Douglas Gomery - HOLLYWOOD STUDIO SYSTEM PDF

THE HOLLYWOOD STUDIO SYSTEM

A HISTORY
Douglas Gomery
HQ Publishing
First published in 2005 by the
BRITISH FILM INSTITUTE
21 Stephen Street, London W1T 1LN
The British Film Institute's purpose is to champion moving image culture in all its richness and
diversity across the UK, for the benefit of as wide an audience as possible, and to create and
encourage debate.
Copyright © Douglas Gomery 2005
Set by Fakenham Photosetting Limited, Fakenham, Norfolk

Printed in the UK by Cromwell Press, Trowbridge, Wiltshire
Cover design: Mark Swan

Cover illustration film credits: (front) Swing Time (George Steven, 1936), RKO Pictures;
(back) Mad About Music (Norman Taurog, 1938), Universal Pictures.
Photographs courtesy of BFI Stills, Posters and Designs, and Quigley Collection, Georgetown
University, Washington, D.C.
British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library
ISBN 1-84457-064-9 (pbk)

ISBN 1-84457-023-1 (hbk)
51
Contents
Acknowledgments vi
Introduction 1
Part I: The Rise of the Studio System 1 91 5-30 7

1 Paramount 1
2 Loew's/MGM 27
3 Fox 37
4 Warner Bros. 46
5 RKO and the Minors: Universal, Columbia and United Artists 56
6 Ancillary Institutions: the Hays Office and the Academy 64
Part II: The Classic Studio Era 1931-51 71

7 Paramount 81
8 Loew's/MGM 99
9 Twentieth Century-Fox 1 1
10 Warner Bros. 130

11 RKO and Disney 144
12 The Minors: Universal, Columbia and United Artists, plus the B-film Factories 157
1 3 Industry Advocates: Will Hays and Eric Johnston 175
14 The Rise of Labour Unions 185
Part III: The Modern Hollywood Studio System 198

15 Universal 202
16 Paramount 226
17 Warners 238
18 Twentieth Century Fox 252
19 Disney 262
20 Columbia and Sony Pictures 276
21 Industry Advocate: Jack Valenti 288
22 Unions and Agents 299
Coda: The Modern Media Conglomerate Studio System 309
Bibliographic Guide 318
Index 328
Acknowledgments
This book began when my 1986 volume, The Hollywood Studio System went out of print some
time in the 1990s. Encouraged by continued interest in the book, I asked the original publishers if
they wanted to reprint it; they declined. So I asked for the rights back, and I got them.
Then I envisioned writing what had wanted
I to do in the first place - a complete history of the
studio system. I also wanted to provide complete notes - where the earlier limited version did not
allow me to do. Andrew Lockett, then at the BFI, agreed to take on the new project.
The book has three parts: part I

- the system's beginnings; part II - the classic system of the
1930s and 1940s, which was covered in the original volume; and part III - the modern system,
from Lew Wasserman in the 1950s to the present.
Within each part, each chapter takes up a major studio corporation in detail, from its founder
up to the current leader as write I in 2004. But how should I go about writing a history of the new
studio system when we are still living through it? Lacking historical perspective, I can only guess at
the proper place of the current leaders, so I end each chapter in Part III with some tentative con-
clusions and also give a concluding Coda. So parts of this book are not history - proper historial
analysis requires distance in terms of time - but they are my best attempt to figure out the trends
of the modern conglomerate studio era as of 2004.
This then is a history of the Hollywood studio system corporations and their leaders. One aspect
of this study worth mentioning is that of gender bias. Save for a very few lesser leaders, this his-
torical analysis has an all-male cast. This is a reflection of the US corporate world, and not of any
authorial bias.
When possible I sought paper validation of all facts I assert. Interviews are great for colour and
provide a necessary sense of personality. But even those interviews conducted with the key leaders
close to the events are flawed, as we all remember what we want to remember and forget much.
Contemporary documents are preferable. When I've encountered a conflict of facts, either I point
it out in context or go with the one that seems to me, after thirty years' immersion in studying the
Hollywood studio system, to be closer to the truth and more accurate.

Andrew Lockett having moved on, Jonathan Tilston guided me to publication. I thank Andrew
for taking on the book, and Jonathan for his skills as an editor and consideration for the writer.
Sophia Contento skillfully finished the job, with help from Michael Henry.
ACKNOWLEDGMENTS |
vii
I thank all those who helped me over the years as I studied the studio system. But in the end
it always comes back to Marilyn. She said over and over again: 'You should do this; you can do it;
you have all the files; you have the ideas.' Without her inspiration and professional example - and
her patience at listening to my endless Lew Wasserman stories as I learned to appreciate his his-
torical importance and consummate professionalism - this book would never have come to be. I
must dedicate this book to a lucky series of events that pushed my life in directions I never
expected, but which thankfully led me to Marilyn.
Dottie Gailer urged me to do well in college, Diane Rauch pushed me to continue, Jon Innis
inspired me to be a professor, Eugene Smolensky taught me to do research, and finally pure luck
put me into the same classroom with Marilyn. Then David Bordwell trained me to be a film scholar,
and Marilyn encouraged me to do my best work as a researcher and writer. Thank you one and
all. But Marilyn, you did it again. 'Thank you' is not sufficient, but will have to do.
Introduction
You can take Hollywood for granted like I did, or you can dismiss it with the contempt for what we
don't understand. It can be understood too, but only dimly and in flashes. Not a half dozen men have
ever been able to keep the whole equation of pictures in their heads.
F. Scott Fitzgerald, The Last Tycoon
Most people who study film still don't recognize the centrality of money.
David Bordwell, The Chronicle of Higher Education
Fitzgerald observed what it was like to work in a Hollywood studio and the industrial system of
which it was part. Hollywood as studio system - its production of motion pictures and later tele-
vision programmes, its distribution of them around the world, and its presentation of these prod-
ucts to audiences - was fashioned in the days just before, during and after World War I. vyith the
coming of sound, a handful of com p anies came to dominate, and most have remained in plac e.
Tnis book is a history of Hollywood as a business and of the industrial system that we usually call
the studio system.
Bordwell offers us the studios' goal - making profits. The film industry in the USA had started
as 'freewheeling competition' - unstable, lots of companies, no central place, a risky set of ven-
tures ^jsjnessleaderssc^
.
They achieved this by 1930 - led by Adolph Zukor, the first of the entrepreneurial innovators
Fitzgerald so admired as being able to keep the whole equation of the industry in their heads -
and fashioned business strategies to create a system with considerable economic power. This book
is a history of these men and women and the business strategies they wrought to make profits for
their owners.
Si mply put, Adolph Zukor of Paramount cre ated the system; ,TV and suburbanisation h fnkp h,f
new
strategy, and Lew Wasserman of Universal provided th^sJudj02J^|]
^ set of stra tegiesjgr
tnlTmoderri Hollywood stud iosystem. I his book seeks to examine this studio system history in
~tnree parts: (1) how Zukor and others created the system by 1930; (2) how their successors, led by
Barney Balaban of Paramount and the Schenck brothers of Loew's/MGM and Twentieth Century-
2
I
Fox. ran it through the 1 950s; and finally (3) how Lew Wasserman led the way to a new studio
system, one richer, more powerful and morp pmfitahlp ttwf ik rbyxir predecessor
In American Film Studios, Gene Fernett found sixty-four studios to profile in the period
--
1 900-25, and admits there were more But the fact . ts that after anh
^55_^r^nl^^^^^gnuesjtf>e number varied as corporations tried to enter the system, but only
the majors created by 1930 survived). These eight (and in recent times sop, known as the majors.
zz~ -a:ez h~z se'-ec t-e i: sj'S^r^ -:~ - rv~a« r-g :c .•.:->;-*:.-. :- ::
presentation - first only on theatrical screens, laterVia various other means such as video and DVD.
1
These majors have been the core of the Hollywood studio system and this book is their history.
The system of corporations (known as studtos but containing more divisions) worked daseJy
together to keep out competitors. B ut the majors did not want to appear to be monopolists, so
ttievajwavs tolerated minor studios operating on the margins. Since the studio system was estab-
lished in 1 930, there have always been entrepreneurs seeking to gain major studio status. Yet the
majors, through collusion, kept intruders at bay, offering a prime example of monopoly r-apitafcin
from the coming of sound (which produced industrially the modem studio system) to the present
day.
A great deal has been written about the history of the US motion picture industry. Much of it
focuses on the films and their makers. Studies of directors {for example. Alfred Hitchcock and
Howard Hawks) and stars (for example, Charles Chaplin and Katharine Hepburn) can help us
understand the Hollywood studio system, but such studies come from the perspective of workers.
Unfortunately, work on the business history of the US film industry largely consists of anecdotes
about colourful moguls who were supposed to lord rt over the California studios, the prime
example being MGM's Louis B. Mayer. Yet Mayer and hts like took their orders from corporate
leaders who could 'keep the industry all in their heads' - in Mayer's case Nicholas Schenck. head
of Loew's, the parent company of MGM. It was Schenck, not Mayer, who had the final say and
plannpdjrhp wholp mrpnratP strategy, of which film-making was pust a part Such figures worked
out of the public eye, knowing that any exposure could reveal how the system actually worked in
all its raw power. We need to skip over the myths of pubic power supposedly possessed by Mayer
and his kind, and move to.a higher level of business analysts - to the top of the corporation. The
Hollywood studio system, is a misnomer. The Hollywood studio - centre of film-making - is but
one part of a corporate system that encompasses film distribution, film exhibition and the 'ancil-
lary' businesses run by each of the major corporations after 1930.
To start a history of the Hollywood system with Lous B. Mayer is to miss the point that he
reported - daily - to Nicholas Schenck, whose office was on Times Square. New York City, and
whose constituency were the stockholders of Loew's. The classic system of Schenck and his feflow
leaders later changed and was re-invented by Lew Wasserman of Universal; maHy scholars cal this
the collapse of Hollywood. Nothing could be further from the truth. Ibe_ûd«^n*djojp^
better in 1 975 - once Wasserman had established anew business model - than thpv had pmpt
.
INTRODUCTION 3
and scholars often substitute one auteur (the producer) for another (the director) when actually
the studios were run by leaders so little known that their names are routinely misspelled: Schenck,
not Schenk. Scholars study Jaws without mentioning Wasserman and his invention of the block -
,
buster These and other myths will be dispelled in this book as I fill a basic gap - a basic book-
length analysis of how the movie corporations actually began and worked through the twentieth
2
century. This is the purpose of this book.
Since its creation in 1 930, the Hollywood studio system has been made up of a small set of cor-
porations, and each successful corporation had a powerful leader who formulated strategies to maxi-
mise profit and maintain the long-run power of the studio corporation. These leaders all chose to
openly collude to protect their joint interests. Through their trade association, the MPPDA, they dealt
with common problems, chiefly censorship and distribution threats by domestic and foreign govern-
ments. Proof of their domination in economic terms comes with the founding of unions - created by
workers who could easily target their small number and offer workers some protection via a united
countervailing force. This system of corporate operations (and its modern re-invention to incorporate
television) has been remarkably stable since 1930. Many of today's Hollywood corporate names are
the same as those of the 1930s. The top studio corporate leaders possessed the skills to navigate
through and prosper from the coming of sound, widescreen, colour, television, home video and a
host of other technological changes that many pundits predicted would alter (or even dismantle) the
basic structure of the dominant power held by a few The major Hollywood studios were never the
.
higgp^jimp^nip^ in thp I
but they surely are among the most adaptable, agile and durable.
Distribution controlled from New York City has always been the nexus of Hollywood studios,
which are profit-seeking corporations, not film-making entities. 'Policy is made in New York, while
pictures are made in Hollywood', wrote The Journal of the Screen Producers Guild in September
3
1966.
Only after analysing the economic history of the studio system can one see Hollywood as it
really is: among the most powerful cultural and social institutions in twentieth-century capitalism.
The studio system offers some of the most famous brands in history - the MGM lion and the
Universal globe, to name just two - and its stars have always ranked among the best-known
people in the world. Their stories have long defined the mythic core of modern society and culture.
But at their basis - we must always remember - the studios were and are economic institutions.
We must never let any seemingly more important public issues cloud our understanding of the
Hollywood studio system at its economic base.
How should we best theoretically understand how the studio system came to be, and oper-
ated as a set of businesses? I choose not to start where Thomas Schatz and company would take
up - at the level of the producer, as if this mid-level executive possessed true power. I propose
instead a method I call Industrial Analysis. I start by first asking who owned, controlled and oper-
ated the corporations. With that established, I then analyse the corporations' economic conduct.
How did they choose how many films to produce? How did they distribute them around the
world? What means did they use to present films to the public, at what price and in what order?
4
I
Two key principles underlie the behaviour of the studios - horizontal and vertical integration.
The coming of sound forced thefilnicorrjga nies to take oyer o ther media as well,, principally mus ic
organisations including record and later
, CD corporations. Disney later added theme parks to the
equation. Effectively, the film studio corporations were heading off competition in the entertain-
ment industry. This horizontal integration gained momentum in the postwar era, so that the
modern studio corporation is usually a part of a media conglomerate, often with a different name.
For example, since 1994 Paramount has been a part of the Viacom Corporation. *
The major Hollywood companies may be identified witr^Tiim^m^kjngJûTas early as 191 5, led
by Adol ph Zukor they sought to control the' (îsthbutioôf their films around the world. This
, is
known as vertically integrated power - Paramount was the distributor for Famous Players-Lasky
films, which it produced, and was thus involved with two of the three stages of the movie busi-
ness. He had signed the stars and found the genres t he public wanted and then fashioned a system
to take and sell t hese productions worldwid e, thus reaping the savings from economies of scale.
Then Zukor entered the third sector of the busjnesp^"pre s entation,\ or exhibition. Before TV, that
meant acquiring movie theatres - the fina|_ste p in vertical integration. So by 19 21, his Paramo unt
made the films, distributed them arouno^4h£-WQridJ an d then_ coll ected the admission fees at a
chain of 1,000 theatres. This wholly vertically integrated model would change only in the means
of presentation - adding video and DVD so that there were simply more possibilities for the pres-
entation of films.
To static Industrial Analysis, I add the consideration of change over time. This comes in two
forms. First the leaders, like Zukor, had to react to outside forces. They fashioned plans to deal with
economic busts and booms, with societal transformations (as in the suburbanisation of the USA),
and changes in tastes in the demand for popular narratives. And secondly, they initiated corpor-
ate strategies. For example, in 1938, when television in every home in the USA was a generation
away, Barney Balaban of Paramount bought part of DuMont television so as to be ready when tele-
vision made its impact - whatever that may have been. These decisions were made at the top. No
one at the studio level running the lot in Los Angeles would ever have had the power to make such
a significant acquisition. That was the task and job of the absolute leader of the corporation.
The history of the studio system at its beginnings was one of developing over time strategies
to successfully preserve the system. Foreign governments sought - and failed - to curtail the dis-
tribution of Hollywood's films. Advocates of new technologies sought to take a place in Holly-
wood's system and failed. Rich new corporate entrants have sprung up - such as DreamWorks SKG
- and failed to enter the majors. Wall Street has tried to tame the studio system - as when MBA-
run Coca-Cola owned Columbia through much of the 1980s - and failed.
These and many other challenges to the Hollywood system proved that talented leaders were
needed to run a studio successfully and keep out intruders. We must recognise these corporate
chieftains who have had the unique skills to operate a non-traditional business in a profit-
maximising fashion, to maintain their control over long periods of time, and to fashion Hollywood
as one of the most successful industries in the world. But these corporate chieftains and their
o
INTRODUCTION 5
companies rarely publicised themselves and their secrets of operating. Despite being publicly oper-
ated companies, the corporate leaders kept the pictures of the industry in their heads, hardly
interested in sharing them with others. Yet there does exist a vast amount of documents on which
to base a historical analysis of the Hollywood studio system, its founding and long-term operational
history.
First, there has long been a long tradition of business press interest in detailing the actions of
the major companies. Here the data are to be found in the trade papers of the industry (Variety
and Motion Picture Herald, for example) and the business press of the day (for example, The Wall
Street Journal, Fortune and Business Week). Three daily newspapers must also be added to the list
necessary to study. They are The New York Times (because of its coverage of corporations based
in New York and of Wall Street), The Los Angeles Times (covering the West Coast operations of
the major movie studios) and The Washington Post (covering key battles between the government
and the studios).
Second, corporate squabbles at times led to court, and these case records are open to the
public. Since the major corporations of the US film industry have been involved in hundreds of law
suits, billions of sheets of papers in the form of memos, testimony and corporate documents can
be found in the National Archives and its regional branches. Indeed, ajcevanji-t njst case in the his -
tory of US la w - United States v . Para mount Pictures etal. - takes three full rolls of microfilm to
hold all the data the Supreme Court used to make its historicJ_9 48 decis ion.
Third, and finally, special collections useful to my study are held in archives: in Los Angeles
(RKO and Fox at UCLA, and Warners at USC, Disney at its studio), at the Wisconsin Center for Film
and Theater Research in Madison (United Artists), the Heritage Center of Wyoming (Paramount
and Columbia). Although most of the key records are not contained in these special collections,
they do offer a narrow peek inside the operation of the major studio corporations. No historian
ever has all the data she or he desires. Yet whole histories of Rome have been written on the basis
of a small number of primary artefacts. For the studio system the data are vast. The record is over-
whelming. We may not have the whole of what went into making corporate strategies and oper-
ations, but surely we have a enough. I cite what chose I to use in the Notes at the end of each
chapter.
I start not from the film texts or the star personalities, but from financial reports and reports of
corporate strategies. I seek to understand how and in what changing manner the studio corpor-
ate bosses fashioned ways to maximise profits, as do all corporations in the USA. In this book you
4
will not read such typical statements as 'Suddenly [in the 1950s] the old studios lost their magic'.
No lost magic here, but rather a proper recognition that each corporation of the studio system
depended for the core of its power on international control of distribution. Here the industrial ana-
lysts see a familiar system tool at work - economies of scale. During the 1920s the Hollywood
system established a worldwidejieiwjxk-Qf ^ i str i but iQa^ made films f r_th£_U5A and
the res t of the w orld. Onc e this network was in pla c£,jt_was_jn . the best interest of any film-mak er
to distribute throjjcihjjiiajQr Hollywood company, not only to gain m oney for the investment in
6 THE HOLLYWOOD STUDIO SYSTEM
a film, but also to have the film seen by the largest possible audience. Many industries in our glob-
alised world now take this approach for granted. Hollywood led the way. Yet film distribution,
sadly, is the least analysed part of the film industry - there are no fascinating movies to consider,
only dry, dull figures, investment decisions, and analysis of international political and cultural
power. I am interested in analysing the whole Hollywood studio system, particularly as its leaders
reacted to changing social and cultural and economic conditions, and as they developed strategies
to maintain Hollywood's economic power base.
This book is divided into three parts: the risepf the system, its classical age before television,
and the modern system. Within each part, the major corporations and their trade association and
unions are analysed in separate chapters. As I outlined in my historiography essay in David Bord-
well and Noel Carroll's Post-Theory (Madison: University of Wisconsin Press, 1996), the history of
Hollywood as a system has long needed a new history. I wrote a version of part II of this book in
1985; the present book seeks to be a fully documented analysis, complete with the rise of the
5
studio system and its re-invention from 1960 to the present.
Let me also stress that it is my purpose to blur the usual distinction made between film studies
and television studies. The coming of television transformed the business and social practice of
watching movies in the USA. Television did not create a whole new industry. Rather, television was
absorbed into movie-watc hing and gave rise to more people seeing more films than ever before.
"far from dying because of TV, the studio system grew to become more powerful than ev er
imagined in the 1930s.
In the end, I argue that historians ought to remember what F. Scott Fitzgerald and David Bor-
dwell stated. The three parts of this book closely examine the corporations and their leaders and
analyse systematically the leaders that Fitzgerald recognised as so skilled, and the centrality of
money, as Bordwell asks us to appreciate. This history of the Hollywood studio system helps us
achieve both these goals.
Notes
1 . Gene Fernett, American Film Studios (Jefferson, North Carolina: McFarland, 1972).
2. Many seek to understand the studios not as businesses seeking to maximise profits. Thomas Schatz's
The Genius of the System (New York: Pantheon, 1988) offers a classic case of beginning in the middle
and assuming away any business motives. His subsequent writing continues this pseudo-sociological
history of corporations that at their core are economic institutions.
3. The Journal of the Screen Producers Guild, September 1 966, pp. 1,3-14.
4. Ronald Davis, The Glamour Factory (Dallas: Southern Methodist University Press, 1993).
5. This is a history - change over time - not a snapshot of the industry at a point in time. I wrote a
snapshot for the end of the twentieth century in Benjamin M. Compaine and Douglas Gomery, Who
Owns the Media? (Mahwah, New Jersey: Lawrence Erlbaum Associates, Inc., 2000), pp. 359-436.
Parti
The Rise of the Studio System 1 91 5-30
While the movies as a new technological form were invented during the latter half of the 19th cen-
tury, and innovated early in the twentieth century, iLwas only during the late 1910s and earl y
1 920s that a small number of companies with prod uction based in south erjLCall f-P rn a anrl ^ktri-
'
bu tion based in New York City began fxTdominate the worl d film industry ^During the 1910s;'
Adolph Zukor through his Famous Players and then Paramount corporations developed a system
by which to manufacture popular feature-length films, distribute them around the world, and pres-
ent them in Paramount picture palaces. By the early 1920s, using production principles of the classic
narrative and featuring notable stars, Zukor taught the world how to make motion pictures popu-
lar and profita ble in a global marketplace. He also laid down the principles of the studio system
From his "entry into the industry, Zukor wanted to take control of the new movie business. He
knew what not to do. The Motion Picture Patents Company (hereafter the Trust) which controlled
basic patents for film cameras and projectors, during its years of control, failed with a patent mon-
opoly. All this approach achieved were numerous lawsuits filed against its illegal combine. Indeed,
during the peak years of its active market control, 1909 to 1913, the Trust spent considerable time
and expense filing patent infringement suits trying to enforce its edicts. Although some early
decisions went in its favour, the legal tide began to turn in_19j2 when the US federal governmen t
filed an anti-trust action__ag_a[nst th e Trust to enjoin the combine. In 1913 a US District Court in
Philadelphia, Pennsylvania, ruled that the Motion Picture Patents Company was an illegal trust. The
Patents Trust legal case concluded on 1 October 191 5 when the US Supreme Court refused to over-
turn the lower court's decision upon appeal. Zukor had his opening as the Trust disappeared, and
began to develop a national distribution system which would thereafter serve as the basis of the
1
studio system's power.
v^v**
Zukor was smart and looked to see how other industries developed their corporate economic
power. He borrowed their strategies and moulded them to fit the/novie business. Borrowing th e
star system from vaudeville, and world distribution from the French Z ukor d id two things: he took .
the star system and c lassic story-telling and made films in a factory-like syst em, and he developed
If distribution division (Paramount) to sell his wares thr oughout the world. Only later did he reac t
to monopolising theatre owners and develop the largest theatre chain in the USA. All this became
possible because of the boom in movie in tprp<;t that startprl m i9Q^_Ry iqir 7nknr who started
in the theatre end, was consolidating movie-making and distribution under his Paramount Famous
2
Players Company (hereafter Paramount), and the studio system came into being.
'I
Zukor was not alone in entering the infant industry. He was simply the skilled leader that
Fitzgerald identified. Th e nicke lodeon business was an easy one in which to start out. The broth-
ers Warner, William Fox and Marcus Loew (cr eator of MGM) started at the same time. At first only
a few thousand dollars in capital was required, no special training or connections. Entrepreneurs
in every major US city and town set up shop in already existing storefronts and watched as millions
of people plunked down millions of nickels and dimes. Only the negative social stig ma attached to
the movies by the educated classes prevented even more folks from attending.
It was not that Zukor had had a light bulb go off in his head. Prior to World War I, he watched
the rise of Pathe, which was not only t he largest, m ost influential Frenc h film company, b ut the
-ffrsTacknowl edged global filmic empire inînernajîstory. By 1897 Pathe had become a corpor-
ation worth 1 million francs. Until 1900, its phonograph divisio n, run by Emile Pathe, contributed
90 per cent of the revenue. Brother Charles Pathe worked on the technical and marketing prob-
lems involving cameras, projectors and film stock. They soon realised that films had greater com-
mercial value than music and set about to mass produce them like canned goods. By the late
summer of 1905, the Pathe broth ers could t urn out a title a day ,
making their Fr enchj^mjaajTyJhe
fi rst in the world to.achieve such a hiq hjevel of regulari sed mass production Thisprodjjctiorijed .
the Pathe brothers to set up a global network of fil m distribution by 1906 Pathe
. offices were
established first in developed nations and French client states: Moscow, New York and Brussels
(1904); Berlin, Vienna, Chicago and Saint Petersburg (1905); Amsterdam, Barcelona, Milan and
London (1906). Within another year, Pathe monopolised Central Europe as well as the colonised
areas of India, Southeast Asia, Central and South America, and Africa.
In the U SA, by October 1906. Pathe' s film saje_s_ averaqed seventy-five copies each of some-
fJrneTa~doz en film titles per w eek, constituting from one-third to o ne half of the growing US
market. The company could rightly boast that it had 'boomed t he film business' in the USA and
that, for both quality and quantity, Pathe films were 'tops in the world'. By the outbreak of World
War I in 1914,j20 other film c ompan ywas as su ccessful as Pathe. No wonder Zukor was studying
its operations. The war stopped Pathe in its tracks, and gave Zukor his opening t o copy the French
company's methods. He would execute production and world distribution on a more far-flung
3
basis than Pathe ever did.
Surprisingly, the war did not disrupt the flow of films outside Europe. But the centre of distri-
bution shifted to New York. This is where Zukor operated and he stood at the epicentre. He then
set out to develop a system for distribution. He would release films first to first-run theatres in the
largest cities in the USA and then later around the world. Then he would pull the films off the
market for a certain period (the clearance) and await a build up of a demand for a secondj^nJ-le
would do this for as many runs - with these time-tested clearances - as the market would permit
him in order to soak the maximum revenues from films he had already invested in. The run-zone-
4
clearance system soon took shape.
After the war, European companies could not catch up with US companies because of what
economists call the advantage of the first-mover. The first-mover is a pioneer that develops scale
THE RISE OF THE STUDIO SYSTEM 1915-1930 9
economies in film production and distribution so that large newcomers have a difficult initial
period. They would have to invest too much money simply to catch up. In addition, Zukor could
test his methods in a marketplace not disrupted by war. On the demand side, the USA established
itself as the world's largest movie-going nation, and Zukor had his monopoly power in place. By
the 1920s, most large European companies had given up film production altogether. Pathe and
Gaumont sold their US and international business, left film-making and focused on distribution in
France The eleven large st

. Italian film producers formed a trust, which failed terribly, and one by
one they fell into financial disaster. The famous British producer, Cecil Hepworth, went bankrupt.
Soon, Britain had become a Hollywood outpost. Adolph Zukor had made Paramount dominant
around the world, and would build on this to strengthen and maintain the Hollywood studio
5
system.
In the end Zukor and his followers developed a set of operating principles. Their industry - sym-
bolised by their Hollywood studios - would be made up of a small set of corporations that pro-
duced, distributed and presented films in order to maximise the profits of their corporations. The
number, after the coming of sound, would total eight. Each successful corporation had a power-
ful leader who formulated strategies to maximise profit and maintain the long-run power of their
studio corporation. Those that lacked such leaders were never able to sustain profitability in the
long run. Each successful leader broke his business into three parts that were vertically controlled.
Five corporations, led by Zukor's Paramount, held strong positions in production, distribution and
exhibition. Three lacked theatre chains and thus had to co-operate with the Big Five even to be
granted the publicity and booking in a major picture palace.
Major leaders emerged, led by Adolph Zukor, including Marcus Loew's successor, Nicholas
Schenck, and the brothers Warner, led by the eldest Harry. William Fo^had built a Big Five
company, but mortgaged it far too much andjost the company by 1 930. The other member of the
Big Five was the leaderless.RKO, which was never successful. The leaders of the Little Three were
Universale Carl Laemmle, .Columbia's two Cohn brothers, and United Artists' Joseph Schenck.
These leaders were the leaders that F. Scott Fitzgerald saw were required to maintain power in all
aspects of the film business through careful strategies. They - led by Zukor - built a studio system.
The following chapters in part I take up the two-part structure set forth here. Each begins with
an analysis of how a corporation operated under its leader. The second part of each chapter then
examines the structure of the corporation during the studio era, focusing on ownership, finance
and composition operation of assets. To finalise part I, I add an analysis of the studio co-operation
through a trade association, and the place of unions. The overarching historical question is straight-
forward: why did these - and only these - corporations survive to make up the Hollywood studio
system? I discuss them in the order of their economic importance in 1930, that is once the Holly-
wood studio system had been established.

,0| THE HOLLYWOOD STUDIO SYSTEM
Notes
1 . Motion Picture Patents Co. v. Universal Film Co., 235 F. 398.
2. Adolph Zukor, The Public is Never Wrong (New York: Putnam's, 1 953); Will Irwin, The House that
Shadows Built (New York: Doubleday, 1 928).
3. Richard Abel, The Cine Goes to Town: French Cinema, 1896-1914 (Berkeley: University of California
Press, 1994).
4. Robert Anderson, 'The Motion Picture Patents Company: A Reevaluation' in Tino Balio (ed.), The
American Film Industry, revised edn (Madison: University of Wisconsin Press, 1985), which offers a
summary of his dissertation; Ralph Cassady, Jnr, 'Monopoly in Motion Picture Production and
Distribution: 1908-1915' in Gorham Kindem (ed.). The American Movie Industry (Carbondale, Illinois:
Southern Illinois University Press, 1982).
5. Gerben Bakker, 'Entertainment Industrialized', unpublished PhD dissertation, European University
Institute, 2001.
•
1
Paramount
It was Adolph Zukor and his Paramount Company that taught the world how to fully exploit fea-
ture films with stars, and book them around the world. By 1921 Zukor had turned Paramount into
the largest film-making and distribution corporation in the world. By 1930 he had the largest
theatre chain in the USA, and had fully vertically integrated the basics of the studio system. By
1930 Paramount stood atop the studio system. Zukor's innovation perfected the studio system;
others then copied him.
Adolph Zukor: the Leader and his Invention
Born on 7 January 1873 in Ricse, Hungary, the son of Jacob Zukor, a farmer/storekeeper, and
Hannah Liebermann, Adolph was orphaned by the time he was eight. Starting in 1881 the orphan
Adolph then lived with his uncle, a dedicated Talmudist, but he eschewed rabbinical study. After
a brief apprenticeship in a store, Zukor sailed alone for the USA at the age of sixteen in 1889. He
knew no English and had only a tenth-grade education. His ambition was to assimilate quickly, and
by 1891 he had learned English (at night school) and become an apprentice furrier, at $2 a week.
In 1893, aged twenty, he then struck out on his own, moving to Chicago to create the Novelty Fur
Company, which achieved considerable success. He prospered and so seven years later, married
and returned to New York City to specialise in selling red fox fur. His mission was clear: by 1900
1
he wanted to become the top furrier in the USA.
During the fashion season of 1902 to 1903, Zukor rode the fad in red fox, and learned to dom-
inate a market. Zukor was already wealthy when a distant relative, Max Goldstein, approached him
about investing n the Marvels of Edison exhibit he had seen at the Pan-American Exposition
i in Bu f-
falo,^ New York. A certain Mitchell Mark wanted to open a penny arcade New York; Mark
in
needed backers, so he had approached Goldstein who in turn approached Zukor, who agreed to
put up the money for Mark's arcade. Zukor was impressed with the profits, and started his own
arcade called Automatic Vaudeville, which was filled with a variety of one-cent mechanical diver-
sions, including strength tests, fortune tellers and Kinetoscope peep shows. From 14th Street at
2
Broadway, Zukor expanded to Newark, Boston and Philadelphia.
In 1927, at Harvard Business School, Zukor recalled his next move:
About twenty-two years ago [1905] we had 'Hale's Touring Car,' which was a Pullman car constructed
with the rear end open. A picture was thrown some twenty feet from the rear, and one would turn
I around, as if in an observation car, and watch the scenery. These pictures were taken in Switzerland,
I Italy ... all parts of the world. Jh at was the first moving pi cture_tha_t attracted my a t tention seriousl y
I thought it was very interesting and I knew that it would appeal to most of the people. William A.
Brady, a theatrical manager in New York, who had bought the rights for that state, asked me to join
him in exploiting this form of entertainment. We started out by taking a store on [Union Square] and
put this Pullman car in. We made the front of the store look like a depot and we were able to get films
3
for about six different tours. [From] the first day [it] was a big success.
He went on lecturing to the Harvard students:
We also had a lecturer who pointed out the interesting points, such as mountains, rivers, and build-
ings, and I felt sure we were on the road to success. But it did not last long because there were not
enough subjects to make changes. We found that after about two weeks we had to repeat the subjects
and, of course, when they were once seen people were no longer interested. Pretty soon we found
ourselves with no business. We approached all of the people who had made pictures in this country -
Edison, Biograph, Lubin, and Selig, and the Belasco Company - and tried to get them to supply these
travelogues, but they did not think we could dispose of enough to warrant their spending money for
the negatives. So we had to shut down [after three years].
He remembered how easy it was to get into the business of exhibition, but how hard it was to get
the films he wanted:
The main business of the Edison Company, as well as of Lubin and Selig, was to make these machines.
Naturally, they all concentrated on the mechanical end of the business. That was very necessary and
very important for this reason: In those days you could buy a projection machine for $75 or $95. People
with money or with a substantial business would never think of opening a little store show, but as
long as it did not take more than $300 or $400 to open up a theater, a good many small investors
took a chance, and that helped to develop the business. The making of these low-priced projection
machines made it possible for a number of store shows to come into existence, without which I believe
there would be no moving picture industry [in 1927].
During 1907-10 Zukor came to believe that the motion picture industry would prosper only if he
raised the stature of the films he showed. Zukor made the acquaintance of Edwin S. Porter, and
frequently would go to Porter's studio to watch films being produced. Zukor also visited Brady to
learn about producing Broadway plays. He visited D. W. Griffith's sets and watched him work. But
Zukor, like all business leaders able to keep the whole business in his head, was as ambitious as he
4
was smart. Zukor wanted to go out on his own
In 1910 Zukor took his family to Europe, taking advantage of the opportunity to observe the
foreign film industry first hand. Relatives in tow, Zukor travelled to Oberammergau, Germany,
PARAMOUNT 1 3
where they were filming a performance of The Passion Play, an elaborate pageant depicting the
life of Christ in twenty-seven scenes. Zukor was so impressed that he purchased the US rights on
the spot for $40,000. But the Trust sought to prevent him from showing it. Fuming; he exhibited
it himself.
In those days when anybody wanted [to book a film] he had to put up a good deposit and take the
lease in his own name. had I taken about fourteen leases and found myself where I had to go through
bankruptcy to get out of the leases or else continue in business. I chose to continue in business. So I
made every effort in this country as well as in Europe to obtain pictures. They were making the best
pict ures in Europe then, in France and Italy. We did not m ak e very g ood pictures in this country [becaus e
of the Trust] , As luck would have it, the Pathe Company in Paris made a picture, The Passion Play,
which was in three reels and hand-colored. That was really the first p icture of any consequence that
I c an reca ll. When saw that I picture I made up my mind to bring it to America. We arranged for an
organ and a quartet to play and sing appropriate music. I did not dare open in New York. So we tried
it first in Newark. We were on a street adjoining a big department store and opened up Monday morn-
ing. A great many of the bargain hunters - I mean the ladies - dropped in early to see and hear the
performance. As they walked out, I stood at the door eager and anxious to hear the comments. People
with tears in their eyes came over to me and said, 'What a beautiful thing this is.' I felt instinctively
that this was the turning point, that my rent would be paid from now on.
Zukor hit it big as an exhibitor with The Passion Play:
We stayed on with that picture for months and did a land office business. That gave me courage to
[book] into New York and ... we showed that picture with the same success everywhere. Then it
occurred to me that if we could take a.npye[or a play and put it on the screen, the people would be
Interested. We should get not only th e casual passers-by b ut people leaving their homes, g oing out in
search ot amusement. However, I had no experience in making pictures and nothing was farther from
my mind. I did approach all the producers then in the business and tnedJoseJUhj^
pictures^ At that time the [Trust] numbered ten, and so many store shows had jumped up - thousands
throughout the country - that there developed a great demand for the one-reel and two-reel pictures
that were being made. They were so busy turning out these pictures that they would not undertake
anything elsejn fact, they did not believe that people would sit through pictures that ran three, four,
ot five reels. I tried for a number of years to convince them, but nobody would undertake to make big
pictures.
That became Zukor's goal: exhibit feature-length films made by his company, and build a mon-
opoly so as never to have to rely on the Trust.
In late 1910 Zukor travelled to Germany a second time, and learned of a young French producer
named Louis Metcanton who had persuaded the famous Sarah Bernhardt to let him film her stage
14| THE HOLLYWOOD STUDIO SYSTEM
success, Queen Elizabeth. Instantly, Zukor purchased the US exhibition rights. The ex-furrier formed
the Famous Players Film Company with the initial feature being his import, the four-reeler Queen
Elizabeth. In 1927 Zukor remembered how he had also researched the theatrical side:
I would go to a theater, take the first row or sit in a box and there study the audience and see what
effect the picture had on them. So was pretty I certain in my mind after the experience I had in watch-
ing audiences that I could use a subject and not go very far wrong. In 1 91 1 , I made up my mind
definitely to take big plays and celebrities of the, stage and put them on'the screen . . . That was in
November, 191 1, and in March, 1912 we released [Queen Elizabeth] in this country. [But the Trust
would not let him exhibit the feature in one of their licensed theaters.] So found myself with Queen
I
Elizabeth and no place to go. There was only one thing could do and that was to take the legitimate I
theaters. I went to Klaw and Erlanger and got bookings. It was in the spring, and there were not many
shows on the road. I booked Daly's in New York and the Powers Theater in Chicago. We found that
our matinees were fine. I remember in Chicago I stood in the lobby and I was very proud. We had
almost a full house at the matinee. The show went off well and ... I may mention that this was the
first time lithographs were made of the pictures. We had used lithographs before, but they had nothing
to do with the pictures shown. We also advertised in the newspapers.
He was already pioneering. 5

Zukor told future Harvard MBAs in 1927:
I believe we had to gross about $60,000 to cover expenses, but we took in enough so that our first
experiment was not costly. We did gain the knowledge that made us absolutely certain that pictures
of the right type had a great future. At that time Daniel Frohman had taken James K. Hackett under
contract. He was on the road with The Prisoner ofZenda. I asked Mr. Frohman to see Mr. Hackett,
who was then playing in St. Louis, and explained that we wanted him to go into pictures and assure
him that it would not hurt his reputation or affect his popularity. Mr. Frohman prevailed on Mr. Hack-
ett to appear in a picture, though it was a very hard job. At that time it was beneath the dignity of a
well-known star to appear on the screen. But Mr. Hackett was a good businessman as well as a good
actor. He realized that this was an art that was going to amount to something and^thought he might
as well have the honor of being its first American star. The first long picture made in this country was
The Prisoner of Zenda, with Mr. Hackett as star. We had all sorts of handicaps to overcome but finally,
after a great deal of trouble, the picture was made. Of course, everybody who heard about it in the
theatrical world thought I was crazy. Nobody believed that people would sit through a picture for
hours as they would a play.
#
He also foresaw the star system:
However, when we finished the picture and had a showing at the Lyceum Theater to invited guests
PARAMOUNT 1 5
and critics, the thing was pronounced a great success. The characters were recognized and called by
name. People said, 'See who is playing Black Michael! Look at so and so! Isn't that so and so?' The
effect was tremendous. was I sure then that personalities plus a good story were all that we needed
in pictures.
He had borrowed the form and stars from the stage, and recrafted them into feature-length
6
motion pictures which would stand at the heart of the film business thereafter.
With his new Famous Players Company, Zukor quickly realised that he needed to develop his
own stars contractually tied to Famous Players-Lasky, not simply bid them away from the legitimate
(live) stage. No better illustration comes than in the case of Mary Pickford herself. Zukor remem-
bered the situation for his Harvard audience:
Just about this time [David] Belasco had a little girl in a play called 'The Good Little Devil.' She played
a blind girl's part and her name was Mary Pickford. I knew Mary Pickford had picture experience,
because she had been with Biograph a couple of years before and knew the camera. We had already
discovered in making these pictures that the makeup and a ction required were entirely different from
those of the reqular stage. The regular actors did not have screen experience and they did not seem
to want to learn. We tried people who were well advanced on the stage, but the director could not
make them do things to suit the camera. I felt, if we could get people who had experience on the
stage and also had some camera experience, the results would be much better. It appeared to me that
Mary Pickford would be a good choice, so I made Mr. Belasco a proposition to produce The Good
Little Devil on the screen. While the play was going on we would take the picture during the day. As
soon as she came into the studio we recognized her ability, and I induced her to stay in the motion
pictures permanently. Her salary with Belasco was $1 75 a week. I offered her $500. Of course, that
was a great deal of money and she could not resist it. So she joined the Famous Players.
7
Zukor had his first [movie] star .
B ecause of the Trust, Zukor had to work out some other method of distribution. The only
alternative then was to sell pictures state by state. Zukor explained to Harvard students and faculty:
We would organize the Famous Players' Company of New England; in Michigan we would have the
Famous Players' Company of Michigan; and so on. We divided the country into fifteen units, and each
unit would buy and distribute the pictures in a certain territory. One unit had no connection financially
(
or otherwise with the others. When we got to that point we realized that a distributor could not main-
tain an office and do busine ss on six or eight pirtnrps a ypar hpransp jtie overhead would not p ermit
it. So we decided to make thirty pictures a yea r. We felt that number of pictures would give an office
about two and one-half pictures a month, and on that they could maintain an organization and run
their business. So we made thirty pictures a year.

