters in the major metropolitan areas that could highlight the new Triangle releases; the films would then pass to affiliated theaters that had contracted with Triangle's exchanges. This bold attempt at vertical integration began to unravel almost immediately, however. Aitken's importation of expensive Broadway stars proved ill-timed and ill-advised. It appears to have been modeled on Adolph Zukor's 1912 scheme of "Famous Players in Famous Plays," but even Zukor had largely abandoned this policy by 1915; audiences had already indicated that they preferred screen stars in their movies. The traditional example here is Aitken's payment of $100,000 to Sir Herbert Beerbohm-Tree for just two films, Macbeth (1916) and Old Folks at Home (1916), both of which were notable box-office failures. On the other hand, despite an initial salary of $2,000 per week, Douglas Fairbanks proved quite profitable for Triangle from the moment his first film, The Lamb, anchored the premiere Triangle program on 23 September 1915.9
Aitken had depended on Griffith's help in handling these stage imports, but Griffith was so busy with the production of Intolerance that he never directed a single Triangle release and limited himself to nominal supervision of the work of his assistants. While the Sennett and Ince productions were popular, exhibitors resisted the higher advance prices they were expected to pay for them. These costs did not show on the screen. Ince spent only $8,356.12 on William S. Hart's The Disciple (1915), a five-reel feature; Hart himself was being paid just $300 per week. But Hart could work only fifty-two weeks a year, and Triangle's overhead demanded more. Kessel and Baumann so mismanaged their end of the business that Aitken had to buy them out in 1916, by which time Triangle's stock had already dropped to $2.10
The following year Triangle's chronic cash problems were so great that all three of its key producers moved to the Paramount program. Griffith wrote Aitken that Triangle was "conceded to be the worst managed business in Film History." Ultimately, Aitken was reduced to peddling reissues of Fairbanks and Sennett films and contemplating ways to squeeze another dollar out of The Birth of a Nation. Coming on the heels of the World Film fiasco, Aitken's failure soured Wall Street on motion-picture stocks for some time to come.11
1917–1919: Paramount, First National, and United Artists
The Paramount Pictures Corporation, the immediate beneficiary of Triangle's collapse, had not fallen into this position by accident. In fact, the success of Paramount was in many ways an illustration of Adolph Zukor's ability to refine and perfect schemes already introduced by men like Harry Aitken or William Fox (just as Aitken's failure with the "Famous Players" idea illustrates his inability to handle a production policy once successfully introduced by Zukor).
W. W. Hodkinson, an independent West Coast exchange operator, first conceived the idea of Paramount after observing the success of the General Film Company's national distribution system. The product of Zukor's Famous Players Film Company, as well as that of the Jesse Lasky Feature Play Company, constituted the bulk of those features then available on the open market (VLSE, Fox, and some others were handling their own distribution). They were offered on a "states rights" basis, with local distributors or exchange operators contracting for territorial exhibition rights. Hodkinson joined with other local distributors from New York, Boston, Pittsburgh, and Philadelphia and incorporated the Paramount Pictures Corporation on 8 May 1914. One week later this corporation entered into a five-year distribution agreement with Zukor, Lasky, and Bosworth, Inc. (an alliance of actor-producer Hobart Bosworth and Broadway impresario Oliver Morosco, financed by Los Angeles capitalist Frank C. Carbutt). By combining nationally, advances could be guaranteed for future productions that would be much higher than what might have been raised in separate states rights contracts, thus encouraging the production of more ambitious films. In exchange for exclusive distribution rights and 35 percent of the rentals, Paramount agreed to advance $20–$25,000 for each five-reel film and pay for the cost of prints and trade advertising. In 1915 this contract was extended to twenty-five years.12
Despite the great success of the organization for all involved, Zukor was uncomfortable about being, technically, a cog in the Paramount wheel. In addition, Hodkinson, remembering Aitken's recent failure at merging production and distribution, resisted Zukor's urgings to turn Paramount into a producing organization. Accordingly, Zukor and Lasky took control of Paramount by buying out the interests of several of the original incorporators on 21 May 1916 and forced Hodkinson to resign on 13 June. Zukor and Lasky then combined their production organizations as the Famous Players-Lasky Corporation on 29 July and acquired the stock of Bosworth and Morosco that November. What had begun as a move to consolidate power in the hands of the distributor had, under Zukor, become the world's most impressive producing concern, as the Film Daily put it, "the United States Steel Corp. of the motion picture industry."13
Having eliminated Hodkinson, the aggressive Zukor went to work on his new partners. Samuel Goldfish, one of the founders of the Lasky Company, was to serve as chairman of the board of Famous Players-Lasky, with Zukor acting as president. Friction between the two was immediate, and Zukor demanded that Jesse Lasky
choose between them. Despite the fact that Goldfish was his brother-in-law, Lasky lined up behind Zukor. Goldfish cashed in his interest for $900,000.14
The combined star rosters of the Famous Players and Lasky operations were already considerable, but in 1917 Zukor was able to add the defecting talents once handled by Triangle. At a time when star prominence was the single most important factor determining a film's box-office success, Zukor had cornered the market. In a 1918 popularity poll conducted by Motion Picture Magazine, the six top stars on the list—Mary Pickford, Marguerite Clark, Douglas Fairbanks, Harold Lockwood, William S. Hart, and Wallace Reid—were all under contract to Zukor.15
Using this leverage, Paramount was able to insist that prospective exhibitors interested in, say, the Pickford films, acquire them in large blocks along with a quantity
of less attractive titles. These block-booking arrangements typically included groups of from 13 to 52 or even 104 titles. Paramount salesmen offered a variety of different product lines, from the top-quality Artcraft releases of Pickford, Fairbanks, and Hart to the more modest Realart productions, in which stars such as Bebe Daniels were being developed. Because these films had not yet been produced, exhibitors were required to "buy blind" from a sketchy prospectus or campaign book. The system was similar to the program policy employed in nickelodeon days. But from the exhibitor's point of view, it was ill suited to current conditions, because audiences had become far more selective in their filmgoing habits (if only to patronize the films of one star over another). As best they could, all of Zukor's competitors soon adopted variants of this policy, with the notable later exception of the United Artists Corporation.16
In 1921 the Federal Trade Commission began an investigation of block-booking practices that continued intermittently until 1932. The ensuing case, Federal Trade Commission v. Famous Players—Lasky Corporation, et al., yielded seventeen thousand pages of testimony covering all sides of this issue. The major producer-distributors defended themselves by arguing that the policy was simple wholesaling, that the sale of individual films was uneconomical, and that exhibitors still had the right to buy specific titles. Supporting the claims of independent producers and theater owners, the government charged coercion, denied the majors' economic arguments, and insisted that the situation was a straightforward example of unfair trade practices. A cease and desist order was issued in 1927, which the majors chose to disregard while the matter worked its way through the U. S. Circuit Court of Appeals.
