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BOSTON PUBLIC LIBRARY 



3 



t 



3 9999 06542 Q24 

OFFICE OF NATIONAL RECOVERY ADMINISTRATION 



DIVISION OF REVIEW 



WORK MATERIALS 



No. 34 



THE MOTION PICTURE INDUSTRY STUDY 



Prepared by 



DANIEL BERTRAND 




Industry Studies Section 
February, 1936 



t 



• -• • 



• • •, 

• • • *. 






FOREWORD 

This study of the I.Iotion Picture Industry v/as prepared "by Mr. 
DaJiiel Bertrand, assisted "by llr. Wilmoth D. Evans, of the Industry 
Studies, Section, Mr. II. D. Vincent in general charge, 

AcknOT/ledgement is here raade to Mr. ¥illiarn P. Pamsworth, 
Acting Division Administrator in charge of the Amusements Division 
of the national Recover^'" Administration who gave generously of his 
time and experience in revievring the facts assenbled and the conclu- 
tions reached. 

In the organization and presentation of the material, the Unit 
had editorial assistance from Mr. E. E. McCleish, fon;ier Deputy Ad- 
ministrator in the Amusements Division. Preliminary'- data on lahor 
problems in the exhi"bition "branch of the Industry !7ere gathered "by 
Mr. RolDert A. Gaffney who, as Deputj^ Administrator in the Amusements 
Division, participated in laoor negotiations and arhit rations during 
the code period. 

As the report indicates, there is need of further study. The 
present material, however, throvrs much light on the difficulties and 
TDTOlDle^ns of this Industry. 



L. C. Marshall, 
Director, Division of Review. 



13 Kly 36 g 

9638 



TAI3LE OF CQN'IEliTS 



SUIvII.'IAIlY OF THE MOTION PICTURE IITOUSTRY STUDY. 

CHAPTER I 



DESCRIPTION AITD SCOPE OF THE 
MQTIOli PiaT.UHa . .INDUSTRY 



A. DESCRIPTION OF TliE .INDUSTRY. ..... -8 

B. SCOPE OF .THE .INDUSTRY......... .. .• 9 

1. .American Films i.n the World Market,..,. ' 9 

2. Capital Investment 9 

3. Annual Production. .,...., .'. 9 

4. Volume of Business 9 

5. V/eekly Attendance. .,. ... . 10 

6. Number of Concerns 10 

7. . Concentrgt,tipA of .C.ontro.l..... .,.,...., 11 

8. Geographical Concentration 11 

9. Emp loyrn en t. ...,.,. . . ... .......................... 11 

C. OPERATION UNDER COPYRIGHT LAY7S 12 

1. The DistrilDu tor-Exhibit or Relationship 12 

2., . The P.ro.du.c.er-Dis.t.ri'butor Relationship 12 

D. II;IPORTANT ORGANIZATIONS WITHIN THE INDUSTRY 13 

1. Motion Picture Producers and Distributors of America, 

Inc 13 

2. . The Motion picture. Tlieatre. 0\7ners. of. America 14 

3. Allied States Association of Motion Picture Exhibitors...... 14 

4. The Theatre. QY/Tiers, Chamber, of Commerce of Nev York 15 

5. The Academy of .Motion, Picture Arts and Sciences 15 

6. The Labor Groups, ,,,.,,,. , 15 

CHAPTEH II 

THE HISTORY AND G-ROWTH OF THE 
MOTION PICTURE INDUSTRY 

A. TWO CENTURIES, OP DEVELOPMENT. ,..,,,,,, 16 



1. _ The First Step .- .The. MagiQ Lantern 16 

2. The Secpnd Step,- Illusions of Vision 17 

3. The Word Cinema Appears .(,,,.*, / 17 

4. The Third Step - Action Photography 17 

5. The Fourth Stop - Thomas .A.. .Edison, 19 

6. The 'Fifth Step - A Roll, qf, Film 19 

7. The 'First. Studio i .The. First .Actors,. . 20 

8. The First Regulair .'! Screen'! Performance 21 



9638 



•1- 



Table of Contents (Cont'd ) 

B. THE STORY-TELLING PICTUBE, 1904 22 

C. THE PIRST MOTION PICTURE "TRUST" 22 

D. THE EEATURE PICTURE 23 

E. THE STAR SYSTEl^I - 1914 24 

E. BLOCK BOOKING BEGINS - 1916 25 

G. MOTION- PICTURE THEATRES. ■. 25. 

H. LOCATING IN CALIEORNU, . • 25 

I . EXHIBITORS' STRUGGLE FOR CONTROL 26 

J. THE ADVENT OF SOUND-. . 27 

1. So-und in Production. .. 29 

2. Concentration of Theatre Omier.ship after Sound 30 

K. GENERAL GEOGRAPHICAL LOCATION OF AFFILIATED CIRCUITS 31 

L. THE IMPACT OF THE DEPRESSION 31 

CHAPTER III 
.... HISTORY OF THE CODE PERIOD 

A. PRE-CODE 38 



1. Code Formulating Coranittees 38 

2.- Public Hearings on Code Proposals 39 

3. Po st Hearing Conference 39 

4. Approvals of Proposed Code 39 



B. THE APPROVED CODE OF FAIR COMPETITION 40 

1. Brief Analysis of the Contents of the Approved Code 40 

a. Definitions 40 

"b . CodQ Authority 40 

c . Labor Provisions 41 

■d. Trade Praotioe Provisions .-.^.. 42 

e , Local Code Administration Agencies 43 

2. Scope of the Code 43 

3. Subjects Considered at Hearings but Omitted from 

Approved Code. 43 

a» Block Booking 44 

b . Double Feat ures 44 

• • -G. Poster Exchanges 44 

d. Score Changes 45 

■ e. The "Right To Buy" - "Right to Sell" Controversy 45 



9638 



*-ii~ 



Table of Contents (Co nt'd ) 

4. The -Executive Order Approvin^:^ The Code 46 

a. Conditio ns ■ i n the Executive Qrder_ of Approval 46 

"b . Effect on the ■ Indust-r y. 46 



C. THE • CODE AUTHORITY; 47 

1. Division of Representation on the Code Authority 47 

■ a . • The Buye reseller Controversy 47 

2. Labor Representatives 48 

3. Administration Members. ' 49 

4. Alternates - 49 

5. Rules of Procedure 50 

D. ASSEl^TS- TO- THE CODE , 50 



1. Objections to Eorm of Assent 50 

2. Interpretation of Fom of Assent 51 

3. Extension of Time Linit in x/hich to Eile Assents 52 

4. Elimination of Time Limit in which to Eile Assents 53 

E. LOCAL AGEIICIES OE THE CODE AUTHORITY 53 

1. Selection of Members to Local Boards 53 

2. Clearance and Zoning Boards 53 

a. Duties , 53 

b . Membershi p 54 

c . Delay in. Submission of . ■S chedu.l e.s.. 54 

d. Amendme nt to Permit Considerati on of Indiv idua l 

• -Clearance. Ineq.ui.t.ies .. 55 

3. G-rievance Boards ^ 55 

a.. Duties . ...... -.•......■.. 55 

b.. Membership. . ..... , . 55 

c.. Authorization, as. Lo.cal. Industrial Adjus t ment Agencies . ... 56 

• d. An.al.ysis of Case.s. .Gons.idercd , 56 

e. Analysis of Relief Granted 57 



E. SPECIAL COMLIITTEES 58 



1 . Agency .Committee. 58 

2. .The .¥riter-Pro.ducer Committee 59 

3. -The .Ac toi>^P reducer .Committee... .59 

4. . The -Standing. Commi.ttee on Extras . .59 

■a.- . Membership and P-tities .......... ...... . . ... .,.,...,.... ,....,. .59 

Tb . Reports and Recommend.at ions Submitted 59 

■ ^' Activities .as Agency for Adjustment .of Labor Cora- 
plaints 60 

5. , .The .Studio Labor Coinjaittee. ...*..., 60 

.a.. .Datie_s. 60 

b . Activities as Agency for Adjustment of Labor Com- 
.plaints... ............. ......... ....... ....... . .................... 61 



Or. EIlTAl^CING THE .CODE .A.UTHORITY 61 

1 . Budget for 1934 61 

a. Change in Budge t to fro vide fo r Legal Expenses 61 

9638 -iii- 



A. 



B, 



Ta "ble of Contents (Cont'd ) 

Page 



' 2. ■ Anendment of Code to Provide for Budget Obligations 62 

3. Bases of Assessment for 1934 62 

4. Revised Budget for 1934 63 

•• 5. Use of 1934 Surplus .•..•.. 63 

6. Budget and Bases of Contribution for 1935 63 

7. Liquidation of Assets of Code Authority 64 

8. Summary of Collections 64 

9. Lack of Pinancial Problems 64 

H. ADMIUISTMTIVE ACTIONS OF THE IIATIOHAL BECOVEHY ADMIIIIS- 

THATION. 65 

■ 1. 'Aiaendments 65 

2. Exemptions 65 

3. ■ "Lcibor Complaints. » . . . . 66 

I . ■ IITVESTIGATIONS INTO OPERATION OF COBE ♦ 67 

1 . The National Recoverj'- Revien Board 67 

2'. ' ' Senatfe ' EiriaJice Committee 68 



CHAPTER IV 



TRADE PRACTICES IN THE MOTION 
■ 'PICTURE- INDUSTRY 



OVER-BUYING 70 



1. ■ Desci*ij)tion- of- the Practice-.. . ; .-. . .-. 70 

2.- Code Regulation of Over-Bu^^ing. ,.•.-. .-. , 70 

3. Procedure Developed in Code Application- 71 

4. Methods of Granting Relief 74 

5 . Summary of- Cases- Considered 75 

6 . • The Public Stake- in Over-Buying 75 

CLEARAl\rCE Aim ZONING.-. .■.•.-.■. . .-. . •.-.■.•.•.-.■.-.•.■. 76 

1.- Des'cTiption-. .-. .•..-.•.•.-.•. '. . . 76 

2'. ■ ■ Previous Attempt's- to- Regulate Clearance 77 

3. The Fo-rmation- cf- Clearance and Zoning Boards 78 

4-. Schedule-s under the- Code 79 

5. The Adjustmient- t)f- Complaints 81 

6. Discussi'on 81 

C, BLOCK -BOO-KING AND THE CAtTCELLATION PRIVILEGE 83 



1. • Filb Mariceting M-ethods. .■.....•.■.-.-... 83 

2. Description of Block Booking 84 

3. The position o-f Various Groups on 'the Block Booking 

Q,uestion t . • 84 

■ a. ' Eidiibitors .. .. .'.'.'.'.V.; . .' 84 

b , Independent Producers and Distributors 86 



9638 -iv- 



Table o f Contents (Con t'd) 



Page 



c. Affiliated Producers and Distributors 86 



d.. ■H eli^'^ious and Other Groups Intere s ted in the. Social 

- ' ■•■■•..■.. l aild i^or al Welfare of ^the Public . . ; 87 

4. previous Attempts to Cope v.dth the Problem ..." 87 

5. Governmental Regulation in En£;land. 88 

6. Pre-Code Proposals 83 

7. The Cancellation Clause 90 

8. Summary of Complaints under the Cancellation Clause 92 

9. The Operation of the Cancellation Clause 93 

10. Discussion 97 

D. ' FORCING' OP' sEOiir siXBJECTs: ......... T. 1 ::.';: ^ : : : . .'; ;'.': .':,-. . :4 98 



1. Description 'of 'Practice! ......... 1 ................ ^. 98 

2. ■ i^re-Code. Discussion ::.;:..: , . . . . : 98 

3. The Code Provision." ,!. ! .........; 99 

4.. Operation of the Provision «........; 99 

5, Di scussion . .'.!,.!....'.. i ,.,..., 101 



E. ' ' KtUiBATES' Oti' ADtllSSION PRICES *. 102 



1'.' " t)'e scrip tibh' of" th.e' Practice. .'.' .'.. . . .■.■ 102 

" ', *. ^', * '_ Pre-Cbd'e* P'rbpo sals • • • • • * • '• 102 

' i3',\ '^'Objec'tibhs to' the Elimination of Premiums '. 103 

'4.' Code' Provisions 103 

" 5*.' "■ Operation- of- Provisions .' 104 

" B'.' ' D'i's'cussibn. ■. ■..■.■.■.'.■.'.. 108 



t i k « * » 
•( t k • « 1 



■ y,' ' Iffi'stGKATED* PKA.T mns^,\;\v,:v,\\\\;:\:;:,;:^:,: .'.'.■.'■. ..109 

' ' T. ' . D'e scrip t'i'o'n'. '.'.'. . '. \ \ ', \ ',', '. '. ', '.■.■.'.■.,■..■,.■....,.... ' ■ . 109 

' ' '2'. ' Pre-Cb'd'e' Discussions. .' 110 

' ' ':$,' ' dode Proposals .' - 110 

'4. ' T^e 'Cb'de Wo vi s'ibns 110 

5. Discussion ■. Ill 



•h fc * i I 

\ <■ : \ I s \ 
I . ■. I » 1 . 



4 >>»<-.; I 1 1 . 1 



'G, ' IIOIT- THEATRICAL ACCOUl^'S'. . . .-.•. . ' •.-....... i .112 



V > 8 > ini 



( > -1 •<. ; ■ i : 



T.' ■ ^Origin "ahd Description of Practice ■. 112 

'••'"'• '2,' ' 'Pre-Code 'Discussions.' 113 

3,' ' 'The Code Provisiohs..".". . . ..... .■•..•.•■.■ -. ,114 

"■ ■ ■ ■ *4. * ■Operation 'o'f the Code" Provisions. ..;......., 114 

5.' ■ Disciissidn. i . ! . . 115 

H. OTHER TRADE PRACTICES 115 



1. General 115 

"2. ' ■p3:'od-dcefs. . . '..•.■. .■.".■.■; ..■.;;:.;•.:•.■.;;•.•.. ,.■.... .116 

"3. ■• 'Producer s-Distri'but6Ts".". :.:;.; .116 

4, Distributors 117 

5. Ei^diibitors 119 

6. Distributor-Exhibitor 121 

7, Unspecified Grievances and Complaints 123 



9638 



«v- 



Ta"ble of Conoents (Cont'd ) 

Page 



8.. , .G-cneral Trade Practices • .123 

9. Miscellgineous Practices ..••.. ■• . .126 

CHAPTER V 

LAJBOH PROBLEI.IS IN EXFxIBITICN, PRODUCT I OIT, 
MD DISTRIHOTIOII DIVISIONS OF THE 
' _ ^iOTICN PICTURE INDUSTRY 

A. EXHIBITION. 129 

1. Employment ,129 

2., . Classes of Employment , . ,129 

3,. Unionization of Employees .".'.... ,130 

4,, _ Conditions and Code Provisions Affecting Skilled and 

'//_ Unskilled Labor .-131 

a. Office Emplo yees. 132 

. . ."b, "Front of the House" Employees . 132 

c . Soimd and the Musician . 133 ' 

. d. Actor Employees 134 

e. The Ma^jor Prohlem - Skilled Labor .138 

5, .Motion picture Machine Operators... ...141 

, . , 9.. Types of Violations of Code Provisio ns. , . 142 

. . .1?, Improved Labor Conditions Due to the Code . .146 

6, post. Code Labor Cpnditipns. ,147 

B. PRODUCTION, .,.,,,....,,............... 148 

1, . . Employment ..,._._.....,......., ,.,,.,,,..... 148 

2, . , Talent and Professional Groups .,,,.,,,.. .148 

. , a. The Pr o blem of E xcessive Salaries 148 

b , . The Salaries Inve sti;q;ation , 149 

^'' Tlie. Agency Conm it.toe. . ._......_._.. , ._, , , 151 

d. The Actor-Producer Com mit tee . . , , 152 

3. The, "Extra.", problem... .....,.'".../...,...... 154 

a. Employmen t , 154 

b.. . The Code Provision s. 154 

. c,. The St anding Comjnittee on Extras. .• .155 

4. . Studio, Labor............................ .,..156 

. a, .The C.o.de Provisions , 156 

. . . b.. T he Studi.o Labor Committe e... . . .... . . . ._ ,..,,,.. .157 

5. Clerical Workers in the Studios 157 



C , DISTRIBUTION 158 



1. Employment. ,,..,..... ,158 

2, . .Code Provisions. .• » • »158 



9538 -vi- 



Ta"ble of Contents ( Cont'd ) 

CIIiPTER VI 

TKS INTERSTATE CHA.MCTEH OF THE! INDUSTRY 

MD SUGGESTIONS AND SECOLIl^IEl^fDATICNS 

FOR TIIE FUTURE 

A. TIIE INTERSTATE CIIAPACTER OF THE MOTION PICTURE INDUSTRY 159 

1. Production and Distribution 159 

2. Exliibition 160 

3. The Industiy as an Entity 161 

B. SUGGESTED POINTS OF APPLICATION FOR FEDERAL POWER 164 

1. Block Booking 164 

2. Over-Buyin;^ 165 

3. Monopolistic Practices 166 

4. Clearance and Zoning 167 

C . SUGGESTED MEANS FOR APPLICATION OF KiIDSRAL P0\7ER 168 



APPENDIX 



(Evidence Study No. 25) 



9638 



-Vll" 



-1- 



SmUvlASY OF THE MOTION PICTURE 



ILHDUSTRY STIEIY 



The l.Iotion Picture Industry is here presented as an economic entity, 
having three divisions, each one dependent upon the other — production, 
distrioution and finally exhibition. Each division has prohlems peculiar 
to its onn activities which intermingle v/ith the problems of each other 
division azid give direction to the activities of the Industry as a whole. 
These problems affect the labor of a wide variety of technical crai'ts and 
creative pursuits — from, scenario v/r iters, directors, the popular stars of 
the screen and the motion picture machine operators, down .to the early 
morning charwomen. And finally, the Motion Picture Industry, as a whole, 
brings to bear an unmeasurable influence upon the social and economic 
welfare of the general public through the educational and entertainment 
content of screen presentations. 

In such detail as became available during Code administration, this 
Study considers the inter-relation and interdependence of the three 
industry divisions and the activities of this Industry ¥;hich flow into 
commerce among the States. The conclusion is reached — ^particularly in 
Chapter VI — that the Lotion Pi ct-'Jire Industry and the public welfare could 
effectively be served by the continuatiqn. of a measure, at least, of 
governmental interest. Because of the present restrictions of the Anti- .. 
Trust Laws, no other arrangements-.geem ;oraeticable.". "A far wider and 
deeper investigation, however, thah'this Study presents of all the Indus- 
triaJ. and public problems inherent in the Industry is required to deter- 
mine the type and extent of federal help- that would be beneficial to the 
Industry and to the loublic. 

The keystone of the Indus try '.s-jproblems and their importance to the 
public are described in Chapter I iri these words :- 

"The Motion Picture Industr-'- is unlike any other; the 
differences extend througii its amazing history, its technical 
progress, its individual business methods; its unusual legal 
involvements and its profound social responsibility. The 
actual product — gjnusement and entertainment — is intangible. 
The visible product — the film— is seldom sold. The business 
operations of the Industry are largely/" governed by ^plication 
of the United States Copyright Laws." 

Although it operates iLnder the monopoly privilege of copyright, the 
Industry is restrained from full exercise of its monopoly power to exact 
any prices whatever for the rental of its product by reason of the compe- 
tition among major producers and independents on the one side and the 
inter-competition of affiliated and independent theatre exhibitors on the 
other. The fickle and changing pop ulsjr demand for certain stars— the 
Mae Uests, Charles Laughtons, Clark O-a-bles, Fred Astaires and G-arbos— 
constitutes another factor of competition that serves to determine the 
earning power — and hence, the rental or selling price of the films offered. 
The competitive situation is a complex one indeed, as this Stud^'^ discloses. 



9658 



- . - ;-2- • .-...-- 

Chapter I considers -tJie extent and scope of this tuo "billion dollar 
Industry, 

Chapter II records the search for mass entertainment from the jeeJo 
1640 to the start of the Industry;- in the early nineties of the last 
century, and the expansion since then. 

Chapter III discusses the history of the IffiA Code period when for 
the first tine, the tliree economic divisions of the Industry were "brought 
toj^ether, and for the enforcement of the Code, a series of extraordinary 
courts of Industr^r were established — an unusual and significant experiment 
procedure not only in IRA. but in American industrial relationships. 

Chapter IV analyses the trade practices which the Industry sought 
to define and regulate. 

Chapter V studies the unusual variety of la'bor pro"blems presented 
in the production and exhi'bition divisions of the Industry, the remedies 
applied and the indicated successes and failures that followed. 

Chapter VI empha.sizes the economic entity?" of the Industry as it 
affects Interstate Commerce, and offers suggestions for possi"ble future 
developments. 

The conclusions of this Study are herewith presented in the follow- 
ing "brief summary of each of the Chapters: 

CHAPTER I - DSSCRIPTIOII AICT SCOPE OF TH3 IIIDUSTRY 

The Lotion Picture Industr^r is comprised of three economic divisions. 
Production, Distri"bution and Ssdiibition. (Page 8) 

In most cases, statistical information regarding the Hot ion Picturs 
Industry is scarce and of doubtful accuracy. (Page £) 

American~made films constitute approximately 85 per cent of the 
value of world "annual production. Approximately $2,000,000,000 is vested 
in the Hot ion Picture Industry in the United States. Approximately 650 
feature productions are released in the United States annually. (Page 9) 

Admissions total between $700,000,000 and $1,000,000,000 annualize. 
(Page 9) Weekly attendance at all theatres (13,500 - 14,500) in the 
United States is estimated between 70,000,000 and 75,000,000. (Page 10) 

Eight large corporations kno^Tti as the major coii^^anies dominate the 
Industry. (Page 11) 

Production is concentrated for. the most part in or near Hollywood, • 
California and New York Citjr. Distribution is concentrated in 31 key 
cities. (Page ll) 

Estimates of eraplo;^'Tient within the Industry range from 185,000 to 
270,000. (Page ll) 



9538 



-3- 



The Industry operates primarily under the copyright laws rather than 
the laws of purchase and sale. (Page 12) 

Film is seldom sold to ah exhihitor "but is usually leased or rented. 
(Page 12) Cistritutors often act merely as agents for producers. (Pege 12) 

Trade organizations for producers, distrihutors and exhibitors are 
descrihed. (Pages 13-14)" 

CIIAPTER II - HISTORY AIID GROITTH OF THI! MOTION PICTUPS IITOUSTRY 

The first step in the world's search for mass entertainment "began 
with the invention of the magic laai'tern in 1640. The world waited then 
for t\70 centuries until photography was ready to. capture instants of 
action through the camera's lens. Finally the way- was found to project 
imcges on a wall or screen. A fury of invention and promotion started 
with Thomas A. Edison's first peep-shov/ contrivance.. "In the short span 
of the last 30 years, a new art of the people is somehow created and a 
gigantic new industry . . . . touching in some measure the life and 
thinliing of every man and woman.- .... emerges with its own special 
"burden of industrial and social pro"blems." (Pag.es 16-20) 

The first motion picture studio was that of Edison in 1893. Because 
of the cumhersome cameras of the day, the first avadlable siibjects for 
the motion picture were dancing acts and prize fights. In 1898, the first 
motion picture show, projected on a screen upon the . stage of a music hall, 
was presented in Nev/ York. Story-telling ca.me into .use with the "Great 
Train Ro'b'bery" of 1904. In 1907, the essential difference "between the 
Motion Picture Industry and all other industries - that of copyrights ►* 
v/as est a"bli shed. (Pages 20-22) 

Many years of patent and other litigation led to the pooling of 
patents in 1907; films were pooled in 191C. In 1915, the patents pool 
and the film pools v/ere ordered dissolved "by the courts. (Pages 22-^23') 

The Industry moved on to the production of its first feature pictiu-e 
in 1912. The "star" system "began in 1914. Block "booking "began in 1916. 
A nation-wide wave of theatre construction and nnich court action over 
theatre control occupied these years as the motion picture "became inde-* 
pendent of the legitimate fheatre. Hollywood was esta"blished as the 
centre- of picture production. (Pages 23-2o) . . 

The Industry in 1925-27 was "brought face to face with a critical 
situation caused in part "by rapid expansion, "but quite suddenly, it was 
saved from impending disaster "by the introduction of sound. (Page 27) 
Sound caused a greater concentration of "theatres under the ownership of 
a fev; large corporations. (Page 30) 

The impact of the depression v/as staved off for two years, largely 
"beca.use of the pu"blic interest in sound or "talkie" pictures, "but "by 
1931, the depression "began to grip the industry. (Pages 5C>^3l) Attend- 
ance fell off. Profits fell sharply off. The nuin"ber of theatres closed 
increased and reached a majcimum in 1933. (Page 35) Drastic economics 
and wage reductions followed. (Page 36-37) 

9638 



CEAPTS?. Ill >- HISTORY Of THE CODE PERIOD 

More than 40 widely divergent proposals for codes to govern the 
I.Iotion Picture Industry were received "by the National Recovery Administra- 
tion. (Page cC) 

A. pul)lic hearing wa,s held in Washington, D. C. , on September 12, 13, 
and 14, 1933. The Code vras submitted to the President and signed on 
IToveriber 27, 1933. (Page 39). 

The Code was vertical in scope covering all branches of the Industry. 
Por the first time in the history of the Industry, an effective agreement 
betueen all factions had been achieved. (Page 40) 

Relatively high labor standards were incorporated in the Code. 
Ijnerican Federation of Labor wage scales were used as standards. (Page 41) 

The Code set up a series of industrial courts throughout the country 
to a,ssist in the enforcement of trade practice provisions. (Page 4o.) It 
is believed that no other such courts of industry were established in any 
other industry. To these courts, exliibitors brought problems and disputes 
on nsdvj subjects not covered by the Code and not subject to relief in the 
courts of law. This contribution to self-regula,tion by industry under 
the eye of the Government is of high importance to the student of indus- 
trial progress. 

Considerable pressure was exerted during the formulation of the Code 
to eliminate certain selling practices loiown to tlie trade (and to a wide 
area of the public) as block-booking, score charges, double feature shows. 
These terms are fully explained and the procedure described — pages 41- to 
46. Other efforts V7ere made to incorporate in the Code, provisions regu- 
lating poster exchanges and affirming in certain terns the exhibitor *s 
right to buy. Such Drovisions were not included in the Code. (Pages 44r- 
46). 

The Industry resorted to the unusual expedient of naming the members 
of the Code Authority directly in the Code. (Pages 47-48). 

Assent to the Code was necessar-"- before any individual was entitled 
to file a complaint under the Code. The controversy that followed was 
carried to the courts but this action was dropped subsequent to an Admin- 
istrative Order interpreting the form of assent required. (Pages 50-52). 

Clearance and Zoning Boards were set up by the Code in the 31 ex- 
change territories to formulate uniform and equitable schedules for the 
showing of pictures. (Pages 53-55). 

Local Grievance Boards set up by the Code Authority in the 31 ex- 
change territories heard 1,576 complaints of trade practice violations 
during the period of their operation. (Pages 55-57). 

. Several special committees were named by the Code Authority'" to 
handle particular problems: the Agency Committee; the Writer-Producer 
Committee; the Actor -Producer Comniittee; the Standing Committee on 
Extras; and the Studio Labor Committee. (Pages 5C"ol) . 

9538 



I 



-5- 



Tlie Code Authority was financed tj assessments against mem'bers of 
the Industry. The expense of administering the Code was divided "between 
the exliitition "branch of the Industry and the production and distri"bution 
"branch of the Industry as a unit. (Pages 01-63). 

During the period of its operation, the Code Authority received 
contri"butionG amounting to 9342,000. At the expiration of the Code, the 
Code Authority had on ha;id $16,000 in cash and $8,000 in undeposited 
checks. (Pages B3-64) . 

Pour amendments to the Code were approved during its period of 
operation, none of which made any major changes. (Page G5) , 

Only five exemptions from provisions of the Code were granted. 
(Pages 65-66) . 

Helatively few compliance difficulties were experienced with the 
lalior provisions of the Code. Complaints with regerd to skilled la"bor 
were for the most part dealt with directly "by the Amusements Division of 
the national Recover3f Administration without going through the usual 
compliance channels. (Pages '^i5~6V) . 

The Motion Picture Code ws,s attacked "by the National Recovery Review 
Board set up in 1934. National Recovery Administration officials replied 
and charged that the ITational Recovery Review Board had acted on incom- 
plete information. (Pages c7-6R) . 

chapt::dr iv - traps practic?.s 

This Chapter considers the unusual raiige of trade practices, majny of 
which are peculiar to the Motion Picture Industry and involve not only 
production, distri'bution and exhi'bition activities^ "but the interests of 
the public as well. 

The practices discussed are (l) over~"buying, (2) clearance and 
zoning, (5) "block "booking and. the cancellation privilege, (4) the forcing 
of short su'bjects, (5) re"bates on admission prices involving schemes such 
as Banlc ITight, (6) designated play dates, (?) non-theatrical accounts and 
(s) others designated in the Code, including p8ym.ent of unreasona'ble 
salaries and the enticement of talent in popular demand, threats to "build 
or acquire theatres, the activity of distri"butors ' employees in competi- 
tion xiith exhi"bitors, substitution of pictures in an existing contract, 
prior advertising of feature pictures, form of license contract, ar"bitra-- 
tion of disxjutes "between distributors and exhibitors, the pledge of 
wholesome pictures and w'nolesome advertising. 

These subjects because of fiieir deep roots in the whole structure of 
the Industrv do not readil?/ lend themselves to a summary in brief. Each 
major problem is discussed as to its origin, its extent before the Code, 
the applicable provisions of the Code and the results achieved. The 
public interest in these major problems is also indicated axid the trend, 
on the basis of Code experience, for the future handling of these problems 
is t raced. The conclusion is reached that federal assistance should be 
consid.ered to control over-buying (page 7fi ) . to help regulate and solve 

9538 



-6- 

clearance and zoning proolems (paige 02 ) , to reach a satisfactory solu- 
tion of the block "booking protlem (pa^e 97), and to determine rights 
proper to ell in the forcing of short subjects (page lOl) and the designa- 
tion of play dates (pages 111-112). 

CE APTMl V - LADOR PROBLgl.iS III EXHIBITION, PRODUCTION AlID DISTHIBUTIOIT 

A. EXHIBITION 

The greatest volume of cinDloyrnent is in exhibition. Statistics , are 
imreliable; estimates varv from 130,000 to 234,000; but the figure 185,000 
is generally accepted by labor organizations. (Page 129). Skilled rork- 
ers are, for the most part strongly organized; the unskilled, except in 
isolated instances, remain unorganized. (Page 130) 

The major problem in exliibition v/as V7ith the skilled workers. An. 
advance of far reaching imjjortance was made through the Code v/hen einploy- 
ers agreed not to lockout v/orkers and the employees agreed not to strike. 
As a result, the Motion Picture Industry had less major labor trouble 
than any other corapsxable industry during the Code period. (Pages 138 - 
139 

Practically all of the complaints with regard to skilled labor origi- 
nated v/ith motion picture machine operators. The vsirious devices and 
subterfuges used to evade the provisions of the Code are discussed on 
pages 141 - 143. Fact-finding committees were found useful in arbitrating 
major disputes. Success was lacking in the New York situation (page 143 - 
14i5) , but the Pittsburgh case involving 100 theatres developed into a 
formula that was proposed for use in later cases. (Page 145 

B. PRODUCTION 

In production, involving probabl:/ 19, COO regular workers and from 
8,000 to 10,000 listed as extra players, certain problems attracted 
national attention. One of these was the study of alleged excessive 
salaries at Hollywood. An investigs.tion v/as conducted at the instigation 
of President Roosevelt. Division Administrator Sol. A. Rosenblatt con- 
cluded that the suspended Code provision directed against excessive 
seJ-aries should remain suspended "because it is not possible of effective 
administration." (Pages 148-150') 

Of importance was the problem of the extra player. The Code provid 
a minimum wage and protective working conditions and sought to put down 
nepotism and favoritism. (Pages 154-165 The Standing Committee on 
Extras was appointed in January 1934 to deal with extra player problems. 
Registration of extra plaj'^ers was attempted, but no final procedure had 
been approved at the time the Code became inoperative. (Page 15R). 

The Studio Labor Committee met few enforcement difficulties and 
adjusted satisfactorily 98 per cent of the cases considered. (Page 156) 

• C. DISTRIBUI'ION 

Prom 8, 'COO to 9,342 arc employed in Distribution. Labor is a minor 
problem in this division of the Industry. (Page. 15P) . 

9638 



CHAPTER VI " TIiE lUTE RSO-'ATE CHAHAC ?EI^- O F TIIE IFJUSTRY 

"Throughout this report, it has oeen shovm that, acting individually, 
the various branches of the Induytr7 have "been unahle to eliminate maJij'' 
causes of friction and are prevented from acting in concert "by the Sherman 
and the Clayton ant i- trust rets. Tlie question ininediately proposed is 
whether some "beneficial steps mi^rht "be tai:en under the Federal ;^overni.ient 
if the practices in question are interstate in character." (Page 153) 

The production and distribution divisions must be considered to- 
gether rather than s eparately. These divisions axe interstate in charac- 
ter. In a number of cases the Courts have so held. (Page 15^0. 

Exhibition, tailing pla.ce in a limited area, is a different problem. 
The exhibitor seldom purchases t}ie film he e:±Libits. He is merely granted 
the right to exhibit films as tne films pass thi'ough the state or cits'- i^ 
which his theatre is located; these films must be returned to the dis- 
tributor, or be shipped to another thep.tre. This current of commerce 
tsJces place "orincipcally through the 31 key exchaiige cities. A delay in 
e:diibition at a key house may be reflected, in delays in theatres in other 
states. (Page IGw) . The cha-in operation of theatres in another 
pertinent consideration. (Page lo''>) 

The inseparability of the divisions of the Industry wouJ.d seer.i to 
justify a conclusion that the Courts would B:p'ply the commerce clause of 
the Constitution to this Industry as a unit. The Swift case, the Stafford 
case, the Standard Oil ca,se, the "hot oil" case, ai'e cited. (Pages I'l- 
1S4) ' 

IText is a consideration of problems in the solution of which federal 
assistance might prove beneficial. Elock booking which was for eleven 
years under consideration by the Federal Trade Commission is cited as an 
instance. (Page 164), There is a.lso the question of over-buying; 
a FederaJ. statute might be incapable of administration but the situation 
would seem to call for the use of agencies under Federal supervision, 
(Pages 135-166) The question whether monopoly exists and if so to what 
extent should be cleaned up through study by a Federal agency. (Pages 
1G6-167) 

Cleara^nce and zoning involve questions of intersta.te character. 
Formulation of uniform schedules are estopped by the anti^trust laws. 
Federal assistance here might safes^iard the rights of minorities and the 
public. (Page 157) 

Because of the difficulties of using the Courts, it would seem that 
only a Federal Commission vrould be flexible enough to cope with these 
various situations. (Pa.ges 16G"16o) The need for further study of all 
the problems involved is indicated. (Page 169) 



9638 



^ji»ik. 



-8- 



CHAPTEIl I 

SESCRIP T IuN AL'H) L-COP E C? C:HE . 

MOTION FICTUHE IaTD USTEY 

A. DE SCRIPT I CN OF THE Iiro USTRY 

The Motion Fixature Industry is imlike iiny other; the diff-erehces.: ex>-'' 
tend through its anazing history, its technical progri,ss, its individual 
"business methods,, its unasual legal invol^vrnonts , ^.nd its profound social 
responsibility. The actual product - aiausenent . "^nd entortainnent -is 
intangible, Thq visible product - the film - is r^tldora sold. The business 
operations of the Industry are determined by applications of the United 
States copyright laws. 

The sudden and dramatic growth of the l.iotion Picture Industry has 
kept its history vivid with e-xcitenent. Its drama proceeds as directly 
from inventions that demand revolutionriry ch?5nges ovOr-nif^ht as from the 
intermittent outbreaks of competitive warfare to the ac'companinent -of ad- 
vertising canpaignc that have a colorful propensity lor hysteria and 
exaggeration. Its units rush to each other's aid y/hen the danger of public 
discipline threatens andj " as instantl;'', fly apart when the drumfire of 
criticism dies down, Fo sinj^^le trade association truly representative of 
the industry as a whole has ever existed; the economic divisions of the • 
industry found no ^'ay to reach common understanding and co-operation until 
producer, distributor, and exhibitor were brought together f9r.,the first 
time under the Code of Fair Competition, 

The Mot"ion Picture Indastr;/ embraces all activities in connection 
with the commercial production, distribution, and exiiibition of motion 
picti;re^s for the e^ntertainiiient of the public. The three economic divisions 
of the Industry deri-ve the 1 1^ existence as well as their, shr-xply defined 
characteristics. from an essential inter-relation and inherent dependence 
upon one "another. ■ 

The' production division covers all processes and activities involved 
in the making of motion pictures. It includes the selection of film 
material, the preparation and photography of scenes, and, to a certain ex- 
tent, the development of exposed film and the preparation of positive prints 
for exhibition, . • 

The distribution division involves the maintenance of a sales staff, 
the renting of film to exhibitors, the physical distribution and servicing 
of film., the collection of due accounts, and the srle .and the lease of 
advertising material, -^ ■■■.:'.■, 

The exhibition division involves the comnercial showing of pictures 
in theatres, with or without an accompanying stage presentation or vaudeville 
program. 

The resi^onsibilities and obligations of the Motion Picture Industry are 
greater perhaps than those of any other industry because of its power for 
good or evil in the cultural and sociological development of our people, 

9638 



-y- 



This profound ?ind f -r-^re-'iching influence upon the moral, Gocial, and 
econcnic standprr's of the world invests the Motion Picture Industry with 
an iLrpori>ance without parallel. 

3. SCOPE CF THS Il^USTT.Y 

St-tistical infornation rcr^arding the Motion Picture Industry is 
scarce and, in the main, ••anreliaDlo. The rajor proportion of such fif^uros 
as are available stem to be estimates "by individuals rather than resiolts 
of acc'irate s-'jirveys. An evaluation of all obtainable statistics on the. 
Motion Picture Industry was raf.dc in the' He sear cli and Pla.nnin/5 Division of 
the National Recovery Administration; is identified as "Zvidcnce Stijidy - 
Motion Picture Industry" nxvl is included as an appendix to this sti:idy# 
A census of anu'jements is tc be made, beginning Janua.ry 2, 1936, by the 
Bureau of Census, Department of Cci,Tmerce# This at-'idy is expected to de- 
velop data concerning the number of theatres, seating capa.city, .division 
of theatres into ty^oe, cross end net income, and the like. Until a truly 
acc^jxate statistical pict^ire has been secur-^d, the following must serve 
to define the approximate position of the Industry. 

1. ATivrican Films in the Hovla. Market, 



Si:-:ty-five ^er cent nf the ann.-^J. -.vorld production of film as measijred 
oy footage or "ftcroen time" is AmericaJi made. This, constitutes 35 per • 
cent of the valie of world annual production (♦). 

2. Cer. i t al I n ve s t re nt . 

It is estimated in the llotion Picture Almanac for 1335 that approxi- 
mately $3,000,0*30,000 is invested in the L'otion Picture Industry in the 
Unit-^d States. Approximately $100,000,000 is invested in production; conr- 
siderably less tli^n this amount in distribution; and the balsjice in 
exhibition. Tne b^ulk of the invoetr.ent in e-icibiticn is theatres and in 
real estate. 

3. A-inu-.l Production . 

Six hundred and sixty-two (6€2) feature productions were released in 
the United States in 1334, This is about average, .^yproximately half of 
these (361) were released by the major cor^anies. Approximately one fifth 
of the total (113) trere independent productions; tiie remainder (132) were 
foreign importations. 

In addition to these feat^are jroductions, approxinia.tely 1,000 comedies, 
cartoons, ajid other so-called "shorts" and about 500 installments of news- 
reels were oroduced. 



4. Volume of 3uj;inesn. 



The iLcticn Picture iJmanac fcr 1935 estimates that admissions in 1934- 
totalled between $700, DOC, XO and $1, OX', 000, 000. This Almanac in the 1933 
edition- listed figrurcs showing the average distrilmtion of the consumer's 
dollar spent on motion pict-ures. This survey showed that approximately 
13,2 per cent of the ccr.rir.or'- dollar iraat to production of motion 



(*) Motion Pict^jre AlnaJiac - 1935. 
5638 



-10- 



pictures; 7.8 per cent to distritution r-nd 74 per cent to exhibition. 

Using $700,000,000 as the more ne.-^.rly correct figure for totR.1 ad- 
nissions and comoining it 'rith the percentaf«roG .above, it is estimated that 
in 1954 approximately $127,000,000 uas spent on the production of motion 
pictures; $55,000,000 ncnt into distribution costs, and $518,000,000 went 
to costs other than film rentals in the exhibition bi:anch of the Industry''. 
Thus the approxim.atc volume of business is estimc.tect as follows: ' for pro- 
ducers, $127,000,000; for distributors, $182,000,000 (distribution cost of 
$55,000,000 plusprodu3ers' estimated $127,000,000); and for exhibitors, 
the <p;rand total again of $700,000,000. The Department of Commerce Census 
of L'-^jiufactures estimated the costs of production ?.t $119,000,000 in 1933, 
The general opinion as reported in trade papers seems to be that the volume 
of business done this year (1935) had improved materially over last year 
(1934), although exact figures to support this contention are lacking, 

5, Weekly Attendance. 

Tne Motion Picture Almanac for 1935 estimates weekly attendance in 
all theatres m the United States at 75,000,000. The Film Daily Year 
Book for 1935 estim,.ites this attendance at 70,000,000. 

6, Number of Concerns. 



An estimate of the number of producers ix the Industry depends largely 
upon the criteria used to define a producer. Sight large producers collec-=T 
tively account for approximately 80 per cent of the capital invested 'in the 
production division of the Industry. Thirty-three (33) of the minor pro- 
ducers are of sufficient importance to have the names of their corporate 
officers listed in the llotion Picture Almanac for 1935. There are many 
smaller producers, - from 100 to 200 of them - v;ho release -ocitures 
occasionally. 

Eighty-six (33) distributors are of sufficient importance to have the 
names of their corporate officials listed in the Film Daily Year Book for 
1955. These distributors operate approximately 550 film exchanges in the 
United States; about 450 of these exchanges are affiliated with producers. 

The Film Daily Year Book for 1935 lists 13,386 theatres open and 
operating as of Jan-aa,ry 1, 1955. The Motion Picture Almanac for 1935 
lists 14,552 theatres as operating, as of the same date. The counts of 
both publications are declared to have been taken from distributors' list- 
ings of accounts serviced. The discrepancy is probably caused by a 
difference in definition as to what constitutes an operating theatre. 

The Almanac declares that the total number of theatres in the United 
States, both closed and operating, is 18,262. Of these, 2,075 are stcated 
to be affiliated circuit houses, 3070, unaffiliated circuit theaters, and 
13,120, independent theatres. Closed theatres are listed as 3,711 in 
number. There i s no indication into which class the closed theatres fall; . 
a majority are probably independent theatres. 

Using data from this same 1935 Motion Picture Almanac it would appear 
that although affiliated and independent circuit theatres represent only 

9638 



-11- 

28 per cent of all theatres in numlDer, they control a.pp roximately 48 
per cent of the total seating capacity. Calculations from this data 
indicate that the average seating capacities of the various types of 
theatres are as follons: for affiliated theatres, 1,300; for uhaffili-^ : 
ated circuit theatres, 850; independent houses*, 450, 

7, • Concentration of Control . 

Eight large corporations known as the "major companies" dominate 
the Industry (*) . According to officials of the Hotion Picture Pro- 
ducers and'Distrihutors of America, Inc., the outjout of these major 
companies constitutes 80 per cent of the value of total film production. 
Eight of the eleven na.tional distrihuting corporations are affiliated 
Fith major conroanies. Approximately 25 ver cent of the most dcsirahle 
seating capacity in the country is controlled "by major companies. This 
concentra.tion. of control provides a clear economic division of the In- 
dustry'' hetneen major and independent interests. The consequences of 
this vertical and horizontal. develOTDment are reflected in practically 
all the pro'blems of the Industry, 

8 • G-eo graphical Concentratio n. 

Approximately 70 Der cent of the total production of film in the 
United States comes from studios in or near Holljj.'vood, California (^f ) 
A large proportion of the remaining 30 -oer cent of American production 
comes from studios in or near Hew York City, 

Approximately 99 per cent of all distrihution is concentrated in 
32 "kej^" cities. Each of these cities serves the surrounding territory. 
In the order named: 'Sen York, Philadelphia, Chicago, Boston, Los 
Ajigeles, Detroit and Pittshurgh are the most important film distrihution 
centers* 

The numher of theatres and their seating capacity^ necessarily de- 
pend on potential attendance or population. Although small theatres ne,y 
"be found everywhere, the larger and finer houses are .concentrated in .the 
largest centers of population, 

9, Emglo22ieni.» 

The Motion Picture Almanac for 1935 estimates that approximately 
270,0.00 persons ?rer® employed "by the motion: picture industry in 1934, . 
divided as follows: 28,000 in production; 8,000 in distrihution; and 
234,000 in exhihition. These estimates, particularly the. latter,, are 
probahly high. For instance, lahor organizations in the industry esti- 
mate the exhihition employment at a maximum of 185,000. 

(*) These ma.jor companies a.re: Warner Bros. "Pictures Corporation, 

Paramount Pictures Corporation, Loew' s, Inc., Pox Film Corporation, 
United Artists Corpora.tion, EIvO Pictures Corporation, "Universal 
Pictures Corporation, Colurahia Pictures Corporation. 

(**) Department of Commerce, Census of Manufactures, 1933, ' 

* ■ ■ 

9638 



-12- 

In addition to the above there is an average of approximately 
250,000 placements per year, accordinf^ to the Almanac's statistics, for 
"extra" players in production. The n-umber- of persons employed as ex- 
tras is variously estimated from 8,000 to 14,000. The average numter 
of placements p^^r "oerson, which may mean one day's work or several, is 
nec<'.ssarily quite low. 

C. OPERATION UNDER COPYRIGHT LAWS 

There is a hi/^hly important difference "between the Motion Picture 
Industry and other industries which were "brought under NRA codes. This 
Industry operates principally under the copyright laws as opposed to the 
laws of purchase and sale. The ostensible product of the Industry - 
positive prints of motion picture film - is seldom sold. The film is j 
generally leased or rented; the title remains with the lessor. The 
actual product of the Industry is intangilDle, and consists of amuse- 
ment, education, entertainment, or information conveyed "by meansof 
film. Each film is used many times, crossing and re-crossing state 
lines as it is leased and shipped to one exhi"bitor after another. 

Operation under copyright laws creates many situationa found only 
in this Industry'-, 

1, The Distri"butor-Exhibitor Relationship . 

So long as the title to copyrighted material remains with the 
holder of the copyright, that ov/ner may impose such conditions as to the 
use or sale of the material as he desires^ 

In practically no case does a distri'butor sell film to an exhibitor* 
The exhibitor secures a license from a distributor to exhibit a picture. 
This creates a contractual relationship, making legal an act which 
otherwise would.be illegal. Having secured the license, the cxhib)itor 
then rents the film from the distributor in order to exercise his ex- 
hibition rights. These two transactions are usually effected in one 
instrument laiown throughout the industry as a "license and rental 
agreement," 

Since he retains title, the distributor has practically a free hand 
in imposing conditions as to the use of his property. He may permit 
exhi'bitiori only upon such .designated days or dates as he may specify. 
He may require that the film licenses shall not be used on a program 
with atiy other fea,ture, or he may require that a minimum admission price 
be ob)served. Perhaps in no other industry has the distributor (whole- 
saler) . coraparab)le rights, 

2, The Producer-Distributor Relationshi-p . 

Thre© general types of relations exist between the producer and the 
distri'butor* 

.1« The copyright to a film, is held by a producer. In this 
case, e:>dn.ibition contracts are 6.rawn up in the producer's name, the 
distrib)utor acting merely as an agent, 

9638 



-13- 

2, A TDroducer, -usually a nmall independent, nay sell a copj''- 
rightcd film and, necessarily, all rights of reproduction incident 
thereto, to a national distrilDutor. In this case exhiliition contracts 
are dra.T,7n in the distrihutor' s narne. 

•3. The distri"butor may te the original ormer of the film 
rights of the suhject material and may employ a producer to make the 
film; "but in this instance the copyright and title^are alTiays in the 
distrilDutor* s name. In this case, as in the preceding case, exhihition 
contracts are made in the distrihutor' s name, 

D, II.IPORTAIIT ORG^INIZA TIOITS VflTEIF ?HE IIIDUSTRY 

1 • Motion Picture Pro(? ucers and Dis trihut ors of America, Inc . 

In the early days of tlie industry several attempts had "be en made 
to organize the TDroducer-distrihutor interests; each had failed^ In 
1921, pulilic furor via.? aroused "by certain sennationa.1 Hollyvrood scan- 
dals, a-nd indignation over the ta'.'dry sensationalism a.nd. immorality of 
current screen productions stirred censor shir) grou-os into unusual 
activity. Box- office receipts dropped off. The movement for govern- 
ment control of films was spot-lighted "by "bills intended for state ajid 
federal legislation. 

The Indu-stry felt that it had to choose "bet'.Teen self-regiilation or 
fcdorcal censorship ~ and choose quickl"^'".. The movie magnates sought a 
leader under whom they could unite. Executive a"bility was necessary; 
strong politica,l connections -"Tould "be no ha.ndicap. Furthermore, the 
man chosen must have no connection with any pa.rt of the Industry. "vTill 
H, Hays, a former United States Postmaster- General, agreed to act. He 
"became president early in 1922 of the newly formed Ilotion Picture Pro- 
ducers and Distri"butors of America, Inc., rnd still serves. This gro-up 
is knov/n generally as the "Hays Organisation", 

In 1928, the 28 interests represented in this Hays Organization 
controlled ahout 60 per cent of all motion -oictures Droduced in this 
country (*) . Film Boa.rds of Trade operating in each of the 32 exchange 
territories acted as a field organization. Regional distri"butors 
affiliated with these Film Boards of Trade controlled, atout 98 per cent 
of all film di stri"bution (=<=*). 

The Hays Organization represents the industry in op'oosing or cir- 
cumventing the ever- re cur ring attempts to secure censorship legislation. 
As a counter offensive, the producers determined to set their ov/n' house 
in order, and as an essential step fortralated a moral "code" and thus 
set up a censorship organizat,ion of their ov/-n. Pictures are revie^-cd 
"by this "board and released to the nutlic vdth a stamp of approval if 
found not to "be inconsistent -dth the "code". In addition, a. standard 
set of advertising ethics was preiDarcd to which all men"bcr groups su"b- 
scri"bed. This pledge of ethical standards in the. quality and character 



(*) (**) "The Motion Picture Industry-" "by Howard T. Lewis of Harvard 
University. Pago 264,. Publisher, van No strand, 1933» 

9638 . " 



-14- 

of pictures nas rc-affirinecL in the Iiotion Picture Code, Unusually 
energetic s^upport of the pledge and other defensive self-regulation 
vrere called forth in 1934 to nnswer a putlic challenge organized under 
the name, The League of Decency. The Industrjr is credited vrith harring, 
during recent years, iirrproved the standards of its pictures in clean 
direction and wholesome story. 

The Haj'-s Organization also represents major producers s.nd distrihur- 
tors and affiliated exhibitors in opiDpsing other types of legi-slation 
deemed "by them to he inimical to their interests. It als(y''serves as a 
co-ordinating agency in the field of puTjlic relationships. 

At one time, the organization through the subsidiary Film Boards 
of Trade attempted to formulate standard schedules of clearance and 
zoning hy agreement vrith independent exhibitor groups in each territory; 
hut the effort ras halted "by the Federal Courts, 

In 1933, approximately fifteen (is) corporations, including all 
major producing and distributing companies, the Eastman Kodak Co., and 
Electrical Research Products, Inc., were members of the Hays Organizar- 
tion (*). 

2» The Motion Picture Theatre OTmcrs of America - (known as 
(:.IPTOA) . 

The Motion Picture Theatre Ovmers of America- was organized by in- 
dependent theatre owners in 1920 to combat the theatre expansion policy 
then pursued by the Famous Players-Lask;:'- Corporation, Several state and 
regional groups o-oerating as independent associations composed a nationr* 
al association rrhich attempted to coordinate activities and provide 
uniform action on problems of m^jor im-oortance to independent ex- 
hibitors. 

In 1927, because of the e7:prcssGd belief that more constru'ctive 
accomplishments could be secured througli cooperc?.tion than through open 
hostility'', the association offered membership privileges to producer- 
distributor theatre owners. The membership of l.CPTOA includes many of 
the more powerful, first ran, circuit and affiliated theatres, 

3, Allied States Association of Motion Picture Exhibitors . 

The association known as the Allied States Association of Motion 
Picture Exhibitors was originally formed in 1923 as a protest against 
some of the activities of the aforementioned MPTOA, Its organization 
was similar in many ways and regional groups in manj'" instances trans- 
ferred their allegiance from one organization to the other (**)• In 
1926, following advances made by the MPTOA to serve the interests of in- 
dependent e^±Libitors primarily. Allied disbanded, 

(*) Transcript of Hearings on Proposed Code of Fair Competition for the 
Motion Picture Industry - Volume 1, page 7, September 12, 1933, 

(**) "The Motion Picture Industry" by Howard T, Lewis of Harvard 
University. Page 300, Publisher, van No strand, 1933. 

9638 



-IS-' 

In Augast 1928, certain Torominent indopendent exbiitiitors v/ho had 
"been members of the original Allied States group decided to revive a,nd 
re-organize the former association. That uas done. Allied States 
"became active once again; it led the opposition to the Motion Picture 
Code, .The memliership is open to affiliated theatres, tut primarily 
Allied States is made up of small, suh sequent- run, independent theatre 
ovmers. The actual mijnter of theatres represented, "by Allied States 
and "by l/EPTOA continues to he the suhject of considerahle speculation. 
Each association claims approximately 4,000 theatres. 

4. The Theatre Ovmers Cha . mher of Commerce of Hevr York . 

This is a powerful orgn.nization in Ne-r; York City, hut its nemhei^ 
ship is limited to tlia.t vicinity. Its principal memhership is circuit . 
theatres, hoth independent and affiliated, 

5, The Academy of M oti on Picture Arts and Sciences . 

The Academy of Motion Picture Arts and Sciences is an association 
of various groups interested in the production division of the Industry, 
It includes six tranches, namely, "oroducers, o.ctors, directors, 
assistant directors, v/riters, p-vA technicians. The Academy x)rovides 
methods of adjustment and conciliation of disputes hetrreen producers, 
as well as "between the producers pnd the special groups of employees 
just mentioned. 

Acting as a clearing house for technical data relating to produc- 
tion, the Academy conducts ed-^icational campaigns within the Industry as 
part of its effort to "bring ahout industry-wide standardization in 
technical processes. The Academy is not concerned with the daily press 
nor the puhlic; its vd rk is more directly focused upon contacts with 
survey experts, special organizations and manufacturing and research 
concerns. 

The Code proposals suhraitted hy the Producers' committee included 
provisions delegating the administrative functions in the production 
"branch of 'the industry to the Academy. Prank G-illmore, president of the 
Actors^ Equity Association raised the o"bjection that the ^.ademy was 
compara"ble to a "companjr -union" (*), while other groups connected with 
the production hranch of the Industry contended that proper re-presenta- 
tion could not "be secured, from a "body dominated "by ma„jcr producers, 

6 • The Lahor Q-rou ps. 

There are several lahor organizations. Discussion of their 
activities appears in the Chapter on Lahor, later in this report, 

-0- 



(*). Transcript of Hearings on Proposed Code of Pair Competition for the 
Motion Picture Industry - Volume 1, page 146. Septemher 12, 1933, 



9638 



-16- 

CKAPTSH II 

THE HIS^OHY AlII) GROWTH OF 
THE MOTION PICTURE IIJDUSIRY 

A. T?/0 CENTURIES OF DSVBLQFII SITT 

The history of the motion -oicture is as fantastic as the curious 
names which its battalions of inventors have over the jears ^iven to the 
devices that "by adding new marvels upon old marvels have brought about 
the seeming perfection of today's product. 

The scientist and the humbug; the earnest inventor and the exploit- 
ing pirate of his ideas; the honest business man and the charletan; the 
man of the theatre, the financier and the lawyer-cross and recross one 
another* s paths in endless entanglements; yet des";)ite this confusion, in 
the short spaji of the last 30 years, a new art of the people is somehov/ 
created; anda gigantic new industry dealing in millions upon millions of 
dollars and touching in some measure the life and thiiiking of every man 
and woman throughout the nation, emerges with its own special burden of 
industrial and social problerase 

Tlie motion, or moving, picture as such traces its origin back to the 
Magic Lantern, In the hour that the "magic" of the ma^ic lantern became 
wedded to the art of photography, the moving picture found assurance of 
its future usefulness ajid influence, 

1. THE FIRST STEP - THE MA.GIC LANTERN 

A company of nobles sat in a room in the Jesuit College in Rome one 
night in the year 1640 and saw, with amazement and delight, grotesque and 
giant shadows cast upon the v/all depicting Death, Evil and the Devil. 
The ingenious inventor was the Jesuit, Athanasius Kircher, He callid his 
contrivance the "Magia Catoptrica" - the magic lantern. His scenes were 
painted on slides of glass and were projected on the wall by means of a • 
lamp, a. reflector and a lens. In 1646, Father Kircher illustrated, in a 
book he published under the title: "Tlie Great Art of Light and Shade", a 
means of changing from picture to picture by the use of a revolving drum. 

The elements of today* s motion picture were present in that room 
in Rome in 1640; but more than tv/o centuries were needed to achieve their 
possibilities. The motion picture had to vait upon - first, the develop- 
ment and perfection of photography^; next, the invention of the photo- 
graphic film and finally, the perfection of devices to combine all ele- 
ments into the reproduction of sound and action. And decades of research 
into the principles of vision had to ^recede these achievements. 

The same Mark Paul Roget who gave the world the matchless wordbook 
he called the Thesaurus, discovered one of the most important of the 
mysteries the day he saw the wheels of a baker's cart through the slats- 
of a Venetian blind. Despite the cart's rapid notion, he saw the wheels 
momentarily at rest in each slit of his blinds - but in a different 
phase of motion, Roget had com?© uiDon the principle of the motion picture 
camera - the eye's ability to carry action over from one successive 

9638 



-17- 

picture .to the next and thus create the full illusion of uninterruToted 
action. 

2. THE SECOND STEP - ILLUSIONS OE VISION , 

Froin Roget, historj'- carried this protlein of the illusions of vision 
to Sir John Herschel, Michael Faraday^ Antoine Plateaa, von Stamnfer rnd 
others. As a curiosity of research and invention, Plateau in G-hent and 
von Stampfer in Vienna, independently of each other, made the "first de- 
vices in the world for seein.?: pictures in simulated motion." (*) Both 
placed drav/ings on the rim of a disc, vierrin;:; the drawin-j;s of successive 
moments or instants of action tnrough another disc as both discs revolv- 
ed upon the same axis. 

That \7as in 1832. In 1353, ah Austrian Lieutenant of artillery too!': 
the same- device, incorporated it in the Xircher Iviagic Lantern of 1640 and 
projected the images on the wall. There -could be, and was, no further 
progress "ijn.til photography was read;/. Da.'^uerre with his imjnortal tini>2T®s 
is the most important -oersonality in achieving this next step. 



o. 



THE WORD CINi:!.'lii APPEARS 



The Viet plate process of photography succeeded Daguerre's sensitized 
metal plates. Experiments with wet plates "by Coleman Sellers ^ head of a 
mechanical engineering business in PhiladelTohia, led in 1861 to the in- 
vention of a machine and because of it a, word that today means "moving 
pictujre" throughout the ?;orld. 

Sellers posed his small sons, - Coleman, Jr., pounding a nail v/ith 
a hanLT.er and Horace near him in a rocking chairo He mounted the prints 
of this series of photographs on a v^rheel or drum which wa,s turned by 
hand as one looked through a stereoscope. This machine of his. Sellers 
called the "Kinemstoscope . " Kineraa (Cinema) was a new and delightful 
word; it went -around the world vvaiting for its 'oerfected product to ar- 
rive, 

Tvjo years later in the se.me city of Philadelphia, Henry R. Heyl in- 
vented a machine he called the "Phasmatrope" . Terry Ramsaye in his book 
"A Million and One Nights," says that the Heyl machine, after the posing 
and development of pictLires at successive stages of action according to 
Sellers plan, "carried thin glass positive pictures mounted radiallj'' on 
a wheel v;hich exoosed them intermittently to the light ray of a magic lan- 
tern. This machine has a shutter and a ratchet and panel intermittent 
mechanism which produced all the machanical effects necessary to the prop- 
er projection of pictures, even by today's standards." 

Keyl's first public showing of this wonder was held February 5, 1867 
for the benefit of the library fund of St. Mark's Evangelical Lutheran 
Church; 1,600 persons' attended and the receipts were $850. 

4. THE THIRD STEP - ACTION PHOTOGRAPHY 

The next step brings swiftly into play the first touches of the mod- 
ern tempo - the first multi-millionaires, a $25,000 wager and a race 



(*) "A Million and One Nights" by Terry Ra.msaye, Voluiae 1, Page 12, 

Publisher, Simon and Schuster, 1926, 
9638 



-18- 

horse. And for those who trace the course of empire westward - the 
first contact of the moving picture with California. 

Leland Stanford, the innensely wealthy governor of California, in 
1877 "bet James R. Keene , another Pacific Coast tycoon, $25,000 that a 
race horse when in full speed took a.ll four feet off the ground at once, 
Stanford was a "breeder of fast horses. He didnH agree with the art 
and sculpture of the centuries. He had to resort to photography to 
prove his contention and win his wager. 

That is how the curious personality of Eadweard Muyhridge entered 
motion picture historj?-. Muybridge was a San Francisco ohotogra^pher who 
had been sent to Alaska to take ohotograDhs to'ansv;er the criticisms 
that aJL-ose over Seward's purchase of that territory, "when Stanford sent 
for Liu;;;-!) ridge to prove his wa^er, the wet plate camera then in use had 
no speed faster than one-tv/elf th of a second; "but Muy"bridge snapped away 
at Stanford's racing horses. One camera wouldn't do. Stanford ordered 
a row of caiiieras to "be set up with a line of strings from each shutter 
stretched across the track. The horses in their stride were to breaJ^ 
the string. That didn't work. An engineer was needed to devise a shut- 
ter arrangement to operate the caineras. John D, Isaacs, who later be- 
came chief engineer of the Southern Pacific Railway, was chosen by Gov- 
ernor Stanford for two reasons? he was an up and coming engineer and a 
first class amateur photographer. 

After trying many expedients, Isaacs hit upon a device resembling 
the cylinder of a Swiss music box; its "pins one after another closed 
electric contacts .controlling the cameras for successive exposures." (*) 
Stanford was excited over the results and set up 24 cameras in a row. 
With this . shutter-opening device furnished by Isaacs, Mu^'-bridge contin- 
ued photographing race horses until 1881. 

The G-overnor was delighted be-yond measure with his enormous collec- 
tions of photographs; took them and Muybridge to Paris* created a nine- 
day's lYonder there and inspired the famed artist Lieissionier to see if 
the disjointed parts - separate pictures of a horse's gait — conld be 
swung back into the rhythm of motion, lieissionier mounted transr)arencies 
of the Mu;j''bridge pictures on a revolving disc, put the disc into a pro- 
jector - and the thing was done I The French had a f-arther important clue 
to the ultimate, motion picture^ Muybridge had praise and remained a. 
photograipher. 

One recoird more and the "pre-historic" days of the moving picture 
are over. ^ ■ 

A Frencliman, Louis Aime Augustin Le Prince "reached a conception", 
says Ramsajre in his "A Million and One Ilights," of a pair or parallel 
strips of "sensitized paper or equivalent ly flexible material which were 
to travel alternately step by step par.t two lenses, one above the other. 
....Le Prince, while living ternporarily in New York, took out an 



(*) "A Million and One -.Nights" by Terry Ram s aye , Volume 1, page 36. 
Publishers, Simon and Schuster, 1926. 



9638 



-19- 

American patent, I'o, 376,247j issuer' in 1886-; He retiirned to Grent 
Britain T7liere another patent was issued January 10,-1887,. . • ." 
Le Prince did. not accomplish what patent authorities call "a reduction 
to -oractice," 

Ton years after Le Prince mysteriously vanished, a machine purport- 
ing to be his was sho'vvn in a New York, court in a suit attacking the 
priorities of a Thomas A, Edison patent; • the Le Prince claims v/ere not 
vindicated, . • 

5« THE FOURTH STEP - TIIOMS A. SEISON ' 

At i>ienlo Park, Hew Jerse5^, Edison was at work in 1836 improving 
and perfecting his ohonograohe He sought now to add pictures to sound- 
pictures to "be made in instants of action on a cylinder. This was the 
plaything of the electrical wizard, his relaxation while V70rking at 
that time on his major problem - the. magnetic separation of ores. As 
confidential teclinical assistant, Edison engaged a young Englishman - 
'.illieun Kennedy Laurie lickson - who come to play a leading part in the 
creation of the world's first "Oving pictures. 

In 1887, Edison iDut Dickson to work to combine pict'^ores with the 
voice reproduction of the Edison phonograph; soon mas-ter and man saw 
that the cylinder motion picture machine had little probability of 
success. The idea was abandoned. Tickson began working v/ith celluloid 
plates. Celluloid was a failure. 

Then in 1889, G-eorge Eastman of Kodalc fame taaking use of the Good- 
win "oatents, announced a method of making a roll of film that could be 
photographically sensitized. Eastman's first order came from Dickson 
from the Edison laboratories. The film couldn't be ras.de longer than 
50 feet; no greater length could be handled in the best available ca;:ier8-» 

6. THE FIFTH STEP - A ROLL OF FILM 

From the Eastman film and the Edison-Pickson plans came the Kineto- 
scope which used a 50 foot length of films wound in an endless loop over 
a series of spools. The film ran between an electric light and a rapid- 
ly revolving shutter which exposed the film to. the viewing lens into 
viiich the spectator peered, A camera '.vas invented to take the films for 
the Kinetoscope, That was called the Kinetograph. 

The Kinetoscope was a VQ^V show ma.chine for the amusement of the 
public, Ajpa.rently that was all the interest Edison had in it. Dickson 
insists in his records and pamphlets that he had projected the films 
upon a screen eight by ten feet; after some apparent denials, Edison 
does recall an experiment with a five foot screen. Sd.ison apparently 
had no desire at that time to complete a projecting camera which would 
have hastened the advent of the motion picture theatre many years. 

On August 24, 1891, Edison made ar)oli cation for a United States 
patent on his Kinetoscope, It was then suggested that he should also 
apply for foreign patents partic-olarly for England and France. 



9638 



-20- 

* 

"How much "will it cost?" Edison asked casiia.ll:''. 

"Oh, about $150," he was told. 

Edison waved the suggestion aside. "It isn*t worth it." (*) 

Business men and shrewd exploiters were keen to get hold of the 
Kine to scope and open x)ee-p parlors; thev could hear the restless money in 
the pockets of millions of future customers. But Edison let the entire 
opportunity of the Chicago World's Fair in 1893 pass b;'-; neither machines 
nor film were available. The fumbling devices that had preceded the 
Kineto scope were at the Fair, but not the Edison-Dickson marvel with 
its traveling film. 

7. THE FIRST STUDIO; THE FIRST ACTORS 

But during these dajrs of 1893, the first motion picture studio had 
been designed and built and the first actors and actresses of the film 
v^orld had appeared before the camera. Tlie studio was made to provide 
scenes for the peep show Kinetoscope, Tliis studio was sjn. ugly black 
tar paper affair in the Edison plant in Ne\7 Jersey and was forbiddingly 
called the Balck Maria, 

Photography in 1893 was a. violence of contrasts; Black Maria pro- 
vided the contrasts. Its stage was svmng like a turntable so that the 
sun, v/hatever the hour, could shine full on the actor against the stj^- 
gian darkness of the shadow-box background. 

Scenes had to be violent and active. Dickson was cameraman, direc- 
tor and laboratory staff. The Black Maria productions for 1893-1894 
(on the authority of Ransaye) were trained bears; raonlzey acts; trick 
dogs; a solo dancer from Broadway; Annie Oakley and Buffalo Bill; and 
an Indian dance; a comic ba.rbershop scene; two cock fights; Sahdow, 
the strong man; a female contortionist; a tooth extraction in which 
(by voy of educational content) Dr. Colton, first to administer gas, 
demonstrated his improved method-ajid then daringly - 50 feet of action 
from a po-pulsr Broadv/ay sho?/. 

Finally'- the first ten machines reached New York at No. 1155 Broad- 
way on April 14, 1994. By June, the Kinetoscope had reached San Fran- 
cisco, The public was ready with its nickles in .endless waiting lines; 
so was the investor v;ith his larger suras. The nickelodeon became an 
Arierican Institution. 

notion pictures started life looking for a "punch" and made "punch" 
a permanent habit. Pictures found their punch in the prize ring - an 
ideal space of action ?;ithin the range of that day' s cumbersome cameras. 
Thus it happened, through crowd interest and the technical restrictions 
of the first cameras that pugilism provided the earliest picture inter- 
est. The first motion picture "star" was James J, Corbett, - Gentleren 
Jim himself of the prize ring. Others followed - Jackson, Fitzsimmons, 
MoAuliffe, Griffo, and Dixon. 

(*) "A Llillion and One Nights" oy Terry Ramsaye, Volume 1, page 76, 
Publisher, Simon and Schuster, 1926. 



9638 



- 21 - 

Importuned time, and again "by t?ie Lathams ar.d others to develop a 
•orojecting camera to throw his images on wall or screen, Edison as per- 
sistently refused. The Lath;ims, pictfiresque father and tv/o de"bonair sons, 
went ahead with their own plr;r.s. On Sunday April 21^ 1895 motion pictures 
were projected life-size on a screen for the first recorled time in 
history* The Lathams were the heroes of a brief hour of fame. 

In that hour, a "bitter controversy started. Thirteen ceaseless years 
of patent litigation clamored and rrecd through the courts,. Piracies and 
appropriations of Edison's patents appeared in the United States, in 
France and in England, Millions of dolla,:-3 poured into the promotions 
that followed and other fortunes were r-pent in the legal warfare of con- 
flicting interests. Some of the questions raised in those days still 
linger on the scene unanswered, 

8. THE FIRST KEGULAH "SCREEN" PERFORMAITCE 

It V70uld appear from patent records and agreements with Edison that 
Thomas Armat of u'ashington, I). C. had established the basic principles of 
film projection with his invpntion of the Vitascope and thus sta,rted the 
commercial history of the motion picture in the United States, The Armat 
invention - Patent No, 586,953, issued July 20, 1897 - was sho\'m first in 
1895. 