Here he had added economies of scale to his set of strategies.
But his distribution company organised this way was not fully exploiting economies of scale in
distribution.
These state rights buyers to all appearances operated successfully, but they had no uniform policy.
One man who owned a picture in New England would handle it on one policy and somebody who
owned the rights in the west or in Pennsylvania would operate it on a different policy. For example,
we insisted that our pictures should not be exhibited for less than ten cents . A g ood many of the
exhibitors had~been charging an admission price of five cents. n I many places editorials were written,
attacking the ten-cent charge. I remember distinctly in Colorado there appeared an editorial stating
that there was no picture made that was worth ten cents. We soon discovered that the state rights
men in the different sections booked their pictures 'hit or miss,' that some were successful and others
were not, and we found ourselves making no progress. We kept on making pictures and we tried to
make better pictures, but as far as distribution was concerned the business was chaotic. At this stage
we called our state rights buyers to New York, when we had our convention preparing for the next
8
fall, and told them that we were not making headway and could not continue on the same basis.
Adolph Zukor's original London office, still in the horse and buggy age
PARAMOUNT 1 7
Zukor realised that he needed his own distribution system, and that it should be uniformly
national. He reasoned that once a film was made, the majority of its cost had been accumulated.
If he was able to distribute across the USA, and even beyond, the additional revenues would over-
whelm any extra costs. So the key date becomes 15 May 1914 when Zukor signed a distribution
agreement with William Hodkinson's new Paramount national distribution company. Starting with
the new movie season on 1 September 1914, Paramount became the first national distributor to
offer a complete programme. Exhibitors loved it. Here was a source that was not the Trust.
Hodkinson had appropriated some ideas from the Trust's General Film Company - principally the
percentage fee rental system - but Zukor pushed him to distribute uniformly on a national basis.
He had even developed a crude version of the run-zone-clearance system. Here we find the origins
9
of a basic principle of the classic studio system.
By the end of May 1914, a series of meetings had taken place New York - led by Hodkin-
in
son, but also including Hiram Abrams of Boston, W. L. Sherry of New York, Raymond Pawley of
Philadelphia, James Steele of Pittsburgh, and Zukor. Paramount was formally organised as a
national agency for the distribution of films. Hodkinson was president and general manager, based
in New York. But soon Paramount had established branch offices around the USA, and in Europe
exclusively distributed films under the trademark name of Paramount. Zukor's Famous Players Film
Company entered into written agreements with Paramount. Paramount was to distribute 104 fea-
tures each year, forty-eight produced by Famous Players. Under the contract th e productio n
compani es were to re ceiv e approximately $2 5,000 in advance for each feature n addition to 65 i
per cent of the profits_ after releasej_with Para molj7irkej?pjnj^fh^ 35 per cent, the so-
called distribution fee that would remain at about 35 perce nt into the next century. The core of
trieTJOVver of the studio system - economies of scale of distribution - was established with Para-
10
mount's system for distribution.
Within two years Zukor took control of Paramount by buying out the interests of several of the
original investors. He forced Hodkinson to resign. What had begun as a move to consolidate power
in the hands of the distributor had, under Zukor, become the world's most impressive producing
and distributing film concern, or, as the press was labelling Paramount, 'the United States Steel
Corporation of the motion picture industry'. By the end of May 1916, the aggressive Zukor could
do whatever he wanted. He was ready to extend his strategies to fashion the biggest motion pic-
ture corporation in the world. In the process he would refine the rest of the strategies needed for
11
the studio system.
On 29 June 1916 The New York Times business section headlined: '$12,500,000 Merger of
Film Companies; Adolph Zukor, President'. The Paramount merger was heralded as distributing
eighty-four pictures a year, by Zukor producing agencies. The newspaper of Wall Street went on:
'A merger of two of the oldest companies producing feature photoplays was made yesterday,
when the Famous Players Film Company and the Jesse L. Lasky Feature Play Company became the
Famous Players-Lasky Corporation. The new company is incorporated with a capital stock of
$12,500,000.' 'The Famous Players Company has released forty-eight feature pictures a year and
1 8 THE HOLLYWOOD STUDIO SYSTEM
12
the Lasky Company thirty-six'. Adolph Zukor was no longer a small New York City businessman,
but was a major entrepreneur, well known within the business community and to the public.
Zukor was now in charge, and he soon faced his first tests. The biggest obstacle came expect-
edly three months later when in April 1917 the USA entered World War I. The large cost of waging
war forced the US government to levy a subs tantial tax on theatre admissions McM£_aj±iiisîons
.
levelled ott t or the fTrsTTTme since 1905. A year and half later an even worse event occurred: the
influenza pandemic, which hit hardest in the fall of 1918, forced the closing of all theatres acro ss
the USA, principally during October and NovembeMjUS- Paramount reported a loss of $1,250,000
13
in uTifuTfiTTed contracts as a result of the pandemic - much worse than any war tax.
Once the war had ended, Zukor was ready to begin expansion again. He established exchanges
dealing with distribution paperwork all over the world, except in the USSR. Many markets formerly
served by European companies were now open to American ones. During these years Paramount
signed agents for Scandinavia, the West Indies, Central and South America, Switzerland, Belgium
and Egypt. In 1919 Paramount reported one of the largest exchange systems in Australia and
Canada. Before the 1920s started it was hard to travel anywhere without encounterinq a Para-
mount office . Zukor took advantage of the disruptions in world trade caused by World War I to
overwhelm his European rivals. The formerly stron g French film indust ry was particularly hard hit.
Not only was the economy in a shambles, but for a time all motion picture theatres were shut
down. Zukor's other central rival, the German film indust/y, also ceased as materials and people
were devoteoto tne war ettort. By 1920 Paramount had settled down into a comfortable world
14
economic hegemony.
The Biggest Film Enterpise in the World

As the 1920s commenced, Paramount stood atop the motion picture industry. Zukor even had a
number of followers (such as Marcus Loew, William Fox and the brothers Warner) who were bent
on out-Zukoring Zukor. They would never succeed. But there did come a real threa t: powerfu l
exhibitor chains formed F irst National to protect themselves. So Zukor began to buy the atres, he
woulddominate exhibition as well. Originally he did not think this was needed, but the success in
Chicago of the Balaban & Katz chain proved that a certain form of exhibition could mean sub-
stantial power and profits. Adolph Zukor reasoned that he need a chain of theatres to guarantee
Paramount's position in the marketplace. He took Paramount public and raised $10 million.
Overnight, seemingly, Zukor by the middle of 1921 owned 300 motion picture theatres. In 1927
he told his Harvard audience: '[I] met [with First National] exhibitors and pointed out to them that
if they went into producing, we would have to go into the theaters to protect our product,
15
especially in the key cities.'
As he formed Paramou nt' s chain, he followed strategies of others who had built deluxe, ornat e
picture palaces that served up elabora te shows mad eu p of one-third live performance (a stag e
s^cw-preseTvBTionTand two-thirds motion picture s (featu re, shorts and newsree ls). Lighting displays
and live vaudeville-inspired performances turned each show into a unique theatrical event. Called
PARAMOUNT 1 9
presentation-cinema shows, they opened with a five-minute overture from a house orchestra of
twenty-five to a hundred members. Next came'the stage show, lasting about thirty minutes. A
newsreel (five minutes), shorts (fifteen minutes) and the feature film (sixty to eighty minutes)
followed. Exhibitors tried to limit the complete show to 1 50 minutes, sometimes cutting the feature
by several minutes rather than eliminating any other part of their crowd-appealing mix of
entertainment.
Zukor was gaining even more power. By 1921 the US Federal Trade Commission (FTC) esti-
mated that a quarter of all theatres in the USA were showing only Paramount films. On 1 3 March
1 920 Zukor wrote an article in Moving Picture World summarising Paramount's accomplishments:
I am leaving for Europe in a most contented frame of mind, for I believe [Paramount] is now ready to
meet the demands of what am confident I will be the most prosperous year [in cinema history]. It will
be a year of unprecedented profit for theaters that can supply the public's rapidly increasing demand
for genuinely fine motion pictures. Success, in turn, will come to the producer who best can furnish
these theaters with the quality of product, week after week, that these theaters must have. There is
no profit in poor pictures or in poor theaters. You can't make a production that is too good for the
public, for now they are ready to pay increased prices for increased quality. The producer and the
exhibitor who recognizes this can work together for mutual benefit. The successful exhibitor needs a
constant influx of big productions, and [Paramount] is now equipped in every department of its vast
organization to furnish him the productions and the service that will bring him profit.
He then boasted of recent hits:
We have recently given to the public . . . such productions as Cecil B. DeMille's Male and Female,
. . . The Copperhead [staring] Lionel Barrymore, George Fitzmaurice's On with the Dance, William D.
Taylor's production of 'Huckleberry Finn,' and scores of the same quality. We have demonstrated that
the public wants big productions, and that the crowds will come to see a great attraction, a great
story, superbly produced, adequately acted and properly exhibited. Jesse L. Lasky, in charge of produc-
tion, has organized a producing force whose activities extend around the world. It is a solid unit, a
permanent organization of the greatest creative artists the world has ever known. A huge corps of
directors, actors, stage directors and designers are combining their talent and are producing a never-
ending stream of pictures of the type I have named.
Zukor ended by proclaiming the world market his for the taking:
The prospects for the foreign business of [Paramount have never been] better. Contracts signed to
date and those in the process of being worked out give every assurance that the next few months will
be a record breaker in the foreign field. Reports received from our various offices and agencies indi-
16
cate a greatly increased demand for Paramount productions.
In January 1921 Zukor made an important move. He promoted to head of distribution Sidney Kent,
who, though with Paramount only three years had mightily impressed his boss. Zukor said:
I look upon Mr Kent as one of the most aggressive and keenest sales executives in the film industry.
During his tenure as general sales manager he has [in three years] put the selling of pictures on a busi-
ness basis. This he has accomplished by applying to the sales of Paramount Pictures the same stable
methods which have been so successful in other industries. His occupancy of the office of general sales
manager has been marked by many innovations, all making for greater efficiency.
Zukor went on: 'The zoning system has given wider distribution to Paramount pictures, and this
wider distribution has resulted in more equitable prices for all exhibitors.' In short Zukor saw in
Kent the same qualities he liked in himself, namely the ability to steal the best ideas from others,
and then combine these in new ways and adapt them to the new studio system. Kent would
dev elop the run-zone-clearance_system of segregating the film bo c>kincjS_ bv runs (first, second an d
so on ), with a territory (a zong) and fpr fixed period of t ime
, (a clearance of time in b etween each
p eriod) to its maximum. His bu s|nessinnovation s would become the bas isfor distribution power
1 7
through the 1930s and 1940s.
On 1 September 1921 the front page of The New York Times read: 'Government Attacks Big
Firm as Film Monopoly; Accuses it of Conspiracy.' Zukor had done such a good job in fashioning
his Paramount colossus that he had provoked hundreds of complaints. The FTC sued Paramount
for unfair competition, specifically for violating the fifth section of the Federal Trade Commission
Act, and the seventh section of the Clayton anti-trust law. The FTC characterised Famous Players
as 'the largest concern in the motion picture industry', and the 'biggest theater owner in the
world'. It alleged that the policies pursued by Zukor in acquiring theatres had in effect made it
nearly impossible for independent operators to make profits. The FTC also alleged that Paramount
had formed production companies in Britian, France, Belgium, Spain, Scandinavia, Poland, Czecho-
slovakia and India. By the mid-1 920s Zukor had established branch distribution offices in twenty-
eight principal cities of the United States and Canada, in London, Sydney, Wellington, Mexico City,
Paris, Copenhagen, Barcelona, Buenos Aires, Rio de Janeiro, Santiago, Havana, Tokyo, Shanghai
and Manila. Paramount's 140 subsidiary corporations gave Zukor staggering power. The FTC
alleged that Zukor was taking in two-thirds of all the revenues spent in movie theatres in the USA.
In short, the FTC charged Zukor had done what all capitalists longed for - eliminated the compe-
18
tition and created a monopoly.
Zukor hired the best lawyers and fought the FTC to a standstill. Better yet, in 1923, he got a
very big hit, The Covered Wagon (1923). This film began so well in first-run theatres that Zukor
held it back from already contracted exhibitors. It was to have been one of the thirty-nine pictures
to be distributed by Paramount for that season, but through a clause in contracts with the the-
atres, he could simply substitute another picture instead of The Covered Wagon. To milk more
profits from this popular film, in the spring and summer of 1923 he decided t o road-show it (that
PARAMOUNT 21
is, increase ticket prices and take reserved seating). The Covered Wagon was an enormous success,
breaking Dox-ottice"7eôrcfracross the USA. On an investment of $336,000 the company had
received a net profit of $1 .6 million. The publicity generated from the success helped to erase the
negative image created by the Fatty Arbuckle scandals that were sweeping the USA in the post-
19
World War attack on Hollywood as a negative influence on
I society.
Also in 1923 came C. B. DeMille's production of The Ten Commandments. This single feature
cost close to $2 million, maki ng it
t h e mnst pxppnîvp jinnvip produced up to that time. The figures
from this production were truly staggering. More than 2,500 people, 3,000 animals, 33,000 yards
of cloth, 55,000 feet of lumber and 25,000 pounds of nails were used to make The Ten Com-
mandments. The movie was hailed by the critics and proved to be extremely profitable. Zukor had
20
a blo ckbuster - long before the term was invented.
Hn Marcn 1923 ZukorJoiliated-a-goncort rd r ffort t n n rqn r r theatres at a previously

i unmatched
rate. While Paramount had steadily acquired theatres for a number of years, the onslaught of
acquisitions that started with the Los Angeles theatre (bought for $2 million in March 1 923) stag-
gered the imagination. Instead of trying to hide any attempts to formulate a monopoly, Zukor
strived for complete control in full view of the public. In the space of a couple of months, Zukor
acquired the San Francisco theatres of Herbert Rothchlld, the Wilmer and Vincent Circuit of Penn-
sylvania, and Newman's Kansas City theatres. In addition, on 8 July 1925 he announced a $20 mil-
lion theatre-building programme that would result in the construction of twenty-two new houses.
21
H e was simply out to corner the f irjt-run pictur e palace market in t he US A^-And hp HiH
In 1925 he needed a manager in the mould of Sidney Kent to make the most of this vast
theatre chain. He found him in Sam Katz of Chicago's Balaban & Katz. In Chicago B&K's rise had
commenced when its Central Park Theater opened in October 1917. This picture palace became
an immediate financial success. Thereafter Sam Katz, as corporate planner and president, put
together a syndicate of businessmen who had all been wildly successful with their own Chicago-
based businesses: Julius Rosenwald, head of Sears-Roebuck; William Wrigley, Jnr, of chewing-gum
fame; and John Hertz, Chicago's taxi king and later innovator of the rental car network. With their
support, B&K expanded so rapidly, so successfully, that it led this nascent motion picture exhibition
business into a profit machine.
Katz carefully considered the location of his theatres. Before, theatre owners had chosen sites
in the prevailing entertainment district. Katz constructed theatres on the edge of the city, going
after t he new mid dle -class audj ence. Katz demonstrated that it was not enough to simply open a
movie house by happenstance; one had to take the movie show to transport crossroads. Rapid
mass transit enabled the m id dle class and the rich to move to the edge of the city to live in the firs^t
tr ue subu rbs (although many were actually within city boundaries). Katz took full advantage of this
revolution by building B&K's first three movie palaces in the heart of outlying business centres of
Chicago, not downtown. The poor and rural in the USA were expected to take what they could.
But an optimal transport crossroads offered only a beginning. For Katz, the start of every show
was the building - the movie palace. With a pride associated with the opening of a World's Fair or
Adolph Zukor in the late 1920s, a captain of

industry
new skyscraper, Chicagoans of the 1920s proclaimed and heralded their B&K theatres, which
defined opulence and symbolised a special treat, a visit being more than simply going-out-to-the-
movies. The Chicago architectural firm headed by the brothers George and C. W. Rapp designed
these theatres by mixing design elements from nearly all past eras and present locales, including
Classic French, Spanish and contemporary Art Deco renderings. Film-goers came to expect a tri-
umphal arch, a monumental staircase and a grand, column-lined lobby (inspired by the Hall of Mir-
rors in Versailles). The architecture of the movie palace insulated the public from the outside world
and provided a stage for the entertainment. The theatrical phase commenced on the street as one
first gazed upon strong vertical lines accentuated by ascending pilasters, windows and towers that
lifted high above the tiny adjacent shop fronts.
The actual theatre building was made from a rigid, steel shell, on which plaster-made decora-
tions hung in brilliant purples, golds, azures and crimsons. Massive steel trusses supported thou-
sands of people in one or two balconies. Outside, huge electric signs denoted 'bright light' centres,
seen for miles. The upright signs towered several stories in height and flashed their messages in
several colours. Behind these signs, stained-glass windows reflected the lights into the lobby. These
exterior lights reminded many of the glories of the Colombian Exposition ( a World's Fair of 1892
held to celebrate the disco very of America ), whicliâwjhe first serious display of electrical light.
The stained-glass windows evoked church architecture, linking the picture palace with a traditional,
respected, institutional architecture of the past.

PARAMOUNT I"
Zukor's New York skyscraper headquarters, a theatre (bottom, centre) and all the Paramount offices, with his
office on the top floor

Once inside, patrons weaved their way through a series of vestibules, foyers, lobbies, lounges,
promenades and waiting rooms designed to impress, even excite. The lobbies and foyers were, if
anything, more spectacular than the architectural fantasy outside. Decorations included opulent
chandeliers lighting every major room, classical drapery on walls and entrances, luxurious chairs
and fountains, and grand spaces for piano and/or organ accompaniment for waiting crowds. And
since there always seemed to be a waiting line, keeping newly arriving customers happy was as
important as entertaining those already in the auditorium. Inside the auditorium, everyone had a
perfect view of the screen, and careful acoustical planning ensured that the orchestral accompa-
niment to the silent films could be heard even in the farthest reaches of the balcony.
One commentator compared these B&K theatres to baronial halls or grand hotels in which one
might have tea or attend a ball. Katz sought to make its upwardly mobile patrons feel as if they
had come home to the haunts of a modern business tycoon. Katz tendered free childcare, rooms
for smoking, and painting galleries in the foyers and lobbies. The basement of each movie palace
contained a complete playground that included slides, sandboxes, and other objects of fun for
younger children left in the care of nurses while their parents upstairs enjoyed the show.
Ushers maintained a constant quiet decorum within the auditorium proper. They guided patrons
through the maze of halls and foyers, assisted the elderly and small children, and handled any emergen-
cies that might arise. Katz recruited its corps from male college students, dressed them in red uniforms
with white gloves and yellow epaulettes, and demanded they be obediently polite even to the rudest of
patrons. All requests had to end with a Thank you'; under no circumstances could tips be accepted.
Katz outdid even the lavish New York Roxy, with its stage shows, by developing local talent
into 'stars' equal to a Mary Pickford or Charlie Chaplin. If the company could mount popular but
tasteful live shows, it could attract the middle-class audience who had grown up on vaudeville. In
time, B&K became famous for impressive stage attractions. Katz's live stage shows were elaborate
mini-musicals with spectacular settings and intricate lighting effects. B&K celebrated holidays, fads
of the day, heroic adventures, indeed all the highlights of the Roaring Twenties from the
Charleston to hero Charles Lindbergh to the radio. Also, Katz developed stars from orchestras and
organists who provided music for the silent films. Jesse Crawford became an organist as well
known as any Chicagoan of the 1920s. In 1923 Crawford's wedding to fellow organist Helen
Anderson became the talk of Chicago's tabloids. When Sam Katz took the pair to New York, the
Chicago newspapers mourned the loss in the same way they would the departure of a sports hero.
Katz offered the fi rst air-condition ed movie theatres in the world, providing summer-time com-
fort no middle-class citizen in the sweltering central USA could long resist. AfteM 926 most import -
arvUri ovie palac esjnstalled air conditioning, or owners built new the atres incorpora ting it. There
had been crude experiments with blowing air across blocks of ice, but prior to B&K's Central Park
theatre, most movie houses simply closed during the summer or opened to tiny crowds. The movie
palace air-conditioning apparatus took up an entire basement room with more than 15,000 feet
of heavy-duty pipe, giant 240-horsepower electric motors and two 1000-pound flywheels. Soon
summer became the peak movie-going season.
PARAMOUNT 25
With its five-part strategy - location, architecture, service, stage shows and air conditioning - B&K
redefined movie-going in the USA. Katz made more money than any chain of movie houses in the
*
world. His theatres were filled from morning to night, every day of the week. Ad mission prices soared
far past the nostalgic nickel, regularly reachin g a dollar for the best sea ts on Saturday and Sunday nights.
' "
"
Zukor met with Katz in 1925, and bought B&K. The company was renamed Paramount-Publix in
honour of its new theatre chain. Now the Hollywood studio system's largest studio was complete, and
the US film industry entered the age of big business. The studio system needed only one more boost,
which came with the coming of sound. The vertically integrated, classic studio system was in place.
Zukor, Kent and Katz made all decisions in the New York office, based on information passed
up the line. Costs fell, but so did the contact with the public and the feeling of the theatre as a
part of the community. Movie shows were now just another chain store, next to a Woolworth's
five and dime and the Sears department store. The Publix slogan summed it all up: 'You don't need
22
to know what's playing at a Publix House. It's bound to be the best show in town.'
After showing average earnings of $5 million for the three years from 1924 to 1926 inclusive,
Paramount made more than $8 million in 1927. This was the largest annual profit in company his-
tory and indicated that Paramount, as Barrons wrote, 'has reached the end of its program of
expansion, which during the period just ended has consumed surplus earnings . .
.'
The coming of
- indeed 23
sound did little to cut into this profitability it helped increase it.
At a special stockholders' meeting held in December 1929 - where the dividend on common
stock was increased by 25 per cent - Zukor stated what was already well known: Paramount was
sitting on top of the film world. He estimated that profits would double those of 1929 and by early
1930 he was proved right. Zukor said to his shareholders:
The company has reached the position of a well rounded and mature industrial corporation. The divi-
dend to be paid [on 28 December 1 929] will be the 44th consecutive quarterly payment on its common
stock. Including this dividend Paramount will have paid in cash to common stockholder since organ-
ization approximately $32 million and, in addition, has paid out the equivalent of $6.5 million in stock
24
dividends and rights. It has no bank loans and the ratio of current assets to current liabilities is strong.
Money spoke again. Paramount had the key leader, and he developed methods to produce, dis-
tribute and present films in order to maximise profit. Each successful studio that followed also had
a powerful leader who adhered to Zukor's methods of formulating strategies to maximise profit
and maintain its long-run power. Four more became vertically controlled. Zukor simply stated this
to the audience at the Harvard Business School: 'I must leave it to others to estimate the value of
what we have done.' We now know that what he wrought was revolutionary.
Notes
1 . Biography ofAdolph Zukor, issued by Paramount Pictures, January 1 950, Quigley Collection,
Georgetown University, Washington, D.C., p. 1.
.. . .
26 j
2. Adolph Zukor, The Public Is Never Wrong (New York: Putnam's, 1953), Zukor's autobiography, and his
earlier company-sponsored biography, Will Irwin, The House That Shadows Built (Garden City, New
York: Doubleday, 1928).
3. On Saturday night, 1 9 March 1 927, Adolph Zukor journey to Cambridge, Massachusetts, at the
invitation of Joseph P. Kennedy, then head of the FBO studio, who was conducting a series of lectures at
Harvard on the film industry. We get a rare look at how he started - about twenty years after the fact -
in print: Joseph P. Kennedy (ed.), The Story of Films (Chicago A. W. Shaw, 1927), pp. 55-76.
4. Biography of Adolph Zukor, p. 20.
5. Biography of Adolph Zukor, p. 1; The Moving Picture World, 17 October 1914, p. 323; The Moving
Picture World, 6 March 1915, p. 1461, The Moving Picture World, 7 August 1915, p. 971.
6. Kennedy, pp. 55-76.
7. Moving Picture World, 1 9 August 1 91 1 , p. 459; Moving Picture World, 9 January 1 91 3, p. 1 1 58;
Moving Picture World, 21 April 1913, p. 480; Variety, 12 July 1913, p. 3; Moving Picture World, 12 July
1914, p. 272.
8. Kennedy, pp. 55-76.
9. Variety, 26 June 1914, p. 16; Variety, 24 April 1914, p. 19.
1 0. Moving Picture World, 1 1 July 1 91 4, p. 208.

1 1 . Moving Picture World, 20 December 1913, p. 1417; Moving Picture World, 3 January 1914, p. 35;
Moving Picture World, 30 May 1914, pp. 1268-9; Moving Picture World, 22 November 1914, p. 921;
Moving Picture World, 1 1 July 1914, pp. 186-7; Motography, 5 September 1914, p. 329; Billboard, 19
December 1914, p. 3; New York Dramatic Critic, 27 January 191 5, p. 3.
12. The New York Times, 29 June 1 9 1 6, p. 33

13. The New York Times, 3 January 1917, p. 22; The New York Times, 9 July 1 91 8, p. 1 3; Variety, 28
December 1917, p. 237.
1 4. The New York Times, 1 6 May 1 91 9, p. 45; Variety, 25 October 1918, pp. 40-1
15. Kennedy, pp. 55-76.
1 6. Moving Picture World, 1 3 March 1 920, pp. 1 761 -2.
1 7. Moving Picture World, 22 January 1 92 1 , p. 39; Variety, 2 5 March 1 942, p. 54.
1 8. The New York Times, 1 September 1 921 , p. 1
1 9. The New York Times, 25 June 1 92 1 , p. 1 1
20. The New York Times, 19 September 1926, section IV, p. 5.
21 . The New York Times, 29 March 1923, p. 27; Moving Picture World, 14 November 1925, p. 114.
22. Variety, 1 April 1926, p. 36; Arthur Mayer, Merely Colossal (New York: Simon & Schuster, 1953),
pp, 1 06-1 1 ; Howard T. Lewis, Cases in the Motion Picture Industry (New York: D. Van Nostrand, 1 933),
pp. 516-8; Variety, 7 August 1929, pp. 2-8, 189; Variety, 7 August 1929, p. 3; Motion Picture Herald,
20 January 1945, p. 10.
23. Motion Picture News, 31 July 1926, p. 396; Barrons, 13 February 1928, p. 8; Barrons, 30 April 1928,
p. 14; Motion Picture Herald, 5 November 1932, pp. 9-10; Variety, 7 August 1929, p. 3; Film Daily,
8 April 1929, p. 1; Film Daily, 16 April 1929, pp. 1, 4; Variety, 26 September 1928, p. 19; Variety, 29
May 1929, p. 30; Variety, 14 May 1930, p. 4.
24. Barrons, 16 December 1929, p. 10.
25. Kennedy, pp. 55-76.

Loew's/MGM
If Adolph Zukor had a follower, it was his partner - for a short time - Marcus Loew, who stuck with
low-cost vaudeville in theatres in New York City while Zukor was building Paramount. To his friend,
Broadway impresario William Brady, Zukor announced one day in 1902
that he'd found a little fellow [Marcus Loew] who was running [vaudeville/movie] shows - in empty
theaters - [around] New York and wanted to step up in the world by renting a real [higher class] theater
. . . 'Where is he?' [Brady] shouted. 'Don't let him get away.' 'He'll keep, he'll keep,' said Zukor. 'Come
round tomorrow evening [and I will introduce you].' An undersized and slightly pathetic figure in an
overcoat that was none too new and with a walk that reminded me of some of David Warfield's stage-
characters [came forward]. Mr. Brady, said Zukor, meet my friend Marcus Loew. 1
Loew's vision was too limited for the bold Zukor. The older Loew would take a conservative course,
and in the end duplicate the lessons Zukor taught him. His Loew's business would not become as
big as Paramount, but would be as famous to movie-goers in New York and around the world
when Loew set up his version of Paramount production - MGM. Loew was the leader Loew's/MGM
needed, but he lacked Zukor's stamina. Loew effectively retired in 1924, and passed his corporation
to Nicholas M. Schenck, who would thereafter push Loew's/MGM into second place in the emerg-
2
ing studio system.
Loew: the Man and his Mission

The son of Jewish immigrants, Marcus Loew was born on 7 May 1 870 at Avenue B and Fifth Street
in lower Manhattan. He started work in 1876, while still attending grade school, selling newspapers
on the Lower East Side of Manhattan. He quit school at the age of nine for his first job with a map-
colouring firm at thirty-five cents a day. Then he and his fellow workers went on strike for forty
cents - and all lost their jobs. Marcus and another boy started their own printing business. They
acquired an old hand press, and printed cards, later expanding to printing a newspaper, The East
Side Advertiser. Working furiously as reporter, editor and advertising solicitor for the paper, he
made a valiant effort, but the venture failed and he and his teenaged friends were forced to sell
out.
Then he took a job with a wholesale furrier, remaining at this work until he was eighteen in
1888. With modest capital, put aside from his savings, he launched his own fur enterprise. Again
business went well until the recession of the early 1890s, and Loew's firm was forced into bank-
ruptcy. Loew then took a job as a salesman with another fur-making and -selling company. In 1895,
aged twenty-five, he started his own fur company, but had little success. Then Loew engaged in a
jobbing business, dealing in velveteen capes, which were coming into wide demand as the 19th
century was ending.
This business developed gradually and soundly into a prosperous organisation. His two decades
of work experience began to pay off. In 1894 he felt wealthy enough to marry Caroline Rosen-
helm, and they had two sons, twins born in 1897, David and Arthur. Then a chance meeting with
theatre actor David Warfield changed his life. It was Warfield who brought Loew into the amuse-
ment business. In 1 899 both Warfield and Loew were investing in apartment house properties, and
Marcus gave the actor advice and assistance and helped turn one property from a money loser to
a money maker. Warfield was grateful. A shoft time later Adolph Zukor was launching a penny
arcade in Union Square, and Warfield, who had amassed a modest fortune through his success on
the stage in the role of The Music Master, was enthusiastic about Zukor's new enterprises. He
induced Loew to enter with him into an association with Zukor and his partners. One of those part-
ners was William Brady who, as described above, met Loew through Zukor.
Zukor's business was flourishing, but he insisted he was the head. Loew and Warfield did not
like sharing power, and so withdrew to form their own company. The first of their shows was
established at 23rd Street and Eighth Avenue, Manhattan. On 4 November 1904 Loew then formed
the People's Vaudeville Company. Two years later h e pionee red nickel vaudeville, a low-priced var-
iety show that included both films and live entertainment. Loew offered a bargain to lower-middle-
class patrons - people who could not afford high-class high admissions charged by Keith-Albee
and Orpheum. With lower prices and movies, Loew could compete with these two entrenched
giant vaudeville companies. From the beginning, Loew considered himself in vaudeville, not the
fledgling motion picture industry. As he prospered, Loew lived at 1 1 1th Street and Seventh Avenue
i
p Harlem u at the_time filled with J ews, including Adolph Zukor, who lived across the street. 3
His strategy to separate himself from the pack was to take over failed theatres in the New York
City metro area, and install his combination of vaudeville and movies at low prices. In 1906 Loew
leased a 2,000-seat house in Brooklyn that had been home to a burlesque troupe, refurbished it,
and named it the Royal. Next he leased the Schubert organisation's excess New York City theatres.
In 1907 Loew then partnered with the Schenck brothers, Joe and Nick, to run the Lyric in Hobo-
ken, New Jersey, across the Hudson River from Manhattan. Nick Schenck would stay with Loew's
4
for the next half century.
By 1910 Marcus Loew's theatrical circuit covered all five of New York City's boroughs. In 1912
the business was incorporated. Marcus Loew was a skilled leader, running his ever-expanding
theatrical empire with a conservative hand. He constantly tinkered with his formula: positioning
his theatrical entertainment combination at a price lower than high-class vaudeville and slightly
higher than the motion picture shows. He ran the operation as a real estate business in which, if
the theatre failed, the land it sat on was still his. Noted playwright and composer George M. Cohan
called Marcus Loew the 'Henry Ford of show business', an appropriate description of an entrepre-
5
neur who sought to tender popular entertainment at low prices.
A conservative, Loew stuck to the territory he knew - the environs of New York City. His acqui-
sition of theatres such as the American and the Plaza was a 'remarkable achievement', judged
Moving Picture World.
LOE W'S/MGM
In five years (late 1905 to early 191 1) Loew has become not only enormously rich but his holdings are
perhaps the largest of any single individual operating in the amusement world. If Mr. Loew can control
his ambitions and refrain from activities which may mean his emerging into new and uncertain fields,
then indeed is he likely to become the most interesting as well as the most powerful figure in the
distinctly popular priced field of vaudeville combined with moving pictures.
6
Moving Picture World was right on the mark, as early as 1 91 1
Loew had good help. On 4 April 1914 The New York Evening Journal profiled the career of
Loew's ace assistant, Nick Schenck. He had come to the USA aged eight, worked first as a news-
boy, next as a drug store clerk, like his brother Joe, and then parlayed their savings into two amuse-
ment parks, the most notable being Palisades. By 1914 Nick Schenck was a millionaire, running the
parks and working for Loew's. He and Joe decided - like the brothers Warner would - to pool all
their earnings and split them 50-50. Nick supported Joe so that Joe could train to become a phar-
macist, but they made their money by buying the real estate on which the drug stores stood. Nick
liked to work with his hands (at one point her aspired to be a carpenter). He was a natural running
the amusement parks the brothers acquired, but he was even better as Loew's right-hand man. 7
Loew and Schenck were not above local New York City experiments. For example, in the
summer of 1914 they rented a baseball field and drew 21,000 to a spectacular outdoor vaudeville
show, which also included movies. With no real mechanical air conditioning at the time, this was
a coup for Loew and Schenck - vast summer earnings. The stage and movie screen were set in
centre field. They offered a Wild West show, singers and dancers, and screened a six-reel feature,
8
The Wrath of the Gods, distributed by Mutual, which had had its first run in January 191 4.
On 6 October 1917 Moving Picture World profiled - glowingly - Marcus Loew. The reporter
first noted it needed like a great place to work when visiting the Broadway headquarters:
The printed pictures of Marcus Loew don't tell you much about him. They show the roundness of his
head and features and they show a kindly face. His eyes are a pleasant but a usual green and show
sensibility and imagination. Talking with him the writer became conscious of a greater capacity in him
than he expected. Nowadays there is so much high-class talent in every great organization that there
is a tendency to regard it as a machine and the man at the head of it being more lucky than necess-
arily able. Loew enterprises are an excellent likeness of Marcus Loew. He is an unspoiled man and he
makes a very good impression on one as a man. He shows a bigness by his simplicity and his conver-
sation confirms it.
Moving Picture World found Loew a very rich man, his wealth stemming from his pioneering entre-
preneurship: he was one of the first to open a picture show in New York and the first man to com-
bine vaudeville with pictures. His innovation: provide a high-class entertainment to a great number
of people at a low price. 'We don't go into any place just because there is money to be made
there. We go where there is need of one of our shows.' As the season was beginning in 1917, the
9
Loew enterprises were charging admission prices of ten, fifteen and twenty-five cents.
By 1919 Loew's, Inc. ranked as a $25 million corporation, and traded on the New York Stock
Exchange. In his chain of 1,000-seat theatres, Loew began to rely on movies as t he core of his
'vaudeville' show. He still ran his whole corporation as a real estate business in which the show
could fail but the land would still be his. By the end of World War I, Loew had an interest (through
various partnerships) in fifty-six theatres. He even became a bit bolder and began to expand out-
side New York City. For example, during the first week of July 1919 Loew executed the largest real
estate transaction in the history of Indianapolis, worth nearly $5 million, for a prime piece of real
estate in the heart of the city. Loew then announced he would build a 3,000-seat theatre and
office building - to open in March 1920 - which would cost another $1 million. All across the USA,
. not just in New York, Loew 's was helping to pioneer, with others, wh^t \A/nniH mngp to bp calle d
'the picture palace style' that is, a first-runjfpaturp film and a livp stage show J
^
But with Zukor vertica ly in:eg r a: ng. Loew was forced to pay higher ana higher prices to rent
^ top films. In addition, motion pictures were gradually forcing vaudeville from the top of the mar-
guee. Patrons would come to see and hear first-line vaudeville talent, but no longer Loew's cheaper
acts. In January 1920 he announced Loew's was vertically integrating by purchasing Metro Pictures,
forming what Exhibitors Herald called a 'strong combination'. But in retrospect, Schenck remem-
bered: 'We still had a rather small organization when we formed Loew's Incorporated in 1919.'
They were still far behind Zukor. 11