Before waiting for the government to come to their rescue, many of the nation's most powerful theater owners had already banded together to form the First National Exhibitors Circuit. The rapid increase in picture-palace construction that followed the opening of the Strand in 1914 soon created a class of "first-run" theaters that proved crucial to the successful exploitation of new feature products. After the publicity of a run in one of these two hundred or so key theaters, a film would eagerly be sought by exhibitors outside the downtown areas. But if a film had no first-run record, it was almost impossible to sell it to the outlying houses.
Nonetheless, the owners of these key theaters (who often controlled chains of local theaters as well) felt themselves threatened by Zukor and Paramount, who compelled them to accept product on increasingly costly terms. As scattered retailers, they had little bargaining power, and only the Stanley Company in Philadelphia was able to deal with Paramount on its own terms, owing to the almost monopolistic control it exercised over local theater programming. Squeezing these exhibitors from the other side was the knowledge that many prime locations were already over-seated, with so much local competition that even a popular (and expensive) feature might play to half-empty houses.17
A plan to organize these exhibitors was hatched by Thomas Tally, a pioneer Los Angeles showman, who together with J. D. Williams promoted the First National concept in 1916—1917. This was essentially a national organization of states rights franchisees. Films would be acquired by First National, with costs apportioned among the various franchise holders according to the value of their territories (table 3.1).18
The formation of the new organization was announced in New York in April 1917. Its two dozen original stockholders controlled about one hundred theaters, but sub-franchises were offered to outlying exhibitors.
By April 1919 First National controlled 190 first-run theaters and approximately 40 subsequent-run houses, not counting some 366 theaters which were controlled under subfranchise agreements. In January 1920 the total number of theaters controlled by First National had increased to 639; of these 224 were first-run houses, 49 were subsequent-run houses, and 366 were outlets operated by subfranchise holders (Howard Lewis, The Motion Picture Industry [New York: Van Nostrand, 1933] p. 17).
Benjamin Hampton claims that the number of screens eventually aligned with First National was as high as five or six thousand, a figure that would have given them control of nearly half the nation's theaters. Whatever the figure, most of these exhibitors had once carried the Paramount program, and when these theaters began to supply their own product, Zukor was faced with an effective boycott.19
But it was not simply aggravation with the Paramount sales policy that drew so many theater owners to First National. In July 1917 it was announced that Charlie Chaplin had signed with the new company. Although his first release, A Dog's Life, was not available until April 1918, the mere news of this acquisition was enough to
| Territory | Percentage |
| S. California, & Arizona | 227/56 |
| Nevada, Hawaii, N. California | 32/14 |
| Alaska, Wash., Ore., Mont., N. Col., New Mexico, Utah, Wyoming, S. Idaho | 3¾ |
| Western Canada | 2 |
| Illinois | 8¼ |
| Indiana | 3⅛ |
| Kansas, Iowa, Nebraska | 4¾ |
| Michigan | 4¼ |
| Minn., Wisconsin, N. & S. Dakota | 5 |
| Missouri | 3¼ |
| Ohio | 7 |
| New England | 8 |
| Maryland, D.C., Delaware | 2¼ |
| New Jersey | 3⅝ |
| New York | 14½ |
| West Virginia, Western Pennsylvania | 4⅛ |
| Eastern Pennsylvania | 4¾ |
| Eastern Canada | 3⅛ |
| Ga., Fla., Ala., Va., N. & S. Carolina | 3⅛ |
| Louisiana and Mississippi | 1⅜ |
| Texas, Oklahoma, Mississippi [sic] | 4½ |
| Kentucky, Tennessee | 1⅞ |
start a rush. First National had been able to lure Chaplin from Mutual not simply by offering him more money but by setting him up as his own producer, with his own Hollywood studio on the corner of Sunset and La Brea. They would advance $125,000 for the production of each of eight two-reelers, with an additional $15,000 per reel if Chaplin chose to produce a longer picture. First National paid for prints and advertising, took 30 percent of the gross to pay for distribution expenses, and split the remaining profits equally with Chaplin. Now that they had changed hats and become (essentially) producers, the First National franchise-holders stopped complaining about high star salaries and became the first to offer a million-dollar contract. They became the second as well, when they lured Mary Pickford away from Zukor himself.20
For almost a year First National had negotiated with Pickford, whose Paramount contract approached expiration in 1918. Zukor, already feeling the effects of this exhibitors' revolt, calculated that he could not raise Pickford rentals high enough to match First National's offer. According to Benjamin Hampton, Zukor offered Pickford $250,000 simply to retire from the screen for five years (an incident that does not appear in Zukor's autobiography), but Pickford is said to have declined.21
In addition to Chaplin and Pickford, First National eventually signed D. W. Griffith, Louis B. Mayer, B. P. Schulberg, and Joseph Schenck, who brought with them such stars as Lillian Gish, Constance and Norma Talmadge, Anita Stewart, and Katherine MacDonald. Starting from an exhibition base, First National had successfully grown to include distribution and production as well. Adolph Zukor made the obvious countermove in 1919: from production and distribution he would move into exhibition.22
On the advice of Walter Irwin, who had successfully been merchandising the weak Vitagraph-Lubin-Selig-Essanay (VLSE) product and now had accepted a Paramount vice-presidency, Zukor decided to attack First National's franchise-holders on their own ground. As Irwin later testified before the Federal Trade Commission (FTC), Paramount could destroy First National if it would go into each one of the First National cities and build, or threaten to build, the finest and largest theater in the city. Many of these exhibitors, weakened by the strain of carrying the large Chaplin and Pickford contracts and suffering cash shortages on account of theater closings imposed during the influenza epidemic, were in no mood to battle Paramount over the issue.23
On 18 April 1919 Famous Players-Lasky acquired a half-interest in Grauman's Million Dollar Theatre in Los Angeles; on 7 May they obtained a controlling interest in New York's Rialto and Rivoli Theaters. This gave Paramount its own showcase in the most prominent East and West Coast exhibition sites. S. A. Lynch, a Paramount partner, sent his so-called "dynamite gang" through the South, intimidating exhibitors into selling out to Southern Enterprises, Inc., a Paramount subsidiary operated for this purpose.24
The general manager of the Saenger Amusement Company, a major Louisiana chain, complained bitterly in a full-page trade advertisement:
The methods they are using are as near Bolshevism as anything I know of. They hope to gain a hold for each tentacle of their octopus by threats and brute financial force, and the independent exhibitor who has worked years to get his theaters in paying class and has striven night and day to make motion picture fans of his town's population is a mere pawn in the operation of this huge octopus and classed by it as worthy of no consideration (quoted in Gertrude Jobes, Motion Picture Empire [Hamden, Conn.: Archon, 1966], p. 220).