Under a special contract, the Vitascope, as perfected by Armat, was 
manufactured and marketed by Edison, Explaining his part in the develop- 
ment of projection, Edison in May 1922, wrote to Armat this acknowledgment J 

"I saw you had a better one (projection machine) than mine dropped my 

experiments and built yours which wr-.s the first practical projection 
machine", (*) It '7as this machine v;hich thrilled the show world in 1896 at 
at Koster and Biall's old Music Eall in Herald Square, New York. The 
pictures v/ere thrown on a 20 foot screen set in an enormous gilded frame. 

Now followed a mad scramble throughout the land for state's rights 
for the new type of entertainment. Stores beca];:e theatres of a sort over- 
night; the customers wedged in to see the jerl<y flashes of something in 
action on the crude screens; mechanical pianos kept up their clatter as 
of pebbles dropping in rnythn on a tin roof. Prize fight scenes satis- 
fied the crowd; occasionally there was a glimpse of some dancer waving 
wings in butterfly flights and theatrical pirouettes, . The audiences viere 
ahead of the mechanical and production capacity of the new entertainment. 
The first emphasis in the new industry was on the development and the sale 
of mechanical equipment, 

9. A NEW INDUSTRY'S FIRST STEPS 

Even before the transition from the peep show to screen, the pro- 
grams supplied were not sufficient to supply the trade. Demand for more 
changes in programs created a demand for more performers. These actors were 
paid from $10 to $50 a picture and expenses from New York City to West 
Grange, N. J. and return. In 1896, a motion picture studio was estab- 
lished in New York City, where celebrities might be brought before the 
camera. Vaudeville houses began to show motion pictures after the last 
act of their performances; and the vaudeville screen continued to 



(*) "A Million and One Nights" by Terry Ramsaye, Volume 1, page 230, 
2 Publisher, Simon and Schuster, 1926, . 



— op_ 



be the main avenue to the public for approximately ten years. The 
length of films increased from the brief flash of 200 feet to the more 
satisfying length of .1,000 feet which is approximately equal to the 
short subjects of today. 

In 1898, the "Passion Play" production made on the roof of the . 
Grand Centrr-.l Palace in New York City, contained 2,100 feet of film and 
sold for $530 per copy. This v;as the first directed screen production 
with continuous story. The film contained no titles, 

I.iotion pictures made of the events of the Spanish-American war be- 
came the forerunner of modern newsreels. But these war pictures despite 
seeming fidelity to action were actually staged v/ith tiny models of 
warships in tubs of water. 

Up to ITovember 3, 1899, the date of the Jefferies- Sharkey fight 
at Coney Island, Hew York, all efforts to make motion pictures under 
artificial lights had failed. Four hundred arc lights were used to 
photograph this Jefferies fight; three or four modern arc lights serve 
the needs today. 

B« TH3 STORY- TELLING PICTUxl2, 1904 

Even as late as the year 1900, pictures had not developed their 
story-telling possibilities to any extent. "The Great Train Robbery" 
produced in 1904 was the first picture to develot^ the story telling 
idea. This was a story especially designed for the screen. The Passion 
Play was a series of scenes patterned after the historic pageant at 
Oberammergau, The Great Train Robbery was 600 feet in length. 

In 1905, the 1,000 foot reel "Raffles the Amateur Cracksman" 
was produced by the Vitagraph Co-.ip.'snj'- in its snail studio on the roof 
of the Horse Building in Ne\7 York, Raffles was r. popular stage play 
and Vitagraph paid for the motion oictiore rights to this play by an 
agreement to give the owners credit on the main oicture title. In 
1907, the Kalem Company produced without first securing a filming 
right, a one reel "Ben Hur" adaoted form General T7allace's popular 
novel; as a result the heirs of General Wallace sued and collected. 
The Legal character of film rights, which in modern production is an 
important element of cost, was thus established. 

The advent of the story picture and its instantly fa-vorable re- 
sults placed the motion picture in the position of independent enter- 
tainment. The screen s'ooke a language that all linguistic groups 
coulc. understand. In 1905, Biograph equipped its new studio with mer- 
cury vapor lamps. The Edison interests built a large studio in the 
Bronx and began to give its actor employees regular pay* Vitagraph 
opened a large studio in Brooklyn, 

C, THE FIRST MOTION PICTURE "TRUST" 

In 1907 every studio was a guarded stronghold. Producers were 
s^^cretive concerning their methods; more important, they feared prose- 
cution for infringement of the Basic Edison patents. Patent litigation 
which had hampered the Industry for a decade reached an armistice in 
1908 with the formation of the Motion Picture Patents Company by all 
the lea.ding interests in the Industry. All patents and claims to 



-23- 

special rights were then -oooled, ' 

In 1909, this oatents com^ipt.ny Dlaced on O'oeration a cross licens- ■ 
irig arrangement v/here"b7 films TDrodaced on n.on-licensed equirjment were 
not to 1)0 -orojected by licensed equipment, and vice versa. This set 
up a monopoly and stifled competition froi.i independent -oroducers. Hie 
independents used every conceivahle method of circumvention and \7ere 
aided "by vnrious li-censes. 

License violations caused the patents coraooJiy 'to seek control of 
the film exchanges by the forrvation in 191u of the Gener.al Film CoLipa-ny* 
This ";\s the first national distributing orgj;'jiization pnd included 57 of 
the 58 exchanges then in existence. Hie exchanges were practically forc- 
ed to sell out to the patents company under threats of license cancella- 
tion for violations of its comolex rules. William Fox, a. distributor, 
with strong financial and political allies,' controlled a. number of 
theatres in Hew York City rnd was able to resist the "trust". 

The ;oatents company held azi exclusive contract for the raw film 
output of the Eastman Kod,?k GomT)any until 1911 when the Eastman interests 
concluded that it was economically and. legally dangerous to withhold the 
sale of raj7 film from, the independent producers* 

The General Film CoLroany was disolved '^oy the Federal Courts in 
1915. The Federal Trade Commission entered a "cease and' desist" order 
against the Motion Picture Patents Company in 1915. In 1917 the United 
States Supreme Court held that the patents company could not enforce the 
exclusive use of licensed film on patented projectors in theatres. The 
decision became of tremendous importance with the introduction of 
sound; the electrical comoanies had no way then to prevent the inter- 
changeabilitj'- of product. 

D. T HE FKlTUllE PICTI.lEE 

In 1912 Adolph Zui^or, v;ho had entered the Industry in 1903 during 
its nickelodeon days, bought the American rights to "Q;iieen Elizabeth", 
a four reel picture made in France, featuring Sarah Serniia^rdt. After 
considerable opTDOsition, Zul-cor succeeded in having the production li- 
censed b^- the patents com-or.ny. This pretentious screen production was 
distributed to so-ca.lled "state right" distributors who leased the films 
with the exclusive right of releasing them to exliibitors within a .given 
territory. In some contracts an outright purchase was actually made. 
This 0;aeen Elizabeth feature wa.s a radical departure from one-reel 
pictures which were a heritage from the va,udeville prograixi when the 
vaudeville theatre was the ■ chief • avenue to the public for such pictures 
as v;ere then made. - 

In 1913, the feature picture movement received a new' impetus from 
abroad Idj the unprecendented success of "Qiio Vadis" in eight refels; 
this show ran for 22 weeks in a large Sroad'-^ay legitimate thea.tre vnLth 
a top admission orice of one dollar. Legitimate theatre interests then 
begaji to make arrrjigements to photograph stage successes. 



9638 



-24- 

The popiilarity of these featiires resulted in atteni:)ts "by -orodiicers 
to provide a constant supply to exhibitors, These productions entailed 
an increase in cost from a few hundred dollars to mnny thousands. Ihe 
-existing distribution facilities required adjustment, David W, Griffith* s 
epoch—making" feature "The Birth of a Nation" (1914) was ezcnloited inde- 
pendently as a road show. This famous picture broke all attendance re- 
cords throughout the world. It is estimated that more than $15,000,000 
has been p.aid in admissions for "The Birth of a Nation", This picture 
is still being shown in various pojrts of the world, and is still adding 
to its royalty records, 

E. THE STJLR SYSTEM - 1914 

The presenf'star system" was a direct outgrowth of the feature 
picture. Adolph. Zukor' s announced ^)olicy of "Fsjaous Players in Famous 
Plays" beginning with Sarah Bernhardt in ^' Queen Elizabeth" really marked 
the inauguration of the naming of stars and other talent on the screen. 
Mary Pickford, Mack Sennett, Charlie Char)lin, John Bunny, and many others 
soon became favorites of motion picture patrons. 

In the latter part of 1914, Mary Pickford' s popularity became so 
great that Adolph Zukor considered it advisable to meet "all com-oetitive 
offers of employment and retained her exclusive services for the Famous 
Players Company at an unheard of salary of $104,000 for the coming year. 
From this point on, actors sought large salaries and, for publicity pur- 
poses, exaggerated the salaries that they actually received. Producers 
began to announce bigger and bigger salaries than their competitors. 
The "Star System" was established. 

On February 6, 1915 the Paramount Pictures Corporation which had a 
contract for the distribution of Zukor' s productions announced that due 
to Miss Pickford' s enormous salary, all future Pickford pictures would 
be first released to large city thea~tres charging a minimum admission 
price of twenty-five cents. 

A general increase in trices of films was attributed principally to 
excessive sala.ries and to increased studio costs. No mention was nade 
of salaries paid to executives, liihile conditions relating to salaries 
of executives may not be comparable with those existing tv/enty years 
later, the investigation made under the National Recovery Administration 
(*) indicated that executive salaries generally equalled or exceeded 
salaries paid to various types of professional talent. 



(*) Reoort Regajrding Investiga.tion Directed to be Made by the President 
in his Executive Order of November 27, 1933, Approving the Code of 
Pair Competition for the Motion Picture Industry -'Made by Sol A. 
Rosenblatt, Division Administrator, National Recovery Administra- 
tion to Gen. Hugh S. Johnson, Administrator for Industrial Recovery, 
July 7, 1934, - . 



9638 



^25- 

F. :DL0 CK 300X1 m EZGINS - 1916 , 

In 1915, the Pr.rai.ioiint Pictures Corpor'ition rJinoiinced a new -gollcy 
relative to the distribution of i.iotion pictures vhich caused alarm Gjnong 
the e^diibitors. Exhibitors v^ere required, as s. condition to leasing the 
pictures they desired, to purchase also the entire product of the corn- 
pan;-. Ihus was called into Dein,;;' the modern so-called "hlock booking" 
system (considered later in this report.) 

G, LiOTION PICTURS TUSATRS S 

As the Industry developed beyond the point of ma^-eshift entertain- 
ment in vaudeville houses and be^an to contest the position of the legi- 
timate drama, theatres designed for the exclusive use of motion pictures 
sprang up thro^ughout the country. The seating capacity of these new 
theatres often exceeded that of the legitimate houses; good seats were no 
longer limited to the orchestra section, there were no living voices to 
listen to and even fleeting facial expressions on the screen could be 
seen distinctly from any prrt of the house. 

In 1914 the Mark—Strand Theatre with a seating capacity of 3,000 
opened on Broadway, New York, to contest the suprem.-cy of the legitimate 
thea,tre. Sojnuel L. Hothafel (Eox3^), exponent of the modern elaborate 
presentation program, was employed for exnleitation. The oioening show, 
"The Spoilers", was a nine-reel feature adapted from the story of that 
name by Rex Eeach, This is the first instance in motion picture history 
where an author wo.s compensated on a royalty basis • 

Several important local exiiibitor chains were organized in various 
sections of the country. Tliese chains v.'ere probably the most important 
buyers of film. Judging from the preponderance of investment in the 
exhibition division today, it is probable that even then the invctment 
in exhibition amounted to larny tim.es more than the investments in pro- 
duction ajid distribution. 

H, LOG ATI Ma IN CALIFOMIA 

The ra;pidly increasing demcvnds for program changes in thousands 
of ne\7 theatres caused producers in New York a,nd Chicago to seek s"iJii- 
shine in Florida, Cuba, and California. Independent producers found 
that they siiffered less diffic^:)J.ty from the activities of the patents 
pool when their operations were sufficiently rem.oved from New York and 
Chj.cago, 

Other reasons drew attention to the West Coast. In 1910, the Bio- 
graph Company set up studios in California for production during the 
Winter; the experiment became an annual winter migration for this com- 
pany. No substantial investment wps required and none was made. The 
Biograph winter quarters interested other "oroducers. By 1913, the so- 
called Western comedies had become popular in the United States and 
in &j.rope. Studios in New York hummed with "Western" activity. All 
year around production became a necessity. The clear climate and sun- 
shine of California induced several companies to establish open air 
studios on that coast. It was soon evident that "Westerns" photographed 
in the west were just as acceptable as those produced in New York, Phila- 
delphia and Chicago, and production costs -oroved to be 50 per cent less# 
9638 



-26- 

Southern California in 1913-14 was in the feverish enthusiaGin of 
a real estate boon. Earl estate promoters nere active in developing a 
subiirhan residential section outside of Los Angeles to \7hich they had 
given the n^jne Holl>"T,-ood. Acreage, huildin'^ m.aterials and labor costs 
were inexoensive. Holi j"wood promoters broioght the cameramen to the hills 
and va.lleys and T)ersiiaded them that the "locations" -were made to order. 
As motion pictures produced there went into circulation the name Holly- 
wood received national publicitj^. Studio b3'- studio, production activi- 
ties were transferred to Southern California. Tinancial control remain- 
ed in Hew York, but that presented no difficulties. Hollywood was solid- 
ly established as the center of motion Toict'ore activities. 

I. EXHIBITORS' STRUGGLE ?0H COl'ITROL 

In 1917, 27 of the principal theatre operators in the country form- 
ed the First National Exhibitors* Circuit, Incoroorated, as a co-operative 
buying group to combat high film rentals and the practice of block book- 
ing. Its members not only secured film for their oivn theatres from the 
"combine" but also became distributors, opercting film exchanges in their 
respective territories. The First National subsequently entered the 
production division of the Industry obtaining the services of many famous 
actors and directors. 

The producers, most of whom up to 1917 ho.d no interests in exhibi- 
tion houses with the possible exception of a fe\7 large theatres used 
for advertising elaborate feature TDictures during their opening run, met 
the nev; challenge for control by entering the exhibition division them- 
selves. 

Adolph Zukor purchased controlling interests in various localized 
circuits holding First National franchises. Marcus Loew, an importpjnt 
exhibitor and a consistent customer of the Famous Players-Las]^ Corpora- 
tion, entered the production division of the Industry by purchasing the 
Metro-Pictures Corporation. These two -oioneers due to family connec- 
tions a-nd for various other reasons worked together and became the Icrg^ 
est theatre owners in the v/orld. 

Independent exhibitors, alarmed at the power of both First Nation- 
al and Paramount, now began to form circuits wherever TDossible. Inde- 
pendent producers fo-O-id great difficulty in selling their products due 
to a desire on the part of local circuits to remain on friendly terms 
with Pa.ramount, which in a number of instances ho.d built theatres in 
cities where exhibitors had refused to buy Parejnount products. Ste-o by 
step, first run theatres in large cities became closed to independent 
productions. 

The Federal Trade Commission issued o, "cease and desist" order 
against the Parsjnount Famous Player s-Lasky Corporation, et al. in 1927 
on the grounds that the Cor-ooration was using coercive means to obtain 
control of theatres; that it "block booked" to exhibitors, and that it 
excluded the product of other producers fron the theatres it controlled. 

Paramount appealed from the Commission's ruling to the United 
States Circuit Court of Apioeals which, in 1932, reversed the "cease and 
desist" order and denied the petition for its enforcement, 

9638 



-27- 

Meanriiile, in 1925, Paranount "bou.^ht control of the iimoortant Bals.- 
tan and Katz circr.it in th'^ middle '-est. The Pa^a.mo■ant-I^l^Dl ix Corporar- 
tion was then formed. 

The theatre control movement '^f 1919, 1920, and 1921 suffered a 
reaction during the next fe-? years. For instance, Faraoiis Players-Lasky 
Corporation ^n Se-otemher 1, 1924, ' controll ed only 181 theatres, a de- 
crease of 122 houses since 1922; First National's suhfranchise holders 
diminished from 3,400 in 3921 to 2,700 in 1923. (*) In the case of 
Famous Players-Lasl'Cj'' it wp.s found that several small to-^m theatres were 
not -nrof ita.hle; and in the case of Fn .-."st i-^ationc?l, a numher of its suh- 
franchise holders cancelled their agre'^^ments "because they ^-rere required 
to take all pictures produced "by the organization. 

The snail independent exhibitor encountered many difficulties during 
1925 when he found himself in comiDetition m th the circuits. High rent- 
als limited his capacity to secure desira"ble Toroduct; the circuits d-om- 
inated first nm sho-^ings of po-oiilar -oroduct. Consequently many small 
exhi"bitors formed ""booking com'bines" and leased pictures hy cooperative 
methods in an attempt to offset the huying power of the circuits. These 
cooperative efforts were usually not perman-nt due to distri"butor antag- 
onism and internal dissensions, "but for a time they did exercise consider^ 
able influence, 

Meamrhile, the -^ell-entrenched independent circuits became increas- 
ingly competitive vith producer-distributors for retail outlets. Because 
of this factor as well as the com-oetition offered by the "booking com- 
bines", a new theatre acquisition program was started in 1925, Mergers, 
consolidations a.nd the constraction of "deluxe" theatres throughout the 
country were made possible largely by the ease ^-^ith which capital could 
be acquired. 

The larger companies becane clearly d'^fined. Famous Player s-Lask^'', 
First Nationalj and Loew's Incoroorated led the field while Universal, 
Fox, and Warner Brothers were beginning to assume nationa.l importance. 

The silent screen tiroba-bly reached its climax during this Deriod. 
Certainly it had reached its limitations under the technical and artistic 
resources of those responsible for the production of films during this 
period. In order to maintain sufficient attendance to justify the finan- 
cial existence of elabora.te theatres, extravagant stage presentations and 
supplemental forms of entertainment ^-^ere brought in to bolster up box 
office recei-ots, (**) 

J. THS AD'VENT OF SOUHD 

The Motion Picture Industry in 1925-1927 ^-^as brought face to face 
with a critical situation brought on "by raijid e?roansion but, quite sudden- 
ly, it was saved from im^oending disaster by the introduction of sound, 

(*il "The I.Iotio,n Picture IncLustry"-, Howard T, Lewis, Harvard University, 

/*^\ f,^SQ 18, Publisher, Van No strand, 1933. 

(**) "A History of the Movies" by Benja.min B, Hairroton, Pages 330 and 374, 
Publisher - Covici-Friede, 1931. 

9638 



- 28 - 



This development revolutionized the Industry and revived a failing in- 
terest in notion picture entf^rtainment. And once again, the Industry 
knew the excitement of a boom. 

Theatres were "built, "bought, or leased on all sorts of terms. The 
desire to acquire theatres apparently doninated the ninds of the In- 
dustry. Little attention wa,s directed to problems of efficient management 
and operation. The promise of large profits due to synchronized sound 
made it possible to secure financial support without difficulty. Patrons 
were attracted to the theatres regardless of the quality of the pictures 
shown provided they were "all talkies", Due to the novelty of this new 
form of entertainment most of the theatre acquisitions s"nowed profits. 

Vitaphone, the Movietone and the Photophone were the names given to 
the three most important types of sound reproduction. Warner Brothers 
helped to develop the "Vitaphone, Fox helped to develop the Movietone. 
The Radio Corpor'>,tion of America due to its delay in entering the sound 
equipment field on a commercial basis formed the EXO Corporation involving 
■oroduction, distribution and exhibition of motion pictures largely to 
secure a market for its product. (*) 

Extensive litigation might have resulted from the claims of various 
electrical engineering and manufacturing interests if the American Tele- 
phone and Telegraph Company, the dominant patent owier, had not suggest- 
ed that all claims be peacefully adjusted for the common purpose of supply- 
ing necessary apparatus to the Industry. The dissolution of the old 
Motion Picture Patents Company may have had some bearing on this decision* 
But by means of this action, interchangeability of equipment was provided. 

Marketing of the './estern Electric equipment by Electrical Research 
Products Incorpqrated began in Aug-^ist 1927, offering the systems which 
embraced sound-on-f ilm, sound-on-disc, and non- synchronous disc systems. 
Installations ranged from $3,P'")n to $15,000 in price depending upon the 
theatre and its acoustics. 

Vfliile not regarded as a true sound picture, "Wings", which opened 
August 12, 1927, was accompanied by sound effects reproduced on a separate 
film run concurrently with the pictures. "Seventh Heaven" and "TThat Price 
G-lory" v-ere used to boom the cause of sound. "The Jazz Singer" starring 
Al Jolson swept the country like wildfire. 

In May, 1928, Paramount, M-G-M, and United Artists contracted for 
Western Electric licenses. Universal and the Hal Roach Studios soon 
followed. The economy wave which had engulfed the Industry within the 
previous year gave way to competitive bidding for the best talent for 
sound films. 

The American Federation of Musicians created a war chest of $1,000,000 
to forestall encroachments of so-jjid -Dictures, Campaigns against 
"canned music" word attenptad thrcu^ht th^ country. There xras a con- 



(*) "A History of the Movies", by Benjamin B, Hampton, Page 388, 
Publisher- Covici-Priede, 1931, 

S638 



-39- 

certed drive or;ainst the suDstitutiovi of i-iociinxiical music for the 
living rausician- in theatres. 

Coast studios felt ti'.e onrtish of sound £?iid construction ;7ork was 
rushed to meet the demand for sound stages. Western Electric sound 
recording equipment was ma.de available to independent producers in 
July, 1928. ' 

Wired theatres prospered while -unwired houses were v/ithout ex- 
ploitation advantages. The year 1929 found sovjid pictures off to an 
auspicious start due to ajmouncement of lovrer prices hy Western Electric 
for either the Vitaphone or Lovietone reporduction equipment for June 
1st delivery at a price of $5,500 each or $7,000 for "both. 

The public wanted voices; there was no longer any demand for silent 
figures on the screen. Theatre ovmers placed contracts for installation 
of scjiid faster than equipment could "be s'applied. At the end of 1930, 
the num'ber of theatres wired for sound wr.s 9,^50. The industry- saving 
nev7 interest of the public in talldng pictrares is dramatically told in 
the estimate "by the Hays organization that theatre attendance increased 
on the average, \)ir 15,000^000 additional admissions weekly daring that 
year, 

1. SCUITD Ii: PRGSUGTIGN 

♦ 

The introduction of sound in production caused a change in style 
of making pictures and at the same time greatly increased the talent 
costs. Lore than 100 special scijJid stages were constracted, and millions 
of dollars in equipment installed. Old talent was eliminated in numerous 
instrdces n:u(J ii.er trdert '.ith spe.^king^r'ijd singing voices '.'.'rs .-introduced. 
An increase of approximately 5,000 employees was reported at the end of 
1930. ^proximately 99 per cent of all pictures produced in 1930 were 
sou.ld or "all talkies". (*) 

Electrical Research Products, Inc., a manufacturing subsidiary of 
Western Electric, producing sound recording apparatus of the variable 
density type, equipped Paramount, United Artists, Warner SrotherB, 
First National, Fox Pictures Corporation, l.letropolitan Sound Studios, 
and Universal Pictures Coirporation. 

Radio Cor3oration of Aiaerica with Photophone built on the principle 
of variable area equipped Columbia Pictures Corporation, Radio Pictures, 
Pathe aiid Tiffany. 

Independent producers of production apparatus sought markets for 
their products among small independent producers. 

At the end of 1930, 60 per cent of the e:diibitors were using the 
souTxd track method of projection and 40 per cent v/ere using the disc 
method. 



(*) Motion picture Almanac - 1931 



96 



38 



-30- 

The introduction of sound caused control of the Industry again to 
come imo-er a certain degree of doraination "by the electrical interests. 
Aside from the o\/nership of BKQ by the Radio Corporation, the Electri- 
cal Heserjch Prodi-icts, Inc., had considerable interest in the activities 
of Fo>:, 'Jarner Brothers and the Prxanount Corporation. (*) 

2. ■ COiTCEKTRATION OF TESATHS 0T,1TERSHIP AFTIS SOUIID 

Soimd caused a greater concentration of theatres under the owner- 
ship of a few l-^rge corporations. Installations .^Jid servicing costs 
were too great a financial burden for ejdiibitors of liriited means. 
Priority'' of sound installations {^ranted to the financially powerful cir- 
cuits caused some loss of business to competing independents who there- 
upon gave voo their then,tres. 

TJarner Brothers, Par^^jp.ount , Fox and RKO generally eroDanded their 
holdin£;s. Warner Brothers purchased control of the Stanley Chain which 
in essence mejmt control of First National and the end of the exhibitor- 
prodUcer-co-o;oerative noverient. Fox purchased the important Foli Cir- 
cuit in llew England for $20,000,000, However, his purchase of control 
of Loev/* s IncorTDorated for ap-oroximately $50,000,000 was upset by the 
Federal Trade Comiiission (**) whose bill of comT)laint declared that Fox 
and i.I-G-I,i controlled 40 per cent of the total production of pictures 
within America. Tiie government rlleged thrt Fox and Loew' s Incorporat- 
ed also controlled a Irxge proportion of the leading first run theatres 
in the United States. In the New York metroDolitan area it was contend- 
ed that tiiese two com-o.-^nies controlled at least 50 per cent of the totrJL 
seating capacity. 

The United Artists Corporation which had been founded in 1922 liy 
ivLary Pickford, Douglas Fairbrjilcs, Charlie Chaplin, rnd David W, &riffith 
owned few theatres outright but shared partnership with Paramount in 
other theratres. Universal Pictures Corporation controlled a number of 
neighborhood theatres in the Schine Circuit in Few York State -^.nd the 
Griffith group in Texas .and Okl.-^lioraa. 

ITliile the above named affilirted comT^rnies held only a'oproximately 
ten per cent of the total nmiber of theatres (22,000), these corpora- 
tions effectively dominated the Industry in 1930 through control of necj> 
ly all first- run rnd many of the best second-run theatres in the country. 



(*) "A History of the liovies", by Benjrmin B, Hampton, Chaoter 17, 

"Talkies" - Publis.her - Covici-Friede, 19ol. 
(**) "A History of the I.Iovies", by Benj.?jain '^. Hanroton, Page 393, 

Publisher - Covici-Friede, 1931. 
(***)"A History of the Lovies", by Benj.omin 3, Hampton, Page 392,393 
Publisher - Covici-Friedo, 1931, 



9638 



-31- 

K. GSrSRAL GSOaR APHICAL LOCATION OF AFF ILIATSD C inC'^ITS 

From r f^eOf^r.-^^-ohical str?r.crooint rt the end of 1931, Paramo-unt 
theatres v/ere located prijuaril.y in the South, I'ev/ En.^land, nxid in the 
Chicrgo district. Fox theatres v;ere uainly \70st of the 1 isGiss^ipT»i , 
dominating the West Coast, although it held i?n;3ortant tneatre holdings 
in r.ietropolitrJi Hbyj York. Loev/' s and BKO controlled importrnt thco.tres 
in I'Tew York City rnd also ovmed thertres in various Darts of the coiintry, 
Warner Brothers had a virtual laononoly in Philadelphia as a result of 
the purcha-se of the St-^nley Circuit and controlled other theatres scat- 
tered throughout the United States, 



T, 



• 



IMPACT OF TIE LEPICSSION 



The market crash of October, 1929, did not innediately involve the 
Motion Picture Industry, Major -Droducing conioniies were still engaged 
in a theatre ac qui sit ion cam"oaign, Fev; the^^.tres 'jere uired for sound 
in October of 1929, but the fact that soujid had arrived was probably the 
major factor sustaining the Industry through the trying days of '29 md 
•30. 

■TAELS I 

THEATRE S 7?I5aD FOR SOmiD BY YSAHS( * ) 

YEAR KIJl.il'SR OF THEATRES 

1929 1,000 

1950 9,350 

1931 13,730 

1932 14,805 

(*) SOURCE: Motion Pict^ore Alnanac, Edition for 1933. 

Tlie volume of business cone oy the Industry in 1930 wp.s approximate- 
ly the same as tho.t done in 1929. The increasing number of sound instal- 
lations mC. the ra-oidly ir.ioroving technique of sound production ,?j"e the 
p r b abl e caus e s • 

The contr?.st betvreen motion oicture and other industries v/as so 
startling that mrrxy investors decided that the "movies" r/ere "Depression- 
proof" and bought stock in leading motion -oicture comp,?iiies. Their fate 
m.py be rea,d in the follov;ing table, 

T;iBLS II 

WEEYOP: STOCK PRICE Il^DEISS 

TKEATSES MOTIOII PICTURE AlTD AI.iUSEl.iElITS (*) 

In relati ves. 1925 - 100 - 7 Stocks 



]AR RA3GE 



RIGH LOU 



1923 145,1 105.1 

1929 154,7 82.4 

1930 . 154.1 • 61.6 

1931 83.0 13.8 

__ 1932 2a, 4 5.7 

9638 (*) Sec footnote on follcTing page,- 



■ "32- 

As the novelty of sound T;ore off, the depression bogpn to grip the 
industry. 

Companies .that in 1929 "nxid 19o0 had shovm large "orofits v/ere "barely 
able to meet expenses in 1931, and in 1952 pjid 19oG sustained heavy 
losses* The folov/ing tables are illustrative, , 



(*) SOURCE! Materials "bearing on Motion Picture Industry - Division of 
ResooTch and Planning, SeptoE:ber 20, 1933, Page 21 - l^A Files. 

9638 






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-35- 

Produciiifj comT3r.nios wore now forced to rolirquish many theatres ac- 
quired during 1)00111 dr.ys:. , The orocediiif trblos reflect this tendency in 
the shift of total assets from oroducing to exhibiting; coimDrjiies. The 
follov/ing table is illustrative. 

TlilBL3 Y 

ESTIMATED THEATRE INT^'HEGTS OF lAJOR FILM COliS'AITIES (*) 

19o0 and 1955 



CO'-npany 



Estimated 


Peak ITunber 


1930 


1,600 


1,000 


600 





Estimated 


Pre 


sent ITiimbor 




1935 




1,200 




300 




500 




165 




90 



Pamnount Pulbix 



Fox Film 



Warner Brothers 



Loev;^ s Inc. (l.I-G-M Inc.) 



Eadio-Kci th-Ornhc-um 



200 



200 



Totals 



5,600 



2,225 



(*) Source: "Stanc^'ard Trade and Soc^jxities" published by Standard 

Statistics . Cq. ,- .Tlieatres and Motion Pictures, issue of 
FebriJiary.20, 1935,^Patie T51-4'?. • ' 

Attendance started .to. decline in 19'ol. In an' attempt to recapture 
lost patronage, admission prices were lov/ercd resixLting in a further de- 
crease in revenue. 

TABLE VI 

ESTIMATED BOX OFFICE RECEIPTS AlCD ATTEIIDA.ICE (*) 



Year 



Total Receipts 
(millions) 



Ave r p.-e Admi s s i on 
Price 



Attondcjice 


(mi 


.llions) 


3, 


,650 


3, 


,920 


3, 


,330 


2, 


,840 


2, 


,800 


3; 


,250 



1929 

1930 
1931 
1932 
1933 
1954 



1,100 
1,100 
880 
625 
560 
650 



30 
28 
24 
22 
20 
20 



(*) Source: Standard Statistics Company, Febraury 20, 1935 



9638 



20,100a/ 


15,473a/ 


4,627a/ 


23.0a/ 


19,311 


13,416 


5,895 


30.5 


18 „ 371 


13,736 


4,635 


25.2 


18,253 


14,552 


3,711 


20.3 



-36- 

The niimbcr of theatres closed increased, reaching a maxiraiun in 1933* 

TABLE VII. 
lTUI,iBEH OP kOTIOIT PICTURE THEATRES OPEII AilD CLOSED (*) 

Date Total ODon Closed Percentage Closed 



Jon. 1932a/ 

Jan. 1953~ 

Jan. 1934 

Jan. 1935 



(*) SouTccs: Motion Picture Almanac 
a/ Standard Statistics Co., Fehnr-.ry 20, 1935, Pa^e TK-46. 

Annua.l expenditure on new theatre construction dropped in 1933 to 
less thoXL a tenth of the 1929 figure. 

TABLE VIII 

ANl'IUAL EXPSIDITURES III TrIEATKE COiJSTRUCTIOl^^ (*) 

Year Anount 

1929 $163,559,000 

1930 97,530,000 

1931 45,000,000 

1932 17,500,000 

1933 - IhroiLgh April 1934 13,000,000 

(16 months) 

1934 - May to April 1935 20,000,000 

(11 months) 

(*) Source: Motion Picture Alnanac. 

In ail effort to make ends meet, drastic econoiMics were ordered in 
production studios. It is interesting to note, hov70vcr, that although 
cost of production in 1933 -Tas reduced 35 loer cent from the 1929 figure, 
in the sane period totol compensation paid by the studios in wages and 
salaries v/as decreased only 16 per cent. 



9638 



-37- 



TABLE IX 



COST OF PnODUCTIOW AND WAGES AITD SALARISS PAID IN (*) 
PI^ODUCTION, 1929 and 1953 



)ollars 



Cost 01 Production 



1929 
184,102,000 



193C 



119, 343 J 000 



Wages 



24,860,000 



18,395,000 



Salaries 



60,168,000 



52,949,000 



Total ComTDonsation 



85,028,000 



71,343,000 



(*) Source: Department of Commerce - Census of Manufactures, 1955. 



9638 



-38- 
GHAPTEHIII 
HISTO-IY 0? THE CODH PliJHIOD 



A - PHT-CCDE 



TTxien the National Industrial Recovei7/ Act v/as si<?^ned ty the Presi- 
dent on Jiine 16, 1933, nany industries hastened to take advantage of its 
provisions "by suoraitting codes. These proposed codes v/ere usually spon- 
sored l3y trade or industrial associations. The Motion Picture Industry 
proved no exception. ' 

During the months of Jun&, July and August, 1933, more than 40 pro- 
posals regarding codes rrere submitted to the Administration oy various 
associations within this industry. The multiplicity of vie^s expressed 
in these proposals made three things apparent: ,(l) That no one trade 
association of group could he considered adequately representative of 
the industry as a whole, or even of any one "branch thereof; (2) Tha.t no 
code for the Motion Picture Industry?- v/ould he likelj?- to succeed unless a 
code vertical in scope could he achieved covering production, distribu- 
tion, and exhibition; and (3) That only by such means as conference and 
concession could the Administration hope to unify within any single, in- 
clusive code the apparently irreconcilable proposals of the different 
branches of this Industry, 

t 

1, COEE POiUvIULATING COi.BIITTESS 

For these reasons, Sol A. Rosenblatt, appointed Deputy Administra- 
tor in charge of Amusement Industry codes by the Administrator, General 
Hugh S, Johnson, called a meeting of prominent members of the Motion 
Picture Industry on August 8, 1933, at the meeting hall of the Associa- 
tion of the Bar of the City of New York for the purpose of aiding the 
Industry to nnme committees that would be truly representative of the 
various interests within each division. 

Three committees were named, one each for producers, distributors, 
and exhibitors, Charles L. O'Reilly, President of the Theatre Owners 
Chojnber of Commerce of New York City was appointed Coordinator for the 
Exhibitors Committee, Because the economic interests of producers and 
distributors are often identical, a single Coordinator, Sidney R, Kent, 
President of the Fox Film Corporation, was appointed to head these other 
two Committees, (*) 

The Producers and Distributors committes working as a group, and 
the Exhibitors Coiiunittee, during the next two weeks formulated, ex- 
changed, end. discussed various code proposals. On August 23, 1933, the 
Exhibitor group and the Producer-Distributor group each submitted a. set 
of proposals for a code to the National Recovery Administration, 

(*) The names of the members of these committees together with their 
coraiDajiy or group affiliations may be found on Pages 2-3, Report of 
the Deputy Administrator on the Proposed Code of Fair Competition 
for the Motion Picture Industry, November 26, 1933, Files of 
National Recovery Administration, 

9638 



2, PUBLIC HEARINGS ON CODE P^.QPOSALS 

PuDlic hearings on these code proposals v/ere held in the large 
auditoriiim of the United States ChanlDer of Commerce Building, T7ashing~ 
ton, Dt C,, on Septemlier 12, 13, and 14, 1933. 

Many controversial subjects vere thoroughly discussed at the hear- 
ing. Representatives of producers, distritutors, exhibitors, affiliated 
and unaffiliated interests, labor, the public, social and welfare 
groups, and other interested parties were heard. The positions of all 
groups concerned were adequa.tely presented, Tyto hundred and six (206) 
witnesses spoke or presented briefs, 

3, POST-HEAHINa CONFESEITCES 

Despite the progress made at the hearing, many problems remained 
unsolved, ITeeks of conferences v/ere held between representatives of 
disagreeing factions under the guidance of the Administration, As a 
result of these conferences, four revisions of the first drai't of the 
proposed code were made. The last of these was approved oy the Presi- 
dent on November 27, 1933, and became effective as the Code of Fair Con- 
petition for the I^otion Picture Industry on December 7, 1933. 

Daring the post-hearing conferences, a group of independent exhibi- 
tors representing the Allied States Association of Motion- Picture Exhi- 
bitors under the leadership of their general counsel, Abram F, iiyers, 
a former Federal Trade Commissioner, quit the conferences alleging that 
they were unable to secure a fair deal. At a meeting of the Allied As- 
sociation in Chicago on October 24, 1933, a resolution was pa.ssed char^ 
ing the Deputy Administrator with bias and prejudice, and further char^ 
ing that the proposed Code was prejudiced to the interests of the inde- 
pendent exhibitor. The Resolutions Committee of the Association was 
called to TTashington by General Johnson to eirplain their charges. The 
charges were referred to Colonel R. T7, Lea, Assistant Administrator for 
Industry, v;ho after investigation declared them to be vrholly unfounded, 

4, APPROVALS OF PROPOSED CODE 

■ Even before Presidential approval of the Code, assents were re- 
ceived by the Adi.iinistrator from all the more important producers and 
distributors; from the Motion Picture Theatre O'^ners of America, an 
important e:±Libitor's organization; • from the more important theatre 
circuits; and from all important labor organizations in the industry. 

In addition to the a.bove, some 9,039 written assents to the Code 
were filed with the Code Authority shortly after a;oproval of the Code, 
Of these assents, 8,950 represented theatres, 60 represented distribu- 
tors coverir^ 31 exchange territories, and 29 represented producers. Of 
the assents received from theatres, 74^ xiere filed by independents, (*) 

(*) Reply of Sol A. Rosenblatt to the Report of The National Recovery 
Review (Darrow) Board, ITEA. Files, 



9538 



3 - THE APPHOVED CODE OF 7AIII COI.gETITIO^T 

The Code as sp )roved vas .necessarily a long and complex instrument 
since it v/as designed to cover production, distrilDution and exhilDition 
of motion pictures, as veil as vaudeville and other stage presentation 
in connection with exhibition, A iDrief analysis of the contents of the 
Code follov;s, 

1. BRIEF Al\rALYSIS OF THE CONTENTS OF Tip] APPROVED CODE 

. ^ The Code was divided into nine articles as follov;s: 

Art, I, - Definitions of terms used in the Codes 

Art. II, ~ Constitution and duties of the Code Authority 

Art, III, - Manda.tory lahor provisions 

Art, ■ IV, ~ Lahor provisions 

Art, V, - Trade Practice provisions 

Art, VI, - Constitution and duties of local agencies of the Code 

Authority .-,- 

Art, VII, - Pledge of industry to maintain and uphold moral 

standards 

Art, VIII, - Exclusion of suh- standard width and amateur motion 

pictures from provisions of the Code and miscellejieous 
provisions 

Art, IX, ~ Manda.tory and amending provisions, 

( a) Definitions 

Terms such as "producer," "exhilDitor," "distributor," "employee," 
"clearance," "non- theatrical account," "affiliated exhibitor," "unaf- 
filiated exhibitor," "associate producer," and other trade terms used 
in the Code are defined in Article I, 

( b) Code .Authorit:/- 

The Code Authority?- consisted of five members representing affili- 
ated interests, five members representing unaffiliated interests, three 
representatives of the Administration without vote, and labor representa- 
tives as required. 

The industry representa-tives were named in the Code, This unusual 
procedure v/as considered necessary to prevent delay in beginning the 
administration of the Code due to the unorganized state, of the industry. 



9638 



-41- 

( c) Laljor Provisions 

Article III 'of the Code contained the labor provisions made raanda*- 
torjr "by Section 7(a) of the National Industrial Recover^/ Act, 

Article IV contained all other labor provisions. This Article \7as 
divided into Division A, Division B, Division C, Part 1, and Division 
C, Part 2, dealing r/ith l&l)or in production, distributioli, exhibition, 
and vaudeville and presentation respectively, 

1, Production:- A general basic wage minimum of 40 cents per hour, 
and a. ma:^cimum schedule of 40 hou.rs per week for "white collar" labor and 
36 hours per week for other labor was set by the Code, In addition to 
basic standards, minimum v/age requirements for many types of skilled 

and ser.ii'-'skilled labor were specified. In general, these represented aji 
increase in wage rates of approximately fifteen (l5) per cent. Provi- 
sions to safeguard the rights of talent and "extra player" groups were 
included. 

An over-riding clause was inserted providing that whereever la.bor 
agreements previously in existence specified wage rates or schedules of 
hours more favorable to labor than those in the Code, such rates and 
schedules should supersede those in the Code, 

2, Distribution:- The wage and hour requirements for the distribu- 
tion branch of the industry were similar to those contained in the 
President's Reemployment Agreement, 

3, Exhibition:- The Code provided that theatre employees in towns 
of less than 15,000 population should receive an increase in wage rates 
of not less than 20 per cent, provided such increase did not require a 
wage ra.te over 25 cents per hour, For skilled labor in towns of greater 
population, v/age rates ranged from 25 to 35 cents per hour. Maximum 
hours were set at 40 per week. 

It was further provided that if an American Federation of Labor 
union wage scale for bill-posters, carpenters, electrical-workers, en»* 
gineers, firemen, raotion-pictui-e-raachine-operators, oilers, painters, 
s ta,ge«hands , wardrobe-attendants, or other ' skilled mechanics and arti- 
sans was in effect anywhere in a given, locality, the A, F, of L# wage 
scale should be used as the standard for determining the wage scale for 
all emplo3''ees with like duties in comparable theatres in that locality. 
In carefully chosen phraseology, provision was made for the arbitration 
of disputes arising under this clause. These provisions of the Code and 
their application are discussed in Chapter V, Sub-Sections 4 and 5 of 
Section A -* Exhibition, 

An important agreement was included in the Code specifying that 
employers would not lock out employees and that employees would not 
strike pending the arbitration of any such dispute, 

4, Vau6.eville and Presentation:- A minimum wage from $25 to $40 
per v;eek was set for professional employees. Maximum hours were fixed 
at 40 per week except where regulation v/as obviously impossible. Care- 
ful provision for regula,tion of traveling companies was included, 

9638 



- 42 - 

5. General: - Enploynent of any individual under sixteen (16) years 
of age was for'bidc-en throu^rhcut the Industry, except for child actors in 
production where State regulation was already adequn,te. 

Labor in general 'vas \7ell satisfied with the Motion Picture Code, 
This was one of the very few codes signed and as'^ented to at the time of 
its promulgation "by accredited representatives of every important labor 
group involved, 

(d) Trade Practice Provisions, 

There vrere six general t.yoes of trade practice provisions in the 
Code. These are considered in salient detail in Chaptt^r IV in sane 50 
subdivisions. For iiinediate comprehension of the Code as a, whole, how- 
ever, it is necessary to present at this Doint a general summary of these 
trade practices provisions. One set of Code provisions was designed to 
cover the industry in general. Three sets governed trade practices in- • 
ternally in each of the three divisions of the industry''. Two sets re- 
lated to trade practices between producers and distributors and between 
distributors and exnibitors. The nore i mportant trade practices are 
named in the following: 

1, General: - Defamation of competitors by false imputation of 
unethical or illegal conduct; publishing threats of legal proceedings 
not in good faith; securing confidential information regarding a competi- 
tor's business by unfair means; ppying sums beyond a fair value for 
personal services resulting in destructive coiipetition, - these were 
declared to be unfair trade practices. The last provision was staz^^ed in 
the President's Order of A-proval and never became effective, 

2, Producers: - Conspiracy'- to prevent renting of studio facilities 
by "a responsible producer; nepotism; and enticement of a com"oetitor' s 
employees r'ere declared to be unfair trade practices, 

3, Producers-Distributors: - Permitting exhibition of a dramatic 
or dramatic-musical work before the date specified in a contract, and 

.creating discord between a distributor and a producer with the effect 
of disturbing existing relations or, pending negotiations were declared 
to be unfair trade practices, 

'4, Distributors: - Intimidation of exhibitors b^/ threats to build 
competing theatres; substitution of one feature for another designated 
in a contract; forcing exhibitors to contract for an excessive number 
of short subjects as a condition of making a contract for feature pic- 
tures; transfer of assets to ayoid fulfillment of a contract; unfairly 
designating plftgr-dates, . were declared to be unfair trade practices, 

5, Distributors-Exhibitors: - Failure to arbitrate disputes, 
attempts to induce the breach of an existing contract, and unauthorized 
disclosure of confidential information were declared to be unfair trade 
practices. In addition, it was stipulated that where an exhibitor had 
booked pictures in a block, and the average license fee was not more than 
$250, the exhibitor should be given the privilege of cancelling ten (lO) 
per cent of the pictures under contract without having to pa^' for the 
cancelled pictures, 

9638 



i 



-43- 

6, Exhibitors: - Cver-'biiying pictures v/itli the effect of depriving 
a conpetitor of product; lor/ering admission prices "by f^^iving rebates in 
the forn oi lotteries; coupons; t-7o-for-one adraissions, or other de- 
vices; transfer of assets to avoid coi.ipletion of a contract; ad.vertising 
a feature previous to ccripletion of a prior run, and 'interference \7ith 
lease negotiations v;ere declared, to oe unfair trade practices, ^ere 75 
per cent of the unaffiliated exhilDitors and 75 per cent of the 8.f filis.ted. 
exhibitors in a competitive territory e^greed that the practice of "give 
a\7a3^s" or premiums v/as unfair, the practice v;as prohibited "by the Code, 

( e) Local Code Administration Agencies 

The prolDlem of super,vising equitahle clearance allotments - that is, 
the time-lap tet^.-een a first shoeing of a picture and its permitted. 
second and. su'o.sequent sho-./ing in other theatres - was delegated to 
"Clearance and Zoning Eoards" '.Thich :7er9 set up in each exchange 
territory. 

An appeal could "be taken to the Code Authority "by any party from 
any decision of a local C-rievonce Board- or local Clearance and Zoning 
Board, These "boa.rds "became extraordinary Courts of Industry *- a. new de- 
parture in indoistrial regulation. The activities of these "boards a.nd 
their influence are discusseci in Chapter IV, Section B, Clearance andi 
Zoning, 

2. SCOPE OE TIS CODE 

As defined in the Code, the Motion Picture Industry included "with- 
out limitation, the production, d.istribution, or exhi"bition of motion 
pictures and all activities nori.iall^'- relatedi thereto, except as specific- 
ally excepted from the operation of the Code,'"(*) 

The exception mentioned, stated, that nothing in the Code should "be 
deemed, to apply to "the production, distri'bution, or exhibition of motion 
pictures on film of recognized, suhrtandard ^-ddths, or to slide films, or 
to non— theatrical motion pictures designed primarily for educational, 
scientific, industrial, commercial, ad.vertising, selling, or other non- 
theatrical purpose, or to television of motion pictures, provid.ed that 
the commercial produc.tion, , distri'bution, or exhroition of such films 
shall be su'bject to invest igrt ion "by the Code Authority to determine 
whether such produ.ction, distri'bution, or exhi"bition of such films is 
unfr.ir competition to an esta"blished motion-picture theatre or thea,tres. 
If found to "be -"onfair competition, the Cod.e Authority shall promulgc.te 
rules and regulations governing such unfair competition, " (**') 

3, SUBJECTS CONSIDEHED AT ISAP.IITGS BUT OMITTED FROM APPROVED CODE 

A num"ber of points were "brought up at the public hearing and. at the 
code formulation conferences which were omitted from the approved Cod-e 
when it was impossible to obtain agreement from all factions. The more 
important of these proposals sought the elimination of block-booking, 
the eliminrtion of "score" charges, the elimination of double features, 

(*) Article I, Section 1 of Approved Code, Humber 124 
(**) Article VIII, Part 3 of A^^proved Code Number 124 

9633 •■ 



-4-4- 

the re^ilation of poster exchanges, and the "right to "buy-right to sell" 
controversy. The intent of these proposals is "briefly disc-ussed in the 
following section, 

( a) E 1 ck~B ol:i ng 

It had long "been the practice in the industry for distri"butors to 
offer e:dii'bition contracts for pictures in lilochs of IC to 5C, It uas 
urged in "behalf of this practice that "block-"booking sta"bilized produc- 
tion and allov/ed rholesole selling and di3tri"bution vifn consequent sav-- 
ings in costs, Exhi"bitors, on the other hand, claimed that this method 
of selling forced them to contract for pictures that they did not wish 
to e:±Li"bit in order to get those they did. Welfare and moral purpose 
groups opposed the practice. The consumer press-ure they v/ere able to 
exert on the local exhi"bitor v^as greatly dissipated they declared r.'hen 
the exhihitcr claimed that it was necessary for him to contract at one 
and the sojne time for pictures, v/hether of the ^ype this group, approved 
or of the type then disapprovedj even "before the pictures had "been manu- 
factured. 

Blaring the formulation of the Godc, considera"ble pressure was 
"brought "by exhi"bitprs to have the practice of "bloc'i-'Dooking outlawed 
under the Code, A. .compromise was affected where"b7 the exhi"bitor who 
contracts for pictures in a "block should have the privilege of cancel- 
ling ten (lO) per cent without lis-ving to pay for them, A more complete 
study of the hlock-lDooking pro"blem nnd the ten (iC) per cent cancellation 
privilege is introduced later in this report, 

( h) D on"ble Features 

To meet the competition of larger prior-run houses, many smaller 
exhibitors resorted to the practice of showing two or more features on 
one program. First run and affiliated exiii"bitors opposed the practice. 
This viewpoint was "backed by the American Federation of Women's Clubs, 
various church groups, and a nu^aber of other social betterment societies. 
It was the desire of these groups to separate motion pictures so tha.t 
one feature alone could be shovm on a program. This they contended 
would enr.ble them to exert censorship powers by means of a. "white list" 
of approved pictures. The value of these lists was lost on a double— 
feature program; though one feature might be apDroved, the other might 
be of a type deemed by these groups to be unsuitable for juvenile or 
family trade. 

On the other hand, independent producers and distributors opposed, 
any attempts to regulate the practice; the double feature market, they 
said, wo.s necessary for their business existence. Almost 15,C0C pro- 
tests were received by the National Recovery Administration against the 
elimination of dorJble features. When it v.'as deemed impossible to obtain 
any agreement on the practice, all mention of double features was 
eliminated from the Code, 

( c) Poster Exchanges 

Distributors, in addition to their other activities, often sell 
advertising material. This has led to the formation of "poster exchanges," 

9638 



-45- 

It is C: practice among some exhibitors, on finishing rdth advertising 
material "bought from a distributor, to sell it to a coster exchange for 
resale "by the "exchange" to some subsequent exhibitor. Distri outers 
attempted to prex'-ent this practice and retain their increased revenue 
from the sale of advertising material by placing in each exhibition con- 
tract a clause stipulating that the exhibitor should 'bvi^r advertising 
material only from the distributor. 

Savings to exhibitors through the use of "poster exchanges" ^7ere 
sufficient to cause them to ignore these provisions in exhibition con- 
tracts. It wr-.s too expensive for a distributor to attempt to collect for 
these violations through the courts and besides there ^7as always the risk 
of alienating a good customer. The distributors proposed that provisions 
regulating the activities of poster exchanges be included in the Code. 
Opposition by exhibitors was vociferous and persistent. Any mention of 
poster exchanges was therefore omitted from the approved Code. 

' (d) Score Charges 

Producers pay royalties for licenses to use music and sound record- 
ing equipment. This cost is frequently passed on in the form of a "score 
charge" to the exhibitor as a p'^.rt of the license and rental fee for a 
"oicture. Exhibitors contended that this cost should be charged off by 
producers as one of the costs of production pud should not be passed on 
to the exhibitor as a separate charge. 

The claim was made that use of the "score charge" as a separate item 
allowed the distributor to discriminate betv,'een different exhibitors. 
"For example, it was charged that where an independent and an affiliated 
< theatre both paid the same license and rental fee for a picture, the in- 
dependent often was required to pay an excessive "score charge" but the 
affiliate was not required to pay. The question becomes largely academic 
when it is considered that the- fee paid by an exhibitor in order to ex- 
hibit a picture is entirely a subject of individual negotiation between 
the parties concerned, ITo mention of "'score charges" was made in the 
approved Code, 

(e) The "Right to Eu,y" - "Right to Sell" 
Controversy 

Independent exhibitors occasionally find it impossible to buy the 
product of a major company for the run they desire, 'partic"jlarly where 
they are in competition with an affiliated thea.tre, and even though they 
offer to pay a higher rental. Indej^endents contend that in these in- 
stajices the major companies try to monopolize the business by withholding 
proper product from the independent. Accordingly, a "right-to-buy" pro- 
vision was advanced "by independent exhibitors. The term became the slogan 
of the independent exlxibitors; so much so, in fact, that the legal impli- 
cations of. the term were often lost sight of. 

The major interests, on the other hand, contended that the full value 
of a film, particularly with reference to subsequent run exhibition, might 
be lost by permitting first run exhibition in an unsuitable house or with- 
out proper exploitation, advertising, and presentation; and so countered 

9638 



-46- 



with a "right-to-sell" slogan. They declc'iTGcL that regulation of this 
practice would "bo tantaino~ant to putting motion pictures in the class of 
puhlic utilities, at least as regards the distrihutor-exhihitor relation- 
ship. 

The opposing factions could come to no agreement on this subject; 
no mention of it appeared in the final approved Code, 

4. THE EXECUTIVE ORDER APPROVING THE CCi)S 

The Executive Order approving the Code of Fair Competition for the 
Motion Picture Industry was issued on i\roven"ber 27, 1933. The Code iDecame 
effective ten (10) days later, on December 7, 1933. 

(a) Conditions in the E?'ecutive Order of A^n'oroval 

There were six conditions as to approval in the President's Order. 

The first condition stipulated that because of the lonusual expedient 
of naming the members of the Code Authority in the Co^le, the Administration 
should have the right to review rjid, if necessary, to disapprove any act 
of the Code Authority or of any comi.iittee or board named by it. 

The second condition stated that if any member of the Code Authority 
failed to act in a fair, just or equitable manner, the Administration re- 
served the right to remove such person and appoint another individual in 
his place. 

The third condition stated that if, in the administration of the Code, 
it was found that any class ^^as not sufficiently represented on the Code 
Authority, the Administration should have the right to appoint further 
members from that class to the Code Authority, 

The fourth, fifth, and sixth conditions related to the suspension pen 
oending further investigation of certain provisions of the Code which 
dealt with specified types of creative workers and with excessive Holly- 
wood salaries, 

( b) Effect on the Industry 

IThen the conditions in the Executive Order of Approval became known, 
the major producers and distributors voiced general dissatisfaction and 
threatened to withdraw their support. It seemed to these members of the 
Industry that assent to the conditions mentioned would give the President 
direct control over the Motion Picture Industry, Representatives of the 
industry conferred with the President, the Administrator for the National 
Recovery Administration, the Division Administrator in charge of the Code, 
and the General Counsel of the National Recovery Ac^mini strati on. As a 
result of these conferences, the Administrator issued a nemorand-'om 
interpreting the Executive Order and the conditions of approval. (*) 



(*) Administrative Order ilumber 124-4 dated December 9, 1933, signed by 
General Hugh S. Johnson, Administrator for Industrial Recovery, 

9638 



-47- 



The interpretation "declared, that the Auninictrator did not in any 
sense consider the first three conditions in the 2::e cut ive Order of 
Approval as creating any ri^ht of appeal from the determination of the 
Code Authority to the National Recovery Ac.raiiiistrator. In other words, 
the paragraphs mentioned ^.rerc interpreted as giving the Administrator the 
right to inquire into the generrl course of cond-uct "onder the raeohanism of 
the Code rather than as. constituting him a court of review of the actions 
of the Code Authority in any individual case. 

It Wfis f-arther stated that the Adrainistrator would exercise the power 
granted in the Executive Order only in accordance v/ith the reconnendations 
of at least a majority of the voting nemhers of the entire Code Authority, 
and that any person appointed under the povrers granted '.70uld. oc selected 
in the manner provided in the Code. Acceptin.';^ this interpretation, the 
dissenting producers and distributors signified their assent to the Code. 

The dissenting le.aders of the Allied States Association of Motion 
Picture Exhibitors hailed the conditions in the E::ecutive Order as a major 
victory in their fight to secure drastic chnnges in the Code, They "bitterly 
denounce.cL. the inter;oretation in which the Adiainistrator stated he would 
exercise the po'.7er grrinted him in a limited fashion only, 

With the exceotion .of the Allied ; States Association, reaction to the 

approval of the Code "by the President "by "both emoloyers pnd em-oloyees 

throughout all "branches, of the industry was excellent, 
<•'■-. ' ■ ■ 

C. THE CODE AUTHCPJTY 

As heretofore rientioned, the ten industrj^ members of the Code Authority 
were named in the Code to prevent delay in beginning Code Administration. (*) 

1. DIVISI OI T OP ::g pPi:SEHTATICiT ON THE CODE AUTHORITY 

The Code Authority was set up on the theory that the principal division 
in the industry iras between affiliated and unaffiliated interests. Con- 
sequently, five r.iembers of the Code Authority -neve selected to represent 
affiliated producers, distributors, njid. exhibitors, and five other members 
to represent unaffiliated producers, o.istributors, and exhibitors, 

(a) Tlie S-'jyer- Seller Controversy 

Some ind.ependent exliibitors expressed dissatisfaction r^ith this di- 
vision. To then, the important line of cleavage in the industry vas be- 
tween buyers of film and sellers of film. They further considered tha,t 
an affiliated eichibitor properly belonged in the seller class. 

It must be pointed out that this l-,st contention holds true onl.y a 
part of the time; competition for product does exist bet^~een affiliated 
theatres. Few the-^.tres caji be operated properly using only one company's 
product. Thus an affiliated theatre, althoug-i part of the time a seller 
through its connection 'vith a distributor, nust be considered a buyer in 

(*) Article II, Section 2 of the ap.oroved "Code, 

9638 



-48- 



its negotiations for product with other companies. The independent theatre 
maintains that this tendency for the affiliated exhibitor to "be a seller, 
only PS regards his own comp^iiy's product, and a b-jyer the rest of the 
time is pirtly or ^.vholly negn.ted through master contracts and unwritten 
•reciprocal agreen'onts bot-.7een the major corapnnies. 

Based wholly upon the independent exhibitor's definition of '-'hat 
constitutes a seller of film, the Code Authority consisted of eight 
sellers and two buyers. 

This question of division of representation. arose several, times dur- 
ing the period of Code Administration, Independent exhibitor witnesses 
appeared before the Darrow Board in March and April, 1S34, pjid contended 
that their representation on. the Code Authority should be increased. The 
spjne- contention was advanced before the Sen-ate Finance Committee in April, 
1935, during the Senate investigation of the Ifet i c nal, E^cov^ ry Administration, 

The most active group in this contention was the same Allied States 
Association of Motion Picture E:diibitors mentioned as opposing the pro- 
posed Code 'during the post-Hearing conferences,. Not all independents 
shared the Allied States view. Other independent exhibitors approved of 
the method of com^oromise and concession that had been adopted. The 
following is quoted from the February 17, 1934, issue of "Harrison's 
Reports," and independent exhibitor's trade paper: 

"I say..' just as I have said to every exhibitor, 

that we 'Tent into this Code proposition without a shirt 
and came out of it with something - with 25 reforms. 
One of the reforms is costing the producers millions of 
dollars - the 10 per cent c?incellation provision; and 
correspondingly it saves the Exhibitors millions of 
dollars." 

2. LABOR REPRESEITTATIVES 

Provision was made in the Code that whenever any q-ue stion, affecting 
the v^elfare of any class of employee 'vas being considered by the Code 
Authority, a member of such class of employee should sit with and become 
for that purpose a member of the Code Authority with the power to vote. 
These labor members were to be selected by the Administration from 
nominations made 'oy the class affected. Only t'-o such selections were 
made, (*) This procedure was seldom used since the Code Authority did 
not often consider labor conditions. 

At the time of the Supreme 'Court's Schechter decision, the Code 
Authority was considering a plan for the handling of labor problems 
directly by the Code Authority upon authorization by the Administration 
and to that end was seeking the appointment of labor representatives for 
each employee class. The procedure specified was satisfactory where 



(*) Administrative Order IJumber 124-2 dated November 27, 1933, signed by 
Hugh S. Johnson, Administrator for Industrial Recovery, appointing 
Miss Marie Dressier and i.lr, Eddie Cantor to represent the actor class 
of employee before the Code Authority. 

9638 



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employees verc unionized, but present-jd difficulties '/here employees were 
unorganized, 

3. .^Dl/linSTEATICN I.DEl.fflEP.S 

In ri.ddition to industry mid labor members on the Code Authority, 
provision I'as made in the Code tho.t the Administr-^tion should have the 
right to appoint three -nernbers, without vote, to act as a liaison between 
the Code Authority and the Hational Recovery Adninistration, Dr. A, 
Lrwrence Lowell of Krvrvnrd University was offered an auoointment on 
■Tovember 27, l^'3o, but refused the offer, (*) On December 6, 1933, Sol 
A. Rosenblatt vjpis appointed Adi-aini strati on member on the Code Authority 
(**) and on May 17, 1934, Claire Boothe 3rokaw received a similar appoint- 
ment. (***) On March 1, 1935, Willia.m P, Farnsworth, then Deputy Admin- 
istrator, Amusements Divisions v.'as cap'oointed as the t-hird Adm.ini strati on 
member. (****) 

4. ALTSRIUTES 

The Code provided for ap.oointment by the Code Authority, with the 
approval of the Administration, of permanent alternates to -'^ct in the 
place of regular members in- case of absence, resignation, or ineligibility. 

The Code Authority o-lso allowed tem^or^ry alternates to attent meet- 
ings "^nd vote in place of members or perm.-^nent alternates. These teimporary 
alternates were not approved by the Adm.ini stra.tionc 

The use ■ of temporary alternates was abused in ^administration of the 
Code, At many Code Authority meetings not nore thmi'one or two regular 
members or permanent alternates were present. The others were temporary 
alternates, usually subordin'^te members of the legnj. departments of the 
various companies. 

According to a letter from Ilathan Yauins, independent exhibitor 
representative on the Code Authority, to'Abr;'ra F, Myers, a'hen questions 
prose that recuired a sacrifice by any or all of the major companies, the 
subordinate was inclined to vote to protect his company's interest, where- 



(*) Correspondence relative to this ma.y be found quoted pages 
1290-1293 inclusive. Hearings before Senate Committee on 
Finance, Investigation of ITBA pursuant to S, Res. 79, 74th 
Congress, 1st Session, 

(**) Adm.ini st rat ive Order Muraber 124~3, signed by Mugh S, Johnson, 
Administrator for Industrial Recovery. 

(***) Adm.ini strat ive Order Fuinber 124-17, signed by Hugh S. Johnson, 
.Administrator for Industrial' Recovery, 

(****) Administrative Order I'-'umber 124-48, signed by Sol, A. 

Rosenblatt, Division Adm.ini strator. Amusements Division. 



9638 



►"oO- 



as the member or ;oGrnianent alternate '"ris of sofficient authority in his 
o\'m comp.anv to coTniiit the company to a s-^crifice for' the benefit of the 
Industry. (*) 

Abuse might have been lorevented by refusing a vote to temporary 
alternates and requiring that notions be passed by a majority of voting 
members present, thus nalcing it to the interest of each party to insure 
proper representation either by a member or by a permanent alternate at 
each meeting, . _ 

5. RULES CF PROCEDURE 

By-laws adopted by the Code Authority ^7ere aporoved by the National 
Recovery Administration on September 28, 1934, (**) It was- stipulated in 
these by-laws that the Code Authority operate under Gushing' s "Rules of 
Parliamentary Procedure, " ' 

To prevent the possibility of a group not being represented when a 
vote was taken, the rule was adopted that to pass any motion or proposal 
a majority of the voting m.embers of the Code Authority (at least six 
affirmative v.otes) would be required, rather than a majority of whatever 
were present at any meeting. Under this ruling, absence or refusal to 
vote was equivalent to a nega.tive vote. This provided a convenient device 
when«a member of the Code Authority did not wish to go on record as 
opposing a motion but still preferred that the motion be denied, 

L. ASSENTS TO THE COHE 

It was stipulrted in the Code that no distributor or exhibitor should 
be privileged to file By)y complaint under the Code unless he. had previously 
filed a statement of compliance with and assent to the Code with the Code 
Authority, (***) Accordingly, immediately upon beginning administration 
of the Code, the Code Authority fornijlated and published an approved form 
of assent. 

1. OBJECTIONS TO FCRl.I CF ASSENT 

The required form of assent was objected to strenuously by leaders of 
the Allied States Association of Totion Picture Exhibitors, It was alleged 
that any exhibitor executing the required form of assent would thereby 
V7aive the right to protest under general or statutory law against any 
arbitrary, oppressive, or injurious action by the Code Authority, and 
further, that the exhibitor would surrender his rights to seek amendment 



(*) Quoted page 1287, Hearings before Senate Committee on Finance, 
Investigation of >!R A pursuant to' S, Res, 79, 74th Congress, 1st 
Session, 

(**) Administrntive Order Nijxiber 124-51, signed by Sol A. Rosenblatt, 
Division Administra-tor, Amusements Division, 

(***) Article VI, P.i-rt '2^ Section 8 of the approved Code, 



9638 



•51- 



or modification of the Code. Abrara ?, JyerSs general coimsel of Allied 
States, advised the men'berS'Of his organization! to execute the assent 
with reservations, the form of TThich he supplied, and of which the follow- 
ing are examples: 

1. "1/7/e, , execute and subscrihe to the Code 

of Fair Competition for the Motion Picture Industry, 
approved by the President by Executive Order dated 
November 27, 1933, under protest, such execution and 
subscription having been imposed as a condition pre-, 
cedent to the right to file complaints with and de- 
fend my/our interests before the Code Authority and 

the several boards established by said Code," 

2. "l/We execute the Code on the following interpre- 
tations, understandings, and conditions: 

1. Ivly/Our action is not to be construed as an 
agreement to arbitrate controversies relating to 
clearance and/or zoning before Clearance and Zon- 
ing Boards or the Code Authority as constituted in 
said Code, 

2. The above-mentioned Executive Order of the 
President is to be carried out according to its 
plain meaning and is not to be interpreted so as 
■to destroy the protection against arbitrary or 

oppressive action afforded thereby, 

3, This does not constitute a waiver of any rights 
now enjoyed under any law, decision, judgment, or 
decree, and does not preclude the undersigned from 
seeking additions to or modifications of said Code, 
or bar me/us from taking any legal action necessary 
to protect my/our rights or interests, 

4, l/We agree to comply with all the require- 
ments of the National Industrial Recovery Act," 

The Code Authority refused to accept such qualified assents, even 
though in many cases checks contributing to Code Authority expenses were 
attached* Checks and qualified assents ?mre returned to the senders, 

2. INTEPJ'RETATION OF FOM OF ASSENT 

Failing to move the Code Authority or the National Recovery Admin- 
istration, a suit was filed against the Code Authority in a Federal 
District Court by the Congress Theatre, Newark, New Jersey, a member of 
the Allied States organization, claiming that the requirements of assent 
without qualification was illegal. In the alternative, the complainant 
requested that the provisions of the Code itself be declared unconsti- 
tutional. 



9638 



-52- 



An interiDretation (*) Tvith regard .to assents was shortly thereafter 
issued "by the National Recovery Ad:.iiniBtrr:tion, The Congress Theatre 
suit was then dropped. The interpretation declared: 

!• No person '.vaivcd their rights under general or 
statutory Isr' to orotcet against anj'' 073 ^res Give-, in- 
j-oriouE, or unroasonahle action by aiiy administrative 
official or agency under the Motion Picture Code, 

2» No Tjerson -^.ssenting to the Code was precluded from 
seekiUi^T amendment or nodifi cation of the Code, 

3, Members of the indastr.y not assenting to the Code 
could still p-^rtahe of benefits provided by the Code, 
but by doing so became liable to assessnent to help 
defraj'' expenses of administering the Code, 

4, While assent vn.s necessary to enable a person to 
file a complaint vrith the agencies of the Code, such 
assent. was not necessary to interpose a defense in any 
matter affecting such persons interests, 

5, Tiie above applied to all assents, whether executed 
in the past or the future, " 

At a later date, a suit was filed by the Independent Theatre O^vners 
Association of New York in the Federal Court, Southern District of New 
York, attemiDting to comoel the local boards to con£:ider complaints filed 
by members of the Association, even though such members had not assented 
to the Code or contributed to\7ards. Code exoenscs. The suit was denied, 
the Court holding that complainants '7u re. in aji inconsistent position, 
attempting to benefit under the Code without contributing to its upkeep, 

3. EXTENSIONS 02 TIME LIMIT IN V/HICH TO FILE ASSENTS 

To prevent delay in the filing of assents, a provision was contained 
in the Code requiring assents to be executed within forty-five (45) days 
rfter signature of the Code by the President, or within forty-five (45) 
days after entering into the Motion Picture Industry, (**) 

It nas found that many members of the industry, particularly in the 
exhibition branch, did not wish to sign assents and so make themselves 
liable for assessments until they had a ch^-^jice to see how the Code would 
work out. To t.ake care of these delinquents, the time limit in which 
assents could be filed was extended four times, the last extension being 
good until August 15, 1934, (***) 

(*) Administrative Order Nujabcr 124-3', February 21, 1934, signed by 
Hugh S, Johnson, A5.ministrator for Industrial Reccvory, 

(*■*) Article VI, Part 2, Section 8 of the approved Code, 

(***) Administrative Orders N-.traber 124-6, January 8, 1934, Number 124-7, 
JciJiuary 29, 1934, Number 124-10, March 3, 1934, Number 124-22, 
July 3, 1954, all signed by Hugh S. Johnson, Administrator for 
Industrial Recovery, 

9638 



•53- 



4, ELIMINATIOi: OF TIlvIE III.IIT IN V/HICH TO FILE ASS2IITS . 