The 1920 Metro purchase would evolve, within four years, into Metro-Goldwyn-Mayer, as
Loew bought the Goldwyn movie-making company and hired Louis B. Mayer to oversee the new
movie-making colossus. Thus Loew could match Zukor, with movie production, distribution and
presentation. Loew did not pay a cent in cash for Metro, but traded 50 per cent of Loew, Inc. stock
to Metro board members in return for all the Metro stock. Faced with the dilemma of decreasing
revenues and increasing production costs, and needing to pay back some substantial loans taken
at exorbitantly high interest rates, Metro desperately needed cash. Loew had lots. Under Loew's
stewardship and with the immediate influx of $2 million, Metro studios expanded. Loew also
expanded Metro's distribution network. And the deal had instant results, with the release of The
Four Horsemen of the Apocalypse (1921), which launched the career of Rudolph Valentino. Yet
Loew was still learning and, in his conservatism, failed to re-sign Valentino, losing him to Zukor.
Still, The Four Horsemen of the Apocalypse gave the anxious Loew the confidence that he and
12
Schenck had done well swallowing both the Goldwyn and Mayer operations.
In late August 1921 Loew opened his Times Sguare showcase, the Loew's State, as his 104th
theatre. The sixteen-storey office building at 43rd Street and Broadway also contained Loew's cor-
porate headquarters. In his office in the new theatre building Loew declared to The New York
Times that:
Each of our 1 04 theaters needs constant attention, so for the next six months we shall devote ourselves
to building up the theaters that we have instead of building others. Indeed it is doubtful if we shall
build any more theaters - a great many houses, including some of the best are being offered to us
ready made. We are being asked to put our b rand of e ntertainment into these houses oijÂSOjaer
cent, sharing basis, and we will be required to run no financial risk at all. So that [technique will be
LOE W'S/MGM 31
used as] our method of procedure hereafter. The building of theaters is a difficult undertaking - it
required two years, for example, [for purchasing] all of the property on which the new State Theater
stands.
13
At heart, Loew was almost as conservative as Zukor was bold.
In September 1921 Moving Picture World described Loew's State, and judged it the best pic-
ture palace in the nation. It had every convenience possible to satisfy the movie-goer. Every pre-
caution had been taken to protect the public in every way. In case of fire, an abundance of exits
led directly to the streets bounding the theatre, so that ushers could easily empty the entire theatre
in three minutes. To protect their health and give them comfort, architect Thomas Lamb's engi-
neers developed scientific ventilation, free from draughts, still assuring a constant circulation and
change of fresh, filtered air during the performance (but no air conditioning yet). The lighting
effect, by the direct method, gave the auditorium a beautiful sofUigjÎir^ which, when desired by
the art director, gave way to a mysterious cast, changing from one colour to another. By blending
14
three coloured lights it was possible to create an unlimited number of effects.
To fully appreciate the interior, the trade paper recommended a visit.
The outer lobbies were finished in various colored marbles; floors of similar material. The inner lobby
and foyer are a splendid Spanish Renaissance Hall, with a marble floor and walls of Travatine stone up
to the height of the mezzanine. From this level running around the three sides of the lobby, was hung
one of the best murals adorning the walls of any building in New York. Overlooking this foyer [one
saw] a reception mezzanine promenade with another open well looking directly into the orchestra
floor of the auditorium. A marble balustrade surrounds this well. Along the sides and at the ends are
Sienna marble columns.
But the industry knew what rose above the auditorium was far more important: the offices where
15
Loew and Schenck would run the empire.
Through 1922 and 1923, Loew kept expanding, but he also made a bold move into radio. In
July 1923 he purchased a small station in Brooklyn, and moved to the Loew's State building. It was
then WHN, but would in time be christened WMGM. But hints began to surface that Loew was
slowing down, and Nick Schenck, it was noted, took the lead for Loew's in the negotiations.
Schenck stated upon purchase that he wished to use the station to broadcast shows from the
Loew's State Theater, and to advertise upcoming movies at Loew's three dozen theatres in the New
York City area. Marcus Loew was with his wife in Europe for 'treatments'. Later in 1923 Loew
announced he had taken a $5 million life insurance policy for his family. He was sick and ready to
16
slow down, and so informally handed the leadership of Loew's, Inc. to Schenck.
Nick Schenck Takes Control

By 1923 Nick Schenck was in charge. Loew retired to his Glen Coe Long Island estate. Schenck
made no major moves without consulting Marcus Loew, as Loew still owned the corporation. From
his office atop the Loew's State building, Nick Schenck made every important decision, from which
"I THE BOLLYWOOD STUDIO SYSTEM
films to make (by constant telephone calls to Mayer m trie Culver Oty studio), to how to distribute
MGM films, to which theatres to book MGM films, to what his Loew's theatres waist book.
T7
Schenck was in charge of Loew's, lnc
Loew's, Inc. was capitalised at STQQ millio n, and was the secorict-y ^r-.-r ,-
the New York Stock Exchange, after Zukor's. In one sense Loew's was still a local New York Qty
company. With twenty-eight theatres m Manhattan, thirteen in Brooklyn, and another ten m other
boroughs and adjacent aties in New Jersey, Loew's held control af ail the runs To milk the great-
est possible money fro m the New York City market all other movie companies nciuding
Paramount, had to booK — £.:~enck . The smaller part of Schenck' s strategy followed the
model of the Keith's and Orpheum vaudeville circuit - awn a couple of major first-run houses in
the biggest aties m the USA So by T925, Loew's owned theatres m (based upon the T92Q census;
in the fifth-largest aty (Cleveland), sixth largest (St Louis), seventh (Boston), eghth (Baltimore),
ninth (Pittsburgh), tenth (Los Angeles), eleventh (Buffalo), twelfth (San Franasco), fourteenth
(Washington, D.C), seventeenth (New Orleans), nineteenth (Kansas City), twentieth (Seattle), and
so on down the line to the twenty-ni nth-largest aty in the USA in T92G (Toledo, Ohio). Cantrailing
the best locations and theatres m New York City gave Schenck a base he knew well and could run
(From left) Buster Keatnn, Harry Rapf, Irvin Thaiberg

Mayer, Eddie Mannix and Albert Lewtn
LOEW'S/MGM 33
like a local operation. Owning theatres in other populated cities gave him a bargaining position to
get MGM films into these cities - in exchange for letting Paramount and other studios into Loew's-
18
dominated New York City picture palaces.
By April 1923 everyone knew Marcus Loew was simply a figurehead. Nick Schenck was run-
ning Loew's, Inc. So, for example, when the musicians' union threatened a strike, it was Nick
Schenck who spoke for the theatre association of New York. Nick Schenck was becoming a famous
leader and so when his first wife Annie sued for divorce in April 1923, it made the newspapers. He
was rich enough to hire major lawyers to make the case quietly disappear. In April 1924 Loew's,
Inc. announced a profit of $1 .6 million for the fiscal year ending 9 March 1924. 19
Schenck began to reward film-makers who produced. While it was always clear that the New
York office (meaning Nick Schenck) had the last word at MGM, rising producer Irvi ng Thalbergwas
-with Schenck's approval - developing a system to produce quality MGM features. Indeed, Thalberg,
not Mayer, was the effective head of film production at MGM because he had Schenck's ear, start-
ing in 1925. While Louis B. Mayer ran the studio, it w as Thal berg who, by-and-laj gp. ^wtpjt_tkat
t he required feature films were rpgularly turned out His years at the studio were certainly
. its best in
terms of making money. Despite severe health problems from birth and the lack of any significant
formal education, Thalberg trained at Carl Laemmle's Universal as studio manager for Universal City.
Thalberg was best as a manager and cultivator of talented directors, producers and writers. But to
20
the public the name was Louis B. Mayer. Yet, above both men, the final word lay with Nick Schenck.
Two early MGM films Schenck green-lighted, Ben Hur (192 5) and The Big Parade (1927 ),
marked MGM's arrival as one of Hollywood's leading siuoTos. Ben Hur was a phenomenal success.
At a time when domestic earnings of $1 million and foreign earnings of $500,000 were the
benchmark of a box-office hit, it earned a domestic gross of $4,359,000 and a foreign gross of
$5,027,000. But the grandiose Ben Hur was far from typical at MGM during its early years. The
budget range of the other twenty-five films of the 1924-5 season was between $80,000 and
$3 1 8,000. The Big Parade was much more typical of these early days of MGM. Director King Vidor
began filming this World War I story on a budget of only $205,000, which was allowed to esca-
late to $382,000 when Schenck gave the go-ahead. It earned a domestic gross of $4,990,000,
a high foreign gross ($1,141,000), and so returned the best profit ($3,485,000) of any MGM
feature of the silent era.
Thereafter stars made MGM. For example. Lon Chaney played fiends and villains in horror films
that were usually directed by Tod Browning (The Unholy Three, 1925-6; The Unknown, 1926-7;
and London After Midnight, 1 927-8). These were made for modest costs despite their consistent
success at the box office, which made them all the more profitable. Thalberg was always looking
for new talent, and found Jo an Crawfor d. Her Our Dancing Daughters (1928-9), for example, cost
21
only $178,000, but earned a gross of $1,099,000 and a profit of $304,000.
By the end of 1925 Loew's was second only to Paramount. But their corporate creations dif-
fered diametrically. Zukor had started with movie-making and then vertically integrated down-
wards, while Loew's grew vertically upstream. Loew's always reflected its origins as a theatre chain.
Schenck created separate subsidiaries for each theatre - literally - so that no one failure could drag
down the company and his minority partners could run (and take part of the risk for) the non-New
York theatres. Srhpnrk al pnp ran thp Npw Yo rk City rhain â Inral monopoly 22
In April 1 926 - as the era of the talkies was just beginning across town at Warner's - Schenck
announced record earnings. The MGM merger was already paying off, contributing a sizeable
chunk of the $7 million in profits. Loew's by April 1926 owned fifty-one theatres in the greater
New York City area - far more than any other theatre owner - and accumulated even more power
because Schenck held the key for booking any film in the largest city in the USA. By 1 926 Schenck
had not quite caught Zukor, but he was certainly ahead of any other studio corporation. 23
To build more theatres, in 1927 Nick Schenck raised needed funds by issuing preferred stock,
and thus Loew's took on no new debt. He made Loew's stock attractive by Enabling buyers, at
some point in the future, to convert this preferred stock into common stock. As MGM was doing
so well with its films under Thalberg, and Schenck was skilfully leveraging their success into monies
for more theatres, The Magazine of Wall Street recommended the purchase of Loew's stock: 'The
[Loew's preferred stock] appears to be a sound investment yielding a liberal return.' Schenck was
not in debt to banks, but to thousands of shareholders, none of whom could cause him a prob-
lem in running 'his' company, as patron Marcus Loew owned the controlling interest. Schenck
always looked to the theatres for his cash flow. His key tool was vertical control of all parts of the
film business from his theatrical base. Yet Schenck permitted his stars, Mayer and Thalberg to glow
- pure anonymous power. 24
in the public's eye. He had the greatest gift
Loew Dies; Schenck Formally Takes Over

On Monday morning, 5 September 1927, Marcus Loew died at his estate from a heart attack (only
rest and retirement at Glen Coe had kept Loew alive). Succession had been well planned.
The Loew's Corporation issued a formal announcement. 'The affairs of Loew's, Inc., and Metro-
Goldwyn-Mayer, representing the principal interests of the late Marcus Loew will continue with-
out interruption under the administration of Nicholas M. Schenck, who has had active charge of
both companies since 1924, when Mr. Loew went into practical retirement owing to failing health.'
All that changed was that the word 'vice' was dropped from Schenck's title. Schenck stated for
the record: 'It is futile to describe the grief of all of our associates, and myself at the loss of that
great loveable person. His memory will linger long in our hearts and in the annals of the amuse-
ment business.' On 19 September 1927 Schenck officially became president of Loew's, Inc; he
25
would run the company for the next thirty years.
The Magazine of Wall Street in late October 1927 labelled Loew's a 'Strong Unit in Popular
Industry; Expansion in Recent Years Strengthens Earning Power'. Wall Street praised Schenck's
policy of slow but steady expansion. Wall Street loved Loew's, because of Nick Schenck, and all
knew who gave Louis B. Mayer his orders; Mayer was simply the West Coast studio lot manager. 26
It came as no surprise when in December 1927 Nick Schenck raised another $15 million, using
preferred stock again, for theatre construction. The following year he did it again. To some,
Schenck was doing better than Zukor. Barrons judged Loew's, 'far stronger than any other moving-
picture company'. Current earnings were running some 20 per cent ahead of the spring of 1927,
and Schenck was building about two theatres a month. He also announced his plan for 4,000-seat
theatres for New York City: one in Jamaica, Queens, one on the Grand Concourse in the Bronx,
one on Staten Island, and one on upper Broadway at 1 75th Street. Schenck was strengthening his
27
hold on the New York City movie-going market.
LOEW'S/MGM 35
On 1 1 May 1928 Loew's and Paramount signed with Western Electric for sound-on-film rights
and equipment to use in production and exhibition. The two corporations had bargained as one,
and on that Friday in May signed identical contracts with favourable terms. (United Artists also
signed, as Nick Schenck represented UA in all negotiations; it was headed by his brother.) MGM
took less than twelve months to switch over to the production of talkies, and Loew's theatres were
among the first to be wired. The coming of sound caused no chaos; it simply made Loew's even
28
stronger.
Looking at Loew's as 1929 endj?d^J7}gJVfaga^ movie

atte ndance was highest" in N evvYofk City^ where every person averaged a vis iteachjzueek. Of
course, most attended a Loew's theatre. Schenck had made Loew's second only to Adolph Zukor's
Paramount (whose headquarters were across the street). These two giants established the very
basis of the studio system.
Notes
1 . William Brady, Showman (New York: E. P. Dutton & Company, 1 937), pp. 266-70.
2. There are no private papers for Marcus Loew. Nor are there very many writings. For a rare example see
Marcus Loew's 'The Motion Picture and Vaudeville' in Joseph P. Kennedy (ed.), The Story of Films
(Chicago: A. W. Shaw, 1927).
3. Variety, 30 March 1907, p. 6; Moving Picture World, 6 February 1907, p. 88; Theatre Magazine, March,
1914, pp. 139-40, 145; Moving Picture World, 6 October 1917, pp. 78-9; Moving Picture World,
6 October 1917, pp. 78-9; Motion Picture News, 16 September 1927, pp. 838-40; Photoplay, August
1927, pp. 40-1, 129; American Hebrew, 26 September 1927, pp. 3-4; The New York Times,
6 September 1927, p. 33.
4. Billboard, 5 June 1909, p. 5; The New York Times, 21 May 191 1, p. 3; The New York Times, 22 May
191 1, p. 6; Billboard, 20 March 1920, p. 3; Billboard, 3 July 1926, p. 3; The New York Times, 2 May
1935, p. 19; The New York Times, 25 May 1935, p. 29; The New York Times, 1 1 August 1935, section
XI, p. 1; Motion Picture Herald, 18 May 1940, p. 54; Motion Picture Herald, 25 May 1923; Business
Week, 9 April 1 966, pp. 32, 34; Palisades For Fun, booklet, June 1 969, passim; The Sunday (Bergen
County) Record, pp. C1, C4-C5; The New York Times, 20 January 1971, p. 36.
5. Robert C. Allen's Vaudeville and Film 1895-1915: A Study in Media Interaction (New York: Arno Press,
1980) analyses with considerable skill the place of Marcus Loew in merging motion picture and
vaudeville entertainment as a mass industry. See also Photoplay, August 1927, pp. 40-1, 129; Abel
Green and Joe Laurie, Jnr, Show Biz: From Vaude to Video (New York: Henry Holt, 1951),
pp. 162-3; Moody's Manual of Industrials (New York: Moody's Investor Service, 1920), p. 2736.
6. The Moving Picture World, 1 8 March 1 91 1 , p. 577; The New York Times, 1 3 December 1 91 3, p. 13; The
New York Times, March 1914, section p. 13;
1 II, The New York Times, 27 March 1914, p. 1 1.
7. New York Evening Journal, 4 April 914, p. 6. 1
8. The New York Times, 23 June 1914, p. 1; Allen, 1 pp. 274-98.

9. Moving Picture World, 6 October 1917, pp. 78-9.
1 0. Moving Picture World, 5 July 1 91 9, p. 74.
1 1 . Exhibitors Herald, 1 7 January 1 920, p. 47; Moody's Manual of Investments, 1 92 1 pp.,

1 275-6;
Prospectus, Loew's, Inc. 30 October 1919, pp. 1 -3, copy in possession of the author.
12. Fortune, December 1932, p. 32.
13. The New York Times, 3 1 August 1 92 1 , p. 21 ;

Moving Picture World, 1 September 1 92 1 , p. 1 53.
.
36
I
1 4. Moving Picture World, 1 September 1 92 1 , p. 1 53.
1 5. The New York Times, 4 September 1 92 1 , p. 3.
1 6. The New York Times, 28 July 1 923, p. 1 0; The New York Times, 3 November 1 923, p. 1 8.
1 7. Literary Digest, 24 September 1 927; Photoplay, August 1 927, pp. 40-1 , 1 29; The New York Times, 6
September 1927, p. 33; Theater (New York), March 1914, pp. 139-40, 145; Exhibitors Herald, 17
January 1920, p. 47. For information on the mergers that led to MGM see The Velvet Light Trap, no. 19
(1 982), pp. 50-1 For more information on the

. architect responsible for many of Loew's theatres see
Robert A. M. Stern, Gregory Gilmartin and Thomas Mellins, Architecture and Urbanism Between the
Two World Wars (New York: Rizzoli, 1 987), pp. 246-52.
1 8. Wid's Yearbook, 1 9 1 9-20, p. 1 33; Wid's Yearbook, 1 920- 1 , p. 1 99; Wid's Yearbook, 1 92 1 -2, p. 75;
Film Daily Yearbook, 1926, p. 625; Moody's Manual of Investments, 1930, pp. 2461-70.
1 9. The New York Times, 1 April 1 923, p. 7; The New York Times, 1 9 April 1 923, p. 1 0; The New York
Times, 1 April 1924, p. 36; The New York Times, 18 April 1924, p. 21.
20. Moving Picture World, 1 3 March 1 920, p. 1 765; Moody's Analyses of Investments, 1 924, pp. 2 1 59-65.
21 . Historical Journal of Film, Radio and Television, vol. 12, no. 2, (1992), pp. 131-3.
22. The New York Times, 5 November 1924, p. 34. See Moody's Manual of Investments, 1929,
p. 2461-70 for a complete list of the theatres, and their unique incorporations. For example, during the
second half of 1925 alone - after the merger with MGM, Loew's was still acquiring theatres. See also
77ie New York Times, 18 June 1925, p. 16; The New York Times, 18 July 1925, p. 14; The New York
Times, 22 July 1925, p. 6; The New York Times, 22 October 1925, p. 42; The New York Times, 4
November 1925, p. 31; The New York Times, 21 November 1925, p. 14; The New York Times, 30
23. The New York Times, 1 3 April 1 926, p. 35; The Film Daily Yearbook, 1 927, p. 372.
24. Moody's Manual of Investments, 1 927, pp. 2476-84; The Magazine of Wall Street, 1 7 December 1 927,
pp. 332-3, 379.
25. Motion Picture News, 1 6 September 1 927, pp. 837-8; The New York Times, 6 September pp. 1 , 23.
26. The Magazine of Wall Street, 22 October 1 927, p. 1 1 21
27. 7??e New York Times, 16 December 1927, p. 37; The New York Times, 17 December 1927, p. 27.
28. Moody's Manual of Investments, 1929, pp. 2461-2.

29. The Magazine of Wall Street, 2 November 929, 1 pp. 24-5, 60; The New York Times, 29 April 1 929,
section IX, p. 5; Variety, 30 July 1930, p. 8.

3
Fox
From his base inJSjew York City, Will iam Fox established a chain of earl y movie and vaudeville ttje-
atres in the manner of Loew's, but with less success. But he did enter movie production earlier.
During the 1910s Fox set up a film production unit to feed his growing number of theatres, eventu-
ally incorporating as the Fox Film Corporatio n. In 1914 the Fpv co mp a ny m^Ho its
fjrtf fiinn in Lo s
Angeles; a year later it set up a permanent operation in California, eventually building a studio lot
complex in Hollywood. By 1920 the Fox company had offices for distribution throughout the world,
and an expanding chain of movie palaces. William Fox, however, was not a leader with the skills of
an Adolph Zukor, Marcus Loew or Nicholas Schenck v It took the Fox company's pioneering inno-
1
^ ^7
vation of sound to turn Fox Film into a major studio by 1930.
The Leader: William Fox

'William Fox' was born the first day of 1879, as Wilhelm Fried Fuchs in Tulchva, Hungary, the son
of German-Jewish parents, Michael Fuchs, the operator of a general merchandising store, and Anna
Fried. In 1880 the family, with baby Wilhelm in arms, emigrated to the USA where the surname
was anglicised. The Fox family took up residence in a tenement on the Lower East Side of New York
City, with Fox's father securing employment as a machinist in the garment industry. As a boy, Fox
during the 1880s peddled newspapers and candy lozenges to help support his family. He was the
eldest of thirteen children, one of six who survived infancy. At the age of eleven, in 1890, he quit
school to work in a clothing firm. In 1900, aged twenty-one, after launching the Knickerbocker
Cloth Examining and Shrinking Company with a friend, he married Eve Leo, a clothing manufac-
2
turer's daughter, with whom he had two children.
Like Zukor and Loew in the fur business he looked for an emerging industry
, in which to invest
and establish his wealth. In 1 903 he sold his cloth-shrinking business for $50,000 and used $ 1 ,666
of his profits to purchase a Brooklyn nickelode on from Vitagraph co-founder J. Stuart Blackton. In
1904 Fox established the Greater New York Film Rental Company to distribute films to his own
growing chain of theatres. Like fellow New Yorker Marcus Loew, he was at heart a theatre owner.
In 1910 he purchased the old Academy of Music on Union Square. For three years he ran a stock
company, producing a play a week and charging ten, twenty and thirty cents admission. But by the
end of 1912 he had lost a reported $380,000. He then decided to turn the Academy into a movie
theatre and, dissatisfied with the offerings of the Trust (whom he fought in court), decided to
3
produce his own films starting in 191 4.
With the 1 February 1915 incorporation in New York City of Fox Film Corporation, Fox only
lacked national distribution. He was vertically integrated only in the East. He launched his film studio
in an obscure section of New York's Staten Island, keeping his theatres and rental accounts. Fox
Film's first production, a one-reeler titled Life's Show Window, proved a start. But as the 1910s
ended, he had learned from Zukor to make new 'feature films'. In 1 91 7 Fox rented a studio lot in Los
Angeles, and was trying to make the actress The odosia Goodm an (whom Fox publicity had renamed
Theda Bara) into^ the next M ary Pickf ord. A series of WgsieiQS featuring former Selig playerlomMi*,
~
and later B uck )nnps began grossing $600, 000 to $800,000 per picture. Fox hired Winfield Shee-
han, a former reporter whom Fox had met in New York City, to driPR^hpphanj/yas responsible fo r
thp si irrpss nf Thpria Rara^jmrl this convinced Fox to promote him to head of production. 4
Like Marcus Loew, Fox operated a series of second-class vaudeville houses in which films
became more and more the top of the bill. In 1919 the Fox company set up a permanent oper-
ation in California, eventually building a small studio lot complex located at Sunset and Western in
Hollywood. By 1920, following Zukor's lead, the Fox company established offices for distribution
throughout the world. Through the mid-1 920s William Fox personally sought to create a set of the
greatest movie palaces in the world, each bearing his name. Soon thousands each day sought
movie fun at 3,000-seat Fox picture palaces in Brooklyn, New York, Detroit, Michigan, St Louis,
Philadelphia, San Francisco and Atlanta. But despite these major city locations, Fox lacked a chain
large enough to reap economies of scale. He learned from Zukor, but never enough to catch
5
Paramount.
From the beginning, William Fox was not chummy with either Zukor or Loew. He viewed them
as enemies who had taken the New York market away from him. He was a classic first-born - inde-
pendent, wanting to go it alone. As he prospered he took up an individual sport, golf, which

because of a crippled left arm, he played with one hand, ultimately with extraordinary skill (he
scored three holes-in-one, without the assistance of a caddy). At his office he was hard to visit.
There was a sequence of outer guards - hard-visaged fellows with guns on their hips - and an ex-
detective on the final reception desk. Only after passing these guards was a visitor admitted,
6
through locked doors, to William Fox's inner sanctum by his secretary.
As a leader, William Fox lacked Zukor's vision. For exampl e, he was late to mo v e to Hollywood.
Indeed, in May 1919 Fox announced to the press a new studio - in New York City! This four-storey
factory-looking building, between 55th and 56th streets and facing 10th Avenue, was also William
Fox's main office, and could accommodate 1,000 workers. An unusual feature was a large air-
conditioning plant which served the whole structure, so that the temperature of 68-70°F prevailed
throughout the building during all seasons of the year (his theatres were not air conditioned!). The
10th Avenue front of the first and second floors were devoted to administration offices, including
the private offices of Fox and Sheehan. Zukor and Loew would have to teach him that a minor
7
studio in California was not sufficient to supply a major studio operation.
Fox moved slowly to expand, while Zukor was rapidly increasing his power. It was not un til
1 924 that Fox purchased a 4 50-acre plot of land - at enorm ous cost - for a new Hollyvvoodjtuxljp
FOX l»
lot. Construction began in the fall of 1924, and at a cost of $2 million was ready in time to help
produce some of the features for the 1924-5 season. Sheehan was sent by William Fox to manage
this expanded West Coast presence. But Fox left most of the land undeveloped, not building sub-
stantially until the coming of sound. By the mid-1 920s Fox finally understood that a major studio
operation was necessary in southern California and - as a press release put it - 'the Fox banner has
been carried into almost every land under the sun'. Distribution had proven key for Paramount and
8
later Loew's. William Fox was always playing catch-up.
By 1925 the Fox company occupied, along with Warner Bros., a middle echelon within the film
industry in terms of both economic power and product prestige. In both categories the studio
system was presided over by Paramount, followed by Loew's. These two stood as the largest and
most fully vertically integrated film companies, controlling not only the production and distribution
of their products, but exhibition as well through the hundreds of theatres in their chains. William
Fox owned few theatres in 1925. And in terms of working capital, Fox was a distant third behind
9
Loew's, having a third of its rival's assets.
Fox tried ways to differentiate his offerings. In 1925 product prestige can be thought of as the
extent to which the films of a studio are perceived to be of 'quality' by contemporary moulders of
public opinion about films - commentators and critics in the trade and the general press. In deter-
mining the Fox prestige factor, I have examined the annual critical poll taken by the Film Daily
If!*
A.
Aspiring movie head, William Fox, dictating his orders to his secretary in his New York office
Yearbook of trade paper and newspaper film critics - a total in 1925 of 104 'best films' lists - and
Photoplay, the most influential of the fan magazines in the late 1 920s, for its monthly designation
of the six best films released. In 1925, the first year of Film Daily's poll, of 1 12 films mentioned by
104 critics, only seven were Fox productions, the highest rated being John Ford's The Iron Horse,
which was the fourteenth most-often-mentioned film. It was the only Fox film to be listed by more
than two critics. Similarly, of the seventy-two pictures singled out by Photoplay in 1925, only two
were Fox efforts. In both lists, the films of Paramount and MGM predominated. 10
In the autumn of 1925 Fox announced that he was arranging with a number of Broadway pro-
ducers to finance plays with strong movie potential. In the mid-1 920s, studio executives coveted
stage plays as the most precious story properties for the motion picture production. Here was a
ready-made story with proven dramatic appeal and with considerable public recognition, the latter
due to the advertising given a Broadway play and its usual road tours. But as the demand for suc-
cessful stage properties increased during the 1920s, so did their price. Again William Fox was a fol-
lower. As early as 1919, Zukor had begun to move into theatrical finance. By providing production
funds for a play, Zukor would receive the screen rights. Late again, in 1 925 Fox spent $ 1 50,000 in
theatrical finance, making a minimal effort as compared to Zukor. The 2 January 1926 issue of
Moving Picture World summarised the tone for the 1926-7 Fox production plans: 'For release in
the new season, starting September 1926, Fox takes another great step forward through the pro-
duction of the world's best stage plays and popular novels of high screen value.' Among the fif-
teen Fox Giant Specials were: four David Belasco plays - The Auctioneer, Return of Peter Grimm,
The Grand Army Man and The Music Master - The Cradle Snatchers, a Broadway comedy which
ran for 338 performances in 1926; The Monkey Talks, a stage success in London and Paris; and
11
What Price Glory?, the 1924 smash Broadway hit.
In 1925 William Fox moved to create a subsidiary, the Fox Theater Corporation. Stock in it and
in the Fox Film Corporation itself was now offered to the public. With the proceeds of this issue,
entire theatre chains were acquired, including the Poli circuit, and the West Coast Theaters, which
owned houses in major cities along the Pacific coast from Seattle to San Diego. He bought the Roxy
in New York from its developers just before opening night, and in Atlanta took over the Yaraab
Temple (would-be home of local religious group, the Shriners), rechristening it the Atlanta Fox. To
12
save money he built movie palaces in Detroit and St Louis as twins of each other.
By 1926 Fox had a three-prong production strategy: adapt stage hits, bring over European
directors to make prestige films, and then rely on classic genre fare for profits. The flagship pro-
duction of the 1926-7 season was What Price Glory?, the film against which future Fox produc-
tions would be measured. William Fox paid $100,000 for the rights to film What Price Glory?,
safe-guarding his investment by having Winfield Sheehan supervise its production. And it became
13
the company's first bi gjiit
In 1926 Wall Street considered Fox to be the most speculative movie stock. Unlike Paramount,
Fox still had a modest capitalisation, and Wall Street knew that the data showed Fox Film to be a
lesser light when compared with the dominant Paramount. But in respect to current working cap-
FOX |
4,
ital, Fox had something of an advantage over its rivals since inventories comprised a smaller per-
centage of current assets, and cash on hand was larger. William Fox was always conservative. To
Wall Streeters: 'Earning power seems relatively stable for an enterprise of this type.' The Magazine
of Wall Street had no idea that Fox was plunging into talkies, and would vastly expand by 1930.
14
But William Fox needed to do something radical to ever hope to match Paramount.
Using Sound to Grow

Fox made his bold move with Movietone, a sound-on-film process developed by Theodore Case
and Earl I. Sponable. F^x_becain&-a-major stud o i w th
i
-
its i nnov a t on of pou nd. William Fox never
i
made a better business decision in his career. By marketing $6 million worth of common stock in
1926, the corporation was able to increase budgets for feature films and enlarge its successful
newsreel division^ Fox-became the leader in sound newsreel product ion and distribution at a time
when Paramount and Loew's did not offer such a product. Fox's other major corporate thrust came
through its subsidiary, Fox Theaters. William Fox finally set out to acquire and build a national chain
of first-run motion picture theatres. Seemingly overnight, Fox talkies were being shown in grand
picture palaces in Philadelphia, Washington, D.C., Brooklyn, New York City, St Louis, Detroit, Mil-
waukee and a score of cities west of the Rockies. His flagship was the Roxy, in the heart of Man-
15
hattan's Times Square. Fox used sound-on-film to seek a way to finally match Zukor.
During 1925-6 Fox became interested in the possibilities of sound motion pictures. He sup-
ported the experiments of his engineer, Theodore Case, bought the rights to the Tri-Ergon sound
process for $60,000, and unsuccessfully negotiated with Western Electric for the rights to its^yila^
jp hon e process. Fox production facilities were upgraded. In January 1926, Winfield Sheehan, Fox's
associate since 1913, arrived in Hollywood to supervise a studio expansion programme which
would cost $3 million and take a year to complete. 16
In August 1926, Warner' s premiered a programme of shorts plus a feature using the Vitaphone
process. Fox saw what Warner's was up to and so moved to differentiate his product from that of
Vitaphone, by going into a heretofore unoccupied portion of the market for motion picture enter-
tainment - sound newsreels. Furthermore, sound newsreels would provide a logical method by
which Fox could gradually perfect necessary new techniques of camerawork and editing, and test
the market, at minimal cost. William Fox and his top staff were convinced, and ordered newsreel
head Courtland Smith to adopt this alternative strategy for technological innovation. This decision
would prove more successful for Fox Film's overall goal of corporate growth than William Fox imag-
17
ined.
On the final day of February 1926 Fox held a press event to announce Movietone. The^firstjaio-
• dnrhoruo^m r t of p4ftw<as-nn
i i
)
a com mercial scale with voice or music on the film (as opposed to
Warner's sound-on- disc process) started at the Fox Studios in West 54th Street. William Fox felt
enough progress had been made in the experimental labs before this to go public, and then to
innovate. Fox always envisaged voices coming from Movietone - but in the form of newsreels. Rep-
resentatives of fifty newspapers and magazines witnessed a demonstration of sound at the Harris
theatre in New York, preceding the regular matinee of What Price Glory?, Fox's current hit silent
film. The programme consisted of two parts, the first being a reel of short features made experi-
mentally at the Fox Studios, and announced as 'Studies in Movietone'. The second part of the pro-
gramme presented the first of the Movietone newsreels .intended for theatrical use. The next day
William Fox issued a statement: 'In as much as most or all of the systems now on the market are
in an experimental stage and further development should follow the line tending toward stan-
dardization of devices to keep the market open to all . . . best adapted for standardization for the
motion picture industry.' This day - 1 March »1 926 - signalled the beginning of the turn towards
18
talkies, not*the premiere of The Jazz Singer some nineteen months hence
On the final day of April 1927 Fox Film presented its first sound newsreels at the ornate, 5,000-
seat Roxy, located at the crossroads of the entertainment world on Times Square. Less than a
month later, Fox stumbled across the publicity coup of the decade by obtaining the only footage
with sound of the takeoff for Paris and triumphant return of aviator Charles Lindbergh. The enor-
mous popularity of Lindbergh's hop across the Atlantic undoubtedly contributed handily to Fox's
success with sound newsreels. Fox newsreel cameramen soon spread to all parts of the globe in
search of stories 'with a voice'. Movie theatre owners across the USA queued up to have their
houses wired simply to be able to show Fox Movietone newsreels. To movie fans of the day, Movi-
etone News offered as big an attraction as any movie star. But Fox had only got his chance because
19
Zukor would not yet take the risk.
That summer of 1927 Smith sent cameramen to all parts of the globe. They recorded har-
monica contests, beauty pageants, sporting events and the heroics of aviators, as well as the
earliest sound film statements by public figures such as Benito Mussolini, US politician Alfred Smith
and explorer Admiral Richard Byrd. Newspaper columnists, educators and other opinion leaders
hailed these latter short subjects for their didactic value and wide appeal. Fox Film's principal con-
straint now became a paucity of exhibition outlets. During the autumn of 1927, Fox Film made
Movietone newsreels the standard in all Fox-owned theatres, but that represented less than 3 per
cent of the potential market. To push towards more extensive profits, Fox Film moved to create a
larger chain of first-run theatres. In the meantime, Courtland Smith established a regular pattern
of releas e of Movi eto ne npwsrepls - one ten-minute reel per week He
. also increased the perma-
nent staff of cameramen and laboratory employees, and developed a worldwide reticulation of
20
stringers.
Smith and William Fox also decided to try to produce vaudeville shorts, and feature films with
synchronised musical accompaniment. Before 1928, Fox had only released one scored feature, Sun-
rise (1927). The two executives moved quickly and by 1 January 1928, Fox had signed up a dozen
major vaudeville artists (including Eddie Cantor), filmed ten vaudeville shorts, and even announced
a part-talkie feature, Blossom Time. During the spring of 1928 these efforts, Fox's newsreels, and
Warner's shorts and feature films (one of which was The Jazz Singer) proved to be the hits of the
season. Thus in March 1928 William Fox declared that fully 25 per cent of the upcoming produc-
tion schedule would be 'Movietoned'. By May 1928 Fox was confident enough to raise that share
FOX 43
to 100 per cen t. Simultaneously Fox Film continued to wire, as quickly as possible, all the houses
in its expanding theatre chain, and draw up plans for an all-sound Hollywood-based studio. Fox's
innovation of sound seemed near success; colossal profits loomed on the horizon. 21
Fox continued to exploit its comparative advantage in sound newsreels. As competitors braved
the switch to sound during the last seven months of 1928, Fox Movietone News increased its
weekly output in two 'issups' ppr wppk In June it had twenty-seven Movietone units in the field;
by October the number reached forty. In January 1928 there were fifty, with thirty-five for US
news, and fifteen for the rest of the world. During the autumn of 1929 Fox reached its apex by
releasing four separate newsreel editions each week, produced by seventy crews. The theatre div-
ision opened America's first all-newsreel theatre, the Embassy, in the heart of New York's Times
Square. And most importantly for company profits, Movietone demanded that all theatres sign
exclusive agreements for five years of Fox newsreels at rates double those for silent newsreel com-
petitors. US theatre chains quickly acceded to these stiff terms. Only giants Paramount and Loew's
22
possessed enough economic power to resist, and wait.
On 28 October 1928 Movietone City opened. This all-sound facility, located in the then distant
Los Angeles suburb of Westwood, California, included a $10 million plant which had taken 1,500
workers in three shifts (twenty-four hours a day, seven days a week) only four months to build.
Fox's largest commitment of resources was to theatres. Fox took over theatre chains in New Eng-
land, New York, New Jersey, California, Wisconsin and the Pacific northwest. Funds came from the
Halsey-Stuart banking house and Western Electric. The latter knew that for every theatre Fox
acquired, Western Electric sound equipment, cross-licensed with Fox-Case patents, would be
installed. Western Electric and Fox Film worked closely together during 1928 and 1929. At the pin-
nacle of its power in 1930, Fox controlled 532 theatres in the United States, second in size only to
4he Paramount-Publix chain. The independent, egocentric William Fox now neared the top of an
industry he had helped to found.
William Fox itched to pass Zukor and stand atop the studio system and, for a brief moment,
he did. At the beginning of 1929, Marcus Loew's widow and sons indicated that their one-third
interest in Loew's, Inc. was for sale at the current stockmarket prices: $28 million. Intoxicated by
recent successes, Fox mortgaged his whole empire to purchase the stock from the Loew family, as
well as shares from top officers of the Loew's corporation, and even some shares on the open
market. To secure the needed $50 million, he borrowed at very high interest rates. On the verge
of the biggest takeover in the history of the US film industry, William Fox even secretly cleared the
merger with the US Justice Department. Officials guaranteed that no anti-trust action would be
taken if the takeover was consummated. On 3 March 1929 William Fox held a press conference to
announce the Fox-Loew's amalgamation. Fox now controlled the largest motion picture produc-
tion-distribution enterprise in the world. In five years Fox had pioneered a sound-on-film process,
and parlayed that into the creation of the world's largest motion picture empire. 23
William Fox gambled that the company's earnings would make his highly leveraged deal a
winner. But he had simply expanded too fast, a result of his habit of working alone and not taking
advice. He also sustained serious injuries in an automobile accident on Long Island in July 1929. He
returned in October 1929 to a stock market crash, a government anti-trust suit and actions initiated
by his creditors. Fox stock fell from a high of $105 to $40.

Fox never built his film production unit to anywhere close to the profitability of that of Para-
mount or Loew's. In the end, we now know that Fox too slowly followed Zukor's lead - save for
the introduction of sound. On 8 April 1930 all of Wall Street read The New York Times headline:
'Fox Out of Films; Clarke Named Head of Vast Enterprise'. The Fox board pushed the corporation's
founder out and put their chair - utilities mogul Harley Clarke - in charge. William Fox was paid
off. Wall Street had never understood William Fox as an entrepreneur, and Fox Film shares rallied
up $7.50 on the news. William Fox was left as an answer to a trivia game question: why does
'Twentieth Century-Fox' end with 'Fox'?
Notes
1 UCLA
. houses the Twentieth Century-Fox Corporate Archive, which consists of four main categories:
scripts, stills, production/story files and legal files. This archive contains data from 191 5, when William
Fox ran the Fox Film company.

2. Newspaper and magazine clippings on Fox are available in the Motion Picture Collection, Lincoln Center,
Library of the Performing Arts, New York Public Library. For biographical information, see Glendon
Allvine, The Greatest Fox of Them All (New York: Lyle Stuart, 1 969); Stephen Silverman, The Fox That
Got Away (New York: Lyle Stuart, 1988); Upton Sinclair, Upton Sinclair Presents William Fox (Los
Angeles: Upton Sinclair, 1933); Aubrey Solomon, Twentieth Century-Fox: A Corporate and Financial
History (Metuchen, NJ: The Scarecrow Press, 1 988). An obituary can be found in The New York Times,
9 May 1952.
3. Allvine and Sinclair, are the basic books on Fox's life. The case against the Trust is 225 F. 800 (1915)-
filled with data.
4. Winfield Sheehan file, Quigley Collection, Georgetown University, Washington, D.C.; Motion Picture
Herald, 10 May 1952, pp. 25, 28.

5. Moving Picture World, 4 July 1914, p. 43; Moving Picture World, 1 1 July 1914, pp. 260-1; Variety, 14
May 1952, p. 22; Sinclair, pp. 59-61.
6. Motion Picture Herald, 1 May 1 952, pages 25, 28.