Zukor bought into Saenger on 22 June 1920. He had already taken over the Black New England Theatres on 27 January and had bought out the Stanley Company of America the previous 1 August. With these interests, he not only acquired some of the nation's most important theater chains but gained control over three of the key First National franchise-holders. The rumor that he had silently acquired E. H. Hulsey's interests in Texas and Oklahoma (he had) demoralized the rest of the First National board, who were no longer sure which of their number was now in the enemy camp. This move so distressed Thomas Tally that he sold out all his theater interests, save his one Los Angeles flagship.25
Much of this expansion had been financed by a $10 million stock issue underwritten by Kuhn, Loeb in 1919. The rumor that Zukor intended to buy up every major theater in the country, combined with the knowledge that Wall Street millions were behind him, did a great deal to soften up the opposition. By 1921 Zukor had acquired 303 theaters, only a fraction of the 14,000 then operating, but significant because most of Zukor's houses were first-class, first-run theaters. Since only some two hundred key theaters existed, Zukor had gained an effective monopoly, according to the complaint of the Federal Trade Commission. The way these theaters were acquired, and their function in denying screen time to independent producers, became the second part of a lengthy FTC investigation that would continue throughout the decade.26
Despite the fact that Zukor had acquired several seats on the First National board, he had not been able to put First National out of business. While the FTC investigation
developed, Zukor's hands were effectively tied, and First National continued acquiring strong program material. It merged in 1921 with Associated Producers, a distributing combine handling the work of Thomas H. Ince, Allan Dwan, George Loane Tucker, Mack Sennett, Marshall Neilan, Maurice Tourneur, J. Parker Read, and King Vidor under the new name Associated First National. In 1923 it constructed its first studio complex, an elaborate facility in Burbank financed by several million dollars' worth of stock issued by Hayden, Stone, and Company. Sam Katz of the powerful Balaban and Katz chain in Chicago tried to organize support among the members to merge all the company's scattered interests into one tightly knit organization. But the unwieldy First National Board hesitated. By 1926 Zukor had managed to buy out Balaban and Katz, crippling First National for good, and had merged many of the components (including the Balaban and Katz chain itself) into his new Publix Theatres Corporation.27
"Now that the inventors, cameramen, exchangemen and exhibitors had taken their fling at motion picture control," wrote Terry Ramsaye, "it was the actors' turn." At the January 1919 convention of the First National Exhibitors Circuit, a wild rumor circulated concerning Adolph Zukor's latest attempt to eliminate his rival: a direct merger of First National and Paramount. Mary Pickford and Charles Chaplin were then both releasing through First National and would have fallen under the control of Zukor if the deal had gone through. Chaplin appeared before the executive committee to ask for an increase in his budget allotment, because, with A Dog's Life and especially with Shoulder Arms (1918), he was spending far more on production than he had originally estimated. The committee refused. "I believe it has something to do with this motion picture convention," advised his brother, Sydney, who served as his financial manager. For Pickford, it was enough that "the trade papers reported that the men ruling the industry were planning to clamp the lid down on the salaries of actors." Realizing that, whatever the results of the merger discussions, events were reducing them to pawns in a far larger power struggle, Chaplin, Pickford, and Douglas Fairbanks (whose Paramount contract was nearing an end) decided on an immediate preemptive move. They quickly involved D. W. Griffith and William S. Hart (both then releasing through Paramount) and ostentatiously announced to the press an ambitious scheme to set up their own producing and distributing organization. According to Chaplin's later testimony, the announcement was a simple ruse: "It was not our intention to go through with the project, however. Our objective was only to stop exhibitors from signing a five-year contract with this proposed merger, for without the stars it would be worthless."28
But the response was so dramatic that the scheme quickly took on a life of its own. Pickford, Fairbanks, Griffith, and Chaplin signed the United Artists incorporation papers on 17 April 1919. Hart, who had already talked of retirement, did allow himself to sign again with Zukor, taking full advantage of the situation to raise his fee to $200,000 per picture. Because Hart was releasing six films a year by this time, he immediately moved into the million-dollar class, in addition to avoiding the corporate squabbles and financial problems that plagued the United Artists members for years to come.
Unfortunately, Pickford and Chaplin still owed films on their existing First National contracts before they could begin releasing through United Artists. Griffith, in order to raise his share of the initial United Artists financing, actually signed a three-picture contract with First National, thus keeping himself tied up until 1920. Only Fairbanks was immediately free, and the first United Artists release, His Majesty, the American, was a Fairbanks picture, just as the first Triangle release had been four years earlier.29
Hiram Abrams, an experienced marketing executive who had served as president of Paramount after Hodkinson's dismissal, was appointed general manager of the new firm. Some historians, especially Benjamin Hampton, have claimed that the essential concept of United Artists was actually brought to Abrams by a young associate of his at Paramount, B. P. Schulberg, to whom he agreed to give half of his share if he could convince the top stars to sign. But by the time the final papers were drawn, Schulberg was out, only to bring suit on this issue in 1920. In his history of United Artists, Tino Balio notes that Abrams denied all Schulberg's claims, which were said to be based on an oral agreement between them. The case was settled out of court for an undisclosed sum. In any event, the existence of the Schulberg-Abrams argument implies that the impetus for an organization of film artists came not from the artists themselves but from one or another distribution executive.30
The early history of United Artists was extremely troublesome. Without automatic access to any theaters of its own, the firm needed to break the stranglehold of Paramount and First National (it was not entirely a coincidence that Paramount began its theater-buying spree the day after the incorporation of United Artists). The
United Artists members also needed to raise production money in advance, and they attempted, with little initial success, to get it from the theater owners themselves. Fearing a possible takeover attempt, the four partners refused to go public with their stock, but given the investment community's opinion of "independent" producers (those with no firm access to theaters), even this group would have had trouble raising money on Wall Street.31 Said Mary Pickford in 1923:
I have to worry so much about distribution now that my ability as an actress is impaired. Producers have so bottled up the best theaters that it is often impossible to get a showing of my pictures in them. I will retire from the business if the conditions become worse…. Key cities mean two-fifths of the returns. If the market is closed by block booking the producers owning theaters will eliminate the people who are seeking to make big pictures and conditions will lapse into the state of three years ago (quoted in William Seabury, The Public and the Motion Picture Industry [New York: Macmillan, 1926] p. 60).