After the various eottensions, it appeared that the only future effect 
to "be expected from the time limit provision in the Code would he to keep 
persons who otherwise might wish to do so from filing assents to the Code, 
For this reason the tine limit in nhich to file assents was removed on 
October 8s 1934, "by amendment of the Code. (*) 

E. LOOAL AGENCIES OF THE CODE AUTHORITY 

Clearance and Zoning Boards and rrricvance Boards were -set up in each 
of thirty-one (31) key exchange cities to act as local agencies of the 
Code Authority and assist in the adraini'stration of trade practices affect- 
ing the exlii"bition and distrihution "branches of tiie industry. The dis- 
cussion that now follows is a "brief review of the organization, the duties 
and the accomplishments of these "bCards, Extended consideration of pro"b- 
lems inherent in the industry as handled hy these "boards is included in 
Chapter IV of this study. 

1, SELECTION OF IvEl.BERS TO LOGilL BOARDS 

As soon as the Code became effective on Decera"ber 7", 1933, the Code 
Authority "began to name members to the Clearance and Zoning Boards and the 
Grievance Boards, 

It was necessary to name 217 mem"bers to the local Clearance and Zon- 
ing Boards and one hundrisd and fifty-five (155) to the local G-rievance 
Boards, Of the three hundred and seventy-two (372) appointments, three 
hundred and seventy (370) were "by unanimous vote of the Code Authority, 

There w^.s disagreement on two members named to represent independent 
exhibitors on local G-rlevance Boards, one in Massachusetts and one in 
Texas, Nathan Tamins, independent exhibitor .representative on the Code 
Authority, filed a minority brief on these two cases, (**) 

2, CLEARAi-ICE AND ZONING BOARDS '..,,. 

(a) Dutie s 

Local Clearance and Zoning Boards, as set up in each of thirty-one 
(3l) "key" exchange cities, vrere enpovrered to set up schedules- of clearance 
and zoning between theatres at the beginning of each year to apply through 
the ensuing selling season, such sciaedules to apply to all fheatres in the 
exchange territory covered. After these schedules were set up' any ex- 
hibitor could complain of an alleged inequity and if he failed to receive 

(*) Amendment N-.imber-3, approved by Administrative Order Number 124-34, 
signed by^CA, Lynch, Administrative Officer, for the National In- 
dustriol Recovery Board, 

(**) Investigation of National Recovery Administration by Senate Com- 
mittee on Finance pursuant to Senate Resolution Number 79, 74th 
Congress, First Session, Pages 1284-6 incl, 

9638 



-54- 



relief from the local Board, he coiild appeal to the Code Authority. 

Clearance is that unit of time which hy agreement must elapse 
"between a showing of a picture and any subsequent exhibition of the 
picture in a competitive territory. Zoning refers to the area in which 
theatres may he considered to be competitive, A detailed discussion of 
these practices r.s such appears^ in Chapter IV of this report, 

(b) Membership 

Eiich Clearance and Zoning Board consisted of seven members. Two 
represented distributors, one affiliated with theatres and one unaffiliated 
with theatres. Two represented first-run theatres, one affiliated with 
a distributor and one unaffiliated. Two represented sub sequent- riin 
unaffiliated "theatres. One member T7as to be an impartial representative 
of the Code Authority, This member was to have absolutely no affiliation 
with any braJich of the industry and was to vote only in cases of a tie. 
Men and women distinguished, in their respective regions, for public 
service were asked to give their time; selection was careful and slpw. 
There was no other difficulty in selecting these members. It is note- 
worthy in KEA e;qperience that, through Clearance and Zoning Boards and 
Grievance Boards, the general public actually participated in the manage- 
ment of an industrye •■ . ■ 

( c ) Delay in Submission of Schedules , 

It was proposed to have schedules for each territory finished by 
January 1, 1933. In practice, however, the membership of the local boards 
had not been agreed upon by this date. Accordingly, the National Recovery 
Administration by Administrative Order permitted the Code Authority to fix 
a later date for the suViission of schedules, (*) 

Other difficulties immediately arose. It was found practically 
impossible to draw up Echedules satisfactory to all parties. In many 
places, previous customs under \7hich clearances had been granted were 
claimed to be inequitable, yet any attempt to correct the inequities of 
the situation resulted in a number of protests. Any theatre whose clear- 
ance was changed or any theatre in competition with such a theatre be- 
came a potential protester. 

There was at first no standard set of principles to govern the drafting 
of clearance and zoning schedules. As a result, plans from different 
exchange centers differed materially in principle,- Finally the Code 
Authority released a set of rules to be followed by the local Clearance 
and Zoning Boards in formulating schedules, (**) 



(*) Administrative Order "..lumber 124-5, December 28, 1933, signed by 
Hugh S, Johnson, Administrator for Industrial Recovery, 

(**) "Principles of Clearance" Code Authority Release September 13, 1934, 
in National Recovery Administration files - Motion Picture Industry • 
Clearance and 'Zoning Schedules, 

9638 



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(d) Ainendnent to Pfrmit Cons idera tion of 
I ndi vi dug.l Cle a r ance_ Ine^jjAJLilJS. 

The time in v;hich schedules vere to l^e filed was extended from time 
to time "by resolution of the Code Authority, finally nnjning'July 1, 1934, 
as the limit date. During this tiiie, little could "be done Decause 
schedules were not approved to eradicate existing cleara.nce evils. The 
Code Authority therefore proposed an amendment to the Code to permit the 
local clearance and Zoning Boards to hear coi.rplo.ints against existing 
inequities whether a schedule for the territory involved had "been approved 
or- not,- This amendment was approTed by tlie National Recovery Administra- 
tion on June 13, 19345. and heccune effective July 3, 1954, (*) From that 
time on, administration of the clearance and zoning provisions moved in. 
comparatively smooth waters. Pressure on the local Boards to hastily 
formulate schedules was removed. In f/xt, the new way to deal with 
clearance inequities worked so well that it wrs suggested that formula- 
tion of schedules be ahandonedo 

3. GRIEYAUCE BOARDS .' . 

( a) Daties 

The Code authorized local Grievance Boards to act as the local 
agencies of the Code Authority in the administration of trade practice 
provisions of the. Code for fne distribution c'ind exhibition branches of 
thue industry other than those provisions covered by the local Clearance 
and Zoning Boards, (**) The principal rjroblems comprised (l) overbuy- 
ing of film to stifle competition; (2) lowering of admission prices by 
means of lotteries and the like; (3) prior advertising; and (4) com- 
.plaints a.rising under the ten (l>'^) per cent cancellation clause on pic- 
tures bought in block, 

(b) Membership 

Local Grievance Boards were set . up m each of thirty-one (31) key 
exchange cities and had jurisdiction im the appropriate exchange territory. 
Each board consisted of five members, ' Two were distributors, one affil- 
iated and one unaffiliated. Two were exhibitors, one afiilirted and one 
unaffiliated. The fifth was a member of the public to serve as an inprr- 
tial member and. to represent the Code Authority, He could have no connec- 
tion with an3/ branch of the industry and could vote only in case of a tie, 

A repetition of the buyer- seller controversy that arose over the 
division of representation. on the Code Authority was staged with regard to 
the local Grievance Boards, The independent exhibitors defined an affil- 
iated exhibitor as a seller, of film, and on that base asserted that the 
local Grievance Boards were weighted three to one in favor of the seller. 
This was allegation made by independent exhibitor witnesses before the 



'(*) Amendment I'^umber' 1, approved by Administrative Order Number 124-20 
signed by G« A, Lynch, Administrative Officer, by authority of the 
National Industrial Recovery Board, 

(**) Article VI, Part 2 of a.pproved Code, Iramber 124, 

QCZQ 



n: 



•56- 



Darrow Board sessions in ITasiiington in 1934, and repeated before the 
Senate Finance Committee in its investigation of the Hational Recovery- 
Administration in April, 1935o The dire eventualities prophesied 
apparently did not -naterialiseo No situation was "brought to the atten- 
tion of the National Recovery Administration where it was deemed advis- 
able to over-rule the decision of a local Grievance Board, nor any' de- 
cision of the Code Authority in the case of an appeal from a local 

Grievance Boardo- ■ . ' ./ .\ 

-^ri.:CiI •^- 

(c) Authorization as Loca l Indu st rial Adjastment • '.. ..^•'•■'^'^^ ''-'. .. 
Agencies. .;ii ■• -^ 

. .• -, .. -■ . •■ ' 

To conform to the procedure reqaired by the National Recovery Ad- 
ministration, the Code Authority on April 6, 1954, appointed a Trade 
Practice Complaints Committee composed of Charles 0. O'Reilly, and 
J# Robert Rubin, members vfith votej and Sol A. Rosenblatt, member with- 
out vote but with veto poner subject to review by the National Recovery 
Administration. This committee was authorized to set up the local 
Grievance Boards as local industrial adjustment agencies to handle all 
complaints excepting production, vaudeville, presentation and labor com- 
plaints. Authorization to handle trade practice complaints in the first 
instance was granted on April 17, 1934, (*) 

(d) Analysis of Cases Considered ■ ' 

According to a report received from the Code Authority by the 
National Recovery Administration the local Grievance Boards heard 1,576 
complaints during the period of their operation. Of these, 400 or 25,4 
per cent were appealed to the Code Authority, • ■ 

The ira.tional Recovery Administration received and has on file 291 
of the decisions handed down by the Code Authority on appeals from local 
Grievance Boards' rulingSo An analysis of these cases shows that the 
Code Authority affirmed the local Board decisions 83 per cent of the time. 
Of these appeals, 51o7 per cent dealt with Bank Night, Race Night, Screen© 
and other methods of lowering admission prices declared by the Code to be 
a violation of the Code; 21o7 per cent dealt with over-buying; 6,2 per 
cent dealt with prior advertising; 5,5 per cent dealt with interference 
with lease negotiation^ and 4<,8 per cent dealt with unfair competition 
by non- theatrical accounts. 

This contrasts with an analysis of cases heard by local Grievance 
Boards from their inception to April 1, 1935, which was submitted by the 
Code Author ity„ Tliis shows that 56 per cent of the total of one> thousand, 
three hundred and sixty-one (1,351) cases cosidered dealt ^rith Bank Night 
and the like; 12,1 per cent with over-buying; 18,8 per cent with pricr 
advertising; 1,8 per cent with interference with lease negotioations; and 
3c7 per cent with unfair competition by non-theo,trical accounts. This 
Same report shows that relief was granted by the local Grievance Boards in 

(*) Administrative Order NuiTiber 124-16, signed by Sol A. Rosenblatt, 
Division Adrainistro.tor, Ajnuseraents Division, National Recovery Ad- 
ministration, 

9638 



-57- 



approximately 60 per cent of all caseSo lo "breal-doun is availaole to show 
the localities in which relief was afford'od, 

(e) Analysis of R elief Gra nted ■ '• .'.'' 

Analysis of the t-vo h-ondred p.nd ninety- one (291) Code Aithority 
decisions on appeal shov/s that relief to complainants ^-ras given in approx- 
imately 71 per cent of all cases of appeals on trade -practice violations. 
The following table shoves the way this relief - or justice as in equity - 
is distri'buted with regard to type of complaint: 



TYPE 01 VIOLATION CHARG.ED 



Bank Night and like • 
devices 

Over- "buying 

Prior Advertising 

Interference with Lease 
Negctiaticns 

Non-theatrical Accounts 



NUISSR- (jI 


PER CENT • 


■ CASES CON- 


COJ.CPLAINAIITS 


SIDMSD 3Y 


•GRAiWED 


ccl:-S author- 


RELIEF* 


ity 




150 


93.8 


63. 


28.6 


18 


77.8 


16 


18.8 


14 


92.9 



Lowering .of Admission 
Prices Soecifiad in 
Contract 

10^ Cancellation Clause, 

Other . ' 



10 

4 
16 



90. 
66.7 
16.7 



* In determining per cent relief, cases remanded to local 

Board for further hearing or cases in 'Tiiich only part relief 
?/as granted, were, not considered^ 



9638 



•-58- 

?, SPECIAL C0I.naiTTEE5 

Provision v/as made in the Code for the appointment of various com- 
mittees to study and make recommendations \7ith regard to problems in the 
production "branch of the Industry. Tnese conmittees vfere known as the 
Agency'' Committee, the Actor-Producer Committee, the Writer-Producer Coi2>- 
mittee, the Studio Labor Committee and the Standing Committee on Extras. 

1. AGENCY COMMITTEE 

The Agency Committee consisted of five (5) producer members and five 
(5) other members representing actors, writers, directors, technicians 
and agents. (*) 

The function of this committee was, after due notice of hearing and 
with the approval of the Administrator, (l) to set up rules of fair prax;- 
tices governing relations between actors, writers, directors, te clinicians, 
agents and producers; (2) to recommend to the Adrainistrator uniform terms 
and conditions and appropriate procedure for the registration of all 
agents vvith whom producers might transact business relating to the produc- 
tion of motion pictures; (3) to formulate appropriate rules and regular- 
tions affecting agents and to provide revocation or cancellation of such 
registration in case of violation. 

The committee submitted a set of proposed rules of fair practices 
on September 12, 1934. A notice of hearing v;as issued and after two 
adjournments, a public hearing was held. The heat of controversy over 
the relations of agents, producers, actors and writers had died down ap- 
parently, for, the presentation of statements from the half dozen spokeg** 
man present at the hearing was lukewarm. The proposals from the agents 
looked forward to a control of relationships beyond their powers as 
parties not subject to the Code itself. The counter-proposals of the 
producers involved regulation of agents, writers and technicians who were 
not members of the Industry, nor employees and v/ere therefore not subject 
to the Code. That there v/as need for a just determination of the problems 
recognized by the Code was admitted on both sides, but it was apparent 
that no practicable formula for adjustment had been achieved, (*♦) 

The National Recovery Administration, through Division Administrator, 
Sol. A. Rosenblatt, accordingly judged that the proposed rules as submit- 
ted did not tend to effectuate the policies of Title I of the National 
Recover^'' Act and were beyond the powers and without the scope of the 
duties delegated to the Agency Committee and so denied approval of these 
rules without prejudice for further submission. (***) 

(*) personnel of this committee and all correspondence regarding 

activities of this committee will be found in National Recovery 
Administration files, under Lotion Picture Industry, Code Author- 
ity - Agency Committee. 

(**) Transcript of Public Hearing on Report of Agency Committee, 

November, 1934. Motion Picture Industry Piles, National Recovery 
Administration. 

(***) Administrative Order 124-^1 - November 26, 1934, signed by W, A* 
Harriman, Administrative Officer for the National Industrial Re- 
9S38 covery Board. 



-59- 

2. THE WIIITER>-FH0D U CE5 CQI.II.1ITTSS 

The './riter-Producer Comnittee, consisting of five (5) representatives 
of producers p.nd five (5) v/riters, was appointed "by the Code Authority 
under Article IV, Division B, part 4, of the approved Code to determine a 
set of fair practices governing relations tetween producers and writers. 
Suggested rules and regulations were suhmitted to the National Recovery 
Administration but a. hearing had not "been scheduled Mp to the time of the 
Schechter decision "by the Supreme Court . 

3. THE ACTOR-FROSUCER COM.IITTEE 

The Actor-Producer Committee, set up by the Code Authority, consist- 
ing of five (5) producer representatives and five (5) actor representa- 
tives, was directed to submit recommendations as to a set of fair 
practices to govern relations between actors and producers. 

This committee could reach no agreement. The actor members djreu up 
a set of fair practice rules and a vote .was taken on each rule contained 
therein. On each one the producer representatives voted "no" and the 
actor members voted "yes". 

After this complete deadlock, the actor members submitted a brief in 
support of their contentions to the Administration. (*) This brief con- 
tains some interesting data contrasting remuneration received by actors 
and executives. No report of this committee received any official ap- 
proval of the National Recovery Administration. Most of the demands of 
the actors, however, were met by the producers through the Academy of 
notion Picture Arts and Sciences. There was one major exception: The 
producers did not agree to recognizee the Actors Guild, an organization 
affiliated with the American Fed ^-..r^ of Labor. 

4. THE STAND INa COMl.:iTTEE ON gCTnAS 

( a) Member shi-Q and Duties 

The Standing Committee on Extras v/as appointed by the Code Authority 
pursuant to Article IV, division A, section 3 of the approved Code and 
consisted of five (5) producer representatives and five (5) representa- 
tives of extra players. The function of this committee was (l) to recom- 
mend rules and regulations to be adopted by all casting agencies and all 
producers with respect to extras; (2) to interpret and supervise any 
provision made for extras and (3) to receive and pass on complaints and 
grievances concerning extras. 

( b) Re"oorts and Recommendations Submitted 

The minimum rate of pay for extra plcyers depended in large part 
on the wardrobe required. The Standing Committee on Extras adopted an 
interpretation of the provisions of the Code with regard to drees 

(*) National Recovery Administration Files under Motion Picture 
Industry - Code Authority - Actor-Producer Committee. 

9638 



-so- 
re quirements for extras on Fetruar^'' 19, 1934, ajid submitted it to the 
National Recovery administration, j^oroval was granted on March 6, 1934. 
(*) 

A set of rules and regulations to govern extras was formulated "by 
this Standing Cojninittee and siibraitted to the National Recovery Administra- 
tion. These recommendations dealt with such subjects as transportation 
of extrs.s to and from employment, pay on location work, pay for hazardous 
work, damage to wardrobe incurred d-^oring production, cancellation of calls, 
meal periods, hours of employment, and trnvel time on one day location. 
The report was approved on Septei.iber 27, 1954, hy the National Recovery 
Administration. (**) 

(c) Activities as Agency for Adjustment of Labor Complaints. 

Although never approved formally "by the National Recovery Administrar- 
tion as an official agency for the adjustment of lahor complaints in the 
first instance, the Standing Committee on Extras claimed this power was 
s;oecif ically granted hy the Code. (**^) 

This claim was not formally recognized "by the National Recovery 
Administration. It was understood that complaints regarding extras might 
oe heard "by the committee in the first instance with the proviso that an 
E^ppeal night be talcen from any decision of the committee to the regular 
National Recovery Administration Compliance Office by any interested 
party. According to a report released to the trade papers, the committee 
during its life heard 1,065 complaints regarding extras and of these 
satisfactorily adjusted 981, or 92fo, (****) 

5, THE STUDIO LABOR COI^QvIITTEE 

( a) Put i e s 

A Studio Labor Committee to investigate complaints and disputes 
relating to studio labor and to adjust them by mediation, arbitration or 
conciliation was set up b;'' the Code Authority under the general powers 
to appoint committees. (*****) The jurisdiction of this committee 



(*) Administrative Order No. 124-11 signed by Sol. A- Rosenblatt, 

Division Administrator, Amusements Division. 

(**) Administrative Order I'o. 124-30 signed September 27, 1934, by 

Hugh S. Johnson, Administrator for Industrial Recovery. 

(***) Article IV, Division A, Section 3, Part 1 of improved Code 

No. 124. 

(****J Page 1 - Report issued by Standing Committee on Extras, pub- 
lished in Film Daily, issue of July 24, 1935. 

(*****) Article II, Section 4 of Approved Code No. 124 



9S38 



-61- • 

extended to all studio labor coraplaints with the exception of those re- 
latinj.3; to actors, writers, directors, s-aoervisors and extras. 

(Td) Activities as Aj^oncy for Ad.justm e nt of Lahor Complaints . 

The Compliance Division of the National Recovery Administration 
objected to the formation of this committee on the grounds that the duties 
proposed extended to the adjustment of labor complaints and the Motion 
Picture Industry Code Authority had never been approved by the National 
Recovery Administration as an agency for the adjustment of labor com- 
plaints. The Labor Advisory Board also objected to the committee. In 
policy, the Labor Advisory Board opposed labor committees appointed by 
code authorities; however, the Board had no complaints to make rel8,tive 
to performance. The Compliance Division after investigation informally 
recognized the right of this committee to hear complaints regarding 
studio labor provided that any interested party might appeal any decision 
of the committee. 

After eight months of operation, Division Administrator Sol. A. 
Rosenblatt stated, "No decision of the Board has been disrupted nor has 
any appeal been taken. This is noteworthy in view of the fact that all 
studios are uniformly affected by the decisions of this Board." Accord- 
ing to a report released by the Code Authority,'- to the trade papers of 
the Motion Picture Industry, 262 complaints were heard by the committee 
during its period of operation and of these 258, or 98.5^ were satis- 
factorily adjusted. (*) 

G. FINANCING TBE CODE -AUTHORITY 

1. BUDGET FOR 1934 

On April 6, 1934, the Code Authorit^^ submitted a proposed budget 
and basis of contribution for the Motion Picture Industry to the National 
Recovery Administration. 

This budget proposed a total expenditure of $360,000 for the year 
1934. Of this amount one~half was to be contributed by the exhibition 
branch and one-half by the producers and distributors. The assessment 
for theatres was to be based on population, seating capacity and the 
classification of the theatre as a first, second or subsequent run house. 
The basis of assessment for producers and distributors was not submitted 
at this time, further study being deemed necessary. The proposed budget 
was approved by the National Recovery Aciministration on j^ril 13, 1934. (**) 

(a) Change in Budget to Provide for Legal Expenses 

On June 8, 1934, the. Code Authority passed a resolution authorizing 
its legal committee to expend a, sum not to exceed $5,000 to cover the cost 

(*) Code Authority Statement published in Film Daily, Page 1, issue of 
July 24, 1935. 

(**) Administrative Order No. 124-14 signed by Sol A. Rosenblatt, 

Division Administrator, Aniusements Division. The itemized budget 
will be found attached to this Administrative Order. 



ro 



38 



-62- 

of engaging counsel to defend litif;ation against members of the local 
Grievance Boards, local Clearance and Zoning:; Boards, the Code Authority 
and the Executive Secretary of the Code Authority. This constituted an 
amendment and an addition to the "budget. The legal expense item vras ^~ 
proved hy the National Recovery Administration on June 28, 1934. (*) 

2. Al'IElMlEl^ OF CODS TO PP.OVIBE FO?. B'JDGST OBLIGATIONS 

After the approval of the budget, the legal division of the National 
Hecoverj^ -^i-dministration raised the point that it should be the policy of 
the National Recovery Administration to include in each Code specific 
provisions 'regarding budgets for Code Authority expenses. Accordingly an 
amendment to the Motion Picture Code known as Amendment No. 2 was approved 
on July 27, 1934. (**) 

In part his amendment read as follows: 

"A^.iend Article II as follows: Add to Section IC , sub-section (b) 
the following: 

"Upon approval by the Administrator of an itemized budget of such 
expenses and an equitable basis of contribution thereto, each such member 
shall be legally obligated for, and shall p.ay to the Code Authority, his 
or its respective equitable contribution, subject to rules and regulation 
pertaining thereto issued by the Administrator. Failure" to pay such 
equitable contribution shall constitute a violation of this Code. In 
addition to all other rights and remedies with respect thereto, the Code 
Authority shall have the right to institute legal proceedings for the 
collection of any such equitable contribution." 

3. BASES OF ASSESSlvHNT FOR 1934 

The Code Authority now proposed a basis of assessment for the pro- 
ducers and distributors for the year of 1934. The assessments were to be 
divided as follows: $150,000 was to be contributed by the larger produc- 
ers and distributors, the remaining $30,04*0 by the other producers and 
distributors. All producers and distributors with their proposed assess- 
ment v/cre listed individually and assessments ranged from $72.00 a year 
to $20,000 per year. This basis of contribution was disapproved on 
August 17, 1934. (***) 



(*) Administrative Order :'o. 124-21 signed by Sol. A. Rosenblatt, 

Division Administrator for Hugh S. Jolinson, Administrator for 
Industrial Recovery. 

(**) Amendment No. 2 approved by Administrative Order IIo. 124-24 
signed by Hugh S. Johnson, Administrator for Industrial 
Recovery. 

(***) Ad:.iini strati ve Order No. 124-26 signed by Leon Henderson, Director, 
Division of Research and Planning, for Hugh Johnson, Administrator 
for Industrial Recovery, 

9638 



-63- , 

A new "basis of assessment" 'for producers and distributors for the 
year 1934 and for exhi"bitors for the last hriJf of 1934 wa-S now proposed, 
Distri"butors under this plan were to pry the Co6.e Authority an amount 
hased on their gross rental; a proportion of this expense was to he 
passed on to the producers in proportion to their individual division of 
funds. The assessment of the exhibitors uhile still hased on the factors 
of picture run, seatinr; capacity and popiilation was revised somewhat. 
These new tases of assessments v/ere approved "by the National Recovery 
Administration on November 7, 1934. (*) 

It was then realized that the mechanism approved "brought collections 
from exhibitors rnd distributors only. Accordingly the basis of assess- 
ment v;as still fiu'ther revised, mairin;;;,' it clear that distributors acts as 
p^ents of the Code Authority in collecting revenue from the producers. 

4. -EEVISED BUDGET 70R 1934 

The year 1934 being finished by. this time it wa.s found that ex- 
penditures by the Code Authority had been somewhat less than anticipated. 
Only $203,589.12 had been spent for the year 1934. A r^svised budget and 
bases of contribution were approved March 7, 1955. (**) 

■5. USE OF 1934 SURPLUS 

Since no provision hs.d- as yet been made for 1935 expenses and since 
the Code Authority had surplus funds on hand, expenditure of these surplus 
fun6.s to cover expenses of the first four months of 1935 was approved by 
the National Hecovery administration on April 4, 1935. (***) 

6. BUDGET ALID BASES OE CONTHIBUTIOIT FOR 1935 "-- 

A' net budget and bases of contribution for 1935, differing little 
from the budgets finally approved for 1954, were submitted and approved by 
the National Recovery Administration on j^ril 24, 1934. (****^ 



(*) For Exhibitors - Administrative Order No. 124-37 and for 

Producers, and Distributors - Administrative Order No. 124-38, 
both signed by Leon Henderson, Director, Division of Research 
and Planning for the National Industrial Recovery Board. 

(**) Administrative Order No. 124-49 signed by Hiram S. Brown, 

Assistant to the Administrative Officer for the National 
Industrial Recovery Act. 

(***) Administrative Order No. 124-52 signed by Hiram 3. BroT,7n, 
Assistant to the Administrative Officer for the National 
Industrial Recovery Board. 

(****) Administrative Order No. 124-55 signed by Hiram S. Brown, 
Assistant to the Administrative Officer for the National 
Industrial Recovery Board. 



9638 



7. LIQUIDATION OF ASSETS OF CODE AUTHORITY 

When the Code "became inoperative, the Code Authority liquidated its 
assets. An audit of the Code Authority's affairs made "by Price, Water- 
house and Company of New York City and quoted in Film Daily, issue of 
July 24, 1S35, shoned that a total of $341,880.37 had heen contributed to 
the Code Authority after it had begun operations on December 7, 1933. 
This was made up of $183,089.37 from the producer-distributor groiip and 
$158,791.00 from the exhibitor group. 

It T;as found that the Code Authority ha^d at the time of the audit 
$15,999.50 on hand, in cash, and undeposited checks ajaounting to $7,874.16. 
These funds represented the balance after the payment of all bills. It 
was decided to make refunds of the cash on hand to members of the Industry 
in good standing in proportion to their contribution. The undeposited 
checks were returned. Of the surplus cash, producers and distributors in 
good standing as of May 27, 1935, received funds aggregating $8,576.96 and 
exhibitor members in good standing at the same date received $7,431.54. 

8. SU1;IMAJRY OF COLLECT lOlIS 

At the time the Code became inoperative, total budgets of $374,786.89 
had been approved for the operation of the Code Authority for the year 
1934 and for the first half of the year 1935. A total of $341,880.37 had 
been collected from members of the Industry. In other words, during the 
entire period of the operation of the Code a little more than 91'fo of all 
assessments had been collected. Approximately 98^ of the assessments 
against producers and distributors had been paid and approximately S5^o of 
the assessments against exhibitors. 

9. LACK OF FINANCIAL PHOELEMS 

The Industry's interest in its own Code did not wane with the pass- 
ing of time. At the tine of the Supreme Court decision in the Schechter 
case, the Code was passing into the period of its most successful opera- 
tion. 

At the beginning, some difficulty had been experienced in selecting 
a proper -method o'f budget assessment. Some members had objected to 
paj'^ing their assessments. However, by the start of the year 1935 most of 
these problems' had been talcen care of and payment of assessments to the 
Code Authority was looked upon by most members of the Industry as a matter 
of course. The lack of eny financial problems may be seen in. the fact 
that the Code Authority was able to finance operations for the first four 
months of 1935, from the 1934 surplus. 

Article II, Section ID (c) of the Code stipulated that any person 
who failed to pay promptly any assessment or levj'' made pursuant to an 
order of the Code Authority as an expense in administering the Code should 
not be entitled to file anj'- complaint under any Article or Part of the 
Code. This was the only method of conrpulsion used by the Code Authority 
in levying assessments. 



9638 



-65- 

K. .ADMINISTRATIVE ACTI01I5 OF T HE MTIONAL B-RCOVERY ADMINISTRATIO N 
1.. A^CENDMEIITS .... 

Amendjiients 1, 2 and 3 have already "been disouss'^a in bi-in. .^i-^j^*.^^-, 
A fourth amendment was approved on March 11, 1935. (*) This amendment 
comprised a numter of minor changes in the Code. The jiirisdiction of the 
Code uas limited to , the Continental United States and to the Territory'- of 
Alaska since it had "beeri found inrpracti cable to set -up Boards required 
utider the Code in other Territories of the United States. 

A new section was added to the Code, stipulating that no exhihitor 
should enter into any' agreement for services of a kind usually performed 
"by, theatre eniployees directly compensated hy exhibitors unless such 
agreement provided that no person actually engaged in rendering such serv- 
ice should he employed under less favorahle labor conditions than those 
provided for in the Code. This provision was added to take care of a 
type of "chiseling" which might arise under the Code and had not "been 
foreseen hy the framers of the Code., 

A number of minor changes v;ere made in the Code provision relating 
to vaudeville and presentation labor. The expediency of these changes 
had been pointed out during actual Code operation. 

The tine in which the Code Authority was requested to hand down its 
decision in any case that had been appealed from a decision of a local 
Clearance and Zoning or a local Grievance Board was extended since 
experience had shoun that an insufficient time had been allowed under the 
original provision. 

Two amendments were under discussion at the time the Code becajne 
inoperative. One of these dealt particularly with' compensation of motion 
picture machine operators in the vicinity of New York City (see Chapter 
on Labor) . The other proposed amendment was to take care of a situation 
which had ajrisen with regard to local Clearance and Zoning Boards. As 
originally constituted these Boards we^*e intended only to make "up 
schedules; by amendment, they were later empowered to hear individual 
complaints of inequitable clearance and zoning allotments. Thus, when a 
case arose involving the property of a member of a local Board, that 
member found himself acting both as judge and advocate in a problem . 
affecting his own interests; The proposed amendment would have provided 
for a substitute of the same class in such a case. 

2. EXELiPTIONS " ' • ' 

Only five (5) exemptions were granted during the life of the Code. 

It was stip-ijlated in the Code 'that appeal might be taken to the Code 
Authority from' a decision of local Boards provided such appeal was filed 
within five days after the decision had been handed do\7n. In two cases 



(*) Administrative Order No. 124-51 signed by W. A. Harriman, 

Administrative Officer for the National Industrial Recovery Board, 

9638 



-66- 

parties who had failed to file an appeal within the required five (5) 
days, later wish to do so. Exemption was requested by each theatre and 
granted. (*) (xx) 

The Code stipulated that no producer or distributor should enter 
negotiations regarding distribution of pictures prior to GO days before 
the conipletion of an existing contract. Walt Disney Products, Limitf^d, 
requested an exeinption from this provision on the ground that it caused 
individual hardship. This exemption was granted March 23, 1934. (**) 

The Radio City Music Hall, New York City, requested an exemption 
from the Code stipulation that a chorus person should not be called for 
rehearsal before 9 A. M. The Music Hall states that on the day a show 
was changed and a new routine instituted, the permitted rehearsal time 
was insufficient, particularly during a holiday a«*ason. Consequently 
this theatre desired to call the chorus at 8 A. M. instead of at 9 A. M. 
agreeing to pay time-and-a-half for the hour over«-time. Exemption from 
this provision was requested twice and granted both times, (x) 

Only one request for exemption from the provisions of the Code was 
denied by Administrative Order. (***) Two other requests for like exemp- 
tion were in the process of being denied at the time the Code became 
inoperative, 

3, LABOR COMPLAINTS 

Labor complaints in the production branch of the Industry were 
handled chiefly through committees of the Code Authority which have al- 
ready been commented on. Labor complaints in the distribution branch of 
the Industry for the most part went throiagh regular National Recovery 

(*) Administrative Order No, 124-43, January 23, 1935, signed by 

Sol A. Rosenblatt, Division Administrator, Amusements Division 
granting exemption to Herman J. Brown, Inland Amusement Company, 
New Majestic Theatre, Nainpa, Idalio. 

(xx) Administrative Order No* 124-54, j^ril 15, 1935, signed by 

Sol A. Rosenblatt, Division Administrator, Amusements Division 
granting exemption to Broadway Amusement Company, Broadway 
Theatre, Butte, Montana. 

(**) Administrative Order No, 124-12 signed by Sol. A. Rosenblatt, 
Division Administrator, Amusements Division, 

(x) Administrative Order No. 124-44 and Administrative Order No. 

124-45 dated January 25, 1935, and signed by Sol. A. Rosenblatt, 
Division Administrator, Arausements Division. 

(***) Administrative Order No. 124-46 dated February 1, 1935, signed 

by Sol A. Rosenblatt, Division Administrator, Amusements Division, 
denying application of J, A. Gallaher operating the Braddock 
Theatre, Braddock, Pa., for exeiiiption from labor provisions. 



9638 



-67- 

Adninistration compliance machinery. It is interesting to note in con- 
nection with minimiTTi wages' for the distribution "branch of the Industry 
that the minimum weekly wage specified in the Code prevailed regardless 
of the number of hours worked, under the code maximum. (*) 

In the exhibition branch of the Industry, complaints regarding 
skilled labor were for the most pert derlt with directly by the Amusements 
Division of the National Recovery A'iministration without going through 
the usual Compliance Division channels. Complaints regarding unskilled 
labor in this branch of the Industry were taken care of b^/ the Compliance 
Division. ITo major labor difficulties marked code administration. A 
complete discussion of the labor provisions of the Code, complaints aris- 
ing under these provisions, and the method of adjustment together with 
the Hollywood salaries investigation and the special stud,y of the "extras" 
problem coinprises Chapter V on Labor in this survey. 

I. IIT7ESTIG-ATI0NS IIITO 0P5EA?I0!I 0? CODE 

1. THE NATIONAL IffiCO'/ERY REVIEW SOARD. 

On March 7, 1934, President Roosevelt set up by Executive Order No. 
6632, the National Recovery Review Board which became knovm from the name 
of its chairman as the Harrow Board. On March 26th and 29th and on April 
3d and 4th, 1934, this Board held hearings with regai'd to the Code of 
Pa.ir Competition for the Motion Picture Industry. Tv/enty-one witnesses, 
chiefly independent exhibitor members of the Allied States Association of 
Motion Pictiu-e Exliibitors, were heard. As expected, these witnesses at- 
tacked the Code and things pertaining to it. An ansvrering brief submitted 
by the major companies was "deemed of small moment" by the Board and 
apparently was not considered. The Natiojial Recovery Administration files 
on the Motion Picture Industrv were not consulted and no attempt was made 
to mal-e use of the knowledge or eiq^erience of the National Recovery 
Administration's Division Administrator who had been in charge of this 
Code every step of the way. 

On the basis of such testiraony as it heard, the Darrow Board attacked 
the division of representation on the Code Authority; the division of 
representation on the local agencies of the Code Authority; the integrity 
of the members of the Code Authority; the integrity of the Division 
Adr.:inistra„tor in charge of. the Code and the Code itself on the ground that 
a-,11 these factors were prejudiced against the interests of the independent 
e:chibitor_. 

Apparently/", the Darrow Board waived aside the fundamental differences 
between this Industry operating under the copyright laws and other indus- 
tries operating under laws of purchase and sale. . Majiy of the recommenda- 
tions of the Darrow Board would have required drastic changes in the 
copyright laws in order to become effective. 

A lengthy reply to the report of the Darrow Board on this Code was 
made by Sol A. Rosenblatt, Division Adjninistrator in charge of the Code 



(*) Acimini strati ve Order No. 124-37, dated February 28, 1935, signed 
by Sol A. Rosenblatt, Division Administrator, Amusement Division. 

9638 



-68- 



answering in detail the strictures of the report. Further criticism 
and coimYients were made by the national Recovery Administrator, Hugh 
S. Johnson, and by Donald R. Richberg, General Coiinsel of the National 
Recovery Aiininistrf tion. John F, Sinclair, who was vice-chairman of 
the Darron Board v/as quoted in the B?iltimore Sun of May 8, 1934, as 
follons: 

"ITpt in ny 25 years of "business and research experience, during 
^7hich time I have been a member of many boards and committees 
of investigation, have I witnessed such utter disregard for fair 
play on the ba.sic facts as the National Recovery Review Board 
under Clarence Darrow, had shown, even at its open hearings. 

"Such attitude in times like these is nothing short of tragedy, 

"I have opDOsed from the beginning the kind of sloppy, one- 
sides, half-informction, that is the foundation upon which 
the Dar row-Russell Report has been written," 

The report itself and the reply of the Division Administrator axe 
of such natiire that a.bridgement is difficult. It is suggested that 
both documents be considered in complete form. (*) 

2. SEr^ATE FINAi.'C3 COMvIITTEE 

Senate Resolution 79 ordered an invest igtt ion of the National 
Recovery Administration before the Senate Committee on Finance. T\io 
witnesses, Abrajn F. Keyers, General Counsel for the Allied States 
Associa.tion of Motion Picture Exhibitors and Melvin Albert, represent- 
ing the Independent Theatre Owners' Association of New York City, 
testified and presented briefs to the Committee regarding the Motion 
Picture Code, Records answering the allegations of these t'.70 witnesses 
were filed with the chairman of the Senate- Committee by Division 
Administrator Rosenblatt. The testimony given by the witnesses re- 
stated their charges before the Darrow Board. (**) 

(*) The report of the Darrow Board may be found in National 

Recovery Administration Files - Motion Picture Industry - Code - 
Report of the National Recovery Review Board, 

The replies of Hugh S, Johnson, l>onald R. Richberg, and Sol A. 
Rosenblatt axe quoted in full in the record of Hearings before 
the Committee on Finance, United States Senate, 74th Congress, 
1st Session pursumit to Sena.te Resolution 79 Investigation of 
the National Recovery Administration - Part VI - Pages 20<^2 to 
2005, inclusive, 

(**) Investigation of National Recovery Administration pursuant to 

Senate Resolution 79 - 74th Congress, Ist Session - Testimony of 
Abram F, Meyers "or^ges 1271 to 1302, inclusive. Testimony of 
Helvin Albert T)ages 1310 to 1329, inclusive. Papers filed with 
the Committee by Sol A. Rosenblatt and Abram F. Meyers, -oages 
1972 to 2031, inclusive. 



9638 



C HAPTER IV 

TRAJS PEACT IGES IN THZ Iv.OTIOJ.I FIC T UliE IIOUSTRY 

In the complicated competition within the Motion picture Industry, 
business methods have developed during the l;\st ?0 vears that are indivi- 
dual to this Industry in their comparative lack of analO;^y to the trade 
practices of other industries. It seems at times as though all the gen- 
eral rules of "business had "been put aside and that the Motion Picture in- 
terests had decided to use only the exceptions. Yet, in daily practice, 
there is an active play of competitive forces determining the kind of 
pictures produced, the sho^wnanship of presentation, the convenience of 
theatre '^locations and equipment and the rental prices paid "by exhibitors 
and the prices charged the public for the attractions it desires to see. 

These competitive forces are two: The first is ^vithin the Industry 
itself as betr;een producers, majors ana independents, S.nd between thea- 
tres—affiliated and independent. The second comes from without. The 
Industry's product is entertainment and competes with all other forms of 
entertainment for popular approval. The public has its choice — radio 
progrems to be enjoyed at home; the legitimate theatre; social engage- 
ments — the dance or the bridge party; sporting events — or an exciting 
evening v.ith Sherlock Holmes, Philo Vajice or other detective heroes. 
These are definite factors that, among others, influence attendance at 
motion oict-are houses and the prices that the public can be induced to 
pay at the box office. 

Motion picture entertainment is subject to another factor of compe- 
tition; that is the imponderable of public enthusiasm which flickers /n- 
to flame and wanes in unpredictable predilections for certain tj'pes of 
pictures and certain' personalities of ■ the celluloid world, Theda 3ara 
and her slow allure is succeeded by the emotional velocity of Clara-Bow 
or Jean Harlow* The anaemic passion of G-reta .Garbo may yield in public 
favor to the "vital magnetism of a Claudette Colbert. It was John Gilbert 
yesterday; Clark Gable today. The homespun wit and drolleries of lill 
Rogers and the ruthless villainios of a Charles Laughton vie for patron- 
age from a pubTic ever changing its likes and dislikes, Mickey Mouse 
unites the world in understanding, Shirley Temple shakes her curls and 
smiles and overnight a Maurice Chevalier loses his popularity. These are 
box-office la-ctors that start nev/ competitions in the amusement field. 

The totoJL of these forces is a restraining influence preventing the 
Motion pictiire Industry from a full and unrestrained exercise of the 
natural power of copyright monopoly for each picture released by exacting 
an unlimited price from the public. In industry relations, the anti- 
trust lav;s are presumed to prevent agreements that might otherwise readi- 
ly happen, Tiiere is competition among producers for stars and box-office 
names; there is competition between the major producers themselves and 
between majors and independents for favorable playing da.tes at theatres. 
There is competition among producer-aiid-distributor-controlled theatres 
and, in turn, bet-/een these affiliated houses and the , independent thea- 
tres. Based on seating capacity, the prevailing spending habit-s of the 
public in his own neighborhood, the number of competing theatres, there 
is a too high for an exhibitor to pay in lea,sing pictures for his theatre, 

9638 



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And except for producer- ovmed theatres, having e:;c''.usive rights to the 
producer's test featured pictures, there is competitive rivalry through- 
out the exiiitition field in "bidding for the pictures announced as forth- 
coming releases. 

Tlie important tr?i.de practices arisin;-- from these competitive forces 
are the concern of this Chapter. Some of the provisions sought to "b© 
written into the Cede ty various interests would have strengthened monop- 
oly power and restricted free competition. Some practices, long in use 
in the Industry, were prohibited "by the Code as not being sound or fair 
competition. Some practices-notably "block-booking — are fields of acute 
controversy in which two or more economic philosophies clash. The pur- 
pose here is to present the controversy as it exists and to weight the 
strength of sides. In order as presented, a. survey is made of over^ 
buying; clear^jice and zoning; block-bookin£: and cancellation priviliges; 
forcing of short subjects; rebates on a.draission prices; designated play 
dates aiid other trade practices. 

A. OVER-EUYIIJG 

. 1, DESCHIPTICH OF THE PRACTICE' 

-X 

Over-bu,7ing is a practice that developed in the Motion Picture In- 
dustry as competition becaiie keener in the entertainment centers with- 
in cities and tovms; its intent was, and is, to deprive a competing ex- 
hibitor of sufficient desirable feature pictures to meet his normal re- 
quirements; it has, in laissez-faire economics, the blessing usually ac- 
corded to the greater purchasing power. The Industry generally regards 
the use of this instrument to destroy competition as inherently v/rong» 

Up to the Code pericd, the Industry had been mable satisfactorily 
to meet this problem and eliminate unfair over-buying. Approximately 85 
per cent of the complaints submitted to the Deputy Administrator by ex- 
hibitors during the pre-code period related to some form of o ver- buying, (*' 

Three' methods of over-buying were generally recognized: 

1» An exhibitor licensed more feature pictures than he used 
in operating his theatre thus "freezing" the surplus. 

2, An exhibitor adopted an opera.ting policy of unnecessary and 
too frequent changes of programs 

3. An exiiibitor exacted from a distributor, as a condition to 
entering into a contract, that the distributor refrain from licensing 
pictures to a competitor, 

2, CODE EEaULATIOiT OF OVER-BUYING- 

The Code provisions specifically declared each of these three meth- 
ods to be unfair trade practices, as well as any other similar a.ct with 
the same intent and effect. (**) 

1*1 The report of Deputy Administrator on the proposed Code of Pair Com- 
petition for the Motion picture Industry, October 26, 1933 - Page 7, 

(**) Article VI, Part 2, Section 1 of the approved Code. 
9638 



-71-.. 

The Code not only declared that over-'b-a;;.'-in;^, however undertalcen, was 
■unfair, but sought to grant affirmative relief to the exhibitor who had 
Ije en injured. Local GrievrJice Boards set up in 31 key cities were given 
the authority to direct that ' an offending eidiibitor surrender the over- 
bought pictures to the complainant involved. This procedure, of course, 
necessitated abrogation of an existing legal contract. But this signi- 
ficant step in industrial self-governi/ient . r;as made possible by the method 
of securing the voluntai';:'' agreement of the distributor who, as a possible 
innocent psrty to the contract, might have successfully resisted inter- 
ference uith his rights as a contractor. The Code secured this voluntary 
agree,.ient by directing that the benefitting exiiibitor should at least 
meet the terras contained in the license agreement bet-een the distributor 
and the exhibitor called upon to surrender his surplus films. Decisions 
of local Grievance Boards could be apnealed to the Code Authority of the 
Motion Picture Industry b^'- any party to the dispute, (*) 

3. PncCEDUSE develop::!) IK cods APPLICATION 

In the actual application and interpretation of the Code provisions 
regarding over-buying, the Code Authority gradually evolved procedures 
and supplementary principles. The decisions of the Code Authority on 
appealed cases created precedents which guided local Boards in later de- 
cisions* 

The simplest form of over-buying consisted in bu^J-ing more pictures 
than could be shor.Ti and freezing the surplus. In this case determina.- 
tions were made by a simple mathematical calculc„tion after allowances for 
the expectancy cf non-deliveries (**) and for the number of pictures can- 
celled under the cancellation clause (**♦) Por exaiaple, an exhibitor mail- 
ing three changes per v/eek will show about 156 pictures a year. Suppose 
that he has licenses 250 pictures. Allowing arpproxiraately 32 pictures 
for non-deliveries and exercise of rights under the cancellation clause, 
he would have contracted for approximately 62 pictures more than his 
reasonable requirements. In such instcnces, the offending exhibitor 
would be required to release 62 pictures. 

Exiiibitors usually cloaked their over-buj'-ing under various disguises* 
The Code framers, experienced in the practices of the Industry, shrewdly 
inserted a clause prohibiting over- buying by "the adoption of an unfair- 
ly competing operating policy of unnecessary or too frequent cha.nges of 
motion pictures," (****) Por example, sup;:)Ose the exiiibitor mentioned 
in the exa:-iple above had adopted a policy of four changes per week, 



(*) Article VI, Part 2, Section (a) of the approved Code, 

(**) Article V-E, Part 2 of the approved Code. 

(***) Article V-F, Part 6 of the ap;)roved Code, 

(****) Article VI, Part 2, Section 1 (b) of the approved Code. 



9638 



-72- 

requiring 208 pictures inster.d of 156 per '.veek. He v'ould then have cir- 
cumvented the test for straight matheaptice.! over-'Duyin~. In an alter- 
native case, he might have adopted the policy of usin^ double features* 
or he night have used a combination of "both nethodr., ostensibly raising 
his requirements to as Li-'^;h as 415 pictures a year. Detection of such 
subterfuges v/as naturally difficult; the date of the adoption of these 
devices held special significance, (*) 

In cases where over-buying vias effected by a change in the operat- 
ing policy of an exhibitor's theatre, the difficult problem was to de- 
termine the intention. An exiiibitor could contend that a change in pol- 
icy was necessary to meet conpetition. Cases were adjudged under the 
Code a,ccording to surrounding circumstances, A change from single fea- 
tures to double features was closely scrutinized, Eowever, such a change 
in a territory where double features predominated might not be considered 
unreasonable. Considerable latitude in judging intent was afforded an 
exhibitor r.h.o showed a deficit record. Discussions held by an exhibitor 
before changing his operating policy often indicated his purpose. 

Another device used to disguise over-buying involved "the execution 
without just cause of an agreement from any distributor as a condition 
for entering into a contract for motion TDict^arec that such distributor , 
refrain from licensing its motion pictures to the complaining exhibitor." 
(**) Here again, the question of intent arose. The mere fact that an 
exhibitor was unable to buy film was not considered to be proof. It was 
essential to show conspiracy between the distributor and the respondent 
exhibitor, l\To such proof was adduced during the life of the code, Sach 
a practice, if ^^roven, would have undoubtedly constituted a conspiracy 
in restraint of trade and entailed serious consequences both to the 
distributor and to the exiiibitor involved. 

The opening of a new theatre v;ith or without circuit affiliations 
might cause a, withdrcwal of product from an existing theatre. A new 
theatre in a competitive territory might find itself unable to buy product 
in competition with existing theatres. Cases of tnis type, where no 
theatrri was overbought or where no theatre had adopted an unfair compe- 
ting policy, were dismissed by the Code Authority on the gound that mere 
inability to buy did not constitute proof of conspiracy; if the theatre 
involved could "out-buy," that fact did not necessarily mean that the 
theatre had in fact over-bougiit, (***) 

Several ca^es arose under this sane provision where distributors 
refused to sell subsequent runs in small towns. The Code Authority held 
that this vias not proof of conspiracy between exhibitors and distributors 
but was entirely a problem of sales policy within the distributor's 
individ'o^l judgment. (****) '^ 

(*) Code Authority Appeal Decision Ho, 23, 

(**) Article VI, Part 2, Section 1 (c) of the aporoved Code, 
(***) Code Authority Appeal Decisions ITo, 54, Ko. 247 and No, 428, 
(****) Code Authority Ap:oeal Decisions V.o, 244, 110,333 and No, 334. 

9638 



-73- 

Another practice which might have been employed as an overb-aying 
device was the "exclusive rights" contract, whereby an exhibitor contracts 
for the exclusive right to exhibit a distributor's product in a partic- 
ular competitive area. Wo case of this type was brought, however, to the 
attention of the Code Authority, 

In order to be certain that no Dossible means of over-buying had 
been omitted from the Code the Code framers inserted a "catch-all" clause 
which forbade the commission of any other act with a similar intent and 
effect, (*) The most common device complained of under this section 
was the use of "selective" contracts, A selective contract allows an 
exliibitor a choice from a group of pictures offered for which he usuallj?- 
pays a higher pro rata price than if the whole group vmre taken. For 
instance he may contract for a selection of a minimijm of 20 from a block 
of 30, The pictures are not selected at the time the contract is drawn 
up but as the pictures become available. This device has the effect of 
preventing a competing exhibitor from contracting for the remaining 
pictures at the beginning of the season. In general, the Code Authority 
ruled that the minimum number of pictures sti-oulated in a selective 
contract should be considered in naking decisions, (**) 

Houever, to prevent the use of selective contracts as an over- buying 
device the Code Authority in a number of cases ordered the respondent to 
make his selections promptly and within a certain time after availability 
was announced so that the complainant might then be free to contract for 
surplus pict-ares. (***) 

TThere an exhibitor has contracted for sufficient pictures to satisfy 
normal deriands the practice of spot booking may be used as an over-buying 
device, "Spot booking" refers to the practice of purchasing individual 
pictures for immediate use as they become available,. SiDecial feature 
products are usually released by this method although the -oractice is 
not confined to this type of picture. In two cases, the Code Authority 
advised the respondents that "extreme care must be observed that the 
practice of 'spot booking' pictures shall not be conducted in such a 
manner that a violation of Article VI, Part 2, Section 1 (c) may be 
charged and proved." (****) 

In decisions on appeals a number of general rules to be considered 
in all cases was indicated by the Code Authority, In considering whether 
an e:diibitor had over-bought, the Code Authority ruled that regardless 
of the age of the pictures, it would consider both the number of pictures 
purchased under an old contract and the number of pictures under a new 
contract; the entire number of pictures regardless of quality was to be 
considered, (*****) 

(*) • ■ i\xticle VIV p*^n 3, Suction 1 (cl) of the airnrovod' Code. 

(**) Code Authority Appeal Decision No. 23, 

(***) Code Authority Appeal Dicisions No. 326, No, 347 and No, 368. 

(****) Code Authority Appeal Decisions No, 123 and No. 231, 

(*****) Code Authority- Appeal Decision No, 53, 

9658 



l\"either -'as any distinction made as to -vhether the picture -under 
contract were first, second or subsequent run. The entire product under 
contract regardless of r\m was' considered in raal-iin;^ decision's, (*) 

The Code Authority refused to v-aiLrsider c»o.ses uhere an exhibitor 'le.s 
unahle to secure the particular run of picture tha-o v>p desired taJrin^ 
the position that this v;as entirely a suDject for negotiati^v, "Ket-roRn the 
distrihutor and the ezdiibitor. (**) 

4, lEETKODS OF GRANTIl^G 3SLIEP 

Ho\7 to grant relief and hov.- to select the pictures to "be surrendered 
"by the guiltj'- .party at first presented difficult problems to the local 
Grievojice Boards, 

The pictures to be surrendered v/ere naned in the first decisions, 
handed dovm* However, beginning with the thirteenth ao^eal decision by 
the Code Authority on June 13, 1934, (which happened to be the fourth 
appeal relating to over- buying) the -exhibitor held to be in violation 
was rea_uired to prepare two lists of featiires each consisting of the 
number over-bought and the complainant was permitted to- make his choice 
of either group. This method prevented the respondent exhibitor from 
releasing only such pictures as he' judged to have the least box office 
appeal. 

In later decisions, further to protect the comr)laining exhibitor from 
having to make a choice between two lists possibly both composed chief l^r 
of independent product, the Code Authority stipiilated that the lists 
should be made up so as to be representative of the product of all dis« 
tributors involved as far as possible, (***) The number of pictiires 
awarded to a complaining exhibitor was not to be reduced because a re- 
spondent exhibitor continued an unfair operating policy thus creating an 
actual shortage of pictures, (****) 

TJhile the Code Authority had to evolve its own methods of procedure 
in granting relief, the Code did state that in making the award the "terns 
and conditions shall in no event be less favorable to the Distributor 
concerned than those contained in the license contract of the Exhibitor 
com;olained of, including the Distributor's loss of revenue, if any, 
resulting from the elimination of or reduction of revenue from any 
subsequent r-un or runs made necessary by such award," (*****) This 
stipi^2ation was entered since it was the ass-umption that the distributor 
was an imiocent -party to the agreement, and therefore any interference 
with his contractual relations should carry the assurance that he v/o-uld 
not be f ins-ncially injured, 

(*) Code Authority Appeal Decisions No, 17, No, 20, No. 73, 

No. 108 and No, 117, . ' • ■••...• 

(**) Code Authority Ai^-^eal Decisions No, 121, No, 283 and No, 284, 

(***,) .Code Authority Appeal Decisions ITo, 53, No. 73, No. 58, 

No, 307 and No, 395, 

(****) Code Authority Appeal' Decision No, 401, 

(*****) Article VI, Part 2, Section 5 of the approved Code, 

9638 



-75- 

Such adjustrnents as became necessary under this cleuse were relatively 
simple in the case of contracts calling for flat rentals. Percentage 
agreements presented difficulties. The Code Authority did not specify 
the "terns and conditions" in these cases but allowed the parties in-» 
volved to arrive at a solution o^ mutual agreement. In cases where the 
distributor Questioned the financial responsibility of the complaining, 
exhibitor, the local G-rievance Boards or the Code Authority usually re- 
quired as a condition to the award a bond or cash deposit. 

It is to be noted that the Code could not interfere with contract-u£,l 
relations existing between a distributor and its affiliated theatre, (*) 

5. SmniASY OF CASES CO"'SII£RED 

The local Grievance Boards reported 164 over-bijying cases considered 
in the period up to April 1, 1935, No analysis showing the amount of 
relief granted in these cases is available. 

The National Recovery Administration has on record the Code Authority 
appeal decisions on 63 cases which were a ope ale d to the Code Authority, 
An analysis of these cases indicates that in nine (9) cases, the local 
board decision in favor of the complainant was affirmed and in eight (8) 
cases reversed. In fourteen (14) cases, the local Grievance Board de- 
cision for the respondent was affirmed and in seven (?) reversed. 
Eighteen cases were dismissed by the Code Authority, three (3) were re* 
manded for fiorther hearing, and in four (4) cases relief in part was 
granted the complainant. This part relief consisted in general of re- 
quiring that the respondent make selections of ;oictures within a definite 
time limit under selective contracts. Omitting those cases in which 
part relief was granted, the record shows that the coraplainant was granted 
relief in 28,6 per cent of the overbuying cases considered by the Code 
Authority, 

6, TEE PUBLIC STAKE IN OVER- BUYING 

Any relief from over-buying is necessarily granted to the smaller 
exhibitor. The financially powerful affiliated or circuit exhibitor 
needs little -protection. His economic strength is his safeguard, 

Overbu;;'"ing is least often encountered where there are many com- 
petitive theatres in a territory. In such a case •verbu;/'ing is liicely 
to prove t6o expensive, tioreover, the returns seldom warrant it, TTnere 
the -.larhet is large enough to accomodate a number of theatres, it is also 
us-ually large enough to sustain several showings of a film. In such 
cases, an exhibitor unable to secure desirable first or second runs nay 
lower his admission prices and step into a subsequent run r»osition. 

It is in the competitive territory so small as to be able to sustain 
two or three theatres only that the more nredatory aspects of over-bu;;/i- 
ing reveal themselves. The intent and effect is first to stifle and 
eventually to eliminate competition, A profitable establishment may be 
driven out of business with consequent unemployment and economic loss 
to the community. 



(*) Article VI, Part 2, Section 5 of the approved Code, 
9638 



-76- 

The -QuMic has not only an economic but a family-circle concern in 
the result of over- buying, \7hen a local theatre establishe-s a monopoly 
for itself by this scheme, three conditions enter the family circle. One 
touches the family pockethook whenever monopoly exercises its jrivile£;;e 
of rr.,isifl.g adjiission lorices. Tlie second condition 'restricts the f ai-iily* s 
choice of pictures -it wants, to see and enjoy, With the rival theatre or 
theatres closed, -there is but one -olace to go; if .'the oicture featured 
there does hot appeal, one family after another see'^s- otlier entertain- 
ment. That cuts dov7n motion picture revenue. But the. offending theatre . 
may seek to check this loss Trit'j a new nrograra iDolicy: and, there, the 
third condition enters to interfere with family' s plans for the week. 
The theatre now attempts to lolay more shows; probably offering double 
bills; often changing pictures every second or third day. Opportunity 
to see the most popular pictures on days convenient to the family is 
thus sharply limited - in many cases, lost altogether for in small towns, 
it is seldom 'that feature pictures play a second engagement. 

Just as the business community and the public lose by the practice, 
in the long run, so do distributors. Whereas distributors may receive 
increased returns during the first part of the "orocess, once competition 
has been removed, the premiums cease. The exhibitor in a non- competitive 
situation is in an excellent position to deal shrewdly with the distributor. 

The e:diibitor suffering from the practice has no recourse even to 
the Courts imless, as is very iinlikely, he can prove concerted action in 
contravention of anti-trust statutes. The loublic is helpless, - The inaividua] 
dist:':l'butcr cp^^-^.at sin^ile-jiaridedly combat the practice to the detriment of 
his business. Distributors acting in concert would b.e-.liable to prosecu- 
tion under ant i-^ trust laws, ATDoarently only through sQ:;ie such Federal 
assistance to industry in general as was, extended by tije National In- 
dustrial Recovery Act, or through particular legislation for the Motion 
Picture Industry does there seem to be. a way to eliminate the harmful 
practice of over-buying, 

B. CLEAHAl'-CE MD ZONIiTG ...• ' 

1. DESCRIPTION 

A "zone." is a territory within which theatre's cojnpete for patronage, 

^'Claarance" is that period of time which, by contract bet^-^een a 
distributor and the exhibittor concerned, elapses between the "orior show- 
ing and an3- .subsequent showing of a feature "oicture within a zone. 

"Itun" refers .to the sequence of different showings of a feature 
pictiu-e in a zone. To illustrate, a first showing is referred .to as a. 
first runj. a second showing -as a second run, etc. 

Earlj^ in the history -of the Industry,, distributors found that at- 
tempts to -release a picture for simultaneous exhibition at a number of • 
theatres in a competitive area resulted in reduced filnj rentals and 
destroyed the market for subsequent exhiljition in the territory. More- 
over, the large number of 'positive prints required for widespread 
simultaneous exhibition - prints that thereafter were of limited use - 



9638 



-77- 

added considerably to a distributor's costs and increased expenses beyond 
comraensiirate retiirn. Because of these facts, a system of clearance de- 
veloped. 

The first-rim exhibitor paj.^-s a ;oremiiKn in the form of a high license 
and rental fee for tha prior use of a print. He maintains a relatively 
high admission price. Many theatre goers are willing to pay this price 
rather than wait a number of weeks or months to view the picture in a 
second-run house. The greater the period of clearance, the greater is 
the number of customers the exhibitor is likely to attract. Naturally, 
the amount of clearance that an exhibitor is able to secure is an im- 
portant factor in the amount he is willing to pay for the use of a film. 

This same situation is duplicated in the case of second-run and 
subsequent run exhibitors, except that in these instances the license 
and rental fees paid are smaller and the clearance period shorter. 

An excellent example of the effect of clearance on admission prices 
is seen in the current (October - November, 1935) marketing of the 
Warner Brothers feature, "A I.Iidsummer Night's Dream". This is being 
exhibited e.s a "road show" attra,ction at high admission prices. One year, 
it has oeen publicly announced-, is the clearance period. It is lar-^ely 
on the strength of the uriusuallj- long clearance period that the high 
scale of admission prices is maintained. 

If the period of clearance is too short, the prior- run exhibitor 
does not receive full value for the' money he has expended in higher film 
rentals and in mairitaining a large and well-equipped theatre. On the 
other hand, if the period of clearance is unduly long, the subsequent 
run e:diibitor suffers. The advertising and exploitation of the picture 
which may ha,ve aroused much enthusiasm in connection with the first-run 
exhibition tends to fade from the public mind and when that happens there 
are eupt3'- seats in the theatre. 

The best interests of the distributor 'would s.ppear to lie somewhere 
in beti.-een. The distributor receives the major part of his income from 
prior-run accounts, but the incoie from subsequent run accounts is also 
essential to him. Moreover, it is imrjortant that he receive all of the 
revenue as soon as possible, Ee is best served when clearance is fair 
to both groups, in which case he is in a position to receive maximum 
income and promj^t return on his investment, 

2, PEEVIOUS AT'TEMPTS TO EEG-I.ILATE CL3ArUl\^GE 

The application of the clearance system throughout the Industry led 
to constant bickering bet'/een subseq^uent run exhibitors anxious to im- 
prove their position and first-ruci exhibitors attempting to maintain 
their advantages in clearance. Distributors v/ere pressed from both sides 
and received the blame for any allege-d inequities. 

To solve these problems, the Hays Organization throUt:ch the Film 
Boards of Trade attempted to formulate clearance schedu3.es in each of 
the 32 distribution districts then existing. Producer-distributor and 
exhibitor coinmittees drew up schedules which were designed to be fair and 
reasonable. However, complaints of unfairness were made by independent 

9638 



-78- 

exhilDitors uho charged that they had "been discriminated against in favor 
of affiliated and unaffiliated circuit theatres, 

iin independent Nebraska exhibitor, William IJ, Youngclaus, took his 
troubles to the United States District Court. In the trial of the suit 
Youngclaus v. Omsiha Film Board of Trade , Judge Hunger handed dovm an 
opinion on July 2, 1932, enjoining the enforcement of the schedule in 
the Omalia territory, holding that it was an unreasonable restraint of 
trade rjid in contravention of anti-trust laws. Attempts to formulate 
schedules were abandoned after this decision, 

3. TIIE rOEIiATION OF Ci::AFai:.XCE iuTO ZOIIING BOAKDS 

The principle of reasonable schedules of clearance and zoning to be 
applicable to all exhibitors was again brought to the fore by the Code 
of Fair Cor.jetition for the Motion Picture Industry, The function of 
drawing up these sched^oles was to be delegated to local Clearance and 
Zoning Boards to be established in each exchange center. All grourps 
agreed to this proposal in principle, but disagreed on the question of 
division of nenbership on the local boards. 

The Lrdiibitors' conraittee pro;DOsed that the local boards should 
consist of four subsequent r^on theatre representatives, two first- run 
theatre representatives, and two representatives of distributors, on the 
assuLiption tha.t the interests of first-run exhibitors and distributors 
coincided -in keer)ing clearance as long as possible (*), 

Affiliated exhibitors and distributors would not consent to such a 
proposal. They stated that many subsequent run exhibitors favored 
eliminating clearance entirely and that such a resiilt would destroy the 
huge investment in the nore elaborate first-run houses, crirjple the dis- 
tributor's revenue, and eventioallj^ throw the entire industry into a 
chaotic and bankrupt state (**), The representation uroposed would have 
given the subseo^uent run exhibitor a tic vote to start with, and it was 
pointed out that the independent distributor's interest might well be 
considered to lie with those of subsequent run exhibitors - his princi- 
pal market « and against affiliated theatres and distributors (***), 

In pre-code conferences independent exhibitors asserted that where 
they xiere in competition with affiliated exhibitors they were constantly 
discriminated against in questions of clearance and zoning, and they 
feared tha-t under the motion picture code their positions might still 
further be subordinated. The actual operation of the code provisions 
was su.ch that this group received the major benefit, 

(*) Article 41 of Code Proposals submitted by the Exliibitors' 

Committee, August 23, 1933, Volume A for the Motion 
Picture Industry, National Recovery Administration Files. 

(**) (***) Memorandum in Explanation and Support of the Provisions of 
the Proposed Code of Fair Competition for the Motion 
Picture Industry (the -producer-distributor proposals). 
Not signed - not dated. Pages 22-27. National Recovery 
Adi.iinistration Files, 

9638 



"79- 

The Clearajice and Zoning Boards as finallv constituted in the code 
consisted of two representatives of distributors, one ^"rith theatre con- 
nections and one with no theatre connections, two representatives of 
first-run exhibitors, one affiliated and one uiiaff ilia ted, and two- rep»« 
resentatives of subsequent run independent exhibitors. This division of 
representation embodied practically all the producer-distributor proposals. 
Subsequent run exhibitors claimed that the majority of votes would bo 
split four to two against them. However, a.ccording to a report submit-ted 
to the Senate finance Committee during investigation of the National Re- 
covery Administration it was sho\'m that this vote vevj seldom occurred. 
Of all cases heard 78 per cent were decided by unanimous vote (*)• 

4. SCHEDULES mmSP. THE COIE 

The local Clearance and Zoning Boards were permitted by the Code to 
formulate schedules of clearance and zoning for their respective exchange 
territories by January 1 of each year, such schedules to be in force 
throughout the ensuing selling season (**), Various difficulties were 
experienced by the local Boards, To make sure that schedules submitted 
would be reasonable and not liastily formulated, delays in submission 
were authorized. This has been discussed r^reviously in Chapter III. 

The greatest diffici3lty ex^Dcrienced in attempting to formulate 
schedules appears to have been disfn-^reement as to what nrinciTDles vrere 
to be used in determining what was fair and reasonable. Most of the 
schedules submitted by the local Boards toolr into consideration every 
conceiva.ble factor that might affect clearance including runs, admission 
prices, double feature policies, vaudeville, premiums, and lotteries. 
To add to the confusion, local customs differed so radically that sta.nd— 
ardization was most difficult. 

In the meantime no affirmative relief coiild be awarded thp victim 
of unfair clearance or zoning since the Code specified that such compla»- 
ints were to be heard only after the approval of a schedule. Since the 
schedules were unavoidedly delayed, the Code Authority proposed an amend- 
ment to the Code to permit the local Clearance and Zoning Boards to hear 
complaints against alleged ineo^uities in individual cases without regard 
to whether a schedule had been a.iToroved or not. This amendment was 
approved by the National Recovery Administration a.nd became effective 
July 3, 1S34 (***). _ 



(*) Reports of Compliance and Enforcement Director's Office - Motion 

Picti^Te Industry - National Recovery Administration Files, 

(**) Ai'ticle VI, Part 5, Section 3 of the api^roved Code. 

(***) A-.ieni-.ient No. 1 to the Code of Pair Competition for the Motion 
Pictiure Industry, 



9538 



-80- 

Lccal j3o8rds continued to differ en the principles to be considered 
in fcrnrlrtin-c; sch<3dule'; or in n-pntine; relief in individual cases, 
finally the Cede i\.i\thorit7 rele.^sed a set of rules for the guidance cf 
local Beards (*), j^'he nore imortant ef these rules recommended that: 

1, An exhibi^'or Lc net prohibited fron see^cing to improve his posi- 
tion 1)7 b-a;;"ing any run he mi-'iit be able to secure by negotiating with the 
distributor, 

2, The difference between admission Drices charged be considered in 
allctti-..:g clearance, 

3, A clearar.je schedule already ap-oroved be revised Tvhere a. prior- 
run reduces admission prices, 

4, The period of cleara-nce be not affectdd by reason of any theatre 
using a deuble feature policy or a stage show, 

5, The vjaiver of a first run of clearance over a second run should 
automatically'' advance the clearance of subsequent runs, 

6, The period of clearance fixed in sni'' case should be a maximum 
and that should not be considered as -oreventing f^ny exhibitor from ne- 
gotiating for a shorter clearance with a distributor if he is able to do 
so, • " 

Only t',70 clearance and zoning schedules wore aporoved by the Code 
Authcrity in 1934, These vrere for Miami, Florida and St. Petersburg, 
Florida, These schedules were ^Jurely geographical and extremely simple. 