7. Moving Picture World, 7 June 1919, p. 1472.
8. Moving Picture World, 17 April 1926, p. 11; Motion Picture News, 2 August 1924, p. 632; Fortune,
May, 1930, p. 49.
9. The Film Daily Yearbook, 1 926, pp. 3 1 3- 1 4.

10. Robert C. Allen, 'William Fox Presents Sunrise', Quarterly Review of Film Studies, vol. 2, no. 2 (August
1977), p. 330.
1 1 . Moving Picture World, 2 January 1 926, p. 5; Robert McLaughlin, Broadway and Hollywood (New York:
Arno Press, 1974), pp. 52-80.

1 2. Sinclair, pp. 68-70; observations by author on touring both Detroit and St Louis Fox.
13. Moving Picture World, 3 April 1926, p. 332; Moving Picture World, 2 January 1926, p. 69; Moving
Picture World, 17 July 1926, p. 151.
1 4. The Magazine of Wall Street, 25 September 1 925, pp. 1 058-9; The Magazine of Wall Street, 22 May
1926, p. 196.
. 1 6 1;
FOX 45
15. Variety, 14 May 1925, p. 22.
1 6. Moving Picture World, 25 June 1 927, p. 589; Allivine, pp. 1 05-1 2.

1 7. Exhibitors Herald, 5 March 1 927, pp. 3 1 -2
18. Altoona Publix Theaters, Inc. etal. v. American Tri-Ergon Corporation era/., 294 U.S. 477 (1935), record,
pp. 251-2; W. R. K. Taylor, 'Summary of a Detailed Study of Fox Film Corporation, September, 1927',
pp. 6-14, Fox Folder 6; 'Statement and Affidavit of Winfield R. Sheehan, 24 March 1930', Fox Folder
17, pp. 26-7; Memorandum, 1 1 April 1927, Fox Folder 18; 'Prospects for Fox St. Louis Theater and Fox
Detroit Theater, 1927', Fox Folders 2 and 1 5, all Bache-Halsey- Stuart Library, Chicago, Illinois. See also
Moody's Manual of Industrials, 1931 (New York: Moody's Investor Service, 1931), p. 410; United States
v. Fox Theaters Corporation etal., Eq. 51-122 (S.D.N.Y., 1929), Answer for Fox Film Corporation,
pp. 27-8; In the Matter of William Fox, Testimony of William Fox, pp. 1 55-76; U.S. Federal
Communications Commission; Telephone Investigation Exhibits (Pursuant to Public Resolution No. 8,
74th Congress), 1936-7, Exhibits 1794-7; Variety, 13 October 1926, p. 5; U.S. Congress. House
Committee on Patents, Pooling of Patents; Hearings before the Committee on Patents, House of
Representatives, on H.R. 6250 and H.R. 9137, 68th Congress, 1st Session, pp. 1245, 1315-49; General
Talking Pictures Corporation et al. v. American Telephone and Telegraph Co. et a/., 1 8 F. Supp, 650
(1937), Record, pp. 2732-4; Moving Picture World, 8 January 1927, p. 1; Moving Picture World, 15
January 1928, p. 2; Exhibitor's Daily Review, 6 January 1927, pp. 1-2; Moving Picture World, 19
February 1927, p. 1; Moving Picture World, 26 February 1927, pp. 622, 677; Variety, 10 November
1926, p. 9; Variety, 23 February 1927, p. 7; Variety, 2 March 1927, p. 10.
19. Moving Picture World, 5 March 1927, p. 20; Variety, 6 April 1927, p. 54; Variety, 13 April 1927, p. 9;
Variety, 20 April 1 927, p. 1 ;

Variety, 4 May 1 927, p. 4. In addition, Courtland Smith also helped Fox Film
plan new theatres, open additional distribution outlets, and increase the production of 'quality' films.
20. Altoona Publix Theaters, 294 U.S. 477, p. 243; Variety, 7 June 1 927, p. 26; Variety, 29 June 1 927, p. 1 1
Variety, 17 August 1927, p. 12: Variety, 1 September 1927, p. 8; Variety, 21 September 1927, pp. 1, 20,
23; Variety, 2 November 1927, p. 21: Variety, 30 November 1927, pp. 18-19; Moving Picture World, 1
June 1927, p. 433; Moving Picture World, 23 July 1927, p. 1; Moving Picture World, 1 October 1927,
p. 299; Moving Picture World, 5 November 1927, p. 10; Moving Picture World, 3 December 1927,
pp. 12-13.
21. Variety, 30 November 1927, pp. 1-5; Variety, 28 December 1927, p. 5; Variety, 15 February 1928,
p. 14; Variety, 22 February 1928, p. 9.
22. Electrical Research Products Inc. v. Vitaphone Corporation, 1 71 A. 738 (1 934), pp. 1 92-7; Variety, 1
May 1928, passim; Variety, 1 August 1928, pp. 16, 22; Variety, 22 August 1928, p. 28; Variety, 12
September 1928, p. 10; Variety, 26 September 1928, p. 17; Variety, 3 October 1928, p. 12; Variety, 28
November 1928, p. 22; Variety, 5 December 1928, p. 7; Variety, 20 March 1929, p. 7.
23. U.S. v. Fox Theaters, Eq. 51-122, Answer for Fox Film Corporation, pp. 25-6; Variety, 6 March 1929,
pp. 5, 10; Motion Picture News, 12 January 1929, p. 82; Film Daily, 1 March 1929, p. 1; Barrons, 1
March 1929, p. 1 1; FCC, Staff Report, vol. 11, pp. 475-8; William Fox, 'Answer', pp. 18-19, Fox Folder
17, Bache-Halsey- Stuart Library; Motion Picture News, 2 March 1929, p. 61 1.
4
Warner Bros
In 1 923 the brothers Warner - Harry the eldest, followed by Abe, Sam (died 1 927) and Jack - incor-
porated themselves as Warner Bros. The following year they began to seek a means by which to
grow to challenge Paramount. Backed by Wall Street's Goldman Sachs investment house, Warner's
began to make short subjects with sound, and then feature-length talkies. While Al Jolson's The
Jazz Singer, released in October 192 7, gets the credit as the first featu re-length talkie, it-was the
seguel - The Singing Fool - that set a reco rd at th^^h^^JzfiifP th a t stood for n nârlo The other
major movie companies, led by Paramount and Loew's, did not ignore the innovative activities of
Warner Bros, (and Fox), but played conservative strategies, and so only in May 1928 did Paramount
and Loew's also sign with We stern Electric to make talkie s. Profits for Warner's - as with Fox -
soared and the company became a member of the new studio system. But Warner's did it with
1
careful planning and, unlike William Fox, the founders held onto their empire.
Harry Warner: the Leader

Warner Bros., as a family business, was always led by eldest brother Harry Morris Warner - 'H.M.'
to his colleagues and friends. Like his younger brothers Abe and Sam, he was born in Krasnosielce,
Poland, to Benjamin Warner (a cobbler) and Pearl Eichelbaum. The family came to the USA in the
mid-1 880s, settled in Baltimore, and then moved to Youngstown, Ohio. Harry, Albert, Sam, and
later Jack (the only one bom in the USA), began looking for a money-making opportunity that did
not include cobbling. During the first years of the twentieth century, they moved into movie exhi-
bition. Harry was always in charge; he was the eldest and his word was final. Their company,
Warner Bros, (never 'Brothers' unless referring to the four men themselves), would come to repre-
sent the only true family-run operation of the studio system. Harry's title was president, next
youngest Abe supervised distribution, and the 'baby' Jack headed the studio film-making operation
in California. Sam, who would help pioneer talkies from the technical side, died as The Jazz Singer
2
was being released during the first week of October 1927.
The Warners' first theatre, the Cascade in New Castle, Pennsylvania, opened in 1906 for the
showing of motion pictures. But soon they ran into trouble with the Trust, and began to make their
own films as independents. They operated under the franchise distribution system, selling shares in
a production to others for their exclusive use in their regions. Harry found that this system did not
provide them with a proper share of the business. It would nnt he until 1 925 that W arner'^ height
a national and international distribution division, Vitagiaph. Until then, Warner's limped along as
WARNER BROS |
4,
another in a long list of independent producers. Harry had a break in 1918, producing Warner's
first big hit, My Four Years in Germany, based on ex-Ambassador James W. Gerard's sensational
story. They filmed it at rented space at the Biograph studio in the Bronx. Then came the success-
ful distribution of the fifteen-episode sexjaj, The Lost City, followed by Peck's Bad Boy, starring
Jackie Coogan, all made in rented space in Los Angeles. By 1920 Jack and Sam were settled in Hol-
lywood producing Monty Banks comedies, and low-budget serials. In 1920 the Warners acquired
a small studio at Sunset and Bronson, with the land costing $25,000 down payment and a mort-
gage payment of $ 1 ,500 a month. There was but one 'barn' - fifty by 1 00 feet - in which to film,
plus attached dressing rooms and shops. The studio cost many thousands of dollars, but by this
3
time Zukor was having Paramount listed on the New York Stock Exchange.
On 4 April 1923 Warner Bros. Pictures was incorporated. Warners' films were still released
through franchise distribution. Slowly they began to sign top stars to produce more expensive
films. The Warners Classics trademark was a clear attempt to portray an exclusive product com-
parable to the efforts of Paramount. Signing up known producers and players like David Belasco,
Ernst Lubitsch and John Barrymore helped. What this did was to position Warners as the leader of
the independent producers then filling Hollywood. Describing the Belasco deal, Moving Picture
World characterised Warner Bros, as 'an organization of progressive producers, distributors, and
exchange men whose history is virtually the history of the independent market of the past 18
4
months'.
In April 1924 Moving Picture World profiled 'The Independent Field', and, in the opinion of the
trade paper, Warner's was 'the foremost state right organization in the industry. First: Warners
have been in the game for eighteen years. Second: They are the pioneers of national distribution.
Third: Their entire organization is one big enthusiastic family from the office boy to the state right
buyer up to the "big boss" himself - Harry M. Warner - who talked of the bright future plans of
the Warner organization.' Still, Warners was falling behind Paramount, and so needed a plan to
5
expand to catch up and move beyond independent status.
Expansion and Talkies

Harry Warner sought, like William Fox, to somehow become a true rival to Zukor. In 1924 he
sought a means by which to grow to challenge Zukor. He increased feature film production,
acquired worldwide distribution by acquiring the Vitagraph corporation, and obtained theatres -
all backed by Goldman Sachs and its venture capitalist, Waddill Catchings. At the pivotal year,
1924, Sam Warner learned of AT&T's inventions for recording sound. He was immediately smit-
ten, and took Harry to a demonstration.

To Harvard students in March 1927 Harry Warner addressed Warner's efforts at expansion to
that date. He stated:
The Vitaphone is, I presume, the thing that you all want to hear about, so I will step outside of for-
malities and try to give you a little outline of it . . . Had [my brother Sam] not wired me to go up and
4,
I
hear a talking picture I would never have gone near it ... I had heard and seen talking pictures [that
functioned so poorly in the past] that I would not have walked across the street to look at one. But
when heard I a twelve-piece orchestra on that screen at the Bell Telephone Laboratories, I could not
believe my own ears. I wal ked in back of the screen to see if they did no t have an orchestra there
synchroBctoayyith the picture. They all laughed at me. The whole affair was in a ten by twelve room.
There were a lot of bulbs working and things I knew nothing about, but there was not any concealed
orchestra.
He then revealed his thought process:
If I myself would not have gone across the street to see or hear a talking picture, I surely could not
expect the public to do it. But Music! That is another story. An organ playing to a picture was the thing
that I visualized. I stopped and thought a minute and said: 'Here's a theater that seats four or five
thousand people, runs a motion picture, which is the most important part of its business, and neglects
the most important part of the picture, which is music. The manager plays his music as an overture
and does not play it to the picture.' Try this experiment some day. Take a motion picture, a silent one,
and run it off. Then take the same [silent movie] and run it with a [recorded orchestra], and you will
see the difference. That vision came to me.
But Harry needed a deal:
So took I it up with the head of the Western Electric Company and arrived at an understanding with
him. I will give our arrangement as briefly as I can. They were to agree to discontinue the use of the
logo name - talking picture - and devote their time entirely to music. Then the question came up,
'What is the proper method of bringing this instrument before the public?' Some members of our firm
were for taking a little theater, making up a few vaudeville numbers and asking the different exhibitors
throughout the country to come in and hear it. That would [have meant] a long drawn out process
... I said to [Mr Bloom]: let's get the greatest artists and the best orchestras in the country. Let's have
confidence in this and put all our muscle behind it. We'll know the result after we have opened the
first show.'
Harry went on:
So we put on a first-class show and opened it to the public ... [As of March 1 927] I do not want you
to think for a minute that the victory has been won. New ideas do not penetrate the human mind as
easily as that. They take more time. We have confidence in our idea and we have put our money in
it, but it still furnishes us serious problems. The main problem is this. The people in the amusement
business [that is Adolph Zukor] have developed mammoth enterprises and they have built them along
certain lines. Some give just motion pictures and some motion pictures and vaudeville and some vaude-
WARNER BROS 49
ville alone. [Zukor] says: 'We have built these institutions, and they are successful. Why should we
discard any part of that which is successful to try something new?'
Yet Harry Warner's confidence was high:
When people will go to hear the Vitaphone but we know the proper kind of entertainment must be
supplied, if it is going to be a great success. This coming year we are to make three pictures in which
the Vitaphone will play an important part. For instance, in the making of a scene in the stage forms
part of the view and the actors singing can be seen playing, we intend to bring out the actors singing
and the actual performance of each person on the stage. Our first picture embodying that feature will
be The Jazz Singer with Al Jolson. Then we are going to perform a wedding ceremony. As you see it
today, a wedding ceremony performed on the screen takes place in complete silence. Nobody knows
what the priest or the preacher or the rabbi has said. We will actually perform a wedding ceremony
and try to make as real as life.
Soon the four brothers were working up a strategy to use sound to help them build up their
company. Sam made recordings of vaudeville acts and offered them to exhibitors as substitutes for
picture palace stage shows, along with their feature-length films. The Warner's sales pitch stressed
that these so-called vaudeville sound shorts could best with sound recordings of stars any stage
show offered by any picture palace. Thus, the very first 'talkers' were short recordings of the acts
of top musical, comic and variety talent in USA. 6

During this phase of experimentation with sound, Warner's also continued to expand its silent
film activities, some of which even began to pay off. Ernst Lubitsch' s s\\enUj)dx_ Windermere 's Fan
established box-office records on its debutjn January 1926 at the Warner's theatre in New York
"City; tFTe silent The Sea fieasfwith John Barrymore opened the following month to the same recep-
tion. To extract the maximum revenue from these silent hits, Warners rented a number of theatres
to road-show these films at a $2 admission price. So Harry Warner and Waddill Catchings were
playing it conservatively. They were seeking to match Zukor with hit silent films and at the same
time innovating talkies. Because of all this investment, Warner Bros.' yearly statement issued in
March 1926 stood in the red at $1.4 million. The company did not face bankruptcy, however,
because this loss was self-imposed and backed by Goldman Sachs. Warner's had begun its climb
towards the top of the motion picture industry.

As the movie season began in August 1 926, Warner Bros, set in motion its strategy of using
vaudeville shorts to innovate and exploit the equipment made by AT&T's Western Electric division.
It took a year to work out the bugs, but at the beginning of the next movie season, in August 1 927,
Warners was ready to premiere the marvel it named Vitaphone. The studio's PR experts launched a
media splash. Th at September, n ewspapers around the world hailed the latest technological
wonder; first-nighters paid ten dollars for a seat to see thp fpatn rp-lpng th nnn lu a n, starring Jo hn
,
Barrymore and accompanied by an orchestra on record, and a set of recorded vaudeville and other
shorts. The cream of New York society came to witness operatic favourites sung on film by such stars
as Metropolitan Opera tenor Giovanni Martinelli. The presentation of the silent Don Juan, with
music on a synchronised record replacing the usual live orchestra, followed but drew little comment.
On 20 April 1926 Harry Warner had signed an exclusive agreement with Western Electric to
use their technology, and after the August 1926 Don Juan New York City premiere, on 6 Sep-
tember 1926 Warner's opened the Don Juan package of shorts and feature at the Globe Theater
in Atlantic City. The show drew a packed house, an especially good sign since Atlantic City was a
popular summer resort. Next, Warners rented the McVicker's theatre in Chicago's Loop and pre-
sented the Don Juan package to overflow crowds. By October the Don Juan show was being
offered in half a dozen major US cities, and a second Vitaphone package, centred around the fea-
ture The Better 'Ole, had its premiere at Moss's Colony Theater in New York. This not only gave
Vitaphone two 'shows' on Broadway, but, more importantly, represented a major shift in pro-
gramming strategy. The programme's shorts all featured vaudeville artists whom (according to Var-
iety estimates) only the four largest motion picture theatres could have afforded to present live.
The 'headliner' was Al Jolson, who did three songs while standing before a set of a Southern plan-
tation. Variety could see only a bright future for an invention that could place so much high-priced
vaudeville talent on one stage at one time.
By the end of the Warner's fiscal year (31 August 1927) Harry's strategy was paying off.
Foreign distribution had grown extremely profitable; rentals in Great Britain alone rose to $2 mil-
lion. But the key was Catchings' ability and willingness to generate the necessary financing for all
Warner's new investments. In 1927, for example, he secured a $1 million loan to construct a new
Hollywood studio, and renegotiated extensions of all outstanding obligations. But such extraordi-
nary financial support did not satisfy Western Electric. This AT&T subsidiary wanted to purchase
Vitaphone and then let Warner Bros, produce shorts and scores while it controlled all the techni-
cal activities and licensing power. Western Electric saw that talkies worked, and wanted to sell
rights to Zukor. But Warner's stood in its way, as it held an exclusive contract.
In December 1926 Western Electric took the offensive. First, it organised Electrical Research
Products Inc. (ERPI) as a wholly owned new subsidiary to market sound equipment. From this base,
Western Electric's president Edgar Bloom met with Zukor. He tried to offer Zukor a direct licence
for sound, even though this was legally reserved for Vitaphone. He did get William Fox to sign on
31 December 1926, but could not persuade Zukor. An alternative bid from RCA and Western Elec-
tric's stiff terms provided major stumbling blocks. Moreover, legally, Warner's through Vitaphone
would have to grant the licence to Paramount, and Zukor wished not to become the licensee to
Warner's. Thus, in February 1927 Zukor formally postponed any decision concerning sound for one
year. In reaction, Bloom forced Warners to terminate the earlier contract as of 2 April 1927, and
transferred to ERPI all Vitaphone's rights. Then ERPI granted Vitaphone a non-exclusive licence to
employ sound equipment.

In March 1927 Harry Warner knew what the costs of theatrical installation were: 'In a theater
of nine hundred or one thousand seats, it costs $16,000; in the next size, the theater of about
WARNER BROS. 51
fifteen hundred seats, $18,000; in the larger theaters, $22,000; in a theater like the Roxy, $25,000.
'
That is the actual cost to us.'
In May 1927 - three months after his Harvard talk - Harry Warner announced that during the
1927-8 movie season Warner's would release twenty-six features and four road-show specials -
all with Vitaphone musical accompaniments. In addition, Vitaphone would add talking sequences
to some of its feature films. Vitaphone continued to produce sound shorts at the rate of five per
week, and release them to the growing number of theatres wired for sound. By October 1927 1 50
of these shorts had been recorded and released. Two new Vitaphone shows opened in June 1927:
Old San Francisco at the New York Warner's theatre, and The First Auto Race at the New York
Colony Theater. Vitaphone shows were now playing at popular prices in New York, Chicago, Min-
neapolis, Dayton, Denver, Philadelphia, Detroit, Buffalo and Portland, Oregon. Vitaphone opened
on Labor Day 1927 in theatres in Newark and Milwaukee.
To meet its new schedule of talkers and shorts, Warner Bros, instituted an intensive building
programme. In October 1927 it completed four new Hollywood stages devoted to the production
of Vitaphone shorts and features. The new stages - 90 by 1 50 feet - had felt-lined walls, with a
glass-enclosed booth to monitor the recording 1 5 feet above the floor. The camera was enclosed
The brothers Warner in 1927, before Sam's October death: Albert, Sam, Jack and Harry
in a soundproof, moveable booth. To maintain absolute quiet, Warners installed incandescent

lamps to replace the usual motor-driven arc and carbon lamps. One of the first films finished in
these new studios was The Jazz Singer. Completed in August 1927, The Jazz Singer cost an
estimated $500,000, making it the most expe nsjy^featujejnJ/Varner Brosjiistory .
Although The Jazz Singer had its premiere on 6 October 1927 to lukewarm reviews, its four
Vitaphone segments of Jolson songs proved a sensation. Vitaphone contracted with Jolson
immediately to make three more talkies for $100,000 per film. On 4 December 1927 Vitaphone
released the short, My Wife's Gone Away - a ten-minute, all-talking comedy based on a vaudeville
playlet developed by William Demarest. Critics loved it; so did audiences. During Christmas week,
1927, Vitaphone released a twenty-minute, all-talking drama, Solomon's Children. Again, revenues
were high, and in January 1928 Warner's initiated an increased production schedule.
During the spring of 1928, with the increased popularity of its talking shorts, Warner Bros,
began to change its feature film offerings. On 14 March 1928, it released Tenderloin - an ordinary
mystery that contained five segments in which the actors spoke all their lines (for twelve of the
film's eighty-five minutes). More part-talkies followed. Harry Warner knew his investment in sound
was a success by April 1928, when it became clear that The Jazz Singer show was more than a
mild fa d. It w as the most popular entertainment offering of the 192 7-8 season. In cities that rarely
held films for more than one week, The Jazz Singer package set box-office records. It took Warner
Bros, only until the autumn of 1928 to convert to the complete production of talkies - both fea-
tures and shorts. With distribution and theatres in place, Warner had laid the foundation for rapid
growth, and hence could extract maximum profit from Vitaphone.

Harry Warner was paid the highest complement the nascent studio system could offer when
on 1 1 May 1928, Adolph Zukor signed with Western Electric, moving to imitate Warner's produc-
tions. Soon the whole of Hollywood was switching rapidly to sound. Sadly Sam, the brother most
responsible for its new thrust, died - only days before the 5 October 1927 opening in New York
7
of The Jazz Singer - at but forty years old.
In 1929 Harry Warner further consolidated his company's p osition by acquiring First Nation al,
a co-operative of regional theatre owners who had failed in an attempt to verticafl^niegrate

upstream. Warner's took over the First National studio in Burbank, and a share of the extensive
First National Exhibitors circuit. Thus, again with Catchings' help, Warner's took ownership of a
half-dozen picture palaces across the USA, topped by the Orpheum in Chicago's Loop. Then Harry
Warner and Waddill Catchings bid for the Stanley Company of America, owners of more than 300
theatres in states from New Jersey to Virginia, including the major cities of Philadelphia and Pitts-
burgh. During the autumn of 1928 Warners bought the Stanley chain. Suddenly Zukor had to
come to Harry Warner to book Paramount in Newark, New Jersey, Philadelphia, Pennsylvania, Bal-
timore, Maryland and Washington, D.C. Ownership of such a chain guaranteed Warner's near
parity with Paramount. Stanley also owned one-third of First National, and thus Warner's acquired
full control. Goldman, Sachs had issued new Warner's stock and raised the necessary $10.5 mil-
lion. By the autumn of 1929 Warner Bros, had powerfully vertically integrated, owning two
WARNER BROS. 53
studios in California (under Jack Warner); a large and growing international distribution unit; and
8
one of the most powerful theatre chains in the USA (under Abe Warner)
Entering the Studio System Hierarchy

The Singing Fool - released in September 1928, as the 1928-9 movie season started - would come
to symbolise Warner's entry intcTfffe^tlidioTystem. It did so well that it would come to stand as
US box-office champion ^f ram 1 928 to 1 940, when it was repl aced by Gone with the Wind . For a
cost estimated at more than $200,000\ The Singing Fool saw Jolson at his best, in a maudlin story
featuring his showy, unique singing style. The Singing Fool also featured noted ingenue Betty Bran-
son and new child discovery Davey Lee, but to movie-goers of the day the film really had only one
name above the title - Jolson. At his peak, Jolson was more than just a singer or an actor - he was
an experience. The Singing Fool remains his greatest showcase.
Warner Bros, knew that the Jolson persona represented the principal attraction for the film and
thus overtly formulated The Singing Fool around the trials and tribulations of the Jolsonesque char-
acter 'Al Stone', a singing waiter who becomes a best-selling songwriter. The narrative provided
Jolson with endless opportunities to introduce new songs. Director Lloyd Bacon guided the film's
creation. To film historians Bacon is well known for his credits for the Warner musicals 42nd Street
The Singing Fooi. poster for Warner's greatest A 1 1J 1 1 }Î N J |1

| |7|TftJjfl
hit, top grosser in USA 1928-38 (Warner Bros.) A Vf«li2iUni2illAH

(1933) and Footlight Parade (1933). Yet he did much more. From the mid-1 920s to the mid-1 940s
Hollywood insiders counted Bacon as one of the consummate professionals who could handle all
genres. No one questioned that after The Singing Fool poured millions into the Warner coffers that
Harry Warner had joined Adolph Zukor, Nicholas Schenck and William Fox as a member of the
clique that ran the Hollywood studio system.

As 1 929 ended, Barrons told Wall Streeters of the new situation: .
Success of the talking movie has played a major part in the sharp upturn in earnings of Warner Bros.
Pictures, Inc., in the past two years . . . From a deficit of $1 .3 million for the fiscal year ended 27 March
1 926, and of $279,096 for the succeeding five months, the company's operations changed to record
sums of black ink. By August 1929, it netted some $16 million profit. As the decade ended the Vita-
phone process was installed in about 6000 theatres, with installations taking place at 100 per month.
Warners receives a percentage for all installations as well as supplying the films.
Wall Street knew that Harry Warner had rolled the dice and, coupled with Waddill Catchings of
Goldman, Sachs, had made Warner's the independent into Warner's the newest major studio. 9
As a Hollywood studio - with headquarters in New York City up the street from Paramount and
Loew's, Inc. - Warner Bros, had powerful units that produced, distributed and presented films in
order to maximise the profits of the studio corporation. By 1930 Wall Street and Zukor knew Harry
Warner was a skilful film industry leader. He had the ability to formulate the necessary strategies
to innovate sound, and use that innovation to expand his company - without taking on the debts
that instantly sank William Fox. He could keep costs in line and so it was no surprise that Harry
Warner remained the valued leader of his family's company for the next twenty-five years. He had
learned from Adolph Zukor the basic tactics - and gone one step further by innovating talkies.
Notes
1 . The Warner Bros. Archive at (JSC contains studio materials, principally on the production of films. The
company was, however, vertically integrated until 1952, and so the exhibition side and distribution side
are mixed in, making the archive difficult to use. I have made use of this when best needed, but have
relied more on the business press reactions to the strategies of the company in the marketplace.
2. There are no private papers for Harry Morris Warner. But the corporate papers for Warner Bros, exist at
the University of Southern California (studio production records) and at Princeton University (distribution
records). As an executive, Harry Morris Warner wrote little for the public record. Yet his 'Future
Developments' in Joseph Page Kennedy (ed.), The Story of Films (Chicago: A. W. Shaw, 1927) is
enlightening.
3. On 1 5 January 1 946, under Harry Warner's signature, for its stockholders Warners issued a history of
how it rose to become a major studio. This financial history is the company's sanitised version of its rise.
See also The New York Times, 1 1 May 1 956, p. 33; Moody's Manual of Investments for 1 928.
4. Moving Picture World, 27 January 1923, p. 343; Moving Picture World, 4 August 1923, p. 385; Film
Daily Annual, 1922, pp. 96, 378.
5. Moving Picture World, 28 January 1924, p. 333.

WARNER BROS 55
6. I have written extensively on the conning of sound. For an overview see The Coming of Sound:
Technological Change in the American Film Industry', in Tina Balio (ed.) The American Film Industry, rev.
edn (Madison: University of Wisconsin Press, 1985). Warner Bros.' pioneering efforts at innovation are
analysed in 'Warner Bros. Innovates Sound: A Business History', in Gerald Mast (ed.) The Movies in Our
Midst (Chicago: University of Chicago Press, 1982). See also American Hebrew, 1 1 January 1925,
pp. 333, 341 . Here one can find the multitude of sources I used. For this account I tender only the
necessary one.
7. There are no private papers for Sam Warner. But the corporate papers for Warner Bros, exist at the
University of Southern California (studio production records) and at Princeton University (distribution
records). As an executive Sam Warner wrote nothing for the public record; his brothers Harry as chief
executive and Jack as studio chieftain handled public relations. Variety, 5 October 1927, p. 1; Variety,
12 October 1927, p. 57.
8. United States Federal Communications Commission. Telephone Investigation Exhibits (pursuant to Public
Resolution No. 8, 74th Congress, 1936-1937). Data from the following court cases proved most
significant: (a) Electrical Research Products, Inc., v. Vitaphone Corporation, 171 a. 738 (1934); (b)
General Talking Pictures Corporation et al. v. American Telephone and Telegraph Company et at., 18 F.
Supp. 650 (1937); (c) Koplar (Scharaf et al, Interveners) v. Warner Bros. Pictures, Inc., era/., 19 F. Supp.
173 (1937). See also Variety, 29 August 1928, pp. 5, 1 1; Variety, 19 September, 1928, p. 5; Variety,
17 October 1928, p. 19; Variety, 24 October 1928, pp. 1 1, 16; Variety, 26 December 1928, p. 17.
9. Barrons, 27 May 1929, p. 5; Barrons, 19 August 1929, p. 17; Barrons, 8 September 1929, p. 12.
5
RKO and the Minors: Universal, Columbia and