While United Artists was originally to release twelve films per year, only seven were issued in 1920, their first full year of operation. To help fuel the distribution machinery, pickups from other producers needed to be acquired. A subsidiary named Allied Producers was established to handle work by such lesser lights as Charles Ray and Max Linder, but it proved unattractive. The partners quarreled among themselves over their own distribution practices, Griffith preferring to handle road-show engagements of his films personally, then turning them over to United Artists after he had already skimmed the better part of their potential earnings. Chaplin released nothing through United Artists until the end of 1923, and then only the commercially unsuccessful A Woman of Paris. A few big hits—Way Down East (1920), Robin Hood (1922), and The Gold Rush (1925)—were outweighed by many unprofitable releases. Between 1919 and 1927 the United Artists Corporation claimed a loss in all but two years, and even those "profits" amounted to less cash than Adolph Zukor would have paid Mary Pickford in a month. United Artists' inability to distribute films efficiently on an individual basis must have seemed an object lesson to Zukor and the other block-booking proponents then under investigation by the FTC.32
At the end of 1924 Joseph Schenck was hired to reorganize the company, made an equal producing partner, and elected Chairman of the Board. He brought with him the contract of his wife, Norma Talmadge, who was by this time selling more tickets than Pickford. Moving immediately to increase the flow of product, Schenck signed Rudolph Valentino, Buster Keaton, Gloria Swanson, and producer Samuel Goldwyn. Such acquisitions had more publicity value than practical success. Keaton's films failed at the box office, Swanson became bogged down in the Queen Kelly fiasco, and Valentino died just before the release of Son of the Sheik (1926). Goldwyn proved irascible and difficult, but his films were successful enough that he was elected a producing partner in 1927. By then Griffith was already gone, his own financial problems driving him back into a contract with Zukor.33
Schenck had begun to act on his own merger plans as well and attempted to join with Metro-Goldwyn-Mayer in 1925, but Chaplin, fearing the size of the prospective combine, rejected the idea. In creative terms, Chaplin may have been right, but the U.A. partners lost millions by failing to acquire a piece of MGM at the start of the Mayer and Thalberg years. By the end of the silent period, Schenck had to content himself with a tentative expansion into exhibition by acquiring first-run houses for United Artists in a handful of key cities and reconstructing their distribution apparatus via the United Artists Theatre Circuit.
1919–1927: Metro-Goldwyn-Mayer, Fox, Universal, and Warner Bros.
If Joseph Schenck had been able to complete the merger with MGM, he would have been adding his forces to the industry's most sensational new combine. Metro-Goldwyn-Mayer Pictures Corporation was the production arm of Loew's, Inc., a theatrical enterprise organized and controlled by Marcus Loew. His action in effecting the Metro-Goldwyn merger in 1924 was the most significant move to date in the industry's increasing centralization, as well as another example of the fallout produced by the Paramount-First National battle. Entering the industry with a penny arcade, Marcus Loew gradually expanded to include nickelodeons and even legitimate theaters (mostly in the New York area) for which he programmed a mixture of vaudeville and motion pictures. Among Loew's many partners in various theatrical ventures were Nicholas and Joseph Schenck, the latter of whom he placed in charge of the booking of live acts for the Loew's circuit and the other theaters handled by the Marcus Loew Booking Agency. The Loew's circuit was small-time vaudeville, less prestigious than the big time of the B. F. Keith or Orpheum circuits, and gradually the film item came to dominate the program at Loew's theaters.34
By 1919 Loew had an interest (through various partnerships) in approximately fifty-six theaters. On 18 October of that year Loew's, Inc., was organized to consolidate the various enterprises under his direct control. Fueled by a $9.5 million loan underwritten by Montgomery and Company and Van Emburgh and Atterbury, it was immediately listed on the New York Stock Exchange. In January 1920 the new Loew's, Inc., acquired all the stock of the Metro Pictures Corporation, a producing and distributing organization that ran its own system of exchanges and operated studios on both coasts.35
Loew's move into production was a clear response to Zukor's policy of theater acquisition begun earlier in 1919. But despite one phenomenal initial success, the acquisition of Metro was not to be the answer to Loew's problems. Metro had been organized in 1915 as an outgrowth of the ill-fated Alco Film Corporation. Al Lichtman, once one of Zukor's partners in Famous Players, had formed Alco as an exhibitors' combine, almost a precursor of First National. But the organization foundered, and its disgruntled component members, short of expected product, reorganized with Richard Rowland as president and Louis B. Mayer as secretary.
The new Metro handled the product of various minor producers, including B. A. Rolfe, Quality Pictures, and Popular Plays and Players (which made Olga Petrova and Florence Reed pictures in a converted church on West Thirty-eighth Street in Manhattan). Louis B. Mayer, an important New England theater operator when he became involved in Metro, further enhanced his status by acquiring the local distribution rights to The Birth Nation. By 1917 he decided go into production on his own and hired Anita Stewart away from Vitagraph. Because Stewart's Vitagraph contract was still valid, the ensuing legal tangle forced considerable delays, and
their first film, Virtuous Wives, was not completed until late in 1918. Following a quarrel with Rowland regarding the film's distribution, Mayer quit Metro and signed with First National.36
At this point, Metro, having bought out many of its weakest members, was in very poor shape, while the stronger franchise holders had gone over to First National. Rowland's production policy wavered between inexpensive program pictures and elaborate specials with stars like Alla Nazimova, but Metro did not have the distribution base to exploit either alternative properly. In development when Loew acquired Metro in 1920 was an ambitious adaptation of The Four Horsemen of the Apocalypse, masterminded by the studio's canny scenario editor, June Mathis. The film version's reputed $4.5 million gross would make it one of the super-hits of the silent era, and not long after its premiere, Loew matched its success by opening his elegant Loew's State Theatre in New York City (designed by classicist Thomas Lamb).37 His theatrical holdings continued to prosper, but Metro Pictures failed to repeat the success of The Four Horsemen, despite the acquisition of Jackie Coogan, Buster Keaton, and even producer Louis B. Mayer again (all independents distributing through Metro's exchanges). Unloading the operation would have left Loew without any ready source of films, and in any case, this practice would have gone counter to the expansive spirit of the age.
On 16 May 1924 Loew merged Metro with an even shakier producer-distributor, the Goldwyn Pictures Corporation.38 After Samuel Goldwyn had been voted out in 1922, the company that bore his name continued to deteriorate. The new production head, Abe Lehr, brought over June Mathis as scenario editor, but her insights were of little practical help. While twenty-eight films had gone into production in 1921, only seven went before the cameras in 1922. The figure rose to fifteen the following year, but this was still not enough to keep the lights burning in the Goldwyn exchange system. Mathis did hire some of Hollywood's finest directors in an effort to improve the quality of Goldwyn releases—Marshall Neilan, King Vidor, and Erich von Stroheim—but catastrophic problems with Greed and Ben-Hur demonstrated how weak the management at Goldwyn really was.