Only cne major schedule v/as approved by the Code Authority - and 
that in 1935 - fer the Los Angeles territory. About five months time 
had 'ooen sient by the local i;oard in drafting this schedule, TThen it 
was subr.iitted to the Code Authority, complaints were so numerous that 
the Cede Authority'- spent 4v days holding prelipiinary hearings with witnes- 
ses from Los Angeles. .After consideration of the schedule, some ten or 
twelve days were spent in continuing re-hearings again with witnesses 
present from Los Aii^ieles, AItO::;ether the schedule was in the hands cf 
the Cede Authority about fc^jr months. Protests from Fox '.Test Coast 
Theatres, Inc. were outstanding at the time of approval, Because ef 
this a prevision was insorted in the approval requiring that the local 
Board hear these protests immediately and certify their findings to the 
Code Authority'-, 

This Le s An,^eles schedule, while not perfect, was a considerable 
imorcvevient ever previous conditions. At the time of its formulation, 
a price-war was raging in the territory. One of the factors considered 
in determining clearance under the schedule was admission "orices, llather 
than suffer changes in clearance, exhibitors terminated the price war, 

(*) Cede Authcrity ilelease of September 13, 1934 - "Principles of 
Clearance" - national lleccvery Administration Files - luotion 
Picture Industry - Clearance and Zoning Scnedules 



QCZO 



-81- 

5. TliE iiDJUSri.SNT OF COMPLAINTS 

D-uring the period of the Code, 875 individual complaints were heard 
"by the vrricus local Clearance and Zoning Boards according to a report 
made "by the Code Authority as of June 16, 19;:;5, No analysis of relief 
afforded in these cases is available. 

According to this same report, a-opeals rrere m='de to the Code Author- 
ity in 136 cases, or 15,5 per cent of the cases considered. The i.Iotion 
Pictiixe riles of the National Recovery Administration contain records of 
96 cf the decisions on appeal cases. An analysis of these 96 cases shons 
that the Code Authority affirmed 28 cases and reversed 10 cases where de- 
cisions for com-olainants had been niadc by local Boards. Local Boards' 
decisions for respondents vere affirmed by the Code Authority in 30 cases 
and reversed in six cases. Thirteen cases were dismissed, four were re- 
manded for further hearing, and in five cases relief in part was granted. 

Omitting cases remanded for fiu*ther hearings and those in which only 
relief in part was afforded, it is seen that the Code Authorit2^ granted 
the complainant relief in 59 per cent cf the ajmeal cases considered. 

6. DISCUSSION 

The subsequent run exhibitor bears the principal burden of unfair 
clearance. It is claimed that 40 per cent cf distributors' revenue is 
derived from first run accounts in 100 key cities (*). All the major 
film-producing companies consider at least 50 per cent of the cost of a 
negative' film should be amortized within three months after release for 
exhibition, 'The Paramount Pictures Corporation amortizes 00 per cent of 
the cost of a negative film in 12 weeks (**). It is obvious that a. 
distributor's prior-run accounts are his largest individual sources cf 
revenue. For this reason, a prior-run exhibitor is in a better position 
to demand increased clearance than is a subsequent run exhibitor to resist 
this incursion. If a controversy as to fair clearance arises, a distri- 
butor is least likely to ris]: alienating his larger account. 

For parallel causes, unfair zoning restrictions are usually at the 
expense of the subsequent run exhibitor. In some cases large theatres 
have "oeen able to exact as much as six months clearance and zoning restric- 
tions cf more than 100 miles. 



(*) "The licticn Picture Industry" by Howard T, Lewis of Harvard 
University, Page 201, Publisher, van Nostrand, 1933, 

(**) P&. TH - 47, "Standard Trade and Sec^irities". Published by 
Standard Statistics Co., N.Y.C, issue of February 20, 1935, 



9638 



-32- 

The principal effect of im'^LLy exten^^ed clearance is to rer^oice the 
revenue of the sul) sequent run exhilDitor, By the time this exhiliitor is 
able to use a film, the advertising and exploitation in connection nith 
earlier exhibition has faded from public raemory in his locality. His 
public is novj besieget^ en every side by new advertising an<i exploitation 
campaigns promoting ne'-.or and fresher pictures. The attractions of the 
subsequent run exliibitor are nor; out-of-date. 

Prior-run exhibitors conceive it to their best interest to have 
clearance as lengthy anrl zoning as extensive as possible, Undoubte'-lly, 
the mere rigid these restrictions, the more tickets such exhibitor ^^culd 
sell, Hov/ever, if coTried to extremes, this practice \70uld force the 
subsequent run erdriibitor either out of business or into such a subordin-* 
ate position that he would be unable to pay pjiy significant proportion 
of the film rental totals. The loss to distributors through the col** 
lapse of these accounts v/ould be transferred to prior-run exhibitors in 
the form of increased charges for film. It is doubtful, if even uith 
increased attendance, the prior- run exhibitors could shoulder this 
burden. 

Cn the other han^l, the maintenance of palatial, architecturally 
attractive prior— run theatres depends upon adequate clearance and zon- 
ing. Theatres of this type employ many people, and in some cases engage 
in vaudeville or elaborate stage presentation activities vfhich in turn 
provirle still more cmplo:^,nnent. To finance these activities, these 
theatres cliarge high admission prices. They pay high film rentals, Un— 
ciuly short clea.rerice or unduly restricted zoning would undoubterlly re- 
sult, as far as these therit res are concerned, in loss of investment, 
loss of revenue to distributors, an^i an increase in unemployment. 

The distributor is helped by fair clearance. He is then in a posi- 
tion to receive majiimum total revenue by charging fair film rentals to 
both prior anci subsequent run exhibitors. Subordination of either group 
results in a loss of competition essential to the distributor if his in- 
come is to be protected. In addition to his concern in protecting both 
prior and subsequent luns, the distributor has a further interest in 
shortened clearancec It is essential for him to obtain the quickest 
possible return on his' investment in films. This is only possible uhere 
clearance and zoning are reduced to an eq_ui table minimum, 

T/here clearance is unduly extended, that part of the public which 
is unable or unwilling to pa.y the high admission prices asked by the de- 
luxe or prior- run house is forced to wait an unreasonable period for an 
opportunitjr to see a popular feature picture. The same argument applies 
to unfair zoning restrictions. The consumer's interest is in keeping 
both clearance and zoning at a minimum. 

Although since the Youngclaus decision, and since the Code of Pair 
Competition for the I.Iotion Picture Industry became inoperative, the 
formulation of clearance schedules has been invalidated, it is never- 
theless a. matter of practice and of fact that plans which parallel or 
are similar to scheH-ules are in effect in every distributor's office in 
each exchange territory. Such a system is essential to the distribu- 
tors, but it leaves them in a vulnera-ble position. If the plans of two 

9538 



-83- 

or mere distrilDutors are similar' or coincide, they leave themselves open 
to charges of conspiracy. 

Under the Code system of the National Recovery Administration dis** 
tri"butors and exhibitors were allowed to get together and agree on joint 
f8.ir schedules. Under existing conditions, this is impossihle. 

It wolild seem to lie to the "best interests of all parties concerned 
to provide some means for the Motion Picture Industry itself to solve 
clearance and zoning difficulties. Federal supervision v/ouLd provide 
suitable safeguards for the interests of minority groups and for the 
consuming public, 

C, BLOCK BOOKING KSD THE GANCELLATIOH PRIVIKEG-E 

1. FILM MARKETING IffiTHDDS 

In carrying out the routine method of selling films, the distribu- 
tor circulates elaborate advertising ma.terial describing forthcoming 
productions to exhibitors. This "pressbook" or advertising portfolio 
usually contains the name's of famous stars, directors and authors or 
various combinations of such talent and synopses of pictures of features 
in uhich it is proposed to use this talent. Advertising copy in trade 
journals points out recorris of past productions and announces the pic«- 
tures for the forthcoming s.eason. Dozens of motion picture vreeklies and 
monthlies - the '^fan" magazines - describe coming attractions. Adver- 
tising in magazines of national circiaation supplements the campaign. 

The advertising and exploitation campaign creates a demand for cer- 
tain pictures - a demand which the exhibitor is made aware of by his 
"movie fans." The exhibitor quite naturally seeks to satisfy his pat- 
rons by attempting to license the pictures they desire to see. However, 
the distributor will usually charge an exorbitant price for any indivi- 
dual film unless the e:±Libitor a,grees to purchase a substantial propor- 
tion of the entire group of feature pictures offered for sale. The dis- 
tributor may offer the exhibitor a selection of a small group of pic- 
tures, but in this instance the price per picture is proportionately 
higher than if a larger group or the entire group is licensed. These 
so*-called "selective contracts" may call for a minimum and maxim^un, 
Por instance, an exhibitor may contract for a minimwn of twenty pic- 
tures with the privilege of taking any number up to a maximum of thirty. 

Regardless of th^* number of pictures specified these contracts are 
drawn v:p during the selling season which is the spring and summer of the 
year and before production on the majority of these pictures has in the 
usiaal ease been started. Deliveries begin in the fall as pictures be^ 
come available for release. 

Various causes may result in gaps in an exhibitor *s program and. re- 
quire the purchase of a single picture to fill an immediate need. This 
practice is known to the trade as "spot booking," 

The first record.ed case of block booking appears to have occurred, 
in 1916 when Adolph Zukor announced that Paramount ^s new selling policy 

9638 



-34- 

woulri. require the p-urchase- of a whole program in order to ottain Mary 
Pickfor^l pir.t-ares(*). This selling policy soon "became general through- 
out the Industry, 

2. DESCRIPTION 0? 3L0CIC BOOKIIIG ' 

In "brief, "block "booking, as practiced in the Motion Picture Indus- 
try, relates to the sale of pictures in groups usu-^.lly varying in num"ber 
from ten to forty an^ in many cases the distri"butor 's entire line. The 
aggregate price for an entire group of pictures in generally loner per 
picture than in instances uhere a smaller group is selected, or the pic- 
tures are contracts for indivi'^uallj''. In areas uhere several e;±.i'bitcrs 
are in keen competitionj distri'outors usur.lly refuse, to sell any pictures 
of a group separately until all efforts to dispose of these pictures in 
"blor^.ks he.ve failed^ In areas where no competition exists, the exhi"bitor 
is in a satisfactory "bargaining position and can almost dictate his orrn 
terms, 

3. THE POSITION OF VAUICUS GROUPS ON THE BLOCK BOOKING QTIESTION 

(a) E::hi"bitors . 

The practice of "block "becking is attacked "by exhi"bitors on the 
grouh'^.s that: 

(i) It forces him to license and pay for inferior films 
or films unsuite'^i to his normal aurlience, 

(ii) It assures the producer of re\'enue on all films re- 
garriless of quality, thus removing one of the incentives toward proriuc- 
tion of "better pictures, 

(iii) It fills his playing time v/ith the proriuc t of a few 
f^istri"butors, preventing him from contracting for ^esira"ble films of 
other distri"butorse 

(iv) It forces him to contract for more pictures than "he 
coulri reasonably use in or'^er to o"btain sufficient films of the "better 
class. 

Affiliated theatres ercpress the opinions of the prc^ucers and ^^Is- 
tri"butors who control these theatres and are in favor of the practice. 

In general, inr^epencTent exhi"bitors oppose "block "booking. They 
maintain that if producer-distri"butors were coinpellerl to sell each pic- 
ture on its own merits, a theatre owner woul^l select only such pictures 
as his patrons requester^ and desired^ DoulDtless producers would suffer 
losses from unpopular pictures, "but these losses would "be no greater 
then those suffered "by manufacturers in other lines of "business who made 
inferior goods, and vzould "be i^onpensated for "by increased profits on 
popular films. Under this system the most capa"ble producers v;ould 

(*) "A Llillicn and One Nights" "by Terry Hamsaye, Page 731, "Vol, II, 
Pu"blisher, Simon c: Schuster, 1926 

9638 



survive a.nd new competition vro-ulri "be free to enter the producticn fielrS, 

The follov.dng testimony "before the general Trade Commission indi- 
cant es the attiturie of the larger exhibitors: 

"The Sxarainer's Findings shov; the testiraonj'- of exhibitors in 
(different parts of the co-untry v;ho were forced by the respondents 
to talce all of a block or blocks or none and their many objections 
to this practice. In addition to this evidence -Te riesire to call 
the attention of the Commission also to the resolution passed by 
the Ner/ York Thea.tre Owners' Chamber of Commerce on August 2, 1923 
(Comm, Ex, 344,345; R. P, 6590-94), This is an exhibitor organi- 
zation with a membership which represents 500 of the leaching 
theatres in metropolitan New York, These resolutions were sub- 
mitted to the entire membership two v;eeks pi^ior to this meeting, 
in order that all might have ample opportunity to consirier and 
discuss them, 

"The resolutions severely condemned the practice of block booking 
and were passed unanimously. This action by such a rei^reoentative 
body of exhibitors is indicative of the attitude of the e:±Libitors 
throughout the industry, 

"Probably the best laiown exhibitor in the Unite'^ States in recent 
years is Samuel L, Rotha-fel, better knov;n to his millions of ra.dio 
acquaintances a,s 'Roxy, ' He was for yea,rs manager of the Capitol 
Theatre in Hew York, one of the largest and finest houses in the 
United States, In his testimony (pp, 721-2) he points out the 
evils of this system — -how it compels the exhibitor to talce the 
bad pictures in orrier to get the goorl ones. He is unalterably 
oppose'-i to the system. His testimony is convincing because in 
the management of his theatre he has been forced, against his 
will, to talre all the pictures of the G-oldwyn Pictures Corpora- 
tion, which owns an interest in the theatre, and he therefore 
speal-cs from experience, 

"It na.turally follows that this practice affects the public be- 
cause, T/hen the e:}±Libitors are forcerl to take any inferior 
product, the theatregoing public is forced to pay its money to 
see poor pictures," (*) 

MaJiy exhibitors have agreed that the licensing of pictures in a 
block as a. wholesaling proce-iure is a desira.ble practice provided that 
no compulsion is used to exact purchases of entire groups and thus 
limit the right of selection. 

The Universal Pictures Corporation inaugurated a complete service 
plan in 1924, While it was a form of block booking it had a limited 
popularitji^ with small town exhibitors. The plan called for a weekly 
payment, sometimes as low as $9, for releases which provided a complete 

(*) Brief for the Commission, Part II, Page 155. Federal Trade Commis- 
sion V, Pajnous Player s-Laslcy Corpora.,tion , Federal Trade Commission, 
Docket 835, 

9638 



shovT including feature and shorts. This filn service, later adopted ■by- 
other companies, supplied motion picture entertainment in small tovms 
having as few as 100 or 200 inhabitants. In most cases shows were limited 
to one o,r two a T;eek. 

( "b ) Independent Producers and. Dis tributors 

The following testimony of Mary Pickford before the Federal Trade 
Commission during the Coirjnission' s investigation of the Famous Players- 
Lasky Corporation indicates the effects of the block booking practice upon 
producers and distributors who control an insufficient number of theatre 
outlets: 

"A. In certain places in the United. States we have 

realized great difficulty in selling our pictures. 

Q,. What difficulty did you have that interfered with 
the sale of the pictures? 

A. ■ • Well, the theatres ha,d purchased the year's out-, 
put, for one reason. They had their 52 pictures, 
or whatever pictures they needed, that they had 
bought in the block, and they had no room for our. 
productions. And anotlier was that they would not 
pay (our prices) and we could not accept the 
prices they offered us. 

Q,. Lid you find that you experienced any difficulty 
"hy reason of certain producers ov/ning theatres? 

A. Yes, we did. 

Q,. To what extent did the blo.ck booking and the 

ownership of theatres by loroducers interfere with 
the market for your pictures? 

A. Well, in certain sections . . . v/e were forced to 
go in cheap houses on side streets instead of the 
pictr.re theatres, thereby losing money. " (*) 

(c) Affiliated Producers and Distributors 

This group defends the block booking practice on the grounds that: 

(i) It is merely the application of the principles of 
wholesaling. 

(ii) It reduces the cost of distribution, thereby bene- 
fiting the exhibitor. 

(iii) It simplified the exhibitor's buying problem. 

(iv) An assured income tends to encourage consistent 
quality productions. 

(v) It is the most successful method of distribution yet 
devised. 

(*) Reprinted from "The Llotion Picture Industrj^" - Howard T. Lewis of 
Harvard University, Page 264. Publisher, Van No strand, 1933. 

9638 



-87- 

(d) Religious and Other Grou-ps Interested in the Social and 
, Moral Welfare of the Public 

These groups oppose the practice of "block "booking on the ground that 
.ohe practice interferes with local censorship activities. When approached 
by representatives of these organizations with regard to the showing of a 
feature deemed unsuitable, the exhibitor disclaims all responsibility. 
He contends that he must contract for such pictures even as a condition 
to contracting for any pictures, and that failure to exhibit a picture 
that might be classed as salacious would involve daioage to his business 
and a possible breach- of- con tract action. 

4. PEEVIOUS ATTEMPTS TO COPE WITH THE PROBLEIvI 

In 1922 the Federal Trade Commission instituted proceedings against 
Famous Players-Lasky Corporation and, after five years spent in holding 
hearings and gathering testimony, decided that block booking was an un- 
fair and improper practice and issued a "cease and desist" order (*). 
However, when the issue was presented to the United States Circuit Court 
of Appeals for the Second District, this ruling was reversed in a decision 
handed down on April 4, 1932. (**) 

In the meantime, trade practice hearings had been held in October, 
1927, with Federal Trade Commissioner Abram F, Myers presiding. Block 
booking was one of the subjects discussed, but no solution to the problem 
was reached. 

In commenting on conditions after this trade practice conference, 
one of the leading disinterested authorities on the Industry stated: 

"At the present moment, block booking is still the common practice 
of the motion picture industry. It is probably tru© that there is 
more open selling than there was. Doubtless this is the result of 
a number of factors among which the threat of governmental action 
is probably one. However, the fact remains that block booking 
still exists." (***) 

The trade practice "hearings under the auspices of the Federal Trade 
Commission broke up finally with little benefit to any concerned. Such 
concessions as had been made by the parties to the conference were soon 
lost through the inability of the Federal Trade Commission to enforce its 
rulings. 

Between 1927 and 1933, a number of meetings were held at which rep- 
resentatives of distributors and exhibitors attempted to arrive at a 
standard contract. A clause known as the "5-5-5 cla.use" was suggested 
and was fina,lly incorporated in these proposed standard contracts. This 
clause permitted an exhibitor to cancel 15 per cent of all pictures bought 

(*) Federal Trade Commission, Docket No. 835. July 9, 1927. 

(**) Federal Trade Commission v. Paramount Famous-La sl-:y Corp., Adolph 
Zukor, and Jesse L. Lask;^'-. 

(***) "The Motion Picture Industry" - Howard T. Lewis of Harvard Univer- 
sity. Page 178. Publisher, Van I'o strand, 1933. 

9638 



in block, provided that he paid for half of those cancelled and provided, 
further, that he v/ac not in default of any existing contract, and that the 
average license and rental fee for the pictures under t>oniira,ct rrs^c less. 
than $400. This clause was never widely adopted. 

Bills have been introduced in practically every Congress since the 
Federal Trade Commission' s investigation of the Famous Players-Lasky Coi^ 
poration brought the problem to the attention of the public, Tlie most 
recent of these anti-block booking bills v/as sponsored by Representative 
Samuel B, Pettinglll of Indiana (*) . The- bill receiving the- most atten- 
tion was probably that introduced by Senator Smith W*- Brookhart of Iowa 
in 1928 (**), This bill progressed to th« stage of hearings before the 
Senate Committee on Interstate Commerce. These hearings lasted five days. 
Practically all controversial di^tributor-^exhibitor problems were then 
discussed, 

5. GOVEiajimNTTAL KEG-ULA.TI01T IH EHGUIIP ..-.:•••-: 

It is. interesting to note that in England the- Cinematograph Films 
Act of 1927 (**'")■ restricted the; practice of block booking.- part I of , 
the Act contains , the following, sections:'.. . • 

1, Restrictions on blind booking of films. 

2. Restrictions on advance booking. ■ , 

3. Penalty on contravention. 

4, Provisions as to existing agreements. 

Charles C. Pettijohn, general counsel for the Motion Picture Produ- 
cers and Distributors of Americaj-.'. asserted at the Senate Hearing that this 
Act was directed towards restricting the importation of American films. 

6. Plffi-CODE. PROPOSALS ' .-■:•••..• .•..•.";. .. ';. ' 

luring -the pre-code discussions, the. various interested groups stated 
their positions verj'" much as outlined previously in this section. ' It was 
obvious from the beginning that distributors would not agree to any code 
which eliminated block booking, and that exhibitors would not -agree to 
any Code that ignored the question. 

The Exhibitors' Committee proposed that the Optional-' Standard License 
Agreement of 1933 including the 5-5-5 cancellation clause be incorporated 
in the Code, However, exhibitor opinions throughout the country seemed 
to favor either complete elimination of block booking or a less restricted 
cancellation clause. 

Ed Kuykendall, president of the Motion Picture Theatre" Owners of 
America, proposed at the public hearings on the code that a strai^t 15 
per cent cancellation privilege without pay/nent for cancelled pictures of 
all films bought in a block be granted the e:±ibitor. In this connection 
he stated: 

(*) H. R. 6472, 74th Congress, First Session, 

(**) S. 1667, 7bth Congress, First Session, 

(***) A copy of this Act was introduced at the Senate Hearings on the 

Brookhart Bill (S. 1667, 70th Congress, First Session P, 150-160) 

by C. C. Pettijohn. 

9630 



-39- 



"We telieve that this 15 per cent elimination claune will satisfy 
and meet with the actual requirements of ever^ responsible and rep- 
resentative exhibitor, and that it will reniove from further contro- 
versy, the question of blocl: boohing which durinj^ the past few years 
has developed into a political issue, both within- and without the 
industry, 

"T7e further believe that the 15 per cent elimination clause will not 
work a hardship or an injustice upon either the producer, distributor 
or exhibitor. We hereby recognize the comnercial advantage to ex:- 
hibitors in buying motion pictures in group for future delivery to 
insure a stoad^^ end dependable supply of sm table attractions for 
the continuous operation of their theatres. "57e are opposed to any 
requirement that motion pictures must be sold singly, separately 
and apart from each other." (*) 

Abran P. Myers, representing the Allied States Association of Motion 
Picture Exhibitors, had submitted a proposal that compulsory block book- 
ing be declared an unfair trade practice, but in connection with the can- 
cellation privilege stated: 

"We suggested that if there was a disinclination on the part of the 
Administration to go into that subject in the code, we felt a 20 per 
cent elimination rate would at least serve the purposes for. the time 
being until the forces of public opinion, whicii are out of our con- 
trol but which are steadily rolling up against the practice of block 
booking, conoid get into action and perhaps regulate the matter for 
all time by necessary,'- legislation." (*) 

The position of affiliated distributors may be inferred from the fol- 
lowing excerpt, talcen frcia a printed memorandum of 66 pages (unsigned and 
not dated) prepared by producers-distributors in support of their own pro- 
posals for a "basic code": 

"As for the Exhibitors' proposed Article 14 the standard form con- 
tract above referred to itself provides for a method of eliminating 
certain pictures, and the Distributors feel that such provision is 
purely a contract provision and that no code should require the sel- 
ler of mercharxdise to permit the cancellation of any percentage of 
the n'erchandise sold or pictures licensed as in this case. It would 
be establishing a very dangerous principle to provide that the fail- 
ure to give such cancellation right would constitute an unfair trade 
practice. On the contrary'- we believe it could be argued with much 
more force and effect that giving cancellation rights on pictures 
licensed is uneconomical and a dangerous principle. The Distribu- 
tors feel that while they are willing to include the cancellation 
rights specified in the standard optional contract, that is as far 
as they should be required to go, since such contract was brought 
about by the Distributor and Exhibitor branches of the industry." (**) 



(*) Tranccript of Hearings on Proposed Code of Pair Competition for the. 
Motion Picture Industr;^- - Volume III, page 500. September 14, 1933. 

(**) Memorandum in Explanation and SuiDport of the Provisions of the Pro- 
posed Basic Code of Pair Competition for the Motion Picture Industry 
(the producer-distributor proposals). Not dated, not signed, page 
49 - National Recovery Administration Piles. 

9633 



7. THE CAIICSLLATION CLAUSE 

The provisions of the code represented a compromise between the con- 
flicting interests. Tiic e^iii'oitor -ras graiitoa the privilege of cancel- 
ling ten per cent without pay-ient therefor of all pictures bought in 
"block, subject to the following restrictior s: 

1. The exhibitor must have contracted for the entire block offered 
by the distributor. 

2. The average license fees of all pictures in the contract must 
be not more than $250. The ajaovmt of the license fee, where 
percent.age pictures were included in the contract, was computed 
largely from past performance. 

3. The e^diibitor must not be in default of his contract. Any sub- 
sequent default would make him liable for the amount of the pic- 
tures already cancelled. 

4. The exhibitor must give the distributor notice of cancellation 
within 14 days after the general release date. 

5. The e:diibitor ijust have paid for nine pictures before he could 
cancel one, Tliis procedure held for each subsequent group of 
ten, applying to the last group only if more than five pictures 
remained. The cancellation privilege was cumulative. (*) 

The Optional Standard License Agreement of 1933 was made standard for 
the Industry with the provisions that any clause thereof that was incon- 
sistent with the Approved Code was deemed to be amended to conform to the 
Code, and, that individual distributor's sales policy provisions might be 
inserted therein provided they were not inconsistent with other provi- 
sions. (**) 

An interesting exchange of letters bearing on the block booking 
question took place about this time. Dr. A. Ls,wrence Lowell of Harvard 
Universitjr was offered but refused to accept an appointment as an Admin- 
istration member on the Code Authority for the Motion Picture Industry. 
Dr. Lowell based his refusal largely on the fact that the code did not 
eliminate block booking. The following excerpts are of interests as 
showing the attitude of certain extra-industry groups on the block book- 
ing question as well as the attitude of the National Recovery Administra- 
tion officiaJ-s: 

December 13, 1933 

(To Sol A. Rosenblatt, Deputy Administrator, Amusements Division) 

Tlie five large producing companies have, by their business 

methods, obtained a controlling grip upon the business and are able 
to put forth upon the com^-runity any films that they please. This 
monopolistic practice, based on block booking and blind buying many 

(*) Article V-F, Part 6 of the approved Code. 
(**) Article V-F, Part 6 of the approved Code. 

9638 



-91- 

of us asked to have checked "by the Llotion Picture Code; "but, instead 
of that, it has teen given a certain legcX sancticn 

A. Lavrrence LottbII (*) 

Decen'ber 15, 1933 

Dear Dr. Lovrell: 

The practices of "block "booking which you say are monopolistic 

have oeen specif icsJly held not to "be "by a Federal Circuit Court of 
Appeals. We cannot impose througli codes a surrender of the advan- 
tages vouchsafed "by the Gcnstituticn luider the copyright laws, and 
unless T7e can o"btain ?.greement to such surrender in Trhole or in part, 
there is nothing to "be done "by us a'bout it. ' 

■ But this code does give exhibitors a right to cancel up to 
10 per cent of the product which they have contracted for. It is 
the first tine that such a concession has "been made. In the opinion 
of -oractical aen this -vrill -r^o far to remedy the evils coEiolained of 



Hugh S. Johnson, Administrator (**) 



Deceii"ber 13, 1933 



Dear G-enerel Johnson 



That the practice of "block "booking is a monopoly illegal at 

law, I do not mean to assert, oiit that the rrhole o"bject of it is 
monopolistic I think one would hardly deny; and I am ver^^ much in- 
terested in your statement that you had no legal power to prohi"bit 
it in the code, "becEuse it wo^'uld seem to follo-^ that, no matter how 
much the representatives of the Goverrjment on the code authority 
should- condcfji it, there would "be no legal power to stop it "by any 
further amendment of the code. 

The right of exhi'bitors to cancel 10 per cent of the product 
is, they tell me, futile; "because it is perfectly easy for the pro- 
ducers to put in 10 per cent of films which the e:±Li"bitors are cer- 
tain to reject "before reaching the objectiona'ble ones. Nor does this 
avoid the a'buse of compelling them to take 90 per cent of an un- 
known "block of films, including o"bjectionaole ones 

A. Lawrence Lowell ('•'**) 



(*) (**) (***) Il'.e P.ecord of Hearings hefcre the Senate JinsJice Com- 
mittee, Investigation of the ITaticnal Hecoveiy Admin- 
~ ~ istration pursuant to Senate Eesolution 79, Part 5, p, 

1290-1292.' 



9638 



-92- 

December 29, 1933 

Dear Dr. Lowell: 

You say that your refusal is based on your statement that the 

"block "bookini:;;' clause is monopolistic. 

All that my remarks on the limit of my authority to stop 
block bookintT and blind buying meant was that I cannot repeal the 
copyright lans on uhich these practices are based, and vzhich, under 
our constitution, were intended to create a monopoly for writers and 
authors. 

But v;e did get a voluntary concession of a ten per cent can- 
cellation clause. Tliis whole procedure is experimental. I was able 
to negotiate this concession which I had no power to impose. I 
could not get more because I was unable to negotiate more. The 
question as to whether it will do the trick or not will not be an- 
swered by conjecture but by test - all I asked of you was that you 
conduct the test 

Hugh S. Johnson, Administrator (*) 



8. SmaiAHY OF C01.1PLAINTS UIjTEH THE CAITCELLATIOH CLAUSE 

A report submitted to the National Recover;^'- Administration by the 
Code Authority (Motion Picture Industrj'- Files) indicates that the local 
Grievance Boards had considered a total of fourteen cases involving the 
cancellation r)rivil9ge in the period from their inception to April 1, 
1935. IIo information on which to base an analysis of these complaints is 
available. 

Information in the National Recovery Administration files indicates 
that only three cases involving the cancellation privilege were appealed 
to the Code Authority from decisions of local Grievance Boards. Four 
docket numbers appear, but this was the result of one case appearing under 
two docket numbers. On first appeal, the case was remanded to the local 
Board for further hearing and, apparently incorrectly, was assigned a new 
docket number on the second appeal. 

Two of th& appealed cases named the United Artists Corporation as 
respondent. It v;as the policy of this company to draw up a separate con- 
tract for each picture, regardless of the total number licensed. On this 
basis, it was contended that the cancellation clause could not apply. 
However, the exhibitors concerned testified that they were required to 
contract for all the pictures offered as a condition to contracting for 
any. The Code Authority held that this had the effect of mailing all the 
separate contracts a part of one transaction, and, therefore, ruled in 
favor of the exhibitors. (**) 

(*) National Recover;^'- Administration File - Motion Picture Industry - 

Code Authority - Administration Members. 
(**) Code Authority Appeal Decisions No. 155 and No, 245, National 

Recovery Administration Files. 

9638 



-95- 

In the trJ.ri esse the U^tTO-Golcrr)ii-lS.^feT Di3tri£nitin.g Corpor^'ticn 
filed ? co-jrplr-int heiore the Charlotte (>rieT3Ece Bofrd ssPinst sn ez- 
hititcr, ps'-ing^ that the exiiihitGr he required tc s-cp-olj preferred plry- 
ing tine tc a T^rcentage pict^are as siDeciiiei in the license agree-.:ient, 
rne einhicitcr interpcsed as a defense that he desired tc cancel the pio- 
tiire in c-aesticn as prcrided in the code. The ci='se -~^s certified to the 
Cede Au-thcrity and -was dismissed hy this ordj (*}. 



9, T£Z 0P±3AlICiC U' TEL C^^'CZLLAlIOr CI^'JS: 



'±j 



Seen after the Code went inte cperation, the qiiestion ^rose ^s to 
irhether the C5ncellaticn ■orivilefe spulied tc e2hi':;ition contracts es— 
ecTited oeicre the effective date cf the code, TiTision js.dministratcr 
Sel A, Zesenhlatt as Administraticn Leaher en the Cede Axithoritj stated 
it as his cpiiiicn that the cancellation pririlege she-old he retrca.ctive. 
This position t??.s ta>en hy the Cede Authcritj (**). 

l?o sx?=tistics as to the — al-oe of the cancellation privilege to ex— 
hihitors are avsilacle, Ezhioit-ors in general de net aproear to have 
heen irell satisfied wltri the operations of the cancellation claiise. 

The folloTTing is q-ooted fron a letter to the ezeciitive secretary of 
the Code Aiitheritv from Ivathan Tamins, s prominent memher cf the Allied 
States AEs^ciptien of Motion Picti3re Zxhioitors and a representative of 
independent ezhicitors on the Co2.e i^u-thcrity: 

^Article 7, ?, part 6, of the Code of Jair 
Ccmi^etition gives to the exhi titer the privi- 
lege of excluding IC per cent of the total 
munher of motion pictures Dicensed vitheut 
payment therefore, providing he has licensed 
c'll th3t has oeen offered, and prcvidijig that 
the average license fee is not in ercess of 

^Tri s provision cf the cede -vtps inserted for 
the ezpress purpose cf elirJ.nrting some of 
the alleged evils rf hlcch hoch±ng, in order 
to enahle an eshi titer to disr^ense Tsith the 
ezhitition of a motion picture that he did 
net think was suited for his aud.ience, and 
also to serve as a cushion to aosorh the usual 
cvernuTing th?t an ezhihitor is compelled to 
nahe hecause of the customary failure cf dis- 
trirmtors to release the numher of pictures 
uronised. 



(*) Cede Authority Appeal Decisi-^n :^r. 40, iMational Recovery 
Administration Tiles, 

(**) Cede authority Sesolution, Karch 25, 1B54, rational Eeccvery 

Administration Files. - - 



963B 




.-94- 



"This provision is 'ncthia-7; now to the in'^^Aistr^, 
It xfps contained in the stf^ndard uniforTn exViibi-. 
tion contract adci.ited "by the industry in Chics .^ 
in 1928, and a sinilsr prcvision^-'as cr.t^ined 
in the optional stand-'^rd license a,<^eenent a^;reed 
to in the Atlantic Cit-','- confere-'^.ce in 1^30. In 
the latter p,^reenent, the privile-'e to exclude was 
restricted to 5 per cent -dthcut payment, 5 per 
cent by paying one~h9lf of the license fee, and 
an additional 5 per cent by paying in full, but 
securint°: extended playir^j tirae on features that 
the exhibitor did shon, 

"Ecwever, the exhibitor's orivil.e9;e of excluding 
xiFS perraitted in all cases Vnere the average li- 
cense fee was not in excess of $400 so that it 
con readily be seen that the code gpve the ex- 
hibitors nothin.^ new that did not enjoy before, 
but en the contrary in the o-oinion of the under- 
si;::;ned, by reducing the average license fee re- 
quirement from $400 to $250, the code actually 
deprived many exhibitors of a iDrivilege they 
foriaerly enjoyed, 

"This privilei2:e of exclusion has therefore been 
in the motion-picture industry at least since 
1S28. Distributors and exhibitors had experience 
r.'ith its wordings from 1928 to 1930 when at the 
Atlantic City conference the 5-5-5 forrr.ula was 
ri;-reed u:pon as a conoronise to the demand of a 
straight 15 oer cent cancellation privile-;e, 
From 1928 to 1930 percenta.^e picture selling rras 
in vogue in the industry, yet in the forTolation. 
of the 5-5-5 plan of cancellation, it '-^s crn- 
tcnplated that the exhibitor could, if he desired, 
cancel a percentage picture, and it was recognized 
that it w^s optional with the exhibitor to cancel 
any picture he desired without restriction, provid- 
ing the average license fee, including distributor's 
sharr of percentage pictures, did not exceed $400, 

"The wording of the cancellation clause in that 
contract shows beyond shadow of a doubt, that the 
exhibitor could cancel a percentage picture, and 
in the actual o"oerntion of this clause, this was 
recognized as a natter of -practice, and., cancella- 
tion of percentage -oictures was Thermit ted, -orovid- 
ing all requirements inserted for the protection 
of the distributor were compiled vith, 

"ITo one can disT)ute that the wording of the code 
provision permits the cancellation of percentage 
pictures. Subsection E provides, "If the rental 
of any motion picture excluded is to be compiled 



9638 



-95- 

in nliole or in part uicn a percenta?,e of the recei-ots 
cf the exhibitors theatre, the suin to be paid by the 
exhibitor as lorovided in -osragraph (b) (5) hereof, 
sholl be deterro.ined ps follo'js:" Nowhere in the code 
is there r^ay restriction es to the right of exclusion 
ether thnn the requiremenL .-> of oart 6, It is clear, 
therefore, th;?-^ it \ns the intent of all iDarties in 
the industr^r from 1928 to 1234 thnt the .v^chibitor 
should have -on arbitrary uiinarvMered ri.=ht of 10 per 
cent exclusion, -orovirin;- he let ^-'ith all reo^uire- 
i.ents stipul?^ted and it ici equ'^lly cl3rir that the 
Cede of j'air C'":.nr)etition intended to "or., serve this 
right to the exhibitor, 

^^^'c\r 6.0 the 1S34-35 fcrm oT contracts offered by 
the distributors deal --ith this situation? They 
have all bodily grafted that •.)rovision of the code 
and inserted it into their contracts, and then in- 
serted other clauses T?hich nullify that lorovision 
cf the cnde, rietro, Paramount, Universal, Columbia, 
I7c::, ex"pressly provide in substance that if an ex- 
hibitcr has exercised his right of exclusion imder 
the code, the distributor ma;'' arbitrarily rescind 
the allocation rf the -oicture excluded -^^nd designate 
anv"ther picture to be exhibited under the terms ap- 
plicable to the picture excluded. In all probabilitj'- 
the snne thing can be done under the R, K. 0. and 
TTarner contracts (United Artists has not been available 
for ex^-nination) , 

"In other v'ords, if an exhibitor ccntr-^cted for 
four rut of 50 on -oercentage uith a gu.prantee of 
$200, 16 at $100, 20 at $50, and 10 at $25, and 
if the exhibitor seeks tr exclude picture X, a 
percentage picture, -.yhich he always could have 
done ;orior to the code, the distributer may ar- 
bitr'-Til- "love ;^iicture X into the last classification, 
r'siC: the exhibitor is relieved of playing a $25 picture, 
and no\r one of the ether inferior "oictures miracu- 
lously becomes ''7erth3i^ rf securing -oreferred playing 
time on percentage, 

"To my mind this is chiselling cf the worst sort. 
It shoves 8n indication en t^.e -oart cf the distrib- 
utor that the;?- never did and do not no-' want the 
code, that the;'- seeh to take advantage of the monop- 
oly they enjoy to impose uoon helialess exhibitors 
• conditions.and terms utterly unfair, but which the 
power of might gives them an opportunity to irai^ose. 
It shows a lack of willingness to coooer^te with 
the Government in the pdrainistration of the code 
and an utter disreg'-^rd for everybody except them- 
selves. 



9^ 3 



-96- 

"I sv.lDnit without further ar^mnent th?5t this pro- 
vision of their contracts is ille^;<?l, because it 
violates the spirit and letter of exDress orovi- 
sions of the code and oecauso it is inconsistent 
\7ith "orovisions of the ooti'irial.', stHndard af!;reer;iont 
that the code has adc-oted. I request imnediate ac- 
tion on the part of the distrihiitors, nithdrawing 
these orovisions from their contracts, and urp;e 
them to do so to prevent an aroused exhioitor "body 
from demanding that the code be onened for amend- 
ment to prevent such practices," (*) 

In connection with the above, it must be pointed out that while the 
5-5-5 cancellation clause mentioned in Mr • Yarain's letter had been form- 
ulated sc;;.e years previous to the Code, *it vas not in general use, A 
disinterested authority on the Industry described the situation in the 
two YBDTs preceding the formulation of the Code fs follows: 

"Throughout the 1931-32 f.nd 1932-33 selling 
seasons, each distributor offered to the ex- 
hibitor a contract v.'hich in his ODinion v^s 
as satisfactory as he could devise. There 
v;as, therefore, no uniformity of practice. 
Thus, seven of the leading companies --^ave the 
e:-±.ibitor no right to exclude finy nhotcolay 
\;hatsoever, while tvo rf them ^pve the ex- 
hibitor the right to exclude 10^ of the oic- 
tures by -naying' 50^^ r'ental, provided that tlie 
ezaiibitor- p^^rch^sed all the Dictures offc?red 
hira."'(**) . ' 

In a letter to United States Senator Pat Harrison, dated April 12, 
1935, Division Adiiiinistrator Sol A. Rosenblatt stated that the practice 
of inserting clauses tending to avoid conformity ^7ith the standard form 
of ej±Libition contract was before the Adiainistration for consideration. 
Activities in this respect were halted by the Sui^reme Coui't decision of 
May 27 , 1935, ' ■' 

Ed Xuykendall, president of the Motion PictuTe Theatre Owners of 
America, at the fifteenth annual convention of this grou->D at Ne'-^ Orleans, 
February 25, 1935, also stated that the OT)e ration of the cancellation 
clause vras unsatisfactory, (***) 



(*) Quoted in full in Record of Hearings before Senate Finance 

Corm.:ittee "on Investigation of the National Recovery Adminis- 
tration, Seventy-fourth Congress, First Sesnion, Pursuant 
to S, Res. 79, (pages 1284 C.. 1235.) 

(**) "The Motion Picture Industry" by Howard T. Lewis of Harvard 
University, Publisher, Van Nostrand, 1933, Page 179, 

(***) Lotion Picture Daily, Issues of Feb, 26, Feb. 27, 1935. 



9638 



-97- 



10. DISCUSSION 



31^c^; "becking- is, if net the mcst cc.aTilica ted, et least the aost 
contrcversiol problem trcujlin-?- the Votioii Pictore Industry, "Dvjcing 
eleven ^'■ears, "betv/een 1921 and 1933, the j'ederal Trpde Conmissicn col- 
lected scne 17,000 pas'es of testir.ony and 15,000 pa^s of exhibits nith 
regard to the practice. In 1952, the Federal Trade Commission annciinced 
that the subject roiild be dropped. 

The nost comiiion solution advanced by inde-oendent exhibitors is the 
complete abolition of compulsorj'' block booking. It is proposed that it 
be declared a violation cf statutor"^'' lar: whenever the price of an in^ . • 
dividr^l pict-jire bears such a relation to the price of the same picture 
bought in a block as to act as an unreasonable restraint on the exhib^ 
itor^s choice. Determination as to whether a price differential is ■un- 
reasonable is to be left to either the Federal Trade Coiimission (*) or 
the Federal Courts. (**) 

T7ithcut going into the merits of arg^jEents, it may be pointed out 
that ad:.iinistration of such a la-'.r would Tjrobablv reauire the services cf 
Federal personnel exceeding the tot.':l number no -.7 eiaployed by the Fe6.eral 
Trade Ccnuission, Lack of adecui^te standards it may be ass^'jried wo^jld 
result in conflicting determinations by different bodies. Moreover, the 
mills cf the courts grind slowly. It wculd "profit the exhibitor little 
or ncthinj;,- to be involved in lengthy and ex'-'ensive litigation. 

The second most freojientl^'' advanced solution is extension of the 
c^ncellpticn privilege. It develoT)ed under the Code th-st practically all 
exhibitors considered the restricted ten per cent cancellation privilege 
inadecuate. Increase of the percentage and removal of the restrictions 
on the free exercise cf this right would "orobably satisfy most exhib- 
itors' rbjecticns to block Docking, This wo^old allow the exhibitor to 
cancel inferior or -onsuitable riictures and contract for quality produc- 
tions if they appeared during the season. 

The producer or distributer of productions of relatively high 
quality T"cu2d h^ve nothing to fear from such an arranger.ent. Since an 
exhibitor must either replace a cancelled nicture with '"another or nust 
extend the run of some more desirable feature, the elimination of un- 
suitable cr inferior pictijres would not involve any loss cf playing 
time to the Industry as a whole. 



(*) Tlie Brcokhart Bill - S. 1567, 70th Congress, First Session. 

(**) The Petfingill Bill - H. ?.. 6-=72, 74th Congress, First 
Sessicn, 



9633 




-98- 

D. POHCrJG ? SHORT SUBJECTS 

1. DESCrLlPTION OF PRACTICE 

All the major comoanies produce short subjects in conjimction with 
the production of feature -oictures. The ornctice of forcing the purchase 
of "short suhjects" such as comeries, travelogs, and, educational pictures 
of one or tvo resl len^^ths as a condition^ lor the contracting of feature 
pict-ores has Icn'':; "been an established 'ractice within the Industry, The 
practice ori-;5inally develooed from a demand for a varied entertainment 
program. Producers also found that the production of short subjects uas 
a convenient method to train' talent for foc-^tui'e pictures and to develop 
directors for the more responsible duties of feature -oroduction. 

The practice of "forcing shorts" is similar in some ways to block 
booking, l.iahy of the arguiaents relative to block booking of feature 
pictures apply equally to the forcing of short subjects, . 

2. PRE-GGIE DISCUSS lOiV 

At the trade practices conferences held in 1S27 under the auspices 
of the Federal Trade Commission, producers and distributors agreed that 
newsreels end. short subjects would net be included in any block with 
fea.tures, and, further, that the.y would not require the lease of nevrs- 
reels r-r short subject blocks as a condition of leasing feature bloclis, 
or vice versa.- Any benefits, ho-/ever, that might have resulted were 
lost due tr the Ic'ck of enforcement po^vers on the part of the Federal 
Trade Ccmnission, 

Independent exhibitors were practically unanimous in their desire 
to eliminate the forcing; of shorts. It was claimed that distributers 
forced er.hibitcrs to contract for greater numbers of short subjects tlian 
they could usej that exhibitors -ere required to date these shorts with- 
out regard to their suitability,'- with a feature -orogram, and that if the 
exhibitor could not date them or cay for tlxem, his film supply was shut 
off (*). 

The Exliibitors' Committee (**) proposed a Code provision declaring 
the forcing of shorts, including newsreels, to be an unfair trade practice. 

The distributors contended that the X)rac1jice was justified because 
it eliminated waste in selling and provided for well balanced programs. 
The producer-distributors group sought to "f)reserve a production invest- 
ment which had been based to some extent upon the "tying in" of short 
subjects. 



(*) Trrnscript of Hearings on the Proposed Code of Fair Competition 
for the Motion Picture Industry. Volume 3., pai^e 506. 
Septe-mber 14, 1933. 

(**) For personnel see Report of the Deputy Administrator , October 26, 
1C33, Ta-r^ 3. National Recovery Administration Tiles - Kotion 
Picture Industry. 



-99- 



3. THE...COIE PROVISION 



Tiie fcllouing cede -jr^visicn relative to the forcing of shorts en- 
bodied prptic-^lly in toto the producer-distributors' pire-code propcscls; 

"lie Distributor shall require as a condition of entering 
into c? contract for the licensing of the exhibition of 
leat-ure motion pictures th^t the Exhibitor contract also 
for the licensing of the exliibition of a greater number 
Cx shrrt subjects (excepting news reels), in pro-portion 
to the total number of short subjects required by such 
Exliibitor, than the proportion of the feature iiictures 
fcr uhich a contract is negotiated bears to the total 
nuj.iber of feature pictures reouirec by the Exhibitor," (*) 

Tc ta":e care of exhibitors' objections regarding the holding uo of 
feat^ares because of a delinquency under a contract frr short subjects, 
the follcv'ing TDr'^vision was included in the Code: 



-t:? 



"Ho Distributor shall refuse to deliver to any Exhibitor 
rn-j ferture notion picture licensed under an exhibition 
contract therefor because of such Exhibitor's default in 
the perfcrnance of any exliibition ccntr-'^ct licensing the 
eidiibi'tion of short subjects of such Distributor, or 
vice versa, provided such Exhibitor has agreed to arbitrate 
all clains and controversies arising under all existing 
Opticnal Standard License Agreements bet- een them," (**) 

4, OPEHaTION 07 E-IE PROVISION 

The privilege of see^:ing relief from an excessive number of shorts 
was not -:;.ade retroactive with respect to contracts executed before the 
effective date of the Code (***), 

This ruling is in contrast to the ruling made by the Motion Picture 
Code Authority with reference to the ten per cent cancellation clause , 



(*) Article V-D, Part 5 of the approved Code, 

(**) Article V-D, Part 10 of the s-p-oroved Code, 

(***) Cede Authority Appeal Decision No. 52 - National Recovery 
Administration 7iles. 

(****) Code Authority Resolution, March 29, 1934. N'-^tional 
Recovery Administration Files, 



9638 



A "brief submitted to the Senate Finance Corariittee on Anril 24, 1935 
"by the Allied States Association of i.iction Picture Exhibitors included 
the fcllrv;-in:^ statement relntive to the orcblein of short subjects: 

"The exhibitors -during the code r)roc3eding submitted a 
prevision which would cut out the practice by the roots. 
The provision in the code ;oer:'its the forcing of shorts 
to the full extent of an exhibitor's vl^ying time and 
recc,;^-nizes and legalizes the practice, llorepver, it is 
so v;rro.ed that it can be easily evaded," (*) 

Study of the record of the administration of this Code leads to 
the r ssiunpticn that this "orovision gave little relief to exhibitors in 
general. Distributors ev-ided the provision by supplying short subjects 
on a. v'ee':ly "orogram basis, charging the exliibitor a suii equal to pa aver- 
age cf the pa;^rments made during the previous year. In effect the ex- 
hibitcr paic". an amount equr-l to his previous year's cost even though 
the nujiiber cf shorts might have been decreased, 

Accrrding to a report submitted by the Code Authority only two com- 
plaints regarding the forcing of shorts were considered by .the Local 
Grievance Boards in the Tjeriod from their inception to April 12, 1935, 

An interpretation was made cf the term "short subjects" which ex- 
cludeo. separate installments of serial pictures from the general category 
of slicrt subjects (**). It v/as a custom to sell serials out of blocks 
separately from shorts and features. 

Representatives of the Motion Picture Theatre Owners of America, 
as reported in the trade press, ex"pressed dissatisfaction with the opera- 
tions of the Code provision on shorts at the fifteenth annual convention 
of this organization held in New Orleans on February 25, 1935, 

In r brief submitted to the Senate Finance Committee in April, 1935, 
during the investigation of the iJational Recovery Administration the 
Independent Theatre Owners Association, Inc. of Hew York, stated its ob- 
jections as follows: 

"The (Code) provision, does not more than recognize the 
existence of an evil and in no way remedies the sa:.ie. In 
the first place, it (the Code) exempts newsreels from the 
operation of the provision and practice h^s shown many ex- 
hibitors overstocked in newsreels having been forced to 
purchase four to five newsreels from different c^ii-ianies. 
Uith i-esoect to this type of short, the evil is even greater 
since only one com;;any's reels can be used unJ.er my circum- 
stances, as they usuallj'- cover the same imocrt'-^nt ne^'s points. 



(*) The P.ecord of the Hearings before the Senate Finance Committee, 
Investigation of the National Recovery Administration pursuant 
to Senate Resolution 79, Page 2029, 

(**) Administrative Order No, 124-39 - November 8, 1934, Signed by 
Sol A, Rosenblatt, Division Administrator, 

9638 



- -101- 

lii addition thereto, the provision is impratical in requiring 
the revelation by the exhioitor of the contract v/hich he has 
T7ith ether distributors rnd involves the necessity of intri- 
cate nathematical coiiputa tions in orc'er to rer-ch a result, 

"ThFt eny such condition and ourden should be ira-oosed upon an 
enhibitcr is self-evident r.ianife station of the unf-^irness of 
the prevision and of the -oartiality tOT/ard the producer dis- 
tributer. Under all circui-istrnces, the -orcvisicn still allorrs 
the distributors to force upon the exhibitors ucre short sub- 
jects than they can use 

"Only CAB provision can rened7 this evil in the industry. 
An absc?.ute prohibition a^-inst any reqi.urenent th-?t sn 
e:i.iibitcr be forced to -ourchaGe shorts in order to receive 
fert'-ireG frcr. a distributor and the lev^T-n^^ of severe 
punisiiiiGnt ux/on any distributor who refuses to abide by 
such provision. " (*) 

5. DISCUSSION 

Tlie ax'filiated ^nd "jnafiiliated circuits oec^use of their inpcrtant 
barjaiiiin^ position are able to resist the f'r-rcin-- of shrrt subjects to 
the saiie extent that they can resist the -^^ractice '^f bl'^cl^ boo'cinf?, 

The independent exhibitors arc -oc^erless to resist the forcing of 
short subjects, A refusal to -o'archase short subjects ordinarily res'jlts 
in difii'cultp in contracting; for features. 

The independent producers of short subjects finds a lar£;e part of 
the narhet cl'^sed to their rjrcduct. Large inde-oendent prod^Jicers of sh-ort 
subjects us-jrlly T7ork -itl^ ."^ijor "oroducers and effect distribution of their 
product th-Tcugh the selling orry nizaticns of the major companies. 

The f'^rcing of short subjects is r^ade r)0ssible tl'-Tough the ability 
of rjEjcr cciijF-nies to control the feature pict-ores r-hich the exhibitor 
must purchrse to renain in business, Coripetition from independent pro- 
ducers cf shrrt subjects is thus restrained, tending to create a closed 

The Licst practical solution to the proble™ would seen to be one 
similai- to thrt enDloyed in the Code; th?it is, to prohibit the forcing 
of a greater n^jziber of short subjects in -jr-^portion t'" the total short 
subject plaping tiine than the number cf fest^jre T)ictui'es contracted for 
fron the sane distributor bears to the total fe^t-jre ■oict-'jire -cla^n-ng 
tise. If, in addition to the abcve, the exhibitor ras given the privilege 
of cancelling a certain percentr3;e of the short subjects bo-jight, a narket 
would be opened to qualit;'- short subjects that night appear, from what- 



(*) Hearings before Senate finance Go::jnittee - Investigation of the 
ITaticnal ^.eccvery Adninistra tion. 74t.h Congress, First Session, 
-•^^P'or s-j£nt to Senate 2.e solution 7r, ?ege IS^C, 

9633 



-102- 

Such a system t/cuIc". relieve tiie e::hi'bitor f I'o a any necessity of 
contrrcting for a greater nuniljer of short subjects tlian lie could play; 
would ore serve a part of his former short suoject ^narhet to the producer— 
distri'oxitor , and would open the ;.pr^:.et to i-iaeoe •indent producers of short 
suDjects, It would greatly encour.M/ie the proc-ucticn of quality short 
subjects "by "both major and indeoendent "orrducers. It would, of course, 
"be neceuspry as was done in the Code to orcvide a-rninst any resort "by 
distributors to a "short subject service", 

E. FJIMTES ON ADMISSION PHIGES 

1. DLSCP.IPTION OP TIE PPJICTICE 

In certain areas of keen competition, o:±Libitors resort to devices 
which are equivalent to rebates on advertised admission prices, such as 
premiums, lotteries, give-aways, t!70-for-one admissions, coupons and 
script books. The public frequently responds eagerly to the "something 
for nothing" lure, whereas an advertised sira'^de reduction in admission 
prices may bring but a small increase in patronage,.. 

The practice of giving rebates is the defensive weapon used "hy the 
exhibitor stri-ggling (l) to meet the competition of larger exhibitors 
offering better and fresher pro :;Tai:ip, or (s) to meet the competition 
offered b3'' another exhibitor who has adopted a double feature policy or 
(3) to meet the competition of a rival who had been able to negotiate 
unfair clearance or (4) to get around clearance based on a minimum ad- 
mission price which cannot be lowered without breach of contract. 

The reba.te practice is the prickly heat of exhibition. Wherever 
the pr.-^ctice proves succosrful in drawing more patrons or in enticing 
patrons from competing theatres, the "oractice spreads. There are man^'' 
instances where all the theatres in a competitive area have become engaged 
in various schemes, offering gifts that have ranged from worthless gadgets 
to auto;:cbiles, 

2, PlUi:-CODE PR0P0S.4LS 

Claims were made by various groups during the form-olation of the 
Code that these various forms of rjrice cutting had demoralized and. were 
threatening the stability of the exhibition branch of the Industry, 

Practically all groups agreed that equitable clearance and zoning 
schedules should be attempted under the Code, Clearance in large part 
is determined by the admission prices charged by the theatres involved. 
Naturally, no standards could be set up where exhibitors were free to 
indulge in unrestrained price-cutting. 

The Producers' and Distributors' Committees submitted for inclusion 
ih the Code a proposal calling for the elimination of all these devices 
whenever they were unfair to competing exhibitors a.nd in all cases where 
they tended to deceive the public. The element of deceit entered where 
one customer night pay the full admission price, not knowing that others 
had entered on "throw-a.wa.y" tickets, "two-for-one" tickets, gift passes 
and the like, 

9638 



-103- 

Distri"butors contended that the notion pictiire show should te con- 
fined to entertainment; that lotteries and games of chance were illegal; 
and fnTther, that handling gifts of merchandise was an alien enterprise, 
Thev proposed that the Code require distributors to refuse to license 
films to offending exhibitors, 

■Some independent exhibitors favored continuation of the practice, 
but the Code proposal submitted oy the Exhibitors' Committee also provided 
for the elimination of these schemes where they were unfair to competing 
exhibitors and in all instances where the public was subject to decep- 
tion. The Exhibitors' differed from the producers' and distributors* 
suggestion in that it pre- supposed the existence of clearance and zoning 
schedules which, exhibitors generally believed would contain measures 
restricting price cutting. The exhibitors' proposal was qualified to 
the extent that where no local boards existed, the ruling of 75 per cent 
of the exiiibitcrs in a designated area would prevail, 

3. OBJECTIONS TO .THE ELIMINATIONS OF P2ELIIU]VIS 

Exliibitors favoring the ;oractice of giving premiums received power- 
ful support from the manufacturers. Pottery manufacturers who sold large 
quantities of chinaware to small exhibitors throughout the country ex- 
pressed strong opposition to the elimination of premiums. Figures of 
various companies were submitted which purported to show threatened 
losses of thousands of dollars worth of business, (*) Representing the 
National Brotherhood of Operative Potters (affiliated with the American 
Federrticn ex Labor), stated that 2,000 of the Brotherhood members were 
emplc--ed in the production of premiums which were distributed by motion 
picture houses, (**) 

4. CODE PROVISIONS 

The Code provisions as finally drafted declared that the lowering 
of annciinced and advertised admission -prices in cases of lotteries, 
prizes, reduced script books, coupons, throw-away tickets, two-for-one 
admissions, or by other similar devices which were unfair to competing 
exhibitors or which tended to deceive the public, were unfair trade 
practices. (***) 



(*) Transcript of Hearings on the Proposed Code of Fair Competition 

for the Motion Picture Industry, Volume 1, September 12, 1933, 
pag-es 216-234, 

(♦*) Transcript of Hearings on the Proposed Code of Fair Competition 

for the Motion Picture Industry, Volume 1, September 12, 1933, 
-OE^ge 214, 

(***) Article V-E, Part 3, Section 1 of the approved Code, 



9638 



-104- . 

Hovrevsr, the Code tli^n rotated th^t "relvitns r.uch ac preminms in 
the form of ^ifts and other things of value shall "be deemed to "be "un- .• 
fair trade practices onljr if 75 per cent of the affiliated exhibitors 
?nd 75 per cent of the inde-»^^endent e-hi^bitors in a parti ciilar area, 
voting separately, so indicated their der.ire." (*) 

Moreover, a period of ninety (90) drys v;ar- granted "before any such 
ruling should hecome effective in order to allow exhibitors to dispose 
of whatever supply of premiums they might have in. stock. (**) 

Enforcement of these provisions after violations had "been found was 
to te secured hy giving the local G-rievance Boards the povrer to order 
the distrihutors to refuse further delivery of films if the violating 
exhihitor refused to cease and desist from continuing the practice, 

5. OPEMTIOIT OF PEOVISIOITS 

Exhihitors strictly adhering to g'ifts of premiuns rrere generally 
unmolested.. An examination of the Code Authority records available in 
the files of the ITaticnal Hecover;;.'' Administration shows that three un- 
successful attempts were made to secure the elimination of premiums "by 
a 75 per cent vote, (****) Thus the actual operation of these pro- 
visions resulted in a complete victory for the pottery group and the 
exhibitors desiring to continue the practice. 

Little difficulty was encountered in cases "^here devices were 
s.dopted vrhich directly lowered the published admission price, such as 
coupons, passes and tvo-for-one admissions. All such cases were con- 
sid.ered. to deceive the noublic and so to be in violation of the Code# 
Determinations by local Boards in such cases resolved down to a finding 
as to whether the respondent was gailty of using the practice and 
whether he competed with another theatre. 

Considerable difiicultj'" wa.s erperiencedt in ma^king decisions where 
various schemes incorporating the element of chance were employed which 
indirectly involved a possible reduction in admission price. Particular 
reference is made to "Bank Night", "Ra,ce Uight", and "Screeno", all of 
which carry copyrights. "Bank Night" was the most frequently used 
scheme* 

a. Bank Night 

"Bank Night" takes its- name from the establishment of a bank account 



(*) Article V-E, Part 3, Section 2 of the apriroved Code, 

(**) Article V-E, Fart 3, Section 4 of the aT^p roved Code, 

(***) Article V-E, Part 3, Section 3 of the approved Code, 

(****) Code Authority Appeal Decisions No. 238, No. 463, No. 473, 



-105- 

"by the management of a theatre and this "bank account is awarded ty 
chance to some person in or near the theatr'i at the time of a drawing 
held on the stage. In the early forms of the scheme, patrons regis- 
tered TfS they entered the theatre. The counterfoils were collected and 
on one night a week, a drawing was held on the stage. One name ws.s 
called; if that person was in the audienr,e, he was awarded the "bank ac- 
count. If the person whose name was called was not present, the "banlc 
account, usually with r':'n added omoimt each time, would "be set aside 
until some person finally claimed the entire accumulated amount. It 
was necessary to register only once to participate in Banl^ Night, 

Before the Code Authority attempted to suppress this device, 
participants were required to "buy a ticket of admission to the theatre, 
thus furnishing consideration and causing the scheme to iDe held a 
lottery in some jurisdictions. Later, the registration hooks were 
placed in the lohhy of the theatr*^ and any one was free to register and 
to "become. eligihle for the prize. On the night of the drawing, an- 
no"uncement' of the name drawn was made outside the theatre as well as on 
the stage. The winning individual was required to present his claim 
within a short time, usually within a minute or two after the announce- 
ment, 

"b. Race Night 

"Race Night" involves a scheme wherehy each patron retains the num- 
hered stulD of his admission ticket, careful note "being made of the 
last digit of the rtuin"ber, During the performance, a short su'bject de« 
picting various advertised articles is flashed upon the screen. A race 
of ten contestants carrying large nu'ierals from zero to nine then talces 
place. Patrons holding the winning num"ber are entitled to a prize 
package if they can name at least four of the articles just previously 
shown upon the screen, 

c« Screeno ' 

"Screeno'' involves a scheme wherehy each patron is given a card 
containing five vertical and horizontal nura"bers corresponding to a list 
of nurn"bers on the screen. During an appropriate intermission of the 
regular performance, an indicator is whirled around a dial stopping at 
one of these num"bers<> Patrons cross off the num"bers on their cards after 
each successive whirl. The first person completing a vertical, hori- 
zontal or diagonal se'ries of nujn"bers on his card yells "Screeno" which 
upon verification entitles him to a cash prize. 

Many other schemes similar in nature "but operating under different 
names were encountered "by the Code Authority, The names of a few of 
these follow: $aving$ Account Night, Grocery Night, Thrift Night, 
Eddie* s Whoopee Party, .Cash, Night, Country Store Night, Gift Night, 
Merchants Prosperity Ni,q:ht, Money'Night, Parm Night, Jack Pot Night, 
Purse Night, Surprise Night, 

The local Grievance Boards experienced considera"ble confusion in 
deciding whether these various schemes incorporating the element of 
chance were violations of the Code. Appeals to the Code Authority were 

9638 



-106- 

50 mimeroiis thr-^t the Codn Avcthoritjr ^•eq-aor.t'^:i an officii'.! interpretcV- 
tion ty the National Hecovery Adjnini strati or- A ruling nas issued 
which declared that I 

So-called "Race Nights" and so-called ''Bank llishts" or similar or 
like schemes or pl?-ns otherr-ise designated if any -oarticipant therein 
is directly or indirectly reqnired to purchase or othervrise acquire for 
value a tic]:et or other token of adnicsicn to the theatre vhen any such 
scheme or plan is heing offered or presented, (*) are violations of the 
Code, . 

Plcins vzere altered after this interpretation so that the partici- 
pants T7ere not required to purchase an adriission ticket "but might simply 
sign their r-ames op-oosite a numher in a hook kept in the lohhy of the 
theatre* VJlien the drawings took place ^inno-'.m cements v/ere made in the 
lohhy as \7ell as inside the theatre* The Code Authority ruled that such 
alterations were -lor'^ technicalities introduced to circumvent these 
provisions end thc^t they produced results siTiilar to lotteries. There- 
fore, these variations uere declared to he violations. (**) 

All ma.terial relatin,^ to "Bank Night" was harred from the mails hy 
the United States Post Office Depn,rtment under Section 213 of the 
United States Penal Code (l8-Uo3,Co -336), Postmasters throughout the 
country rrere so informed, (***) 

Exhioitors facing cease and desist orders from local Grievance 
Boards were placed in the position of either compl^'-ing, closing their 
theatres from lack of filra supply, or seeking injunctions against the 
Grievance Boards or the distrihutors. 

An indeterminate numher of these injunction proceedings were filed. 
Fourteen are record<-!d in the files of the Litigation Division of the 
National Recovery Administration, The majority of these cases were 
still pending at the time the Schechter case o.ecision put a stop to 
further Code activity. However, several decisions interesting in their 
lack of uniformity were handed down. 

The most notahle decision p.gainst "Bank Night" ws.s given "by Judge 
Charles A. Dev/ey on May 19, 1935, in the United States District Court 
for the Southern District of Iowa in the case of Central States Theatres 
Corporation v, Memhers of the Local Grie vanc e Board, et al, - No, 4563, 
Equity Ruling on Application for Temporary Injunction, Judge De\7ey de- 
nied an application for the iss\\ance of a temporary injunction against 



(*) Administrative Order No. 12'i-15 - April 17, 1934 ' 
Signed hy Sol A, Rosenhlatt, Division Administrator, 

(**) Code Authority Appeal Decisions No. 121, No. 130 and No, 198. 

(***) Letter of ICo.rl A, Crowley, Solicitor, Post Office Department to 

Sol A, Rosenhlatt, Director of Comnliance and Enforcement, Nation- 
al Recovery Administration, May 6, 1935, 



9638 



distri'bxitors enjoining them from cea.sin;- to siroply film to th-^ com- 
plainants and a restricting crd'^r previonsl^r in force against ths de- 
fendants X7C.3 terminated, on the groimds that the "Bank Hight" scheme 
which the exhilDitor atter.Tpted to have protected "bordered on a lottery 
and did not narrant protection "by a Court of Equity. 

In cUrect contrast to this decision- the follomng order nas 
entered ''oy Judge Paul J. McCormick in the District Court of the United 
States in the Southern District of California, Central Division in the 
case of Orjiard Theatres , Inc . Ve J. J. Mil stein et al . , No. Equity 
554-M: 

- Ilinate Order - 

The acts of Complainant in carrying on "Bank Higbt" and '^Bicycle 
C-iv^.-rvay"' at th'^ then.tr^ o-oerated. hy it in 6:mard, California, 
are ao renote fron interGtat3 or foreign commerce an t o Tdg neg- 
ligil)i'^ c,nd incons'^i-l'.ential to either. 

There "being no substantial relation to commerce of J^ederal cog- 
nizance in the ac'initted acts of Complainant, the Motion Picture 
Code Authority exceeded its -oovrer in issuing the "Cease and Desist 
Order" that is sought to he enforced against Cornjolainant. 

The Motion to Dismiss the Bill of Complaint is denied. 

The status quo should "be -preserved, and accordingly, the restrain- 
ing order of March 6th, 1935 is now made an inj-ijnction pendente 
lite, and ac; such, will issuee...... 

Dated April 4th, 1935, 

On June IS, 1935 an order ■'•ras accordin;';ly entered signing, filing 
and entering stipulation and decree of dismisso.l ^dthout costs. 

In a third case (*) the court ordered the complaining exhihitor to 
cea.se running "3a,nk Night" and to ahide "by all future decisions 'bf the 
local G-rievance Board, and enjoined the local Grievance Eoa.rd from en- 
forcing their cease and desist order. The substantial effect was to 
substitute a Court order for the order of the local G-rievance Board, 

One majr infer that the compliance instrument proved very effective 
since no records have heen disclosed showing the perma.nent closing of a 
theatre due to a discontinuance of film supply. Pictures were denied to 
exhihitors for a short time in a few cases. (**) The res-oondants in 
such ca,ses usually discontinued the nractice and started injunction 



(*) Mid-TJ^st Film Distribu ting Corpora tion y. D, M, Thornhurg , et al . 
United St?.tes District Court for the Southern District of Iowa, 
May lo, 1935, Bill for Declaratory Judgment. 

(**) Code Authority Appeal Decision No. 251 



9638 



-108- 

proceedings, pnd in on(=' case danat^e action, agn.inst the menters of the 
local G-rie-vance boards. (*) National Renov^Ty ^^diinistration la^Tyers 
assisted in the defense of these ccses iintil the Codes vrere declared 
■unconstitutional; the defendants ^eie then J.eft to their oiTn resources. 

According to reports sulomittGd "by the Code Authority to the 
National Hecovery Administro.tion, (**) 6G9 cas'^^s., or appro::ima,tely 55 
per cent of a total of 1,122 tr?de practice coriplaints "brought "before 
the local Grievance Boards in 1934, related to schemes involving the 
element of chance. During the first three nonths of 1935, 152 cases, 
or 63 per cent of, a total of 240 coniplaints involved such plans* 

National Recovery Administration files contain records of 150 ap- 
peals to the Code Authority from local Board decisions in cases involv- 
ing re"bateo on admission prices. Analysis of these 150 cases shows 
that the Code Authority affirmed 131 decisions and' reversed tvro de- 
cisions rrhere the local Board decision had "been for the complainant; 
affirmed trro decisions and reversed four vrhere the local Board decision 
had "been for the rcsTDOndont; dismirs3d five ca<5es, and remanded six to 
the local Boards for further "hearing, 

..6, DISCUSSION 

According to the dsAly trade press of the Industry, the practice 
of giving relates on admission prices through all the various schemes 
which have "been discussed ha^s invaded nev territories since the in- 
valid.a,tion of the Code, 

In these situations.; e:'dii"bitors in their efforts to keep theatre 
seats filled and. bneir ooriDetitors' houses Pitrpty seem "but to reflect 
the s^mnto'-ic; of notional advertising, particularly over the radio. The 
country'" IS in one of its recurrent periods of the giveaway. Practically 
every comr.ercial "broadcast over the radio offers something for the 
listener to require, either "by collecting carton tops or "by simply writ- 
ing to the' station or to the advertiser, -he current craze to check 
listeners TDOc^mes in tine more fascinating than watching a sales curve 
rise© The pu"blic response d.ces seem to "become stimulated - whether 
giveaways are offered over radio or "by the motion picture theatre. 