United Artists
•
By 1 1 May 1928 all the major studios - the old line of Paramount and Loew's, and the newcom-
ers, Warners and Fox - had signed with Western Electric for sound. T hat left the other soun d
system - developed by the Radio Corporation of AmericaJRCA) - with no studio customers. So
-RCA-amaJgamated a minor s tudio with international distribution (the Film Booking Offi ce or FBO ),
_RCAJ> sound system, ancTthe theatres of the former KeittVsjDdjQrpTieTrm vaudevillelheatre chain s.
It was titled Radio-Kp jth-Orph Qiim (horoafto r RK n ), with no Zukor-like leader, RKO can best be
characterised as a 'corporate foundling' that backed into the Hollywood studio system. Then there
were three minor studios, defined as those owning no theatres. These partially vertically integrated
corporations were Universal, Columbia and United Artists (hereafter UA). These three owned pro-
duction facilities and had international distribution - but with no theatres had to deal with the five
large studios to get their films into the best picture palaces in the USA. I take them up in order of
their power in 1930: RKO, Universal, Columbia and UA.
RKO
-RKCtyyas formed so that RCA could market its sound equipment. Joseph Kennedy, father of Pres-
ident John F. Kennedy, added his FBO studio for production and distribution. The recently merged
Keith-Albee-Orpheum vaudeville theatre circuit was converted into movie-house chain to offer the
third part of a wholly vertically integrated major studio. RCA's money built up FBO, and sought to
leverage its power as the leading maker and programmer of (NBC's two networks) radio. RCA's
David Sarnoff proved a pioneer of possible synergies of broadcasting and movies long before the
1
term was invented. But in 1930, these synergies helped little.
RCA's leader David Sarnoff challenged Western Electric's sound-on-disc and then variable den-
sity sound-on-film system with RCA's variable area sound-on-film (Photofilm) system. He tried to
persuade Zukor that going with RCA would be in Paramount's best interest. But Zukor saw Warner
Bros.' and Fox's success with Western Electric. Zukor used his fifteen months of playing RCA against
Western Electric to gain the terms he wanted - from Western Electric. His technical and legal con-
sultants agreed that Western Electric had the better system, by all criteria. RCA put up a good fight,
2
but by the middle of May 1928, the corporation stood without customers.
Joseph P. Kennedy's minor independent FBO specialised in B-filrns ai med at small-town a udiences .
Its staples were mass -produced Westerns. FBO made about one B-film a week for about $30,000 .
-
~~~-A1~tfie TJme^^ of sound, Kennedy got an offer to merge from John J. Murdoch, general
RKO AND THE MINORS: UNIVERSAL, COLUMBIA AND UNITED ARTISTS |
57
manager of the Keith-Albee-Orpheum vaudeville circuit of 200 vaudeville palaces. Kennedy knew that
Sarnoff needed a client and some theatres in which to install RCA equipment. The parties met, and
3
RCA financed and melded FBO, Keith-Albee-Orpheum and RCA i n October 1 928 to form RKO.
In October 1928 Sarnoff placed Robert Kane, a former First National producer, in charge of
RKO sound film production. Kane added scores to three silent features, King of Kings, The God-
less Girl and The Perfect Crime and sent them out to the few theatres wired for RCA sound. Kane
announced upcoming RCA-Photophone vaudeville shorts and signed up Pathe to produce sound
newsreels. Thus, starting in 1929 RKO was off and running, but far behind Paramount, Loew's,
Warners and Fox. Sarnoff promised and delivered low installation prices to tempt independent the-
atres to sign up. He ordered instant installation in RKO's former vaudeville palaces, and converted
4
them into picture palaces
Sarnoff put up over $100 million to jump-start RKO, which made $3.4 million in profit in its first
year, 1929. Yet this initial success was an illusion. RKO had backed in as a major - the last vertically
integrated company. In 1930 it could produce, distribute and present films in order to make profits,
but it never had a stable management or a leader of the calibre of Adolph Zukor, someone who
knew the business inside and out and who could react successfully to changing conditions. As I make
clear in part II, chapter 11, this management void would render all synergistic advantages worthless. 5
Thus by 1930 five studios - Paramount, Loew's, Fox, Warners and RKO - owned the key first-
jun picture palaces in the USA and had wired them for sound. If any film-maker or rival studio
wanted access to the best theatres in the USA - the formidable picture palaces - they had to go
through the Big Five. Universal, Columbia and UA - a.k.a. The Little Three' - survived because of
distribution power alone.
Universal
Carl Laemmle's Universal, founded in 1912, was the equal of Paramount in 1 91 5. In that year, the
US Supreme Court had dissolved t he Mo t ion Pictures Patent Trust allowing Laemmle to jump in.
HtsTTnTversal generated significant profits. 'Uncle Carl' wanted a place where he could consolidate
all his production, opening Universal City in Hollywood and closing down East Coast filming. Uni-
versal City's 250 acres had all natural backdrops: hills covered with rocks and trees, a stream, and
even some desert for Westerns. Laemmle invested in film laboratories, dressing rooms, rows of out-
door stages, a zoo and stables. On 15 March 1915 Laemmle came from his New York office and
opened Universal City. As the climax of the opening-day celebration, the 101 -Bison company of
Indians and cowboys staged a rip-roaring rodeo and Wild West show. Describing the facilities,
Moving Picture World was struck by their comprehensiveness. The reporter was awed to find even
a blacksmith (for horse shoeing) and a bunkhouse (for the cowboy-actors).
All over the place are sets, elaborate, some temporary and some that may well be permanent, that
have been erected from time to time for large productions, ranging from castle walls to city streets
. . . The Universal is building an experimental roof over a ten-foot section of its stage. It is to be of steel
frame construction. It will be covered with galvanized steel, designed to roll back over the roof of the
property building in the daytime. In the event of bad weather it will remain in position, and with the
installation of lights have the full effect of an inside studio. The roof is designed primarily to prevent
the striking of sets with which a director may not be finished at the close of a day when atmospheric
6
conditions indicate rain. It is an experiment, but it looks good.
Laemmle seemed that day to be the match of Adolph Zukor, with whom he shared a similar
background. Like Zukor, Laemmle was born abroad - in Laupheim, Wurttemberg, in southwest-
ern Germany, the son of Julius Laemmle, businessman and his wife Rebecca. Like Zukor, he landed
as a teenager in New York (in 1884), poor and not speaking English. Laemmle learned English and
tried his hand in retailing. By 1887 he - like Zukor - was in Chicago, but working as a clerk. In
1890 at age twenty-three, Laemmle moved to Oshkosh, Wisconsin, as bookkeeper for the Conti-
nental Clothing Company. Within four years he was manager and, on 28 August 1898 at age
thirty-one, felt able to marry Recha, daughter of Loeb Stern, the niece of his boss in Oshkosh. The
couple, with their infant daughter Rosabelle, moved back to Chicago - for an even higher-paying
job - and were settled when in 1 906, with savings, Laemmle looked for an investment opportunity,
7
originally a chain of five and ten cent stores.
Like Zukor, Laemmle saw opportunity in movies. He later remembered: '[In 1906] I was sitting
in the Nickelodeon on Halsted Street near Van Buren [in Chicago] when I definitely made up my
mind.' He had found an empty store on Milwaukee Avenue and had it remodelled. On 24 Febru-
ary 1906 Laemmle, now thirty-nine years old, opened the White Front Theater in Chicago, the first
of a string of nickelodeons. The White Front had cost him $400 for remodelling, $25 for a plaster-
covered muslin screen, $250 for seats and $250 for a projector. His total investment came to
8
$1 ,200 - including his first day's film rental of $3
He recouped his investment in the first month. After that his expenses never totalled more than
$1 50 a week and his weekly take was never less than $600. This success whetted his ambition. In
April 1906, two months after he opened the White Front, Laemmle opened the Family Theater at
1233 Halstead Street. He had noted that rival shows were dark, hot and dirty. Laemmle installed
huge fans, kept his place clean, and hired muscle to toss out rowdy elements. A strong advertis-
ing campaign brought in the family trade. He soon added a service to book films into other the-
atres. In 1907 he increased his service by establishing exchanges in Evansville, Memphis and
Omaha. The next year saw new Laemmle exchanges in Minneapolis, Portland, Oregon, Salt Lake
City, Montreal and Winnipeg. Soon his distribution activity dwarfed his theatre interests. Laemmle
hated paying the Patents Trust a share, and so in April 1909 he severed his relations with the Trust
and declared himself an independent. In May 1909 Laemmle became a producer of films as the
Independent Moving Picture Company (IMP).
Like Zukor, he sold his nickelodeons and, with former assistant Robert H. Cochrane, concen-
trated on vertically merging production and distribution. By 1910 the Laemmle Film Service was
the largest distributor in the USA. But the Trust sought to shut him down. Laemmle fought back
RKO AND THE MINORS: UNIVERSAL, COLUMBIA AND UNITED ARTISTS I 59
Carl Laemmle (second left) at the opening of Universal City
in the trade press: 'Come Out of it, Mr. Exhibitor! Are you going to pay $2 a week every week you
are in business for the right to run your own theater and use your own goods?' Laemmle said to
his customers:
The Trust is threatening exhibitors with 'fines and calamities' for running my films. Take it from me, if
any fines or calamities are imposed upon any customer of mine, I'll back the exhibitor with all the
resources at my command. ... If anyone comes into your place and tries to scare you with any sort
9
of bluff, hand him one swift, speedy kick in the seating capacity and I'll pay the damages.
Laemmle rented a studio at 1 1 1 East 14th Street, New York (not to be confused with Biograph's
famous address, 1 1 East 14th Street). He hired William Ranous, who had worked with Biograph,
but before Ranous could begin, the Trust swore out an injunction against Laemmle to halt filming.
Acting on the suggestion of James Bryson, an exchange employee, Laemmle told Ranous to go
to some remote spot. Ranous took a second-hand camera Laemmle had bought at a bankruptcy
auction, and hired some actors. So, IMP'S first film production, Hiawatha, directed by William V.
Rancous, was made on location in Coytesville, New Jersey. Ads proclaimed: 'It is taken from
Longfellow's masterpiece of poesy. It is a gem of photography and acting.' By the beginning of

10
the 1910s IMP was producing a film a week.
In 1910 he coaxed away from Biograph (and the Trust) a young actress named Mary Pickford
by paying her $ 1 75 a week - $75 above her Biograph salary - and giving her star billing under her
f ull name . This success led Laemmle in 1912 to engineer a merger of his company"with Patrick
Powers, Adam Kessel, Charles Bauman and W. H. Swanson to form the Universal Pictures Cor-
poration. Laemmle initiated many of the business strategies Zukor would shortly copy. But Zukor
was always able to exploit them far more. For example, Laemmle never used his newsreel company
11
- founded in 1913 - to any advantage.
The problem was Laemmle's limited philosophy. If Zukor wanted to be the US Steel of the
movie industry, Laemmle offered a Woolworth five and dime store. He did his best when Zukor
was small, making Universal profit through the merchandising of vast quantities of cheap goods.
But this nickel-and-dime philosophy was ultimately responsible for Universal falling further and fur-
ther behind Zukor. So when Zukor was distributing features, Laemmle was still promoting his 'reg-
ular service' programme of one-, two- and three-reel pictures, attacking feature-length films, and
decrying the lavish presentation policies of the downtown theatres as wasteful. He was a pioneer,
and then stopped innovating - and even stopped keeping up with the model Zukor was laying
12
out.
So, for example, Laemmle did not have the skill to retain top talent. During this crucial period,
John Ford, Rudolph Valentino, Rex Ingram, Lon Chaney and Mae Murray all spent considerable
time at Universal but, just as they began to establish themselves, Laemmle let them get away, lured
elsewhere by promises of greater control, money or both. His greatest loss was producer Irving
Thalberg to MGM. A Thalberg project, The Hunchback of Notre Dame, proved a rare financial
success for Universal in 1923-4.
It was not that Laemmle did not try. In 1925 he sold $3 million worth of stock in Universal Pic-
tures, Inc. to fashion a subsidiary, the Universal Chain Theaters, Inc. But it failed within two years.
Laemmle tried to match Zukor's vertically integrated empire, but only became a part of the system
13
called the Little Three.
Columbia
Columbia's origins lay in a partnership of two brothers - Jack and Harry Cohn. Their early training
in the movie business came from Carl Laemmle. In 1908 Jack Cohn, aged twenty, took a position
in the film lab of Laemmle's IMP, and five years later he founded and edited Laemmle's Universal
Weekly Newsreel. In 1917 Jack was named a shorts producer for Universal, and got his brother
Harry, aged twenty-seven, appointed secretary to Laemmle. In 1919, inspired by fan magazines,
Jack produced the Screen Snapshots series. Harry's best move at IMP was to hire director Frank
Capra. Then they quit to form Columbia Pictures, which was f ormally estab lished Qn 10 lannary
1924.
Slowly the brothers Cohn marshalled their forces to create first a national system for distri-
bution and then an international one. Columbia had small studio facilities, beginning with two
stages on Gower Street in what was then known as Hollywood's Poverty Row. The Cohn brothers
RKO AND THE MINORS: UNIVERSAL, COLUMBIA AND UNITED ARTISTS |
61
never had the resources to consider buying theatres. Harry Cohn became VP of production and
was based in LA, while Jack Cohn became the accountant, and remained in New York. Both had
been born and raised in New York City, and Jack Cohn remained there, as the true power broker
14
of the company, while his brother earned the publicity and put the public face on the studio.
Columbia almost went bankrupt on its very first production, a series of two-reeler shorts based
on H. A. McGill's Hall Room Boys cartoon strip. In 1928 - not going with the mainstream studio
system - they contracted with RCA for sound - at a discount. Meanwhile, Jack was doing import-
ant work back in New York, slowly but surely building an international distribution network -
which was in place by 1929 - enabling Columbia to join the Little Three. In 1930 - after a series
of brilliant business moves - the company assets stood at $5.7 million, a considerable sum, and a
signifier of Columbia's success as a major company of minor status - defined by its strategic lack
15
of investment in theatres.
United Artists
On 15 January 1919 stars Charlie Chaplin, Douglas Fairbanks and Mary Pickford joined with direc-
TOrtr; W. Griffith to create United Artists, with the intention of distributing star-produced features.
In the happy days of UA, in 1933 when Joe Schenck (centre, seated) had signed Darryl Zanuck (centre,
Owners of UA
standing) from Warner. at the time, Mary Pickford and Douglas Fairbanks (seated) and Charlie
Chaplin and Sam Goldwyn (standing)
" /
H+E hK2LLYWQQQ STUQIQ SYSTEM
~fns company at stas "ratr ssueEt a aecaraian at i from ther farmer employers;
mraugn UA tney :auia gan mrec control aver their awn dims and fully acpknt ther drawing
lowe ar the aox atftce Rir the drsr time aver, matran aicture aertarmers acquired campiete
autonomy aver their warK. carrtrailing a corporate aopararus which set in motion approved pro-
motion, anvertising ana aumicrv. jA maae iame aapuiar early dims: The Mark afZorra ( 1 920,
^ssrusriKSj, lantn -Kiaa:< 9ZH. -arnarncs;, _rffe _orcr -aumt&ay < 1 9Z1 , Rcktord) *rd 77re Gakt Rush
"2Z5. Ciannm. jrrrarTunareiv, :ouia iat elease a consistent output of features. Eêrr though
tbeatreawneFS wantea Tdaoiin, -arnancs ana ^cxrdrd dims, they could not afford ther theatres
aping t&k waring *ar diem. ~hus. Â A/as lever aniero duly expioir its stars or develop new anes.
-Xsrthe maauee /aue jt ^ccara, -aroarKs et a/, oegan to facte. UA was forced to become a
Taven "or noeaenaerrr araaucers same goaa, same aaa) ieeng tram die strict confines of a
n '
9Z4- me Tustrateo *ounaers urea as eon Science This gave them a great leader and an
j
nsurance aancy - ae <new drat f UA ever gar nta Touoie us drather Mick at Loew s would datl
Tim our. n '57A ae araugm wirtt urn dre comracr it us wife, actress Norma tamaage. wha was
ay dns time lelmg more traces than a c<roro. Vloving mmeaiate*y to ncease the daw of prad-
ac. Science tigneo Huacaan /aerrnna, 3uster <eatan. Gana Swansan and producer Samuel
~
Sxnawvn. ~hts: aravetr to threat to Hucar, aur eturned r

OA to viability. 17
~he Serene agreement ores erven the co-operative set-up of UA. Schenck was to recerve his
urnman ztac n dre arescrdea narner. lamev as ê nalfiiled dis disirrbudan contract. Like his
oam err. ie nvesieo n the caroaranan ay sunscibing to a II 00,000 black at preferred stack.
Science agreea ta aerer anv iaav antii the company showed a praffr, which fie figured hre could
av '
9Zfi— ana ie A/as Tgrrt. He A/as Tiacing dis money ay managing ms wife sister-mUaw, Nataie
"amaage ana arather-n-aw. 3uster < eat on. He dap access ta Loews theatres through younger
arather Mio. JA inoer Science taminueo n the aiacx, and n 930 was the smallest member of
1
die _ttte "hree.

s
. Iteerr ana Laurie; Shaw Sz. x Z7E, /army, ZSMarcn '923. a2 Jarmy, Z5March 1924, a 5.
Z 7reeA/»agazznearvVffi/ llreer. ZZ Vlav '925. gp. '92. 1

96
3. Tie Vtaaaane-'jr A/ail 3reef: '4-Aqni !
9Z4-. 596: 77ie<Vtega22ne or '/l^5ireer, Z5 Septem ber 1934>
y
ix tDZ—£ oZE. TjeVesv eor Tmes. Z3 Vlarcn !93J; Tr&Vew Ybrk TTmea. IZMarch 1930; The New
-'otk -tea«jl7oiinet '3VI»cr '930, Janm, 'SivlarcP 1930; SmerE aucner, Rama and Dana
Earnarf New 'or*. '9653, ocaegintr^JaviaSarTia^lJbrafy, ff'in ceffan .Mew Jersey, pp. 652—5;
^rnencan "rr-ôon, Z94-U.S. '93S, lesarcL cp. 536. 539. aQO-6. The- New York TTmes, 30
anujfv '927 i '; ~heNew 'am ~imes, 5 Pemiary 1927 a. 18c Vfowng- afCu/*Warict 5 February
'927 x 7 Feaerat Ijmmurncaacin Carnrnission, Teiepnur er investiqaaDn Exhibits tFursuanfta i
*jhiic êsomnon NJa 1 Congress], '936-~ Exhibit 1 6Z2. pp 1-7; Generat Talking Ffeures. 18F
Mipn iED. Teeora ajx
~" E-
i :
6. Ead I. 5qananie. Kistancal Deyekipmentaf SbunU Fflms',
. aurnai <jt neZacerv 'jr \Aaxian Jfaxue Biginet»^. ah. 4»iMay 19*7), p 420; FCC, telephone
Em-enrs. Lxmoir '
62! : IS. Canoress. House Camnrattee-an Parents, Noting of Patents. Hearings before
RKO AND THE MINORS: UNIVERSAL, COLUMBIA AND UNITED ARTISTS
the Committee on Patents, House of Representatives, on H.R. 4523, 74th Congress, 1st Session, 1935,
p. 518.
4. Maurice D. Kann (ed ). The Film Daily Yearbook - 1928 (New York: Film Daily, 1929), p. 888; Kahn,
p. 495; Variety, 1 1 January 1928, p. 5; Bucher, p. 667; David Sarnoff, 'Reminiscences on Joseph Page
Kennedy', Sarnoff Library, written 30 October 1 964; Radio Corporation of America, Annual Report for
1929 (New York, 1930), p. 12; Variety, 25 April 1928, p. 4; Variety, 2 May 1928, pp. I, 52; General
Talking Pictures, 18 F. Supp. 650, Deposition of Elmer Blucher, page 2; Koplar, 19 F. Supp. 173, Record,
pp. 568-71; Moody's Manual of Industrials - 7929 (New York: Moody's , 1930), p. 794; Vanety. 15
February 1928, p. 11; Variety, 22 August 1928, p. 7; Variety, 27 June 1928, p. 19; Variety. 1 1 Jury 1928,
p. 12; Variety, 1 August 1928, p. 21; Variety, 8 August 1928, p. 20; Variety, 2 May 1928, p. 63; General
Talking Pictures, 18 F. Supp. 650, Opinion, p. 13; Variety, 25 April 1928, p. 19; Variety, 16 May 1928,
pp. 14-15; Variety, 5 September 1928, p. 7; The New York Times, 16 Apnl 1928, p. 4; Vanety, 18 April
1928, pp. 1, 41; Variety, 2 May 1928, p. 10.
5. Bucher, 'Radio', pp. 686-9; Princeton, New Jersey, David Sarnoff Library, Plan for the Formation of
Radio-Keith-Orpheum Corporation, Deposit Agreement. 22 October 1928, pp. 1-10; Variety,
24 October 1928, p. 9; Variety, 7 November 1928, p. 30; Vanety, 24 October 1928, p. 29.
6. I. G. Edmonds, Universal in the Silent Days (South Brunswick, NJ: A. S. Barnes and Company, 1 977),
pp. 46-79; Richard Kozarski, An Evening's Entertainment (New York: Scribners, 1990), p. 329.
7. The New York Times. 5 January 1914, p. 9; Moving Picture World, 18 April 1914, p. 347. Moving Picture
World. 2 February 1924, p. 360; The New York Times, 28 February 1926, section VIII, p. 5.
8. Moving Picture World, 26 March 1927, pp. 377-8.

9. Benjamin Hampton, A History of the Movies (New York: Covici, Friede, 1 93 1 ), p. 89.
10. I. G. Edmonds, Universal in the Silent Days (South Brunswick, NJ: A. S. Barnes and Company, 1977),
pp. 19-24.
1 1 . Moving Picture World, 2 February 1 924, p. 360; The New York Times, 28 February 1 926, section VIII,
p. 5; The New York Times. 5 January 1934, p. 38.
12. Universal Weekly, 23 January 1 91 5, p. 9; Universal Weekly, 6 February 1 91 5, p. 28; Moving Picture
World, 10 March 1917, pp. 6-7.
13. The Magazine of Wall Street, 22 May 1 926, p. 1 36; Moving Picture World, 26 March 1 927, pp. 377-8;
Universal Pictures Company, Inc. Poors Industrials Report (New York: Poors, 1934), pp. 2034-6.
14. Variety, 25 January 1999, p. 43.
1 5. Exhibitors Herald, 13 February 1926, p. 45; Moving Picture World, 27 February 1926, p. 4; Views and
Reviews, vol. 1, no. 4 (Spring, 1970), p. 9; 7he New York Times, 3 February 1932, p. 26; Variety, 12
1 6. Tino Balio, United Artists: The Company Built By the Stars (Madison: University of Wisconsin Press,
1976), and United Artists: The Company that Changed the Film Industry (Madison: University of
Wisconsin Press, 1 987) chronicle the data found in the UA papers held at Center for Film and Theater
Research, State Historical Society, Madison, Wisconsin. While Balio exaggerates the importance of UA.
his documentation is the most impressive of any history of any studio.
17. Letters and contracts Dennis O'Brien files, November 1924, United Artists collection. State Historical
Society, series 1a, minutes and series 1b, O'Brien legal file, November 1924.
1 8. United Artists Income History, United Artists Collection, series 2C, and series 3C, State Historical Society,
passim.
6
Ancillary Institutions: the Hays Office and the

Academy
By 1920, the Hollywood studio system boiled down to eight corporations. The Big Five owned the
key first-run movie palaces in the USA; the Little Three did not. But to maintain power over all
aspects of the film business they faced three key common problems: (1) government censorship,
(2) international distribution restrictions, and (3) the threat of labour unrest. By 1930 two common
industry-funded ancillary institutions were in place to deal with these problems.
The Hays Office

Zukor recognised these common problems as earlyj^J-922 and, with his former partner Marcus
Loew, formed an organisation of the then studios^- the JVIotion Pictu reproducers and Distribu tors
Associ ation (MPPDA) (

also known as the Hays Office, after its first leader Will Hays (1922-45). All
Will Hays doing what he did best, lobby on the telephone

ANCILLARY INSTITUTIONS: THE HAYS OFFICE AND THE ACADEMY 65
the largest firms eventually became members of the Hays group. The studio system was thereafter
built on commonalities, whereby the insiders who joined together solved common problems while
competing only among themselves in the marketplace - and working to keep out competitors.
They dealt in common with reformers who wanted to impose government censorship, and with
foreign governments - with help by the US Department of State - to keep world markets open. 1
Hays, plucked by Zukor in 1922 from the cabinet of President Warren G. Harding, proved to
be very good at what he did. Hjaysne ver got studio films officially into the USSR t but with h is_£Qn-,
sj derable political skillsîejûdios HktrihntpH intQ_gyery other nation in the_w orld. Foreign gov-
ernments, as well as cultural and religious institutions, brought forth an array of policies in the
2
1930s designed to protect their cultures from the Hollywood tidal wave; all failed.
The MPPDA was incorporated on 10 March 1922, with a stated objective to 'foster the common
interests of those engaged in the motion picture industry in the United States', and to do this
by establishing and maintaining the highest possible moral and artistic standards in motion picture
production, by developing the educational as well as the entertainment value and the general useful-
ness of the motion picture, by diffusing accurate and reliable information with reference to the industry,
by reforming abuses relative to the industry.
Hays had at his disposal all the political muscle that Zukor and the others could muster. 3
Hays - in co-operation with Zukor - initiated an innovative policy designed to recruit influen-
tial organisations in support of a publicly led programme of motion picture reform. The corner-
stone of the programme was a Committee on Public Relations, made up of representatives of
powerful community groups, which Hays hoped would serve to channel 'destructive' censorship
energies into a constructive drive towards 'higher' movie standards (translation: maintain the status
4
quo). He called the Committee 'my special hobby - a creature of my own brain entirely'.
To the public, Hays' work seemed to involve handling complaints in the USA about racy themes
and portraits. In reality, the studios paid him a handsome salary (in excess of $100,000 per year)
to keep open their domestic and foreign distribution pipelines. For all Hays' pious talk of elevating
cinematic art and ensuring high moral standards, the MPPDA saved the studios enormous costs by
vetting scripts and preventing the shooting of scenes that would have run afoul of censorship
boards around the globe. Hays had been a Republican Party leader and used his contacts in the
Harding, Coolidge and Hoover administrations to run interference for the studios on the grounds
that 'trade follows the film'.
Zukor and Hays started the Motion Picture Export Association of America, a subsidiary of the
MPPDA, to advance studio interests. Hays enabled the co-operating studios to work as one, con-
quering the world cinema market. Specifically Hays used the US State Department as overseas
negotiator for the film industry - he sometimes treated the department as his set of official assis-
tants - and the US Commerce Department to dampen the complaints about censorship. As the
film industry grew in size, Hays stated over and over again how important the film industry was to
US corporate capitalism. Hollywood's global supremacy led trade around the world, and served as
the focal points of retailing in urban USA. He made the MPPDA into a classic trade association, in
5
which the members of the oligopoly acted as one, for all their common interests.
Hays had honed his management skills as chairman of the Republican National Committee, in
which capacity he steered the election campaign of Warren G. Harding. H arding became the first
'movie-made' president . On 8 June 1920 Hays banged the gavel to open the Republican national
convention - all recorded by newsreel cameras and then shown in theatres across the USA. He bro-
kered the deal which got Harding nominated, and then orchestrated the famous front-porch cam-
paign whereby Harding, in' a white coat and blue trousers, gave speeches, princip ally seen _but not
heard by movie-goers in newsreels. Hays used all his connections as party chair - he was known
as Telephone Bill - to call in favours. After the election, a grateful Harding appointed Hays Post-
master General, in January 1921; Harding was sworn in as president in March 1921; and Hays then
cashed-in a year later to help form the MPPDA. He was part of the classic Washington revolving
6
door of officials cashing out to lobby the very politicians they helped get elected.
His first job was to eliminate the real possibility of federal censorship. Studio p roblems with
state and local censors reached a peak in post-World War USA

I . Studios were testing the limits of
postwar morals with offerings such as The Branded Woman (1920), Ever Since Eve (1921), The
Leopard Woman (1 920), Luring Lips (1 92 1 ), No Woman's Man (1 920), Passion's Playground (1 920),
The Plaything of Broadway (1921), Restless Sex ( 1 920), The Truth About Husbands ( 1 92 0) and Why
Girls Leave Home (1921). There gre wjn. thp public mind a relationship betw ^n the rnntpnt nf^
films an d the lifestyles of the men and women who had acted in these and other films This .. was
why, during the spring of 1920, a press flurry surrounded thj^Jôdivorce pf Marv Pickford, then
^
thetop star in the system. Her husband Owen Moore charged her with fraud, collusion andjnsuf-
Jide£rt,rejidence in the state of Nevada (Pickford had married Douglas Fairbanks only four weeks
after her divorce decree had been granted). This coverage of thetriaTwas nothing lesstHan a sen-
7
sation, even when the Nevada courts ultimately ruled against Moore.
That scandal set the tone of what was to come. A Zukor star, Roscoe 'Fatty' Arbuckle, one of
the most popular and highly paid of all Hollywood comics, held a Labor Day 1921 bash in San Fran-
cisco at the St Francis Hotel. At the wild party, a would-be starlet, Virginia Rappe, was taken vio-
lently ill and died. Her associates brought charges against Arbuckle for murder. The evidence
against Arbuckle was clearly suspect, but the ambitious San Francisco district attorney, Matthew
Brady, decided to pursue the Hollywood star in court with a case based upon sensationalism and
innuendo. The press went wild. Fed by rumours, lies and half-truths, they condemned Arbuckle as
a rapist and murderer. While most of Arbuckle's friends and employers had originally supported
him, the tide began to turn when his first trial (on manslaughter charges) resulted in a hung jury.
By the time Arbuckle's second trial began, on 11 January 1922, industry leaders had already
announced that Will Hays was leaving the cabinet to supervise a film industry clean-up.
Zukor ended the Arbuckle scandal by blacklisting his star. On 12 August 1922 Hays announced
to the world the final verdict in the Arbuckle case: an acquittal, complete with an apology to
Arbuckle on the part of the jurors. Hays thentojjreo^^^

had pniirpH i^plf Hays established his bona fides and began to push the line that informal industry
censorship workeB and no government interference was needed. Whereas reformers had pre-
viously rejected all industry pleas for self-regulation, they now accepted the notion from Hays. After
1922 no more states established censorship boards, an d the MPPDA succes sfully haltpd all bilk fp r
federal regulation."
in 1 924 nays issued a list of twelve subject s that members of the MPPDA would not, in future,
present in their motion pictures, and twenty-five subjects that would be presented only with the
exercise of special care. Hays promoted this as a gentlemen's agreement within the film industry to
eliminate pictures that dealt with sex in an improper manner, were based on white slavery, made <
t
*.
"
vice attractive, exhibited nakedness, had prolonged passionate love scenes, were predominantly con- 7,1 ^ i
s
cerned with the underworld, made gambling and drunkenness attractive, ridiculed public officials, /1j
offended religious beliefs, emphasised violence, portrayed vulgar postures and gestures, and used ^ (
l© n
salacious subtitles or advertising. Hays would later become famous for a restrictive code, but his first J
attempt - which worked through the 1920s - was simply the most overt sign of studio system co-
operation. Studio leaders agreed that their studio story departments would submit to the MPPDA
office readers' reports on all pre-existing story material under consideration as to questionable theme
or treatment. By 1924 Hays proudly proclaimed that sixty-seven stories had been rejected by the
MPPDA. With the coming of talkies, the MPPDA common content policies and restrictions were con-
siderably strengthened by the adoption of a series of published standards. Studio leaders agreed to
9
avoid taboo topics, but Hays avoided mentioning any penalty for a violation.
That problem solved for the moment, Hays sought to make sure Hollywood features and
shorts continued to flow freely into all the nations of the world. While there were problems, none
grew obtrusive and so by 1930 the studio system was producing talkies in record numbers, and
they were being freely distributed to all regions of the USA and the world. The coming of sound
- which could have caused the MPPDA major problems - was skilfully handled and the major stu-
10
dios all came out on top, hardly prevented from maximising their foreign revenues.
The international problem grew trickier when The Jazz Singer opened on 3 October 1928 in
London. Foreign producers saw the transition to sound as an opportunity to finally seize a share of
the world market from the Hollywood studios. Certainly audiences, they reasoned, would demand
native-language films. But conversion to sound was slow. By the end of 1929, 40 per cent of US
theatres had been wired - the major picture palaces owned by the Big Five - compared to only 18
per cent in the rest of the developed world. Hays focused on how best to keep world distribution
open for his studio bosses. In October 1929 Zukor and Hays sat down to consider their options.
After market testin q^dubbinq o f Hollywood films proved to be the long-term solution (making
foreign versions of these films was simply never profitable) and foreign audiences quickly accepted
11
this practice.
The one nation that put up a serious battle was Germany. Warners planned to premiere The
Singing Fool in Berlin in June 1929. German sound pioneer Tobis-Klangfilm sued Warners for sup-
posed patent infringement On 4 June 1929, ten minutes before The Singing Foots planned open-
ing, a German court stopped the showing with an injunction. A week later the court adjusted its
ruling, and The Singing Fool could play. Tobis-Klangfilm appealed. On 22 July 1929 the German
appeals court upheld Tobis-Klangf ilm's exdusrve hght to the sound-on-film recording in Germany.
The Singing Fool ended its run. No studio system films could be shown in Germany while the case
continued to a higher court. The German public was upset; German sound films would not be
ready until October 1 929 and The Singing Fool had set attendance records for its run.
In May 1 930 Zukor and Hays soon tired of this stalemate, and met with German leaders. They
proposed a conference. On 9 June 930
1 1 Hays opened the American-German Rim Conference at
a neutral site, in Paris, at the Royal Monceau Hotel. The stakes were high. Germany was a vast
market and the Hollywood studio companies had seen the foreign share of grosses drop because
of the stalemate. They settled upon a question: how best to divide up the worid? Slowly all the
interested parties compromised on the necessary variables. Tobis-Klangfilm kept their monopoly in
Germany; the Hollywood studios. Western Electric and RCA got the same guarantee for the USA.
The rest of the world was deemed open territory. On 22 July 1930 the representatives - studio
bosses and sound manufacturers alike - had formed a cartel that divided the worid into three
regions with respect to sound patent rights. All not only pooled their patent rights, but also all
technical information. All pending litigation was dropped. This so-called Paris agreement again
12
proved Hays' skill and worth as head of the MPPOA.
The Academy and Labour

As the studios grew wealthy, workers ached for a greater sha£e_j04)iiddftMfiifiQmiÛ^tiA?
rif-f-/ cA
BflMB b-z - '/: /.
;
v •:
jOscar ceremony. The announced goals of the Academy were 'to develop harmony and adjust dif-
ferences and grievances within the industry ... to promote the good repute of the profession and
protect it from outside attack, and ... aid in the advancement of the motion picture in all its arts
13
and sciences'. It was a company union.
On 29 November 1926 the major producers had finally signed the Studio Basic Agreement
with the International Alliance of Theatrical Stage Employes [its accepted misspelling] and Motion
Picture Machine Operators (IATSE or IA), which codified their relationship t o organised stagehands ,
rarppntprs plprtn rians. oainfprs and musicians, (IATSE had already organised the protectionists.)
IATSE had finally established its jurisdiction over studio craft workers. But there, Zukor drew the
line. F or all othpr wnrkpre - frnm st ars op d "wn - he would work only through the Academ y. 14
It became the Academy's mam tas ktg_nrp"ont an y nth P r ""to gs from nai pmg a fr>nffy>iH in tKo
studio system . The Academy did its job well, despite significant efforts by tfle American Federation
of Musicians and Actors Equity. Unionisation would come to the studios only in th eJ930s. The
stud ios were free to p*pj2itih 0>r lah ™ ir - anH thp^HiH H thprp pw>r was prnnf of the power of the
Hollywood studio system in 1930, it came with its ability to suppress unionisation.
Notes
1 . The widely available sources are The Film Daily Yearbook - 1926, p. 361 and, Variety, 2 September
1925, p. 25. The Will H. Hays Papers are held in the library at Indiana University, Bloomington, Indiana. I
edited an abridged version of the papers on microfilm in 1987.
2. John Trumpbour, Selling Hollywood to the World (New York: Cambridge University Press, 2002).
3. Articles of Incorporation, quoted in Raymond Moley, The Hays Office (New York: Bobbs-Merrill, 1945),
p. 226. Moley's book is the standard account of the MPPDA. He was highly sympathetic to the
Association and its progressive business methods, and although his book is a useful source of
information (due to the fact that he was given access to the MPPDA's records in its preparation), it is
nevertheless a frankly partial account.
4. Hays quoted in Stenographic Report, 'Minutes of January Fourth of the Committee on Public Relations',
4 January 1923, p. 2, Civic Committee file, Will Hays Collection, Indiana State Library, Indianapolis.
5. See, as a case study of how simple it is to examine the Hollywood industry when the dominant
corporations work together, Douglas Gomery, 'Hollywood, the National Recovery Administration, and
the Question of on Monopoly Power', Journal of the University Film Association, vol. 31 (spring 1979),
pp. 47-52.
6. Hays' role in the Harding election is best understood through the political skills of his attorney general,
Harry Daugherty, the power behind the throne of Harding's short-lived, unsuccessful presidency. See
James N. Giglio, H. M. Duagherty and the Politics of Expediency (Kent, Ohio: Kent State University Press,
1978), pp. 103, 108-15, 122.
7. These titles are taken from Wid's Yearbook, 1921 , pp. 292-31 3; Robert Windeler, Sweetheart: The
Story of Mary Pickford (New York: Praeger, 1973), pp. 115-18.
8. Will Hays Collection, Box 20, Indiana State Library, Indianapolis.
9. Moley, pp. 55-60; Motion Picture Producers and Distributors of America, The Don'ts and Be Carefuls
(1 927)', in Gerald Mast (ed.), The Movies in Our Midst: Documents in the Cultural History of Film in
America (Chicago: University of Chicago Press, 1982), pp. 213-14.

1 0. Harold Sugarman, Letter to Arthur W. Kelly, 1 7 July 1 933, W. Page Philips file. Box 2, Folder 3, United
Artists Collection. William Victor Strauss, 'Foreign Distribution of American Motion Pictures', Harvard
Business Review, vol. 3 (1930), p. 314; George R. Canty, 'The European Motion-Picture Industry in
1927', Trade Information Bulletin no. 542, p. 1 5. See Hays quoted in 'Resume of Dinner-Meeting of the
Studio Relations Committee', 24 July 1928, Will Hays Collection, Indiana State Library, Indianapolis;
Jason Joy, 'Resume of Dinner-Meeting of Studio Relations Committee', 24 October 1928, Will Hays
Collection, Indiana State Library, Indianapolis.
1 1 . William Victor Strauss, 'Foreign Distribution of American Motion Pictures', Harvard Business Review, vol.
8 (April 1930), pp. 307-15; Martin Quigley, Motion Picture Almanac - 1931 (New York: Quigley
Publications, 1932), pp. 308-9; Variety, 1 1 December 1929, p. 4; Variety, 23 January 1929, p. 6;
Variety, 13 February 1929, p. 6; Variety, 18 December 1929, p. 5; Variety, 18 December 1929, p. 6;
United Artists Collection, O'Brien File, Manuscript Collection (Wisconsin Center for Theatre Research,
Madison, Wisconsin), Box 84-4, letter, Arthur Kelly to Dennis O'Brien, 16 March 1929, and letter Murray
Silverstone to Dennis O'Brien, 30 July 1929; Variety, 21 August 1929, p. 6; Barrons, 22 July 1929, p. 19;
Variety, 30 April 1929, p. 6; Variety, 7 August 1929, p. 189; Business Week, 9 February 1930, p. 40; The
New York Times, 17 November 1929, p. 5; Variety, 28 November 1928, p. 5; Variety, 2 October 1929,
p. 5; Variety, 16 October 1929, p. 9; Variety, 6 November 1929, p. 4; Variety, 12 February 1930, p. 4;
The New York Times, 10 December 1929, p. 9; Variety, 26 March 1930, p. 10; Variety, 9 April 1930,
p. 4; The New York Times, 1 7 April 1 930, p. 9; The New York Times, 27 April 1 930, p. 1 0; Variety, 30
April 1930, p. 7; Variety, 5 April 1930, p. 6; Variety, 2 July 1930, pp. 7, 26; Variety, 10 September 193,
p. 6; Barrons, 8 September 1930, p. 12; Variety, 17 September 1930, p. 2; Variety, 22 October 1930,
pp. 7, 64; Variety, 7 January 1931, pp. 7, 78; Variety, 19 March 1930, p. 30; Variety, 6 August 1930,
p. 4; Var/efy, 30 September 1930, p. 6; Variety, 24 December 1930, p. 6; Var/efy, 29 October 1930,
p. 6; Variety, 15 September 1931, p. 17. For a history of the technology involved in dubbing see George
Lewin, 'Dubbing and its Relation to Sound Motion Picture Production', Journal of the Society of Motion
Picture Engineers, vol. 16 (January, 1931), pp. 38-48, and W. A. Pozner, 'Synchronization Techniques',
Journal of the Society of Motion Picture Engineers, vol 47 (September . 1 947), pp. 191-211.
12. Moving Picture World, 5 September 1925, p. 106; Franklin S. Irby, 'International Relations in the Sound
Motion Picture Field', Journal of the Society of Motion Picture Engineers, 1 5 (December 1 930),
pp. 744-6; Douglas Miller, 'Talking Syndicate Organized in Germany', Commerce Reports, 20 August
1928, p. 496; Rudolph K. Michels, Cartels, Combines and Trusts in Post-War Germany (blew York:
Columbia University Press, 1928), pp. 126-39; Frank A. Southard, American Industry in Europe (Boston:
Houghton & Mifflin, 1931), pp. 17-37, 100-1 ;
Douglas Miller, 'Competing Talking Film Companies
Organized in Germany', Commerce Reports, 1 October 1928, p. 53; Variety, 31 October 1928, p. 6;
Variety, 13 February 1929, p. 6; The New York Times, 14 March 1929, p. 24; Variety, 6 February 1929,
p. 6; Variety, 13 March 1929, p. 2; Barrons, 18 March 1929, p. 4; The New York Times, 15 March 1929,
p. 3; Variety, 17 April 1929, p. 2; Variety, 12 June 1929, p. 2; Variety, 5 June 1929, p. 2; Variety, 19 June
1929, p. 2; The New York Times, 27 July 1929, p. 7; Variety, 24 July 1929, p. 5; Variety, 28 August
1929, p. 2; Variety, 25 September 1929, p. 4; Variety, 25 September 1929, p. 4; US Federal
Communications Commission, Telephone Investigation Exhibits (Pursuant to Public Resolution No. 8,
74th Congress, 1936-7, Exhibits 1813-1814; Variety, 6 November 1929, p. 5; Variety, 13 November
1929, p. 4; Douglas Miller, 'Difficulties of the Spitzen Organization in Germany', Commerce Reports, 18
November 1929, p. 430; Variety, 4 December 1929, p. 4; Variety, 8 January 1930, p. 76; Variety, 15
January 1930, p. 5; J. Byron McCormick, 'Some Legal Problems of the Motion Picture Industry',
American Bar Association Journal, vol. XVII, (May 1931), p. 318; The New York Times, 1 December
1929, p. 22; Variety, 1 1 December 1929, p. 4; Variety, 31 July 1929, p. 2; Barrons, 16 September 1929,
p. 12; Variety, 31 July 1929, p. 2; Variety, 4 September 1929, p. 2; Variety, 12 March 1930, p. 8;
Barrons, 21 April 1930, p. 13; Variety, 9 April 1930, pp. 6, 68; Variety, 25 June 1930, p. 22; The New
York Times, 23 April 1930, p. 39; The New York Times, 17 May 1930, p. 20; Variety, 21 May 1930, pp.
7, 47. E. S. Gregg, The Shadow of Sound (New York: Vantage Press, 1968), pp. 61-2; The New York
Times, 18 June 1930, p. 9; Variety, 25 June 1930, pp. 105, 114; Variety, 2 July 1930, pp. 3, 31; Variety,
16 July 1930, pp. 7, 57; United Artists Collection, Box 86-2, Agreement, American-German Film
Conference, 22 July 1930 and Box 86-5, Contract, ERPI and Producer, 6th proof, 9 January 1931;
Thomas G. Patten, letter to Will Hays, 12 May 1923, in Will Hays Collection, Indiana State Library,
Indianapolis; Will H. Hays, The Memoirs of Will H. Hays (New York: Doubleday and Co., 1 955), p. 507;
Kristin Thompson, Exporting Entertainment, (London: BFI, 1985) p. 161; 'Policy of the Department of
Public Relations', Meeting-Committee on Public Relations file, 1924, Will Hays Collection, Indiana State
Library, Indianapolis; Commerce Reports, 24 April 1922, p. 191 . 'The Motion Picture as a Business'
(speech to be delivered by Carl Milliken in Boston), 3 April 1928, Trotti file, Will Hays Collection, Indiana