Bosley Crowther writes that Goldwyn chief Joe Godsol failed in an attempt at a merger with First National (they built their own studio instead) and watched the company's stock drop from 22 in the spring of 1923 to 8¼ by the end of the year. Loew, who could hardly resist such an undervalued plum, acquired control through a simple exchange of stock, without any cash changing hands.39
Among the items included were the fine Goldwyn lot in Culver City (originally the Triangle lot), a distribution contract recently negotiated with William Randolph Hearst's Cosmopolitan Pictures, the services of the aforementioned directors, and Goldwyn's theater and exchange interests, which included control of New York's Capitol Theatre, the largest in the country. Replacing the Goldwyn management seemed to be the only problem, and to do this Loew brought in, as part of the deal, Louis B. Mayer, then operating his own Los Angeles studio on Mission Road.
In fact, to run the new studio Loew acquired what was known as "the Mayer group," which included not only Mayer but attorney J. Robert Rubin and production head Irving Thalberg, who had been working for Mayer since February 1923. This group was under personal contract and in addition to salaries would divide 20 percent of the profits of all films produced under their regime.40 Harry Rapf, not one of the official group, was an immediate addition to the studio's executive cadre.
Their first move was to assert firm control over the disparate forces brought together by the merger. They refused to restore the cuts already made by the Goldwyn management in Greed; they changed directors and stars on the nightmarish Ben-Hur production and eventually recalled the entire company from Italy; they censured (and possibly blacklisted) troublemakers like Neilan. But for those who would play by the rules—directors such as King Vidor or Clarence Brown—they offered unprecedented material support and the fabulous distribution potential of the Loew's chain. For the favored few, a measure of artistic freedom could be achieved, but it was clear from the beginning that it was the executive office that would have the last word at MGM, an attitude underscored by Thalberg's increasing reliance on a producer system by the end of the silent period.
Marcus Loew lived to see little of the success of his brainchild. He died in 1927, and control of his empire passed to his chief lieutenant, Nicholas Schenck. A few years earlier, Schenck's brother, Joseph, had suggested a merger of MGM with United Artists. In 1929, Nicholas would make his own merger attempt by gathering together enough shares from the Loew estate and other interests to sell out Loew's, Inc., to a bitter rival, William Fox.
That deal was never consummated, but for most writers it remains William Fox's most significant claim to a place in their histories. Of far greater practical significance, however, were his battles with the Motion Picture Patents Company in 1912, while he was still a local exhibitor and the owner of the Greater New York Film Rental Company. Like Marcus Loew, Fox operated a series of second-class vaudeville houses in which films had become a major part of the bill. To ensure his film supply, he went into production as early as 1914, when the establishment of Box Office Attractions made him "the first movie man successfully to embrace in one organization all branches of the industry."41
Fox's first film, Life's Shop Window (1914), was an instant success in a product-hungry market, but it was with Theda Bara that his organization really struck gold. Reorganized as the Fox Film Corporation on 1 February 1915, the new organization expanded production rapidly. It leased the old Willat studio in Fort Lee, New Jersey, as its main production center but operated many scattered studios in places like Hoboken, New Jersey, Flushing, New York, and Edendale, California. Fox's control over this production-distribution-exhibition combine was unique. Financed by a group of New Jersey investors headed by John F. Dryden, president of the Prudential Insurance Company, Fox was able to maintain majority control of this empire in his own hands, a claim neither Zukor, Laemmle, Loew, nor any other mogul could make.42
For a decade, Fox avoided the race for prestige driving Paramount and First National. With Theda Bara, William Farnum, and Tom Mix, he produced melodramas and action pictures to please the patrons of his unpretentious houses. One experiment with lavish spectacle, A Daughter of the Gods (1916), starring swimming champion Annette Kellerman and directed by Herbert Brenon, was an error
Fox did not repeat. Presaging Irving Thalberg, Fox took the film away from Brenon and cut it himself. More typical was Over the Hill (1920), a sentimental tale of filial ingratitude that earned $3 million in rentals, according to Fox. He claimed to have written the script and produced it personally.43
Unsophisticated films like Over the Hill brought continuing profits into the coffers of the Fox Film Corporation, but by 1925 even Fox had begun to worry about the increasing expansion of Paramount, First National, and Loew's. Fox's international theater holdings were vast, but according to Gertrude Jobes, by the late teens his domestic chain was limited to twenty-six lower-quality vaudeville picture houses. In 1925 he moved to rebuild his holdings with the creation of the Fox Theater Corporation. Stock in this organization, and in the Fox Film Corporation itself, was now offered to the public for the first time. With the proceeds of this issue, entire theater chains were acquired, including the Poli circuit, the Midwest circuit, and the West Coast Theatres, previously an important First National franchisee. By the end
| Year | Pictures | No. of Negatives | Gross Rentals | Ratio of Costs to Rentals (%) |
| 1914 | 4 | $ 53,250 | $ 272,401 | 23.9 |
| 1915 | 36 | 767,243 | 3,208,201 | 30.4 |
| 1916 | 52 | 1,289,785 | 4,244,558 | 41.6 |
| 1917 | 70 | 2,964,696 | 7,118,172 | 44.0 |
| 1918 | 73 | 3,212,689 | 7,300,301 | 31.2 |
| 1919 | 69 | 2,929,069 | 9,380,883 | 19.5 |
| 1920 | 71 | 4,317,403 | 12,609,725 | 34.2 |
| 1921 | 65 | 4,783,210 | 13,715,000 | 34.9 |
| 1922 | 66 | 4,350,083 | 12,327,957 | 35.3 |
| 1923 | 51 | 4,821,456 | 11,242,629 | 42.9 |
| 1924 | 46 | 3,610,433 | 9,926,025 | 36.4 |
| 1925 | 42 | 5,226,809 | 11,750,515 | 44.5 |
| 1926 | 51 | 8,328,252 | 14,274,234 | 58.3 |
| 1927 | 46 | 8,558,101 | 17,012,875 | 50.3 |
| 1928 | 55 | 10,379,365 | 22,626,747 | 45.9 |
| 1929 | 53 | 16,142,216 | 30,803,974 | 52.4 |
| Total | 851 | $81,734,055 | $187,810,297 | 43.5 |
of the decade Fox would control over five hundred houses. He bought the Roxy from its developers just before opening night and took over the Yaraab Temple, would-be home of Atlanta's Shriners, which he rechristened the Atlanta Fox. This Arabian Nights spectacle, called "the most overpowering [atmospheric] theater of all" by historian David Naylor, is one of the last great picture palaces still surviving in the post-studio era. Some of the other theaters crafted by Fox were not so lucky. The San Francisco Fox, "the largest and grandest movie palace ever built on the west coast," was decorated with museum-quality art and antiques personally acquired by Mrs. Fox on her European shopping tours, but like the East Coast jewel of the Fox empire, the Roxy, it has long since disappeared.44
But Fox was not just picking up real estate. His acquisition of Theodore Case's sound-on-film process, as well as the European Tri-Ergon patents, put him in a commanding position to dominate the coming age of talking pictures. Impressed by Paramount's big-screen Magnascope effect (which enlarged the screen image to giant size) he set his own technicians to work perfecting a 70-mm process ultimately marketed as Fox Grandeur. Most telling of all, he drastically altered the style of the most ambitious Fox Film productions. The decision to acquire hundreds of upscale theaters meant that Fox could no longer depend entirely on the familiar melodramas and Westerns that had carried the studio for a decade. He sent his chief lieutenant, Winfield Sheehan, to supervise production operations on the West Coast and ordered a massive expansion of the studio facilities at Western Avenue and at Fox Hills, the newly acquired hundred-acre tract in Beverly Hills, California (table 3.2).45
His success with The Iron Horse in 1924 (a Western but a prestige Western, itself inspired by Paramount's The Covered Wagon [1923]) led to such powerful historic epics as What Price Glory? (1926) and Three Bad Men (1926). But Fox's boldest move was the importation of Germany's most respected director, F. W. Murnau. That Murnau's The Last Laugh (1924) had been a catastrophe at the American box office failed to daunt Fox, who not only allowed Murnau a free hand in the production of Sunrise (1927) but encouraged the studio's other contract directors—solid Americana types like John Ford, Raoul Walsh, and Frank Borzage—to study Murnau's style and take from it what they could. The results were such brilliant amalgams of German and American style as 7th Heaven (1927), Street Angel (1928), The Red Dance (1928), Hangman's House (1928), and The River (1928).