The usual result of the introduction of these at tendance- lures in 
motion pictures e^±Li"bition is a form of price war which no one can win. 
Having responded to one stimulus, the puhlic looks for greater and 
greater ind/a.cenents. The motion piicture industry files in the National 
Recovery Adjviinistration disclose a.n instance in point. One small ex- 
hi"bitor tried one device after another and finally decided, to give away, 
a Ford ca-r, Tha-t set the community'' agog with excitement until the smaJ.1 
e?ihi"bitor^ s chain competitor countered with the offer of a Pierce Arrow, 



(*), Piles of Litigation Division - National Recovery Administration,. 
(**) National Recovery Administration files - Motion Picture Industry, 



9638 






-109- . . 

In that comimmity, the Industry stepped out of the motion picture husi- 
ness pjid matched dollars in gemhling and merchandising schemes. The 
habit once started in a community has a hahit of its oun — it spreads 
and multiplies in ingenuity of scheme; in simple economics, the last 
state of the exhihitor is worse than his first. 

The practice is to "be found almost exclusively in areas of keen 
competition. Premiums are seldom given ^rhere there is little competi- 
tion, Ezqperience hr-.s shoim that where schemes similar to lotteries 
have heen used in non-competitive areas, attendance has "been stimulated 
only on the one night that dravrings are held. The net result has "been 
no gain to the exhihitor, 

Heha.tes on admission prices. are usually the resort of the suhse- 
quent-run exhihitor aga.inst too strong competitive forces, or against 
unreasona.hle clearance or zoning. Usually the device affords a re- 
spite - temporary at the "best. But it does not remove the causes of 
this erJiihitor's difficulties. 

The e^diihitor, "by and large, considers the most effective and fair- 
est means of regulation of the practice to he through clearance and zon?- 
irig schedules,. In addition to the "something for nothing" incentive, 
and no matter how effected, all these schemes involve a reduction in' ad- 
mission rr ices. The exhihitor considers that clearance should he in- 
creased over any ejdiihitor using such devices exactly as if said ex- 
hihitor had cut admission prices. 

F. DESIG1IA.TED PLAY DATES 

1. DESCaiPTION 

Pesif^iated play dates is a trade term used to describe the prac- 
tice of designating a specific day or days on which pictures must he 
shown. In selling a group of pictures under the hlock "booking system, 
the distributor may require that certain pictures - estimated to have 
unusual box office attraction - be licensed on a percentage basis. and, 
to make profits more certain, may then require that such pictures be 
played on diiys of the week when the largest attendance is assured. 

The distributor practically without exception designates Saturdays, 
Sundays, and holidays, which are preferred playing d^tes due to the 
prevailin,;- larger attendance and generally higher admission prices. 
Either Sati\rday or Sunday in motion picture exhibition experience is 
from two to throe times as productive as any other single week day. The 
same rule applies to holic-Ays, 

Percentage films me^ "be sold on (l) a minimum guaranty plus a 
split, (2) a straight split, or (3) a split over the exhibitor's oper- 
ating ex^penses, or (4) many other combinations of factors may be used. 
The e:>±Libitor usually favors the straight split method, maintaining 
that the distributor should share the losses as well as the profits. 
The distributor usually'' opposes the straight percentage policy, contend- 
ing tha.t straight percentage tends to lessen the e:diibitor's advertising, 
and exploitation efforts. The distributor usually requires as a guaran- 
ty the erqpected rental plus a division of the receipts above that figure, 

9638 



-110- 



2. 



•PEE-CODE Discussions 



During Godf^ formulation, the c'lGtri'butors advanced the argument 
that designated play dat^is "ere jiiGtifiec for these r^asonsi First, 
that the hest pictures were thus shorn on days ^'hen the r^ul^iic had the 
greatest leisure and hence inclination to see them; second.ly, that since 
these selected pictures involved extra expense in production, the dis- 
trihutdr T;as entitled to share in increa.sed profits and lastly, that a 
practice profitaljle for the distrihutors Tjas invariahly good "business 
for the e:>±.il)itorG» 

Br.t, said the exhihitors, this practice int^rfereT nith an ex- 
hibitor's f-ondamehtal right to control the operating policy of his 
theatre and V7a.s an attempt to take this right from him. It was "brought 
out at the hearings that the' exliihi tors' often found it desirahle to 
shoT7 porrerful "box office attractions on v/eek d^ys in order to average 
attendance throughout the week. The situa'tion was further complicated 
hecause.the exhihitors usually "bought films from a num"ber of distri"bu- 
tors each of whom demanded preferred playing time on Saturdays and 
Sundays* 

3» COHE PROPOSALS 

The e:±Li"b iters' proposal for a code provision covering this situa- 
tion stipulated tliat the practice of designating playing dates for 
specific pictures or classes of pictures "be eliminated. 

The distri"butors' proposed t) revision while "based upon the continua- 
tion of the practice, conceded that their renuirement of designated play 
dates might "be waived in the instance of pictures deemed unsuita"ble for 
ejdiihition on certain da^/s. ?or instance, a Mae West picture might not 
"be considered hy an exhihitor to he a wholesome or sij.ita'ble feature for 
Sunday e:dii"bition in a small com-junity. 

It was proposed that exlii'bitors should "be permitted to seek relief 
"by applying to an arbitration "board three days after the receipt of 
notice of a.vailability of a, feature picture judged to "be unsuitahle on 
the designated date. To this proposal, this condition was attached: If 
the exilii"bltor' s claim was sustained, the distri"butor was to have the 
right to designate another picture for the same date, or for a later 
date, upon the original terras. 

4. THE CODE PROVISIONS 

The Code provisions finally approved wore similar to the proposals 
of the distri"butors in that local Grievance Boards were empowered to malce 
determination as to the suita"bility of the picture in dispute. Appeal 
could "be tal^en to the local Board "by the ei/iii^bitor "for the reason only 
that the suhject and character of the motion picture so designated are 
ujisuitahle for exhi"bition , ... on such day or days". The carefully 
worded section should "be quoted in full as illustrative of the exact 
negotiation agreed upon: 



9638 



■c 



-111- 

"Pa.rt 9. (a) No Distri'biitor shall require any specific day or days 
of the \7e"!k for the exliibition of s-oecified ;oictures or class of 
pictiiros iinless specif ically provided for. in the E-diihitor' s con- 
tract therefor and in no event if the license fee therefor is a 
fixed Slim onlj'', 

"(h) Where -under an exhihition contract xrhich lorovides that the 
rental to "be paid "by the 3xhihitor for any feature motion pictnre 
specified therein shall he detemined in v;hole or in part upon a 
percenta,ge hasis, and that said picture shall he played hy the Ex- 
hihitor upon a designated day or days of the veek and the Exhihitor 
seeks to he relieved, from the ohligation to e?-hihit such motion 
picture upon such desi^^nated day or days for the reason only that 
the suhject and character of the motion -picture so designated are 
unsuitahle for exhihition at the Exhibitor's theatre on such day 
or da.ys, the claim of the Exhihitor shall he determined hy the 
Local Grievance Board provided for hy this Code, and the Distrihu- 
tor, if such Local Board so determines, shall relieve the Exliihitor 
from the ohligation to play the motion picture upon the day or 
6.eyB designated hy the Kistrihutor; provided that the Exhihitor 
makes such claim vdthin three (3) di^ys after receipt of the notice 
'of avr.ila.hility of such feature picture. In such cases the said 
• Local Board shall proceed to determine the ma.tter upon forty-eight 
(48) hours* notice if the Distrihutor so desires, 

"(c) If the said Local Board shall sustain the claim of the Ex- 
hihitor? 

"(1) the Distrihutor shall have the right to designate for the 
same day or dates another motion picture licensed upon a percentage 
hasis -upon the same or similar terms as the motion picture in 
question, if there he one licensed; and to designate the motion 
picture ohjected to for a. later date or dates hut upon another day 
or da-ys of the rreek; and (2) th'; avrard of the said Local Board 
shall not he deemed to FTpr)ly to eny other theatre in the same way 
or a.ny other location, 

"(d) Wliere hecause of a proceeding hefore a Local Grievance Board, 
or hecause of an award of such Local Board, it shall he impractical 
to serve sub sequent- run E-diihitors in compliance with any notice 
of availahility or confirmed play dates given any such suhsequent- 
run Exhihitors, the Distributors shall have the right to change 
such play dates," (*) 

The Motion Picture Code files in the llational Recovery Administra- 
tion, disclose hut four cases -under this provision having heen hrought 
hefore the Grievance Boards from the inception of the Boards to April 1, 
1935. 

5, DISCUSSION 

As in the cases of most other trade praxtices, the designation of 
play d^ates does not seriously affect the affiliated e^diihitor or the 

(*) Article V-D, ?art 9 of the approved Code, 
9638 



-112- 

unaffiliated circuit exhibitor "becpuse of their strong "bargaining povrer. 

The practice, however, has inlxercnt po',;er strongly to affect the 
ind°rpendent exhihitor since he munt' not onl" purchrse fil'ns in a coiii- 
parativel7 closed narhet "but imist in order to secure percentage pic- 
tures concede substantial control of his -oreferred playing time to the 
distrihutor. Little relief could "be seci^rod under the cancellation 
clause in the Code; percentage pictures are usually not of the type an 
average exhihitor rrould Trish to cancel outright. 

The independent producer's mark'^t is still further restricted "by 
designated play dates "because the rr^^jor companies largely monopolize 
the preferred pla^ring time» Independent productions, therefore, vihen 
they do secure a market have left only a choice of the veek days of 
leapt attendojice, 

TThat is the real nuh of the prohlem? Does the fact that only four 
complaints were filed under this Cede provision disclose that the true 
objection on the part of the e:±ii"bitor xtbs not to unsuitahle pictures 
for Srjidays, "but rather his desire to "be free in his onn management of 
his theatre? Would it not he entirely Trithin theatre eiKperience for 
an exhihitor to desire to play a cheaper picture during the -vreek-end, 
knowing his attendance would be high in any event and he would thus "be 
free to use his "better pictures to stirmilate attendance on the poorer 
days of the week? The distri'butor' s motive in sponsoring designated 
play d^ites is simple and clear; a determination to get the largest 
amount of rentals possiole for each of his pictureso 

It is suggested that the Industry "by agreement might work out an 
arrangement paralleling that used under the Code (Forcing of Short 
Su'bjects - Chapter IV ~ D of this Heport) to prevent the forcing of an 
undue numher of short su"bjects. This would prevent difficulties such 
as those experienced "by one exhihitor who appealed to the National Re- 
covery Acijninistration officials to assist him when he discovered that 
he had contracted for 30 designated play dates for one year - and each 
one on a Sundayi Add to that arrangement, a smficlent \mrestricted 
cancellation -Drivilege and many of the causes of friction and controversy 
under this practice (designated play dates) might remove themselves from 
the scene* 

G. lT0H-.TEE:AT5IGiL ACCOUNTS 

1, OZEGIII AlTD DESCRIPTION OP PRACTICE 

The no n- theatrical account serves many purposes. Distri"butors find 
it usefuH. not onljr as a puhlic relations policy hut as a noose for the 
exhi"bitor who is comparatively free from theatre conoetition. Adver- 
tisers hecome non- theatrical accounts when they use free motion picture 
shows for the development of good will or as "bait for promoting the sale 
of real estate, speculative stockc, used cars, new foods, toilet articles 
and other products. Schools, religious groups, social welfare groups, 
and community movements use motion picture performances to increase 
attendance or add variety and interest to their programs. Army camps, 
ships of the United States Nav;^'', passenger ships, nrisons, hospitals and 
oi'phanages also make use of motion pictures In -oerfomances not intended, 

9638 



-113- 

of -"curse, for the general public. These uses, then, of the motion 
picture "by in'^ividuals or others v/ho are not primarily theatre operators 
have come to te knovm as non-theat rical acr^ounts, ami ha,ve long "been ajid 
still continue to be a source of controversy in the Industry, 

As motion pictures "became popular and producers had advanced "beyond 
the first eye~jer]<:ing screen flashes of "boxing matches and \he "butterfly 
dances of the Loie Fuller days and had "begun to introduce 'jell-contrive n. 
stories and. educational subjects, it was found appropriate to the devel- 
opment of good-will for the new industry to supply suitable films to 
hospitals and other "shut-in" institutions and to church societies. 
Schools, private and public, began to install projection booths and, to 
maize a feature of certain pictures. Community cente-^s kept pace with 
the progress of the "movies" from the silont to the sound film and d.e- 
signer! their nevzer halls to include complete projection equipment for 
the b9st pictures coming from the Holly.vood and New York studios. These 
films were furnished by distributors at low cost and on other generous 
terns. 

Scon exhibitors began to complain that motion picture shows at the 
town high school, the tovm hall and in the church basement constituted 
unfair competition, Exliibitors contended in support of their objection 
tha,t those who held such performances had no regular labor costs, had. 
no special faxes to pay, and. no investment, and yet were able to exhibit 
pictures as attractive as those advertised for the local tteatres. 

Distributors meanwhile had a problem on their hands; they used the 
non'-theatrical account as an effective answer. The problem came from 
the e:diibitor in a small town with no immediate competing theatre. In 
this situation, the exhibitor was in an excellent bai'gaining position 
when he came to lease his films. If he d.id not show a distributor's 
pictures in that community, no one else would. Discovering this, dis** 
tributors began to use non- theatrical accounts to create competitive 
situr.tions in these towns. It is because of the use of this noose by 
distributors that e:diibitors during the last ten years have become in- 
creasingly antagonistic toward all types of non-theatrical accounts, 

2, PRE-CODE Discussions 

At the Code conferences, exhibitors proposed tha^t distributors be 
forbidden to lease to non-theatrical accounts any pictures generally re- 
leased, conceding that pictui'es might be furnished to certain specified 
accounts where, the public was not admitted, provided that only such 
pictures be shov/n as had completed their last commercial run. It was 
further suggested that any distributor proposing to sell to a non- 
theatrical account, should., in advance, satisfy the local agency of the 
Cod.e Authority that such a sale would not interfere with a regularly 
established theatre. 

Church groups and institutions accustomed to free film servicing 
oppose'^* these proposals strenuously. The distributors contented, them- 
selves with quiet opposition. 



9638 



-114- 

3. TIE CODi: PROVISION 

As finally approved, the Motion Picture Code authorized the local 
G-rievanoe Boards to hoar for.iplo.ints of o::hi"bitors against non- theatri- 
cal acooijnts, and to or^er -"'istrioiitors to stop servicing such accounts 
if found to tTS unfa.irly eo:.TpctitivG. The proviso was added, houever, 
that this Code provision shoulfH in no case he used "to i^rohihit the 
licensing of motion pictures for oxhihition at p.rr.iy posts, or canps, or 
on hoard ships of the United States Ilavj' or ships engaged in carrj^^ing 
passengers to foreign or (domestic ports or at educational or religious 
institutions or at institutions housing "shut*-ins," such as prisons, 
hospitals, orphanges, etc, (*) 

4. 0PEFwA.TION OF THE CCI3E PROVISION 

The principal activities of the Grievance Boards under this part 
of the Code were thus limited to the regulation of free shov/ing of .• 
motion pictures as a crov.'d~catcher for advertising or sales promotion 
puirposes. Code Authority Appeal Decision "To, 122 (national Recovery 
Administration files) was a case of this t^^^pe and illustrates the atti— 
turie of the local Boards and the Code Authority, Some. 50 non- theatrical 
free street shows \rere in operation in the state of Indiana, In May, 
1934-5 the Indianapolis G-rievance Board unanimously declared thet these 
shows constituted, unfair competition and ordered distributors to cease 
suppl^'-ing film. In its decision, which was upheld, hy the Code Authority 
on appeal, the local Board advcmced the following reasons in support of 
its conclusion: (l) Ivee admissions automatically raalie such exhioitions 
unfair competition; (2) Such e.xhihitors are not "burdened "by many of the 
costs ordinarily paid hy the regularly estahlishod theatres, such as 
music, license fees, code assessments, federal and. state special taxes 
and licenses, union wage scales, etc,; and (3) Advertising such free 
exhioitions within a competitive area attracts patronage from regularly 
established theatres charging an admission fee. 

In other cases, the looa,! Grievpjice Boards v/ere called on to de- 
cide \7hethcr the exhihition;^ of motion pictures in restaurants, cluhs, 
amusement parks and churches was unfair to the resident exhihitor, 

Accor'^ing to a report suhnitted hy the Code Authority, the local 
Grievcjice Boards heard and determined. 51 cases concerning non-the?.tri- 
cal accounts in the period from the organisation of the Code Authority 
to April 1, 1935, Uo hreakdown of this total as to the relief awarded 
is available. 

In his hook, "New Courts of I-nd.ustry," Louis ITiz^.r oaolyzes the work 
of the Grievance Boards for the year 1954 (**) and states that of 45 
cases filed, relief was awarded the comi^lainant in 24; that complaints 
were d.ismissed in ten cases and that eleven cases were withdrawn before 
a decision had been reached, 

(*) Article V, Division D, Part 4 of the approved Code. 
(**) Hew Courts of Industry b^'- Louis Uizer, Lcngacre Press, Inc., 
Hew York City, 1935, pg. 127 



9638 



The National Recovery Adiaini strati on has on file (Motion Picture In- 
dustry files) 14 decisions of the Code Autliority on ap^ieals from decisions 
of the local Grievance Boards on non- theatrical cases. All had teen deci- 
ded for the conplainant "by the local Board. Thirteen were affirmed "by the 
Code Authority and one was reversed. Inspection of these decisions shows 
that the Code Authority consistently enforced this provision of the Code 
to the fullest extent of its discretion. 

5. DISCUSSION 

Despite the .heat shown "by cydiihitors at the Code- formulating confer- 
ences, relatively few complaints against non- theatrical accounts were 
filed under the Code, This was to be expected since in mailing such com- 
plaint j the exhibitor ran the possible risl: of alienating or offending a 
part of his public. 

.. -The exli-ibitor needs little or no protection from non- theatrical ac- 
counts not, •admitting the general public, such as schools, hospitals, sani-; 
tariums, or prisons. However, the erdiibitor may need protection against 
jion-theatrical competition when such exliibitions are open to the public. ' ... 
The exhibitor has an investment to protect and property to maintain. He- '• 
employs a. number of people. His business activity is an integral part of 
the business, activity of the community. 

The Code Authority solved several delicate situations l^y setting-back 
the competing non-theatrical account a definite period after the general 
release da.te. (*) This v/as done on all pictures whether played by the ex- 
hibitor in question or not. In these cases the non- theatrical accounts 
involved were treated as commercial runs. They were given a clearance of 
six months after the general release date. By that time all commercial 
runs ha,d been completed. The exhibitors concerned were thus guaranteed 
the selection of all fresh pictures and the non-theatrical acco'ont was 
not prevented from licensing film. 

While such a solution does not go as far as some exhibitors wish, it 
would seem to offer an effective method of meeting the problem without 
prejudice to any of the i:arties concerned. 

■ H. OTHER TRADE PRACTICES 

In addition to those already discussed other tra,de practices were 
specified in the Code as unfair. Certain of these Code provisions which 
were seldom invoked or which were not particularly controversial do not 
command extended discussion. Accordingly, the following section is devo- 
ted to a brief analysis of these provisions, omitting those discussed 
elsewhere in this report, in the order in which they appeared in the Code. 

1 . GEIIERAL . 

(a) Defamation of Character (**) 

(b) Threats of Lawsuits not m Good. Eaith (**♦) 

(c) Securing Confidential Information by Unfair Methods (****) 



(*) Code Authority Appeal Decisions No. 195 and ITo.- 196. 
^**^ (***^ (****) Article V, Division A, Parts 1, 2 and 3 of the approved 

Code. 

9638 



(These practices are, of course, .'generally considered unfair and sub- 
ject to "cease and desist" orders "by the i'eder.'al T'r:.ide Conmission. Their 
inclusion in the code uas for the purpose of talcin<^ them out of a mythical 
future and making them specifically pertinent to this Industiy. Their 
effects were largely deterrent.) 

(d) TayrriSnt of unreasonaT^le salaries for personal services which 
resulted in destmctive competition ras declared to "be an unfair trade 
practice. The Code Authority was authorized to assess the guilty employe 
ers up to the sum of $10,000 (*). Tl-iis provision was temporarily stayed, 
pending investigation, in the Executive Order of Approval. The report on 
the investigation recommended indefinite suspension of this provision. 
This subject is fully discussed in Chapter V - A, this report. 

2. PRODUCERS 

(a) The Code declared it to be an unfair practice for any pro- 
ducer to aid in the voluntary release or dismissal of ajiy author, drama- 
tist, or actor employed in connection v;ith the production of a "legiti- 
mate" drama or musical coned;-'' for the purpose of securing his services (**) 
This provision was inserted "by agreement "between the code formulating 
groups of the Motion Picture Industry and the Legitimate 5\ill Length Dra- 
matic and Musical Theatrical Industry. A similar provision was contained 
in the approved Code for the Legitimate Tlieatre. The reciprocal provi- 
sions were intended to prevent cross- raiding of talent. 

("b) The Code declared it to he an unfair tirade practice for a 
num"ber of producers to conspire or take Joint action to prevent any res- 
ponsible producer from renting studio facilities (***). This provision 
was an e^zpression of policy. If proof existec' as to conspiracy, the in- 
jured part:/ would probably seek redress in the courts and attempt to col- 
lect treble damages under the anti-trust laws. 

(c) The Code declared it to be an unfair trade practice for a 
producer knowingly to employ as an "extra" any norfjer of the immediate 
family of any employee or any person not obliged to depend upon "extra" 
work as a means of livelihood, unless the exigencies of production re- 
quired an exception to be made (**h«*). This provision aimed at the prac- 
tice of nepotism alleged to be rampojit in the studios. The provision had 
a beneficial deterrent effect. 

3. PHODUCESS-DISTRIBUTORS 

(a) Where any contract granting the motion picture rights in any 
dramatic or dramatico-musical work specified a date prior to which no 
motion picture based upon such ',vork might be publicly exliibited, the code 
declared it to be an unfair trade -nractice for any producer or distributor 
to permit public exliibition of such motion picture prior to the date speci- 
fied (=<«****). Tliis provision merely supported a condition of a contract. 
Court action where proof existed would probably result in the collection 
of damages, 

(*) Article V, Division A, Part 4 of the approved Code. 

(**) Article V, Division b. Part 1 of the approved Code. 

(***) Article V, Division S, Part 2 of the approved Code. 

(****) Article V, Division 3, Part 3 of the approved Code. 

(*****) Article V, Division C, Part 1 of the approved Code. 

9638 



"117- 

("b) The Code, having made it an unfair trade practice for distribu- 
tors and producers intentionally to interfere with existing relationships 
v/ith regard to associate producers, attempted to strengthen this provision 
"by forbidding the initiation of negotiations previous to 60 days "before the 
termination of a then existing contract (*). The limitation on time for 
negotiations might work considerable hardship. In the case of Walt Disney 
Productions, Limited (**) the time was extended indefinitely. There appears 
to be no convincing reasons for having included this provision in the Code. 

f 

4. DISTRIBUTORS 

( a) Threats to Build or Acquire Theatres . 

The Code stated it to be an unfair trade practice for any distribu- 
tor to threaten, coerce, or intimidate any exhibitor into entering into a 
contract for the exiiibition of motion pictures, or into paying higher 
film rentals, by the commission of any overt act evidencing an intention 
to build or otherv/ise acquire a motion picture theatre for operation in 
competition with such exhibitor. It was further provided that this pro- 
vision should in no way abrogate the right of a producer or distributor 
to build or otherwise acquire in good faith a motion picture theatre in 
any location (***) , The provision v/as a well intended attempt to prevent 
a large Company from stifling competition by menns of its greater economic 
power. Actually the provision was not successful since it was incumbent 
upon the aggrieved party to prove that any such act was not in good faith. 

(b) Distributor's Employee in Competition with Exhibitor . 

It was provided by the Code that no distributor's employee should use 
his position with the distributor to interfere with the licensing of mo- 
tion pictures by an exhibitor operating a theatre in competition with a 
theatre in which such employee had an interest, provided, however, an era- 
j)loyee of the distributor should not be deemed to have an interest in a 
theatre affiliated witii such distributor. (****) This provision was of 
little importance since in the first place few distributors' employees are 
interested financially in theatres other than those affiliated with the 
distributor and in the second place proof of violation would be most 
difficult to obtain. 

(c) The Code provided that no distributor should substitute for any 
feature motion picture described in a contract as that of a named star or 
stars, or of any director, or well-known author, book, or play, any fea- 
ture of any other star, director, author, book, or play. The Code also 
forbade a distributor to substitute any other feature motion picture for 
one which was designated "no substitute" in a contract and further pro- 
vided that no e^diibitor be required to accept any such substitute. There 
is available no data on which to base judgment as to the extent or the 
prevalance of this practice; the Code recognized its existence. 



(*) Article V, Division C, Part 3 of the approved Code. 

(**) Administrative Order No. 124-12 signed by Sol A. Rosenblatt, Divi- 

sion Administrator, March 23, 1934. 
(***) Article V, Division D, Part 1 of the approved Code. 
(****) Article V, Division D, Part 2 of the approved Code. 



9638 



It was specifically provided however, that a distributor should not 
"be prohibited from chariging the title of imy motion picture contracted 
for ^ by- making- changes, alterations or adaptions of any story, book, or 
play or from changing the director, or any member of the cast of any mo- 
tion picture exccot as specifically prohibited in the preceding. It was 
further provided that in case any such substitution was made, notice of 
such substitution should be ^,'ivcn by paid, advertising of not less than 
one quarter page in at least one issue of a national trade publication 
before the release o.ate of the motion picture in which the substitution 
had been made (*) • , The practice forbidden would involve a breach of con- 
tract. However, the exhibitor hesitates to jeopardize his future supply 
of motion pictures by engaging in any such litigation with a distributor. 
The good intent and purposes of tne provision were weakened by the var- 
ious provisos. 

(d) The Code provided that no distributor should divulge or author- 
ize or knowingly permit to be divulged oir any employee or checker any in- 
formation received from the checking of receipts of its motion pictures 
excepting that such information might be divulged in any controversy heard 
by the Code Authority, or for ,any Government or Code Authority report (**) . 
The provision wns ineffective since, first, it would be next to impossible 
to obtain proof of violation and, secondly, a distributor might easily 
escape any responsibility by disclaiming knowledge of an employee's action. 

( c) The Code provided that no distributor should convey or transfer 
his assets for the purpose of avoiding tne deliveries to any Oydiibitor of 
any ferture motion picture licensed for exhibition by such exhibitor (***). 
The difficulty here presented is to prove fraudelent intent. The provi- 
sion was not. used. 

( f ) The Code re^'uirod a distributor to make a fair adjustment of 
license fees for the exhibition right of a number of pictures licensed in 
a group for a stated avcra/je sum per picture. If tne total mirabor of 
TJictures so licensee" were not delivered, provided that the exhibitor should 
have fully and completely performed all other terras and conditions of the 
contract (****), Since it is not the general practice in the Industry to 
contract for pi'ctures on a stated average basis, this provision was not 
used, 

(g) The Code provided that no distributor should refuse to deliver 
to any exhibitor any motion picture because of such exhibitor's default 
in the performance of a conti'act licensing the showing of short subjects 
of such distributor, or vice versa, provided that such an exhibitor had 
agreed to. ar,bitrate all cl.^ims and controversies arising between them un- 
der the clauses .of the Optional Standard License Agreement (*****), in 
most contracts between distributors and exhibitors a clause a-opcars 
specifying that in c:?ses of violation by the eyiiiLitor of any one contract, 
any other subsisting contracts are subject to suspension at the will of the 
distributor. Dist.vibutors prefer to retain such provisions as giving them 
greater economic control over exhibitors. Probably all parties concerned 
would be better off if such clauses wore outlawed from all contracts. 

(*) Articlp V, Division D, Fart 3 of the approved Code. 

(*♦)■ . . Article V, Division D, Part 6 of the apr>roved Code. 

(*'^*) Article V, Division D, Fart 7 of the approved Code. 

(****) Article V, Division D, Fart 8 of the approved Code. 

(*****) Article V, Division D, Part 10 of the approved Code. 
9638 



-119- . 

(h) The Code required that first offer of any special prodaction re- 
leased during the vcar. should he made to the exhibitor contracting for the 
major portion of that' distrihutor' s pictures (*) . Inasmuch as the prices 
and terms were left entirely within the control of the distrihutor, the 
offer might mean absolutely nothing. However, in one case the local 
G-rievance Bo-rd unanimously decided that a distributor had violated this 
provision. The Code Authority confirmed the decision of the local Board 
(**). 

( i) The Code obligated the distributor to bide by such regulations 
as might be promulgated by the Code Authority for the prevention of fire 
(***). The Code Authority was never active in any such activity. Further- 
more, distributors were required by local fire regulations to take proper 
care of their premises. 

5. EXHIBITOHS 

(a) Tne Code stipulated 'that any exhibitor entering into a contract 
for the exhibition of motion pictures permitting the exiiibitor to select 
from the total sum of pictures licensed less than 85 per cent of the 
total number and to reject the remainder, shoulc by \7ritten notice to the 
d^istributor reject each of such motion pictures, not to exceed the num- 
ber which might be rejected, within 21 days after rvailability of such 
pictures had been jinnounced in the exchange territory wherein said ex- 
hibitor's theatre was located, rmd upon the exhibitor's failure to give 
such notice er.ch such pciture should be deemed to have been selected (****), 

The purposes of this provision were to codify and make uniform ex- 
isting industry practices, thus preventing disputes, and to prevent the 
use of selective contracts as an over-buying device. The provision, while 
of benefit to subsequent run exhibitors, would have been more useful had . 
it been strengthened to read "upon the e:chibitor's failure to give such 
notice e. ch of such pictui^es should be deemed to have been rejected". 
Such a provision wouldi have enabled, the small e:iiibitor to get immediate 
availability for negotiations at the expiration of 21 days. 

Under the present system where a strong competitor adopts the selec- 
tive contract system of buying pictures, the small e:diibitor may not know 
until the end. of the season what pictures will be available. In one im- 
portant case before the Code Authority involving continued and intolera- 
ble delay in selection by a first-run affiliated theatre, the Code Author- 
ity ordered the first-run exhibitor to make selection by the 21st day or 
else the pictures would be deemed to have become available to his small 
competitor (*****) . Although this decision was directly contrary to the 
wording of the Code, the Code Authority felt that this decision was in its 
proper discretion if unjust competitive action by the first-run theatre 
was to be stopped ;;jid a fair chance granted to the small competitor. The 
respondent affiliated exhibitor agreed and complied with the order. Any 
attempts at regulation of overbuying (q.v.) necessarily involve careful 
consideration of the use of selective contracts. 



(*) Article V, Division D, Fart 11 of the approved Code. 

(*♦) Code Authority Appeal iJecision No. 126. 

(***) Article V, Division D, Part 12 of the approved Code. 

(****) Article V, Division E, Fart 1 of the Code. 

(*****) Code Authority Appeal Decision No. 347 

9 638 



-120- 
•(■b) The Code provided that no e-'aiibitor should transfer ownership or 
possession of a theatre or theatres for the purpose of avoiding an incomplet 
ed contract for the exhibition of motion pictures (*). Unscrupulous and 
financially irresponsible crdiibitors have on occasion resorted to this 
practice. Enforcement was difficult since it w.-s necessary to prove 
fraudulent, intent. However, one case under this provision was decided for 
the distributor by the local Board >nd Affirmed by the Code Authority (**). 

( c) It was stipulated in the Code that no eichibitor should adver- 
tise any feature motion picture before completion of a prior run (***) . 
Some such protection is needed by prior run exhibitors. Customers are 
less likely to attend larger; prior-run houses if they see advertising 
announcing subsequent showin^,'s at reduced prices. It was provided in the 
Code that where this provision worlied a hardship on any individual exhi- 
bitor, he mii^ht plead his case before the local Grievance Board and be 
afforded relief if justified. It was further provided that this injunc- 
tion should not be interpreted in such way as to prevent general adver- 
tising of future attractions by an exhibitor. 

Under this Code provision, an exhibitor could advertise his house 
policy and his fut-ija-e prop^rams in 'e;encral terms. It was permitted to 
announce for instance that, dui^ing the season a G-arbo picture, a Clark 
Gable or Joan Crawford or a ?rea Astaire picture would be shown but 
specific dates could not be given in advance of the first or prior runs 
of these pictures. This was adjudged a sound regulation of advertising 
privileges, otherwise v/idely abused. 

There was some difficulty in enforcing this provision. In big 
cities, particularly Chicago, the period of clearance between subsequent 
runs was quite short. Approximately 20 per cent of all cases heard by 
local Grievance Boards were brought under this provision. It would seem 
possible for distributors 'to eliminate this practice by inserting a pro- 
vision in exhibition contracts stipulating that no advertising of a pic- 
ture licensed should be made prior to a specified period before the ex- 
hibition date of, the picture provided that such period is less than the 
negotiated clearance. 

(d) It was provided in the Code that to prevent disturbance of con- 
tinued possession of a theatre by an exhibitor it should be an unfair 
trade practice for any person engaged in the industry knowingly and in- 
tentionally to interfere with pending negotiations between the exhibitor 

and any other party pertaining to or affecting the occupancy of any 
theatre than that actually operated by such exliibitor (****), Since 
this provision affected the rights of landlords who were not parties to 
the Code enforcement was difficult. The provision should probably have 
been oramitted from the Code. 

A number of cases of this type wore heard on appeal by the Code 
Authority. In only three cases were decisions affirmed for the complainant 

(*) Article V, Division E, Fart 4 of the approved Code. 

(**) Code Authority Appeal Decision No. 1S6. 

(♦**) Article .V, Division F, Part 5 of the approved Code. 

(****) Article V, Division E, Fart 6 of the approved Code. 

9638 



-isl- 
and in enly one case was a decision for the respondent reversed on appeal. 
The majority of all cases were dismissed. In perhaps the best defined 
case which was presented to the Coac Authoritv, it was icund that the acts 
of the respondent in obtaining an interest in a cnattel mortgage on the 
equipment in a theatre and usin.^ the interest thus acquired to force a 
lease to himself when the complainant was in possession and operating the 
theatre and negotiating for a lease constituted a violation of the Code 
(*). An inspection of the decisions of che Code Autnority shows that the 
issue was avoided wherever possible. 

The "pending negotiations" clause was strictly interpreted. Whore 
there were no pending negotiations, there v/:;s no complaint. In one case 
the complainant had been operating his theatre in the Town Hall for a 
number of years. Ihe town gave public notice that bids would be received 
for the rental of the building. Tlie complainant and the respondent both 
submitted bids and the respondent's bid was found to be higher. The Code 
Authority found no evidence of interference 7/ith pending negotiations (**). 

In another case the complaint was dismissed 02r the Code Authority on 
the ground that there wr^s insufficient evidence to show willful and in- 
tentional violation (***). 

(e) The Code prohibited an ejoiibitor from exhibiting a motion pic- 
ture previous to dawn of the first licensed and booked day of exhibition 
unless expre.is written permission therefor v/as given in the license agree- 
ment (****) . This provision was inserted to prevent occasional unauthor- 
ized midnight sliov/s by eidiibitors for which the distributors received no 
additional compensation. The provision is covered by adequately worded 
clauses in most license agreements. It was inserted in the Code to act as 
a deterrent and to provide for quick and inexpensive determinations rather 
than lengthy and costly Court actions. 

6. DI3THIBUT0Il-Er-:i3IT03 

(s.) The Code "rovided that the so-called Optional Standard License 
Agreement of 1933 should be the standard foirm of license contract to be 
used by distributors for licensing the exhibition of motion pictures un- 
less the parties mutually agreed to a different form. It is further pro- 
vided that ',vhen any provision of such agreement conflicted with Code pro- 
visions the agreement should be considered to be -iraended to conform. It 
was stipulated that although individual sales policy provisions might be 
substituted in the agreement, such stipulations should not be contrary to 
the Code Provisions (*****), 

This contract provided for arbitration rather theji litigation in case 
of any disagreement betveen the distributor and exhibitor. The only diffi- 
culty met with, in the use of this contract, was that exhibitors charged 
that certain distributors wrote sales policy provisions into the license 
agreement which conflicted with the spirit if net the letter of the Code. 



(*) Code Aut lority Appeal Decision No. 134 

(**) Code Authority Appeal Decision ITo . ISC 

(***) Code Authority Appeal Decision I'o . 7S 

(***♦) Article V, Division 3, Part 7 of the approved Code. 

(*****) Article V, Division ?, Part 1 of the approved Code. 



9638 



•-122- 

The comments of llr.than Yanins '.vith rcj^ard to this practice as applied to 
the canccllaticn privilege have been quoted previo-uslr tuider Section C 
of this Chaptor. The use of a standard contract woul"l seem to "be desir- 
able. However, such a contract must retain sufficlant flexibility to meet 
varying conditions throughout the Industry. 

(b) The Code provided that ai-bitration of all disputes between dis- 
tributors and exiiibitors arising under any e-Jhibition contract should be 
in accordance with the options. 1 arbitration contract of the so-called 
Optional Standard License Agreement of 1933, except as the provisions of 
such clause might bo modified by the provisions of the Code. It \ias 
further provided tnat the number of a^'bitratars to be appointed by each 
party under this clause might bo reduced to one each; if these two could 
not agree they could appoint rn umpire (*). 

One of the m.ain elements with re.^ard to the distribution oJid showing 
of film .is, time. ?.ccoursc to the Courts in cases of disputes over exhi- 
bition contracts have result oc' in del.nys - nd considerable expense and 
the Industry has, v;herever possible, attempted to substitute arbitration 
for litigation with usually favorable results. Independent exhibitors have 
objected in some cases to any compulsary arbi traction, feeling that they 
should have recourse to the Courts if they are not satisfied with the 
results of any such proceedings. 

(c) The Code provided that no exhibitor or distributor should in- 
duce or seek to induce the breach of any subsistin^^- contract (•**) . The 
language of the jDrovision v»-as not clear; it was uncertain wiiether the 
distributor or e-^diibitor referred to in the clause was party to tne con- 
tract under discussion. The clause was included in the Code as were so 
many others to miniraize litigation by the settlement of disT)utes within 
the jurisdiction of the Code Authority. 

(d) It was stipulated in the Code that no eyjiibitor or distributor 
could give any gratuity for the purpose of procuring advantages not other- 
wise obtainable; or as an inducement to influence any e:diibitor or dis- 
tributor or representatives of either not to deal v.'ith any competing ex- 
hibitor or distributor (***), This is one of those practices v,'hich has 
been condemncc' in "cease and desist" '^rdors by the Federal Trade Com- 
mission. The Code attempted to provide substitute relief in such matters 
instead of the dcla;,' of legal action by the Federal Trade Commission. 

(e) It was provided in the Code that no .exhibitor or distributor 
should make any Disclosure of box office receipts for publication except 
necessary reports to stock holders, credit and governmental agencies and 
other like bodies. This provision was qualified by stc?ting that no dis- 
tributor or e.-Jiibitor should be responsible for disclosures by unauthoriz- 
ed agents (****) , 

(*) Article V, Division F, Fart '^i of tae approved Code. 

(**) Article V, Division F, Fart 3 of the approvea Code. 

(***) Article V, Division F,' Fart 4 of the approved Code. 

(****) Article V, Division F,"Fart 5 of the approved Code. 



9638 



-123- 

7. U1\TSPECIFISI) G-RI3VA^ICES AWD COMPLAINTS 

In that part of the Code setting up the local Grievance Boards, it 
was prescribed that: 

All complaints and grievances of Exhibitors or Distritnitors 
concerning provisions of this Code or other^.'ise and not 
specifically designated to he heard and passed upon by the 
Local Clearance and Zoning Board shall be heard by the Local 
Grievance Board (*) 

The local Grievance Boards, and through then the Code Authority, 
were requested to hear and decide a number of comTolaints under this " or 
otherwise" clause. The most frequent causes of complaint were breaches 
of contract cr the erection of a competing theatre. 

The Code Authority refused to consider any such cases. The general 
position of the Code Authority majr be inferred from its decision in a 
case certified for determination to the Code Authority from the Washington 
Grievance Beard, This was a complaint by an exhibitor that the respond- 
ents should be restrained from proceeding with the erection of a theatre 
which nc-'old o-oerate in competition. The Code Authority stated that: 

The power in the Code Authority to dete-rra-ine a complaint or 
grievance concerning the provisions of the Code "or otherwise" 
certified to it by a local Grievance Board rests entirely in 
its discretion. We are of the opinion that the intendent of 
the prevision, despite its general wording, does not extend 
to a complaint of the character above described.,... (**) 

8. GEilEEAL TRkJE PRACTICSS 

Betr/een 1919 and 1922, the Lotion Picture Industry as has been in- 
dicated previously in this re^Dort encountered a general outbreak of pub- 
lic indignation over allegedly salacious features (***) and over scandals 
involving prominent motion picture actors and actresses (****), Religious 
and T.^lfare groups were working for Federal and State censorship legisla- 
tion. The major companies did not favor this, Howard T, Lewis, a dis- 
interested authority on the Industry states the position thus: 



(*) Article VI, part 2. Section 4 of the approved Cede, 

(**) Code Authority Appeal Decision No. 3. 

(***) "The notion Picture Industry", by Howard T. Lewis, D, Van 
ITostrand Co., N.Y.C. , 1933, pg. 368. 

(****) "A Llillion and One Nights", by Terry Ramsaye, Simon and Schuster, 
Inc., N.Y. C, 1926, Volume II - pgs, 803 - 821. 



9638 



. -12.4- 

Faced uith the probability of additional state and national 
legislation, the industry recognized the need of effecting 
a -united front under the leadership of one executive, ... (*) 

Accordingly, the Motion Picture Producers and Distributors of 
America, Inc» was formed in 1922 V7ith V/ill H. Ha-'s as active head. Since 
that date this group has more or less effectively resisted various move- 
ments to compel Federal or State censorship of films (**), principally 
by undertahing the question of censorship itself. In liarch, 1930, in 
order tc f.-^cilitate this method, the Motion Picture Producers and Dis- 
tributors of America, Inc., announced the ad'opticn 'of a code of moral 
principles to govern production of films (***), This cet of guiding 
principles became known as the Hays Morality Code, On the basis of this 
code, the producers and distributors have consistently opposed extra- 
industr^'- regulation of the quality cf filns, ' The follo\^ing, quoted from 
a brief (unsigned and undated) presented by the producers and distributors 
in favcr cf their Code proposals, is illustrative of their attitude: 

The standards of public responsibility in relation to screen 
entertaiiiment cannot remain static, Ne-T problems of self- 
control arise with the adoption of nep enter tain.ne n't themes 
end. changing standards of public view. 

Hence the necessity cf retaining r^ithin the industry the 
means of regulation. ....... (****) 



w 



Exhibitors at the Code formula tih^ conferences charged the producers 
ith freouent violations of the Morality Code. (*****) They asked that 
these standards be made a part of the Code of Fair Competition for the 
Motion Pict-ujre' Industry, and that the question whether any feature picture 
violated these standards be left to the decision of a i\iational Appeals^ 
Board or ether diily constituted industry authority (******), in these 
requests exhibitors had the support of vario'os religious and social wel- 
fare groups, 

(*) "The Motion Picture Industry", Howard T. Lewis, D, Yan 

Nostrand Co., N.Y.C., 1933, pg. 371 

(**) "A Hillion and One ivTights", Terry Rarasaye, Simon and Schuster, 

Inc., N.Y. C, 1926, Volume II, VS' S20 

(♦**) uq^i^Q Motion Pictijire Industry", Howard T, Lewis, D. Van 

Nostrand Co., N.Y.C., 1933, pg. 385 

(****) Memorandum in Explanation and Support cf the Provisions of 

the Proposed Basic Cede of Fair Cora;')etition for the Motion 
Picture Industry (the. producers' and distributors' Code 
proposals), -pg. 2, National Hecovery Administration files. 
Volume A for the Motion Picture Industry, 

(*****) ITa.tional Recovery Administration files, A:ialysis of and Stiges- 
tions Concerning Revised Code, Submitted in Behalf of the Inde- 
pendent Producers, Distributors and Exhibitors' Code Protective 
Committee, pg, 44 

(******) Article 19, Code Proposals submitted by the Exlriibitors Committee, 
August 23, 1933, Volume A for the Motion Picture Industry, 






The major producers ond distributors objected to any procedure giving- 
the -unaffiliated interests in the Industry or the Governinent any voice 
as to v/hether pictures should or should not "be sho'-.'n. The following is 
quoted fron- a.' "brief (unsigned and undated) presented "by the producers and 
distri'bulcrs in favor of their ^oroposals as opposed to those of the ex— 
hi"bitcrGl 

The provision proposed oy the Exhi"bitors vrss -adopted "before 
the prevision proposed "by the Producers and Distrihutors was 
formulated and was an effort to harmonize with such provision 
a-s was expected to "be adopted "by the Producer and distri"butors, 
I7e' should, therefore, consider the provision in the Exhi"bitors^ 
Code as solely an expression of desire to adliere to the provi- 
sion of the Producers' and Distributors' Code (*) 

The producer-distri"butor proposal read as follows: 

The industry pledges its combined strength to maintain right 
moral standards in the prr auction of motion pictures as a. 
form of entertainment. To that end the industry pledges it- 
self to adhere to the regulations promulgated by and within 
the industry to assure the attainment of such purpose, (**) 

The Independent Producers, Distributors and Exhibitors Code Protcc-- 
tive Committee had the following to say regarding this proposal: 

The nebulous character of the pledge set forth is, in 

itself, evidence of an utter lack of sincerity, and is as- 
suredly and completely ineffectutual, (***) 

The proposal of the Producers and Distributors Com.mittees was tha.t 
incorporated in the approved Code (****), 

(*) pg. 1, Memorandum in Explanation and SupiDOrt of the Provisions 

of the Proposed Basic Code of Eair Com.petition for the Motion 
Picture Industry, (the Producers' and Distributors' Code pro- 
posals), Volume A for the Motion Picture Industry, National 
Zeccvery Administration files. 

(**) Article V, Section 1, Code proposals submitted by the Producers 

a.nd Distributors Committees, August 23, 1933, Volume A for the 
Motion Picture Industry, National Recovery Administration files, 

(***) pg, 44, Analysis of and Suggestions Concerning Revised Code, 
Vclime A for the Motion Picture Industry, National Recovery 
Ad:-.iinistration files, 

(****) Article VII, Part 1 of the approved Code, 



9638 



-126- 

A si..iilar s-u^£!;estio.n regarding rules of decency and good taste to 
be followed by all exhibitors in advertising motion pictures advanced 
by the exhibitors, was handled in a similar way, and a. porollel plori^rv 
of good social conduct was inserted in the approved Code (*)• 

9. MISGELLAivIEOUS P11A.CTICES 

a. The Code provided th.^t pny exhibitor forwarding or delivering 
to another exliibitor a print of a motion picture at the request or upon 
the order of the distributor thereof should for that purpose but for that 
purpose onlj'-, be considered the agent of the distributor (**). This 
mere].y incorporated the customary legal relationship existing in such 8. 
case into the Code for purposes of clarification. 

b. It was provided in the Code that wherever arbitration was pro- 
vided for, other than arbitration as provided in the Optional Standard 
License A.j^Teement of 1953, such auestion should be submitted to an 
Arbitration Board. This Board was to consist of four (4) members, two 
(2) to be appointed by each party to the dispute. The arbitrators named 
were to have no interest, direct or indirect, in the subject in dispute. 
In case a. majority of the arbitrators were unable to reach a decision, 
they were empov/ered to select an umpire by majority vote, such umpire 
not to be engaged in the motion picture business. In case no umpire 
could be agreed upon, it was provided that the National Recovery Ad- 
ministration should be requested to make the selection (***), 

The method of arbitration specified applied particularly to disputes 
arising between employers and employees in the exliibition branch of the 
Motion Picture Industry (****), it was used principally where employees 
wished to negotiate for a higher wa^ scale. It proved satisfactory. 



(*) Article VII, Part 2 of the approved Code. 

(**) Article VIII, Part 1 of the apr)roved Code. 

(***) Articlo VIII, Part 2 of the approved Code. 

(****) Article IV - C, Part 1, Section 10 of the aDproved Code, 



9638 



-127- 

CEAP7EH V 

LABOH PH0BI21.IS III EXHI3ITI0r, PRODUCTIOIT, 
AlID DISTRIBUTIOIT DI7ISICi:S C? THE MOTIOIT 
TICTUFZ IlIDUSTRY 

I 

• 

The three economic divisions of the Motion Picture Industry present 
an unusually conplez and interesting la"bor situation. The lahor spot- 
light s'^ngs from aspiring vaudeville actors vrho at times felt compen- 
sated if they had "cakes and coffee" ajid a round of applause, to usHers 
content rrith free tickets and the hand-me-doxm tr-id of a uniform, to 
skilled craftsmen rrho at times enjoyed v/ages of $150 a rzeek end at other 
times aana^ed. as "best they could on $2,00 a shor?; end in the center of 
the lahor stage stand the popular stars under contract for $10,000 and 
more for each picture. 

The rapid gro^h and enomoios profits ma.de in this Industry from 
the early part of the TTrentieth Cent-'ory to the "business depression in 
1929 resulted in these extremes. The artists through their popularity 
and the comparative scarcity of their numbers, and the highly skilled 
and strongly unionized rrorkers through their collective "bargaining 
poT/ers, h3jd. o"btained-a high scale of -^ages and satisfactory r^orking 
conditions. In direct contrast the unskilled, such as ushers, doormen 
?nd the like, ansrrering the lu-re of "shorr "business" rrere poorly paid 
pud TTorked long hoiirs. This can -oerhaps "be attri"buted to the constant 
over—supply of this la"bor and to lack of organization. 

IThen the depression spread its dark shadoTrc over the theatre, the 
Industr;^'- under the increasing pressure of reduced "business, sudd.enly 
knerr panic and felt th-At it faced chaos. Por years no serious atten- 
tion had "been paid to correcting certain prevalent ciistoms generally, 
recognized as unso-'jnd "business Tjractice, The Industry felt a sense of 
immunity in vierr of its rapid gror^h and seemingly unlimited -orofits. 
At each crisis, some neir invention ha.d ansT7ered public need and given 
the entire industry a nerr im-'jetus. But -^hen at last income "began to 
shrink, defective "b^asiness practices stood out mena^cingly, "bahkrui: teles 
and receiverships "became n^xmerous; and la"bor foiond itself forced to 
accept loTTsr r^a^es and to TTork longer hours in uncertain emplo^nnent. 

In early 1933, the "biggest chains s^ich as Parajnoijnt-?u"bli z and 
rL.Z.O. Tere either seeking "banJcruotcy- or "being run "by receivers. 
Theatres rrere operating on a Treek-to-^eek "basis; hundj-cds -vrere closed. 
Thousands r^ere out of ^ork. Those still eyiroloyed in e::hi"bition ha.d to 
accept TTage reductions as high as 50 per cent in the skilled trades; 
the unskilled sar? their meagre -nages slashed still lo-^er. In the 
studios, slack production meant fever jols and as a. result of disputes 
over rage scales and ^-^orking conditions, several thousand on strike saw 
their places taken "by others at lo-'er scaJes, 

The genera-l la"bor situation is specifically descri"ted in the folloT?- 
ing extract from the report of Assistant President loijls Krouse of the 
International Alliance of Theatrical Stage Employees and Moving 
Picture liachine Or;erators of the United States and Canada to the 32nd 



9638 



>' 



-12 S- 



Annurl convention in Louisville, Kentucky, June 4 to 8, 1934: Mr, 
Krouse srld: 

"In conr^idering the National Industrial Recovery Act 
rnd the vrrious Codes of Fpir Coimoetition affecting our 
crpi'ts, it must "be remembered that only tvo yerrs ago the 
"by-v/ord of our Columbus Convention wns 'Work at any Price*, 
rnd it was not very long before it was just that — and not 
a very high price at that.* ******* 

"Receiverships and bankruptcies v;ere (then in 1932) 
imj-iinent. Naturally, the first and most concerted retrench- 
ment r.'as aimed at, reduction of salaries Hardly 

had the Convention closed than our general economic position 
begaji to get worse, 

"From our General Office in New York City, there was 
immediately observed in July of 1932, duel unions gathering 
■ force throUi:;;hout the country because of lower scales in the 
key cities. Large circuit houses were forced to work on a 
we ek-t 0-week notice. The stage employees of many locals 
took a fifteen per cent cut. The Theatre Owners Chamber of 
Commsrce asked all unions to accept 1926 scales.. 

"In August of 1932, four hundred members of a single 
local lost their positions because a dual union was furnish- 
ing nen for far lower wages. Both East and Pacific Coast 
unions took reductions in pay. September of 1932 saw the 
trade papers over the country boldly proclaiming 'Union 
Deris Not So Tough,' In October of 1932, we fo'ond further 
reductions being made by various important locals. November, 
a record lov/ for stage employees was established when one of 
our local unions was forced to agree to work for $2.00 a 
show, and in Ohio and else^^^here exhibitors imported strike 
breakers and paid them a total booth cost o.f SSCOO'per week 
as against a booth cost of $218.00 per week for union men. 

"The new year of 1933 showed no abatement in ::ur economic 
troubles, January saw the biggest ci'.ains, such a s Paramount- 
Publix and R.K.O. in bankruptcy or being run by a receiver. 
The effect of these receiverships and bankruptcies was felt 
immediately. In February, 1933, we found cuts demanded by 
the exhibitors wherever situated. During February, in a 
certain 3tr\te of our Union, a fifty (50) per cent cut was 
forced upon the majority of our local unions. Majrch, 1933, 
started out with a fifteen (15) per cent cut for the receivers 
of R.K.O. in Minnesota. 

"With the bank holiday, the exhibitors became hysterical 
and would talk of nothing less than a fifty per cent cut in 
every city throughout the United States. Indeed, there were 
some exhibitors whose theatres in their cities were shut 
down for weeks owing to their unreasonable madness and frenzy. 

9638 



-129- 



Only the confiaence, en-^endered by the taking of office ty 
President Roosevelt ond his nasterly h.-^idlinrg of our general 
econoraic situation, saved us from complete finaacial ruin. 

"After the immediate hysteria, of the bank holiday, the 
drive for further reductions continued and in Aoril 23 found 
■ denrnds on the West Coast, the Middle West and the Epst for 
still further reductions, ranging from fifteen to thirty- 
seven and one-half per cent, TThich in most rilaces had to he 
grrnted. This was followed vco in May "by more reductions in 
Marylcjid still more on the West Coasts By J'one the Colorado 
situation "became more serious riuh only ten out of thirty- 
five theatres in one city still union," (*) 

Ho'" each class of workers farod "before the Code, during the 
Code and since the Code oecane inoperative is here xjresented with 
respect to (a) Exhibition; (b) Proauction, and (c) Distribution. 

A. E:gII3ITI0N 

1 . El.I'LCYlVlENT 

The greatest volume of employment in thp* Industr;- is in the 
exhibition, or theatre "cresentation of motion pictures. Exact employ- 
ment strtistics for this division were not available during code 
formulation; nor during the period of code administration. There axe 
reasons for this condition. The number of theatres is not constsnt 
from season to season. Thea.tres close their doors this week and re- 
o-oen next week or nonths later; others are abandoned a.s -olayhouses; 
newly built theatres turn on lobby lic^hts in bright invitation to 
the public, month "oy month. As a result, employment rises and falls 
from season to seeson, 

For these reasons and others - employment figures and actual 
number of theatres elude exact deteiTnination by the Industry itself, 
by its alert trade -oress, by the United States Dex)axtment of Commerce, 
Eurjau of the Census, or even loy the labor organizations directly 
concerndd. Estimates as to the number emDloyed in exhibition, there- 
fore, Ycjry from 234,000 as recorded by the l.iotion Picture Almanac of 
1935 to 130,000 listed by the 1935 Census of American Business. Labor 
orgcnizations are in general agreement on an estima.tc of 185,000 and 
this estimate is usually accepted in cor3.sidering the labor -orobleins 
of motion -oicture exhibition. 

2, CLASSES OF EMPLOYEES 

Employees in the exhibition of oictures are generally divided into 
the follo\.'ing five classes: 

(*) Report of 1934 Convention of International Alliance of 

Theatrical Stage Employees and Moving Picture Machine Operators 
- National Recovery Administration Piles - Motion Picture 
Industry, 

9658 



-13U- 



Class I. Office Eimoloyecs . In this .^roup are included house 
manrigers, advertising and publicity persons, stenographic and clerical 
employees. 

Class II. Front of the House emDloyees (so-called). This grouo 
represents ap^:>roximately. t:'0-thirds of those eim-^loj'-ed and includes, 
among others, ushers, doormen, ticket-takers, cle^jiers and natrons. 
These are unskilled workers, comparatively easy to replace. 

Class III. Musicians . Once a group of more than 30,000, there 
are -orobahly no more than 2,000 of them now playing in motion "Dicture 
theatres. 

Class IV. Actor Employees . Another disap' earing group. 

Class V. Skilled Employe es. This ^^roup includes motion r)icture 
machine o-oerators, stage hands and maintenance rien, engineers, v/ard- 
robe attendants, firemen, oilers, electricians, carpenters. 

3. UNIONIZATION OF EIvlPX.OYEES 

There is a sharp contr-^st in this Industry between skilled and 
unskilled labor. Many attempts have been made to organize the un- 
ski].l.ed or non-craft labor but only in isolated instances have these 
efforts been successful. On the other side of the bargaining table, 
there has been for years a high degree of union ore:ani2a,tion among the 
skilled \7orkers, particularly in Class V employees as herein classi- 
fied. There axe several strong and -ouwerful union organizations in 
this class, notably: 

(a) The International Alliance of Theatrical Stage Employees 
and Moving Picture Machine Operators of the United States 
ajid Canada. 

(b) The International Union of Opera.ting Engineers. 

(c) The International Brotherhood of Electrical Workers. 

(d) The International Brotherhood of ?iremen. Oilers, 
Helpers, Railway Roundhouse and Railway Shop Laborers. 

(e) Local and regional unions of motion picture operators; 
organizations of stage hands in some strtes - not 
affiliated, as are the dominating skilled trade groups, 
v;ith the American Federation of Labor. 

The ■' axgest and most powerful of these union ^^roups is the 
International Alliance of Theatrical Stage Employees and Moving Picture 
Machine Operators of the United States and Canada, which at the present 
time (November, 1935) claims a.bout 25,000 members. The international 
headquarters was moved from New York to Washini^-'ton, D. C. during the 
Code period so that its international officers could maintain daily 
cooperr.tion '/ith the National Recovery Administration and with the 
main of. 'ices of the American Federation of Labor. The Alliance con- 
tinues to operate from Washington. 



-121- 



This international alliance, knovm in the notion pictur*^ industry 
as the "lA" is the outgrowth of the old N.'^tional Allirnce of Theatri- 
cal Str^r.'B Employees - rn or,i;r?nizr.ticn thn.t ^mtc-d-'^^ed the motion 
picture industry "by a decade of activity. The old "National Alliance" 
drew its membership principally from the stoge hands in V8udeville and 
legitimate theatres. As the "lA", this orgnnizr.tion early entered 
the motion ;oicture theatre and -oroceeded to orj-^anize the motion picture 
operator and other v/orkers necessary to projection rocin and theatre 
operr.tion. The present "lA" membership of 25,000 includes some members 
T^or'cing in the production of motion pictures, such as caiiiera-nen, 
soujid ;.ien, 'aboratory mechanics end other studio -'orkers. This situa- 
tion gives the "I A" something of the character of an industrial union. 

The International Union of Operating Engineers is a crr-ft union. 
About 2,500 of the totrl ne.nbership are employed in theatres in charge 
of heating, cooling and ventilating systems. In pjq... it ion to these 
2,500 men, there are alsc engaged in the motion cicture industry 
ap'oroxiraately 1,500 non-^Inion engineers. In some situs.tions, the 
union of Operating Engineers conflicts V7ith the International Brother- 
hood of Electrical Workers and the International Brotherhood of Firemen, 
Oilers, Helpers, Ra.ilv7ay Roundhouse and Railway Shop laborers 'vhich 
claim ji^JTisdicticn over certain tyoes of r/ork. 

4. C01:DITI0NS AITD CCEE FROVI signs AFrECTIlTG- SKILLED AND UN- 
SKILLED LABOR. 

During the depression, union 'vages .had suffered under steady 
do^'m\7axd -pressure; wor':ing hours were long; v^orking conditions had 
surrendered many of the gains won before 1930, (*) 

The files in the office of Sol A. Rosenblatt, who, as Deputy 
Administra-tor, supervised the drafting of the Cgde of Fair Competition 
for the Llotion Picture Industry and, as Division Administrator, was 
responsible not only for the Code's administration but for Code dom- 
plirnce and enforce: lent; the transcripts of ITRA he^^rings on code 
organizationl editorial ajid special articles in the trade papers - 
all — show a comnon "^^ffcrt by the representatives of the various union 
organizations, the producers and exhibitors to write into the laotion 
picture code fpvorable conditions for labor. 

These documents and attendent correspondence disclose a com^.on 
interest to prevent any further demoralization of working conditions 
for organized labor and to bring the standards of un-organized skilled 
workmen up to this level. The record shows that employee and employer 
worked tlirough NRA machinery in sympa.thetic understanding in this 
effort to standardize wages, reduce hours and incref:se employment. 

The wge and hour situation of employees in the period preceding 
the Coce ano. the standardizations GOi;^ht oy Code provisions are now 

(*) Report of Louis Krouse, As:-:ist.'jit Prosiaent, International 
Alliance of Theatrical Stage Employees and hoving Picture 
Machine Operators to 32nd Convention of Alliance - 1934. 

9633 



-132- 



presented, "briefly, first -ith respect to office eiTployees; secondly, i 

"front of the house" employees, thirdly, the musicians and actors, 
and finally "because of the extended considerjvtion necessr.ry to a full 
under str.nding of the lahor situation, th^ slcilled •employees. 

a. O ffice Em-ployees 

Office employees have been and are today almost wholly unorganized. 
House majLagers and the advertising and pu"blicity employees are included 
in this group. As usual "ith. this tyoe of employee, these executives 
and their assistants in the -pre-code days v^'orked unrestricted hours, 
but, to conroensn.te for that, appear in mjst instances to have been well 
paid.- Under the Code, these employees were limited to 40 hours a week 
unless they received at least $35.00 a week. (*) Their assistants, 
in pre-code days, aver-^ged from $13,00 to $35.00 a week with no limit 
upon hours. IJndejr the Code, the 40 hour week applied to these workers. 

Exhibitors contenaed that unrer.trictf^d hours were justified for 
this class of employees because of the nature of their work and to 
provide opportunity to train these men for ■?:)Ositions either in charge of 
publicity or as theatre managers. During the code a.dministrrtion period 
there v/.as littlf^ compliance and enforcemant difficulty with the hours 
provisions for this class. 

b . "Front of the House" Emp.loyees 

The "front of the house" employees - ushers, doormen, ticket-taJcers, 
ticket-sellers, cleaners, etc, ►- wor'Ked in pre-code days from 40 to 80 
hours &. week. The Code limited these employees to a maximum 40 hour 
week, (**) 

It was not unusual in the pre-code days for ushers and ticket- 
takers to work for not'ning more than the flattery of free admission 
tickets. There was a scale, however, for this class in some cities that 
ran up to $15.00 a week. In some strongly organized union labor com- 
munities, these unskilled workers had succeeded in organizing and had 
negotiated successf^olly with their theatres for better wages and improved 
working conditions. Over many years, attempts had been made to organize 
these workers but except in these isolated cases, all efforts failed. 
Except for cleaners, matrons, and watclimen, most of the employees in 
this class are from 16 to 25 years old. A rapid turnover in omployment 
is the rule. 

The Code stajidtirdized a minimum of wa,ges for this mobile class, 
within specified population differentials. Code wages and hours pro- 
visions are credited generally with having resulted in an increase in 
employment for this group and a shortening of hours with little or no 
resultajit ].oss of earnings. Only scattered complaints of non-compliance 



(*) Article 17, Division C, Tart 1, Section 2 of .the approved Code, 
(**) Article I"\r, Division C, Part 1, Section 2 of the ap^^roved Code, 

^ 

9633 



— 1 '7,'7. 



OCT- 



v'ith r7-?4'es and hours Torovisions are found in the National Recovery 
Adjnini strati on conicliriiiQe records. It hR,s ■"been in^iossible to get ?jQy 
infor :'^.tion as 'to conditions in this group since' the Kotion Picture 
Code becrme inoperative. 

The Code set utd these ^age iDrovisions for these workers: 

"With respect to employees reguarly employed as ticket- 
sellers, doormen, ushers, cleriiers;, natrons, watchmen, attendrnts, 
portsrs, and office help, such employees shall receive not less 
than a twenty per cent (20^) increase over the wage -caid to them 
as of August 1, 1933, in cities and places having a population 
of less than 5,000, -orovided that this shall not require a 
ua^e for these employees in excess of twenty-five- cents (25) 
per hour." (*) 

"With respect to employees regiiarly employed as ticket- 
sellers, doormen, cleaners, ma,trons, watchmen, attendants, 
porters, and office help, such employees shall receive not 
less than thirty (30) cents "oer hour in cities and Dlaces hav- 
ing a population of more than 15,000 and less than 500,000, 
and not less than thirty-five (35) cents per hour in cities 
and towns having a popula^tion of more than 500,000." (**) 

"With respect to employees reguarly employed as ushers, 
in cities and Dlaces having a '■opulation over 15,000, such 
employees shall receive a wage .of not less than twenty-five 
(25) cents TDer hour," (***) 

c. Sound and the Lxu.sician 

Another lahor -orovision of the Code which presented few difficul- 
ties governed musicirns . 

The musician once had an inoortant "olace in the motion pict-ore 
theatre; that was "before the "talkies" replaced the silent screen. 
Sound, ^ith its similitude of life in action and spoken word and its 
inclT'.sion of orchestral perfonacmce drove the musician from the thea.tre. 
His employment was almost completely eliminated. The musician who 
survives finds work only in conjunction --^ith vaudeville and other 
sta^e presentations. 

Hore than 30,000 musicians had "been employed in the exhibition of 
motion -oictures in the days "before audiences heard the voices of Al 
Jolson, ilgirtinelli and a gypsy chorus in the first experimental, yet 
successful, sound pictures. The "talkies" had arrived. The musician 

(*) Article IV, Division C, Part 1, Section 3 of the approved Code. 
(**) Article IV, Division C, Part 1, Section 4 of the aprroved Code. 
(***) Article IV, Division C, Part 1, Section 5 of the apDroved Code. 

9638 



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slowly departed. Today, it 13 estimr'.ted not more than 2,000 musicians 
are eirolojred in the motion picture theatres of this co-untry. 

At the reqirest of the Anerican Federrtion of lliisicians, a lator 
provision "broad and general in itn terms, ^as included in the Code, 
This provision was acceptal^le to the exliibitors; in code administration, 
no difficulties arose over this -orovision. Section 9 of Article 17, C, 
Part 1 of the approved Code read: 

"3y reason of the -Drpfessional charact.'^r of their em- 
ploj'Tnent, the minimum wages and raax.iumura hours of employment 
of er.Tnloyees performing the duties of musicians shall, as 
heretofore, Tdo ostallished hy -orevailing lahor agreements, 
understandings, or practices. " 

d. Actor Employees . ' ■ ■• . 

Class IV enoloyees are the Actors. Usually they are employed in 
presentation and vaudeville entertainment in connection with picture 
showings. There are proTjahly not more than 5,000 of them now on the 
stages of motion picture houses. Ac in the case of the musician, the 
actor also lost his old imoortance in the motion -oicture house when 
" sound" cane in. 

The future of vaudeville presentation in motion picture theatres is 
uncertain. Less than a decade ago, the actor could crown a lifetime of 
amhitious work with established national success if he could win a 
rousing round of applause on the stage of the old Palace Theatre on 
Broadway - the mecca of the vaudeville artist. Now, as everywhere, 
ictures are first, even in the Palace, Amatear Hours, for the moment 
NovemlDer, 1935) are a poxsular enthusiasm of presentation theatre 
audiences and troupes of talented and near- talented actors and singers 
are amhitiously seeking through such opportunity to revive motion pic- 
ture vaudeville. There is, on the evidence of the daily and weekly 
trade press of the Industry, a presently increasing demand for "name 
acts" occasioned "by the current popularity of personalities from radio 
and motion picture studios. 

In a survey of the vaudeville situa.tion in the motion picture ex- 
hibition field, the Motion Picture Herald (J^ine, 1935 issue) makes this 
comments 

"One of the severest tlows dealt the cause of vaudeville 
in recent years lies in the record of the exclusive film 
policy of Loew' s Capital on Broadway (New York) where 'China 
Seas' completed three successful weeks when stage shows were 
elimina.ted for the first, time since the theatre was opened 
in 1919. ' " ' 

"The Loew' s Circuit, and others, "believe that with a 
large percentage of meritorious films "being released, there 
will "be no need for "bolstering stage shows even on Broadway; 
while the "booking agents "blame the increased trend to theatre 
pooling and the accompanying decrease in competition as well 
as the la"bor situation for accelerating the "back-to-film 
movement, 
9638 



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"Considered highly indicative of the jeeneral trend is tiiat 
Loew's five years a^o scheduled stage shows in 36 of its theatres 
as regular policy and last year, vrith fluctuations, in twelve 
(12), this year only three theatres will play vaudeville reg- 
ularly: Loew's State in New York; the Centrnjy in 3'iltimore and 
the Fox in Washington, on weekly stands. " 

The actor's decline tegan when the motion pciture ca,ught public 
imagination sufficiently to keep the audience in its seats, instead of 
sending them home, Wlien first introduced, motion pictures were used in 
the old-time vaudeville theatres not as an added attraction, but as a 
novelty at the end of full hill of vaudeville acts. There ^-'ere, at that 
time, many vaudeville circuits. Traveling companies had no diff-iculty 
in securing 52 reeks of work in a year. The growing popularity of the 
motion picture gradually reversed this situation; the -ohantoras of the 
screen "became predominant; the living actor, became a fleeting figure. 