State Library, Indianapolis.
13. The New York Times, 23 June 1 927, p. 1 ; The New York Times, 24 June 1 927, p. 3; The New York
Times, 2 July 1927, p. 21.
1 4. Frank Woods, 'The Academy of Motion Picture Arts and Sciences', Journal of the Society of Motion Picture
Engineers, vol. 33 (April 1928), pp. 25-30.
Part II
The Classic Studio Era 1931-51
The fifty-seven-year-old Adolph Zukor stood atop the studio system in 1930. His strategies defined
the Hollywood film industry. But thereafter - through the 1 930s and 1 940s - the Big Five and Little
Three (plus thr ee small marginal comp anies Repu blic, Monogram and Disney) had other issues with
which to deal. All made classic, narrative, genre films, starring some of the most famous and
beloved public figures in world culture. Vertical integration was key; the Big Five controlled the key
theatres. But then outside forces challenged leaders, first the Great Depression, then World War II.
But neither outside economic or social shock could affect the dominance of the Big Five and Little
Three.
By owning and operating picture palaces in all of the central cities across the USA, the Big Five
had three-quarters of the average domestic box-office take. Only after they granted their own
theatres first and exclusive runs and soaked up as much of the initial wave of grosses as possible
did the Big Five then permit independently owned theatres to scramble for the remaining bookings
- sometimes months, or even years, after a film's premiere. No corporations could match the econ-
omic muscle of the Big Five because they did not own the top (exclusively first-run) theatres. Here
was a collusive oligopoly (control by a few) that operated as an almost pure monopoly.
The Stars and their Studios
Throughout the 1930s, the trade journal Variety published extensive information on the exhibition
market. The Pictures section of Variety included weekly box-office reports from as many as 200
cinemas in thirty cities, principally first-run big-city picture palaces. John Sedgwick has analysed
Variety's range of financial information from October 1934 to October 1936. The fifty highest-earn-
ing films include many we now regard as classics, as well as others that are barely remembered
now. The top ten films for this period are: 1 . San Francisco (MGM, 1936), 2. Top Hat (RKO, 1935),
3. The Great Ziegfeld (MGM, 1936), 4. Swing Time (RKO, 1936), 5. Mutiny on the Bounty (MGM,
1935) , 6. Roberta (RKO, 1935), 7. Follow the Fleet (RKO, 1936), 8. Anthony Adverse (Warners,
1936) , 9. David Copperfield (MGM, 1935), 10. Love Me Forever (Columbia, 1935). Among the top
fifty, the Big Five led the rankings: 1. Loew's/MGM; 2. Paramount; 3. Warners; 4. RKO; 5. Twenti-
eth Century-Fox; 6. Columbia; 7. Universal; 8. United Artists.
Variety was reporting to its readers the trends of the first-run sector of the exhibition market -
about one-quarter of the first-run theatres. The first-run picture palaces played films first, they
played them exclusively (within their area) - fans knew they would have to wait usually a month
for a chance to see them in second run - and they charged the highest admission charges. First-
run set the trends. Variety told its readers about the relative popularity of films in first-run, and
1
owners of subsequent-run theatres used this information to predict their grosses.
In its reports from individual cities, Variety commented on local promotional and pricing strat-
egies, and local tastes and interests. In Kansas City, for example, a lack of interest in Warners' The
Story of Louis Pasteur (1935) was attributed to the film being 'too classy for this town', and star
Paul Muni's lack of popularity. MGM's A Midsummer Nights Dream (1935) was reported to have
drawn a limited audience in St Louis because ticket prices were set as high as $1 .50 and 'locals
won't pay top price [for Shakespeare]'. With all its stars, even MGM could not sell a literary classic
everywhere. In Minneapolis, local audiences considered MGM's Greta Garbo a 'Scandinavian lumi-
nary' and so, although there was little critical enthusiasm for MGM's The Painted Veil (1934), she
2
nevertheless drew crowds.
Regional differences can best be seen in Birmingham, Alabama, where white audiences of the
Deep South demonstrated a strong preference for Fox's stars, Will Rogers and Shirley Temple. The
'
top-three highest-earning films in Birmingham during the mid-1950s were: 1. In Old Kentucky
(1935); 2. Steamboat Round the fiend (1935); and 3. Judge Priest (1 934). All of them starred Will
Rogers. Shirley Temple's Dimples (1 936), The Little Colonel (1 935) and The Littlest Rebel (1 935)
placed among the top twenty highest-earning films. When Temple herself starred in the Civil War
drama, The Littlest Rebel, the film was, as Variety described it, 'a natural for Dixie', and it became
3
one of the top-earning films in white (read: well-off) Birmingham during this period.
Rarely did a short film make a difference, save in the case of a newsreel of a boxing match
between heavyweights German Max Schmeling and Joe Louis of the USA. Hollywood sold this as
a melodrama in which the evil Schmeling was portrayed representing the Nazis while Louis por-
trayed the free (Black) American. This newsreel, Variety found, circulated a week after the match
and was reportedly a more important draw than the feature films it preceded in Boston, Denver,
Detroit, Indianapolis, Los Angeles, Minneapolis, Montreal, Portland, San Francisco and St Louis -
4
but not in the Deep South.
Stars could save a studio - in the short run at least. During 1934-6, RKO thrived only because
of the popularity of £ red Astaire and Ginger Rogers. Four of their films {Top Hat, Swing Time,
Roberta and Follow the Fleet) appear among the top ten highest-earning films in this two-year
period. These distinctly contemporary, witty and sophisticated musicals, which combined singing
and dancing, were broadly popular across audiences.
Only two other stars came dose to matchinÂstaire and Rogers. One was MGM's Clark Gable.
In sum, Gable's films earned more than those of any other star in this two-year period. This was a
result of the sheer number of films MGM placed in theatres because of Gable - from highly suc-
cessful costume dramas (San Francisco, Mutiny on the Bounty) to romantic dramas (China Seas,
1935, Wife Versus Secretary, 1936) and his pairings with Joan Crawford (Forsaking All Others,
1934, Chained, 1934). The other leading national star was Fox's Shirley Temple, and she too made
an impact at least partly as a result of the sheer volume of her films. Over the twenty-five months,
THE CLASSIC STUDIO ERA 1931-51
I"
she starred in no fewer than eight new releases. This was an era in which audiences were able to
see their favourite stars in several films each year, and they were apparently willing to pick and
choose among the genres that Fox executives selected for their top star. In short, the Zukor star
system continued as the foundation of the Hollywood studio system, unchanging save for protec-
tions that are analysed in chapter 14 on the rise of unions.
While production - with each film's stars - was the most publicised of the three stages of the
vertically integrated movie studio - production, distribution and exhibition - production did not
stand at the core of the studios' economic power. The classic Hollywood narrative film had became
the standard and Hollywood corporations organised the studios to make these features on a reg-
ular basis. (The studios also had shorts and newsreel divisions.) The process was organised as fol-
lows: the regular production of scripts, shooting, editing and then corporate approval - before
release. To keep product flowing, the narrative system - so well analysed by David Bordwell - saw
an efficient use of trained personnel, filming, and set construction and re-use - all supervised by
the head of studio production. Here is where Louis B. Mayer had power, keeping the process of
narrative-making on an even keel. He never had the final say, but since he often dealt with people
who outlived him to tell of his power, his image has been magnified far more than it ought to be.
All his decisions had been pre-approved by Nicholas Schenck - via daily phone calls. Only after
5
clearing it with Schenck could Mayer lord it over 'his' studio.
Distribution
Of course, back in New York, Schenck - taught by Zukor - knew where the real power lay: con-
trol of international film distribution. This global power guaranteed the studio companies the maxi-
mum advantages for selling their films. To set up such a network from scratch was prohibitively
costly, which kept away the competition. And it milked revenues from the whole of the planet,
almost guaranteeing - along with re-releases - that few movies ever in the long run lost money.
The studios alone could guarantee top films, shorts and newsreels to theatres around the world.
Even film companies in other nations did not have the resources to compete in the international
marketplace with the Hollywood studio system. Indeed most film companies in most countries out-
side the USA conceded part of their own native market to Hollywood, so powerful was the Holly-
wood film industry's advantage in distribution. Throughout the 1930s and 1940s overseas rentals
accounted for approximately half of an average feature film's takings.
To make the most from their productions and to maximise profits from their theatres, the Big
Five developed a complex set of distribution practices. By manipulating trade arrangements they
were able to reduce risk and ensure continuity of control. To affect bargaining relations, practices
based on the economics of price discrimination were developed. Price discrimination allows the
seller (or co-operating sellers) to generate larger revenues than going it alone. It is difficult and
costly to segment consumers to charge them different prices, however. The studio system accom-
plished this task in a cost-effective, straightforward fashion through the use of runs, zones and
clearances (temporal and spatial separation of markets).
The distribution exchanges of the Big Five co-operated to establish runs, zones and clearances
for all cities and towns in the USA. All major city picture palace first-runs were followed by a period
of time (the clearance) of seven to thirty days before the film could play second-run - all within
certain geographical limits (the zone). Then the film would play second-run. A clearance would
follow before the third-run, and so on down the line. In some large cities there might be up to
eleven runs requiring more than a year to complete. In smaller communities there might only be a
first-run downtown at the bigger theatre, an'd a final run at a smaller rival, possibly across the
street.
Different admission prices were charged for each run, the highest at big city first-run picture
palaces and falling as the film went down the scale of runs. Keen movie fans paid up to a dollar
to see their favourites at the biggest picture palace downtown, for they knew they might have to
wait as much as a month for a chance to see it a lower admission price. Casual moviegoers waited,
and paid as little as ten cents. Widescale advertising tried to line up potential patrons to attend a
first-run showing rather than have them wait and pay less. Distribution executives juggled run
status, zone size, clearance time and admission price to milk the most from any market. In actual
practice, through a trial-and-error method, runs, zones and clearances were established by 1930,
and then fixed as studio distributors responded to the declining demand created by the Great
Depression and rising demand associated with the economic boom of World War II. Throughout
the classic studio era, this run-zone-clearance system served to maximise the revenues of the Big
Five and to a lessor extent the Little Three, regardless of differences in the qualities of the films
produced.
Actual bargaining between distributors and exhibitors was not a complicated affair. Each
theatre had a fixed run-zone-clearance status - set in thirty-two regions of the USA by a studio co-
operative Film Board of Trade that covered a specific region. Contracts stipulated admission prices.
A rivalry did exist among the Big Five to sell their films to the best of the non-affiliated
theatres. With block-booking and blind-buying the members of the Big Five studios attempted to
force independent theatres to take groups of films, sight unseen. These tactics kept selling costs
low and helped to guarantee a base of revenues, even for the most mediocre film. In effect dis-
tributors shifted a part of their risk to powerless exhibitors, guaranteeing that even films accepted
poorly in first-run houses would receive a sub-run pay-off.
The system of distribution was called admission price discrimination and had far-reaching impli-
cations for the studio system. First, this system minimised the number of theatres the Big Five
needed to own to effect a measure of control. In practice, with approximately 1 5 per cent of all
US theatres (but the majority of first-run) the Big Five could easily gather in an average of 75 per
cent of the box-office revenues. Second, it kept Big Five theatres fully utilised. Year in and year out,
despite depressions, wars, poor films, ageing stars and changes in public taste, the Big Five could
count on a steady flow of revenues at the theatres they owned. Finally, this process of selling kept
transaction costs low. With fixed agreement as to the status of run, zone, clearance and admission
prices, bargaining and negotiation costs were minimal. Distribution staffs were small. Costs of
I"
required prints never mounted up. If all theatres showed the same film simultaneously, it would
have necessitated nearly 20,000 prints. (At that time prints cost an average of $250 and lasted 200
screenings.) But with a limited number of theatres in each run, only 400 prints were needed. If
prints wore out prematurely, later runs were simply cancelled since striking a new print and ship-
ping it cost more than expected revenues.

The advantages of a national and international distribution network were considerable. Even
though in 1945 it cost Loew's or Paramount about $5 million per year to operate a distribution
network in the USA, they could spread these costs over numerous features, shorts and newsreels,
reaping low per unit costs. No outsider could afford to start an international organisation for only
a handful of films. It was far easier (and cheaper) simply to work through one of the established
corporations. In addition, control over key theatres gave the Big Five the power effectively to
exclude other distributors from a large share of the potential market. Theatres owned by the Big
Five studios rarely - save in the case of UA - booked independent products.

This distribution system stood at the core of the power of the studio system. Foreign versions
of the system worked so long as the nation did not pass laws to disrupt it. It meant that the leader
of the studio corporation could calculate in his head the profits of a film, for the leader alone knew
the real cost of production, was fed the numbers of admissions and their monies, and got to know
internally what a film's profit destiny would be. That was the skill of the leader - the ability to judge
public taste on a global scale and then calculate what to do next. It was an awesome and unique
skill, the skill F. Scott Fitzgerald so admired. It was why the studio system survived intact decade
after decade.
Exhibition Changes
Production and distribution operated through the classic studio era of the 1930s and 1940s almost
as Adolph Zukor had planned it. But exhibition changed. So, for example, double features came in
the middle 1930s as a way of increasing audiences, which had dropped sharply because of the
Great Depression. Now a patron could pay the same admission price as before but see and hear
two films. In the depths of the Great Depression in 1934, the number of theatres in the USA that
regularly showed double features stood between 50 and 75 per cent. Two-for-the-price-of-one
drove this strategy, but usually the audiences sought one of the two. Variety often reported on
double bills by commenting on which film was the greater attraction. To give one example, when
MGM's It's in the Air (1935) was paired with Universale Fighting Youth (1935) at the Broadway
6
theatre in Portland, Oregon, Variety reported that audiences were coming 'chiefly for/4/'/-'.
Many of the very largest cities, meanwhile, did not have double bills at all within the first-run
sector. Exhibitors in Chicago (dominated by Paramount's theatres), New York (dominated by

Loew's theatres), and Philadelphia and Washington, D.C. (dominated by Warner theatres) banned
double billing. First-run-designated cinemas were meant to be movie palaces - with continuing
stage shows - and subsequent-run double features were no substitute. Audiences paid a higher
admission fee to attend a picture palace, and in 1936 Warners conducted a biased survey
indicating that more than three-quarters of those polled at picture palaces preferred single bills.
Continual market testing by all the leaders of the major studios indicated that this was really prob-
7
ably the case, otherwise the studio leader would have changed.
In the biggest cities - led by New York and Chicago - weaker A-films were coupled with a
strong live stage show to improve attendance. For example, Paramount's The Scarlet Empress, star-
ring Marlene Dietrich, is now considered a classic, but when it was first releasedon September 1934
it met with dismal box-office returns. It was not held over for a second week in most bookings,
except in New York and Chicago where it was accompanied by a stage show. In Pittsburgh, the
Stanley Theatre postponed its engagement of the film until it could book a stage show that would
carry the film through its one-week engagement. The Scarlet Empress was duly screened with a
stage show led by the popular Fred Waring and his Pennsylvanians, and the box-office gross for
the week was a remarkably high. This result would make it seem as though The Sca rlet Empress
was one of the leading attractions in Pittsburgh during the 1934-6 period, but Waring and his
Pennsylvanians were the real draw and compensated for what Variety called '100 minutes of dull
8
celluloid'.
In the mid-1950s, stage shows featuring a headline name from music or radio often drew
remarkable results. These appearances could add considerably to the venue's overheads. Top-rated
performers such as radio stars Jack Benny and 'Major Bowes and his Amateur Hour' were able to
earn between $7,500 and $15,000 for a one-week engagement, as well as garnering a percent-
age of the box-office takings. Bowes was the host of a radio programme in which amateur per-
formers auditioned before a studio audience. The winners of the radio competition were then
placed in Bowes' stage revues, which toured the country playing in combination houses. They fea-
tured the usual mix of singers, tap dancers, magicians and comedians, and yet they drew audiences
9
into cinemas because the audience loved the radio show.
Paramount owned the most theatres (about 1,000), principally in the Middle West and South.
Loew's had the least (about 200) with its houses mainly in and around New York City. Fox,
Warners and RKO owned between 300 and 500 each. The biggest and grandest theatres were
downtown, and were ornate in non-USA styles, held thousands of fans, and because of their affil-
iation with one of the major Hollywood companies, were booked with Hollywood's finest films
upon their national premiere. Each company dominated a territory - Paramount the Middle West
and South, Fox the West, Loew's New York and New England, and Warners the middle Atlantic
states with its major cities of Philadelphia, Baltimore and Washington, D.C. They then co-operated.
If you play my feature film in your territory, I will play your film in mine. The USA - by the studios
- was 10
a nation state of feudal regions dominated by five studio corporations.
There was a distinct reaction to the Great Depression aside from lowering the prices by double
featuring. The studio-owned chains followed their independent rivals by adopting a couple of fam-
iliar retailing tactics. As the Depression deepened, many independents began giving away pre-
miums (for example, dishes), holding gaming contests (for example, screeno, a form of bingo), or
both. One estimate had the amount in prizes surging over $3 million by 1937. Items carried away
I"
from movie houses usually included chinaware, glasses, linens, cooking utensils and even groceries.
Once one theatre instituted a programme of giveaways, then the competition had to follow, look-
11
ing for different prizes.
One special giveaway, called Bank Night, moved to the top because it offered the prize every-
one wanted during the Great Depression - hard cash. Indeed by 1937 Bank Night had become
something of an American obsession. After four years on the scene, Bank Night was functioning
in 5,000 theatres, giving away an estimated $1 million per year. Exhibitor trade paper Saturday
Evening Post in 1938 noted: 'It's got to the point where nobody can schedule a basketball game,
a church social or a contract [bridge] party on Tuesday night, because everybody is down at the
Gem [theatre] hoping to cop a cash prize - usually standing in the street beyond the marquee
12
because the theater is too small.'
Bank Night was by-and-large a small-town phenomenon. Charles Yaeger, of an independent

theatre chain based in Colorado and New Mexico, and his Affiliated Enterprises, Inc. were behind
Bank Night. For his small chain, as elsewhere, the nadir had come during the winter of 1932-3.
To drum up business Yaeger staged beauty contests and gave away Christmas trees, but the effects
on attendance in the long run proved nil. Bank Night changed all that. Bank Night evaded the anti-
lottery laws then on the books because patrons did not have to pay for their lucky number, and
13
theoretically could wait outside the theatre to learn if they had won.
The Great Depression also pushed movie exhibitors to seek a new source of revenue, to collect
monies for something besides admission to the show. The answer had long stood outside their doors.
Rather than let patrons buy snacks from confectionery stores within a few steps of the cashier's
booth, exhibitors ignored the associations with lower-class amusements and began to sell candy, then
soft drinks and finally popcorn in their lobbies. This transformation represented a radical break from
the development of movie exhibition that had taken place over the previous thirty years. The selling
of food had long been associated with carnivals, burlesque shows and cheaper class entertainment
from whose image the new movie theatre owners sought to disassociate themselves; they sought a
'higher class' tone. During the 1920s movie palace owners steadfastly refused to sell food. But movie-
going in the USA had always been accompanied by snack treats. Patrons in small-town theatres or in
informal neighbourhood houses simply purchased their candy, popcorn and soda before or after the
show from a nearby shop. During the 1920s some small neighbourhood theatres did sell candy in the
lobby because it was pre-packaged and thus easily handled, required little investment, and with their
lower-run status, often meant the difference between profit and loss. But the norm dictated that the
14
first-run theatres did not need the added revenues from the sales of sweets.
The Great Depression saw such past assumptions swept aside. The introduction of selling
snacks came in three steps. First came the candy stand. A simple wooden stand, staffed by a high
school student, could generate hundreds of dollars of pure profit and not have to be shared with
any greedy Hollywood company. This instant success prompted exhibitors, particularly independ-
ent exhibitors not affiliated with Hollywood, to expand the base of revenue creation. They wanted
15
to make profit creation less dependent on the popularity of the feature films.
To use the economist's terminology, theatre owners internalised the sales of a complementary
good that had long been associated with going to the movies. Through the 1930s concession
stands opened in nearly every movie theatre in the USA. The small investment frequently provided
the difference between a profit and loss. By 1936, sales of candy in movie houses in the United
States topped $10 million. This may have paled beside the estimated $1 billion taken in at the box
office, but to the average exhibitor who kept half the receipts at the concession stand as profit,
16
this may have represented the only profit he or she had.
Then came popcorn. For decades, vendors had sold this snack to movie patrons from the
nearby confectionery store or from wagons positioned outside theatres. During the late 1930s
theatre owners simply moved the popcorn stand into the lobby. Popcorn, easy to manufacture,
spread its aroma to waiting customers. Theatre owners learned that popcorn was one food which
Americans ate more, not less, of during the bad economic times. With popcorn, which is relatively
cheap, consumers bought more (and less of more expensive treats) as their incomes fell. And once
the habit took, movie-goers in the USA seemed to be hooked.
During the late 1930s exhibitors overcame the past (and present) negative associations with
popcorn, and began to pop corn by the carload. The ageing movie palaces, owned by the Big Five
chains, negotiated to purchase popcorn in bulk, and thus affected considerable cost savings. Con-
sequently they could produce a fifteen-cent box for three cents, a nickel bag for about a penny.
Even with the other associated costs (wages to salespersons, costs of containers and popping appar-
17
atus) profit rates for the sale of the average bag of popcorn frequently exceeded 100 per cent.
The movie theatre industry pushed popcorn into the status of an important farm crop in the
United States. The popcorn harvest grew from five million pounds in 1934 to more than one hun-
dred million pounds in 1940. By the boom times of World War II, popcorn became a fixture at the-
atres. And farmers responded. Even with acre after acre devoted to growing wheat and other
staples for the troops, the popcorn harvest still soared beyond 400 million pounds per year. That
18
represented more than four pounds of popcorn for every person in the USA.
Another strategy to attract more patrons was air conditioning. As we saw in chapter 1, more
and more theatres began to offer air conditioning through the 1920s. During the 1930s, with
Carrier's development of a compact, relatively inexpensive apparatus, many more exhibitors
installed a system for air-cooling and humidity control. Willis Carrier's new inventions - demon-
strated at the Chicago World during the summers of 1933 and 1934 - generated familiarity and
favourable publicity. Big Five movie houses functioned as the sole institutions offering such service
at prices affordable to middle- and lower-income US citizens. Generally throughout the studio era
Big Five theatres offered complete air conditioning: air-cooling plus dehumidification. Independent
19
theatres more often than not only cooled the air, often with indifferent results.
As part of this new strategy for exhibition (multiple features, air conditioning and in-house
refreshments) exhibitors ritualised the intermission. The first feature would end, the house lights
would go up, and the patrons would rush to the lobby to purchase popcorn, candy and colas.
'Coming attractions' would signal a return to more entertainment. The form became narrative,
THE CLASSIC STUDIO ERA 1931-51 79
food, narrative in a continuous pattern. Other services, standard during the presentation-cinema
era, were eliminated. Theatre lobbies and auditoriums (as well as exteriors) were left to run down.
Less was spent on upkeep, most potential light sources were covered up or unused, and fewer and
fewer ushers were employed. The decorative displays of Oriental, Egyptian, French or Spanish archi-
tecture gradually came to represent a bygone era.
The Peak of Power

The Big Five and Little Three openly colluded to protect their interests in production, distribution
and exhibition. We saw in chapter 6 how they organised self-censorship through the trade associ-
ation, the MPPDA, to fight off a rising tide of state and municipal censorship restrictions. In 1934,
after a dozen years of informal controls, the MPPDA set up formal enforcement machinery, com-
plete with $25,000 fines. Member producers (the Big Five and Little Three) were obliged to submit
all scripts and films for approval. Since the majors controlled the theatres in which all films sought
to play, non-approved films were denied access to significant sources of revenue. Indeed, MPPDA
disapproval guaranteed box-office failure.
The Big Five and Little Three grew so powerful that in 1938 the Department of Justice of the
administration of President Franklin D. Roosevelt filed an anti-trust suit against them (usually titled US
v. Paramount etai). The Big Five and Little Three defendants were charged with conspiring to fix dis-
tribution contract terms of runs, clearances and admission prices. In 1 940 all parties signed a consent
decree that set up a broad system of rules for bargaining and settling disputes similar to the pro-Big
Five self-government which had operated under the National Recovery Administration (NRA). Little
changed. In August 1944 the government reactivated the case, and pressed for divorcement of the-
atres of the Big Five. This came in in May 948

1 in a notable decision by the US Supreme Court, which,
on 25 July 1 949, ordered the Big Five to divest themselves of their theatres. Though some dragged
their feet taking the required action - in particular Nicholas Schenck of Loew's until 1 956 - this decision
signalled the beginning of the end of the classic studio era. The Big Five, logically, fought to save their
valuable run-zone-clearance system, but for a variety of social and political reasons lost their case.
The studios hit their peak of profitability in 1946. Paramount made $39 million, Fox $25 million,
Warners $22 million, Loew's $18 million; even poor cousin RKO made $12 million. In real dollar
terms all these were corporate records, not approached again until the 1970s. This is what counted,
and the long-time leaders of the major studios thereafter struggled to retain that money-making
power. Some would; some would not - as we shall see in the following chapters.
In sum, the classic studio era represented a stable twenty-year epoch in the history of the Hol-
lywood studio system. Eight major corporations - Paramount, Loew's, Twentieth Century-Fox,
Warner Bros., Radio-Keith-Orpheum, Universal, Columbia and United Artists - dominated all phases
of industry operation. In their quest for profits, these eight regularised film production with stan-
dardised products including features, animation and live short subjects, serials and newsreels. All
embraced narrative structures and then actively sought to convince potential movie patrons of the
differences in their products. They differentiated their wares, but hardly possessed individual per-
sonalities themselves - just different styles of leadership. Through widespread advertising, all the
majors heralded stars, potentially interesting stories and stunning special effects - particularly Tech-
nicolor. In so doing, these eight corporations worked to define how peoples around the globe
understood what was an acceptable (natural) use of motion picture technology - and make the
profits of a big business.
Notes
1 . John Sedgwick, 'Product Differentiation at the Movies: Hollywood, 1 945-65', Journal of Economic
History, 62 (2002), pp.,682-3.

2. Variety, 1 1 December 1934, p. 11; Variety, 25 October 1934, p. 8; Variety, 31 October 1935, p. 12;
Variety, 2 April 1936, p. 8.
3. Variety, 1 5 January 1936, p. 8. Note that in Birmingham the first-run theatres did not allow African-
Americans to purchase tickets.
4. Variety, 25 June 1 936, p. 4.
5. David Bordwell and Kristin Thompson, Film Art: An Introduction (New York: McGraw Hill, 1979) offers
the best introduction to how the film-making process in classic narrative style worked.
6. Variety, 25 September 1934, p. 9; Variety, 30 October 1935, p. 9.
7. Variety, 12 August 1936, pp. 5, 34.
8. Variety, 13 November 1934, p. 17.
9. Variety, 22 January 1935, p. 49; Variety, 8 April 1936, p. 19; Variety, 1 5 July 1936, p. 34.
1 0. Douglas Gomery, Shared Pleasures: A History of Movie Presentation in the United States (Madison:
University of Wisconsin Press, 1992) details the history of how Hollywood extracted maximum monies
through systematic presentation.
11. For a general description of the use of giveaways see Frank H. Ricketson, Jnr, The Management of
Motion Picture Theaters (New York: McGraw-Hill, 1938), pp. 249-55, 260-8.
12. Forbes Parkhill, 'Bank Night Tonight', Saturday Evening Post, vol. 210(4 December 1937), pp. 20-2, 82.
13. These rules to evade lottery laws did not prevent anti-gambling forces from becoming morally outraged.
Bank Night was sued hundreds of times throughout the late 1930s. For examples of the attendant legal
controversies see Motion Picture Herald, 26 February 1938, p. 30 or Motion Picture Herald, 25 June
1938, p. 38.
14. Motion Picture World, 'Better Theaters', 19 November 1932, pp. 55-6; Motion Picture World, 'Better
Theaters', 19 October 1935, p. 40; Motion Picture World, 4 March 1939, p. 2.
1 5. Motion Picture Herald, 'Better Theaters', 2 1 November 1 931 , p. 26; Motion Picture Herald, 28
November 1931, p. 28.
1 6. Motion Picture Herald, 22 March 1 952, pp. 55-7; Fortune 38 (August 1 948), pp. 94-6; Film Daily
Yearbook, 1937, p. 37.
1 7. Motion Picture Herald, 24 February 1 940, p. 42; Motion Picture Herald, 'Better Theaters', 1 1 January
1941, pp. 8-9.

18. Charles E. Buckhead, 'Rice, Popcorn, and Buckwheat By States, 1866-1953', Statistical Bulletin, no. 238,
United States Department of Agriculture (Washington, D.C.: United States Government Printing Office,
1958), pp. 10-17; Business Week, 17 June 1944, p. 66.
1 9. Margaret Ingels, Willis Haviland Carrier (New York: Doubleday and Company, 1 952), passim; Motion
Picture Herald, 'Better Theaters', 18 March 1939, pp. 6-7; Motion Picture Herald, 'Better Theaters', 15
October 1938, pp. 9-11.

7
Paramount
In 1930 Paramount Publix was the most profitable and powerful Hollywood studio corporation. Its
international distribution arm stretched around the world. Its chain of more than 1,000 theatres
further boosted corporate might. But Paramount Publix had taken on too much debt, and Zukor
could not keep bankruptcy at bay. It was the Publix theatre chain - which would be dropped -
which sank Zukor's vision. After four years of legal wrangling, in 1936 the Paramount Board of
Directors appointed a former Chicago theatre man, Barney Balaban, as the new head of Para-
mount, and Zukor stepped upstairs into an advisory role.
For a decade Balaban had been head of Paramount's most successful theatre operation,
Balaban & Katz in Chicago. He was a conservative accountant by training, and remade Paramount
into a business operation as 'modern' as any in any industry. He hired as many lawyers and MBAs
as movie stars. He kept tight cost controls, and required management approvals for every expen-
diture from a wig for Bing Crosby to setting up a separate distribution office in New Zealand. Bal-
aban's conservative corporate strategies worked, and in 1946 Paramount earned a record profit -
1
a figure that would stand unmatched for two decades.
The New Leader: Barney Balaban

In 1936 Barney Balaban installed his own man in California - former Georgia theatre man Y. Frank
Freeman - who through the remainder of the classic studio era quietly and skilfully ran the pro-
duction operation on Melrose Avenue in Hollywood. Y. Frank Freeman was good at delegating
authority and, with Balaban's full co-operation, the Paramount studio operation led Hollywood in
box-office take from a strong list of money-makers, including the Road films of Bing Crosby and
Bob Hope, and the regular production of spectacles from long-time Paramount film-maker Cecil
B. DeMille. Crosby's Going My Way was number one in domestic rentals in 1944 and Welcome
Stranger number one in 1 947; and DeMille's The Unconquered (1 946) was number three, Samson
and Delilah (1949) number one and The Greatest Show on Earth (1952) number one in domestic
box office. The 1940s saw Paramount return to the top of the studio system. Gone were founder,
Adolph Zukor, and Sam Katz, Zukor's VP for theaters, the duo who had mortgaged Paramount's
vast theatre chain into bankruptcy - at the time the second-largest bankruptcy the USA had ever
known. Fortune noted that when theatre attendance plummeted, not all the managerial resolution
in the world could lower the fixed charges that the company had been so sanguinely accumulat-
2
ing. 'It required the judiciary axe.'
PARAMOUNT |
S3
Balaban and Freeman loved stars, and developed Bob Hope from radio and Bing Crosby from
records. Through the 1940s this duo ranked atop all polls with Road to Morocco (1942) and Road
to Utopia. There were no intervening Road pictures, although Hope and Crosby appeared together
in several revue-format pictures like Star Spangled Rhythm (1942) and Duffy's Tavern (1945). Crosby
also had a memorable cameo in the climactic battle scene in Hope's 1944 swashbuckling spoof, The
Princess and the Pirate. Hope and Crosby each co-starred with Lamour during the war: Crosby in a
1943 musical Dixie, and Hope in a 1943 espionage comedy - They Got Me Covered. In fact,
Crosby's two biggest wartime hits teamed him with other male co-stars: Fred Astaire in Holiday Inn
(1942) and Barry Fitzgerald in Going My Way (1944). The latter was a wartime sensation, netting
Paramount $6.5 million, scoring seven Oscars (including best actor for Crosby and best supporting
actor for Fitzgerald), and propelling Crosby to the number one spot in the Exhibitors' Poll. Crosby
remained on top in 1945, owing largely to The Bells of St Mary's, opposite Ingrid Bergman.
Hope demanded more money, but Barney Balaban balked and suspended Hope in 1944 for
failing to appear in a third picture that year (after The Princess and the Pirate and The Road to
Utopia). Hope shrugged off the suspension and continued to entertain front-line troops on the
Foxhole Circuit overseas, and on radio. Balaban realised that the bad press Paramount received was
not worth the suspension and relented when Hope was awarded a special Oscar for his war-related
humanitarian efforts. Quietly, Hope was re-signed to the studio and, with Crosby, became the
3
focus of Balaban's new Paramount.
Balaban and Freeman loved comedy. During the 1940s they would draw the most critical praise
for combining popularity with filmic complexity in the comedies of writer-director Preston Sturges.
The Great McGinty (1 940), The Lady Eve (1 941 ), The Miracle of Morgan's Creek (1 944) and Hail
the Conquering Hero (1944) sparkled with a wit rarely seen in the classic studio era, and also con-
tributed substantially to Paramount's bottom line as they featured less well-paid stars. In addition,
Paramount's newsreels were considered the best in the business, and Paramount's Popeye the
Sailor cartoons added a bit of flare to a theatre's marquee and even more to the Balaban-Freeman
4
Paramount's profitability.
Yet Balaban was hardly known to the public. He carefully avoided publicity. In an industry
whose brief history seemed a public record of numerous cigar-chomping moguls, he looked like a
typical business executive, in railroads or banking. Newspaper morgues, which have bundles of files
on such tycoons as Louis B. Mayer of MGM, typically contain a bare handful of clippings about Bal-
aban. He wanted no publicity, only money. His mother gave him his best advice when she and
Barney attended their first movie show back in Chicago: '[My mother] Goldie clutched my arm and
stated: "Barney, do you see what see? People drop
I in their nickels before they even know what
they're going to get! What a business! That's the business we need to get into.'" She added up
the wealth of the family - $750 - and invested it all in a nickelodeon. But she told him to hire stars,
not try to be one himself.

Balaban worked all day and all night. His hobby was 'counting the house'. Year after year he
balanced the Paramount books during the day, and saw some 250 pictures a year, nearly all the
"I THE HOLLYWOOD STUDIO SYSTEM
studio system's products from the most expensive specials down to the lowest of the Bs: Westerns,
thrillers, documentaries, musicals and newsreels. Sometimes he watched them in his plush screen-
ing room at the Paramount Building on Times Square. More often he screened them at his big col-
onial home in Green Haven, in Rye, New York, twenty-five miles from Manhattan - a double feature
each evening, and triple bills on weekends. He sat in a leather chair, feet stretched on a chair in
front of him. No matter what sort of narrative, his only comments during a typical screening were:
This ought to do well in Boston ... the girl is good ... the musical background interferes too much
5
. . . the boy is good . . . will have to depend on word of mouth . . . this won't advertise well. . .
.'
He looked at all Paramount pictures exactly as rationally as he viewed the products of the other
companies. He then communicated his thoughts to Freeman, usually by phone the next day.
At the home office, the Paramount Building at 42nd and Broadway, Balaban arrived at his desk
every morning at 8.45am, and after skimming over new revenue cheques, he closely examined all
reports showing how much cash Paramount had generated that prior day. He first wanted to know
'his' cash position each day - so he could do business without ever considering borrowing. He
worked constantly to rid Paramount of debt and by 1947 freed his formerly bankrupt company of
any outstanding obligations. Once cash on hand had been determined, then Balaban read reports
of current costs and commitments. If the West Coast wanted a big change - any amount over
$20,000 - then Balaban prepared a report to take it to his board.
He daily read thousands of reports on exhibition, which were prepared overnight for him to
examine in the morning. He was known to read them at a speed which would defy the average
Harvard-trained accountant, even though he had but night-school training back in Chicago. Infor-
mation continued to pour in daily, all requiring Balaban's decision and a brief answer. Balaban's
afternoon was then spent in discussions with his key assistants - who alone learned the big pic-
ture - and then ordered them to take action. He was the consummate professional business leader,
not a believer in inspirational memoranda, and believed Paramount policy was best made on the
phone or in face-to-face meetings. If a telegram proved necessary, it was brief, seldom more than
a paragraph, usually a sentence. Since he alone knew the whole of Paramount's operations, a 'yes'
or 'no' usually sufficed.
Balaban, born in 1888, had an inner-core of younger advisors. His most trusted aide was
Leonard Goldenson, born in 1906, who ran - at Balaban's direction - the Paramount theatre chain.
Balaban was grooming Goldenson to be his successor as Paramount's president, but the unex-
pected loss in the US v. Paramount et al. anti-trust case in 1948 forced Balaban to let Goldenson
go and manage the spun-off theatre chain, United Paramount Theaters. Under Balaban, Golden-
son learned Balaban's theory of decentralised management: hire good men (never women) and let
6
them do their job.
Balaban also conferred regularly with Charles Regan, born in 1896, who was vice president in
charge of distribution in the USA. His main customers were Paramount's 1,000-plus theatres. His
others were the 17,000 theatres Paramount did not own; Balaban and Regan aimed to sell Para-
mount films into about half of these. At times they scored a near-perfect hit, such as with Going
PARAMOUNT 85
My Way, which played in 1 5,500 theatres across the USA. Balaban and Regan set all release dates,
and approved all advertising campaigns.
The Balaban goal was to maximise the crowds during the opening week. During the classic
studio era, this meant a glossy Broadway premiere, usually at the Paramount theatre which occu-
pied the first three stories of the world headquarters at 43rd and Broadway. If the Paramount pub-
licity campaign (and hopefully 'word-of-mouth') worked, then maximum revenues would be
extracted as the feature worked down the chain of the run-zone-clearance system. Balaban and
Regan approved publicity leading up to the Broadway opening to whip movie fans into a fever to
see the film. For Balaban, the skill lay in the art of maximising that fever, so that fans would pay
top dollar. Stories were pre-written and planted in newspapers and magazine; stars' romances
were made up; any hook was set to get the word out in the newspapers, magazines and, increas-
ingly, over radio. In the all-important first four months after a film's release, Balaban expected to
recover just from the USA and Canada twice the cost of the film. For a top picture that cost $1 .5
million to produce, Balaban might add another $1 million for promotion. Thus profits did not begin
until $2.5 million was extracted from the share of theatre's gross. But after that, all the rest-of-the-
world grosses were pure profit.
Finally there was George Weltner, in charge of international operations. Weltner was usually
out of the New York office, but always in touch with the boss. His job was to extract the maximum