These dark and introspective works marked a significant change in Fox's most prestigious releases, but in fact, such experimentation was only icing on the traditional Fox cake. While Murnau and his crews were busy re-creating "swampscapes" inside the Western Avenue stages, Tom Mix still rode the range at Fox Hills. Bertha the Sewing Machine Girl (1926), The Return of Peter Grimm (1926), and Mother Machree (1928) upheld traditional Fox values for traditional exhibitors, and the Fox Film Corporation was able to absorb its experiment in expressionism without affecting overall profitability.
A different situation evolved at Universal. Like Fox's operation, the studio run by Carl Laemmle was highly successful in serving the needs of small exhibitors in the pre-1925 period. Westerns, melodramas, and short comedies, spiced with an occasional prestige effort, made the product of both companies rather similar in this period, and very different from that of Paramount, First National, or Metro-Goldwyn-Mayer. But Universal had special problems of its own, inherited from its early days as a consortium of independent producers organized in opposition to the Motion Picture Patents Company.
By the time Universal City opened in 1915, only the tenacious Pat Powers still contested Laemmle's hold over the company. Most of the internal dissension was gone, but a rational method of organizing the studio's vast output (fifty-four reels a week by 1916) eluded the company until the arrival of Irving Thalberg. Carl Laemmle often used the Woolworth metaphor to describe his position in the motion-picture business, and the most successful years of his administration did see Universal profit through the merchandising of vast quantities of cheap goods. But this "nickel-and-dime" philosophy was ultimately responsible for the studio's abrupt decline in the early sound years and Laemmle's departure not long after. Universal, while well situated in 1915 with a fine new studio and an aggressive distribution system, soon found itself falling behind its competition in the use of stars, the ownership of theaters, and even the introduction of feature pictures.46
Despite the fact that Universal had distributed three of the most successful early features—Paul J. Rainey's African Hunt (1912), Traffic in Souls (1913), and Neptune's Daughter (1914)—Laemmle resisted the move away from a "balanced program" of short subjects much longer than any of his competitors. In a 1915 editorial headlined "Quit Using Dope!" he attacked feature-length pictures as "over-done" and claimed that the public was already tiring of them. Two years later he was still promoting his "regular service" program of one-, two-, and three-reel pictures, attacking feature-length films, and decrying the lavish presentation policies of the downtown theaters as wasteful. What is especially odd is that throughout this period Universal was offering not only the regular service program of short subjects but an entire range of feature pictures, some handled through their own exchanges and some distributed via states rights release. Promotions for each were carried in the studio house paper, alongside these continuing editorial attacks on the feature. Not until mid 1917 did Universal stop offering this full program of shorts, and the production of two-reel Westerns and comedies remained a staple there throughout the silent era.47
Laemmle had earlier been responsible for the promotion of Florence Lawrence and Mary Pickford, which gained him some credit for "launching" the star system. But in 1915 his experience with a line of "Broadway Features"—starring such theater imports as Jane Cowl, Nat Goodwin, and Florence Reed—completely soured him on stars, and he spent the rest of his career grumbling about them. While Aitken, Zukor, and others moving heavily into the production of features continued to promote the star, Laemmle resisted long enough to leave his studio almost bereft of big-name talent by the postwar period.
In the late teens Universal was known as a giant factory where work was easily attainable but working conditions (especially salary) remained substandard. During this period, John Ford, Rudolph Valentino, Rex Ingram, Lon Chaney, and Mae Murray all spent considerable time at Universal, but just as they began to establish themselves, Laemmle let them get away, lured elsewhere by promises of greater control, money, or both. By 1919 he had even lost Lois Weber, his most important director during the war years, although in this case her subsequent career, at First National and Paramount, was brief and unfortunate.
Historians have often noted the fact that Universal was heavily committed to women directors during the late teens. Lois Weber, Ida May Park, Cleo Madison, Ruth Stonehouse, Elsie Jane Wilson, Grace Cunard, and Ruth Ann Baldwin were all directing there by 1917. Because most of these women were hired before the establishment of the military draft, the shortage of manpower resulting from the war was not the reason for this situation. Laemmle's low pay scale and vast production needs might have been part of the explanation (as it was years later at Roger Corman's New World Pictures), but Universal was certainly not the only cheap studio in town. Idiosyncratic personal judgments seem to have played an important role in Universal's hiring policies. Laemmle was very fond of Lois Weber, for example, and when she fell on hard times in later years, he gave her work directing screen tests and doctoring scripts. The early Weber films had paid off handsomely, and perhaps he enjoyed continuing the gamble.48 This well-known gambler's instinct (promoted in the trades as "Laemmle luck") seems to have induced him to hire Erich von Stroheim as a director at a time when von Stroheim's only reputation was that of a stock villain in World War I atrocity pictures. Von Stroheim's films, especially Foolish Wives (1922), became the studio's tentative entries in the growing postwar competition for prestige pictures. Ultimately, von Stroheim proved more trouble than he was worth, and the man given the responsibility of putting him in his place, Irving Thalberg, emerged as Universal's most significant contributor to the rise of the modern studio system.