In pre-NEA Code days, wages for vaudeville troupers in motion pic- 
ture theatres, ranged from "coffee and cakes" to thousands of dollars 
a week for "name acts, " It is still common practice in large cities 
where stage presentations continue to give five shows a day on week days 
and, where permitted, three shows on Sunday, Although acts are seldom 
on the stage more than ten minutes for each show, additional time must 
be spent by players in preparing for the show and in removing make-up 
and donning street clothes after the show so that actual working time 
has been estimated to be anywhere from 50 to 70 hours a week. 

To correct conditions both as to hours and wages, Part 2 of Article 
IV, Division C of the Motion Pict-ore Code set up elaborate protective 
provisions for actors and the heretofore neglected chorus. Rehearsal 
periods were restricted for principals and chorus, Rehersals for the 
chorus ^-^ere limited to 40 hours in any one week. Salaries were establish- 
ed and minimuas defined: $40 a ""eek, net, after any deductions, for 
performers with more than two years theatrical experience; $25 a week 
net, for those with less th^ii two years theatrical experience; $7.50 
net "in cash per day to performers er.ployed on a per diem basis for each 
theatre in which such performer appears," Transportation, including 
sleeper and baggage charges, w.as for the first time recognized and es- 
tablished as a proper obligation of the employer, Wigs, shoes, tights, 
stockings, costurars s.nd other necessary stage wardrobe' also became an 
obligation of the employer with respect to performers receiving less than 
$50 a week. Lay-offs and rest periods were also for the first time de- 
fined and established. 

These were far-reaching reforms in improving the lot of the actor 
and the chorus girl. To check violations by subterfuge, it became 
necessary in March, 1935 to amend the Code (*) and thus close up loop- 
holes for evasion, and circumvent practices which are described in the 
following six pertinent observations in the report of William P. Farns- 
worth as Deputy Administrator, 

(1) "Exhibitors have in some instances contracted with 



(*) See Deputy's Report to the National Industrial Recovery Board sub- 
mitting Amendment ITo. 4 to Approved Code No. 124, dated March 4, 1935i 

S638 



-136- 

thirdpoxties for the scrvicu of theatre emoloyees for the 
definite iDurpose of avoiding payment of Code wages for being 

hound hy Code hours • The amendment nrovides that 

Exhibitors who contract for such services in the future must 
require the contractor to agree in the contract to pay the 
T7ages and observe the hours set forth in the Code." (•) 

(2) The definition of actor employees was changed to exclude 
specific mention nf "rep shows, tab shows, t-^nt shows, medicine shows 
and show boats", confining the definition to "permanent and traveling 
companies of artists playing Toresentrtion and vaudeville houses". 

The evil detected and the remedy sought are stated by Deputy 
Administrator Farnsv;orth as follov/s: 

"llo difficulties have arisen with regard to these excluded 
tyDcs of shows, nor is the amendment designed to include them 
within the Code at the present time. However, some presentation 
and vaudeville comiDaJiies have adopted such names as "tab shows" 
or "show boats" and sought by such means to escape compliance 
with the Code, The employers of performers in these companies, 
who have sought by th^se means to defeat the TDurposes of the 
Code, are actually the 'presenta.tion and vaudeville companies' 
referred to and described in the Code -orovisions as they now 
exist. There is nowhere in existence specific definitions 
of the various terms used in describing the types of shows 
exempted from the Code nrovision except that the Code provision 
itself defines the terms 'as these terms are \mderstood in 
the theatre'. The definition resulted in considerable con- 
..'. fusion, and subterfuge. 

"The amendment will improve the standards of labor cf 
the employees in those shows in which the employer used one 
' of the above mentioned turms to circumvent compliance with 
the Code, since the object in the use of such terms was to 
pay the employees less than the minimum wages and to require 
the performers to work rtiore than the maximum hours provided 
in the Code. The amendni^nt will also increase the purchasing 
power of the employees referred to above, and will tend to 
raaJce necessary the employment of xiersons not now employed." (**) 

(5) A further amendnent to increase earnings and purchasing 
power was ap'oroved to require "the payment to -orincipals 'of one half 
of the weekly wage for each week or part thereof that the rehearsal 
extends beyond two. weeks". 

(4) On the $7.50 per diem class of actors, the Deputy Adminis- 
trator reports in justifying another change in wording made in 

(*) Pages 2 and 3, DerDuty's Report to the National Industrial Recovery 
Board submitting Anendment No. 4 to ^proved Code No. 124, dated 
March 4, 1935. 

(**) Page 3, Deputy's .Report to the National Industrial Recovery 

Board submitting Amendment No. 4 to Apriroved Code No. 124, dated 

March 4, 1935. 
9638 



-137- 



Amendment No. 4: 

"The original Code provision for \7hich this r'unendment is 
proposed as a substitute provided for a $7,50 per diem rate and . 
was intended to accomplish the snme result as the amend»:ient, 
"but it has been found that certain performers v;ore thereafter 
required by their employers to olay in more than one theatre in 
a single day and that the Code provision as worded was not 
sufficiently clear to indicate this intention of the original 
provision, 

"In a subsequent provision of the Code, applicable to 
principals, it is provided that: Ov/ing to the peculiar nature 
of the stage presentation and vaudeville business and the con- 
ditions prevailing therein, the changing nature cf the enter- 
tainment, etc., it is recognized that it is impossible to fix 
the maximum hours per week of artists .appearing in such theatres. 
Since no maximum hours are fi:?:ed, the injustice of permitting 
employers to require that principals appear in more than one 
theatre in one day and be conpensated only the minimum rate, 
is apparent. The amendment \7ill definitely improve the stan- 
dards of labor of the performers " (*) 

(5) Layoffs. Cn this subject, the Depiity Administrator reports: 

"This ,,, anendmezit clarifies that portion of the Code 
which provides that a chorus person be released from work with 
pay one dajr out of every seven days. Lay-off periods were rare 
and uncertain before the adoption of the Code and the original 
Code provision coupled with this amendment will definitely im- 
prove the standards of labor for chorus persons." (**) 

(6) Clear provision for paying actors or chorus persons in 
cash for transportation was next found necessary, the Deputy Ad- 
ministrator reporting that:- 

"In a number of instances in the past, employers have tal^en 
a shew 8Jid chorus on the road to different cities in the United 
States and if the show did not prove a success, it became the 
practice of employers, either because of insufficient finances 
or for other reasons, to dismiss the chorus persons on the road, 
and provide no arrangement for the transportation of such chorus 
persons back to the point or origin. This practice frequently 
resulted in chorus persons being stranded without funds, some- 

(*) Page 4, Deputy's Report to the Ifationa,l Industrial Recovery 
Board submitting Amendment No. 4 to Approved Code No, 124, 
dated March 4, 1935. 

(**) Page 5, Deputy's Report to the National Industrial Recovery 
Board submitting Amendment No. 4 to Approved Code No. 124, 
dated March 4, 1935. 



9638 



-138- 



times groat distances from thnir homes or point of possitle- 
reemployment." (*) 

Despite the condition oi.evr-sicn emphasized "by the Deputy Adninistra- 
tor, the compliancs records and correspondence files in the National Re- 
covery Administration disclose but few references to violations of the 
actor and chorus sections of the Code. The conditions remedied appear to 
have been common knowledge in the indos try, 

e. The Major Problem ~ Skilled Lr.bor 

Major attention \7as given throughout the -Deriod of Code administra- 
tion to the problems of Class V of Exhibition employees - the • skilled 
workers. This group was defined in. the Code, as including bill posters, 
carpenters, .electrical workers, engineers, firemen, motion picture machine 
operators, oilers, painters, theatrical sta-i^e enployeos, theatrical ward- 
robe attendants, and other skilled mechanics and artispjis directly and 
rega.larly employed by the exhibitors. {*■"*) 

An advance of far reaching ecv-nomic. importance to each division of 
the Industry v;as made through the Code by the agreement betvjeen the 
employer-exhibitor^ and the skilled workers of this Cl'-'ss III '..'hereby the 
employees agreed no t to strike and the e xhibitors agreed not to lockout 
skilled v;orkers . (•"''-''*) Strikes and lockouts - a constant!/ recurring 
economic disturbance in theatre CDcratinn - practically'" disappeared dur- 
ing the period of Code administration. 

In public addresses before conve.ntions of motion licture exhibitors 
and theatre owners, at Atlantic City, September 1954 and in New Orleans, 
February, 1935, Division Administrator Sol Ao Rosenblatt, spealcing as Ad- 
ministrator of the Motion Picture Industry Code and as National Director 
of Compliance and Enforcement for i-iP.A said that, as a result of this un- 
usual agreement, there had been less labor trouble in motion picture 
theatres than at any previous time and that the motion oict'ore industry 
had exi^erienced less labor strife than any other comparable great indus- 
try. (**'^*) 

The structure upon -vhich labor relations moved to this result was 
built up through a series of scrupulously v/orded "orovisions in the Code 
that sought to prevent (l) discharge of workers, (2) doubling of duties 
to circumvent employment or re-employnent, (o) reduction in pay below the 
rate prevailing upon a specified day preceding the approval of the C<^de, 



(*) Page 6, Deputy's P.eport to the National Industrial Recovery Board 

submitting Amendment No. 4 to Approved Code No. 124, dated M.arch 4, 1935 

(**) Article IV, Division C, Part 1, Section 6 (a) of approved Code, 
(***) Article IV, Division C, P-^'.rt 1, Section 6 (d) of approved Code, 

(**'**) Addresses of Scl A. Rosenblatt,* Division Administrator - National 
Recovery Administration Files - Motion Picture * Industry. 



9638 



-139- 



and (4) a regard for the earning capacity of each the.T.tre involved so that 
wage scales might "bear a proportionate relationship and thus set up an 
equita'Dle "basis of competition with respect to lahor costs. 

These provisions are of sufficient general interest that it is "be- 
lieved that they should be quoted in full in fnis report. 

"Employees associated with organizations of or performing 
the duties of "bill-posters, carpenters, electrical workers, 
engineers, firemen, motion picture machine oper'^.tors, oilers, 
painters, theatrical stage employees, theatrical wardro"be atten- 
dants, or other skilled mechanics and articans, who are directly 
and regularly employed "by the £xhi"bitors, shall receive not less 
than the minimum wage and work no longer thaji the maximum n-am'ber 
of hours per week which were in force as of August 23, 1933, as 
the prevailing scale of wages and maximum num"ber of hours of 
labor by organizations of any of such employees affiliated with 
the American Federation of Labor with respect to their respec- 
tive type of work in a particular class of theatre or. theatres 
in a particular location in a particular community, and such 
scales and hours of labor with respect to any of such employees 
in such community shall be deemed to be, and hereby are declar- 
ed to be, the minimum scale of wages and maximum number of hours 
with respect to all of such employees in such coraraunities in 
such class of theatre or theatres, (*) 

"In the event, however, that there exist in the particu- 
lar community organizations of such employees above mentioned, 
members of which were directly and regularly employed by the 
Exhibitor or Exhibitors on August 23, 1933, and which organiza- 
tions are affiliated as above set forth, and (1) no prevailing 
scale of wages and maximum number of hours for such employees 
exist in such community with respect to such employees, or (2) 
any dispute should arise as to what is a minimum scale of wages 
or the maximum number of hours of labor with respect to any of 
such employees for a particular cla^s of theatre or theatres in 
any particular community than and in either of those events such 
disputes shall be determined as follows: (**) 

"(l) If the question at issue arises with an organiza- 
tion of such employees affiliated with the American Federation 
of Labor, then a representative appointed by the National Pres- 
ident of such affiliated organization, together with a repre- 
sentative appointed by the Exhibitors, shall examine into the .' 
facts and determine the existing minimum scale of wages and 
maximum number of hours of labor for such class of theatre or 
theatres in such particular locality, and in the event they 
cannot agree upon the same, they shall mutually designate an 
impartial third person who shall be empowered to sit with such. 

. (*): .Article IV, Division C, Part 1, Section 6 (a) of approved Code, 
(**) Article IV, Division C, Part 1, Section 6 (b) of approved Code. 
9638 



-140- 



representatives, review the facts and finally deternine such dis~ 
■Qute, with the TDroviso, however that in the event such represen- 
tatives cannot mutually agree upon such third person, then the 
Administrator shall designate such third person: or (*) 

"(2) If the qaestion at issue arises with unorganized em- 
ployees, or with an organization of such employees not affil- 
iated \7ith the American Federation of Lahor, and if in said 
community there exist members of such affiliated organization 
directly and regularly ^employed by a-n Exhibitor or Exhibitors, 
then a representative of such unorganized employees,' or, as the 
case may be, a representative appointed by the President of such 
unaffiliated organization or both, together with a representa- 
tive appointed by the national President of such affiliated organ- 
ization above referred to, together with a representative appoint- 
ed by the Exliibitors, shall examine into the facts and unanimously 
determine the existing scale of wages and maximum niunber of hours 
of labor for such class of theatre or theatres in sach pratic- 
ular community, and in the event tliey caxmct unanimously agree 
upon the same, they shall mutually designate an' impartial person 
who shall be empowered to sit with euch representatives, review 
the facts, and finally determine such dispute j with the pro- 
viso, however, that in the event such representatives cannot 
mutually agree upon such impartial person, then the Administra- 
tor shall designate such impG.rtial person; or (**) ' 

"(3) If the question at issue arises with unorganized em- 
ployees or with an organization of* such enployiees not affilirted 
■with the AmericaJL Federation of Labor and not subject to the 
foregoing provisions of subpara-;Taphs (1)' and (2) or paragraph 
(b) hereof, then a representative of the President of such un- 
affiliated organization, or both together, with a representative 
R,ppointed by the Exhibitors, shall examine into the facts arid 
determine the existing minimum scale of wages and maximum hours 
of labor, for such class of theatre or theatres in such partic- 
ular locality, and in the event they cannot agree upon the same, 
they shall mutually designate an impartial person who shall be 
empowered to sit with such representatives, review the facts and 
finally determine such dispute, vdth the proviso, however, that 
in the event such representatives cannot mutually agree upon 
such impartial person, then the Administrator shall designate 
such impartial person. (***) 

« 

"Pending the determination of any such dispute, the rate 
of wages then paid the Exhibitor in such theatre or theatres in 
such community, and the maximum number of hours, then in force 
(if not more than the hours provided for in this Code) shall not 
be changed so as to decrease wages or increase 'hours, (****) 



(*) Article IV, Division C, Part I, Section 6 (b) of ao-oroved Code, 

(**) Article IV, Division C, Part 1, Section 6 (b) (2) of approved Code. 

(***) Article IV, Division C, Part 1, Section 5 '("b) (o) of approved Code 

(****) Article IV, Division G, Part L, Section 6 (c) if approved Code, 
9638 



-141- 



"In order to effectuate the foregoing provisions of this 
Section 6 hereof, and pending the determination of any disputes 
as above specified, the employees herein embraced and provided 
for agree that they shall not strike, and the Exhibitors agree 
that they shall not lock out such employees, (*) 

"In no event shall the duties of any of the employees 
hereinabove specified in Section 6 (a) directly and 
regularly employed by the Exhibitors as of August 23, 
1933, be increased so as to decrease the number of 
such employees employed in any theatre or theatres in 
any community, except by mutual consent. (**) 

"liTith respect to any employee not hereinbefore pro~ 
vided for, such empolyee xihen directly and regularly 
em^jloyed by the Exhibitors shall be paid not less 
than forty (40) cents per hours, (***) 

"With respect to disputes arising bet\7een employees 
and employers in the Exhibition branch of the Motion 
Picture Industry, the parties pledge themselves to 
attempt to ^arbitrate all such disputes, (****) ^ 

"The Administrator after such notice and hearing as 
he shall prescribe may revise or modify anjr deter- 
mination of any dispute pursuant to Section 6 of Part 
1 of Division C of this Article IV*" (*****) 

The majority, by far, of all complaints \7ith regard to skilled labor 
originated with moving picture machine operators and as a result the Code 
provisions were interpreted and administered principally for this class. 
The problems of this class will be taken up in detail in the following 
section, 

5. MOTION PIGTlffiE MAGHIIIE OPERATORS 

Before MA, members of the "lA" (The International Alliance of 
Theatrical Stage Employees and Moving Picture Machine Operators of the 
United States and Canada) were working from 35 to 50 hours a week at scales 
ranging from $25,00 to $125,00 a week. 

Unaffiliated union operators in this pre-^-code period generally receiv- 
ed scales ranging from 20 to 30 pr-r cent less than the "lA" scales and 
worked longer hours. Non-union operators worked even longer hours than 



(*) Article IV, Division C, Part 1, Section 6 (d) of ap"oroved Code, 

(**) Article IV, Division C, Part 1, Section 7 of approved Code. 

(***) Article IV, Division C, Part 1, Section 8 of approved Code, 

(****) Article IV, Division C, Pa,rt 1, Section 9 of approved Code. 

(*****) Article IV, Division C, Part 1, Section 11 of approved Code, 

9638 



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these t\70 groups ijid wore paid "^.s lo'? as $in a week, 

a. Types of Violations of Code Provisions, 

The types of violations of thes'e various -orotective provisions which 
called for special attention fell into the following catagories: 

(1) Complaints made "by local unions affiliated rrith the American 
Federation of Labor that their members who' hrd "been working in a theatre 
on August S3, 1953, subsequently had had their waif^es reduced and were now 
receiving less than the scale of August ^o, 1933« 

Invr.ripbly this involved a dispute as to what the actual wage 
was on August 23, 1933 and the settlement of complaints of this type in- 
volved the production of proper evidence by the contending parties and a 
determination of the actual facts. The principal cases of' this type were 
the St, Louis, Mo,, (*) and the Central States Theatre Corporatipn, Mason 
City, lor/a (*) cases. ■ 

(2) Complaints made by local unions affiliated with the American 
Federation of Labor that i n other theatres of the s.ame class in their 
community, employees rrho were members of competing unions, or company 
unions, or were non-union employees, were receiving a lower scale of wages 
than the prevailing American Federation of Labor scale as of August 23, 1933. 

In these cases, it was invariably necessary to set up a fact-finding 
committee to determ.ine tl7.e disputje as to the classification of the theatres. 
This committee was composed of re^iresentatives of the employer, his em- 
ployees and the union affiliated v;ith the American Federation of Labor, 

The fact-finding committee first investigated the classification of 
theatres and rates of wages v/hich were paid on August 23, 1933 to the 
members of the union affiliated with the A:iericah" Federation of Labor, 
The committee then compared the theatres against which complaint had been 
made with the theatre which, on August 23, 1933, emDloyed American Federa- 
tion of Labor members and attempted to agree on a proper classification 
on the basis of the method which had been used in cla.ssifying the American 
Federation of Labor theatres on August 23, 1933, 

In most causes, this procedure involved tailing into consideration the 
location of the theatres, the seating capacity, the prices of admission 
cha.rged ajid the ran of pictures sho\7n in the theatre, A thorough explana- 
tion of this procedure ±s contained in Field Letter No. 131 (**)• 

An important advance in labor negotiations is to be noted in the fact 
that these factors were studied in order to determine as closely as possible 
the relative potential possibilities of profit In each situation so that 
the wage scales of the employees might bear this same relationship and thus 
provide an equitable basis of competition among employers with respect to 
labor costs* 

(*) Motion Picture Industry Code Labor Decisions, page 3 and page 16, 
National Recovery Administration Files, , 

(**) National Recovery Administration Files for Compliance Division - 

Field Letters sent to State Offices - No. 181. 
9658 



-143- 



Wheii a coiamittee of this type found it inpos^ible unanimously to 
a.^ree on these -Qoints, it was then provided in the Code that the com- 
mittee members should either mutually" a{^ree upon an impartial person to 
determine the dispute or that the Administrator should appoint the im- 
partia,l person. This was done in many instances. 

As soon as the degree of comparability "between the theatres had been 
agreed upon, wage scales were then established having the same degree of 
comparability and based upon the scales actually paid in a comparable 
theatre or theatres on August 23, 1933, 

A majority of the cases handled fell into this catagory. Whenever it 
became necessary to appoint an impartial person, it was invariably possible 
to a.rrive at a solution agreeable to all parties in controversy. 

(d) The Hew York Situation. 

In New York City, labor problens of threatening import arose under 
this classification of complaints and attracted rdde attention, as did a 
similar situation in Pittsburgh, because of the number of theatres and the 
issues involved. 

Labor disturbances in New York continued through the early part of 
1934 and the particular situation with respect to skilled employees re- 
quired the special Dersonal interventions of Sol A. Rosenblatt, the Di- 
vision Administrator. As early as Janurry 6, 1934 (*), the Regional Labor 
Board in New York was considering a complaint by Local No, 306 of the 
International Alliance of Theatrical Stage Employees and Lioving Picture 
Machine Operators of the United States and Cana.da that certain theatres 
had violated Section 7-a of the national Indastrial Recovery Act md had 
also violated Article IV, Division C, Pr'rt 1, Section 6 and 7 of the 
Motion Picture Industry Code, 

The situation in New York City was very complicated. In addition to 
Local llo, 30S, which was aff ili^-ted ^7ith the Americaji Federation of Labor, 
there were four other raoti'.n pict'ure operators' unions, one of \7hich had 
been characterized by a New York Court as a company union. 

Further complicating the situation wa.s the fact that Local No, 306 
had no established minimum -"vage scales; theatres which unquestionable fell 
in the same classification were paying qaite varying wages under contract 
with Local No, 306, 

The situation was further complicated by this fact: the Independent 
Theatre OiTners* Association Inc., of New York, operating between 250 and 
420 motion picture houses in Greater New York City, claiming dissatisfaction 
with Local No, 306 and the Empire State I.Iotion Picture Operators Union, 
caused the creation of the Allied Motion Picture Operators Union, Inc. , 
and entered into a ten 3''ear contract witli Allied (identified by the New 



(*) Letters of Division Administrator, Jan^iar^.^ 6, 1934 and Januarj'- 22, 
1934 - New York Situation - I.Iotion Picture Industry Code - National 
Recovery Administration Piles, 

9638 



-144- 



York Courts as a comp''.ny -union) (*) stipulp.ting thp.t Allied' s projectionists 
exclusively were to be employed. This caused the dicchr.r^e of Local No, 
506 projectionists and in some instances re-employmc-nt of Allied men at 
lov/er TJB.ges; and in other instances no replacements were niade at all (*)• 
Threatened local warfare would appear to have teen prevented by the action 
of the National Recovery Adnini strati on. 

In June 1934, the Division Aar.inistrator apr)Ointed a fact-finding 
committee head by Major L. £• Thompson of the RICO Circuit and on which 
the various employer nud labor factions were represented for the purpose 
of arriving at a scale in accordance with the provisions of Part B, of 
Section 6 of the Cede. 

The fact-finding corar.ittee -under ■•■lajor Thom-oson attr,ckcd the problum ,-«.', si douily 
in an effort to compose the differences. Considerable Jieadr.-'vy was made 
along these lines and a general plan for s-^ttling the problem had been 
worked out, but specific points still h-id. to be a^rreed upon, particijlarly- 
a basic hourly wage from which to graduate wage scales for the various 
classes of theatres. In December 1934, a oubliq hearing was arranged to 
consider an amendment to the Code which would settle the New York problem. 
Notices of this Hearing, the proposed a'-iendment nud the stenographic re- 
port are contained in the Motion Picture Industry files of the National 
Recovery Administration. 

Major Thompson's committee collected data on both employment, booth 
costs, admission prices, seating capacity a.nd the run of pictures in each 
of 436 theatres out of the total of 506 theatres in Ne^ York, The report 
filed with the Np.tional Recovery Administration showed that the hourly 
rate varied from 22 cents an hour for non-union Ipbor up to $4,25 per 
man per hour in deluxe union theatres. The schedules proToosed by this 
committee called for a 30 hour week in order to spread employment and a 
minimum booth cost for motion picture machine operators of $60 a week, 
this scale to exist for ten years subject to revision at stated inter- 
vals, but not sooner than tvo years after enacitment. 

Disagreements arose dt the public hearing held on February 1, 1935 
bringing out factional differences among union representatives. Since the 
proposed schedule would lower the total weekl;/ booth cost from $89,47o to 
$67,453 some Union representatives, while agreeing to the shortening of 
hours, would not agree to a corresponding decrease in wages. It was 
maintained that the employers v;ere not contributing to the financial 
sacrifice which would be made by the employee for the loss of wages by 
reason of working only 30. hoiirs per week. 

Several counter proposals T7ere offered at this hearing (**) and it 
was decided to revise the proposed ai-^endment and call another public hear- 
ing. The Schecter decision had been handed down ^y the United States 



(*) Decision of Justice Collins in Sherman v. AbeleS g New York, 

National Recovery Administration Files - Motion Picture Industry - 
New York Labor Conditions, 

(**) National Recovery Administration Files - New York Situation, 

Motion Picture Industry - Hearing of February 1, 1935. 
9633 



-145- 



Supreme Court "before this second hearing: could "be held. Reports in the 
daily trade press of the Ind\istry disclosed that since May 27, 1935, 
violence ha,d "broken out in Hew Yorlc; the coinoany union reraains a factor 
on the scene and union cliff icilties have not "been ironed oi± and 
no wage scales esta'blished* 

("b) The Pitts'burf'jh Case, 

The Other important situation developed in Pitts"bur;^h where 100 
theatres in and around the city r.'ere involved. 

In this situation the impartial ar"bitrator named by the National 
Recovery Administration did not readily reach a solution v/hich was agreea'ble 
to the majority of exhibitors and employees, 

Hov7ever, the Division Administrator's office granted any exhihitoi'^ '- 
or employee who felt that an -jjifair determination had "been made the right 
to represent his ca^-e and to have his determimtion revised or modified 
as provided for in the Code (*) if the facts warranted. 

To assist in the review of these cases, an exhi'bitor-lahor committee 
was set up in Pitts'burgh, This committee made a careful study of the 
situation in ^jid pjround Pitts'burgh. The National Recovery Administration 
cooperated with this committee- sending an Assistant Deputy Administrator 
to Pitts'burgh, In this mediation,., more than 25 per cent of the cases 
were settled to the satisfaction of the parties concerned. 

It w.as plajined by the Division Administrator a^t the time of the 
Schechter decision made t'tie Code inoperative to use this same procedure 
in Los Angeles where a similar situation existed, 

(3) Another frequent type of complaint came from non-union or 
unaffiliated employees ^rho alleged that they were not receiving the scale 
01 v/ages provided for in the Code even though such scales were establish- 
ed by trade agreement in the community. These situations were handled in 
the same m.anner as outlin-^^d in Field Letter lie, 131, ComT^liance Division, 
National Recovery Administration, 

(4) A fourth t^rpe of complaint came from employees who alleged that 
although they were receiving the minimum scale of wages jrovided for in 
the Code, they were unable to negotiate with their employer for better 
conditions. 

It should be noted here that the provisions of Section 10 of the 
Code stated that the employers and employees must a.t tempt to arbitra.te. 
In cases of this kind, in order to prevent strikes or lockouts resulting 
from the dispute, the Division Administrator's office used its influence 
with employers a:id employees to encourage arbitration and frequently 
offered the services of an Assistant Deputy Administrator, assigned to 
these labor com-olaints, as impartial a.rbitrator. Although the history 
up to 1933 is replete strikes and lockouts, the period of the Code was 
practically free of such disturbance So 



(*) Article IV, Division C, Part 1, Section 11 of approved Code, 
9638 



-146- 



(5) Next in importance were complaints from union org.anizations 
that a reduction in skilled er^ployees had bern eo iiade as to increase 
the duties of those who remained in enplo\ment. 

These disputes were usually srttled under the mutual consent pro- 
visions of the Code labor conditions, through correspondence from the 
Division Administrator's office pnd by personal intervention through an 
Assistant Deputy Administrator, The L'ction Picture Industry files of the 
National Recovery Administration disclose that the following methods were 
used by exhibitors found in violation of the pertinent code provisions: 

(a) Stage hands or maintenance emloyees were discharged on the 
claim made that their duties no longer existed. In many cases it was 
found that these duties had been transferred to unskilled employees. 
There v;ps much difficulty in determining Just action in such disputes, 

(b) li?nere employers were v'orking two men on a shift, the time of 
these men was cut in half, leaving one man on a shiftc Thus, although 
there was an increase in the duties of the individual employee, there was 
no act-'jial reduction .in the number of such employees. This procedure was 
adjudged to be a clear violation of the labor section of -the Code. 

(c) Duties of another class \iere transferred to skilled employees 
causing a jurisdictional dispate, thus beclouding the issue, 

(d) A theatre chan;.;6?d hands; the new o\7ner raised the question that 
this interruption in continuity of management removed the employees from 
the protection of this section of the Code, 

(e) A theatre was closed and later reopened by the same management 
and the claim was immediately made that this situation also removed the 
employees from the protection of the Code, 

(f) A sixth tyr)e of complaint Ccune from non-union employees in 
communities where no org^x.ization affiliated with the Ajnerican Federation 
of Labor existed on August .25, 1935, The usual complaint here was that 
these employees were not receiving the scale of wages provided in the 
Code, These situations were taken care of by the provision of the Code 
which stated that such employees should receive not less than 40./ per 
hour, 

(g) Another series of complaints came from members of unions affile- 
iated with the American Federation of Labor, stating that tlie reduction 
in their hours as provided for in Section 2 (that no employees shall work 
more than 40 hours in one week) resulted in a lower weekly wage. In- 
vestigation prior to the formulation of the Code had indicated that the 
average hours of employees of this t^.nrje affiliated with the American 
Federation of Labor were slightly over 40 so that the average reduction 
in weekly wages which would result was less than an hour's wage. In most 
of these cases the employees, through collective bargaining, obtained 
equitable adjustments commensurate with the reduction in hours, 

b , Im'.oroved Labor Conditions due to the Code 

In his annual report to the 32nd annual convention of the Interna- 



-147- 

Operators of the United States and Canada held in 1934, L'^uis Kro-use, 
the Ansintant President of the lA, asserted that the Code had increased 
emplojTnent am'>ng their memlDers in 152 commimities in theUnited States; 
that lijany wage increases had been obtained for unskilled workers and in 
a great many instances their h^urs were decreased. 

From the files of the Division and Deputy Administrators in charge 
of the code, these evidences regarding empl'^yment have been extracted as 
typical examples: 

Motion picture machine operators in approximately 100 theatres in 
and around Pittsburgh, Pa., received increased wages and shorter hours 
of work under the Code, 

"W'^metco Theatres, Inc, , operating five theatres in Miami and Miami 
Beach, Florida, increased their annual payroll approximately $8,000, 

Engineers in theatres received increased hourly wages and shorter 
hours in Bost'^n and Nev/ York, 

Motion picture machine operators received increased wages and short- 
er hours of work in Dallas, Texas; Long Beach, California, Erie, Pennsyl- 
vania; Lynn, Massachusetts; Laxrrence, Kansas; Youngstown, Ohio; Centralia, 
Illin">is; Seattle, Washington; Nashville, Tennessee; San Antonio and 
Tyler, Texas; pueblo, Colorado and many other places. 

Operators whose wages had been decreased in St, Louis, Missouri, won 
back their original scale and received restitution in the amount of 
$17,000, 

The intervention of NBA representatives prevented strikes and I'^ok- 
outs and resulted in amicable adjustments bein£; made in Centralia, 
Illin->is; St, Louis, Missouri; Kansas City, Missouri; Boston, Massachu- 
setts; and ITew York, New York, In the same manner wage reductions were 
prevented in New York City and St, Louis, 

6, POST CODE LABOR CONDITIONS 

Since the Code became inoperative it has been difficult to obtain 
much reliable information as to what changes in labor conditions have 
since talcen place. The following inforaiation, however, has been received 
from various labor organizations by NBA during the progress of this study 
of the Motion Picture Industry, 

The "lA" reports that most of its locals have been able to sign new 
contracts with their employers; and in a number of cases because of better 
business conditions, the memlsers have received an increase in wages. 

However, Local No, 370 of Richmond, Virginia, received notification 
from the theatre owners of that city a few weeks before their contracts 
expired on September 1, 1935, that thev would have to take a 20 per cent 
reduction in wages. All the theatres banded together and said that un- 
less this cut wa,s talcen, the union operators v^rould be locked out. After 
many conferences, the local union agreed to a ten (10) per cent cut to 
prevent a lockout. The membership of Local No, 370 consists of 23 men? 

9638 



-143- 

a loclout would have affected staf:e emol'ij^ees and miisicians affiliated 
with the Araerican Federation of X'fi.'b'^r in that city, 75 to 100 men» 

Alth'^ugh the attemT)ts made by the National Recovery Administration 
during code administration to establish we^e scales in New York City uere 
unsuccessful, there v/ere no ^7!ixge cuts. Since the Code "became inopera- 
tive menbers of Local No, 305 of the "lA" have taken 15 per cent to 17 
per cent cuts» These cuts affect from 700 to 800 men. 

B. PEODUCTION 

1, Ei.S^LOYlvIElNT 

The United States Census of Manufactures for 1933 reported 19,037 em- 
plo^rees in the production branch of the motion picture industry of v-'hich 
8,260 T7ere salf.-ried employees and 10,777 v.^ere wage earners. This total 
did not include some 8,000 to 10,000 pers-ins who from time to time work 
as "extras"* 

The same Census also reported that wages for 1-J33 constituted 15»4 
per cent of the cost of production '-'hereaG salaries constituted 44,4 per 
cent. The marked difference v/s.s caused by the large salaries paid to 
executives, directors, star's and featured players. 



<^m 



TAIiEIIT AIjD professional GROUPS 



The development of quality pictures from the early production of 
short subjects which were ap-oroximately 200 feet in length to the present 
feature len^::;ths sometimes reaching 10,000 feet, a.nd the enlargement of 
theatres from the "empty store" variety/ seating 200 to the modern thea- 
tres seating 5,000 and more persons, was a-ccompanied by the development 
of acting tjid directing as v/ell as by tremendous technical improvements. 

Today, the production of motion pictures centers about a relatively 
small group of personalities, such as 'actors, direct'^rs, writers and 
technicians. The removal of a single individual has often seriously de- 
layed production until a suitable replacement could be found or developed, 

a. The problem of Excessive Salaries 

New producin-;; companies have usuaJly found it more profitable 
to employ talent alra-^ dy developed, obtaining personalities from existing 
companies hy offers of higher salaries, 'The existing companies have sought 
protection from this condition hy placing their people on long term con- 
tracts* 

However, the problem of increasing salaries was not solved by 
long term contracts. Competing producers desiring to acquire the ser>- 
vices of important personalities, induced these artists to find means to 
break existing contracts or to become dissatisfied v.dth their work. 

At the Code forraulating conferences producers contended that 
the control of salaries would satisfy the Industry and create employment. 
.During the period of the depression previous to the Code, high salaries 
had increased while other v/ages had decreased and curtailment of employ- 
ment had -occurred, 
9638 



-149- 

Moreover, the Industry had just experienced increased invest- 
ment requirements f'>r sound equipment '.7hich added sutstantially to its 
heavj'- fixed charges. Desperate efforts were "being made in 1931, 1932, 
and 1933 to attract patrons "by quality attractions in the face of de- 
clining admission prices and decreased attendance. Salaries of stars 
were raised substantially higher than the average salaries commanded "by 
the feature plaj'-ers of the silent screen. In the face of drastic re- 
ducti-^ns of operating eiqjenses in other comriercial enterprises, salaries 
of executives in the Motion Picture Industry were increased, 

"b. The Salaries Investigation 

Tiie reported enormous salaries paid to the child, animal, and 
adult stars and the executives of the motion picture world remained an 
unsettled problem through the Code period. An exhaust ivelj'- detailed re- 
port of all executive, artistic and technical salaries was conducted by 
Division Administrator Sol A, Rosenblatt, President Roosevelt had di- 
rected that such an investigation be made in signing the Code on November 
27, 1933, The President then wrote; 

"Because the President believes that further investigation 
with respect to the problems of pajTnent of excessive com- 
pensation to executives and other employees in this indus- 
try is required, the provisions of Article V, division A, 
part 4 of this code are hereby suspended from operation 
and shall not become effective pending further report from 
the Administrator after investigation; and 

"Because the President believes that writers, authors, and 
dramatists are engaged in purely creative work, the pro- 
visions of article V, division 3, part 5, sections 1 (c), 
2, 3, 4, and 5 of this code, shall not become effective 
with respect to such employees; and 

"Because the President believes that further investigation 
is required with respect to problems generally affecting 
unfair competitive methods for the services of classes of 
employees of producers rendering services of an artistic, 
interpretative, technical, supervisory, or executive na- 
ture, the provisions of article y, division B, part 5, 
sections 1 (c), 2, 3, 4, and S, of this code, are suspended 
from operation and shall not become effective pending 
further report from the Administrator, after investigation, 
as to whether such provisions should be indefinitely sus- 
pended, or modified, altered or changed, or become ef- 
fective," 

On July 7, 1934, Division Administrator Rosenblatt submitted 
his report, covering 125 printed pages of pains talcingly detailed statis- 
tics, to the Administrator, (*) He called attention (page 1 of report) 
to the fact that the intent of the provisions of the Code suspended by 

(*) Report Regarding Investigation Directed t^ be Made by the President 
in his Executive Order of November 27, 1933, Approving the Code of 
Pair C'^mpetition for the Motion picture Industry- - National Recovery 
Administration Piles. 

9638 



-150- 
order of the President were designed: 

(a) To control payment of excessive salaries for services 
of executives and certain other employees in the 
motion picture industry; and 

(b)- To eliminate alleged unfrir competitive methods util- 
ized hy one producer in sec^iriiig the services of 
various classes of enployees under contract wi-th an- 
other pr'^ducer. 

Division Aciministrat'^r F.osenolatt in his findings pointed out 
that the suspended provisi'^n dea.ling vrith excessive salaries would "be 
undesirable, even if the Recover*'- Act itself did not impose limitations 
upon fixing naxinum compensation' ""because it is not capable of effective 
administration, ..,,,•, Leaving aside the question of social im- 
plications (page 9 of rep'>rt) a star ^r executive is worth as much as 
the public can be led to think he is worth by paying to see his offeiv 
ings. • «It is therefore reconr.iended (page 10 of report) that the pro- 
visions e.s now contained in the code dealing vdth the payment of exces- 
sive salaries be indefinitely suspended." 

Ttie provisions of Article V, division b, part 5, sections 4 
and 6 of the Code concerned the meth'^d of securing stars and other em- 
ployees by competing employers. The Division Administrator recommended 
that the President's suspension of this section be indefinitely c^^ntinued, 
making this comment 

"The pr'^visi'^ns of this entire section are based upon the 
assumpti'^n that v;hile an artist may be bom, in effect he 
has to be made o-^^ the efforts of the producer before his 
t?lents have any unusual cominerciaJ. value. Careful train- 
ing, proper casting in proper parts, and skillful and ex- 
pensive advertising are all considered important contribu- 
ting factors in developing a star to a point where his 
services command substantial compensation. In short, the 
producer maintains that he compensates an artist for his 
services in two ways; First, through the actual payment of 
Scilaries; and second, through the professional standing 
wiiich the artist secures as the result of intelligent 
direction and proper casting. It is on the contention 
that this latter t^npe of compensation in many ways is 
of more real value to the artist than the former, that 
the producer maintains he is entitled to some machinery 
wLiich will tend to protect his goodwill value in the 
artist* 

"On the other hand, the employees affected by this provi- 
sion oppose its application upon the ground that such 
provision will tend to liiiit the compensation T*iich their 
services may command in the future; further, that such 
provisions impair their right of negotiation while com- 
pletely free from any contractual obligations 'pdiat soever," 



9638 



-151- 

Specif ically, Divisi'^n Adiainistrator Rosenblatt foimd tha,t 
while one individual artist, cin actor, rvns under contract calling for 
$25,000 a T;eek, this actoi-'s annual earnings in 1933 totaled only $76,- 
656,66; tha.t f/hile others v/ere rated fit $10,000 a picture and some at 
the rate oi $1,200 a \7eek, the average coupon sat ion for 812 artists listed 
in this special study T^as $2,048.61 per employment. 

As to the value of the services of artists and like high 
saJ.aried employees, the SosenMatt report (page 5, column 2) remarked 
significantly'-: 

"In the first place, and as a matter or principle, no 
salary is to'^ high or excessive if the picture produced 
"by the individual receiving the salary meets vzith un- 
usual public f?3Vor as a result of unique direction or 
artistry. Such a picture may continue to earn large sums 
after the charges for the services which produced it 
have been absorbedo On the other hand, the reverse 
maj'" be true. Public popularity of artists is a flimsy 
and perishable product. It is dependent upon the va- 
garies of public favor, A screen personality naj be a 
popular hero today and forgotten tomorrov.', Moreover, 
it is difficult for executives to determine with even 
a. reasona,ble degree of certainty the extent of the 
contribution made to a motion picture by the author, 
director, actor, scenic artist, photographer, publicity 
agent, or any one of £. large number of other individuals 
who contribute to its creation and final presentation 
to the public. 

These imponderables make it difficult but not inherently 
impressible for management to maintain a reasonable ad- 
justment betv/een income and outlay for salary payments 
to executives and artists. The difficulties encountered 
on t'.iis score are not limited to the motion picture in- 
dustry; they are cyn.i^n in one degree or another .in every 
comrjercial enterprise whose existence is dependent upon 
the whims of public favor. 

Granting aJ.1 of the legitimate reasons that malce for 
comparativelj'- high salaries, as well as giving full weight 
to the difficulties encountered b2/ management in setting 
proper- salary standards in the industry, the fact remains 
that aJ-l availaJble' evidence indicates that primary gross 
salary rajiges in the raotion picture industry have gone 
be3;-ond anj'' rational standard of compenscation, i.e., based 
upon a percentage of the receipts representing the con- 
tribution to the picture, Tlie basic reasons for the 
failure on the part or management in the adjustment of 
salary payments must therefore be sought for in some 
other quarters. " 

c. The Agenc^' Committee 

Closely allied to the problem of excessive salaries was the 
question of agents. 

9638 



-152- 

Pmducers complained that agents xjere constantly engaged in 
demoralizing artists; that agents fomented discord and dissatisfaction 
in the minds of players for the sole purpose of earning a commission. 
Producers were incensed over the apparent success of agents in securing 
large increases in salaries for their clients in the face of decreasing 
revenues and the virtual "bankruptcy of many members of the Industry. 
Hollywood v;as in a constant nervous state as a result of these entice- 
ments and offers. 

The producers had attempted t^ regulate these practices through 
the Acs.demy of IJotion Picture Arts and Sciences which had promulgated 
a plan for such regulation some eight months previous to the hearings 
before the National Recovery Administration. Max D. Steuer speaking 
in behalf of the agents at the National Administration hearings (*) 
claimed that the Academy which had formulated the provisions was not 
truly representative of agents. Deputy Administrator Rosenblatt's sug^ 
gestion that any regulations in the Code be administered by s Code Ai>- 
thorit^r \7a,s agreeable to Mr, Steuer who insisted however that the au- 
thority selected to administer the provisions be fairly representative. (*) 

Article V, Division 3, Part 4, Section 2 of the Motion Pic- 
ture Code established an Agency Committee consisting of ten members, 
five of whom were to be producers or producers' representatives namied 
by the C^de Authority, and the other five to consist of one agent, one 
actor, one writer, one director and one technician, who were selected 
by the National Recovery Administration from nominations as to each 
class named in such suitable manner as prescribed by the Administrator* 

Producers were restricted by the Code from directly or in- 
directly transacting business with an agent who had been found guilty 
of extending gifts, or of enticing employees by misrepresentation, or 
of having violated any section of the pertinent article of the code. 
The Agency Committee was to recommend to the Administrator uniform 
terms and procedure for registering all agents with whom. producers might 
deal. These recommendations v;ere to be submitted to the Administrator 
for approval or modification. 

On September 27, 1934, the Agency Committee submitted its sug- 
gestions for rules for fair practice. A public hearing was held on 
Novem.ber 26, 1934, The rules proposed were denied without prejudice to 
further submission, bpsed on the finding of the Division Administrator 
that they were "beyond the powers and without the scope of the duties 
delegated to the Agency Committee," Agents were not members of the In- 
dustry'- end were not subject to the Code, and the relationships to be 
governed by the proposed regulations were chiefly those between agents 
and actors. No final decision had been reached up to May 27, 1935« 

d. The Actor-Producer Committee 

The Code provided that should the Administrator determine at 
any time after notice and upon a fair showing that a set of fair practices 
shoiild be adopted governing relations between producers and writers, 

(*) Transcript of National Recovery Administration Hearings on the Mo- 
tion Picture Industry Code, V'^l'ume 2, page 331, September 13, 1933, 

9638 



directors, technicians, rct'^rs, and ngents a special cominittee should "be 
appointed for that purpose (*), 

The national Recovery Administration decided that such a set of 
fair practices was necessary to govern relati'^ns "between actors and pro- 
ducers and \/riters and producers (**). 

These committees iiere set up similar in form to the Agency 
Committee, The Actor-Producer Committee c-'nsisted of five representa- 
tives each of producers and actors, and the Tifriter-Producer Committee, 
five re^Dresentatives each of vrr iters and producer s» 

On J"uiie 19, 19.34, fiie Actor-Producer Committee first met, Con- 
sidera.'ble divergence in vicws was expressed^ The actor nem^berp of the 
Committee compiled a set of suggested fair practices which were then', stib- 
mitted to vote. On each of the proposed ru.les, the producer mem'bers of 
the C'^m.mittee voted "no" and the act^r mem'bers of the CoiTimittee voted 
"yes", 

Ir. the month of ?e"bniary 1935 the actor mem."bers -^f the Comjiiittee 
sii'bmitted a report to the National Hec^very Aciministration. This report 
was simultaiieously pu"blished in the trade papers in contravejition of a ■ 
provision of the Code (***), 

This report c^ntaine sharp complaints against the producers' 
treatment, of little kno^Tn axtors with respect to hours and wages. Claims 
were made' that sixteen hour days with practically no rest periods under- 
mined the health ^f the actors. Use was ma.de of Division Administrator 
Rosenblatt's report on salaries of July 7, 1934 showing that of 1,563 
actors listed therein, 432 or 28 per cent earned less than $1,000 and 
$2,000; that 49 per cent listed therein earned less than $2,000 in 1933; 
that 1,120 or 71 per cent of the 1,563 received less than $5,000 in 1933, 
I.Ioreover, it was claimed that 10 per cent agency commission fees and con- 
sidera'ble wardrobe expense (sometimes ano-onting to $1,000) were neces- 
sary before an actor could fill the roles required. 

Before the Code became inoperative the producers acceded to 
practica.lly all the requests of the actors, including limitations on 
working time and overtime provisions, biit refused to recognize the 
Screen Actors G\iild, The Producers' concessions were made through 'the 
actors branch of the producer-controlled Academy, 

The Writer-Producer Committee set up at fne same time as the 
Actor-Producer Committee and similar in form and duties to the Actor- 
Producer Committee never submitted any report to the National Recovery 
Administration aJid succeeded in accomplishing little. Negotiations with 
regard to writers were carried on principally'' through the Academy of 
Motion pictiire Arts and Sciences, 

(*) Article V, Division B, Part 4 (a) (a) of the approved Code 

(**) Administrative Order N'^'. 124-18 dated Jrnie 6, 1934 signed by Hugh 
S, Jolmson, Administrator for Industrial Recovery, 

(***) Article V, Section B, Part 4 (a) (c) of the approved Code, 
9G38 



-154- 
3. THE "EXTIIA." PROBLEl.I 

The Code defined "extra pla^'^ers" as "those v/ho "by experience and/or 
ability ere known to "be corrpetent to 'olcy group and individ^oal "business 
parts and to otherwise rppear in a 'notion pictui'e in other then atnospher- 
ic ■background or crov/d uork." (*) 

a. Em:olo:','7nent 

The number of persons directly or indirectly involved in the problem 
of extra enployment in notion pictures in the Los Angeles area lirs been 
estimated at widely differing fi{r;ares. Registrations by the Central Cast- 
ing Corporation apparentlv reached a ^oak of about 17,500 in 1927 and 1928 
v/hen numerous individuals registered for talking, musical, dajicing and 
other specialties due to the demand for sound pictures. Since that date, 
the registrations of all classes have fallen off . The total is now 
estimated to be between 8,000 and 10,000 inclusive of the active lists 
and what arc termed "casuals". In 1932, an average of 677 placements per 
day cleared throiji^h the Central Casting E-oreau. 

The Academy of Motion Picture Arts and Sciences in a report submitted 
to the national Recovery Administration about the time of the formulation 
of the Code stated that there were opproximatel;'- 12,000 persons registered 
in Hollyr/ood as available for employment as extras. It was further stated 
that the requirements of all studios in the Los Angeles area averaged 631 
placements per d.a^r during the six months period ending June 30, 1933« 
The Academy further stated that informed persons estimated the number of 
extras who load a justifiable claim on the Industry for employment at from 
1,400 to 2,400. 

ReT)resentatives of extras at the Code hesxings on September 12, 13, 
14, 1933 charged tha,t nepotism and favoritism were long standing evils in 
Holl^rwood and that wages for extras at that time rejiged from $1.25 to 
$15.00 per day. 

b. The Code Provisions 

The Code provided a minimum wage for extra players of from $7.50 to 
$15.00 per day depending on the importance of the performances involved 
and the personal v/ardrobe required. Any plai'"er who was required to ploy 
apart or bit with essential story dialogue was classified as a "bit 
play"er" rather than an "extra player" with a minimum wage of $25 per day 

Further provision was made that people might be hired for crowds or 
to provide "atmosphere" at a minimum of $5 per day (***) 



(*) Article IV, Section 5, Part 2 (a) of the aiDproved Code. 

(**) Article IV, A, Section o. Part 3 (a) of the approved Code. 

(***) Ai'ticle IV, A, Section 3, Part 3 (b) (c) of the approved Code. 

9638 



-155- 

Provision was made that transportation to and from location should 
."be paid "by employers, thus preventinf^ this type of chiseling into an extra 
pla;^'-er*s vrages. Wiiere interviews or fittings \7ere of unusual length the 
player was to "be compensated for his or her tim© -accordingly (*). 

To provide against nepotism and favoritism it was ettpolated that 
no one should be employed as an extra player who was a dependent meraher of 
the imnediate family of any regular employee of a motion picture company 
or who was not obliged to depend upon extra work as a means of livelihood 
(**) and that rotation of work should he established to such a degree as 
might be practicable (***). ^ eight hour maximum day with overtime as 
provided for in the California Statutes relating thereto was also included 
in the Code (****). - - 

c. ' The Standing Committee on Extras 

To supervise the provisions of the Code regarding extras, to receive 
and pass on complaints and grievances, and to recommend such additional 
rules and regulations as might become necessary, the Code provided that a 
Standing Committee on Extras be appointed by the Code Authority (*****), 
This Committee was appointed January 12, 1934. 

In March 1934 the Code Authority determined by resolution the follow- 
ing procedure for the Standing Committee on Extras! 

1. That all communications from the Committee on 
"Extras" shall be addressed directly to the Code Author- 
ity for review and thereafter to the Division Adminis- 
trator for approval. 

2. That the Committee on Extras include in the 
minutes of the meetings the roll call vote by narnes of 
members, who vote on motions .which result in a division 
of votes. 

3. That no interpretation by this committee shall 

be regarded as final, until such interpretations have 
been approved by the Code Authority and the Administrator 
for Industrial Recovery. 

4. That the announcement of interpretations shall 
be withheld from publication until approved. 

One of the first accomplishments of the Standing Committee on Extras 
v;as an interpretation of those provisions of the Code establishing mini- 
mum wages for extra, players depending on dress requirements. This inter- 
pretation was adopted ^oj the Committee on February 19, 1934 and was 
approved "by the National Recovery Administration on March 6, 1934 (******). 

(*) Article IV, A, Section 3, Part 3 (d) of the approved Code. 

(**) Article IV, A, Section 3, Part 4 (b) of the eqiproved Code. 

{***) Article IV, A, Section 3, Pojct 4 (e) of the approved Code, 

(****) Article IV, A, Section 3, Part 4 (c) of the approved Code, 

(*****) Article IV, A, Section 3, Part 1 of the approved Code, 

(******) Administrative Order llo. 124-11 signed by Sol. A. Rosenblatt, 

^'„^~ Division Administrator, 
9638 



The Committee at tern ted to solve the prctlem of the large rminber of 
extras registered for employment "b"- requiring re-registration. The inten- 
tion was to eliminate at the tine of registration persons who did not de- 
pend upon this work for a means of livelihood or who fir other reasons 
night he ineligihle. On Liarch S, 1935, the trade press r-^jinounced that 
1,304 persons from a list of 2^,900 possitilities had been registered "by 
the committee handling registration, which consisted of three representa- 
tives of extra placers, three producer representatives and llrs. Mabel 
Kinney, v/ho v;as chairnpn of the Standing Committee on Extras. At a later 
date in 1935 provision for the registration of approximately 500 more 
plac^'ers was made. 

Uaxiy extra, players complained that discrimination had "been shown in 
nailing up the re-registration lists a,nd tliat those actually seeking employ- 
ment had to he on the active list in order to secure work as extra players 
and so to receive any benefits from the Code provisions. Neither the Code 
Authority nor the Administrator approved the registration which was re- 
called for a more unrestricted procedure, ilo solution had been reached 
at the time the Code became inoperative. 

A further duty of the Committee was to hear and pass on comrplaints 
made by extras. During the period of its operations the Committee heard 
1,065 complaints of this nature and satisfactorily adjusted 981, or 92 
per cent (*). 

4. STUDIO LABOR 

Prior to the Code the hours of both skilled and unskilled labor in 
the studio were irregij.lar depending almost entirely upon the exigencies of 
production. The 1929 United States Census of Ilanufactures shov/ed prevail- 
ing hours of labor per week between 45 and 48. Wages on the whole were 
sonewhat higher than the amountc paid the same class of workers in the 
coi-TT-Tunity outside the studios. A higher percentage of all labor was skill- 
ed. 

At the hearings on the proposed Code of Fair Conpetition for the 
i'otion Picture Industry, September 14, 1933, Sidney R. Kent, president of 
the Fox Film Corporation, sta.ted that by agreement between producers and 
labor prevailing hours had been reduced from 48 to 40. He further stated 
that if prevailing hours were to be reduced to 36, as was proposed, 
naintenajice of the weekly wage rate would anount to a wage rate increase 
of approximately 14-^- per cent. 

a. The Code Provisions 

The Code provided that studio labor should work not more than 36 hour 
hoijrs in any one week (**). These mar'-imam hours did not SK)ply to employ- 
ees on emergency maintenance and repair work, nor to cases where restric- 
tion of hours of skilled' v/orkers on continuous processes would hinder, 
reduce or delay production, nor to er^oloyees engaged directly in produc- 
tion work whose working time necessarily followed that of a production 



(*) Report on Code Authority Affairs contained in July 24, 1935 issue 

of the Motion Picture Daily, page 1. 
(**) Article IV, A, Section 1 (c) of the approved Code. 

9638 



-157- 



-unit 



nor to enclorees assi^^ed on location -oork • 



^revision ras 
laade for cor^ensatory periods of idleness in cases where these exer^ticns 



2K>plied i**\ 



The Code provided a ninins: irae^ for employees of all classes of 40 

cents 3:er hour. In addition to this, Tario.i5 specified types of studio 
labor trere given niniimr; wa^ rates ranging fron 60 cents to $2.25 rer 
hour (***). 



^♦^V -o4r~--' 



Ban m eac:i oi s-^c:i ::*ln5 5?- 



tc so-calle: 



It vas provide:- 
su2)s - : :r 

eErplo:"ees night 1 
rate rhen su-ch e: 
were s-jjrstit^jited 

\ ^ • 



r assign-" - ' " 

h: - rate (•'♦•*S I* ^ss also r 

e - :i on a weekly rate rather ihan c: 

^lovees were on distant location vork. Vien soch scales 
-' -?.s required that all ersrloyees' expenses be paid. 



An over-riding provision ■ 
conditions as of ijLir~ist 23. 19- 
oetiseen an t i, 

than these scales designated i: 
with res::ect to these enrlovee; 



ip->ilated that if the prevailing labor 
■ as fixed in aay agr^^ient or as in : - 
12ns of erplojrees should he aore favorahle 
- Tone, such conditions should prevail 
in such localities. 



.iio -a:::- 



1: assist i" - ; ,- -■' - :f • 

la':::'. T.:e Code Authorit ■ 3* 

aittee :. - : ;; .V:apter '. 

of the ninutes of its nee tings ' ' ~ "" ' 
Inspection of these records reveals t.i-' 
respect to the najor producing ccnpsnies, 



e rrc visions regarmn^ st\iaio 

1;.- -r Condi t tee. : : : - -.- 

r r:-~ittee sent copies 

1 ~ 'ration. 

ic icutine with 
..ese — ---r. reveal 



sone coznrlaints against independent studios shciri ::lations 

"b^ fl7>~b"-night operators. IXiring its life the C: . 2f^ cases 

and adjusted 255 or 95 per cent (*»*»•»', There were co-rara": :V- few 
enforcenent difficulties rrith regard to this type e: ' ler the Code. 

ISo statistics s^s to conditions since the Code "became incper - are 

available. 






Cleri:al 
worked fron 4C t 
imole : 

A Baxinu:- -iC h:- _:: 
Code (*****»*' . 



's -oer 



-^- e^ ^ ; 



and ";;usiness offices of prodocers 
rior to the Code and were paid on the 
^loyee in other "business 
qployee was established c^ 
nal caoacities. d 



.. i _ ^ _ *. 






> - 



Article I. 
Article I*: 
Article IT 
Article IT 
Article IT 
Rerort or. 



9658 



Erection i v,d; of i;he cpproved v-ode. 

Section 1 (e) of the approved Code. 

Section 2 (a) (c) (d) of the aj:p roved Code. 

Section 3 (e) of the soproved Cede. 

Section 2 (f) of the epproved Code. 
Code 1 t:* Affairs oooted in lioticn ?::- : 

issu; :: July 24, ivco, page 1. Also reports of Cc 
Sational Recovery Adninistration files - Ilotion Pic: .: 
A:- ' ' lY, A. - -' ' - (>) of the approved Code. 



~iDa- 



and their assistants, directors, manafS^ers, evecutives, their assistants 
and secretaries, producers, ..their assistants, purchasing agents and 
T/riters were exempted frorri these hour limitations (*). 

ITo data is available as to changes caused "by the Code. No com— 
TDlianco difficulties were experienced and no data is available as to aiiy 
changes since the invalidation of the Code. 



« 



C. jDI STRIEUTION 

1. EMPLOYl/IENT 

No recent statistics on the numlDer of persons employed "by the 
distribution tranch of the Industr-^/ are available. The Motion Picture 
Almanac for 1935 estimates this fi;_:;ure at 8,000. The United States 
Census of Distribution for 1929 reported a figure of 9,342, 

Enployees in distribution include executives, salesmen, office 
employees, checkers, and others in the hone offices and the various 
branch offices of; the distributors' in the 31 key exchange cities. 

According to the 1929 Census of Distribution, wages and salaries 
in 1923 constituted 52 per cent of the total cost of distribution. This 
total cost was given as $34,659,281; wages and salaries, $17,978,258, 
Of this latter amount, 535 executives received $2,467,258 (14 per cent); 
1,562 salesmen received $6,253,076 (35 per cent); office workers, check- 
ers and other enployees were paid the balance of $9,257,378 (51 per cent), 

2. CODE PROVISIONS 

In distribution, labor was a minor problem. UTell paid for the 
most part before the Code, employees were but little affected by the 
Code provisions. 

T7age minima of $14 to $15 per week depending on population dif- 
ferentials similar to the provisions contained in the President's Reem- 
ployment Agreement, were established by the Code. These wage minima 
prevailed regardless whether the number of hours worked was less than 
the nuiaber specified in the Code. 

The maximum permissible working week was set at 40 hours. 
Employees on emergency, or maintenance ajid repair work, and executives 
and outside salesmen were as usual not included in these limitations. 
The usuaJ. child labor provision limiting eraplo^nnent to those sixteen 
years of age or over applied throughout the Industry. 

It ma^ be fairly stated that there were no labor disputes in. this 
division during the Code period. 



(*) Article IV, A, Section 2 (b) of the aporoved Code. 



9638 



-159- 

CHAPTSR VI 

THE IlITERSTATE CHARACTSH OF THE IlITUSTRY, AITD 
SUGGESTIONS AND SECOU.IENDATIOKS FOR THE FUTURE. 

A. TPr Il^ERSTATE CHAPA.CTER OF TI-IE I.IOTION PICTURE INHJSTRY 

Throughout this report, it has "been shown that, acting individually, 
the va.rious "branches of the industry have been unahle to eliminate majiy 
sources of friction, and are prevented from acting in concert by the 
Shermaji and Clayton anti-trust acts. The question immediately proposed 
is whether some beneficial steps might be taken under the Federal gov- 
ernment, if the practices in question are interstate in character. 

1. PRODUCTION AITD DISTRIBUTION 

The production and distribution phases of the Industry must 
be considered together rather than separately. According to the 1929 
United States Census of Distribution, 444 of a total of 553 motion 
picture distribution exchanges in the United States were then owned or 
controlled by producers. These producer-controlled exchanges accounted 
for 95 per cent of the total volume of business done that year, and of 
the rei.iaining five per cent, three per cent was done by export exchanges, 
and only two per cent by independent domestic exchanges. It is thus 
obvious tl-£.t individual consideration of distribution would be purely 
academic* • 

Of 92 producing establishments listed by the 1933 United States- 
Census of l.anufacturers, 63 or 68.4 per cent i^ere located in the state 
of New York and the state of California. This concentration of pro- 
duction is jr.ade still uore apparent when it is realized that eight 
major coipianies in 1934 released 75.2 per cent of the number of all 
features produced in the United States. (*) Considered by value or by 
cost of production this figure would be even higher. 

From the producing establishments, film goes to distributing 
exchsjnges, the majority of which are located in 31 key cities, each 
servicing the surrounding "exchange territories". According to a 
survey by the lotion picture Herald, (**}. 25 of these exchange terri- 
tories include parts of two or more states. 

For these, among other reasons, it must be concluded that the 
production and distribution divisions of the notion picture Industry 
are interstate in character. In a number of cases, the Courts have 
so held. (*■**) 



(*) The 7±lu Daily Year Book for 1935 

(**) '..otion picture Herald, issue of January 28, 1933 

(***) rc.Qus Players - Lasky Cor:J»re.tion v_. United States , 232 
U. S. 50, 
United States v, ?irst National Picture's', Inc. , 232 U. S. 44, 

Sindenro v. Pat he Exchange , 263 U. S. 291, 



9638 



-160- 
2. EXHIBITION 

Exhibition presents a different problen. The physical function 
of exhibition of film, taking place in a limited area, probably directly 
affects interstate commerce only in rare instances. Hov7ever, there axe 
other and weightier considerations. 

The exhibitor seldom purchases the film he exhibits. He is 
merely granted the right, throu.gh a license and rental contract, to ex- 
hibit films as they pass through the state or city in which his theatre 
is located. Films are not delivered to an exiiibitor with intent to end 
their transit there, nor is the transaction complete with such delivery. 
Films must be returned to the distributor • vrho txien forwards these films 
to other exliibitors, or the films must be directly forwarded to other 
exhibitors at the request of the distributor. The movements of the 
films in commerce are interrupted only long enough to fulfill existing 
contracts; the films then move on to other exhibitors in uore remote 
areas and out of the locality of the former theatre. The film or films 
are thas within a current of commerce among the states and are part and 
incident of such commerce. 

This current of commerce between distributors and exhibitors 
takes place principally between distributors located in 31 key exchange 
cities and exhibitors located in cities and tov.-ns throughout the entire 
country, Tvjenty-five of these key exchange cities service parts of two 
or more states. In general, clearance spreads out from these central 
points to the other theatres in the territory serviced. The n-'jimber of 
prints of any film are limited. Outlying theatres must wait their turn 
for the use of these prints. A delay in exhibition at a "key" house 
may be reflected in delays to theatres in other states. 

The instrument by which overbuying, clea.rance, zoning, block 
booking, and other practices are effected is the license and rental 
agreement. If such an agreement be entered into between parties in dif- 
ferent states, it would seem that the instrument itself might be con-- 
sidered interstate in nature, and likewise the subject of such agreement. 
In this connection it is to be noted that many exhibition contracts are 
entered into in the producer' s name (as the holder of the title and 
copjrright to film) even though the distributor and exhibitor concerned 
may be in the same state. In other cases, a similar result is achieved 
where both the distributing and producing corporations are controlled by 
a third corporation which acts as a holding company for both. 

The chain operation of theatres should be considered. In ad- 
dition to the producer-distributor controlled theatres stretching from 
coast to coast, there are a number of independently owned circuits. 
Many of these operate theatres in several states. The two groups con- 
sidered together own or control 28 per cent of all theatres in the 
United States, and 48 per cent of the total seating capacity. (*) 
. > 

(*) Calculated, from figures a^opearing in the Ilotion Picture Almanac 
for 1935, Qv^igley publishing Co., N. Y. Pg. 988 



9638 



-161- 

The iiTportance of these theatres in the Industry .cannot be guaged solely 
from these figures. As indicated "by the high proportion of seating 
capacity to numter of theatres, the chain groups control a relatively 
large number of the bigger theatres, the so-called "key houses". It is 
such theatres that are able to negotiate long periods of clearance, and 
it is from the playing dates of such theatres that the clearance of other 
theatres is figured and negotiated. Their paramount importance is 
obvious, 

3. THE IinXJSTRY AS AN ENTITY 

Although many arguments may be presented tending to show that 
each branch of the Industry in itself has interstate features, there is 
an alternative view of the problem. The Industry, as a whole, may be 
considered as a commercial unit in which the various branches are so 
interdependent as to defy legal separation, and in which no one branch 
can be adequately or justly considered without consideration of all 
others. 

Many facts supporting this view are evident. The nation-wide 
advertising campaigns featuring players and pictures which are supported 
by all branches of the Industry will serve as an example. The extent of 
this advertising may be judged from figures presented in the Motion picture 
Almanac for 1935, It is there estimated that the cost of production for 
the 1934-5 season Y/as $110,000,000, and that the annual motion picture 
advertising expense in the United States was $70,000,000, m other words, 
it costs nearly two- thirds as much to advertise the films as it costs 
to make them. 

The vertical integration of the industry, whereby a few companies 
control a major part of production and distribution and a large part of 
exhibition, has already been commented on. It is obvious that the ex- 
hibition branch of the Industry is dependent on these companies. 

On the other hand, no one branch of the Industry could exist in- 
dependently. Each is dependent, one upon the other, for existence. 

The inseparability of activities between the three branches of 
the Industry would seem to justify a conclusion that the Courts v/ould 
apply the commerce clause of the Constitution to this Industry as a 
unit and not to each branch of the Industry separately. 

In Swift and CoLTpany et al . v. United States , 196 U, S. 375 
(1905) the United States Supreme Court, speaking through Mr. Justice 
Holmes, said in part — 

"* * * commerce among the states is not a technical legal 
conce;-;tion but a practical one drawn from the course of 
business." 

A^id in Stafford et al . v. Wallace et al . , 258 U. S. 495 (1922), 
the constitutionality of the Packers and Stockyards Act of 1921, 42 Stat., 
159, was involved. This Act provided for supervision and control of 
facilities furnished, and regulated the brasiness of the packers done in 

9638 



-162- 



inter state Commerce. The right of tiie Federal Government to regulate 
depended upon v/hether the "business conducted was in or affected inter- 
state coiamerce. , . 
The Court Said; 



"The application of the Commerce Clause of the Constitution 
in the Swift_ Case v/as the result of a natural development of 
interstate comnerce under nodern conditions. It v;a.s the 
inevitable recognition of the great central fact that such 
streams of comraorco from one part of the country to another 
which are -everflowing, are in their very essence the com- 
merce ainong the states and ?/ith foreign nations which his- 
torically it was one of the chief purposes of the Consti- 
tution to tring under national protection and control. 
This court declines to defeat 'tliis proposition in respect 
of such a stream and take it out of complete national 
regulation 'hy a nice and technical incruir y i nto tx^e non- 
interstate character of sonie of its necessa ry incidents 
a nd facilities when considered alone and without reference ■ 
to their a . ssociation with the movei:ient of which they were 
an essential "but a s'u'bordi nat e par t." 

In these, and many other cases, the Court derlt with the 
Industry as an entity. ' ' " ■ 

It may "be contended that "because the transactions "betv/een pro-i 
ducer and exhi"bitor, and distributor and exhi"bitor is a contractual 
relationship relating to transactions (showing films) 'which in and of 
themselves are intrastate coraiacrcc, thej'' are not su"bject to federal 
jurisdiction. That argi-iment was raised in the case of St andard Gil Co . 
V. U. S . , 283, U. S. 183. It was there contended that cross-licensing 
agreements for the manufacture of gasoline "by the cracking process were 
agreements relating to manufacture, and not to sale or transportation, 
and, therefp.re, were not within the purviev/ of the Anti-Trust Acts. 
But i.Ir. Justice Brandeis, delivering the ooinion of the court, saad 
(p. 168): 

"The defendants contend that the agreements assailed rela.te 
solely to tne issuance of licenses under their respective 
patents; that the granting of such licenses, like the 
writing of insurance, liew York L ife Ins. Co . v. Dear Lodge 
County, 231 U. S. 495, is not inter sta.te commerce; and 
tha.t the Shermr.n Act is therefore inapplicable. This- 
contention is unsound. Any agreement between competitors 
may be illegal if part of a larger plan to control inter- 
state markets. Ilontag-ge & Co . v. Lowr y, 193 U. S. 38; 
Shavniee Compress Co. v. Anderson 20 9, U. S. 423. * * * 
lioreover, while maiiufacture is not interstate commerce, 
agreements concerning it vrhich tend to limit the supply 
or to fix the price of goods entering into interstate 
commerce, or which have been executed for that purpose, 
are within the prohibitions of the Act. Svaft & Co . 
V. United States .- 196 U. S. 375,307; Coronado Coal Co . 
V. United Mine Workers , 268 U. S. , 295, 310; United 
States V. Trenton potteries Co ., 273 U. S. 392." 