foreign rental and pour these pure profits back to the New York ledgers. Weltner dealt with a com-
plex of innumerable national restrictions, and thus had a staff of 2,600 people scattered around
7
the globe, all Paramount ambassadors.
Balaban spent minimal time on the orphans of the studio system - the profitable Paramount
newsreels and short subjects. Movie-goers seemed to love good shorts, but most movie executives
- Balaban included - regarded them as a necessary evil, profitable but hardly as profitable as
feature-film returns. Balaban, as a former exhibitor, made sure his Paramount made and distrib-
uted more shorts than any other studio - Unusual Occupations, Sportlights, Speaking of Animals,
Popeye, Little Lulu, Pal Puppettoons and a dozen other series. Balaban spent less time planning the
release and publicity of shorts than he did features, but as he told Fortune, 'he considered them
necessary but not sufficient to draw crowds'.
Balaban not only loved watching films and evaluating their market potential, he also spent a
considerable portion of each day trying to find stories for the fifty-two features Paramount released
each year. He had a large staff to search novels and short stories from all possible sources.
Balaban trusted his aides to make profitable movies, but he first had to be convinced what to pay
for such source material. And then with his aides' advice, Balaban approved each film's budget -
the initial cost being acquiring the story. At the studio lot, Freeman and his subordinates met every
day to discuss new stories, sending their reports back east for Balaban to read. Balaban then made
the decision to approve (in his day, approval was called getting on the masterlist; the current term
is green-lighting). Balaban's masterlist was updated each day. The progress of production was care-
fully tracked so that he and Regan could plan release dates and advertising expenditures.
Mrs Y. Frank Freeman (third right) and her husband (right) who ran the Paramount studio lot from the mid-
1 930s through the late 1 950s
Y. Frank Freeman, who ran the overall studio, managed a staff to handle the day-to-day execution
of the orders from on top. More than likely Freeman spent his day dealing with unions. He told
Fortune: 'There are fifty-four unions to negotiate with, and only fifty-two weeks in a year; even if
8
I bat 1,000 per cent there are two unions left over.' He left working producers to put Balaban-
approved scripts on film. They first allocated staff. Should this script be directed by Billy Wilder,
John Farrow, George Marshall or Mitchel Leisen? Stars were assigned the same way. Then the cost
of production was estimated. A staff of specialists - such as head costumer Edith Head - were
scheduled. Then, when all these many decisions were made, filming began.
Most costly were Cecil B. DeMille epics. For example, DeMille's Unconquered, released in
autumn 1947, had a cast of twenty-five name players and 4,325 extras, all in costume; one scene,
involving Gary Cooper and Paulette Goddard shooting the rapids in an Indian canoe, required two
weeks of special shots on the Snake River in Idaho. But most of the filming took place on the back
9
lot on Melrose Avenue in Hollywood where costs could be monitored daily.
PARAMOUNT 87
The Fall and then Rise Again of Paramount

How did Balaban gain such power? In 1930 - as the classic studio system was being set in place
by Adolph Zukor - Balaban was simply the head of a regional theatre chain, Balaban & Katz in
Chicago. He, his brothers, and Sam Katz had created this Chicago-based profit machine. Katz, the
fair-haired boy, was chosen by Zukor to go to New York to run the whole of the Paramount
theatre chain. In the event, Zukor should have chosen Balaban. Katz simply increased the corpor-
ation's debts so that when box-office takings fell by a quarter as the Great Depression hit, there
was not enough cash to service the debts, and Katz's mortgages dragged Paramount into the
bankruptcy court. Katz by 1932 brought in banker John Hertz to help save his job, but the
company went into receivership because of the mounting theatre debt. The Paramount board of
directors then forced Katz out. For three years, Paramount was in bankruptcy - until July 1935
when a reorganisation plan was formulated, and the 'new' Paramount Pictures, Inc. emerged with
a movie studio, a network for worldwide distribution, and more than 1,000 theatres. Only Zukor
survived from the salad days. After a period under an interim management team, the board at
10
Zukor's urging brought in the right man from Chicago - Barney Balaban.
But until that decision, Paramount temporarily lost its top spot in the studio system. Its fall was
rapid. By late 1930, Barrons noted that 'Paramount's earnings have been in a downward trend
since September, 1930, when earnings established a record for any three months' period, at
$5,100,000. In the December quarter net declined to $4,825,000.' Zukor admitted to his stock-
holders that movies were not Depression-proof. On 30 October 1931 the Paramount board of
directors began to strip Zukor of his absolute control, appointing Chicagoans Albert Lasker chair-
man of the board of directors, and John Hertz chairman of the finance committee. This was initially
seen as a sign of Katz's ascendancy, as he knew both men. But Lasker and Hertz asserted their con-
trol and immediately instituted a 33 per cent cut in production budgets and a 10 per cent reduc-
tion in employee salaries. They sold the studio's share in the Columbia Broadcasting System (CBS)
11
radio network.
In January 1932 Lasker and Hertz appointed Emanuel Cohn to revitalise Hollywood production.
They then forced Zukor cronies Sidney Kent and Sam Katz to resign, as neither would agree to cut
back. So Katz, instead of claiming the top spot, was out on the street. By May 1932 Barrons head-
lined: 'Paramount Operating at Loss . . . Salaries Cut 5% Again.' Zukor tried to put a good face on
things, stating cash flow was still positive, even if profits were not. Paramount thereafter reduced
salaries twice more, in May and June 1932, to save $1 million. Where would the payments due on
12
theatre mortgages come from? Lasker and Hertz had no idea.
But later in 1932 it became clear that Lasker and Hertz had developed a plan to refinance Para-
mount's theatres by issuing $12 million of new stock. But as the economy continued to sour,
Lasker and Hertz laid off more employees, and made more budget cuts. Paramount announced
that the production of shorts would be discontinued for the next season and that the company
would only distribute shorts made by independent producers. To generate profitable features,
Lasker and Hertz approved - for the first time - making deals with outside independent producers,
..I
including King Vidor and Cecil B. DeMille at $200,000 a film. As a result. Paramount began to
abide less strictly by the Hays Code, and its features dealt with more explicit and violent subject
matter in an attempt to raise box-office receipts. The Film Daily Yearbook chose DrJekyll and Mr
Hyde as one of the Ten Best Pictures of 1932; another hit in the same year came with the Marx
13
Brothers' Horse Feathers, which was filled with sexual innuendo.
In October 1 932 Paramount released its last financial statement before declaring bankruptcy
in 1933 - a loss of $1 5.9 million for nine months. Costs had been cut, but not enough; revenues
at the Paramount theatres were falling, not rising. By December 1932 Paramount had sunk to the
lowest financial state in'the history of the company, with an annual loss of $21 million. On 20
December 1932 Lasker and Hertz announced that Paramount would institute a mandatory two-
week unpaid vacation for all employees for 1933 to save an estimated third of a million dollars.
14
The company Zukor had built simply had no solution to deal with the Great Depression.
As 1933 commenced, Lasker and Hertz faced meeting $39 million in mortgage obligations,
money Paramount did not have. Time had run out, and on 26 January 1933 Paramount entered
equity receivership, while its theatre chain - with $28.9 million in assets and $41 .2 million in
liabilities - filed for formal bankruptcy. Lasker and Hertz - and Zukor - had failed. Some fifty-three
different law firms were used to make Paramount Publix solvent again. It was an enormous
financial and legal task to sort out the mess, the biggest reorganisation anyone had ever seen. The
leading force was the law firm, Root, Clark, Bucknet and Ballantine, which spent a total of 9,545
hours by the partners, with an additional 62,568 hours of work by associates - for a total legal bill
of nearly $1 million. One lead partner noted: 'A railroad receivership is child's play compared [to
reorganising this] vast company. . .

.' Yet out of this legal mess finally came a solution: Zukor
formed a Stockholders' Protection Committee led by Barney Balaban, who would turn out to be
15
the new Paramount.
Balaban's New Paramount

After more than two and a half years of receivership, a new single company emerged - the Para-
mount Pictures Corporation. (Publix was gone. With equity receivership, the formal name of the
company would simply become Paramount Pictures, Inc.) In early 1935 nearly $300 million worth
of claims were settled at twenty cents in the dollar. Still, an estimated $95 million in debt remained.
On 28 August 1935 Paramount Pictures was re-listed on the New York Stock Exchange after a
two-year absence. Zukor moved west and took charge of production, but after becoming presi-
dent on 1 July 1936 Balaban quickly replaced him with Freeman. Zukor was made chairman of the
board - a figurehead position. Here was the defining moment of change as a new Zukor-less Para-
mount commenced. •
Balaban proved to be the answer to Paramount's woes, quickly bringing stability to the cor-
poration. Initially Balaban even declined to accept a salary, thereby immediately saving the cor-
poration a large amount of money. Balaban quickly consolidated operations to increase efficiency
and sizeably decrease costs, and simultaneously saw to the rapid repurchase of debentures. The
PARAMOUNT
The two men who ran Paramount from 1916-64: Barney Balaban and Adolph Zukor
end result of these changes in the fabric of the company was a $5 million profit in 1936, once
16
more establishing Paramount as a solid force in the studio system.
Freeman and Balaban looked to other media for new stars, and for The Big Broadcast of 1 938
introduced Bob Hope, who would stay with the studio for twenty years. They also found top talent
for behind-the-cameras, for example, promoting Edith Head to costume department chief, a pos-
ition she would hold for thirty years. Freemen himself would stay in power until his retirement in
1959. As Fortune noted: 'With the available Paramount star material more or less in mind, they
17
sooner or later find a story that blossoms in their minds into a successful film.'
For Balaban, Paramount's greatest obstacle to regaining the top spot in the studio system lay
with its real debt of $96 million, ruthlessly demanding interest payments. Accordingly, in 1936 Bal-
aban began a programme of debt reduction and capital simplification. His goal was simple: elimi-
nate all debt. On 26 April 1937 Balaban issued his first president's report in the Paramount Annual
Report: 'Operations for the fiscal year resulted in a transfer to Surplus of $6,01 2,250.52.' This was
beautiful music to the stockholders' ears. Balaban had inherited two quarters of losses amounting
to $1 .3 million, and during his first six months as president he had turned operations around and
Adolph Zukor visiting the set of Princess Comes Across (1937), with stars Fred MacMurray and Carol
Lambard to his left and two unknown studio workers to his right
then generated a profit. He had consolidated, trimmed and begun to eliminate debt first, but he
always made sure there was a profit too - for the next decade. One can feel his commitment as
he wrote in the annual report under his own name: 'It gives me great pleasure to express my deep
appreciation to the officials and employees of Paramount Pictures Inc., its subsidiaries and affili-
18
ated companies for their loyal support and cooperation.'
In 1937 Fortune profiled the new Paramount. The business publication was impressed. The
stock - which was selling for around $8 when the bankruptcy ended - had now passed $28. The
huge cargo of theatres that nearly sank Paramount in 1932 were bringing in profits. Fortune noted:
'Based in New York, not Hollywood, is the headquarters of the movie industry. . . . Balaban, Zukor,
and a small company of advisors run [Paramount] from the Paramount Building on Broadway at
the base of Times Square. ... No movie studio can be efficient in the assembly-line sense of the
term. It is not a factory so much as a series of delicate psychological adjustments.' This was high
19
praise for a company that had almost gone under in 1933.
By October 1 937 Balaban had become the darling of Wall Street. The Magazine of Wall Street
recommended
PARAMOUNT 91
Paramount Pictures, Inc. as a thoroughly integrated unit in the motion picture business, controlling
one of the largest theater chains in the country, consisting of about 1 ,400 theaters and having complete
facilities for the production and distribution of films. Production activities embrace a full season's output
of feature film for release in its own chains as well as for rental to independent exhibitors; also shorts,
newsreels and specialties. Exchanges are maintained in principal cities through the country and foreign
20
distribution is obtained through its own exchanges and distributors in foreign countries.
Balaban and Freeman were producing hits. DeMille's Union Pacific (1938) led the list, but there
were top-grossing films starring radio favourites George Burns and Gracie Allen, Jack Benny and
Bing Crosby. As the 1930s ended Balaban was cutting debt - by a sixth during his first three years
on the job. The following year was even better, with Hope and Crosby's Road to Singapore (1940),
21
and DeMille's Northwest Mounted Police (1 940).
Paramount films also took a new direction under Balaban's administration. In the animation
area, Paramount attempted to match the success of Disney's Snow White and the Seven Dwarfs
(1937). Popeye - one of Paramount's most important stars, capturing newspaper attention and
top billing on theatre marquees - starred in Popeye Meets Ali Babba and His 40 Thieves (1937),
which did well through clever marketing and merchandising. In addition, Paramount made a fea-
ture-length animated film, Gulliver's Travels (1939), which performed well at the box office. Para-
mount's star list added Paulette Goddard, Barbara Stanwyck, Loretta Young and Frederic March.
The most important newcomers in the late 1930s were Bob Hope and Bing Crosby - although
nobody realised it then. Both came through Balaban's interest in radio.
Paramount Again at the Peak

In April 1 940 Balaban announced that profits for 1 939 were $2.5 million. He told his stockholders
in the annual meeting held on 18 June 1940 that profits were made with little help from the Euro-
pean market, which had been disrupted by the war and was making a loss. Wall Street seemed
not to care. In March 1941 The Magazine of Wall Street praised Paramount: 'Despite heavy pre-
vious dependence upon foreign income, domestic economies and better business [will] offset the
22
foreign loss . . . [Recommendation] buy!'
By Labor Day of 1 941 both Barrons and The Magazine of Wall Street rated Paramount as the
,
top studio in the system. Popular films were regularly streaming out of the studio on Melrose
Avenue; the theatre chain was starting to fill as Americans moved to cities with Paramount the-
atres (like Detroit) to gain war-related jobs. Paramount was now making $1 million a quarter in
profits. Balaban took advantage of World War II. In June 1942 Balaban told his stockholders of the
vast inventory Paramount had, just in case the rules of film stock allocation were changed, and that
the Paramount sales staff were releasing them slowly to milk the maximum revenues from each
film. During the war, Paramount Pictures benefitted from what the business press called 'a rapid
and accelerating increase in public purchasing power . . . [no] war-time restrictions . . . [and] the-
23
ater attendance stimulated by gas rationing'.
92
I
In July 1944 The Magazine of Wall Street judged that Paramount was not making the disas-
trous mistakes that it made in the Golden Age that ended in 1929. Then, the studios competed
with each other to bid ever higher for theatres; and when the Great Depression came, not only
were they loaded down with theatres that were empty, debt only led to bankruptcy. During the
war, business expanded greatly, and there were no unusual expenditures being incurred; Balaban
24
used the vast profits to pay off all of Paramount's debt.
Hits piled up. In 1944 Balaban and Freerhan had two unexpected successes: Fred MacMurray
in Double Indemnity and Bing Crosby in Going My Way. Going My Way, directed by Leo McCarey,
captured seven Academy Awards: best picture, best script, best original story, best actor (Bing
Crosby), best supporting actor (Barry Fitzgerald) and best song. Other successes for Paramount in
25
1944 came with Preston Sturges' Hail the Conquering Hero, and Miracle of Morgan's Creek.
As revenues rose. Paramount became the studio to work for. Consider the case of producer
Hal Wallis. Just before Memorial Day May 1944, he and Joseph Hazen moved their production
company from Warners to Paramount. Wallis had just won two Academy Awards, best picture for
Casablanca (1942; for Warners) and the Irving Thalberg award as top producer. Hazen handled
the business side, while Wallis sought scripts and supervised production. They made many a hit for
26
Paramount - starting with Sorry Wrong Number (1 948) and My Friend Irma (1 949).
Hope and Crosby made hit after hit. Crosby's record of five consecutive years as the industry's
number-one star (1 944-8) was rivalled only by Fox's Shirley Temple (1 935-8) and MGM's Mickey
Rooney (1939-41). All Hope and Crosby's Road films of the 1940s finished among the top grossers
of their respective years: Road to Singapore (1940), Road to Zanzibar (1940), Road to Morocco
(1942), Road to Utopia (1945) and Road to Rio (1947). This series grossed more than any other
during the classic studio era. Crosby's Here Come the Waves (1944), Blue Skies (1946), Welcome
Stranger (1947), The Emperor Waltz (1948) and A Connecticut Yankee in King Arthur's Court
(1949) all finished among the top grossers of their respective seasons. Like many Paramount cross-
over stars of the 1940s (including DeMille with his Lux Radio Theater) Crosby appeared continu-
ously in other media. In his case, phonograph records (he would sell a total of 300 million), and his
radio shows were always near the top of some ranking. Bob Hope is today rarely thought of as a
movie star, but he made profitable films for Paramount all through the 1940s. His hits included:
Caught in the Draft (1942 with Dorothy Lamour), Louisiana Purchase (1941 with Victor Moore),
My Favorite Blonde (1 942 with Madeleine Carroll), Let's Face It (1 943 with Betty Hutton), Monsieur
Beaucaire (1946 with Joan Caulfield), My Favorite Brunette (1947 with Dorothy Lamour and Peter
Lorre), Paleface (1948 with Jane Russell), Sorrowful Jones (1949 with Lucille Ball), The Great Lover
27
(1 949 with Rhonda Fleming) and Fancy Pants (1 950 with Lucille Ball).
In 1947 life seemed stable and superb for Balaban, according to Fortune. He carefully tracked
how Paramount spent every dollar. So, for example, he knew within a few hours how much it cost
to get a wig for star Paulette Goddard; how much cash the story buyers had to pay for Evelyn
Wells's new novel, Jed Blaine's Woman, and so on. His micro-management brought Paramount
back to where it was in 1930 - the top studio in the system. In 1945 Paramount made a net profit
PARAMOUNT 93
after taxes of nearly $18 million. In 1946 the figure stood at a system record $44 million - twice
as much as its nearest competitor, Fox, at $22 million. Warners stood third at $19 million, Loew's
fourth at $18 million and RKO fifth (of the Big Five) at $12 million annual profits. Based upon 1945
Justice Department data, Paramount wholly owned fourteen theatre chains totalling 455 theatres;
owned from 50 to 94 per cent of 775 theatres; and owned from 25 to 50 per cent of 275 the-
atres. The studio was humming: using an average of 125,000 feet of negative film each week. At
any point in time more than 3,000 people were working on the lot. Balaban continued to believe
in building an inventory to hedge against strikes or foreign conflicts, so at any one time there sat
on the backlot six months of product ready to be thrown into the market in an emergency. Things
28
would never get better.
The Slow Fall: Television and a New Media World

Balaban was the leader in the studio system's conversion to television. The process of change was
not easy. In 1945 Paramount already had a stake in television through its interest in DuMont. Paul
Raibourn headed Paramount's television activities as treasurer and director of Allen B. DuMont Lab-
oratories, Inc. Raibourn was also a member of the board of directors of Scophony Corporation of
America (the US counterpart of the British theatre television company) where he represented Para-
mount's one-sixth interest in this large-screen projection system. Paramount also owned TV stations
in Los Angeles and Chicago, and was already publicly speculating about a TV network to connect
29
stations and theatres for television programming.
Balaban pushed into television far ahead of his Big Five rivals. But he did not anticipate the fall-
out from the US v. Paramount et al. anti-trust case. The 1 934 Communications Act authorised the
FCC to refuse licences to any concern convicted of monopolistic practices. The Commission of the
late 1940s applied this covenant to television licence allocation. The negative Supreme Court
decision put an end to Paramount's chances of directly acquiring valuable television licences. And
without valuable TV stations, like those owned by NBC and CBS, there would be no Paramount TV
30
network.
Balaban unsuccessfully sought an alternative - theatre television. In 1948 he began to plan

how to integrate television into his theatre chain. Innovation took place in Balaban's old haunt,
Chicago's Balaban & Katz chain. To launch this theatre television in June 1949, Balaban & Katz
organised a spectacular show at its flagship house, the Chicago Theater. The television equipment
would record the stage acts (of whom only Henny Youngman is best remembered) in a studio
across the street, and then telecast them into the theatre. A beauty pageant was also held in con-
junction with opening day. All the publicity seemed to pay off. A capacity audience of 4,000
people attended. A remote crew recorded the crowd entering, then the audience saw themselves
on the theatre's television screen several minutes later. Chicago's mayor, Martin H. Kennelly,
appeared on stage to congratulate Balaban.

Gradually, Balaban tried to fit theatre television into its regular movie-house programming
strategy, but with little success. Sports seemed, for a time, to work: the 1949 World Series, Big Ten
football featuring the University of Illinois in the autumn of 1950, and championship boxing
matches. Occasionally there were news events, for example speeches by generals Douglas
MacArthur and Dwight Eisenhower. However, all operations ceased in mid-1951 because costs far
exceeded extra revenues. For example, one house lost more than $3,000 on the 1949 World Series,
and $18,000 on Big Ten football. Barney Balaban cut Paramount's losses and turned to widescreen
production (with the company's own VistaVision) to revive sagging revenues. Paramount made a
half-hearted thrust into pay-television later 1n the 1950s, but the termination of theatre television
31
in essence signalled the end of nearly thirteen years of innovation and investment in television.
In May 1948 the US Supreme Court decided to force the end of vertical integration. The Big
Five had to sell their theatres. After negotiations with the Department of Justice, Balaban on the
last day of 1949 agreed to split his company in two parts. He, Zukor, Freeman and Freeman's top
aide, Henry Ginsberg, would stay with the production-distribution part, called Paramount Pictures.
Leonard Goldenson, theatre manager, would become head of the independent theatre chain,
32
United Paramount Theaters (which later took over ABC-TV). An era ended.
Still, Balaban had his stars. Taunting MGM's publicity machine across town, he officially listed
in Paramount's annual report of 1950 the following Paramount luminaries: Edward Arnold, Jean
Arthur, Fred Astaire, Lucille Ball, William Bendix, Charles Bickford, Ann Blyth, John Bromfield, Phyl-
lis Calvert, Corinne Calvet, Macdonald Carey, Joan Caulfield, Montgomery Clift, Wendell Corey,
Bing Crosby, Robert Cummings, Howard Da Silva, Don DeFore, Olivia de Havilland, William
Demarest, Billy De Wolfe, Melvyn Douglas, Dan Duryea, Betty Field, Barry Fitzgerald, Rhonda Flem-
ing, Joan Fontaine, Mona Freeman, Paulette Goddard, Coleen Gray, Sir Cedric Hardwicke, June
Havoc, Sterling Hayden, Wanda Hendrix, Paul Henreid, William Holden, Bob Hope, Miriam Hop-
kins, Betty Hutton, Paul Kelly, Alan Ladd, Hedy Lamarr, Dorothy Lamour, Burt Lancaster, Angela
Lansbury, Jerry Lewis, Peter Lorre, John Lund, Diana Lynn, Dean Martin, Victor Mature, Ray Mil-
land, Thomas Mitchell, John Payne, Claude Rains, Donna Reed, Ralph Richardson, Gail Russell,
George Sanders, Mary Jane Saunders, Lizabeth Scott, Barbara Stanwyck, Gloria Swanson, Joan
Tetzel, Gene Tierney, Henry Wilcoxon, Marie Wilson, Shelley Winters and Loretta Young. 33
That was the good news. But there was an undercurrent of bad news. Balaban wrote that
because of the divestiture of its theatres, 'the Board of Directors has determined not to hold the
annual meeting this year'. His vertical empire was gone. The new Paramount Pictures would start
34
on 1 January 1950.
Paramount Pictures seemed to have a head start in this new era. In 1949 came DeMille's
Samson and Delilah - the studio's biggest box-office earner in corporate history - and the first Jerry
Lewis and Dean Martin hit, My Friend Irma. From 1950 to 1954, Balaban developed a three-
pronged strategy for corporate stability: (1) create VistaVision as Paramount's exclusive widescreen
system; (2) spend more on 'original and aggressive' marketing and distribution; and (3) eliminate
B-pictures and short subjects. Balaban had some success. In 1951 A Place in the Sun became the
studio's most profitable film to date, and among its most honoured by Oscars. In 1952 DeMille
won best picture and director Academy Awards for the circus epic The Greatest Show on Earth;
-
PARAMOUNT 95
and better yet for Paramount the film broke the studio box-office record. In 1953 Alan Ladd, one
of the studio's minor stars of the 1940s, achieved star success in the adult Western Shane, while
Roman Holiday featured Audrey Hepburn in her film debut. In 1954 Alfred Hitchcock began a
seven-year run at Paramount with Rear Window, starring Grace Kelly and James Stewart. Also in
1954 the Bing Crosby-Danny Kaye film White Christmas inaugurated VistaVision, Paramount's
answer to CinemaScope. In 1956 DeMille's remake of The Ten Commandments became the
studio's most expensive production to date ($13 million), but shattered the studio's box-office
35
record, grossing $86 million, three times the previous record.
But Balaban was obsessed with making good in television. Unable to challenge CBS or NBC,
Balaban bet on pay-TV through the Telemeter subsidiary. The first Telemeter presentation came on
2 November 1953 in Palm Springs, California, and was heralded by Balaban as a preview of the
future. However, as estimates of the cost of implementing Telemeter nationwide began to reach
$350 million, Balaban again pulled the plug. Telemeter only proved Balaban was ahead of the
36
game; he had invented HBO two decades too early.
The second major blunder came on 21 February 1958, when Balaban sold Paramount's pre-
1948 features to Lew Wasserman's MCA for $50 million. For the 700 full-length films Paramount
would receive $10 million up front, $25 million in instalments over the following twelve years, and
up to $15 million from a pre-determined share of TV syndication receipts. This sudden surplus
income from film library sales allowed Balaban to show a profit for 1 958 and 1 959, but in the long
37
run the move cost Paramount dearly.
Finally, with former aide Leonard Goldenson doing great things at ABC-TV, in May 1959, key
Balaban advisor Y. Frank Freeman retired. Through his career with Paramount as the studio boss,
Freeman outlived a number of assistants - such as Henry Ginsberg in the 1940s, and Don Hartman
in the 1950s. At age seventy-nine, he was succeed by his long-time assistant Jack Kapp, fifty-six
a graduate of Columbia Law School - who had served as Freeman's lawyer. Kapp's failures
through the early 1960s proved only how valuable Freeman had been. 38
Balaban still had his stars. In a Variety interview in 2002, Jerry Lewis said,
On my 40th birthday Barney Balaban, head of Paramount Pictures, asked me to name anything I wanted
as a gift. I said, 'I want the negatives from my 1 1 Paramount movies.' Remember, I'm the only performer
who didn't have a contract with Paramount. It was a 17-year handshake deal with Balaban and Y.
Frank Freeman. Then to get a gift like that. Somebody once asked Barney, 'Are you in tune with Jerry?'
Barney said, 'If Jerry wants to burn down the studio, I'll give him the match.' I made $875 million for
Paramount when tickets cost a quarter.
Lewis recalled,
Barney was giving a big party for his daughter in their Long Island home, and the night before the
party the English artists who were supposed to entertain fell out. Barney called and asked, 'What'll I
do.' I said, 'I'll be there tomorrow.' "I came in, did a concert with a 30-piece orchestra and did the
greatest show of my life. I did those things for him and he did them for me. Barney never let a year go
by without sending me $50,000 for my [MD charity]: Every single year; but he wanted it to be anony-
mous. He was chairman of the board at Paramount and every single check said, 'To Jerry With Love.'
His other star was Elvis. Presley's first Paramount film, Loving You, was released in 1957. His later
films for Paramount, all for producer Hal Wallis, included King Creole (1958), G.I. Blues (1960),
Roustabout (1964) and Blue Hawaii (1961). All made Paramount vast profits - as did most of Jerry
39
Lewis' films.
But these hits were not enough. Between 1962 and 1965 Paramount went through a period
of cautious consolidation. Although the business of producing motion pictures was by and large
its primary activity, in terms of the changes in the company's structure and direction, television
became its main interest. Barney Balaban pursued a larger and larger share of the lucrative tele-
vision production market. But it was too little to late. In 1962 Paramount marked its first loss in
twenty-five years. Balaban's plans for change were simply not working. Balaban at seventy-four
took Zukor's place as chairman (Zukor became chairman emeritus) on 2 June 1964 after heading
the company since 1936. With his company failing, and in play as a takeover candidate, Balaban
retired in 1965. 'It was about as smooth and well planned a change as it's possible to be,' suc-
40
cessor George Weltner said with a smile. 'After all, we're a very conservative company.'
Balaban had been the right leader for twenty-five years. He knew vertical integration. But the
1 960s brought something else: media conglomeratisation. Balaban failed when it came to captur-
ing other businesses as needed. He was an innovator in television, embracing it before all of his
fellow executives, but sought to use television in his theatres and then as pay-TV. Both strategies
failed. So as the Hollywood studio system became more and more television-oriented - into the
home rather than the theatre - Balaban bowed out, and the company he headed sold in 1 966 to a
pure conglomerate, Gulf + Western. Paramount would continue, but as a vastly different company.
Notes
1 . Barrons, 29 April 1945, p. 9; Barrons, 27 August 1945, p. 7; Barrons, 22 March 1948, p. 7.
2. Variety, 1 January 1935, p. 3; Fortune, March 1937, pp. 87-96.

3. Motion Picture Herald, 3 April 1943, p. 29; Motion Picture Herald, 1 1 December 1943, p. 9; Motion
Picture Herald, 1 8 November 1 944, p. 8. See rankings in Susan Sackett, The Hollywood Reporter Book
of Box Office Hits (New York: Billboard Books, 1990).
4. Variety, 1 January 1930, p. 1 ; The New York Times, 25 April 1930, p. 28. This account of Paramount's
history is based on Michael Conant, Antitrust in the Motion Picture Industry (Berkeley: University of
California Press, 1960), pp. 51-4, 94-106, 130-1; United States Temporary National Economic
Committee, 'The Motion Picture Industry', Monograph 43 (Washington, D.C.: United States
Government Printing Office, 1941), pp. 5-16, 45-8, 68-74; Howard T. Lewis, The Motion Picture
Industry (New York: D. Van Nostrand, 1933), pp. 30-50, 74-5; Fortune, March, 1937, pp. 87-96;
Fortune, June, 1947, pp. 90-4.
5. Fortune, March 1937, p. 88.

1
PARAMOUNT 97
6. See Leonard H. Goldenson, Beating the Odds (New York: Charles Scribner's Sons, 1991), pp. 26-96.
This autobiography tells in some detail all Goldenson learned from Balaban.
7. Correspondence to Balaban is included in Box 1 of the George Weltner Collection in the University of
Wyoming's American Heritage Center, Laramie, Wyoming.

8. Fortune, June 1947, p. 92.
9. Fortune, June 1947, pp. 90-4.
1 0. Publix Opinion, p.
1 The New York Times, 7 January 929, p. 40; The New York
1 October 1 927, 1 ; 1 1
Times, 1 New York Times, 25 April 1930, p. 28.

April 1930, p. 40; The
11. Barrons, 5 January 1931, p. 29; The New York Times, 15 January 1931, p. 20; Barrons, 2
February 1931, p. 29; The New York Times, 17 April 1931, p. 27; The New York Times, 23
December 1932, p. 31; Barrons, 20 April 1931, p. 24; The New York Times, 22 April 1931,
p. 42; The New York Times, 25 April 1931, p. 28; Barrons, 4 May 1931, p. 16; The New York
Times, 23 May 1931, p. 33; The New York Times, 28 May 1931, p. 43; The New York Times, 9
June 1931, p. 33; The New York Times, 26 June 1931, p. 26; The New York Times, 29 August
1931, p. 16; The New York Times, 10 September 1931, p. 23; The New York Times, 18
September 1931, p. 32; The New York Times, 31 October 1931, p. 25; The New York Times,
2 December 1932, p. 39; The New York Times, 30 December 1931, p. 25.
12. The New York Times, 22 January 932, p. 5; The New York Times, 25 March 942, p. 9; Barrons, 9
1 1 1 1
May 1932, p. 23.
1 3. Variety, 1 9 January 1 932, p. 1 ; The New York Times, 5 January 1 932, p. 31 ; The New York Times, 1
March 1932, p. 5; Variety, 10 May 1932, p. 6; The New York Times, 28 February 1932, section
1 p. 9; II,
The New York Times, 18 March 1932, p. 25; The New York Times, 20 March 1932, section p. 5; The II,
New York Times, 4 April 1932, p. 23; Film Daily Yearbook, 1933, p. 85.
1 4. The New York Times, 8 May 932, p. 3 The New York Times, 9 June 932, p. 32; Barrons, 9 May
1 1 1 ; 1 1
1932, p. 23; The New York Times, 16 September 1932, p. 32; Barrons, 1 November 1932; The New
York Times, 16 December 1932, p. 33; The New York Times, 17 December 1932, p. 32; The New York
Times, 19 December 1932, p. 31; Variety, 27 December 1932, p. 1.
1 5. Variety, 23 January 1 934, p. 22; The New York Times, 22 June 1 934, p. 31 New York Times,
; The
1 December 1934, p. 19; The New York Times, 12 December 1934, p. 39; The New York Times,
28 December 1934, p. 31; The New York Times, 7 March 1934, p. 30; The New York Times,
8 November 1934, p. 27; Fortune, 1937, pp. 87, 194.
1 6. The Magazine of Wall Street, 14 September 1 935, pp. 546-7, 566; The New York Times, 5 June 1 936,
p. 16; The New York Times, 16 June 1936, p. 39; The New York Times, 17 June 1936, p. 35; The New
York Times, 28 August 1936, p. 23; Motion Picture World, 4 July 1936, pp. 13, 24; The New York Times,
24 July 1936, p. 30.
17. The New York Times, 25 September 1936, p. 35; Fortune, March, 1937, pp. 87-96.
18. Annual Report, Paramount Pictures, 1937; Fortune, June, 1947, p. 90; The New York Times, 28 February
1937, section III, p. 1; The New York Times, 2 March 1937, p. 36; The New York Times, 19 March 1937,
p. 38; The New York Times, 14 April 1937, p. 37; The New York Times, 27 April 1937, p. 36.
19. Fortune, March 1937, pp. 99-100, 194, 196, 202, 204, 206, 211.
20. The Magazine of Wall Street, 23 October 1 937, pp. 32-3.
2 1 . Annual Report, Paramount Pictures, 1 938; The New York Times, 27 January 1 938, p. 31; The New York
Times, 1 8 April 1 938, p. 1 1 ; Annual Report, Paramount Pictures, 1 939; The New York Times, 6 January
1939, p. 33; The New York Times, 1 1 January 1939, p. 32; The New York Times, 2 March 1939, p. 35;
Barrons, 8 May 1939, p. 1 1.

. .
22. The New York Times, 22 March 1 940, p. 36; The New York Times, 27 April 1 940, p. 25; The New York
Times, 16 May 1940, p. 41; The New York Times, 19 June 1940, p. 33. Quoted from The Magazine of
Wall Street, 8 March 1941, p. 657. Note Barrons, 14 April 1941, p. 13, repeats the same glowing report.
23. The Magazine of Wall Street, 23 August 1 941 , pp. 529-30; Barrons, 8 September 1 941 , p. 4; Annual
Report, Paramount Pictures, 1942; The New York Times, 23 April 1941, p. 21; The New York Times,
2 May 1941, p. 37; The New York Times, 18 June 1941, p. 31; The New York Times, 1 August 1941,
p. 26; The New York Times, 1 October 1 941 , p. 5; The New York Times, 31 October 1 941 , p. 38; The
New York Times, 4 New York Times,
November 1941, November 1941, p. 39; The New
p. 39; The 1 1
York Times, 5 December New York Times, 6 December 941 p. 29; The New York
1 941 , p. 39; The 1 ,
Times, 13 December 1941, p. 33; The New York Times, 16 December 1941, p. 49; The New York Times,
20 December 1941, p. 33; The Magazine of Wall Street, 27 December 1941, p. 323; The New York
Times, 1 7 June 1 942, p. 33; The Magazine of Wall Street, 30 May 1 942, p. 1 94; The Magazine of Wall
Street, 8 August 1942, p. 441

24. The Magazine of Wall Street, 22 July 1944, pp. 413-14.
25. The New York Times, 21 September 1944, p. 26; The New York Times, 9 November 1944, p. 22; The
New York Times, November 944, p. 24.
1 1
26. The New York Times, 26 May 1944, p. 22; The New York Times, 28 May 944, section p. 2. 1 II,
27. The New York Times, 7 March 1946, p. 33; The New York Times, 19 June 1946, p. 29; Annual Report,
Paramount Pictures, 1947.
28. Fortune, June 1947, pp. 90-4, 208, 21 1-14, 21 7-21
29. Business Week, 24 March 1945, pp. 92, 95.
30. The Magazine of Wall Street, 6 November 1 937, pp. 92-3, 1 23-4; The Magazine of Wall Street, 22
May 1937, pp. 158-9, 194-5; The Magazine of Wall Street, 23 April 1938, pp. 20-1, 61-2; The
Magazine of Wall Street, 1 2 August 1 939, p. 448; The Magazine of Wall Street, 14 January 1 939,
pp. 362-3, 398-9.

31 . Fortune, July, 1947, pp. 1 53-4, 1 58, 200, 203; Annual Reports, Paramount Pictures, 1944-1948.
32. The New York Times, 30 December 1 949, p. 1 3.
33 . American Business, March 1 950, pp. 1 0- 1 1 , 38-9.

34. Annual reports covering the period of 1948, when the anti-trust decrees were handed down, and 1949,
when the Paramount consent decree was agreed, up to the last day of 1 949. See also Variety, 2 March
1949, p. 3; Variety, 1 1 January 1950, pp. 7, 18; The Commercial and Financial Chronicle, 3 July 1952,
p. 32.
35. Paramount Pictures, Annual Reports, 1953 1954, 1955 and 1956.
36. Variety, 9 June 1 954, p. 1 3.
37. Paramount Pictures, Annual Report, 1958.

38. United States Congress, Jurisdictional Disputes in the Motion Picture Industry, House Special Committee
on Education and Labor, vol. 1, 1947, pp. 102-3; Motion Picture Herald, 8 July 1950, p. 18; The New
York Times, 6 July 1950, p. 31; Motion Picture Herald, 23 May 1959, p. 10; The New York Times,
7 February 1969, p. 37; Motion Picture Daily, 7 February 1969, pp. 1, 3.
39. Variety, 8 September 1 954, p. 5; Variety, 1 5 July 2002, p. 56.
40. Paramount Pictures, Annual Reports, 1 962, 1 963, 1 964 and 1 965; The New York Times, 2 July 1 964,
p. 33.
8
Loew's/MGM
Loew's, Inc. - run by Nicholas Schenck since 1924 -owned Metro-Goldwyn-Mayer (MGM), which
ranked ahead of Paramount in fame, but not in profitability. Only during the early 1930s - before
the fabled producer Irving Thalberg died - did MGM prosper. More importantly from a purely busi-
ness perspective, although Loew's had the fewest theatres of the Big Five, they were well located
(principally in New York City) and free from debt by 1930. Thus Loew's was never dragged into
bankruptcy and earned steady, if not spectacular, profits through the Great Depression. Its lack of
theatres later hurt when the boom associated with World War II came, and Loew's profits fell
behind other, larger chains. But Nicholas Schenck had always played it conservatively since he had
taken control from founder Marcus Loew. He was satisfied with debt-free, New York City-centric,
vertical integration. As a conservative leader, Schenck formulated strategies to maximise profit in
the short run, but lacked the vision for maintaining the longer-run power of the studio corporation.
He ran Loew's, Inc. as if he were running almost a local theatre chain dominating New York City,
but kept a tight leash on distribution (with his men down the hall), and an even tighter leash on
Mayer in Hollywood. Schenck had brought Mayer into Loew's, Inc. in 1924 and some two decades
later was to force him out. Schenck was the boss and everyone at Loew's called him, appropriately,
'the General'.
The Leader: Nicholas Schenck

Schenck worked from an office high above the Loew's State Theater, one block north of Adolph
Zukor. The General had a trusted team of assistants, many of whom remained loyal to Schenck for
more than thirty years, the most visible aide being Louis B. Mayer. They faithfully executed his
every order. The problem was that Mayer was good at keeping the studio running efficiently, but
could not turn out popular feature films on a regular basis. As long as Irving Thalberg was there,
MGM prospered. After Thalberg's death in 1936, an adequate replacement could never be found.
The General was left weakened on the West Coast, but always had his highly profitable theatre
1
chain.
Schenck's struggle to find a new Thalberg is the key theme of Lillian Ross' 1952 book, Picture,
researched for The New Yorker, about the making of MGM's The Red Badge of Courage (1951).
Naively, she started in when filming began on 25 August 1950, observing director John Huston
struggling with MGM hierarchy. This was the corporate drama Ross expected to document. MGM
production No. 1512 was not a cheap film ($1.65 million negative cost). But she soon found out
its budget had not been approved by Louis B. Mayer but by the latest 'new Thalberg' Dore Schary,
who was supported by Schenck. In the end, The Red Badge of Courage rapidly sank to the bottom
half of double bills, tolerantly written off by Schenck as a training film for his man, Dore Schary. 2
Perceptively, Ross does not end her book with the sad tale of film-making gone sour, but with
a rare interview with the man who was really running the show, Nick Schenck, in his office, not
far from the headquarters of Ross's magazine, The New Yorker. She learned that Schenck could
tell at any moment of the day what was being produced, the narrative, the characters and the
costs. For his MGM unit Schenck spent hours a day on the phone with Eddie Mannix, his eyes and
ears at the studio. One of Schenck's chief assistants stated for the record: 'Put [Schenck] in a room
where anything is being talked about and he'll learn it. There's no branch of this business he does-
n't know. He keeps tabs on every little thing. The minute a picture is released, there he is on the
telephone, the reviews in his hand.'
Another aide told Ross: 'Mr. Schenck is the president. Dore works for him. Mr. Schenck saw
[The Red Badge of Courage], and he knew right away it wouldn't go over with the public' But that
was not the point. Schenck knew of the cost overruns, of Mayer's increasing sloppiness as a studio
executive, and had all this - and more - in his head, just as F. Scott Fitzgerald had learned when
he was at MGM. She learned from Arthur Loew, son of the founder, that: 'In the beginning, when
Dore joined the company - was glad to see him get the job - Schenck gave him free
1 rein. He even
let Dore make a few pictures Schenck really didn't want to make' - one being The Red Badge of
Courage. Once in his office, Ross reported:
Schenck spoke decisively, confidently, and with a strong air of knowledgeability about his business.
He is a compactly built, energetic man in his late sixties, with graying hair brushed back and parted on
the left. He has a quietly direct manner and a benevolent air. The day saw him, he was deeply tanned,
I
and he was wearing a double-breasted gray suit, a white shirt with blue stripes, a small-figured dark-
blue necktie, and tortoise-shell glasses. He sat behind a large, highly polished mahogany desk, on
which stood framed photographs of his three daughters as children, all with long curls; a carafe and
two glasses; an ashtray; a brown leather folder; and four yellow pencils with sharp points. At his feet
was a brass spittoon.
She went on: 'His office was small and modest. It had a green carpet; a fireplace, on the mantel