Thalberg was another of Laemmle's hunches, appointed general manager of the studio before he was old enough to sign checks.49 Breaking von Stroheim was his way of demonstrating that control would henceforth be centered in the front office, not
scattered among various production units as it had been during the late teens. For a time, Thalberg was also able to ward off the conflicting and confusing orders that issued from New York, contradictory signals which had made the position of all previous general managers quite impossible.
For example, in a letter to Thalberg dated 5 December 1922 Laemmle expresses disappointment regarding The Shock (1922), has faint praise for The Storm (1922), complains about various cost overruns, second-guesses Thalberg's choices of writers and directors, predicts that Wallace Worsley will turn The Hunchback of Notre Dame (1923) into another "flivver," and urges, "Irving, turn over a new leaf, do business along conservative lines, and be cocksure you are right before you go ahead with anything."50 Within a few months, he had lost Thalberg to Louis B. Mayer.
Two Thalberg projects, The Hunchback of Notre Dame and Merry-Go-Round (1923), were major financial successes for Universal in 1923–1924 and encouraged Laemmle to increase the quality of the general run of Universal features. He brought in Al Lichtman as general sales manager, and Lichtman announced to the sales force, "I have come to the conclusion that exhibitors want bigger pictures, and will pay to get them." In line with this policy, Laemmle reorganized his operation in 1925, selling $3 million worth of stock in Universal Pictures, Inc., a holding company that controlled the studio, its exchanges, and a small theater circuit called the Universal Chain Theaters.51
But Universal's move into domestic theaters had come too late (their foreign holdings were already considerable, however). In 1926 Robert H. Cochrane, the company's vice-president, complained that Universal was suffering from the lack of first-run houses and noted that, when their lease on New York's 539-seat Cameo Theatre expired four months hence, they would have no first-run theater in that city available to them.52 As it happened, the theaters acquired proved so ineffective that Universal began to sell off the chain in 1927.
To create the elaborate films needed to meet this supposed exhibitor demand, Universal leaned heavily on its European connections. Not only was Laemmle a major owner of German theaters, but he was involved in European coproduction and in 1926 had even tried to merge with the German production firm UFA. Fox may have acquired Murnau, but Universal's exotic European talent was the most broadly based of all the Hollywood studios. By the end of the silent era, E. A. Dupont, Paul Leni, Paul Fejos, Dimitri Buchowetzki, Conrad Veidt, and Edgar G. Ulmer were all on the Universal lot. With such films as The Man Who Laughs (1928) and Lone-some (1928), they offered new stylistic models for familiar Universal genres. Even a little Western like Wild Blood (1928), nominally featuring Rex, King of the Wild Horses, contains more than its share of superimpositions and hand-held subjective camerawork. But the lack of effective exhibition outlets, combined with increasing production costs, strangled Universal's profits by the end of the 1920s. A film like The Cat and the Canary (1927) might do very well at the box office, but as Carl Laemmle could hardly help noticing, the box office usually belonged to someone else.
There was one studio, of course, whose role in the history of silent film was remarkably small but that ultimately succeeded in upending the entire medium: Warner Bros. Harry, Sam, Albert, and Jack Warner had been touring exhibitors in the store-show era, exchange operators (who were forced to sell out to the General Film Company), and states rights distributors. Their infrequent early efforts at production reached a peak with My Four Years in Germany (1918), taken from ambassador James W. Gerrard's best-seller, which successfully exploited a tide of wartime patriotism.
Through the aid of Motley Flint, vice-president of the Los Angeles Trust and Savings Bank, the brothers obtained a cash loan of $1 million, some of which went into their new Hollywood studio at Sunset and Bronson. Production activity was minimal, however: one film in 1920, three in 1921. On 4 April 1923 they reorganized as Warner Bros. Pictures, Inc., and began a more ambitious production program that included acquiring the rights to a series of David Belasco properties and, more successfully, initiating a series of features starring a dog, Rin-Tin-Tin. Even more than at Fox or Universal, Warners releases in this period were characterized by outdated society melodramas and soap operas. Such films had little appeal in urban centers, but the brothers were essentially states rights specialists and were able to market their films successfully to the thousands of theaters located outside the big cities or otherwise unaffiliated with the major chains.53
With "expand or die" as the industry watchword, Warners decided to acquire theaters and raise the general level of their releases. They made the startling move of hiring Ernst Lubitsch and John Barrymore, and in December 1924 they bought their first theater—in their hometown, Youngstown, Ohio. Thirteen more theaters followed the next year. As with so many other studios, 1925 proved to be a year of expansion driven by Wall Street investment. Forming a close association with Wad-dill Catchings and the firm of Goldman, Sachs, Warners floated a $4 million stock issue. On 23 April 1925, they acquired control of the Vitagraph Company of America. Nearly moribund as a producer, Vitagraph did operate thirty-four domestic and twenty foreign exchanges as well as large studio facilities on both coasts. The brothers were now directly involved in exhibition, but they needed an edge of some sort if they intended to compete with the larger, better-financed, and longer-entrenched chains of their rivals. To this end they formed the Vitaphone Corporation of America on 25 June 1925.54
The Vitaphone process was a sound-on-disc system developed by Western Electric that Sam Warner felt could supply inexpensive canned musical accompaniments for features, thus eliminating the salaries of house orchestras in the growing Warners chain and providing a potent attraction for the small outlying houses that the Warners had serviced for so many years. Since March 1925 Warner Bros. had operated radio station KWBC in Los Angeles, and the microphone held no terrors for them.
While the recorded musical sound track of Don Juan gained some acclaim at its 6 August 1926 premiere (as did the accompanying program of all-talking shorts), not until Warners used some dialogue in a feature picture did the talking film demonstrate that it might supplant the silent picture as the industry standard. It is easy to exaggerate the impact of the premiere of The Jazz Singer on 6 October 1927. Silent films did not disappear overnight, nor did talking films immediately flood the theaters. Wiring for sound proceeded at a brisk pace, but it was limited by the realities of the manufacturing process. Two years later, silent films with stars like Greta Garbo and Lon Chaney were still opening and still playing to excellent business.55 Nonetheless, 1927 remains the year that Warner Bros. moved to close the book on the history of silent pictures, even if their original goal had been somewhat more modest.
* * *From 1915 to 1928 the structure of the American motion-picture industry had changed dramatically, and one of the major reasons behind this change was the way in which the industry was financed. In 1915 Motion Picture magazine had simply warned its readers to stay away from motion-picture investment schemes.56 This was the standard line at the time, based on observed industry instability and the lack of any business methods that Wall Street analysts might understand as rational. As internal pressures forced film industry executives to seek capital in the marketplace, they tried to entice investors by making their organizations seem more businesslike and by promoting the notion that the cinema was one of the nation's industrial giants.