9638 



-163- 



Even here the parties to a transaction are engaged v/holly in 
intrastr^te commerce, and their activities affect the interstate "busi- 
ness of some third person not a party to that transaction, it has been 
held that such transaction is rdthin the r)urviev7 of federal regala- 
tion. In the case of Internation-^l Brotherhood of Electrical Workers 
V. Western Union Telegr.nph Co .. 46 Fed. (2d) 736, the Electrical 
Workers 'r-ere enjoined from conspiring to violate the Anti-Trust Act 
where "both the employers and the employees were engaged in intrastate 
commerce, ajid their activities affected the "business of the Western 
Union Telegraph ComiDany, V7hich was not a party to the employment 
contract. 

The seme situation o"btained in the cases involving the restraints 
in the local live poultry markets of New York, Criminal prosecutions 
and suits in equity were sustained against the Greater New York Live 
Poult rj;^ Chajn'ber of Commerce and many individuals engaged in a con- 
spiracy to violate the Sherman Act. (*) 

In the latter case it '"'as rrgued thrt an injunction issued "by the 
District Court for the Southern District of Nev/ York was invalid, 
"becruse it was "broa^d enough to enjoin acts of a purely local character 
and was not limited to those acts which affected or dealt with inter- 
state commerce. In giving the opinion of the court, Mr. Justice 
Butler said: 

"And maintaining that interstate commerce ended with the 
sale by receivers to marketmen, appellants insist that the 
injunction should only prevent acts that restrain commerce 
up to that point. Intrastate acts will be enjoined whenever 
necessary or appro-priate for the protection of interstate 
comi-ierce against any restraint denounced by Act ." 

Here such intrastate transactions were considered part of the 
plan which affected interstate commerce, 

I^ Victor V. I ekes , Supreme Court, District of Columbia, Equity 
No. 56298, December 1, 1933, the Court stated: 

"The Petroleum Industry is the third largest in this country; 
the bulk of gasoline does flow in interstate commerce. The 
functions of a filling station is as essential tc that flow 
as is the function of commission men and dealers in the 
Packing Industry at the Stockyards." (The Court had previously 
cited the Swift and Stafford cases.) 

• ■ In the Motion Picture Industry the film, which is the product of 
this Industry, moves continuously in interstate commerce. The ex- 
hibition houses, lihe the filling stations, perform their task in 
rela.tionship to interstate commerce within the jurisdiction of one 

(*) Greater N. Y. Chamber of Commerce v. U . S . , 47 (2d), 196, cert. 
6.enied 283 U. S. 837, Local #167, et al v. U. S., 78 Law Ed. 
506. 

9638 



"164- 



state or commiinity. The exhititors' function axe as essential to 

the flow of commerce in the Motion Picture Industry As are the func- j' 

tions of filling stations in their relationship to the novement of 

gasoline in interstate commerce. 

From these facts, the conclusion may ^"be fairly made that, through 
its connection \-'ith- and relationship to the distribution and -oroduction 
brmchesj the exhibition "branch is an integral and necessary part of 
the entire scheme and plan of the Motion Picture Industry, Further, 
revie\7ed in the light of the Standrrd Oil case, the Stafford case, the 
Swift crse and others, it would seem that the Motion Picture Industry 
is of such a character that the Federal Government would be justified 
in assuming jurisdiction over the Industry as a unit. 

B. SUGGESTED POINTS OF APPLICATION FOR FEDERAL POllER 

At this point it would seem advpirtageous to inquire as to those 
places where Federal assistrnce might -orove beneficial to the Industry 
and the general public. ,. :: 

1, BLOCK BOOKING 

Several lines of thought have been indicated in the discussion 
of this subject earlier in this report. 

Exhibitors in general favor complete abolition of block booking. 
Distributors, on the other hand, opoose any such steps. 

Outside of complete elimination of the practice, the most frequent- 
ly advanced suggestion for lessening the conflict resulting from the 
practice is the granting of a cancellation' -crivilege to exhibitors 
wherever they have bought filvis in blocks. That .. reducers and dis- 
tributors are not unalterably op'oosed to such a solution may be seen 
from the fa.ct that the Optional Standard License Agreement of 1935, 
which was negotiated between ^roups of distributors and exhibitors, 
contained a Cancellation clause, aithough a much Testrlct'ed one. 

But the problem is not easy of sor>.tion. The Federal Trade 
Commission started its inquiry into the practice of block booking in 
1921. In 1927*, the Commission declared block booking to be unla.wfully 
in restraint of trade and ordered various defendcints to cease and 
desist from using this method of selling pictures, (*) Iri 1932 
it was announced by the Federal Trade Commission that the problem 
would not be considered further when the United States Circuit Court 
of Ap'oeals ruled against the Commission's contention that block book>^ 
ing wa.s in violation of the Federal Trade Ccmnission Act. (**) 

(*) Federal Trade Commission v. Famous Play^rs-Lasky Corcoration 
et al , , Federal Trade Commission Docket No. G35, 

(**) Federal Trade Commission v. Paramount Famous-Lasky Corporation , 
AdolTph Zukor. and Jesse L. Lasky , April 4, 1934, United States 
Circuit Court of Ap-oeals for the Second District, 

9638 



-165- 



During its long inquiry, the Comraission collectsd 15,000 pages of 
testinon-- and 17,000 -oages of exhibits. In the fr.ce of such a record, 
any attenipts to delve "briefly into the full implications of the use of 
block booking must be fruitless. 

As the problem stands at riresent, the use of the practice, without 
limitr.tion, is legal. Any attemr)ts at limitation of the use of the 
practice should be nreceded by an intensive study of the subject by a 
disinterested Federal agency. Since the practice is one used by dis- 
tributors, block booking is obviously within Federal jurisdiction. 

2. 0"/EE3UYIN& 

Overbuying of film v/ith intent to deiDrive a competitor of sufficient 
product nith which to orierate his theatre on a reasonable basis is con- 
sidered an indefensible practice throughout the Industry. 

Eo\7ever, the victim of such a "or act ice experiences difficulty 
when he epDlies to the Courts for remedy. He must Drove his case 
against a financially more -oowerful op-oonent under statutes not speci- 
ficrlly designed for protection against this practice. Lengthy and 
expensive litigation may exhaust a complainant's resources, already 
drained by the harmful effects of the -oractice. The Courts before 
which he pleads are usually not informed as to the comnon Industry 
practices except by the litigants. MaJiy legal loopholes may be open 
to a powerful and probably better advised opponent. ' ' "'■ 

It wouJ-d seem simple to uass a statute forbidding an exhibitor 
to overbuy or forbidding a distributor to license film to aJi exhibitor 
in such quaJitity over his nor„ial requirements as to prevent a competing 
exhibitor from obtaining sufficient -product. The difficulty arises 
in connection with the application and administration of such a 

sta.tute# 

■■i " , 

Leaving the Courts to decide whether violations have occurred in 
specific cases would again raise the spectre of evasion. Even under 
the Motion Picture Code, where all members of the Boards which deter- 
mined overbuj'-ing complaints were fully informed on general Industry 
practices, it was not always -cos-sible to secure uniform agreement. 
How much more difficult a task it would be for a Court unacquainted 
with the weight which might be given different factors, having no 
Industry experience to fall back on in determining which of tJ70 arguments 
might be considered specious. Moreover, the objection to lengthy and 
costly litigation still obtains. 

It night be possible to frame a statute maZcing illegal any con- 
tract licensing the exhibition of film through which one exhibitor by 
overbuying prevented another exhibitor from sec-oring adequate product, 
thus acting as an unreasonable restraint on trade. Rapid and in- 
expensive determinations as to violations might be made by small 
bodies under Federal supervision located in each exchange territory, 
easy of access to all exhibitors, as under the Code. The Federal 
Government would then be in a -oosition to withstand appeals to the 

9658 



-166- 



Courts in place of ler.ving the small and relatively helpless exhibitor 
to his own resources. Such a method v?ould answer most of the objections 
previously referred to and would extend Government protection to the 
small "business mano 

. 3. MONOPOLISTIC PRACTICES 

Claim and counter-claim with regard to the charges that the major 
motion picture corapaines are replly monopolistic have "been advanced 
.for years. An atmosphere of suspicion and distrust has existed between 
the affiliated and unaffiliated groups. Such monopolistic tendencies 
as are inherent in operation under the copyright laws do exist in the 
Motion Picture Industry. 

The growth of trade practices such as "block "booking, forcing of 
short subjects, and designation of play dates, have tended to crepte a 
protected market for the large companies. Competition from independent 
producers is restricted since absorption of a large portion of an 
exhibitors^ total plaj'-ing time and preferred playing time, limits the 
licensing of independent' product. 

The affiliated com-panies are often in direct coicpetion \7ith the 
•exhibitor who must license their product in order to secure a sufficient 
supply of suitable filins. While it is not incumbent on these large 
units individually to conduct their business so that competitors may 
have an equal ^degree of opportunity, the existence of reciprocal 
agreements between these greater corporations frequently intensifies 
the hardships of independent interests. 

In the absence of proven combination, the methods of negotiation 
as practiced by the individual companies may hinder independent 
interests, but these methods have not been considered illegal because 
no one company even ap-oroaches monopoly of any division of the Industry, 
However, the collective effect of t'nese practices tends to establish 
restraints on free competition. 

Frequently, more serious charges ape made. It has been alleged 
tha.t major companies have enaged in collusive effort to restrain com- 
petition and establish a virtual monopoly. Such statements are usually 
advanced, b,}'" independent exhibitors but also occasionally by persons 
interested in social v/olfare. (*) 

(*) Letter of Er. A. Lawrence Lowell of Harvard University to 

Division Administrator Sol. A. Rosenblatt, December 13, 1933, 
quoted in full in record of Investigation of National Recovery 
Administrption by Senate Committee on Finance pursuant to S. 
Res, 79, 74th Congress, 1st Session, April, 1934: 

"The five large producing companies have, by their 
business methods, obtained a controlling grip on 
the business and are able to put forth upon the 
community any films that they please." 



9638 



-157- 



Such airs of s-uspicion and dculDt should be cleared. Whether these 
charges rjre true or false should "be generally estphlished. The tduIdIIc 
is entitled .to full knowledge. 

A thorough study of the Industry "by a Federal agency \--ith adequate 
facilities and authority to examine "books and other records should he 
made. Such a study would undoubtedly consume a considerable period of 
time, but the results possible to such an inquiry would Justify the 
cost and time« 

■4, clejveuuce md zoning 

The problems of clearance and zoning have been discussed previous- 
ly in this report.. These problems are not new, nor were they new under 
the Code, A number of years ago the Motion Picture Producers and 
Distributors of Anerica, Inc., through the Film Boards of Trade attempt- 
ed to eliminate friction in the Industry by the adbiTtion of uniform 
clearaJice and zoning schedules through negotiations between distributors 
and exhibitors. These attempts were enjoined by the Federal Courts, 
wnich rules that such schedules were in contravention of anti-trust 
lav;s. (*) No further attempts were made until provisions for the 
formulation of equitable schedules of clearance and zoning were in- 
corpor.^tsd in the Motion Picture Code. 

The choice seems clear between laissez-faire and uniform schedules. 
No insuperable difficulties appear are present to prevent the estab- 
lishjient of schedules fair to all exhibitors. 

Here no question need be raised as to the interstate character of 
the practice to be regulated. Formulation of uniform schedules was 
estop-oed by Federal anti-trust laws. Relaxation of these statutes 
would permit the Industry to act. It follows, of course, that adequate 
Federal supervision would have to be TDrovided to prevent any undue 
influence from major groups and to safeguard the rights of minority 
groups and the public. 

Any steps in establishing uniform schedules of clearance and 
zoning v/ould necessarily be slow as indicated by experience under the 
Code, Only one major schedule was apriroved "onder the Code, and this 
after many long months of labor. More would have followed had not the 
invalidation of the Code intervened. However, in the short time that 
this one schedule was in operation it "oroved satisfactory. In future 
attempts, sufficient time would have to be allotted to preclude hurried 
formu-lation and to -orovide for adeque'je considera.tion of the -rights and 
needs of all theatres involved. 

Uniform schedules could hardly harm the small exhibitor. The 
large exhibitor, the affiliated or independent circuit, is at all times 
under the -^^resent system able to contract for all the protection desired 
over smaJLler theatres to the limit such exhibitor wishes to pay for 

(*) ¥m. Youngclaus v. ' Omaha Film Board of Trade , United States 
District Court for Nebraska, July 2, 1932. 

9638 " ■■ . 



-168- 

such protection. This Drotcction may be unfair to competing exhibitors. 
The distributor exercises the only restraint and that only when he may 
be unuilling entirely to eliminate competition. He has observed that 
high rentrls are usually the result of keen competition. 

There is, however, another factor. Distributors axe frequently 
in keen competition for the business of these larger exhibitors and 
so are willing to give concessions in the way of protection in;th:eir^ 
efforts to handle these large accounts. Distributors are prevented '-j.j d 
from acting in concert by the anti-trust lavs. Reciprocal treatment ^ 
betveen affiliated theatre groups may overlook a nice consideration of 
the needs of financially wenker exhibitors. 

C. SUaGESTSD MEANS FOR APPLICATION OF FEDERAL PCTTER 

Little good is accomplished in pointing out places where us^e of 
Federal powers might be beneficial unless constructive suggestions 
are made as the methods by which this newer should be exercised. 

The idea of a simple statute directed toward bettering- any set 
of conditions must immediately give way to the -problem of its applica- 
tion and adninistration. The first thought is to refer the matter 
to the Courts. 

The difficulties of using the Courts to curb the vicious aspects 
of overbu;^'-ing have been commented on in this chapter. The difficulties 
a Court might be called on to contend with in an attempt to cope with 
the problem of block booking have been previously suggested in Chapter 
IV - C. No court could be called on to investigate and inquire into 
the industry in general in other than some specific instance and it 
would be hardly reasonable to ask the Federal Courts to add to their 
already crowded dockets a review of any or all proriosed uniform clerxance 
and zoning schedules. 

Only a Federal Com.nission would seem versatile enough to cope with 
these various situations. Such a commission might be a, separate Federal 
body or might constitute an addition to the duties of the existing 
Federal Trade Ccmnissiono 

For these several reasons a separate comnission would seem to be 
indie a. ted, 

1, Due to the unique character of this Industry and its trade 
practices, the functions of such a body would elso be unusual. There 
would seem to be no adequate reason for merging a body established to 
perform these functions with another body. 

2. In a single body res-ronsible to the public for its acts, the 
element of shifting of responsibility would be minimized. 

3« Centralization of control of such a body would tend toward 
more efficient administration aJid mana-gement. 

The ph;j'-sical form of such a body would be dependent on the duties 
to be performed. However, a suggestion may be advanced. Control of 

9638 



-169- 

the comnission could "be vested in a numter of Federal Motion Picture 
CoEunis si oners appointed by the President with or without the ap-oroval 
of the United States Senate, These Commissioners might "be appointed 
for a stcted period of years, with the proviso that acceptance "be 
illegal of any position in connection with the Motion Picture Industry 
within a certain period after termination of service as a Commissioner, 

A Deputy Commissioner might "be appointed for each exchange 
territory to work in such territory in cooperation with members of the 
Industry, Liaison committees composed of local members of the Industry 
and patterned after the Code Clearance and Zoning Boards might work 
with and assist the Deputy Commissioner in efforts to prepaire equit- 
able uniform schedules of cle^^rance and zoning for epch com.petitive 
district, 'The G-overnraent would retain the riower of disap'oroval of 
any such schedule or any part of such schedule, A right of spveaL 
from an^'- scliedule to the Commissioners coiild be provided at any time 
a change in competitive conditions occurred. 

The liaison committee might assist the deputy com:nissioners in 
determining the facts with regard to any coinplaints regarding unfair 
overbuying. 

Personnel m.ight be a.ssigned to the Commission to study block 
booking and other controversial problems of the Industry with a view 
to eventual elimination of causes of controversies. The commission 
might be intrusted with the duty of seeing that satisfactory standards 
be maintained with regai'd to all films entering into interstate 
commerce. 

A factual and theoretical stud^"- of the industry which would provide 
inforr.ation invaluable to both the Industry and the G-overnment might be 
undertaken under the auspices of the Commission, This would be a con- 
tribution of the highest value to an Industry so heavily charged with 
resx)onsibilities to the social and cultural welfrre of the Nation, 



9638 # 



MCTICN FICTL'iG IiOi^UGrRY srODY 



AP?i:iDIX 



The material roiich follCTs is Evidence Stud;^- No. 25, 
with the addition of pages lOA, 30A and 303. 



9638 



COIITEIITS 



E§iie 



Foreword • 



• ■ vkim I: i:^t:ioductioii 

CHAPTE:^ I - TK2 llATUTJi] 0? TILi] IIILUSTHY , , . . 2 

Definitions of the Ind.Msti';'' 2 

Description and 3co_je of the Indf'-Etry 2 

Assets .^ . . . 3 

Capi-ta-l Inve'stiAGlit; '. ' 4 

Interstate Charrxter of the Industry 4 



PAI^ II': ■ PEODUCTIOil 

CIIAPTZE- • I - KIE iliTUEE- OIT TJiE DlVISIOIi 6 

• ■ Total ifcnher of Estaolishnents 6 

IJuinoer of nstahlislii.ients hv Principal States, , , . 6 

• • • • HimDer-of IlenhSrs and Size of Concerns, ,...♦• ? 

- • • Gross and I'.'et Intone." ,., 7 

ilet Income 'b-j I.Iajor Conpanies 8 

Total Cost of Production, 9 

Volurae of Production. ..',,,. 9 

Total Domestic and roroi,{m Releases 9 

• ••■•• Praductio'n "of "?caturer>" 10 

Production of "Shorts" 11 

• "-Bare-Off i'ce" Ratin.^" of pL'oducers, 11 



CIIAPTHR . II - lABOR SIATISTICo, 



• Total- IJ-uater of :ijTolo"ees 13 

• lluuher of "^-:tras", 15 

• Sear.onc.i Variation in i^nplo^Tient 14 

•Total Annual Waj^es, 15 

Annual T;7ages ^rf Principal States 16 

■Salaries cjil Va^es is a 'Per Cent of Cost 

• -of Production 16 

T/ages of 13::tras 17 

•Average -He iirly V/age Pate. ■, . . . 18 

•Avera/^e Hours Worked per Week 18 

Child Lahor , 19 

'Smplo^ees -"by Prince ip'al States ., 19 

Total 3mploj''ees 19 

- • • Wage Earners. ., 20 



■(Continued') 



8976 






COIITZIITS (Continued) 



CFJIPTZR III - I.IA.TEriULS 



Pa.Te 
. 21 



CHAPTER 



CHAPTER 



CiiAPTSR 



CHAPTER 



Cost of Principal Uaterialc Uced , ... 21 

Source of Eq'aip:je2it and Supplies, . . , , 31 

IV « UIIEAIR TRA3I] PRiiCTICES 23 

Enticement of To-lent and Activities of Agents , . , 23 



y .-^ .(ySTiTZRkL lirJQI^I-ATIQIT .. 24 

EzDports 24 

Advertisinj;^ , , 24 

Productive Caoacit7 ,,•,,, .... 24 

Tr?.de As.so.ciations . 24 

notion Picture Producers aL^d 

.Di,stri"butors of Ar.ierica, Inc. ..,,,•. 24 
The Acader.v of Motion Picture 

Arts and Sciences •••..•. .24 

Trade Union Activity ,25 



PART.III:. .DISraiBUTIOII 
I - Tiis rATiKS. OF TH:: Division 26 



History and Scope of Division .... 

Orijiin of Eiln E::clia2igo .... 

Jleyelopmen.ts. in 7iln DistrilDution 

National and "State Rif^ht" 
pistri.'bujtion 

Producers as, Eiljn Distributors. 

Present-^Daj Film DistrilDution , 
Total ifur.iDer. of J]::c^^n^e EstaLlishi.ient 
ITuuter of Exchange EstalDlislinents l)y 

Principal States, , . 

Volurne of Business, by Principal States 



ijumoer 



Volijne 



of .EstalDlisJu-ients. "by I^'pe of 



E;:change, 



of JSusiness 03^ Type of E:-change 



II ~ LABOR STATISTICS, 



26 
26 
26 



. 26 
. 27 
. 27 

, 28 



. 28 
. 28 

, 29 



31 



31 



Average Annual. lT-^i)ej7 pf. iirnployees, , 
Total ITur.iL>er of Employees by T^oes 

of Exchanges. ,• ,,..31 

Average Ann-oal Payrolls , . , 31 

Per Cent Salaries and Wages are of 

Total E.-q^ense .31 

(Continued) 



8976 



*-ii- 



Jv^.V 



COIJ'TEITTS ■ ( Continued) 

• i .• • 

CHAPTER III - UlIFAIH TRXD-E PEACTICE3 32 

Block BooJcin.?^ and Blind Booking. , , , 32 

Forcin-^ Short Suojectn rrith TeacvTes . , 53 

Overo"u;'"in:;;, . ■, , 33 

CHAPTER IV - GEIuSAL Ilu^ORI.LilTIOiJ 34 

Trade Acsociation Activity , 34 

PART IV: E:DII3ITI01I 

CHAPTER * ' 1 }- TEE TAlTREi OP TiS iDIVISIOlI 35 

History and Bescri :)tion of Divisi9n. .,.,.., 35 
The Developnont of I.iction Pict-.u-e 

Theatres 35 

The DevGloprae:-;.t of the Entertainraent 

Program, . , , 35 

Entr£;.nce of Producers into the 

Ezdiiuition Bivision , 35 ' 

Claccien of Erdiihitors 35 

Total il-uijnher of Tlieatres ., . -36 

iIumDer of Theatres "by Principal Statec 3G 

Nu'-ilDer of Theatres C;pen and Closed 37 

Seatin-"- CaTD^-citv. . ,,-,, 37 

ruTii'ber of Thoatres and K-xmlDer of Scats 

' ■ ' Classified by Tyoe of Ownership 39 

Total Theatre Receipts and Atte2-.da3ice 40 

Theatre Receipts "by Principal States 41 

Competition ^'ith Other Industries , . 41 

Expenditures fo:^ Iieatre Construction 41 

Pinancial Conditio?!, 42 

CHAPTER II - lABCR ST^vTISTICo 43 

Hu-iter of Sr.iployees 43 

Total A-nniial Payrolls 43 

Total Annual Payrolls as a. Per Cent of 

Total Receipts 44 

Nunher of Wa^^-e Earners and Total Ann-oal 

!Tages hy Principal States 44 

T3'a{;;es and Hours , , , 45 

In Principal Cities 45 

In I7ashinr;ton, B, G 46 

(Continued) 



8976 



— lii— 



C0:TTZ:TTS (Concl-cicled) 



Pa^ie 



CKAPT2H . Ill - I,IATSRLA.LS 49 

IJura'ber of Tilns Ussd 49 

Per Cent of Con3iir.ier'G Hot ion Pict-ore Dollar 
"Spent on Film Cental 49 

CHAPISi IY-'U1.7AIH IHADE PIU.CTICES 51 

Clea,rar.ce and Zoninf , , 51 

Other Unfair Trads Practices, 51 

Trade Associations, ......... 52 

Tiie Motion Pict-.u'e Theatre Omers 

of Anerica, ,,,,,,♦.,,...,. 52 

Allied States Association of 

i.Iotion Pict-axG E:.±aoitor£ , , ,52 

Trade Union Activity' 52 

International Alliance of Tl'ieatrical 
State 3jnplo;-ees and I.Iotion Picture 
llachine Operators of the United States 
and Canada 52 



APPTilDIX 53 

Exhihit A - Persons Q;aalified as Erqoerts on the Entire Industr;'' , 53 

Eidiilfit 3 - The Advent of Scond in Motion Pictiires. , . 55 

So-und in Erdiibition ,55 

So-und in Production 56 



8976 -iv- 



I 



LIST CF 

Til3LES 

TA.B3I3 I - Assets of miction Pictr.re Producerc, 19o0-l'.:33, ... 5 

Til3LE I A ~ Assets of Motion Pict^ire Q^ieatres, 1930-1^^33 .... 4 



'TA ■nx.T' 



II - Total Ilimlier of Esta"blisiimentG, for Census 

Yaars, 1921-1933 6 

TA3LS Hi - I?an"bar of lUstalDlishiUents, 07 Six Principal 

States 7 

TABLE IV - Gross Incone mid llet Profit or Loss, 1927-1932 ... 8 

TABLE V - Consolidated Ilet Income or Losr: for Six 

• • ilajor Motion Pict-^n-e Con^janies, 1932-1934, ..... 8 

TABLE YI - Total Cost of Production, for Census Years, 

1921-1933 9 

TABLE VII - Hunter of Domestic and rorei^n Tiotion Picture 

Features Iteleased in the Uiiitoc. Sta,tes, 
1927-1934 10 

TABLE 71 II - Features Released 07 Major and Independent 

Donestic Coin'oanies .10 

TABLE IX - Total Ifun'ber of Shorts Produced, 1930-1931 

• • to 1954-1935 , 11 

TABLE X - Estimate of Box Office Strength of Feature 
Pictures, for each of Eight Liajor Companies 
and All Independents, 1933 and 1934 12 



TABLE XI - Average Annual ITumlDer of Salaried Enplo^^ees 

^ ^ . — ■ ir _■ . I II : — : i :— » ___________ ______i"- 



and of Wasie Earners. Iv 



TABLj:ij XII - IJuT-iDer of Placements ?-nd TJages of "Extras" 

Registered T7ith the Central Casting Corporation, 
1926-1934 \ 14 

TABLE XIII - ITtunoer of Wage Earners, "oy Llonths, 1929 and 1933 , . 15 

TABLE XIV - Total Ann-ora Salaries and TZages, 1929 and 1933 ... 16 

TABLE XV - Annual 7ages, "by Tliree Principal States, 

1929 and 1933 ~ 16 

(Continued) 



897^ 



o -V- 



TA.IILE XVI - 



TA3LE XVII - 



TABLE XVI I r -• 



TABLE XIX - 



TABLE ]CX - 



TABLE XXI >- 



TABLE XiCII - 



TABLE-X^ail - 



TABLE ICC IV - 



TABLE :GCV « 



TABLE ]LXVI - 



TiABLE :acvii - 



TABLE XCVIII- 



TABLE ]iXIX - 



TABLES (Continued) 

Total Cost of Production, A:inu::.l Galc.ries 

and AnnuSvl Uat^es, 1S23 and 19c.j» 17 

DiGtri"bution of Placements of Extras "by 

the Central Castini:": Corporation at 

Specified Bailv Ware llates, 1930 and 1933 ..... 18 

l?ajnl)er of Establishments and Humher of 

Wage Earners, Classified by r-tu.-iher of 

Full-Time Hours Uorked per Ueek, 1929 19 

Average Ann-oal ITumber of Employees, by 

Tliree Principal States;, 1929 and 1933 19 

Average Ann^ial lJuj-.iber of Wage Earners, 

by Three Principal States, 1929 and 1933 20 

Total Cost of Production and Cost of 

Materials, Eael, and Purchased Electric 

Energy 21 

Number of Establishi.ients Producin;:^ Photo- 
graphic Apparatus and Supplies, by 
Principal States , 22 

Exports -of Motion Picture Films, 1929 and 1954 . . 24 

Number of E:cch.^\nges and Volurae of Business 

Handled, by Six Principal States, 1929 28 

number of Exchanges, and ITuiaber of Em;olo?/ees, 

by Principal T^rpes of Exchanges, 1929 29 

VoluLie of Business, Salaries, ITages and 

Total Expenses, by Principal T^-pes 

of .E:cchanges,. 1929 ^. 30 

Average Anniml llumber of Employees 

and Average Annual Payrolls, 1929 51 

ITumber of Motion pictiore Theatres, 

by Principal States 36 

Sound and Silent Motion Picture Theatres, 

Classified as to YTnether Open or • 

Closed, 1929-1935 '38 

(Continued) 



8976 



—vi— 



I&BLZS (aoncl-JLied) 

ZjIL - Total ITonter cf Seats in l!otion 

Picture "Sieatres, 1931—1935 ,39 



A/.-S.I - ir-jn'cer cf Lotion ric""j:e ^leaires, 

GlciEsified c" Z-rz^^ of >niersrii:,, 1933-1935, . . 40 

IZZni - l?jn"ber of lloiior. Pictire Theatre Seats, 

Classified 'xrj Ifpe of Ormcrship, 1953—1935, , , 40 

1143LZ 'nJJilZ - Istiiaated Total Bon— Office P.ec^i^ts, Average 



.2^. 



.. _jp.. 



I ■fv.r«— i- 



Al , ~ .-_nr.-:s.l Zrr^endit-ore ir. ^.eatre Gor.str-JXJtion, 

ZiY - Srcss Income, 17et Profit or Loss, 1927-1932 . . 42 

-LVI - Ar.r.':ial Average I/JL-.lzer Zzr>lc*'ed, J-:l11 sind 

Part— TiLie, cj !I^es of Theatres, 1933, , . , .43 

.'-711 - Zz Zc.- Payrolls, J-ill and Part— tine, 

57 jr:pes cf Zieatres, 1933, , . , , ,44 

rni: - lotal Pecelpts, .:-— "cer cf P-jil-Tire Zrrilojees 
and PaTTolls, Classified rj IC Principal 
States, 1933 ' 45 

ZZZZ1 - "age Scales and S>urs "fcorlied per T7eek cy 

"Jnionized Projectionists, Classified 'cir 

f 



^jncej. - ^ j_ . — V .: I J. -"l. iT •■•,•••••••*, "^zo 



'C - Arerage TTeelfL" Ho-ors and "B'ages of Zhployees 

in 11 jeiglncorhood Ilction Pict-jre Theatres 
of 'Hashington., D, C, , b:' Branch of "wDrk 



average ..e5^::_:- .:age£ m _iii5rent -:~es oi 
Motion Pi^Tire Theatres :f TTashinrton, D, 0,, 

'orh and Occ^jpation, 1951, . , , , 45 



-.T"^'^ (-» •- 






Per Cent of the Consigner* s Motion Pict-::re 

T-ollar Accoimted for 57 -he Tnief Tirisi^ns 

cf the Ind-istrr, 1933 50 



-"vni— 



I 



-1« 

1.I0TI0N PICTUHE IWDUST.1Y 

Foreword 

Tlie date, -oresented in this report lir.ve beeii assembled fron "both r-ove^.-rjzQnt 
and private sources. Most of the government data used have "been tci^en f::'Oi:i 
•oublications of the lliirean. of the Censas, "but data have a].so "been talcen fror: 
reports of the Bm-eau of Labor Statistics -nd the 3-3ureaii of Internal ?.evj-v-e, 
Arnon{::; the private sources, the nor.t i-nport:..nt are the Motion Fictixre Alnonac, 
the Fijjn_ra^ lX_Ye_ar_op ok , reports of the Standard Statistics Com^>an--, i-nc. the 
trade association, the Motion Picture Producers and Distributors of .cL-ierioa, 
Inc . 

The or,{;anization of this study is sonev/hat different fron that call-jd for 
in the Outline for Evidence Studies. The Industi" as codified includec the 
production, distribution, pnd exhibition of riovin,^: pictures, and it has been 
considered advisable to follov/ the Ou.tlinc throUt-h seoaratelv for each of these 
divisions. The oresent stud"^^ therefore consists of four --^arts: Part I, Intro- 
duction, in which certain j.irterial ;-)ertainin^; to tiie Industry as a whole is 
presented; and Part II, Production; Part III, Distribution; and finally, Part 
III, E3diibition. Tlie oarticiO.ar ConsUo oublications used in describing each of 
the three main divisionr of the Industry are as follov.-s: Production, Ce nsu s 

o f Ivlanui' a c tur e s ; Distribution, Census of 'lioles:J .e Distribution; a nd 

Frdiibition, Ce^siig_j)f_j^aei^ic_^^^ .Imusenents, and Hotels", 

The Census d^ta are considered roughly applicable to the ap^^rooriate 
division of the Industry as codified. The fact that the Census covera^:e does 
not include the smaller estoblishments is not held sipnificant in this I-^.dustry. 
As pointed out in the text, hov/ever, Census dr.ta :uid those fron ^^rivate noiu'ces 
ofte-''- indicate large discrepancies which r.re ■■^reswiably due to the fact that 
the latter are freouently estinates and to difference in the coverage of the 
tY:o sets of data. " • 



8976 



PART I: INIHODUCTION 
Clia\Tter I. TJrie ITature of the Industry 



II 



Definitions of the Industry 

The Motion picture Industry, as defined "by the Code of Fair Competition 
for the Industry, includes, 

",... nithout limitation, the production, distribution, or 
exhibition of motion pictures r.nd all activities normally related ^^ 
thereto, except as s-necif ically excepted from the operation of the Code. 

The limitations in the sco-oe of the Code ^re as follow: 

"Nothing in this Code shall be deemed to a-oply to the pro- 
duction, distribution, or exhibition of motion pictures on film 
of recognized substandard v/idths, or to slide films, or to non- 
■ theatrical motion pictures designed -nrimarily for educational, 
scientific, industrial, commercial, advertising, selling, or other 
non- theatrical purooses, or to television of motion pictures, 
provided that the commercial production, distribution, or exhibi- 
tion of such films shall be subject to investi^-ation b'^ the Code 
Authority to determine ^"hether such production, distribution, or 
••• ■ exhibition of such films is unfair competition to an established 
motion oicture theatre or theatres. If found to be unfair com- 
petition, the Code Authority shall promulgate rules and regulations 
governing such unfair competition." 

The Code covered "actor employees in vaudeville and presentation motion 
picture theatres" in "both permanent and tra\'-eling companies of artists play- 
ing presentation and vaudeville houses," but it did not cover "amateur" shoTvs, 
"rep," "tab," "tent," "wagon," ''truck" and "medicine" shows, "show-boat" or 
"burlesque," as these terms are understood in the theatre. 

The Industry as defined by the Census of Manufactures embraces, 

",.,, all processes and activities connected with the pro- 
duction of motion r)ictures, such as the photogra^ihy of scenes, the 
development of exposed films, the printing of projection films, and 
other studio and laboratory work necessary in connection with the 
preparation of projection films for use," 

Since Census of Manufactures data thus cover only motion picture pro- 
duction, they are not applicable to the entire Industry as defined by the 
Code, but only to the production branch of the Industry which is described in 
Part II of this study. The remaining branches of the Industry, distribution, 
and e:chibition, are covered by the 17holesale Census and the Census of Service, 
Amusements, and Hotels, 

Description and Scope of the Industry 

The Industry as codified is composed of three major divisions of activity; 
production, distribution, and exiiibition. These three economic divisions of 
this Industry are closely inter-related with and dependent upon each other. 
The production division covers all of the processes and activities involved in 

8976 



the making of motion pictures. It includes the preparation and photography of 
scenes; the developing of exioosed films; the printing of projection films; ajid 
other studio and laboratory \7ork required in the preparation of positive films 
for use. The dictrihutioh division involves the "renting" or "leasing" cf 
films to exhibitors; the maintenance and physical distribution of the films, 
and the collection of due a.ccounts. It also includes the outright sale of 
finished films and the sale of advertising materials. The exhibition division 
incjudes the commercial exiiibiting of the finished films in the theatres; and 
also vaudeville and presentations given in conjunction with m.otion jjictures. 

This Industry, Fhioh has asnumed a position of unusual imToortance beca.use 
of its far-reaching influence upon social and economic standards and conduct, 
is characterized by rapid, growth by the possibility' of radical changes through 
teclmical developments in the film c.nd rele.ted industries by the geographical 
concentration of production. It's further characterized by the large degree 
of integration of its three main divisions, and the individuality in the in- 
dustrial "oractices uhich it follovvS. 

Production, distribution, and exhibition are both horizontally and verti- 
cally integrated and the concentration of corporate ownership in the hands of 
a fe-j large comoanies provides an economic division of the Industry between 
what are kno^Tn as "major" and "Indr.pe.ndent" interests. The economic conse- 
quences of this concentration are reflected in nearly all problems of the 
Industry, 

Assets 

Tables I and lA shov/ the assets of motion -iiicture producers and oxhibitors 
for the years 19^0 through 1923. Fixed assets constitute the largest type in 
both the production and exliibition divisions. Total assets of loroducers drop- 
ped from $954,000,000 in 1930 to $249,000,000 in 1933, while in the- exhibition 
division total assets rose during the same period from $619,000,000 to $1,- 
075,000,000, The number of concerns re-oorting in the oroduction division 
averaged around 175 each year, whereas in the exhibition group the number 
rose steadily from 1,889 in 1931 to 2,568 in 1933. 

TABLE I 

Assets of Motion Picture Producers, 1930-1933 
(Dollars In Thousands) 

1930 1951 1932 1933 



Number Pteporting 



182 170 177 181 



Total Assets $933,347 $849,916 $411,622 $248,824 

Current 228,871 192,911 54,015 42,057 

Investments 251,320 220,408 109,593 18,543 

Fixed 384,421 571,766 218,629 163.-40 

Miscellaneous 39.255 34.851 29,585 ^^J^> 584 

Source: Bureau of Internal Revenue, tabulation sheets and published reports 
(statistics of Income). 



8976 



-4- 



TABLE I A 



Asstts of i.Iotion Picture Theatres, 1930-1953 
(Dollars In thousands) 







1930 


i::<'31 


1932 




1933 


Numher Report 


ing 


1,839 


1,809 


v./ , Xo-O 




2,368 


Total Assets 




$6ia,7i^2 


$717,307 


$936,584 


$1 


,076,486 


Qurrent 




102,404 


113,728 


205,919 




265,927 


Investinents 




53,340 


68 , 143 


17::., 753 




244,684 


Fixed 




389,434 


470, 4o3 


523,241 




490,536 


MiscellaneoTis 




73,554 


59,003 


33,771 




75,339 



Source: Bureau of Internal Revenue, tabulation she?ts and published reports 
(St.-^.tistics of Income). 

GaT)ital Invoatiaent 

Accordinj'T to the Motion Picture Alm an.g.c the caoital investment of the 
Industry stood at $2,000,000,000 in each of the years from 1929 to 1955, -dth 
the exce-jtion of 1934 vdien the fi,<^ure vras placed at $1,750,000,000, The invest- 
ment in studios is roughly $100,000,000; the investment m the distribution 
branch of the Industry is something; between $10,000,000 and $20,000,000; rrhile 
that for the exhibition branch of the Industry lies bet\-een $1,630,000,000 and 
$1,880,000,000. In other ^ords, the investyaents in production or distribution 
are insignificant in com-'oarison v.'ith the investment in e^diibition. In a study 
made recently oy a group of architects, Messrs. Larab, Rapo, Alschla^er, Eberson 
and Schultz, it was ectir.mted that $1,460,000,000 has been spent to date in the 
building of theatres exclusive of those yjarts of theatre buildings given over 
to office space, 1/ 

Interstate Qh^^racter of the Industry 

In the makin:; of films, n-omerous writers, actors, actresses, directors, 
cameramen, and other artists and artisans, are assembled from many dif.ferent 
states and foreign countries. Great quantities of uneicoosed films and lar,^e 
quantities of scenery, cost-umes, -"naraphernalia, and prooerties are transported 
from many different states to the studios located in those few where motion 
pictures are -nroduced. 

The distributors enter into contracts for leases with exhibitors for the 
exhibition of films throug^hout the United States throu;^h the media of corres- 
pondence, branch offices, and salesmen. Thus fi?^m contracts which are entered 
into betv/een residents of different states, involve the leasing of a comi-iodity 
manufa-ctured in one state and trans"oorted to and used in another state, 

1/ Verbal statement by Mr. David Palf re;^/Tnan of the Theatre Service Division of 
the Motion Picture producers and Distrioutory of America (June, 1935), 

8976 



After the fil:ns are produced, they are packed into metsl containers, and 
are transported "by parcel nost, express trucks and other cominon carriers, from 
the studios and laboratories to exchanges, then to the theatres in cities sjid 
tc^/ns of the country. After display to the public, the films are returned to 
the exchajiges for redistribution to other theatres, or are foruarded to other 
exhihitors. Thus, there is a constant current of trade and commerce in films 
through the states. 



8376 



-6- 

PART II: Pr.onJCIION 
Chapter I, The lTat"'-ire of the Division 

Total I\Fiin"ber of Zstabli^^hmorits 

Table II indicates the numher of establishments engaged in the produc- 
tion of Liotion pictures. It \7ill be noted that in the first Census talcen 
after the depression years of 1921 and 1933, the nuuber of establishments 
shovred a markod decrease in each instance* 

TAELE II 

Total Number of Establichmenisn, for 
Census Yecj-s,, 1921-1953 



Year 


Number 




per 

from 


Cent Change 
Preceding Year 


1921 


127 






— — 


1923 


97 






-23o6 


1925 


132 






4.36.1 


1927 


142 






^ 7.6 


1929 


142 






no change 


1931 


140 






- Ic4 


1933 


92 






-34.3 


Source : 


Census of 


l'.an\if 


acture 


3. 1929 and 1933 



"Motion pictures, not Including Pro- 
jection in Theatres." 

Number of Hgtablishmentr by Princi-pal States 

An examination of Table III shows that more than 80 per cent of rJLl 
motion picture establislunonts are located in six states. In 1929 Calif oml 
the leading state, accounted for 41 per cent of all establishments and Hew 
York accounted for 21 per cent. By 1931 California had gained relatirely 
and Ne\7 Yori: had lost, while in 1933 the reverse was tiue. The concentra- 
tion in the six states was more marked in 1951 and also in 1953 than in 1929* 



8976 



xlSLE III 
lifumber cf Zstailishaents, tj Six iPrinciral States 



19^9 






State IC-^rer ?fr T-ent IroziDer ?er Cent Ir^rer ?er "ent 

U. S. lotal 

Calif cmia 

Illinois 
Beir tTersej 
Hew York 

Ohio 
Penns^lrazia 

Total, 6 States 
Total, ether States 





IDO.O 


14:1 


100.0 


92 


100. Q 


5B 


4C.9 


71 


50.7 


39 


42-4 


8 


5.S 


7 


5.0 


8 


8,7 


6 


4.2 


5 


3.5 


3 




30 


21.1 


26 


1B.5 


24 




S 


5,€ 


6 


4.3 


3 


o»3 


5 


3.6 


6 


4,3 


1 


— • — 


115 


81.0 


12T 


B6.4 


78 


54, S 


27 


19. D 


19 


13.6 


14 


15.2 



lot 



Source: Censng cf HanTLfacr-ires . Ir29 . 1931 . sni 1933, Motion Pictnires, n 

The nenhers cf the rrodnoticn iivisicn cf the Iniistry fall into t^ro 
grcuxs. Ihere are eight large conrsnies Tshi ch proiice s^proxiriately 80 per 
cent of the total value of proauction as valued on a cost— of-prodaction 
"basis £z.i ^rproxlr.ately 6.5 per cent hj number of features jrciacei. _!/ rive 
of the na^cr ccnrsnies supply nearljr IOC rer cent of the ne-ffsreels ^Tc±i.c^-Lm 

Ihe regaining pictures are pro±icea "by ^pTcxiinately 30 inierenicnt coib- 
ranies having sufficient imp'Ortance to have the names of their Trroduction 
staffs listed in "die lirticn ?icr.ire j^nanac . Host of these ninor producing 
firms contrirute their portion of tihe -rodnct tinier a '*unit'' sTTstem trhich 
fits into and "becomes a trart cf the productirr. -r"-rdules of the major pro- 
ducers. In addition to the ab-cve, there are ~.---v ether small producers "Rh-c 

•ne cr t^o motion pictures intermittently over a period r.f years. 

; and ITet Incrne 



-Tahle IT shows the grtss income and the net profit or loss of motion 
picture producers from 1927" through 1932. In 1930 gross income increased al- 
most 70 million dollars over :he 192-9 level of $343,445,001 and _ the producers 
report.od a profit of more than ?40, 000,000 annually in each ef these years. 
Alxhot:^ in 1931 gross inc&m^ vas almost 101 million dollars greater "ihan in 
1929, there -as a net loss cf SB, 574, 000. In 1952 grcss income fell to less 
than one— half the 1931 level and th.e n.rod:icers s'jtffered a net loss cf over 
$30,000,0<jC. 



.^ ...ztiin Picfire rrtdnoers =ni ~istriO"JLt ^rs cf Jjmerica. 
5976 



-8- 

The decrease in the profitability of the Industry has "been attributed 
to a number of factors, including over-expansion in the direction of seating 
capacity, erection of theatres at an excessive cost per seat, mismanagement 
within the Industry, payment of inordinately large compensation for services, 
and the effect of the depression upon the demand for entortainment, 

TABLE IV 

Gross Income and Net Profit or Loss, 1927-1932 

(in thousands) 



Year 


. 


G-ross Income 


Net 


Profit or Loss 


1927 


• 


$239,426 


• 


$8,032 


1928 




230,266 




17,109 


1929 




343,445 


' 


44,400 


1930 




410,700 




40,282 


1931 




441,948 


V 


-8,674 


1932 




190,795 




-30,199 


Source: 


Buri 


eau of Internal 


Revenue , 


Statistics of Income 



Net Income "by Ma.lor Cora-oanies 

TaJble "V shows the consolidated net income of six major companies for 
1932, 1933, and 1934, Attention is directed to the recovery made "by the 
three companies, namely. Fox, Warner, and Paramount, which had the largest 
net "bases in 1932. The totals show that the group loss of $34,519,000 in 
1932 had by 1934 been turned into a net income of $14,371,000. 



TABLE V 

Consolidated Net Income or Loss for Six Major Motion Picture 

.Companies, 1932-1934 
(in thousands) 



Com-pany 



1932 



1933 



1934 



Group Total -$36,519 

Columbia Pictures Corporation 574 

Fox Film Corporation - 16,151 

Lostt' s Incorporated 7,961 

Warner Brothers Pictures, Inc. - 14,095 

Universal Pictures - 1,250 

Par amount-Pub li.c Corporation - 13,558 



$4,568 

740 

1,411 

4,034 
-6,292 
-1,017 

5,692 aj 



$14,371 

1,009 

3,000 a/ 

7,480 
-2,530 
- 500 a/ 

5,912 a/ 



Source: Standard Siiatistics Company, Standard Trade and Securities , 

"Theatres and Motion Pictures, " "Vol. 75, No. 22 (February 20, 1935) 

a/ Estimated, 



8976 



-9- 

Total Cost of Prodaction 

The production of motion picture films is not a manufacturing activity 
in the sense in which the terih is generally used to designate the factory 
production of commodities. Furthermore, since the Motion Picture Industry 
does not usually sell, hut leases or rents its product, it is impossible to 
detennine the actual value of the output of a given year until a long time 
after its close. It is therefore necessary to substitute "cost of produc- 
tion" for "value of product" in presenting data for this Industry. 

• An examination of Tahle VI indicates that the cost of production increase* 
each year from 1921, until it reached a peak of $184,102,000 in 1929 when 
the introduction of equipment for sound production caused a large increase in 
cost of production. In 1931, the Industry's decreased production costs can 
probably be attributed in part to better adjustment to the innovation of 
sound, but the impact of the depression was probably beginning to be felt, 

TABLE VX . 

Total Cost of PiJ-oduction, for Census Years, 1921-1933 

(In thousands) 

f ii> y ■ ■ ,1 ,,, . ^ .. II _ I,, .M, , , — ,.— , ■■■—■■— ■■...■■ ■ -■■■..■■■I. . .11 ■■ . I II I ■ . , . .m . 

Year Cost of Per Cent Change 

Production " from Preceding Year 

1921 $77,397 

1923 86,418 + 11.7 

1925 93,636 + 8,4 

1927 134,343 ^- 43.5 

1929 184,102 ^ 37.0 

1931 154,436 - 16.1 

1933 119,343 - 22.7 

Source: Census of Manufactures , 1929 and 1933 . "Motion 

Pictures, not Including Projection in Theatres." 

Volume of Production 

Total Domestic and Foreign Releases . - Table V.I I shows the total number 
of features released in the United States for the years 1927 to 1934, Data 
are presented to show how many of the totaJ release^ were foreign features and 
how many were made by American' pi'oducers. During the years 1932, 1933, and 
1934, the proportion of foreign pictures releases was greater than in most of 
the prior years. In 1934 the number of foreign features shown in this country 
amounted to 27,5 per cent of the total. . : • 



8976 



-10- 









TASLE VII 






■ 


ITum'i 


)er of Domestic and 


Foreign Mot 


ion Picture 


Features 


Released j 






In the 


United Stat 


ss, 1927-1034 








Total 


Domestic ! 


• 

features 


- Foreign 


Features 


Year 


.Number 


Per Cent 
of Total 


Hiimber 


Per Cent 
of Total 


Number 




Per Cent 
of Total 


1927 ' 


743 


100.0 


668 


89.9 


75 




10.1 


1929 


820 


100.0 


627 


76.5 


193 




23,5 


1929 


850 


100.0 


705 


. 82.9 


145 




17.1 . 


1930 


600 


100.0 


514 


85.. 7 


' 86 




14,3 


1931 


627 


100.0 


505 , 


. 80,5 


122 




19.5 


1932 


685 


100.0 


489 


71.4 


196 




28.6 


1933 


644 


100.0 . 


507 


78.7 


137 




21.3 


1934 


662 


100.0 


480 


72.5 


182 




27.5 


Source: 


Film Daily Yearbool- of Motion 


Pictures, 1935. 






?ro 


duction 


of "Feature 


s." - Table 


VIII shows 


the number ol 


r features 



produced from 1927 through 1934, Attention is directed to the high number 
of releases by major comrpanies in 1927 and the gradual decline through 1932, 
with the subsequent moderate rise. During these years the major corrpanies 
averaged almost 70 per cent of the total number of feature pictures released, 

•■ • TABL3 VIII • 

Features. Released by Major and Independent Domestic 

Companies a/ 





Total 


- 




'Kind of 


Company 




Year 


Ma^ 


or 




Independent 




Humber 


P( 


3r Cent 


i^omber 


Per Cent 


Number 


Per Dent 






of Total 




of Tot^al 






of Total 


1927 


668 




100.0 


510 


76.3 




158 


23.7 


1928 


627 




100.0 


462 


73.7 




165 


26.3 


1929 


705 




100.0 


393 


55.7 




312 


44.3 


1930 


514 




100.0 


• 363 


70.4 




152 


29,6 


1931 


505 




100.0 


324 


64.1 




181 


35.9 


1932 


489 




100.0 


318 


fe5.0 




171 


35.0 


1933 ' 


507 




100,0 


• 338 


66.7 




169 


33.3 


1934 


480 




100,0 


361 


75.2 




119 


24,8 


Source! 


Film Daily 


YearlBook 


of Motion 


Pictures. 


1£ 


)35. 





a/ During 1927-1931, ten companies listed; during 1932-1934, eight 

companies listed. 



8976 



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production of "Shorts." - Table IX shows the estimated number of 
"Short Subjects," of one or two-reel length, produced for the years 1920- 
1931 thi'ough 1934-1935, The table does not include nev/sreels produced 
annucJ.l7 by each of the five major companies., or approximately 20 reels. 

TABLE IX 

Total Number of Shorts Produced, 
1930-1931 to 1934-1935 

Season Number 



1930-1931 1,286 

1931-1932 1,372 • '■ • 

1932-1933 1,237 

1933-1934 1,062 a/ 
1934-1935 956 a/ 

Source: Compiled from data in the Llotio n 
P icture A l manac. 

aj Estimated on basis of announced 

, plans of companies. 

"Box-office Rating" of Producers 

The relative quality and importance of the production of the eight 
major producers may be ascertained from an examination of Table X, v/hich 
shows the estimated "box-office strength" of feature pictures produced by 
the major producers in comparison with the feature pictures produced by the 
independent producers. 

Each feature release is assigned a weight, according to indico,ted box- 
office potency, and a weighted average for the entire year is then coiirputed# 
A perfect score of 1,000 would result only if every film of a producer were 
given a "Hit" rating. 

It will be seen from the table that United Artists and Loew' s (l.IG-Ll) re- 
ceived the highest box-office ratings in both 1933 and 1934. In 1934 they 
received 762 and 552 respectively. In the same year, independent companies 
received an average rating of 164. 



897( 



-1 '^— 



TABLE X 



Estimate of Box Office Strength of feature Pictures, 
for Sach of Eight Major .Conr^anies cjid All Independents, 

1933 a^.d 1934 



Company 



United Artists 
Loev/-' s (MGlvi) ■ 
T7oj:ner Brothers 
H.Z.O. 
Pojrarao-ant 
Tox Film 
Universal 
ColumlDia 



1933 



583 
582 
486 
395 
380 
368 
362 
260 



1934 



762 
552 
429 
433 
508 
4^16 
366 
302 



Average 
Independents 



424 
175 



453 
164 



Source: Standord Statistics CompaLiy, Standard Trade and 
Se curities , "Xheatre and Ivlotion Pictures," Vol. 
75, No. 22 (:?ebruar7 20, 1935) p. i^H-4G. 



8976 



' ■ -13- 

PiiHT II: PRODUCTIOIT 

Chapter II. Labor Statistics 

Total I^T ui n"ber of Eiirrloyees 

Table XI siior/'j the a.veragG annm:! number of employees, in the produc- 
tion division as reported by the Census of Manufactures. The Motion Picture 
Almanac lias estimated the total employment as 30,000 in 1933, compared v/ith 
the Census figure of 19,037 for the same year. 

TA3LS XI 

Average Annual Number of Salaried EnplOj^'ees and of 

Wage Earners 



1929 



1931 



1933 



Salaried Znroloyees 
Wage Earners 

Total 



.3,818 
10,784 

19,602 



8,260 
-- -. 10,777 

14,339 a/ 19,037 



Source: Ce ncus of Hanufr.ctureG, 1953, "Motion Pictures, Not 
Including Projectioi\ in Theatres," 

a/ Figures for 1931 arc incomplete and not comparable 
Fith figures for other years. 



Number of "Extras " 

There are no accurate data as to the total nu.mber of "extras" empl037"cd 
in the Industry. Mr. Allen Garcia, representing extras, sta,ted at the 
hearing on the proposed Code that the total number of this type of employee 
registered and available has been variously estimated as between 8,000 and 
14,000 annually. 1/ 

In a.dditioji, complete data are not availa.ble as to the total number 
of placements of extras, but Table XII shova the number of such pla.cements 
made by the Central Casting Corporation, the leading emr^loyment agency for 
obtaining Jobs for this tjne of employee. The number reported by this 
agency is considered to represent a great majority 
placements. 



•■"■ of the total number of 



1/ Transcript of IIPA Hearing, Motion Picture Industry, September 12, 1933» 



8976 



-14^ 



TAP-LIJ XII 



Niim'ber of placements and TTages 
of "Extras" Rociistored v;ith the 
Central Casting Corporation 
19£o-1934 









PI' 


^.cements 




T7ages 




xear 




Total Himiber 




Average Da-ily 


Total Annua,! 


Average Wage 










N- 


■jnber a/ 


(000 's) 


per Placement 


1926 




259,259 






710 


$2,195 


$8.46 


1927 




330,39? 






905 


2,838 


8.59 


1928 




276,155 






758 


2,470 


8.94 


1929 




252,958 






840 


2,401 


9.13 


1930 




252, M6 






807 


2,450 


9.74 


1931 


>/ 


177,523 






621 


1,658 


9.34 


1932 


c/ 


175,785 






677 


1,545 


8.74 


1933 




251,914 






305 


2,049 


8.14 


1934 




219,857 






705 


1,985 


9,03 


Source: 


Hot ion Picture 


Almana.c 


, "Annual 


Report of the Cen 


tral Casting 



Corporation." 

a/ Total nuTuber. of placements divided by total number of days, 
exclusive of Sundays. 

b/ Data for 1931 are for the first eleven months of the year. 

c/ Data for 1S32 are for the firr.t ten nonthr. of the year. 



Seasonal Variat i on in Sm-^lo^nrae nt 

Data on seasonal variation of en-plo;>''nent in the -production division 
of the Industry, which are presented for the years 1929 and 1933 in Table 
XIII, shor; relativelj'' low employment in the first four months of each yea,r« 
Production for the summer selling season begins around l.Iay, and producers 
usually a^ttevTot to start uork on special features at that time in order 
to further their sales efforts. In 1929 and 1933 emploinent was higher in 
the last six months of the year, with maximu:n eirrployment occurring in 
September. 

Table XIII also shows tiiat during the last four months of 1933, enploy~ 
ment was generally about 15 per cent higher than in 1929. This increase 
may be partially attributed to a decrease in hours and sabsequent increase 
in the nu:.iber of wage earners under the "President's He-employment Agreement." 



8976 



-15- 

TABLE XIII 
UurnTDer of Wage Earners, iy Months, 1929 and 1933 



Month 



January 

February 

March 

April ■ 

May 

June 

July 

August 

Septemher 

OctoDer 

Novemher 

Deceraher 

Average 



1929 



1933 





Index 






Index 


NuwlDer 


(Annual av- 


ITuj-Q'ber 


(Ai 


nnual av- 




erage^lOO) 




erage=100) 


9 , 929 


92 


9,592 




89 


9,694 


90 


9,567 




89 


9,113 


84 


8,592r> 




80 


9,560 


' 89 


8,547 




79 


10,722 


.99 


7,880 




73 


10,805 


,100 


9,212 •• 




85 


11,422 


106 


10,491 




97 


11,616 


108 


11,821 




110 . 


11,938 


111 


13,734 




127 


11,506 


107 


13,627 




126 


11,690 


108 


13,310 




124 


11,407 


106 


. ,12, 947 




120 



10,784. 



100 



10,777 



100 



Source: Census of I.Ianufnctures , 1929 and 1933 , "Motion Pictures, 
not Including Projection in Theatres." 



Total Annual W.ages 

Tahle XIV shows the total salaries and wages paid in 1929 and 1933 
as reported hy the Census of Manufactures. Comparison of the years 1929 
and 1933 indicates that the reported total compensation decreased from 
$85,028,000 to $71,343,000, or 16 per cent, salaries decreased approximate- 
ly 12 per cent, and wages dropped B."bout 26 per cent* The decline in total 
salaries \7as accompanied hy a somewhat smaller decrease in the nuraher of 
salaried employees, "but since the 26 per cent decline in total wages was 
accompanied hy practically no change in the numher of wage earners, there 
mast have occurred marked cuts in wage rates and/or a. considerable substi- 
tution of pr,rt-time for full-time v:orkers. (See Table XI, above.) 

It may. also be seen from Table XIV that sala-ried emjoloyees enjoyed 
a larger proportion of the total corripensation in 1933 than in 1929. Salaries 
represented approximately 71 per- cent of the total compensation in 1929 and 
about 74 per cent in 1933, v/hile- wages as a percentage of total compensation 
decreased from about 29 per cent to approximately 26 per cent. 



8976 



-16^ 



TA5LE XIV 
Total Annual Salaries and TTages, 19?9 and 1933 



1929 



1933 



Kind 
of ComDcnsation 



Arnouiit 
(000 's) 



Per Cent 
of' Total 



Aij'^ijjit 
(OOC's) 



Per Cent 

of Total 



Per Cent 

Change 

1929-1933 



Total 




$85,328 100.0 


$71,343 100.0 . - IS.l 


Salaries 




60,168 70.8 


52,948 74.2 - 12.0 


Wage s 




24,860 29.2 


13,395 • 25.8 - 25.0 


Source; Census 


of Manufactures, 19?5, 


"Motion Pictures, not Including 


Pro: 


jection in Theatres." • 




Annual Tira,s:es 


^ 


Principal States 





Table XV sho'-;s the annual wages paid in 1929 and 1933 in the three 
principr.l -producing states. California accounted for 79 per cent of the 
tot^.1 in 1929 and 84 per cent in 1933. Neu York declined in inroortance 
from 1929 to 1933, for it accounted for 15 per' cent of the total in 1929 
hut only 11,5 "oer cent in 1933. 



TABLE XV 

Annual T7ages, b;;,'- Three Principal States, 
1929 and 1933 



State 



1929 



1933 



Wages 
(OOO's) 



Per Cent 


Wage s 


Per Cent 


of Total 


(OOO's) 


of Total 


100.0 


$18,395' 


100.0 


78.8 


15,460 


84.0 


14.7 


• 2,111 


11.5 


.9 


185 


1.0 


94.4 


17,756 


96.5 


5.6 


639 


3.5 



U. S. Total 

California 
NeT7 York 
Illinois 



$24, 860 

19,584 
3,649 
. -216 



Total, 3 States 23,449 
Total, Other States 1,411 



Source: Census of l/Ianufacture^ . 1929 and 1935 . "Motion Pictures, 
Hot Including Projection in Theatres." 



Salaries and TJages as a Per Cent of Cost of productio n 

Tahle XVI shov/s the per cent of total cost of production spent for 
wages in 1929 and 1933. The 1929 vage cost of $24, 860, 000 dropped to 
$18,395,000 in 1933, hut as a per cent of total cost of production, it 



8976 



-17- 

increased fron 13.5 per cent in 19,?9 to 15.4 per cent in 1933, or a gain 
of 14 "oer cent. While the annual salaries paid in 1929 decreased from 
$60,163,000 to $52,948,000, the per cent of total cost of production which 
these fii^-ures represent rose from 32. 7 per cent in 1929 to 4-4.4 per cent 
in 1933 or a gain of 36 per cent. 

TABLE :^'l 

Total Cost of Production, Annual Salaries and Annual Wages 

1929 and 1933 



Year Total Cost of Total Salaries and Salaries Wages 

Production - Wages ', 



(000' s) Aiiiount Per Cent of Aiiiount Per Cent Amount Per Cent o: 

Total Cost (000 's) of Total (000' s) Total Cos' 

Cost 



1929 $184,102 $85,028 46.2 $60,163 32.7 $24,860 13.5 

1933 119,343 71,343 59.8 52,948 44.4 18,395 15.4 

Source: Census of Ma nu factures, 193 3, "Motion Pictures, Not Including 
Projection in Theatres". 



Wage s of Ejitras 

Taole XII ahove indicates the average wage per extras placed by the 
Centrr-1 Casting Corporation. Those figures nere derived "by dividing the 
total annueJ nages by the total number of placements. It must be understood 
that the average uage per placement as shorm does not represent the average 
wage of all registered extras, but merely of those placed by this particular 
agency. 

Table }CVII indicates the reduction, betreen 1930 and 1935 in the number 
of extras, as placed by the Central Casting Corporation ;7ho received high 
daily wage rates. In the former year three-fourths of the placements re- 
ported in the table received $10.00 per day while in 1933 only one- third were 
placed at this rate. The number receiving daily wages of $5.00 increased 
from 24 per cent to 40 per cent while the ii-umber in the $3,00 wage class in- 
creased from ,1 of one per cent in 1930 to 27 per cent in 1933. 



8976 



-18- 



TA3LE XVII 



Listrior.tion of Placements of Extra:? t;' the Central Casting Corporation 
at Specified Daily ;7age Hs,tes, 1930 and 1933 a/ 





'Js-ge 




1930 




1933 


• 


Daily 


Nun'bcr 




per Cent 


IJijii'ber b/ 


per Cent 


Rate 








of Total 




of Total 


Total 




143.209 




100.0 


126,934 


100.0 


$3.00 




206 




.1 


34. 336 


27,0 


5.00 




34,075 




23.3 


51,102 


40.3 


10.00 




109,128 




76.1 


41,446 


32.7 



Source: Transcript of IJEA Hearing, l.iOtion Picture Industry, Septerater 12, 193^. 

a/ The number of placements does not represent the total number of 
ejitras placed, but covers only those placements made at the r/age 
rates sho-wn. 

b/ Sctimated by prorating the placements for the first half of 1933. 

A vera g e Hourly ^.Jage p.at e 

There are no accurate average figures available -.vhich represent the 
composite hourly rrage rate f^r all classes of rrage earners in the production 
division of the Industry. The minimum hourly 7:age rate specified in the Code 
for all cla-sser of em^oloyees was 40 cents. The range in minimuia rates for 
various classes of studio mechanics and laboratory v/orkers was from 60 cents 
to $2.25 per hour. Reports of tlie Research and Planning Division of IWl 
and from the Division Administrator's Office ha.ve indicated that the Code 
ra.tes represented an estimated increase of appro7:imately 15 per cent over the 
1929 rates. It is believed that the increases applied mainly in the lower 
wage brackets, v/here labor is largely unorganized. 



Average Hours TJorked iper TTeek 

Table XVIII gives the prevailing hours of labor ner v;eek in the pro- 
duction division of the Industry for the year 1929. More than 60 per cent 
of the total nu»nber of establishments -.vorked their o:iipl05''ees between 45 and 
48 hours per week. The total number of wage earners in this group amounted 
to 86 per cent of the total number of wage earners. Only .1 of one per cent 
of the wage earners worked 43 hours or more -oer v/eek. 



—1 o 



TADLE 'XVIII 

Foj-nber of Establishments and Ilimoer of Tjagc Earners, 
Classified "b.7 ITrti'-iber of I^all-TiIae Eo-'us Tforked 

per Ty'eek, 19. 39 









Establ 


ish-,ients 




Wa^-e 


Earners 


Niimber of Hours 




Per Cent 




Per Cent 


per TToek 






TTumber 


of Total 




Uurnber 


of Total 


Total 






135 


100.0 




10,742 


100.0 


40 hours or less 






5 


3.7 




100 


.9 


40-45 hours 






41 


30.4 




1,357 


12. S 


45 - 43 Lours 






82 


60.7 




9,278 


36.4 


48 hours or more 






7 


5.2 




7 


.1 


Source: Conroiled 


fr 


'om 


.Census of 


Manufactures, 


1S29, 


, Vol. I, 


Table VI, 



"notion Pictures, not Includi-.e: Projection in Theetres". 



Child L.-^.bor 

Child labor is not an iijportant problem in the Industry. In 1930, 
2,213 helpers in motion picture production were reported by the occupation 
statistics of the Census, of Population, but only 93 of these helpers" v/ere 
bet^ireen the a^es of 10 and 17 years. It imj.st bo borne in mind that these 
data refer not to the number actually errployed, but rather to the number 
reporting theuselves as belon^in^, by occ-uxation, to this Industry. 

En iplo7/eos by ?ri"ci:-;al Crt en 

Total Employees . - Table XIX sho'7s the average annual number of salaried 

eijiployees and vra^e er-rners by threa -■•rincipal stat'-^s for 1929 and 1933, There 

was an increase in California from 77,4 per cent of the total in 1929 to 86,2 

per cent in 1933, a -c-ain of 11 per cent, IJeTT York shorted a lar=?^e decrease, 

from 14.5 per cent of the total to 9,2 per C3nt, or a loss of 36 per cent. 

These tr.^o states .alone employed over 90 per cent of the ^Torkers in each of 
Lhese ye.-:rs, ' ... 



2A3LE XIX 
Average Annua.l ITujnber of Employees, by Three Principal 

States, 1929 and 1933 Sj' 



3 929 



1 C'Z'7 



state 



ITumber per Cent 
of Total 



Number 



Per Cent 
of Total 



U. S. Total 



California 
New York 
Illinois 



Total, 3 States 
Total, Other States 



19,502 

15,167 

2,350 
202 

18,219 
1,383 



100, c 

77.4 
14,5 

1.0 

7.1 



19,037 

16,417 

1,748 

162 

19,037 
710 



100,0 

86.2 

9.2 

.9 

96.3 
3.7 



Source; 
8978 



Census of llanufactures , 1929 and 1933 , "Hot ion Pict^jre: 
^-ot Incl^iding proj-^cti^n in Theo.tres". 
Includes wage earners and salaried eL»ployees, 



-20- 



Wage Earners. - Table XX 3ho7/s uoge earners, "b.y principal states, 
for 1929 ajid 1933. In 1929 California accounted for 74,6 per cent of total 
wage earners; in 1933, 63.7 per cent, representing a gain of 12 per cent. 
New York again showed a large decline fron 15,7 per cent of the total to 
10.7 per cent, or a loss of about one-third. These tno states alone enrDlo^-- 
ed more than 90 per cent of the rage earners in 1929 and 1933. 



TAI3LI: XX 



Average Annual ITurj'ber of ,;age Earners, "by Three 
Princioal States, 1929 and 1933 



State 



Number of 
Wage Earners 



U. S. Total 



10,784 



1929 



Per Cent 
of Total 



100.0 



193: 



IJumber of 
7age Earners 



10,777 



Per Cent 
of Total 



100.0 



California 
New York 
Illinois 



8,052 

1,695 

82 



74.6 
15.7 

•8 



9,022 

1,149 

108 



83.7 

10.7 

1.0 



Total, 3 States 9,839 
Total Other States 955 



91.1 
8.9 



10,279 
498 



95.4 
4.6 



Source: Census of I'anii factures, 1929 and 1933 , "Hot ion Pictures, 
not Including Projection in Theatres." 



C 



8976 



^-21- 

PART- It: PROTX'CTION 

Chapter III. Materials 

Cost of principal Iiaterials Used 

The principal material used in the production division of the 
Industry- is raw film, purchased from the Eastman Kodak Company, the 
Birpont Film Manufacturing Corporation, and from a few foreign countries, 
principally Germany, France, and England. 

Tahle :;rxi shows the total cost of materials, fuel, and purchased 
electric energy used "by the production division oi tne Industry in 1929, 
1931, and 1933. This cost averaged a'Dout 21 per cent of tne total cost 
of production in each of the years shown. 

TAIhE XXI 

Total Cost of production and Cost of liaterials, 
Fuel, and Purcha^sed Electric Energy 



Ye; 



Cost of Materials,^/ Fuel, 



Total Cost 


of 

L 


and Purchasi 


3d 


Electric EnerAT 


Product! or 
(OOO's) 


Amount 
(OOO's) 




Per Cent of 
Total Cost 


$184,102"' 
154,436 
119,343 




■ $38,441 
32,222 
26,153 




20.9 
20.9 
21.9 



1929 
1931 
1933 



Source: Census of lianufactures, 1933 , "Motion Pictures, not Including 
Projection in Theatres." 

a/ Materials consist of miscellaneous studio supplies and 
containers for films. 

Source of Equipment and Supplies 

Tahle X^CII shows the n-omter of establistiments producing photographic 
apparatn.s and supplies hy ste.tes for 1929, 1931, and 1933. It must he 
understood that these data pertain to the entire production of such material 
and not just to that used "by the Motion picture Industry. 



8976 



-22- 



TAIJLE XXII 



NiimTDer of Estalslishinents Prod-u.ciri,f phouo^raphic 
4oparatas ajio. Supv.lieK, "by Principal States 



States 



I90Q 



/GO 



1931 



193LS 



U. S. Total 



U5 



110 



84 



California 

Illinois 
Indirjia 
I'.iassachiiset t s 

ilichigTZL 

I.anne sot a 
Missouri 
YievT yor],c 
Ohio 
Pennsylvania 

Total, 10 States 
TotcJL, Other States 



11 


.8 


21 


24 


'6 


4 


4 


3 


3 


2 


4 


3 


8 


7 


t. 'w' 


32 


5 


3 


14 


14 


lOB 


100 


7 


10 



5 
17 

3 



a/ 



o 

c 

3" 

7 

43 
41 



Source; Census of Manufactures , 1929 , 1931 , and 1953, "photographic 
Apparatus and Supplies." Census data do not include esta'b— 
lishments having- an annual production of less than $5,000, 



a/ 



Tot reported separately in 1933, 



8976 



- 23 ^ 

PAIIT.II: FIlOLTJCTIOl- 
.Chapter lY. Unfaia- Trade Practices 

Entice:.ie?it of Talent and Acti viti en of A;:ents 

The -oro'ble-i of salaries of stars and the activities of agents are the 
only tuo significant trade practice proljlerns uhich na;'" "be clearly/' allocated 
to the production division of the Industry, 

This division centers a'bout a relatively'- sFiall /;;ronp of personalities 
— siich as actors, directors, v/ritcrs, and teclinicians -— v7ho ]iavc 'beconc 
loionn thro-ugh advertising, puhlicit^'', and other methods, Hie removal of a 
personality often seriously disrupted production luitil a sultali^le replace- 
ment could he found or developed, 

l\Iew companies usually found it more profitaole to emi^loy talent 
already developed and secured sucn individ"u.i.ils hy offers of higher salaries. 
Long-term contracts did not solve the prohlem of "star-raiding, " "because 
cojiipeting e:d\ihitors, desirous of acquiring the services of such talent, 
induced the hrealcing of existing contracts, Iloreover, offers of liigher 
salaries from competitors ^mouestionahly produced psychological effects 
which tended to decrease the qur.lity of the stars' Y;or]c and in extreme 
cases rendered them worthless. Complete contentment necessary for ojjaJ.ity 
work rras usually reestahlished only when t]ie employer equalled the com- 
petitive offer which, in some cases was not definite enough properly to 
"be called en offer. 



897S 



■ - 24 - : 
PAIiT II: PPlODUCTIOIT 
Chapter V, General Information 



ErcDorts 



TaDle :Zllll shoves the e:q7orts of total linear feet of film for the 
years 19,?9 through 1934. llo fi^ires are available on the value of such 
films other than the declared value, \7hich is "based largely on quantity 
rather than on erdiioition value. 



TABLi; :siii 

Eicports of notion Pict^j-e Pilns, 1929-1934 a/ 

( In thousands ) 



fr 



rear Total Linear Feet 



1929 282,216 

1930 274,251 

1931 199,690 

1932 160,773 

1933 164,537 

1934 194,434 



Source: hot ion Picti^je Alnana c: as prepared hy the Bureau of Foreign 
and Poi:iestic OorniiiercG, 

a/ Includes negative and positive sound and silent films. 

Advert is im : 

The Motion Picture Alnanac has estimated that the Industry'" as a 
T7hole spends $70,000,000 annually for advertising in nerrspaper, magazines, 
oillhoards, radio, rnd other media. No figures are available relative to 
the amount spent "by the producers. 

Pro due t i ve Ca'oac i ty 

ITo adeq-i-jate measures of the productive capacity of the Industry'' 
exist. Production schedules are determined largely by the demand from 
the exiiihition division. 

Trade Associations 

Ho t ion Pictn jre Pro ducer s and Distri bu tors of Arierica, Inc, (l.IPPIA. ). - 
This organization, of rmich I7ill H. Ha^^s is President, v;as formed in 1922, 
It is composed of more thaii twenty companies, incliiding the so-called 
"Big 8" producers and distributors. It fi-ijrnishes information on all Industr;;.'- 



- 25 - 

mattsrs and serves as a coordinating agency in industrial relationshros 
and fimctions as interpreter of prololems and policies of piiblic interest. 
It also represents the Industry in connection with, all sorts of "anti" 
legislative measures r^hich are a constantly rec-'orrin.g plague to the Indus- 
try, Its mem'bers fine" it an economical means of gathering useful infor- 
mation, and of securing necessary services and facilities. 

The Academy of Ilotion Pictuve Arts and Science s,. - This organization 
which is a (guild-like^ acsociation of the j) reduction "branch of the Industr;^^, 
was organized in 1927 to deal with production prohlems. The Academjr is 
controlled £ind financed, "by the producers. It has provided methods of 
adjustment and reconciliation among producers as well as "between producers 
and their variou.s classes of employees. It has cittempted to "bring about 
industr^'--v/id.e techiiical coordination "by educational campaigns designed to 
reach all concerned therein,, and has served as a clearing house for the 
collection of technical data in production. Its ■ou'blic-relations efforts 
have "been focused toyards contacting siirvey e:'perts, special organizatiorns, 
and mamxfacturing and research concerns, rather than the press and the 
puhlic, .. , ■ 

Trade Union Activity . 

The Actor's Souit-'- Association which is chartered "by the Associs-ted 
Actors Pond Artists of America a.nd affiliated with the American S'ederation 
of Lahor has jurisdiction in the motion picture field. Its offices are 
located in ITew York, Chicago and Hollyivood, In 1933, the Association had 
1,413 mem"bers. These consist of "both actors and actresses who had received 
screen credit (i.e. listing in cast of pictui'es) or professional recognition. 



8976 



-26- 
PAET III: DISTIIII^UTIC]:! 

i 

Chapter I. TJrie liature of the Division 

History ;incl Scp-c^e of Division 

Orifjin of Film Exchange. - During the Industry's fornative stages, filns 
were purchased outright fron ^iroducers and ezmibited until v/orn out or -until 
they ceased to be profitable. Tiiis syster^ later gave way to a ncre efficient 
and econcniccl method of distribution kno\7n as the film exchange, which uas 
introduced in 1902 by Harry J. Miles of S3-n Francisco. This system originated 
in the functions of maintaining film stocks, which req-'oircs the su-oervising 
and physical transportation of film, and the inspection and repair of cju.iaged ' 
film. Ilie film exchange is in essence a licensing sj^stem whereby the filns 
remain the property of the exchange, and the exhibitor merely obtains a license 
to show a poTticular film in a designated theatre for a stipulated period of 
time, at a charge equal to about half the purchase price. 

Developments in Pilr. Distribution. - In the eo.vly stages, positive filus 
were sold '^oy length on a fla.t footage basis regarc'lecs of the individ-ual pic- 
ture, actor, or director. l]o consideration was ;;lven to the number of "Tictiores 
leased, character and size of theatre, and the ooo'jlation of the tov/n or city. 
There were no distinctions made between first or subsequent runs. 

■ ' 

Tlie dirtributors developed what was known as the "program, system," surviv- 
ing the cxliibitor with a constant flow of tv;o or throe-real pictures, tv/o or 
three time per \?eek. The public appreciation for better-quality films ga.ve 
rise to the "stcr" systen, rnd demands for longer programs featuring such stars 
Pickford, Hart, and Scnnctt. ■ The exploitation of stars and concomitant efforts 
to attain q^uri-lity by r^urchases of e:;roensive scenarios and -nroduction extravi- 
ganda bro-og^T-t on the full-length feature, absorbing the greater part of the 
entertairiXient program. Rising production costs led to an upward revision of 
leasing charges and eventua.lly to the general adoption of a rjolicy of block 
booking b3^ the distributors. 

iiiiother development was the construction of theatres exclusively for the 
showing of motion pictures, displacing arcades, shooting galleries, and euotj 
stores as well as legitimate and vaudeville theatres. 

TTith the developr.ent of tlie "star" and the "feature" system v.'hich gave tbc 
pictures individuality, and the construction of theatres exclusivcl" for rioticc 
pictures which resulted in more efficient and economical presentation, c'dstri- 
butors began to yctj the prices of pictures according to their estimated value. 
Pictiues v/ere no longer sold at random on a flat footage basis. TTider geo- 
graphical distribution cane to be considered necessary since it was found tliat 
first shovangs usually exhausted considerable eidiibition value of a picture 
in localijied areas. Thus nation-wide facilities for merchpjidising, rehandling, 
and servicing a product, v;hich varied in price and quality, becar.e necessary. 

national and "State Right" Distribution. - Tiie first effort to attain 
effective national distribution v^ras made by the formation in 1910 of the Crcner- 
al Film Comp-iny, controlled by the Motion Pictin-e Patents Company. Inde;Dendfint 
producers, v/lio \/ere not permitted to use these facilities, distributed chiefly 
through independent distributoj^-s. These distributors, v/ho were scattered 

8976 



-S7- 

throil<2'iiout the Country, ooerated on a "state ri.'jit" "brcis. The st>T,tc riQLit ex- 
changes "bought lilnr- outri,;^:ht or nore connonly .ler-'-sed films with the exc?.Lisive 
right of redistributing theii to e:±ii'bitors v/ithin certain geographical areas. 

Host state right distriljutors v/ere also e:±.ihitors r/hose original •nu^-ooses 
^•'ere to obtain films for their own theatres, their interest in complete distri- 
bution being often less then crsual. lioreover, since no -oroducer could sutoI"- 
sufficient product to furnish the entire requireiaents of the average erdiibitor, 
state right distributors were n.aturally interested i-i obtaining films from mor« 
than one -oroducer, and this diversit.^^ of interest usually resulted in mediocre 
sales, service and maintenance efforts from, the point of view of the producers. 
Aggressive selling efforts necessar-/ for intensive distribution v;ere lacking. 
Rentals received from films viere not believed to be commensurate vrith their 
earning pov-er. The producer, on the other hand, could not set -orices for the 
distributors* subleasing of film but received what the latter v/ould pay for it. 
He usuall:/ found out a -oicture's value in a given territory after it Y7as toe . 
l£ite to capitalize on it. 

Producers as Film Distributors * - Unlihe conditions in the raaniifacturing 
industries, the cost of the ;oroduction of r. motion picture has usually little 
direct relation to its sales value. Consec.uently the producer soon realized 
the gre^.t importance of obtaining proper control of distribution. Inte-Tation 
with production v/as inevitable sinCe producers were placed in the position of 
having the value of their product determihed to a large extent by distributors. 
Conseouentl:-, producers with sufficient finan.cial resources generallj^ pursued 
the policy of obtaining control of distribution. 

Pr e s ent-^Day Fi Im Di s t r i but i o n . ' ~ The actual process of distribution in- _ 
volves the licensing of the e:diibitor to show copy-righted film, assigning pla:. 
ing dates, phj.'sical distribution of 'films to theatres, o,nd the collection of 
accounts. Advertising .material for the pictures to be shovvn is usually sold i: 
conjunction with the licensing of films. Exchanges are located in he-^ cities 
throughout the United States. Tlie 50 to 250 positive ;orints made from the' ex- 
posed negative are distributed to first-run, second-run,, and subseq-aent-run 
theatres in proper order and point of time according to contractur-il s'lecificr- 
tions. Cental variations extend from, as low as $5 per day to several thousand 
dollars per week, while percentage agreements may call for 10 per cent to 50 
per cent of the box office receipts. Combinations of both forms pjre not 'OJi- 
common. Another arrangement sometimes used allows th.e e:dnibitor a su: to de- 
fraj'- Ccirrent operating e>a)enses and the siu-'plus is then split according to 
agreePxent. The rental charge is governed primarily by the exhibitor's abilit;>' 
to pay, which, in tixrn, depends upon a variety of ffictors, chief among which i 
the estimated box-office receipts, based upon "orevious ercoeriences v/ith the 
star and co.st in some comparable vehicle. Other factors are seating caoacity, 
number of perf ormrjices per day, price of acjmission, character of accompanying 
presentation, prestige of the theatre, and efforts made for eizploitation. 

A].l the "major" companies r.aintain distributing establishments in "key-" 
centers thro-oghout the United States. Small independent producers often dis- 
. tribute their films through the facilities of the large producer-distributors. 

Total Humber of Exchange Establishments 

The total number of exchange establishments in 1929 was reported by the 
Census as 535. (See Table XXIV, Below). 
8976 



-iib- 



NTiTi ber of Il:-jcliriv;.e Est-^.'ulishnents "by ?i i nc i'o c -l 3t.'\toG 

Tofole IZllY shov.-s tlio distribution of the 5o3 erxlifn^cG "b^ si': principcil 
states in 1929» Fen York r.ccoiunteci for -'.liiont 16 :.er cent of the tot.v2 nuT.ioer^ 
California ?::iC. Pennsylvmia each h<':,cl ;::ore tiian 6 per cent. Ohio, ila'^,sachiisett» 
and Illinois folloiv in the order ;.ie:!tioned, each h-.-vinf-; rbout 4 'oer cent of ti: 
total n-jxibor of oxchanf^es within their borders. 'Hie -^i:: states acco-mited for 
42 Der cent of the total nimber for t/io co-untr:/, 

TA3L3 ::xiv 

H^uiuber of Exchrjiges ojid Voliaj.ie of Ilusiness Hnjidled, by 

Six Principal States, 1929 



State 



Exchj^n.qies 



NuLiber 



Per Cent 
of Total 



Voliijie of Lusiness 



/u 



:'jnt 

(OOO's) 



Per Cent 
of Total 



U. 



S. 



Total 



California 
Illinois 

I'.iassachusGtts 
Hew York 
Ohio 
Penns;;-lvoxLia 

Total, G s tat OS 
Total, Otiier States 



5Z'>3 



35 
21 
23 
85 
26 
34 



225 

303 



100.0 



6.3 

'7 O 

4.3 

15.9 

4.9 

6.4 



42.2 
57.8 



$220,605 

16,057 
14,962 
13,283 
51,581 
13,326 
25,097 

134,306 
. 86,299 



100,0 



30.9 
59,1 



Source: Censu s o f Distribution. 1929 "l.iotion Picture Filr.is" (Trade Sories, 
Distribution IIo. V,^20l). 



Includes 14 export exchm.^es. 

VoluMC of Btisiness by Princi^-ial States 

Table ^DCEV, above also shov/s the volurie of business done by these si:: 
■orincipal states in 1929. Nov; York, which had the Irrgest n^unber of er-chan^ei^ 
accounted for nore than 23 per cent of the total exchange business (includinj;_ 
exports by the 14 llev York City exchanges v/hich enga./;ed in export business- 
exclusively'-,) Pennsylv?nia was the second nost important state in 1929, ac- 
counting for about 11 per cent of the tot>:.l business; California accounted ft 
7 per cent of the busi^-^u::; and Illinois, ilassachusetts , ond Ohio, avena:;ed a 
little ;.:o:-e thcai 6 oer cent each. 



It is noteworthy thrt these si:c states containing; less than 33 -oer cent 
of total population of United States accoiuited for nore thru 60 oer cent of 
toto-1 volume of the notion -licture distributing business. 



8976 



-29- 

II-un"ber of Estc/olishoents o:;' l^ne of .TD-clian.-gcG 

r/ith tliG developr.ient of l:irge chain tlieatres, the vortical inte^-ration of 
producers rdth theatre chains, and. thj growing financial strength of •orod-o.cing 
conT:iCiiies, the independent distributor has becone less significant. Producers 
no\7 either associate with existing distributors or nore often establish their 
own distinct exchanges • In 1929, recording to Table .^IXV, loroducers e::changes 
totalled 444 in nur.iber or 83 -per cent of the total, Hoxt in inioortar'^.e to the 
exchrnges orrned bjr producers v/ere the indeoendont' exchange g, conprising 14 per 
cent of the total. The e:'-port exchanges nu^.bered 14, or less thpn 3 'oer cent 
of the aggregate, and 4 of these were ov/ned by producers. 

TiiBLE XaT 

iTuj.iber of Exchfinges, and Nunber of Sn-i^Aoyees, by 
Principal Tyoes of Exchanges, 1929 



I ten 



Total 



I^rt's of Exchange 



Proc.ucer 



Independent 






Hunbcr Per Cent iIu-.-ibor 
of Total 



Per Cent Total Per Cent Total Per Gent 
of Total Amount of Total Ariount of Total 



ITuniber of 
Exch^jj^-es 533 



100,0 444 



83.3 



75 



14.1 



14 



2.6 



Nuribei- of 
Employees 9342 



100.0 8797 



94, 



39: 



4.2 



152 



1.6 



So-'orce: Cens us of Dis tribution, 1929. "i.Iotion Picture Filns" (Trade Series, 
Distribution No. 17-201.) 

VoluLie of Business b:-' Ttoq of Exchange 

Table XI.TI shov/s that in 1929 the ;oroducers exchcuiges did most of the 
business, for they accounted for 95 "oe: cent of the total, Furthernore, the 
4 export exchanges owned by the latter contributed an additional $5,olo,000 
worth of business or almost 2.5 per cent of the totcl volu'':ie. 

ilext in ir.iportfince to the er.changes ov;ned by producers were the e:nort 
exchanges which c-arried on a business amounting to 3 ^er cent, 2\ per cent of 
v/hich, as mentioned above, was done by the 4 exchanges o-.med by the producers 
The indeoendents accounted for onl^" about 2 r)QT cent of the total. 



8976 



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3976 



I 



-303- 



Key City 

or 
Exchange 



HEW OHLEAITS 
NEW YOHC 

OKLAHOllA CITY 
OlvIAEA. 

PHILADELPHIA 
PITTSBURGH 
PORTLAN]}, OEE 
ST. LOUIS 
SALT LAKE CITY 

SAN ERA.NCISCO 
SEATTLE 



(states) 
Territory Served by Key City 



Connecticut 

La,, parts of Ala., Arl:. , Ela. , Hiss. 

Long Island, Greater N.Y. City, N.Y. State as far 
ITorth as Poiighlceepsie, and Northern N. Jersey. 

Oklahoma 

Most of Nel). , parts of la. and S.D. 

Eastern Pa., So. N. Jersey, Delaware 

Western Pa. and part of West Va. 

Most of Ore. and parts of Cal., Ida. and Wash. 

Southern 111., East. Mo., part of Ky. 

Parts of Utali, Ida., Mont., Nev. , Ore., Wyo, , Ariz., 
Wash., Colo, both Lalcotas. 

Parts of Cal., Ore. and Nev. 

Alaska and parts of Wash, and Ida, 



WASHINGTON, D.C. D. of C. , Marj^land, parts Del., Va. , and W. Va. 



9638 



I 



-31- 

PAHT III; DISTRIBUTION 

Cliapter II. Labor" Statistics 

Average Annual H'um'ber of Employees 

Censxis data as presented in Table XXYII place the average annual ein- 
ployiiient of all exchanges at 9,342 in 1929. Of. these,, about 20 per cent 
were executives or salesmen. 

Total jTiinber of Employees by Types of Exchanges 

As shoirn in Table IL'iV, above, producers' exchanges reported 8,79?, 
or 9^1 per cent of- the total number of employees. Independent exchanges 
employed 4 per cent, and the export group accounted for less than 2 per 
cent of the total. 

Average Annual Payrolls 

According ta Table XXVII, the average ann.ual payroll covering all 
employees was $17,978,000 in 1929^, Executives, who constituted less ths;a 
4 per cent of total employees, received alinost 14 per cent, v'hile the 
salesmen, ainounting to 17 per cent of the total number, received 35 per cent 
of the total psyroll. The remaining employees, who. constituted almost 80 
per cent of the total eqployees, received 51 per cent of the total payroll. 

Tii£LE XXVII ■ . ■ 

Average Annual Number of Employees and Average Annual 

Payrolls, 1929 



Kind of 
Employee 



[Employees 



Per Cent 
Number ^^ ^^^^.^-^ 



pa.yrolls 



Amount per Cent 
(000«s) of Total 



Total 

Executives 
Salecjmen 



9,342 

335 
1,552 



100.0 
16.7 



$17,978 



2,468 
6,253 



100.0 

13,7 

34.8 



Other Employees 7,445 



79.7 



9,257 



51.5 



Source: Ce nsus of D irtribut ion, 1929 , "Motion Picture Films" (Trade 



;erj.i 



jistribucion No. w-201) 



Per Cent Sc -larie s and -Wag^s are of Total Expense 

In 1929 salaries and wages constituted the largest single item of 
e3cpense, auo^uiting to about or;e-half of total expenses for all types of 
exchanges. In both the producer and independent type of e^ccnange, total 
salaries azid wages accounted for about one-half the total expenses, but 
in the export exchanges, this percentage was somewhat less. (See Table 
XXVI, above.) 



8976 



-32- 

PAHT III: DISTRIBUTION 

Chapter III, Unfair Trade Practices . 

Bj.oc'" Bool-'in.-^ and Blind Eool'in "-. 

"Block tooking" and ""blind "booking" , v/hich involve the purchase of films 
si,.<^ht -UQiseen, has lont*? "been existent in the Industry. ?roducer-distri"butors 
have maintained that this method is economically sound, incsinuch as it assure! 
exiiihitors a continuous sup-oly of films while at the same time statilizin^ 
■oroduction. Individual selections^, it has been claimBd, would result in 
prohibitive license fees, since all -oictures are not box-office successes. 
The impossibility of -ore- judging; box-office attractions has also, been Dointed- 
out. ' . 






The Q-ooonents of block booking o.nd blind bookin^^, who are mostly indepen- 
dents, have claimed that these practices have forced thera to show undesirable 
DictfiroG These independents have had the support of social, reli^gious, and 
educational organizations which have realized that independents would probab]jr ; 
be ruined financially if they i^ere' to refrain from showing, yet be forced to 
pay, for all unendorsed pictures. 

The "right to buy" controversy art^ears to have been concerned -orimarily • 
with -nref erential master contracts existing between oroducer-exhibitors. 
It has been alleged by independents that certain producer-exhibitors having £ 
comiDetition in a specified area are given unfair advantage by being permitted 
to piu'chase films of ot'ner producer-exhibitors at lo^/er orices tiian those 
at which the fcrmer's competitors are -oernitted to buy -^ if they are pernitlid 
to bu;;.'- at all. In return the latter producer-exhibitors received this low 
rate preference from the former when they have competition from independents 
in their areas. 

Independents who ha,ve thus been unable to compete with the large circuit 
and -oro6.ucer-aff iliated theatres for the -ourchase of first-r-'jji -pictures 
have been at a. further disadvanta^^e because of the fact that these -oroducer- 
affiliatod theatres have exchanged their relaying time among themselves. This 
has resulted in forcing the independents to show subsequent run pictures, 

Hhile exhibitors have sou/:ht the "right to buy" first runs irresToective 
of the character of theatre, location, size, quality of accompanying presen-- 
tations, or TDrestige and standing enjoyed in the community, producer-distrib- ■ 
utors have claimed the "right to choose" their customers. They have sought 
to bring out their features under the most favor.-ble auspices in theatres 
havin;:-; established reputations and the best and finest quality -oresentation • 
in the country. They claimed the right to determine the factors that go into 
a bargain, such as the financial responsibility of the buyer. . 

It is- generally understood by the independents that the "ri.^iht to choose" ' 
customers, provided no collusion exisljs, ha5!.been found justified by the 
Federal Tr-ade Commission, as. shown by, the ^^ollo^Ting quotation from Federal " 
Trade Commission versus Paramoijmt Famous Players CorDoration, 57 Fed.. 152: ' < 

"A distributor of films by lease or sale has the 
right to select his own customers and sell such 



8976 



-MJ- ' jjm ^< i » 



a 



-33- 

quantities at f^iven iDrices, or to refuse to sell at all 
to any particular person for reasons of his o\"ti. 
Federal Trade Commission versus Raymond Bros. -Clark Co., 
263 U. S., 565; U. S. versus Col.^ate, 250 U. S. , 30; 
Great A d P versus Crean O'lJheat, 227 Jed. 46 (C,C.A.2)." 

Forcin." Short Subjects v/ith Featu res 

Forcing the purchase of short subjects as a condition for contracting 
of features has "been a lonf^-established -oractice in the Industry. Exiiihitors 
have claimed tliat in some instances requirements were exacted which forced 
them to "buy more shorts than they could Reasonably be expected to show. Dis- 
tributors have contended that this was a lon;j- established selling method and 
that their investment was based UT)on the "tying in" of the sale of short 
subjects. They have claimed further that the cost of features' was directly 
related to the total sales made and that interference vrith the usual oractice 
would result in an increase in the cost of featiores. Distributors claimed 
moreover, that they were "oroviding the exhibitors with a well-balanced prograr: 

Overbuyin g 

It has been .-generally admitted that certain financially well-entrenched 
exhibitors have sometimes contracted for more motion pictures than they 
reasonably required for exhibition in their o^Tn theatres with the intent of 
deprivin.^^: a comoetin-^ exhibitor from securing sufficient pictures for exhibi- 
tion in his theatre. This -oractice has been generally recognized "by the 
Industry as unfair. 



897( 



-.'^^.U 



I'JlPJ.^ Ill: I3IST:iI":UvI0;: 



Cha-Dter 'x'\. ' Goneval I^'xl'or.nati'on 



Trade AGgo/3ia tior; Activity 

Filin Boards of Trade, uhic/- constitute local diytributor trade 
association, v/ore estaolished in 19^2 as th-5- ■field or-'Tranization of the 
Motion Pictiire Prodacers and Distribitors of Ai-ierica, Tiese "boar-Is e::in" 
in 32 kev city exchan.':e cer.ters, 

TliG Tiln lioardG keep sales nan.a^-cers advissd of charv:;es in theatre 
ovmership, ~>cj'ln-^- the transition period froa the- silent to the so\md 
pictureu, the Poardt. supplied distrihutors v;ith infomation relative to - 
the ec^mpnent used hy various eidiijitors. The :;oards also ?.ocate lost 
and stolen films, check up on, "nisnoatF, " deter.'iine roSponsioility for 
filu nmtilations arid dela'^ed returns of -orints, and atfeiid to various 
other routine aatteri-> in the interest of their neuVers, 



8976 



-Z5- 

PAP.T IV: EXHIBITION 

Chapter I, The Hatiire of the Division 

Eistor:'- and Sescrrotion of Division 

The Deyglooment of Motion pigtiire Theatres . - The ezihition division of the 
Motion Picture Industry corresponds to the retail tr'TiCh of manufacturing in- 
dustries. It started with the "store-room" sho^-', composed of short-reel en- 
tertainment T'ith 5 cents as an admission char^^e. The seatin,? capacity of 
these "store-rooms" was any^./here from 100 to 200. At a later date the seating 
capacity at "store-room" shows was enlarged from 200 to 300, R.nd the enter- 
tainment program was lengthened. The fjrice of admission was then raised to 
10 cents, 

'Construction of buildings in great numbers, for the exclusive purpose of 
shovring moving pictures soon followe"cI. The seating capacities of these movie 
houses ranged from 300 to 600, and again tht=^ entortainraent was lengthened and 
the price of admission increased, this time to 20 cents. 

At this point, promoters entered into the. business and adopted various 
methods of obtaining capit 1 v/ith which to build lavish theatres, some of which 
had seating capacities ranging up to 5,000 sec^ts. The building of these large 
"de lujce" theatres on a grand scale required substantial public finejicing, 
which meant that the promoters had to turn to bond issues and eventually to 
Wall Street for the necessary financing. 

The Development of the Enter tainriient' Program . - The construction of de 
luxe theatres irequired more lavish motion pictures m order to operate the 
picture hous'-"^cprof itabl3'', and it thus became necessarj for theatre o-iiers from 
different T5a,rtfe of the country to combine into operating units so as to obtain 
high-class entertainment to which they hoped to attract capacity audiences. 
As the size of 'the theatres was increased, programs were expanded to include 
additional ente'rtainment, such as ""oresentations" consisting of symphony 
orchestras, ballets, and headline vaudeville acts. At the same time, the price 
of admission was increased to offset the added ex^oense involved. 

Entrance of Producers into the Exhibition Divi sion. - The motion picture 
theatre owners almost from the beginning, formed cooperative buying groups in 
order to buy picture films for their theatres and to control if possible, 
■nrices and playing time. The producers were sometime'.- required to sell at 
prices which these groups xreve willing to pay or else not sell at all. Finally 
to meet this situation, producers of motion pictures entered into the exhibi- 
tion field, TThile the great majority of the theatres are operated b"^ indivi- 
duals and by independent chains a large proportion of the most important 
theatres is controlled by the producer-distributors. 

Classes of Exhibitors , - The exhibition division of the Industry today is 
composed of three classes of exhibitors; namely affiliated, ijnaff iliated, and 
independent. Affilitated exhibitors include those operating a n^jraber of 
theatres, commonly called circuits, v/hich are owned or controlled by the "oro- 
ducer-distributors. Unaffiliated exhibitors include those who operate a cir- 
cuit of theatres but have no connection with producer-distributors. The re- 
maining ejchibitors are called independents, (See Table XXXI, below.) 

8976 



— ii<6— 



Total NTU'i"ber of Theatres . 

As sho!7n in Table X^CVIII, the 7 ilra Sally Yearbook reoorted 16,885 motion 
picture theatres in the United Statei. in 1'j34. 

Number of Theatres "by Principal States 



ITnile production of motion oictures i.-? taj^hlj'" concentrated in a feu stat 
the market for films, v;hich consists of all exhibitin" theatres in the Unite 
States, is vddely scattered. Table XIvVIII indicates the. distribution of 
theatres b;/ principal states in 1934, Th'-' state of Nev/ York v;as the most im- 
portar.t in 1934, for it reported 9 per cent of the total number of theatres, 
Pennsylvania and Ohio followed in close order having 6,6 per cent and 5,7 per 
cent respectively, California, which is the principal producin.T state, con- 
tained about 5 per cent of all theatres, 

TABLE XXVIII 

Number of jvlotion pictu.re Theatres, by Principal 

States, 1934 



State 



Number of Theatres 



per Cent of Total 



U. S. Total a/ 



16,835 



100.0 



California 

Illinois 

Indicjia 

Iowa 

Kentucky 

Massachusetts 

Michigan 

Minnesota 

Missouri 

New Jersey 

New York 

Ohio 

Pennsylvania 

Texas 

Wisconsin 



875 
965 
573 
458 
420 
409 
570 
4:^1 
523 
427 

1,539 
985 

1,121 
930 
484 



5.2 
.5.7 
3.4 
2.7 

3.0 
3.4 
2,5 
3.1 
2.5 
9.1 
5.8 
6.6 
5.5 
2.9 



Total, 15 States 
Total, Other States 



10,790 
6,095 



63.9 
36.1 



Source: Film Daily Yearbook of Motion Pictures. 1934 . 

a/ This total figure does not agree with the total given by the Motion 

Picture Producers and Distributors of America which report 18,371 as 
shown in Table XXXI below. 



J 



8976 



Number of Theatres Open and Closed 

Table XXIX sho-'s the total nuraber of fiieatrsG froLi 1£29 throiJ4;h IS^G, and 
from 1332 on; the d:ita arc broken do-.Tn to sho-- the nxnbor open and closed. It 
will be noted th£.t in 1932, 4,627 !:iovie houses out of a total of 20,100, or al- 
most 25 oer cent, ^^'ere closed. However, onl;/ 7S7, or 17 per cent, of tiiose 
closed -ere scund-equi'roed theatres. In 133L:, out of a tot/,:,] of IS, .311 
theatres, 5,595, or about 30 per cent, vere closed, of ^hich 2,170, or almost 
37 joer cent, 'jere eoui^iped ■".7ith sound. The over-arc .ansion in the nanber of 
theatres, their construction in imz-uitable locations as reel estate -oromo- 
tions, and the attendjance by the public at the finer theatres only, "esujtod 
in the closin:< of a lar^e n":imb3r that }i:id become obsolete or rihoulf never ha.ve 
been built, 

Althou];h the pro;oortion of clcsod tJientres decrersod from. 1332 to 193'., 
the relative n-iombsr of closed sound-e qui' )psd theatres riad increased, HoTvever, 
it nust be borne in mind that the r>rooorti^n jf sound~enuiT)ped movie houses to 
the total han been incre-isir.-?; sir.ce 1.929, -iintil in 193.5 these hiO'ises constitu- 
ted almost 90 per. cent of all theatres. 

Seating- Capacity 

Table XjCC sho^s the total nurauer oJ seatc in motion pictr^re theatres 
during the years 1931 throia^,-h 1935, 3 Lice 1933, the n-o:iiber has reroained re- 
latively constant at sli,_,htly more tiir,n 11 nillion. 

The potential seating- capacity of the Industry ■'■^^ir be obtained by com- 
bining ^'ith tiie actual m:anber of seats the avera::e member of sho'vs per dr?.y. 
Since some theatres give at least t:70 shov/s -oer day, and most of them probably 
three or four sho^s -oer day, the ootential daily c?orcity ^-ould be at least 
trro or three times the act'jial nonbrj-r of seats. 



PQ 



76 



-38- 



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8976 






11A3LE XXX 



Total Kunber of Seatc in Motion Picture 
Theatres, 1931-1935 a/ 



Da,te Ninnber of Seats b/ 



1931 12,143,751 . 

1932 ' 10,7C7,000 6/ 

1933 11,151,193 
1954 11,028,950 
1935 11,132,595 



Scarce:' Data for 1951, 1932, and 1953 from Motion 
Picture ALnpnac, 1933 , p. 6; for 1932 as 
indicate':, in fcotiote _c/; for 1935, 1934, 
and 1335 fron li'ilu: Board of Trade pLe-oorts . 

a/ As of January!, each year; includes o-oen 
and closed theatres. 

W It i-'ill "je noted that the total mjimber of 

ser.ts is not identical -jith those given by 
the source- cited in Table XX2II, below. 

c/ Standard Statistics .Com-oany, Standard Trade 

and S'"^ cur i ties , "Theatres and Motion Pict^ores," 
ITol. 75, i:o. 22 (rebruary 20, 1935), t., TH-45. 

Number of Theatres and IT-'omber of Seats Classified by Tyoe of Ownership 

. Although,, as sho^in in Table XXXI, affiliated circuits owned on an averagie 
about 11 per cent of the total number of theatres during the years 1933-1935, 
they cTnedor controlled about 25 per cent of the total number of seats, as 
sho"..!! in Table XXXII. This indicates that th-is grourj owned large theatres. 
The unaffiliated circuits average about 16 per cent of the number of theatres, 
but they represent ap-jroxima-tely 23 per cent of the total seating capacity. 
Theatres of large seating capacity are also found among the unaffiliated cir- 
cuits, but independents, uho own or control approximately 72 per cent of the 
total number of theatres, accouat for a little more than 50 per cent of the 
total seating capacity. 

This is significant because of tne conoetition within the Industry bet\.een 
these three groiips. The unaffiliated circuits are usijally well entrenched and 
in a powerful bargaining position in the purchase of films. The independents, 
who are widely scattered, are usually in a relatively x)Oor bargaining position 
when their theatres happen to be located in close proximity to the affiliated 
or unaffiliated circuits. Independents located in non-competitive areas, ho^.-?- 
ever, are often in good bargaining rjo sit ions in the purchase of films. 



8976 



-40- 



TABLE XXXI 



Nujn'ber of Motion Picture Theatres, Classified "by Tyve 
of Ownership, 1933-1935 



Year 



To tal 



IvTimhsr 



per Cent 
of Total 



Circuit Theatres 



Affiliated 



Num- 
ber 



Unaffiliated 
Num- Per Cent 
ber of Total 



Per Cent 
of Total 



Independent Theatre 



Number 



Per Cenl 
of Tots 



1933 
1934 
1955 



19,^51 
13,371 
13,263 



100.0 
100.0 
100.0 



2,266 
1,954 
2,073 



11.8 
10.6 
11.4 



3,189 
2,846 
3.070 



16.6 13,796 71.6 
15.5 13,571 73.9 
16.8 13,120 71,8 



Source: Motion picture producerf/and Distributors of A]:ierica, Inc., as of 
Je.nuary 1, each year. 



TABI^ XXXII 



-t 



Year 



Nuiiiber of Motion picture Theatre Seats, Classified by Type 

of Ov/nership, 1953-1935 



Total 



2/ 



N"'aiiiber per Cent 
(000«s) of Total 



Circuit 



Independent 



Affiliated 

Theatres 

Per. Cent 
of Total 



Unaffiliated 
Theatres 



Num- 
ber 
(000 »s) 



Num- 
ber 



Arum- Pe r Ce nt ( 000 « s ) 
ber of Total 
(000«s) 



Per Cent 
of Total 



1935 
1954 
1955 



11,086 
11,029 
11,032 



100.0 
100.0 
100.9 



2,938 
2,587 
2,719 



26.5 
23.5 
24.4 



2,562 
2,493 
2,539 



23.1 
22,6 
22.8 



5,586 
5,949 
5,874 



50.4 
53.9 
52.8 



Soijrce: Motion Picture producers and Distributors of America, Inc., as of 
Januarj'' 1, each year. 

a/ It ijill be noted that the total numbers of seats is not identical wi" 

those given by the source cited, in Table XXX above. 

Total Theatre Recei-ots and Attendance 

The total estimated box-office receipts from 1929 through 1934, inclusive, 
are sho\7n in Table XXXIII. Heceipts fell from $1,100,000,000 in 1929 and 1930 
to approximately half this amount in 1933. TTliile avera.^e estimated admission 
.prices fell from 30 cents in 1929 to 23 cents in 1930, the increased attendance 
was sufficient to keep tiie total estimated receipts at the 1929 level, namely, 
$1,100,000,000, The estimated avera^-e admission price fell from 30 cents in 
1929 to 20 cents in 1933 and 1934, or a droD of one-third. 



8976 



-41- 

TAELs ram 

Estimated Total Box-Office Receipts, Average Admission Price, 

and Attendance, 1929-1934 



Year Total Heceipts Average Attendance a/ 

(in millions) 



Total Receipts 


Ave 


;rage 


(in millions) 


Admission 




P-i 


:'ice 


$1,100 




.30 


1,100 




.28 


880 




.24 


625 




po 


560 




.20 


650 




.20 



1929 $1,100 .30 3,660 

1930 1,100 .28 3,920 

1931 880 .24 3,330 

1932 625 .22 2,840 

1933 560 .20 2,800 

1934 550 .20 ^.,250 



Soiorce: Standard Statistics Company, Standard Tra^e and Securities , "Tlieatrer 
and Motion Pictures," Vol. 75, No. 22 (February 20, 1935), p. TH~4-6. 

a/ These fiarures arc not consistent '-rith the average weekly attendance 

^"^'"" figures given ^oy the Film Daily Year Book. 1935 , presumably because 

the latter source has a more complete coverage than tlaat of the 
Standard Statistics Company. 

■ Theatre Recei-nts by Principal States 

Receipts by ten ■orincinal states are shown below in Chapter II, Tabl© 
XXX^/III, as rerjorted l)y the Census of American Business for the year 1933, 
New York State accounted for 23 Tier cent of the total receiuts reported in 

1933, although, as shown in Table XXVIII, above, it contained only about 9 
per cent of the total number of theatres in 1934. The ten principal states 
together acco^onted for more than 70 per cent of the total receipts in 1933, 

Com-oetition with Other Industrie s 

Aside from competition between various tj'pes of theatres within the In- 
dustry, motion picture theatres compete with radio broadcasting, s-oorts, and 
other amusements, such as the burlesque industry and the legitimate theatre. 
Moreover, there exists a tyjDe of so-called non- theatrical com-oetition wherein 
schools, churches, lodges, and sometimes business concerns, display films to 
the disadvantage of local exhibitors. No figures are available as to the ex- 
tent of comoetition from these sources. 

Expenditures for Theatre Construction 

Table XXXIV shows the rapid decrease in annual theatre construction from 
$163,559,000 in 1929 to $13,500,000 for the 16 months covering 1953 and the 
first 4 months of 1934. The figure of $20,000,000 for the 11 months from May, 

1934, to April, 1935, indicates the beginning of more activity in theatre con- 
struction. The biggest decline came in 1932 when construction dro-oped 61 per 
cent, 

8976 



-42- 



TABL2 XjJiU 



Annual Expenditure in Theatre Construction, 
1929-March, 1935 



year 



Amount 
(OOO's) 



Per Cent 
Change from 
Preceding 
Period 



( 



' 



1929 

1930 

1931 

1932 

1933, - ADril, 1934 (16 months) 

May, 1934 - March, 1935 (11 months) 



$163,559 
97 , 580 
45,000 
17,500 
13,500 
20,000 



-40.3 
-53.9 
-61.1 
-22.8 
J.48.1 



Source: Motion Picture Almanac . - 

Financial Condition 

Table XXXV shows the latest available data concerning financial condi- 
tions of exhibiting corporations re-iortin^;;; to the Bureau of Internal Revenue 
for the years 1927 tlirough 1932. The peak of earnings for all corr)orations vr?. 
reached in 1930, vrhen net profits amounted to almost $30,000,000, Horzever, 
the year 1931 saw a decrease of about 87 per cent in profits from the 1930 
peak. In the year 1952 motion pictui'e theatres ODerated at a loss of more 
than $59,000,000 

. TABLE XXXV 

Gross Income, Net Profit or Loss, 
1927-1932 
(in thousands) 



Year 



Gross Income 



Net Profit or Loss 



1927 
1928 
1929 
1930 
1931 
1932 



$345,771 
407,842 
508,439 
513,105 
484,652 
505,490 



$18 , 951 

21 , 646 

22,394 

29,743 

4,423 

-59,335 



Source: Bureau of Internal Revenue, Statistics of Income, 



8976 



i 



-43- 



PAET IV: EXHIBITION 



Chapter II. Laoor Statistics 



Number of Euployess 



Censu.s data:fcr the year's prior to 1933 are not available on enploynent 
and wages in the e-iiihi-.'.on brrjich of the Industry,^ Table ZZXVI , talcen from 
the Census of Ai^e^ican Basineaa, 1533. sho77s the total n-omber of employees 
and the average n'^^iiber eiiiplcyed per motion pictuxe theatre. The fir;^ure of 
^.9 for the average nunber employed, per theatre is lower than that reported 
by the 5ureaa of Labor Sbatiscics in a study made of eleven neighborhood 
theatres in TTashingtonj D. C, in the latter part of 1331, when an average 
of 10«7 employees per theatre was reported (See Table XL, below). However, 
according to figures givfcn in trade publications such as the Film Daily , ' 
Variety , and Motion Pic-;ure jjaanac . theatres have been reported to average 
pbout 16 employees. It is considered that the average for the entire 
country approaches the latter figiire as reported by the trade publications, 
especielly since the higher figure is further supported by the fact that 
employees s^ach as musicians, vaudeville talent, and office employees were 
omitted from the Washington survey. 

'- TASLE XXX-7I 

Annual Average ITuinber Enployed, 5^111 and Part-Time,. 
"oj x^'pes of Theatres, 1933 a/ 



Total 



Type of Theatre 



lain- 
ber 



per Cent 
of Total 



Pull- lime 

ITum- Per Cent 
ber of Total 



Fart- i. ime A.verage 

Employees 
Ifum- Per Cent per 
ber of Total Theatre 



Motion Picture only 65,723 lOC.O 54,030 
Motion Picture and 

Vaudeville 8,635 100.0 7,924 



82.2 11,698 17.0 



91.8 



711 8.2 



Total Theatres showing 

Motion Pictures 74,363 100.0 61,354 83,3 12,409 16.7 



G.5 

13*4 

7,3 



Source: Census of Ajnerican Basinets. 1933 . "Service, Amusements, and not els." 
a/ Includes proprietors. 

Total Annual Payrolls 

Table XXXVII shows total payrolls for moving picture theatres in 1333« 
xor all t^'pes of motion picture houses, full-time payrolls amounted to 34 
per cent of th© total. 



8976 



-44- 



;j 



TASLE X/OCVII 
Total Payrolls, Fall and Part-time, by Types of Theatres, 1933 



Type of 'ilieatre 



Total 



I^all-Time 



Part-Time 



iunoiint Per Cent Amount Per Cent Amount Per Cent 
(OOO's) of Total (000' s) of Total (OOO' s) of Total 



Motion Picture 

only $71,451 100.0 $67,009 93.8 $4,442 

Motion picture and 

Vaudeville 10,505 100.0 10,053 ' 97.5 252 



6.2 






i 



Total Th.ea,tres Showing 

Motion Pictures 81,756 



100.0 77,062 94.2 



4,694 



5.8 



Source: Census of American Business. 1933 . "Service, Amusements, and Hotels. IJ 

Total Annual Payrolls as a Per Cent of Total Receipts 

According to estimates of the Motion Picture Almanac for 1933, pa^^nrolls 
in the e:±Li"bition division represent about 25 per cent of total theatre 
receipts. This figure is slightly higher than that derived from receipts 
and payroll data reported by the Census of American Business in 1933, which 
listed receipts as $415,153,000 (see Table XXXVIII, below) , and a total, full 
part-time payroll of $81,756,000, which represents approximately 20 per cent 
of total receipts. (See Table XXXVII, above.) 

Number of Uage Earners and Total Annual Wages by Principal States 

Table XXXVIII show-s the distributi^on of full-time employees and payrolls 
by ten principal states, as reported by the Census of American Business in 
1933. The ten states listed employed almost 67 per cent of all the full-time 
employees in that year and paid them 73 per cent of the total payroll. The j 
state of Hew York employed 18 per cent of all full-time workers, but reported 
26 per Cent of the total full-time payroll, which indicates high average , 
wages in tha.t state. California was second with more than 8 per cent of 
total employees, who received 8 per cent of the total payroll. New York also 
received the largest share of theatre receipts, amounting to 23 per cent of 
the total. 



,"1 

'V 



-45- 



TABLE ]CC:VIII 



]otal Receipts, l-Taraber of Full-Tirae Employees and Payrolls, 
Classified "by lO-J^rjjicipal States, 1933 a/ 



State 



T otal lieeeipt g . ITull-TinQ J^nipAlJit^ Fall-Tiine Pa\nroll 



Ainoiint Per Cent 
(000' s) of Total 



ITunter Per Cent Aiuo-unt Per Cent 
(000' s) of Total (000' s) of Total 



U, S. Total 

California 

Illinois 

Massachucetts 

Michigan 

Missoiiri 

New Jersey 

New York 

Ohio 

Pennsylvania 

Texas 



$415,153 100.0 63,136 



100.0 $00,519 100.0 



35,223 
23,106 
22,809 
14,124 
10,255 
19,179 
93,907 
20 , 730 
30,891 
12,825 



Total, 10 States 293,050 

Totrl, Other States 122,103 



8.5 
8.0 
5.5 
3.4 
2.5 
4,6 
22.6 
5.0 
7,4 
3.1 

70.6 
29,4 



5,220 
4,303 
3,678 
2,324 
1 , 501 
12,116 
11,463, 
3,822 
4,889 
2,548 

41,969 
21,167 



8.3 


6,284 


8.3 


6.8 


6,695 


8.9 


5.8 


5,141 


6.8 


3.7 


2,925 


3.9 


2.5 


2,370 


3.1 


3.4 


3,647 


4.8 


18.2 


19,778 


26.1 


5.1 


4,223 


5.6 


7,7 


5,583 


7.4 


4.0 


2,200 


2.9 


65c5 


58,851 


73.1 


33.5 


21,668 


25.9 



Source: Ce nsus of American Bus i ness. 1933 . "Services, Amusements, and The- 
atres." 

a/ The data include 122 legitimate theatres and operas which grossed 

$3,611,000 and employed 1,182 full-time workers with a payroll of 
$3,457,000. "When allowance is made for the inclusion of those 
legitimate thea,tres and operas, the employee and payroll data In 
this table are identical with those given in Tables XXXVI and 
XXXVII, above. - 

Wages and Hours 

In Principal Cities . - Reports on wages and hours of unionized projection- 
ists in 1933 wore published by the Bureau of Labor Statistics in the Monthly 
Labor Revie w for May, 1933. The report, v^hich embraces almost 230 cities and 
5,494 operators, shows that average weekly wages ranged from $22.50 to $95.00. 
Prev.-^iling hours ranged from 23 to 62 hours per week. 

An analysis of the report discloses the distribution of weelcLy union wage 
scales find hours worked per week shown in Table XXHX. These ranges vary 
primajrily with the strength of the union in particular localities rather than 
with the size and type of theatre, size of city, or section of the country'-. 
It is believed that wages and hours of work of other organized workers (stage 
hands and musicians) in the motion picture theatres would show a similar 
variation, depending upon the strength of the union. 



8976 



-46- 



TABLE XXXIX 



Wage Scales and Hoars Worked par Week "by Unionized 
Projectionists, Clasnified by iMuraber of Citioa, 1933 



Item 



Number of Cities 



Wage Scale 

Under $35 per week 
Between '$35 and $45 
Between. '$45 and $65 
Over $65 

Hours Worked -per W eek " 

Under 36 

Between 36 and 40 
'Between 40 c?jrxd 45 
Between 45 and 50 
Over 50 



25 

75 

111 

. 29 



\ 



< 



45 

43 
35 
44 
25 



Source: Compiled from Bureau of Labor Statistics 
Monthly Labor B.eview . (May, 1933) p. 1111. 

In V/ashington. D. C . ~ Table XL shows the hourly wage rate and hours 
worked per week by the various classes of wage earners employed in eleven 
neighborhood theatres in Washinfjton, D. C. in the latter part of 1931. 1/ 
The averrge weekly hours for all types of full-time employees ranged from 
32.5 to 49 hours per week; for all types of part-time workers, from 8 to 24 
hours. In the service branch, weekly wages for full-time employees ranged 
from $9,28 to $18,40: for part-time employees, from. $6. 65 to $8,55. Tech- 
nicians such as operators, electricians and engineers were the highest paid 
help and averaged about 45 hours per weok. 



1/ The Bureau of Labor Statistics reports that the city of Washington was 

chosen for this survey "because of the belief that this city has been af- 
fected less than any other city of its size by the business depression, 
and it would therefore be possible to segregate the effects broUjC^it about 
by the changes in technology from those due to other causes, and especi- 
ally to the depression." 



^47- 



TABLE XL 



Average Weekly Hours end Wa^^s of Employees in 11 
Neighborhood Motion Picture Theatres of Washington, D. C, 
by Branch of Work and Occupation, 1531 



Branch of work 


Num- 


Num- 


Aver- 


Aver- 


Aver- 


and Occupation 


ber 


ber 


age 


age 


age 




of 


Em- 


Hours 


Wages 


Wa^es 




The al- 


ployed 


per 


p«r 


per 




ters 




Week 


Week 


Hour 


Service 












Cashiers 


11 


11 


38.e 


$14.61 


$0,378 


Relief Cashiers 


3 


3 


12.3 


6.C5 


.540 


Doormen 


11 


13 


33.$ 


10.11 


.300 


Full-time Ushers 


11 


31 


32.5 


9.28 


.285 


Part-time Ushers 


1 


3 


24.0 


8.55 


.356 


Matrons 


2 


2 


39.0 


13.53 


.346 


Porters 


11 


18 


54.6 


18.40 


.336 


Cleaners 


2 


3 


37.3 


12.66 


.339 


Elevator boys 


i... 


1 


44.0 


14.25 


.323 


Projection 












Operators 


11 


24 


40.0 


67.10 


1.677 


Relief operators 


2 


2 


8.0 


17.00 


2.125 


liusi9 Or^ajiists 


1 


1 


42.0 


75.00 


1.785 


Sta^e 












Electricians 


1 


2 


48.0 


70.00 


1.458 


Relief electricians 


1 


1 


16.0 


20.00 


1.250 


Me "^ "^ -^ '-' -■ - ce 












_:.,^_:.. ,rs 


1 


1 


49.0 


33.25 


.678 


Watchmen 


1 


1 


56.0 


19.00 


.339 


Total l?umber Employed 




117 








Average per theater . 




10-7/11 








Source: Bureau of Labor 


Statistics Monthly 


Labor 


Review, (November, 1931) 



■Pl 



o. 



8976 



-48- 



TcJolc JLT shows the average v/eekly wage of fiill-tirae projectionists end 
"service" employees in tb^e various types of theatres in Washington, D. C, 
Cashiers in -downtown de luxe pic tui-e houses,; labelled Type 1, averaged 
$21,85 uhile in ''other colored".. theatres, lypo 7, they averaged only $10,00 
per v/eek. Pro joctionist 'operators in Type 1 theatres averaged $96,67, while 
in Ty^oe 7 they r-eceived $31,-00v • -• ' " 



ta3i:e xli 



^49V• 



"fjy 



Average "Weekly Wages in Different Types of Motion 
Picture Theatres of Washington, D.C,,. "by Branch 
of Work and Occupation, 1931 






Branch of 'Work 
and Occup.Ation 



theatre Types a/ 



Service 



o-iLc-^'i-: 



Cashiers 
Loornien* 
Ushers ^ 
Porters 
Matrons 



$21.85-. $19.08 $14.57 $14.61 $10.70 $14.33 ' $10..00 



22,33^ 


21.15 


20.00 


10.11 


11,15 


16,08 


11,22 


17.18 •• 


15,81 


—— 


9.28 


8.S5" 


11,23 ■ 




19.57 


19,32 


11.70 


13.40 


13,63 


18.35 


18.12 


10.46 


11,70 


»— ~ 


13.53 


9,00 


— J.— 





Projection 



Operators 



96. 67-. 83.55 50.00 67.10 41.47 47.33 31,01 



Source: 'Goinpiled from Bureau of Labor Statistics, Monthly Labor Review 
(xHovember, 1931), pp. 4-6. 

a/ Theatre types are defined as follows: 

Jl^e 1 - Down-town de-luxe presentation houses. 

2 - Down-town first-class straight-picture houses. 

3 - Other down straight-picture houses, 

4 - First-class neighborhood straigt-picturo housoc* 

5 - Other neighborhood straight-picture houses, 

6 - Colored first-class picture houses, 
vo^;..- ,Other colored picture houses. 



8976 



-49- 

PART IV: EXIiIlITION 
Char)ter III, I.Ir.terials 



Nmnber of Filns Used 

De lu::e theatres usaally eidiilDit no noro tlian 50 featiire pict-ures cxiring 
the year, v;hile the "better neighborhood theatres generally exhibit fron 100 tc 
150 features. Both these tjnpes of theatre shov,' each year approximately tv.'icc 
as many short subjects as features. Tnese short subjects consist of conediop. 
cartoons, aiid travelogues, otc, but d..o not include nev/s filns. 

In other neighborhood theatres, v/here features are changed three tip-ies 
a week, approxinately 150 are required annually. In recent years there nas 
developed the practice of showing tv/o features during a progran, and this Iid,z 
gree.tl^^ increased the nuj:iber of filns used per year. 



Per Cent of Consuner's llotion Picture Dollar Spent on Piln Rental 

Ho acc-'jtrate data are available as to the total e^-oenditures of e:±d.bitor- 
for fill! rentals. According to Table XLII, the cost of prodiicing filns ac- 
counts foi^ a little nore than 18 per cent of the consuner's noving picture 
dollar, rnd cUstribution costs ainoimt to alnost 8 oer cent. This nakes a 
total of 26 per cent which may be taken as a rough indication of the proportic. 
of the consuraer's dollar s\")ent on film rental. 



§976 



-50- 



TABLE XLII 



per Cent of the Conauiaer's Motion Picture Dollar 
Accounted for by tlie Chief Divisions of the 

Industry, 1933 



Division Per 'Cent 

of Total 



Prodaction 



Players . 4.5 

Directors and Cameramen 2.4 

Sets 1.8 

Costumes .5 

Location .5 

Raw Film 1.4 

Stories and. Scripts ^ 2.9 

Administration . 4.2 



Distribution 



Exhibition 



Source: Motion Picture Almanac, 1953 . 
8976 



.Total Production 18.2 



Branch Erpenses 3.6 

Print Cost 1.6 

Home Office Expense 2.6 



Total Distribution 7.8 



24. 


7 


8. 


.2 


5, 


1 


15, 


A 


2. 


.1 


5. 


1 


8. 


3 


5. 


1 


74. 


• 


100. 






I 



Payroll 

Advertising; 

Deprecia,tion and Maintenance 

Rent, Real Estate, and Taxes 

Other Taxes and Insurance 

Electricity and Heat 5.1 "! 

Other Expenses 

Interest aj\d Profit 



Total Exliibition 
Total for Industry 



-5.1- 

FAST IV. z::Ki:"iTioii 

Ch-'";;>ter IV, U:ifc.ir Trslu Prccticos 
Cle?^.iT.nce rr.d Zonin>T 

ZjomtcDle cloarance r.nd zoning hrs tee:!, rnd still rerirlnc, a ..lost con- 
troveraicl pro 1)161.1 within the Indastry. i^eature filnj;. , which open in Icj-ge 
cities for as jjoch as $5,000 per vreek, uc.-j eventually ret'orn to those sa;ie 
cities for 525.00 First-rim eriiibitors, -nri'vinr^,- 1ct£Q license fees and chrrging 
high acj^ission jric^s, have comjlained th-^t insufficient tine elapses 'bstv.^sen 
the lirst-r-un of a i'eo.tvxe pict-ore at a Irxge theatre and suh sequent rvns in 
smaller theatres, Clains have been nade that the pa.Tr'.ient of large fees en- 
titles the..": to the "orotection of showing "oictuTes \.lthout txic fear that snaller 
theatrer, nay present the srine fili.; so soon after the- first shov.lng, that "oros- 
pective patrons ^.'ould he inclin-^d to v/r.it for the lov/er admission prices on 
subsequent r-.T.s elsev^here. 

On tJie other hand, subsequent-r^m- exhibitors have claine^:^ tnat the major 
e:diibitors receive iJinreasonable clo?rancs of tine between first and subseqv.ent 
showings, cjid altjo t?-Bt 'the lar.'^e ■^^dnibitors have e::a-cted rights over i:nrea;;on- 
abl.7 large areas. 

Other 'Jnfair Trace Practices 

host e:h.ibitor contracts '.rith distributors contain -provisions that the 
exhibitor v.lll charge 3->ecified acxiission prices acd the cost of the license 
to show- the picture is based en these -trices. ji:d:.ibitors, althougli publishir-g 
these prices, have often n^-torially lo^-ercd the:.: 03- offering gifts or •:rer;i-.^:is; 
by holdin^- lotteries, or oy instituting a policy of throvtr-avraj-' tickets or two- 
for-one acjussions. Once started, these "oractices cn>read throughout an entire 
conpetitve area and e^diioitors have vied -.'.'ith each other in naking more e::- 
t r ava-'-ant offers. 

The "oiactice of showing t'.^o feature lilns lor one ad.nis£ion -orice was an 
extrci.ely controversial subject d^1ring ore-Code diiicussion. Social, religious, 
ana educational organizations protested thrt this policy of having a, double- 
feature progrcj:! absorbed screen tirje whic^i wo^ild otherwise be given over to the 
showing of travelogaes and other educational ohort subjects. Sone independent 
ezhibitors claimed that the elinino.tion of this C'Olicy wou3.d deprive then 01 
their only means of competing with the larger r.ioving picttare theatres. !Ehis 
practice, Ti'hich spread raoidly in any territory vrhere it v/as initiated, ':as 
soon adopted 03'- the larger as "ell as the scalier theatres. 

Sshibitors as a group have considered unfair the leasing of fil:.is to non- 
theatrical accounts, i. e,, to social, religious, and educational organizations 
which erdiibit motion pictiires s-uch as travelogues, religious pictures, comedies^ 
and educa-tional short subjects. 

Hiirdbitors have claimed that discrimination has been used in the applica- 
tion of "score" charges, [Biese charges are a han/:over from the early days 
when "scored nur.ic" was sold in ::onj'jncti m v;ith pict-ures. T-ien soioid recorci- 
ing was introd'jred the "score" charge was continued, being included in the 
cost of the disc or so^^nd track. 

8976 






-5.?- . 

Trade Associr.tijn s 

The i.I otion Picture 'Tl'ieatr e Ov norr) of A'leric : {jj V T- .-.^. - This 

p.SGOciation was orgrJiiiied in ] '3/?0 l/v inc^-JC/idcit tne:t,tro ovmerc to conbr.t the 
tlieatre ercoansion -oolic,7 ;pu3ri;ued "b;/ Fanouc Pla/ers Lack:/ Corooration. 

Tlie or^-anization ic> corv:)csod of several state enC^ regional grou-^s operat- 
ing as indeoondunt associations. Tlie national organi5-:atioR rttenots to coordi-» 
nate activities and provide •un.iforr.i action on oroblcns of major inportcjice to 
exhi'Ditors. It i.iay rout?:hly ue stated to represent at least 2,500 of the af- 
filiated theatres. 

In 19.o7, "bocaase of the cxr^ressed belief that riore constructive accoii- 
plishijcnts could be secured by constr\ictive cooperation rather than open 
hostility, producer-distributor thc.:*tro o\mers were granted r.er.ibershi-o. Tiie 
orgpjiii^aticn ipjiecliatel3- beco.ne fiiiancially der^ondent upon these nevr ner.bers 
and control massed fror.i the hands of the independents to the new grou;-). 

Allied States Association of ilotion Picture Ezjiibitor s. - This Associa- 
tion uas originally fori;.ed in 192o as a T)rotest against sone of the practices 
of the Motion Picture Theatre 0-.;ners of A^.iericc. It \/as fashioned after the 
K.1-' '\ A. and in nany instances regional groups siriply transferred their al- 
legiance fror.i one organization to tl:e otnor. In 1926, folloi/ing a proD.ise 'oy 'i 
the v. J P I'.i to serve the interests of the inde-'ondent exiiibitors prina.ril^/', ' 
Allied States voted to disband nnd affiliate vath the forner, T'.to voars later 
certain proninerjt inde p.endent erJiibitor ner.bers of the original Allied gi'ou - 
decided to reorganise. ♦ 

In 1952 Professor Lev;is Howard reported that Allied States represented 
6,000 theatres. It is generall-r conceded by the Industry that the Icxger 
circuits rre reuresonted by the i: ? T A, and the snaller theatres by A^.lied 
States. 

Trade Unio n Activ ity 

Inter?iational Alliance o f Theatrical Sta )i;: e I'r.rployees and I.Iotion. ?ict\u-e 
Machine Operator s o f the United States and Cana dr . - This union was conposed 
of appro:-:ii lately 26,000 nenbers in 1934, according to o. statement iiade in 
that year bj'- its Assistant President, Louis Krouse. It is affiliated with _ 
the Aierican Federation of Labor rnd its nei.ibers are the skilled- enployees in '^ 
the Industry. • Tlie organization is conposed of a nunber of local unions 
throughout the United Strtes Lnd Canada. 



8976 



-53- 
iiPFZiDIX 
Eydiibit A. Persons ;;?aa"'.iried as Ex p erts or. the Entire Industr y 



Will H. H£.7s, President, i'otion Picture producers & 

Distrioutors of ADorica, Inc., 
• • 2S 7e£t 44th Street, lie-' York, Hew York 

David Palfre^man, Theatre Service Division, Motion Picture 

Producers d:. Di^tritutors of Araerica, Inc., 
28 7est 44th Street, llev7 York Ile^r York 

Sol A. Pjonenhlatt, forrr.er Division Administrator, liRA, 

International ^^Jiildin^, I^.dio Git;,', ITew York 

John C, riinn, foraer Secretar;/ of the Code Authority, 

no- connected -.rith Variety, Inc., 
154 "Jest 4£th Street, I'ew York, IJe^ York 

Tyree Dillard, fomer Co-.insel for the Code Autl'^rity, 

nor; connected with Letro-GoldTrTn-Llayer, 
Leffal Department, 
iIeT7 York, !Tew York 

Kathan Yamins, represented Independent E:±iicitors on Code 

Authority, 
Pall Piver, l^ssaciTusetts 

Ed IZu^'lcenc^.ll, President, Ilotion Pict-ire Theatre Ormers of 

America; also i-e^o resented Independent 
E%}::.i^oitors on fomer Code Authority, 

1600 Sroad-ay, ITev: York, T.&n York, and/ or 

Col-jinbus, i'ississippi 

Ahrai: E, Uysrs, Chainaan of Board and General Counsel for 

Allied States Association of Llotion 
Pict-jLre Ezhihitors, 
723 15th Street, 11.^,, "^'ashin-^tcn, D. C, 

John P, Ziiisht, Mainter^ance Executive, Paramount Theatres 

Service Corporation, 
limes Sq'JLare, !Ie»7 York, iler? York 

Pat Casey, Producers' P-epresentative for Studio La'cor, 
160-0 ProadvTa.y, ITeT^ York, ITov? York, and/or 
5504 Eollywood Blvd., Hollj^ood, California 

C-eorge Ero^rme, President, InterriationsJ alliance of Theatrical 

Stage Eroployees and Hotion Picture Liachine 
Cperators of th.e United States and Canada, 
Earle Theatre Irj.il dine, T7ashin|:ton, D. C, 






-54- 



Loiiis Ilrousc, Assistant President, International Alliance 

of Thec.trical Stage Srrployees and Motion 
picture Hrchine Qooratorr, of the United States 
and Canada, 
Earle Theatre Biiildin:T, Washington, D. C. 

Steven ITewLian, International Representative, International 

Alliance of Theatrical Stage Employees and 
Motion Picture Machine Operators of the 
United States and Canada, 
3671 Valley Brinl<: pLoad, Los Angeles, California 

Joseph TJeher, President, Aiiierican Federation of liusicians, 

1450 Broadway, ITe^ Yorh, T.e\i York 

Franl: Gilmore, President, Actors Equity Association and" Chorus 

Equity Association, 
45 West 47th Street, I'e-j York, i^e:? York 

Professor l.i, P. I.IclTair, Disinterested authority on the Industry, 

Harvard Bureau of Business Hesearch, 
Canhridge, Llassachusetts 

Professor Ho^7ard T, Levris, Disinterested authority and historian 

on the Industry, 
Harvard Graduate School of Business, 
Cambridge, Massachusetts 

Terry Harnsaye, Editor, Ilotion Picture Herald; Writer, historian 

and authority nhose rrorks ha.ve "teen 
regarded l),y subsequent historians as 
original . 



Szhibit 3. The Advent of So-Lmd in Motion Pictureo 



Soiind in £:-±.i"bition 

The advent of soamd in 1926 cnused a revolution in the Industiy 
conrocraole ilth the intro.'.uction of the feature pict-ore in 1913. The 
development suddenly chcn^ed the entire Dtisiness and revived a failing 
interest in ^notion picture erxtertaininent. The tremeiidous influence of 
gc^i music later brought to sound- equipped theatres a Is.rge increase in 
patronage. At first onl7 snorts wore synchronized 'jith sound reproduced 
from discs. Couroanies moved cautiously to nal-c^, the transition to sound 
as gradn^il as po£.3ihle, ores^ima'Dly "because of the large technical changes 
involved. 

Warner Brothers' Vitaphone ushered in the present coinmcrcially 
successfiil innovation in Aug'ist, 1926. 7ox closed a contract with 77estem 
Electric for the development of liovietone in January, 1327, ^hich led to 
a cross-licenGing arrangeiient with VibaT)hone. A sicple attachment to the 
projectors was dev-=loped by ^rhich 7it-j-p,hor.e and Movietone equipment could 
be used interchangably. Subsequent cooperation of General Zlectric, 
?.. C. A. and TTestem Zlectric -.7ith major producers, brought quick progress. 
Cost of equipment for reproduction T.^as constantly decreased, due to the 
Industry's ImoTrledge, tliat small- theatre installations were necessary to 
the success oi sound pictijires. Fox ''caught'- the Lindbergh talceoif for the 
solo flight to Paris for the L'ovietone lleTrs. The "covering" of the 
Lindbergh reception in. TTar.hingtonwith sound newsreel made history. Hott- 
9ver, the distribution of txie ncTTsreel -r/as restricted, due to the limited 
number of rrired houses. 

Marheting of the T7e stern Zlectric eqiiipment by Electrical Research 
Products began in August, 1927, offering the systems which embraced sound- 
on-film, sound-on-disc, and nonr-synchronous disc systems. Installation 
costs raiig-:d from $8,000 to $15,000 in price, depending upon the theatre 
and its accoustical requirements. 

Mean-.vhile, TTarner Brothers had secretly prepared an all-dialogue 
picture entitled ''The Lights of Hew York." Exneriments up to this time 
had included mostly sound effects and music with only scatterings of 
dialogue. Vitaphone and Liovietone Hews, as short "all talkers," had been 
tremendously successful, TThile successfully received throughout the 
country, "The Lights of New York" clearly demonstrated that the most rigid 
care had to be exercised in the selection of words given the characters to 
speak. Voices which wo^lld s^/nchronize were necessary. Stars began to 
worry about lessons in elocution. 

Wired theatres prospered while •'onwired houses were not even given 
proper exploitation advantages. Exhibitors were fretful concerning the 
oft-arising question of interchangoability en which the patent holders 
refused clearly to commit themselves although well-informed sources had 
conceded it to oo no problem, provided reproduction standards ejid quality 
were satisfactory. 



S976 



-56- 



The year 1929 found sound pictures off to an auspicious start, due 
to the announcement of lower prices Vj Western Electric for either the 
Vitaphone or I.iovietone reproduction equipment for June 1st delivery at a 
price of $5,500 each, or $7,000 for both. At the end of 1929, wired 
theatres nuxahered 9,350. T7ill H. Hays estimated that theatre attendance 
increased 15,000,000 weekly during the year. 



Sound in Production 

The introduction of sound in production caused a change in style 
of making pictures, the erection of more than 100 sound stages,' and the 
installation of millions of dollars in equipment. 'Old talent was 
eliminated in numerous instances and nev; talent introduced. An addition 
of approximately 5,000 employees was reported at the .end of 1930. It 
has been estimated that 99 per cent of all pictures, produced in 1930 nere 
either sound or all- talking pictures. 

The cost of making a. picture ^vith sound v/as estimated to "be from 
five to seven times the cost of makin'5 an all-silent picture. The 
increased overhead, loss of 'bbx-office names of players, who had starred 
in silent pictures, employment of additional writers,, losp of time' through 
experimentation, and the use of more film were the major contributing 
factors. 

At the end of 1930, 60 per cent of the exhibitors were using the 
sound-ttacli method of projection and the remainder were using the disc 
method. Until late 1930, V/arner Brothers and First National were 
producing all pictures on discs, but in that year they began to use the 
sound- traclc method. The disc method hats the disadvantage that the discs 
are cumbersome and hard to handle, and the method is also more expensive. 

According to 'the Motion Picture Daily " of July 29, 1935, 18 patent 
licenses for a new sound system have been issued. Thb invention is known 
as "the dynamic m:ultiplier system," by which the undesirable character- 
istics of present sound apparatus are eliminated. More l.ife-1 ike quality 
is effected, v>hich may again revolutionize the Industry, 



8976#