The first goal could be accomplished in a relatively straightforward, if timeconsuming, manner. The Commerce Monthly announced in September 1924:
The motion picture industry is slowly getting out of the class of a game and more in the class of a business. A settling-down process has been taking place during the past two years, resulting in the establishment of three fundamental principles: first, that production costs cannot be enlarged indefinitely without straining the financial basis of production to the breaking point; second, that sound financial methods are indispensable for the progress of the industry; and third, that public approval and good will are its most valuable assets (quoted in "A Banking Endorsement of the Industry," Film Daily Yearbook [1925], p. 55).
Barron's reported in 1924 that "the principal objection bankers make to producers' methods is not so much in the sum of money they spend in staging a story, as in their failure to keep within agreed limits." Three years later, analysts at Forbes pointed to Famous Players–Lasky as one firm that had nearly eliminated this problem. They reported that Famous Players–Lasky was generally within 2 percent of its annual production budget each year and that, out of a dozen costly features in the $1.5 million range, there was a difference of only $3,000 between the initial budget and the actual cost. "That looks as though the industry were on a business basis," they noted with approval. Even better, the studio had adopted uniform bankers' forms, ironed out the seasonal spurts of production that had made it impossible to predict cash flow, and eliminated most production waste. "Lasky has figures to show that his factory, which he calls a 'studio,' averages 90% of capacity," Forbes noted.57
In fact, according to Famous Players–Lasky comptroller Richard Saunders, writing in the New York Times in November 1926, it was this slow recognition that "certain of the prominent companies [had] built up proper organizations, along recognized industrial lines," which triggered the massive flow of Wall Street money in 1925–1926. Because theater attendance remained at a flat 46 million per week in 1924 and 1925, it was clearly greater efficiency, not increasing audiences, that attracted these investors.58
Howard T. Lewis, in his 1933 study The Motion Picture Industry, shows that funded debt grew substantially in the industry throughout the 1920s, from less than $10 million in 1921 to over $300 million in 1930 (table 3.3). More significantly, this debt as a percentage of total invested capital rose from 12 to 36 percent in the same period. The nearly 100 percent increase in this debt load over 1925–1926 coincides with the major stock issues floated that year by most of the major motion-picture firms.
To quote Richard Saunders again, 1925 "might be viewed as the year in which the motion picture industry became definitely recognized as stabilized and the stocks of the leaders regarded as safe investments."59 Harry Aitken and Lewis Selznick had learned, to their chagrin, that bringing in outside investors had liabilities as well as
| Year | Funded Debt | Capital Stores, Reserves, and Surplus | Total Invested Capital |
| 1930 | $305,586 | $544,400 | $849,986 |
| 1929 | 227,066 | 425,599 | 652,665 |
| 1928 | 128,537 | 278,804 | 407,341 |
| 1927 | 105,465 | 165,798 | 271,263 |
| 1926 | 71,578 | 157,909 | 229,467 |
| 1925 | 35,935 | 129,182 | 165,117 |
| 1924 | 25,266 | 97,465 | 122,731 |
| 1923 | 22,703 | 77,723 | 100,426 |
| 1922 | 15,966 | 73,572 | 89,538 |
| 1921 | 9,691 | 68,539 | 78,230 |
benefits, and in the years to follow, most other producers would be forced to confront the same dilemma.
The larger context of industry boosterism, against which this influx of capital took place, plays an intriguing, if uncertain, part in this story. Was the motion-picture business one of America's industrial giants? Most analysts of the time appeared to see it that way and advised their clients accordingly. In January 1916 the New York Times reported that motion pictures ranked "fifth in importance among the industries of this country," behind agriculture, transportation, oil, and steel. In fact, the glowing tone of this piece might almost seem a paid insertion on the part of the industry: "The ramifications of the film industry are almost limitless," it sighs.60
As early as 1919, however, this "fifth-largest industry" claim was coming under direct attack, with one analyst proposing "the top ten" as a more likely supposition. The argument would rage around this issue throughout the silent era, because even within the industry not everyone was pleased with the attention garnered by the more lavish of these claims. The Motion Picture News found them "so absurd that it is difficult to understand their wide acceptance." Worried that legislative and public-interest groups would take a harder line with the film industry if they considered it a colossus, the News tried to promote a low-profile approach and hired the Babson Research Organization to collect accurate data in 1922 (although they never did propose a different industrial ranking).61
When Will Hays came on the scene, one of his first duties was to "restore the bankers' confidence in the industry" after a series of notorious scandals, and among the ways he accomplished this was through a continuing promotion of the industry as large, stable, and secure. His 1929 book See and Hear claimed that the motion-picture industry was "well among the first ten industries in the country," and for the period, this assessment was on the modest side. Barrons had reported in 1924 that the movies were in seventh place among America's leading industries, and the WallStreet News put film in the fourth slot in 1926. Carl Laemmle claimed in 1927 that United States Commerce Department statistics listed the film industry in eighth place, but most commentators were not so specific about the source of their information. E. E. Quantrell, vice-president of Halsey, Stuart, and Company, wrote in the Banker's Monthly for October 1927 that the U.S. Bureau of the Budget had ranked film as the fourth-largest industry. Of course, Halsey, Stuart was deeply involved in industry financing at this point, but other analysts should have been more objective.62
The wide acceptance of such figures continued as late as 1966, in Gertrude Jobes's Motion Picture Empire, the first attempt in many years at a history of the industry. Chapter headings included "America's Fifth Industry (1914 to 1918)" and "America's Fourth Industry (1920 to 1934)." But most recent scholarship is decidedly more conservative on the relative size of the motion-picture business. Even in 1944 Mae Huettig claimed that "in so far as size of industry is measured by dollar volume of business, the motion picture industry is not only not among the first ten, it is not even among the first forty. It is surpassed by such industries, to name only a few, as laundries, restaurants, loan companies, investment trusts, liquor, tobacco and musical instruments." Using data from the Bureau of Internal Revenue's 1937 Statistics of Income, Huettig placed the film industry forty-fifth in volume of business.63
Huettig's was not the first revisionist assessment, although it remains the most influential. As early as 1931 the French critic Lucien Lehman, in a caustic study entitled American Illusion, had put the industry in seventy-fifth place, based on the value of annual production. Lehman argued that factoring in the profits of theater companies was like including stationery stores in an account of the printing industry. While this attitude displays a serious lack of understanding of the connection between the production and exhibition ends of the American film industry, the real problem is that Huettig and Lehman were applying different criteria from those used by their predecessors. They chose to count different returns, and their application of statistics was very selective.64
In any case, the crucial issue during the 1920s was the perceived position of the industry, a status that might draw the interest of government regulators but would certainly attract its share of investment interest as well. Whatever the truth of the matter, the movement into Hollywood of such vast amounts of capital suggests that the business community at large was reasonably convinced.