of which stood a black iron statuette of the MGM lion; a couch covered with brown fabric; four
worn chairs; and Italian walnut paneling.' She learned Schenck had been in this office since for-
mally becoming Loew's president in September 1927 when founder Marcus Loew died. He told
her he watched four films a day at work, and three a day over the weekend at his home in Sands
Point. 'You have to see other people's pictures as well as your own. Any picture that becomes
good or important, I see it. You have to know about everybody's taste.' He told Ross with pride: 'I
weigh a hundred and forty-one in the morning, a hundred and forty-three at night.' He then can-
didly told her how ultimately he decided every detail of company policy. When he read the outline
LOEW'S/MGM
for The Red Badge of Courage, he said, he felt that the studio was taking a big chance. At the
time, Schary was in New York, and was not feeling well. 'I went right over to Dore's hotel to talk
to him,' Schenck said to Ross. 'Dore had been having differences with Louie [B. Mayer] about the
picture.' Schenck had to put an end to that, and did.
Schenck told Ross about the action he took: 'Right from [Schary's] hotel, I called Louie, and . . .
arranged for Dore and Louie to talk it over when Dore got back [to LA]. But Louie remained
opposed to making the picture, and on other things he wasn't seeing eye to eye with me. Eventu-
ally, I had to support Dore.' Ross had found unexpected drama - Schenck was about to fire Louis
B. Mayer.
Schenck then lit another cigarette as he summarised his business strategy: 'Dore is young. He
has not had his job very long. I felt I must encourage him or else he would feel stifled. It would
have been so easy for me to say no to him. Instead, I said yes. I figured I would write it off to
experience. You can buy almost anything, but you can't buy experience.' Schenck smiled in a wise,
fatherly manner. 'Before I saw it, I had heard it was very bad,' Schenck said.
But it was better than I had been led to expect. I would call it a fairly good picture. Only, it was above
the heads of our audiences. For me, it was good entertainment. But not for our audiences. I felt immedi-
ately we would have to take a loss on it, and we have. When saw the I picture was not doing any
business, [I ordered Loew's, Inc. to stop] spending money on promoting it.
'[My promotion and distribution staff] did the best they could with it,' Schenck candidly told Ross.
'Unfortunately, that sort of thing costs money. If you don't spend money, you never learn.' The
General, with more than a third of a century in the movie business, laughed knowingly. 'After the
picture was made, Louie didn't want to release it,' he said. 'Louie said that as long as he was head
of the studio, the picture would never be released. He refused to release it, but I changed that!'
Schenck puffed quickly on his cigarette. 'How else was going I to teach Dore?' he said to Ross. 'I
supported Dore. I let him make the picture. I knew that the best way to help him was to let him
make a mistake. Now he will know better. A young man has to learn by making mistakes. I don't
think he'll want to make a picture like that again.'
Then Schenck surprised Ross; he picked up one of his yellow pencils and jotted something
down on a memo pad. Then he buzzed for his secretary and asked her to get Schary on the tele-
phone at Culver City. After a couple of minutes, he picked up the phone and said, 'Hello, my boy.
How are you doing?' Ross realised that he had made a note to order Schary to do something about
some picture on his masterlist. Others may have been on the set and in the editing room, but Nick
3
Schenck had the final say. It was his company - through the 1 930s 1 940s and into the 1 950s.
Schenck Takes Loew's Through the Great Depression

The 1930s were a struggle for all studios, except for Loew's. Schenck achieved this by operating
debt-free theatres and ordering Mayer to make as many different kinds of film at MGM as
possible, while the PR department projected a Tiffany of studios' image. So MGM produced jungle
adventures (the Tarzan series), slapstick comedies (Stan Laurel and Oliver Hardy) and the satire and
burlesque of the Marx Brothers. With New York City suffering the least from the Depression,
Schenck never experienced the downturn in attendance that other studio-owned theatre chains
did.
Schenck carefully picked trusted aides. While Mayer symbolised the studio to the public, Eddie
Mannix (one of Nick Schenck's inner circle) was at the core of real power. He reported daily to the
General by phone; Schenck made his decisions and then called Mayer with his daily orders. Born
in 1891, Mannix was a decade younger than Schenck and fiercely loyal; Schenck always trusted
Mannix, never Mayer. A tough man, he had been a bouncer at the Schenck-owned Palisades Park,
and was never intimidated by Mayer. Mannix was a member of the exclusive Loew's club who
gained a percentage of all profits each year - as well as a high salary. Mannix, an elementary school
dropout, had the ability to remember, record and report the essential numbers to Schenck so that
Mayer could not make some undocumented claim. Clark Gable knew the score and had this to say
after returning to MGM from service in World War II: I've shaken hands with Eddie Mannix - what
4
more do I need?'
Producer Garson Kanin knew Mannix and his power: 'When I first met him, he was a solid,
immovable fixture in the MGM front office. I liked him. He was extremely tough but eminently fair.'
He also had a Sam Goldwyn-like way of mangling the language. 'You know,' he once told Kanin,
'I went around the world last year. And you want to know something? It hates each other!' As
much as Mayer was known to the public, Mannix made sure he avoided all publicity. He had the
5
trust of the General. Louis B. Mayer was simply the front man.
Through his career Schenck believed firmly in the star system. Joan Crawford, Greta Garbo,
Wallace Beery, Robert Montgomery, Laurel and Hardy, Marie Dressier, the Barrymores, Clark Gable,
Jean Harlow and Jackie Cooper joined MGM and gained international prominence. And until 1936,
his best producer was not Mayer, but Irving Thalberg. As we have seen, Schenck searched in vain
to replace Thalberg. At the same time, he signed more stars: the Marx Brothers, Myrna Loy,
Spencer Tracy, William Powell, Mickey Rooney, Judy Garland, Robert Taylor, Robert Young, James
Stewart, Jeanette MacDonald, Nelson Eddy, Greer Garson and Katharine Hepburn. These names
gave MGM the motto that the studio had 'more stars than there are in Heaven'. The studio there-
6
fore needed only adequate producers to craft star-laden features.
In April 1930 the financial publication Barrons did a survey of Loew's, Inc. Conclusion: loew's,
Inc. Prospering'. For the sixteen weeks' period ended on 14 March 1930 - that is, the first three
months of 1930 - Loew's, Inc. reported the largest profits for any earnings period in its history. It
was doing even better in bigger cities, as Barrons noted the 'recession' - as the Depresion was then
called - had only hit small cities so far. This gave the General an edge - the continued prosperity
of New York City, where Loew's dominated movie exhibition. Barrons noted that Schenck had
started to work on making Loew's recession-proof the very day of the stockmarket crash of 1929,
while his competitors marched along as if expansion would never end. Barrons marvelled that
LOEW'S/MGM 103
MGM factory generators keeping the lights on twenty-four hours a day

Loew's theatres in Greater New York did about as well in 1931 as in 1930. In 1931 Schenck was
doing so well that, far from struggling with bankruptcy, he was using excess cash to retire all out-
7
standing debt.
As the economy grew worse, the General was not about to let Loew's, Inc. bleed red ink. So
in July 1932 Schenck cut salaries by between 5 and 35 per cent. He restricted Thalberg to pro-
ducing a feature a week. This policy worked. During the early 1930s, MGM produced more hits
than any other company. Of the twenty-foul features that made it to Variety's annual list of top-
grossing films from 1930 to 1933, MGM produced nine, or more than a third. As Fortune in 1932
put it, MGM was 'encrusted with more stars and triumphs than Hollywood had seen in one place'. 8
Schenck believed that location shooting was a waste of money. He had constructed on MGM's
lot some twenty-two sound stages, as well as a park that could be photographed to look like any-
thing from a football field to the gardens at Versailles. He approved the purchase of $2 million
worth of antique furniture, a greenhouse devoted to the raising of ferns, twenty-two projection
rooms and a subsidised commissary, and signed stars - as well as the hundred other different pro-
fessionals needed to make a movie - to lengthy unbreakable contracts. He even hired writing staff
at $40,000 a week, and one - F. Scott Fitzgerald - insightfully admired Schenck from afar.
In 1932, according to Fortune, Thalberg was a small and fragile young man who hardly looked
the part of the movie mogul - no cigar, no yelling. Thalberg's method as producer was to have
several writing teams work on the same project, and then he would select - once he passed it by
Schenck - the version that would be filmed and fill Loew's theatres. Thalberg perfected the decen-
tralised method of production - having a set of associate producers who were assigned individual
projects. Thalberg cleared everything with the General. He was a faithful and trusted employee
who knew his place. Thalberg, in turn, trusted Schenck, a man who had seen more films than any
one alive, and bragged of his ability to predict how well the film would draw, often down to the
9
dollar.
A turning point for Loew's came in September 1936 with Thalberg's death, which set in
motion Schenck's hunt for a new 'boy wonder'. Hunt Stromberg, was one of a handful of super-
visory producers who trained under Thalberg, tried and failed to replace the master. Under Thal-
berg, Stromberg had helped bnng together such classics as The Thin Man (1934), Naughty Marietta
(1935) and Marie Antoinette (1938). Another of his films, The Great Ziegfeld, earned the Academy
Award for best picture in 1936. Under Thalberg, producers developed genre specialities, usually
associated with the careers of certain stars. Stromberg achieved remarkable success in the 1930s
by first formulating films for Jean Harlow and Joan Crawford, and later with the Jeanette
MacDonald and Nelson Eddy cycle of musicals and The Thin Man series. But Stromberg chafed
10
under larger responsibility - as did many others who followed Thalberg^nd failed.
Schenck was also forced to confront the changing realities of movie-going. In 1936 he
announced that all subsequent-run Loew's theatres were to be converted to double features.
Schenck kept a stable of B-picture specialists busy like every other studio, giving the lie to MGM's
PR line about being the Tiffany studio. Producers Lucien Hubbard and Harry Rapf divided up such
LOEW'S/MGM 105
pictures between them; the busiest directors were George B. Seitz and Edwin L Marin. However,
MGM's low-budget entries were the highest budgeted of B-films the Hollywood studio system was
then producing. 'When Metro goes out to make a Class B picture', said Variety, 'they give it plenty
of production, steady direction and a certain amount of class. It may not have big draw stars and
the situation may be overdone, but it certainly will stand up on the second picture shelf in the the-
aters for which it was designed.' The approach worked. In 1939, while the other studios were
recovering from the Depression, Loew's profits of $9.5 million were roughly equivalent to the net
profits of all the other major studios combined. As we shall see, the war boom helped Loew's, but
in the end Schenck's theatres could no longer depend on MGM regularly turning out far more hits
than any other studio. Indeed in 1941, Paramount was to pull even with Loew's in both gross rev-
11
enues and net earnings.
The secret had been not only debt-free theatres, but MGM's B-films. These included the hugely
successful Andy Hardy pictures starring Mickey Rooney, the Dr Kildare series with Lew Ayers and
Lionel Barrymore, the Maisie series with Ann Southern, and the Tarzan series with Johnny Weiss-
muller and Maureen O'Sullivan. Because of Schenck's top-budgeting of B-films, he could often sell
The Schenck brothers, Joe (left) and Nicholas (right), surrounding Leo Spitz
them for first-run release. MGM's series pictures produced continuous profits. To Schenck - as
quoted in Fortune: 'Without being able in most cases to act, write, or direct, [his MGM staff] are
supposed to know more about writing than either the director or the star, more about directing
than the star or the writer.' Translation: a well-run MGM could ride its accumulated, but mediocre
12
staff and thus make profits without Thalberg.
So. for example, MGM's B-film factory made Mickey Rooney the numbeccone box-office draw,
through the Andy Hardy series. A Family Affair (1937), a modest B-picture based on a minor Broad-
way play about a small-town judge and his family who lived in Carvel, Idaho, proved a sleeper hit.
and soon a series was in the making. By 1939, nineteen-year-old Rooney had become MGM's
'most valuable piece of talent', and the Andy Hardy pictures, 'the biggest money makers, in ratio
to investment, in [the studio system's] histon/. Rooney's multiple talents enabled him to take on
drama and musicals as well as comedy, and such hits as Boys' Town (1938) and Babes in Arms
(1 939) showcased his popularity. Love Finds Andy Hardy (1 937-8) cost only $2 1 2,000 but earned
a profit of $-1 .345,000. Over the next five seasons, Schenck approved ten more Andy Hardy films
at similar costs, and each had a profit of over $1 million. As the 1930s ended, a half-dozen Rooney
films - made inexpensively - generated combined profits of over $7 million. By 1939 Rooney was
13
earning over $2,000 a week - a payment Schenck was happy to approve.
In August 1 939 Fortune reported that Schenck was most worried about the lack of success of
MGM's A-films. Since Irving Thalberg's death, MGM features had begun to fail 'to make their cus-
tomary splash in the trade'. So, for example, in 1938, when the expensive Marie Antoinette and
The Great Wattz were presented, patrons stayed away in droves; neither film even returned enough
to cover its negative cost. Schenck turned to re-releasing Thalberg standards: Grand Hotel and
Mutiny on the Bounty for example, every month as in 1 939 'the recent Metro crop of turkeys has
not been reassuring'. No wonder Schenck was willing to lend independent producer David O.
Sebnick Clark Gable for Gone with the Wind- in trade for the film's distribution rights. No wonder
Schenck later acquired the full rights to Gone with the Wind. He needed top A features MGM was
not making. While MGM's own costume dramas were failing at the box office. Gone with the
14
Wind made box-office history by earning a gross of $48,979,000 and a profit of $16,222,000.
One can see this in the reports Eddie Mannix issued to his boss. In the early 1 930s rarely did
Schenck approve pictures costing in the range of $600,000 to $900,000. and only once a year
above $1 million. Typical were cheap jungle adventures, such as the very profitable Trader Horn
(1930-1) and the Tarzan films. Stars like Greta Garbo and Norma Shearer proved inconsistent at
the box office. In fact, according to Mannix, Anna Christie (1930) and Grand Hotel (1932-3) were
Garbo's only films to achieve a $1 million domestic gross. However, her strong foreign grosses
compensated for her domestic weakness. The expensive costume drama Queen Christina (1 933-4)
even earned the best gross of its season when an outstanding foreign gross ($1,843,000) was
15
added to a mediocre domestic one ($767,000).
Contrary to MGM's sophisticated image, Schenck's most reliable star in the 1 930s had been
the sixty-something Marie Dressier, who starred in Reducing (1930-1), Politics (1930-1) and Emma
LOE W'S/MGM 107
(1931-2). Her films earned better domestic grosses than those of Garbo and Shearer, and returned
profits that were twice their production costs. Dressier scored her best grosses when she was
paired with Wallace Beery. They played the down-and-out characters of Min and Bill (1 930-1 and
)
Tugboat Annie (1932-3), and led the cast of the all-star film Dinner at Eight (1 933-4). Tugboat
Annie earned the best domestic gross ($1,917,000) and the best profit ($1,212,000) of the early
1930s. San Francisco (1936) earned the best gross ($5,273,000) and the best profit ($2,273,000)
of the decade. The highest loss of the decade belonged to Greta Garbo and Conquest (1937-8):
16
$1,397,000.
The War Boom

The economic boom associated with World War II came to Schenck's rescue. As The Magazine of
Wall Street understood as early as 1942: '[All] Motion Picture Companies Have Bright Prospect.'
During 1942-4, prospects brightened so much that all companies - Loew's included - were all set-
ting profit records. In general, revenues grew 20 per cent a year and profits tripled records set in
the 1920s. Loew's had $20 million cash on the books, and no debt. In its 1945 annual report
Loew's financial balance sheet looked as solid as any industrial concern in the USA. The peak came
in 1946 when Schenck maximised Loew's profits at $18 million - from just twenty-four features.
17
Schenck simply stretched the pay runs from a week to two weeks and attendance did not suffer.
During the war, Mannix reported that MGM profits hit new highs in 1940-1 and 1941-2, with
an all-time high of $23,245,000 reached in 1942-3. Yet changes had to be made. For example, the
Tarzan series, which had always drawn the majority of its earnings from the foreign market, was
abandoned. Garbo 'retired', as did Shearer after Her Cardboard Lover and We Were Dancing (both
1941-2) bombed. Rooney and Judy Garland proved to be the new musical stars, with Strike Up the
fiand(1940-1) and Babes on Broadway (1941 -2), both films earning a profit of over $1,500,000.
Just six months after Pearl Harbor, MGM released, its 'tribute' to the British war effort. Mrs
Miniver (1941-2) starred Greer Garson as an average English housewife defending her home and
children against the Nazi blitz. Top grosses were usually in the range of $3.5 million to $4 million
in the early 1940s, but Mrs Miniver earned the best gross ($8,878,000), and the best profit
($4,831,000) of any MGM film to this time. Mrs Miniver was MGM's top-grossing film of the
1940s, but many films released during the war exceeded a gross of $5 million.
With the first-run market offering such huge returns, during the war Schenck changed his
strategy and approved fewer but more expensive films. The number of releases steadily dropped
from forty-eight in 1941-2 to twenty-seven in 1945-6, with the number of inexpensive films
sharply curtailed. The average production cost climbed from $650,000 in 1941-2 to $1,680,000
in 1945-6. Top costs sometimes reached $2 million to $4 million. For the first time, the majority
of MGM's films were made at costs well above the industry-wide average cost, which stood at
$900,000 in 1946.
Schenck's star was Greer Garson. Besides Mrs Miniver, Random Harvests 942-3) and The Valley
of Decision (1 944-5) were the only films of the war years to achieve grosses of more than $8 million
1 08
I
and profits of more than $3 million. Garson also had top grosses from Madame Curie (1943-4), Mrs
Partington (1 944-5) and Adventure (1 945-6). Many of the other top-grossing films were musicals.
Arthur Freed and Judy Garland hit their stride with Meet Me in St Louis (1944-5) and The Harvey
Girls (1 945-6), MGM's most expensive and successful films at this time. Anchors Aweigh (1 944-5),
starring Frank Sinatra, Gene Kelly and Kathryn Grayson, earned the best gross ($7,475,000) of all
the wartime musicals; but it was closely followed by the lavish aquacades of Esther Williams (Bathing
Beauty, 1943-4; Thrill of a Romance, 1944-5; and Easy to Wed, 1 945-6). 18 ->
In November 1942, despite Nick Schenck*'s reputation for not trying new media, MGM became
the first of the studio system to sponsor a radio show, 'The Lion's Roar'. (As early as 1937 he had
an MGM show, but it Was sponsored by Maxwell House coffee.) On NBC, 'The Lion's Roar' was
simply a plug for MGM films. But that Schenck would pay for radio time surely meant that he was
familiar with how broadcasting worked, and his anti-television position seems less a 'dodo bird'
philosophy, more one of wait and see - a rational approach to a period when technological change
meant that no one really knew what would happen. 19
MGM was also successful in developing new talent during the war. Several younger MGM
players became stars: Lana Turner, Van Johnson, Red Skelton, Robert Walker, and two precocious
pre-adolescents, Margaret O'Brien and Elizabeth Taylor. The wartime ascents of Van Johnson and
Margaret O'Brien were particularly impressive. Van Johnson began in 1942 in bit parts and a sup-
porting role in a B-series picture, Dr Gillespie's New Assistant (replacing Lew Ayres, who left the
series and the studio after declaring himself a conscientious objector to the war). For Nick Schenck,
Van Johnson had matured into a consummate boy-next-door heart-throb, rising to number two in
the Exhibitors' Poll and competing with Frank Sinatra for the hearts and screams of America's
20
bobby-soxers.
In April 1944, The Magazine of Wall Street noted that the studio system's cash accounts were
'pleasant to behold'. (It was this abundance of cash that allowed Schenck to acquire the complete
ownership of Gone with the Wind.) Schenck demanded and got higher admission prices and film
rentals, so together with reduced production schedules and reduced costs, he simply sat back and
watched profits rise. Longer and longer runs of first-run pictures - made possible by record
demand for movies - considerably lowered amortisation charges and enabled Schenck to expand
inventories and then release films until all possible box-office monies had been milked out of them.
Wall Street loved Loew's because of its profitability. Cash on hand soared to over a half a billion
21
dollars.
In 1945, as its hedge against eventualities, Loew's filed TV applications with the FCC which, if
approved, would provide stations in Los Angeles, Chicago, Washington, D.C. and New York. In
addition, Nick Schenck hired radio writers and producers on two-year contracts as part of a plan
to develop a technique for short-film productions for telecasting. Schenck has been long portrayed
as ignoring television, but the evidence proves precisely the opposite. Business was so good during
1 945 and 1 946 that The Magazine of Wall Street headlined: The Movies Enter a New Phase'. Pros-
seemed destined 22
perity to last forever. It would not.
LOEW'S/MGM 109
The Downfall and the End

Schenck was at the peak of his career and, despite Louis B. Mayer publicly embarrassing him by
leaving his wife, and taking up gambling and horses, the studio seemed to run smoothly and prof-
itably as it continued its policy of making fewer and more expensive films in the postwar period.
Only twenty-five films were released each season in the late 1940s, and the average production
cost hit a new high of $2,249,000 in 1947-8. However, cinema admissions began to fall rapidly,
23
and Schenck axed Mayer in favour of Dore Schary.
The studio economics were changing. The Three Musketeers (1948-9) earned the second-
highest gross of the 1940s, but with the highest cost of the decade ($4,474,000) its profit was less
than half that of Mrs Miniver. Similarly, The Yearling (1 946-7) and Green Dolphin Street (1 947-8)
had grosses over $7 million, but profits of less than $500,000. Better profits came from Esther
Williams and her aquatic musicals (Fiesta, 1946-7; On an Island with You, 1947-8; and Neptune's
Daughter, 1948-9). In truth, the star power of Gable only symbolised the MGM of the past. 24
The combination of rising costs and falling earnings devastated profits. Revenues tumbled from
$98 million in 1944-5 to $77 million in 1946-7, and levelled off at approximately $80 million over
the next two seasons. A nadir was reached in 1947-8 when sixteen of the twenty-five releases
showed losses; and for the first time in Loew's history, a corporate loss - of $6.5 million - was
recorded. The 1948-9 season saw a slight recovery, with a slim profit; but Loew's began a tumble
25
downward from which the General never recovered.
Dore Schary was not Schenck's first choice as production manager. In 1 947 Schenck first made
overtures to David Selznick, Walter Wanger and Joseph E. Mankiewiez, but each refused the oppor-
tunity to serve as MGM's messiah. So on 1 July 1 948 Schary was installed as VP in charge of produc-
tion at MGM. The anointed saviour had been RKO's production chief for a year, and was also a MGM
alumnus. He reminded Lillian Ross of a Hebrew scholar. Schenck announced that 'the boom days' of
the film industry were over and that 'the economic situation in the foreign markets was cause for
serious concern'. He indicated that the executive shuffle was timed to ensure concentration of effort
on individual pictures in an attempt to economise and improve quality. This was rhetoric; Schenck
26
was at a loss for what to do, and continually went back to what had worked so well in the past.
In May 1948 the US Supreme Court demanded Schenck divorce and divest his precious
theatres. He spent much of the rest of his tenure - until 1956 - resisting this demand, and his
successor would handle that. Television stations flooded New York City, Loew's core theatrical
market, but he learned, as Barney Balaban had before him, that the loss of the Paramount case
meant that Loew's could not acquire a station. Also in New York City a wave suburbanisation
pushed new suburbanites miles from Loew's theatres. Schenck did what any conservative business
leader would do: he simply cut costs. He had a great deal of working capital on hand - at the end
of its 1947 fiscal year Loew's showed an all-time peak of $105 million - but needed a new strat-
egy to preserve his dividend payment record (Loew's had always paid a dividend since Schenck
took charge in 1924). Wall Street in 1948 became nervous, and labelled long-time blue-chip
27
Loew's a 'speculative' investment. Nick Schenck knew his career was on the line; but what to do?
Schenck and Senary in the late 1940s and early 1950s were responsible for all of that great
studio's famous films, such as Singin' in the Rain (1 952), On the Town (1 949), Adam's Rib (1 949),
Father of the Bride (1950), The Asphalt Jungle (1950), Ivanhoe (1952), The Band Wagon (1953),
Kiss Me Kate (1953) and Seven Brides for Seven Brothers (1954). While this may not have been
MGM's Golden Age in terms of making money, if for nothing else Schary will be remembered as
the head of the studio at which Arthur Freed's wonderful musicals were created. Schary left Freed
loose to work with the Stanley Donens and Gene Kellys to create some ofthe greatest musical
cinema Hollywood has ever known. But that is MGM did not keep
not to say that the Schary-led
an eye on the box office. Indeed in the early 1950s, the beginning of his tenure, MGM seemed to
do just fine. And Schenck had reason to be pleased with his new chief of production.
After one year of Schary, the studio showed a profit of around $300,000 for fiscal 1 949 (com-
pared to 1948's $6.5 million loss). Schan/s Battleground was a huge success ($5.06 million total
rentals), and two films released in 1950 (King Solomons Mines and Annie Get Your Gun) passed
the $4 million mark in rentals to put the studio's total operations $3.8 million in the black for fiscal
1950. Battleground - $1.6 million in negative cost, $5.1 million in rentals - elevated Schary to
Schenck's inner circle. Schary was making profitable movies. Schenck and Schary had produced a
new post-1946 high of $15 million profits for Loew's in 1951, and all seemed good. But in 1952
that profit figure - despite revenues remaining constant - was halved. The problem was not at the
28
MGM end, but at the theatrical side, long Schenck's corporate baby.
We know that Dore Schary kept in touch with Nick Schenck on a dairy basis. In the Dore Schary
Papers at the State Historical Society of Wisconsin we find some of the nearly daily phone notes
Schary made to make sure he efficiently got through all the points with the General. These were
always titled 'matters to discuss wtth mr. schenck, and to take up with the new york ofrce'. I list the six-
teen items Schary made for a typical phone call to the General probably some time in 1 954 or 1 955.
1 Talk to Mr. Schenck in terms of a studio with public relations: (a) Labor; (b) Management; (3) Cham-
ber of Commerce; (d) Charity Activities; (e) Studio kJentification re community activity; (f) MGM Studio
Club. 2. Discuss FRANKLIN DELANO ROOSEVELT story (memo in file). 3. Discuss Arnold Forster's request
for episodes from IT'S A BIG COUNTRY (correspondence in file). 4. Discuss John Houseman deal. (5
years straight $3000 a week. 7 years - no limit in pictures). 5. Discuss Gene Kelry and singing commer-
cials (memo in file). 6. Discuss Jackie Gleason idea of E. J. Mannix. 7. Discuss Normin Corwin. 8. Discuss
Nicky Nayfaak-Oorothy Kingsley earthquake story idea (memo in file). 9. Discuss NO TIME FOR
SERGEANTS (memo in file). 10. Discuss Ava Gardner. 11. Discuss RKO properties (memo in file). 12.
Discuss Eddie Fisher and Debbie Reynolds - remake of THE CLOCK. 13. Discuss BEN HUR - (Living
Christ). 14. Discuss envelope from Harry Friedman in file. 1 5. Discuss Hacketts in connection with
ROBIN HOOD (memo in file). 16. Discuss Steve Allen and make a date through Sidney Phillips.
These were all projects that Schary had to clear with Schenck. Most involve proposals for future
29
projects.
LOEW'S/MGM
Technicolor musicals helped. Consider Singin' in the Rain, starring Gene Kelly and co-directed
by Kelly and Stanley Donen. The whole picture cost $2,540,800, as Mannix estimated when pro-
duction closed down on 21 November 1951 . It was previewed at the De Anza Theater in Riverside
on 21 December 1951, and then at the Loew's 72nd Street Theater in New York on 1 1 March
1952, so that Schenck could see it play before an audience in one of his best theatres. He approved
and the film was released nationally with a New York premiere on 10 April 1952 - to good
reviews. Yet a few weeks later, Vincente Minnelli's pretentious An American in Paris (1951) won
the Academy Award for the best picture and, in order to capitalise on that kind of publicity,
Schenck yanked Singin' in the Rain out of distribution and put An American in Paris in its place.
After the latter had run its course, Singin' in the Rain was allowed back into the theatres. But it
was Singin' in the Rain the public loved, and it eventually made back $7,665,000. Nick Schenck
was pleased, as here was the studio system at its best - combining talents, taking risks and making
30
money on everything.
Yet this was an exception. Singin' in the Rain proved a swan song. Remarkably, in 1953
Variety listed no MGM films in its top grossers. Schary could not make the old system work - under
Schenck - with agent Lew Wasserman running around making package deals. Schenck would
simply not stand for Wasserman's independent deals, even though he had tried to hire Wasser-
man. So again Schenck cut costs. On 9 July 1952 before a star-studded mass meeting of 4,000
MGM studio employees, Schenck outlined the company's plans to downsize. Executives' salaries
of more than $1,000 a week would be cut immediately. Others faced the axe or substantial pay
cuts as well. Schenck had been at the Culver City studio since the middle of June meeting on a
daily basis to formulate a plan to stop the company haemorrhaging red ink. He brought all top
executives from New York to this summit, and consulted daily with labour leaders as to what guilds
and unions might accept. Schenck said he would give opportunities to young (read: lower-paid)
creative talent. The General also referred to the possibility of the production by MGM of films for
television: 'We will examine and re-examine the field as time goes on,' he said. 'But at the present
31
time we have no plans nor are we contemplating any plans for television filming.'
By 1955 Schenck was keeping his yearly revenues in the $160 million range. Indeed, in 1954
Loew's produced $172 million in revenues, a record. And profits were back up from the $8 million
1953 nadir to a positive $14 million in 1954 and $13 million in 1955. One can see why Schenck
clung to his theatres. They were the base of the revenues as MGM's contribution fell. As long as
Schenck could keep Loew's intact, he would have a company that was doing well. But the gov-
ernment was pressing him to spin off the theatres and Schenck was smart enough to know that
he could not keep a separate theatre division profitable without the leverage provided by MGM.
He was seventy-two and faced the extinction of a strategy that had worked to the end. Here is the
32
case where the Paramount anti-trust decision actually effected studio system change.
But he did go quietly. One of the bitterest corporate takeover battles feuds in the history of the
Hollywood system broke into the open publicly on 16 February 1954 when Louis B. Mayer fired
an open verbal blast at his former boss. The cause of the rare public display of temper came on the
•
thirtieth anniversary salute to the creation of MGM on Ed Sullivan's CBS Sunday night programme,
Toast of the Town. Mayer was 'outraged' and 'incensed' because Schary alone served as spokesman
for the studio, giving Mayer, under Schenck's orders, no credit. Schary knew who was really in
charge; at a Los Angeles Advertising Club's birthday luncheon he paid tribute to the men who helped
establish the company: 'We at MGM are grateful for the leadership of Nicholas M. Schenck.'
33
Variety revealed what all knew, or could easily see if they looked at all: Loew's was still making
profits but had fallen behind even Columbia and UA. By December 1955, the rumours were out.
Schenck would move up to the position of chairman of the board, and let Arthur Loew run things
on a day-to-day basis. On 23 December 1955 the board of directors of Loew's did just that: Arthur
Loew succeeded Schenck. Like Zukor two decades earlier, Schenck was kicked upstairs to chair-
34
man of the board, an honorary title.
In 1956 MGM became a new company as the General was no longer in charge. Arthur Loew
sold television rights to 725 MGM features to KTTV-TV, Los Angeles, for $5 million and invested
$1 .6 million of that in a 25 per cent interest in the station. He also leased the films to other stations
for a record-setting sum estimated at between $16 million and $20 million, and announced that
MGM was looking to purchase an interest in other TV stations on a film-exchange basis. In Sep-
tember 1956 Arthur Loew traded a number of MGM films for a 25 per cent interest in KTVR-TV,
Denver, and, in November 1956, arranged a similar deal for 25 per cent ownership in what became
KMGM-TV, Minneapolis. November 1956 saw the debut of The Wizard of Oz on CBS, the begin-
ning of what would be an annual tradition for more than thirty years. And finally Loew separated
the theatres from MGM, and took charge of the studio. Now MGM was just another producer-dis-
35
tributor studio openly competing with surging minors like Columbia and United Artists.
The era of Nick Schenck should be represented as the classic Hollywood system at its vertically
integrated best. He was a skilled leader who steered Loew's in-house production, distribution and
exhibition in order to maximise its profits. Schenck provided the necessary continuity and success
until he was forced out. He believed strongly in the power of running his New York City theatres
as his base and MGM as a division that fed the product to lure the paying customers. He simply
grew too used to his successful ways and failed to adapt to a world in which television and agents
packaged feature films. He should have pressed harder to hire Lew Wasserman who, as analysed
in chapter 1 5, innovated the system that replaced the one Schenck was so good at operating
Notes
1 . The closest we have to personal papers for Nicholas Schenck is the Dore Schary Papers, housed at the
State Historical Society, Madison, Wisconsin. Like many powerful leaders of the twentieth century,
Schenck chose to stay out of the limelight whenever possible.
2. Lillian Ross, Picture (New York: Rinehart & Company, 1 952), p. 2 1 0.
3. Ross, pp. 246-58. In the Schary collection of papers are documents describing the struggles, and
Schary's ultimate firing by Nick Schenck.
4. Variety, 4 September 1 963, p. 63; The New York Times, 31 August 1 963, p. 1 7; Films in Review,
December 1963, p. 603; Garson Kanin, Hollywood (New York: Viking, 1974), pp. 282-3.
;
LOEW'S/MGM |
113
5. Kanin, pp. 281-2.
6. Fortune, December, 1932, p. 108; The New York Times, 28 May 1 932, p. 35; The New York Times,
14 October 1932, p. 22.
7. Barrons, 28 April 1930, p. 13; The New York Times, 10 May 1930, p. 25; The New York Times, 5
November 1930, pp. 33, 43; The New York Times, 3 April 1931, p. 34; The New York Times, 3 May
1931, section VIII, p. 6; Moody's Manual of Investments, 1931, pp. 1681-9; Barrons, 4 May 1931,
p. 16; Barrons, 29 June 1931, p. 18; The New York Times, 4 October 1931, section II, p. 7.
8. The New York Times, 2 April 1 933, section II, p. 2; The New York Times, 24 November 1 933, p. 1
Fortune, November, 1932, pp. 102, 104, 106.
9. The New Yorker, 30 April 1932, pp. 22-5; Fortune, December, 1932, pp. 51-2.
10. Maurice Rapf, Back Lot: Growing Up with the Movies (Lanham, Maryland: The Scarecrow Press, 1999),
pp. 62-7.
11. The Magazine of Wall Street, 1 February 1 936, pp. 446, 478; Variety, 6 October 1 937, p. 6.
12. Fortune, 1932, p. 108; Fortune, 1937, p. 1 10.
13. Variety, 20 September 1 939, p. 27.
14. Fortune, August 1939, pp. 2525-8, 104, 106, 108, 110.
1 5. At the Academy of Motion Picture Arts and Sciences can be found the Eddie Mannix ledger that list all
grosses (domestic and foreign), costs and profits or losses for all MGM features from 1924 to 1959 - the
Schenck era. Mannix maintained this ledger off the books so he could give Schenck the truth, unlike
Mayer. Herafter I simply refer to this as the Mannix ledger.
16. Mannix ledger.
17. Moody's Manual of Investments, 1944, pp. 1622-30; Moody's Manual of Investments, 1945,
pp. 855-63; The Magazine of Wall Street, 21 February 1942, p. 557; The Magazine of Wall Street, 16
May 1942, pp. 134-5, 153; The Magazine of Wall Street, 5 September 1942, pp. 549-50, 566; The
Magazine of Wall Street, 6 February 1 943, pp. 484, 500; The Magazine of Wall Street, 4 September
1943, pp. 576-8, 595; The Magazine of Wall Street, 19 February 1944, pp. 509, 536.
18. Mannix ledger.
19. Motion Picture Herald, 28 November 1942, p. 9. See Forbes, 60th anniversary Special issue,
1 5 September 1977, p. 69. Sadly based upon misinformation and poor history, Forbes pictured Schenck
as the biggest dodo bird businessman of the twentieth century.
20. Variety, 8 April 1942, p. 7.
21. The Magazine of Wall Street, 1 5 April 1 944, pp. 19-21; Variety, 8 March 1 944, p. 1 ;
Daily Variety,
19 November 1999, p. 2.
22. The Magazine of Wall Street, 1 7 February 1 945, pp. 525, 538, 543; Business Week, 24 March 1 945,
pp. 92, 95; The Magazine of Wall Street, 4 August 1 945, pp. 487, 509; The Magazine of Wall Street, 5
January 1946, pp. 401-3, 418; The Magazine of Wall Street, 30 March 1946,
pp. 776-7, 797; The Magazine of Wall Street, 20 July 1946, pp. 452-4, 480-1, 483; Business Week,
1 December 1946, p. 22.
23. See the experiences of Lucille Ball, contract player at MGM, who hated how Schenck traded and loaned
out stars to make money, as described in her autobiography, love Lucy (New York: Putnams, 1996),
pp. 128-33.
24. Mannix ledger.
25. Variety, 29 January 1 947, p. 1 ; Motion Picture Herald, 5 July 1 947, p. 1 0.
26. The New York Times, 12 December 1947, p. 33; Life, 23 February 1948, pp. 55-9; Ross, p. 29.
27. The Magazine of Wall Street, 1 9 June 1 948, pp. 294-5; Variety, 1 4 July 1 948, p. 1 ; Variety, 2 1 July
1948, p. 1; 11 August 1948, p. 1.

114| THE HOLLYWOOD STUDIO SYSTEM
28. Moody Manual of Investments, 1950, pp. 664-70; The New York Times, 29 September 1949, p. 33;
Ross, p. 201; Moody's Manual of Investments, 1953, pp. 229-35.

29. Dore Schary Papers, State Historical Society of Wisconsin (Box 14), Madison. From the Schary Papers we
have a greater understanding of Schary's tenure than Mayer's.
30. Film Comment, May-June, 1978, pp. 7-12.
31. The New York Times, 1 April 1 95 1 , p. 8; The New York Times, 23 June 1 95 1 , p. 9; The New York Times,
26 June 1951, p. 25; The New York Times, 17 July 1951, p. 31; The New York Times, 22 July 1951,
section II, p. 3; Theatre Arts, September 1951, pp. 56-7, 84; Variety, 9 December^ 953, p. 11.
32. Moody's Manual of Industrials, 1 956, pp. 1 1 8-23.

33. The New York Times, 1 7 February 1 954, p. 33.
34. The Magazine of WaU Street, 25 June 1 955, p. 23; Motion Picture Herald, 1 9 March 1 955, p. 25;
Variety, 16 March 1955, pp. 3, 18; The New York Times, 7 December 1955, p. 2; Variety, 21 December
1955, pp. 3, 53; Variety, 28 December 1955, p. 7; Variety, 4 January 1956, p. 65.
35. Radio Daily-Television Daily, 21 June 1956, p. 1; Radio Daily-Television Daily, 15 August 1956, pp. 1, 5;
The New York Times, 15 August 1956, p. 59; Broadcasting, 21 August 1956, p. 7; Variety, 19 November
1956, p. 28.
9
Twentieth Century-Fox
In 1 930 Fox - unlike Paramount and Nicholas Schenck's Loew's - lacked a leader. It would be a barren
five years before the Fox Corporation would locate one, Joseph Schenck, who possessed the skills F.
Scott Fitzgerald so admired. Yet because Darryl F. Zanuck remained in charge of production from the
founding of Twentieth Century-Fox in 1935 for two well-reported decades, corporate leaders
Schenck and Spyros Skouras have not been given the proper credit for making Fox the third-ranking
studio during the classic studio era. Schenck and Skouras kept distribution and exhibition running
smoothly and approved budgets, and so were able to continuously work with (and restrain) Zanuck
to keep the corporation as a whole profitable. Still, while the ascendancy of Twentieth Century-Fox
after 1 935 has to rank as the greatest corporate comeback of the classic studio era, neither Schenck
nor Skouras - nor the too much credited Zanuck - could enable Fox to pass Paramount or Loew's.
The massive Fox lot

Seeking a New Leader and Finding Joseph Schenck

As we saw in chapter 3, William Fox had, by 1930, almost taken his company under because of
heavy borrowing for an extensive theatre chain, investment in the innovation of sound, the con-
struction of Movietone City and the attempted merger with Loew's. Ultimately his lenders pres-
sured William Fox to sell his majority interest to utilities mogul Harley Clarke, the president of
General Theatres Equipment, Inc., in 1930. Clarke did not possess the know-how to revive a dis-
1
tressed film company, and Fox lost nearly $11.5 million in 1931 and 1932*
Edward Tinker replaced Clarke as president of Fox on 18 November 1931. On 23 March 1932
Sidney Kent, late of Paramount, became a vice president under Tinker. Finally Fox had a person of
studio experience in place to begin the process of rebuilding the company. Kent halted the flow
of red ink, and started the process of change in June 1933 when he was made president of Fox by
a desperate board. It was Kent who raised Shirley Temple and Will Rogers to stardom. Still, Kent
knew his limitations; he was a distribution executive, and so began seeking a leader to run the Fox
Studio Corporation as a whole. He also sought a producer to run Movietone City. 2
Kent approached UA president Joseph Schenck and Fox merged with Schenck's Twentieth
Century Pictures. Joe Schenck would run the whole company, Sidney Kent would handle distri-
bution and Darryl Zanuck would run the studio. Joseph Schenck - older brother of Nicholas at
Loew's (see chapter 8) - in the half-dozen years before World War II made Twentieth Century-Fox
into a studio system powerhouse. Joe Schenck liked the limelight more than his brother, but
pushed production boss (and partner) Zanuck to take centre stage and public notoriety. But while
many will argue the merits of Zanuck as a film producer, it was Schenck who kept the international
hegemonic corporate apparatus called Twentieth Century-Fox humming and profitable. He was
the first Fox leader to formulate strategies not only to maximise profit, but also to maintain the
long-run power of his studio corporation in the classic studio system. Like his younger brother, Joe
Schenck must be credited for establishing one of the cornerstones of the classic studio system,
alongside Paramount and Loew's. Joe Schenck signed up the stars, co-ordinated worldwide film
3
distribution, and ran Twentieth Century-Fox's chain of more than 700 theatres.
In pure money terms, his brother Nick had much more economic might. Nick became Joe's
angel; from his office in the Loew's State Theater building on Times Square, he helped his older
brother whenever needed. During the Great Depression, Joe twice called on Nick. In 1933 Joe,
head of United Artists, was tired of bickering with the studio's founding partners, and formed
Twentieth Century Pictures, which was backed by Nick Schenck. When in 1935 an ailing Fox Film
company sought new management, Nick again put up the monies to create Twentieth Century-
Fox with Joe Schenck in charge.
Joe Schenck was one of the great pioneering producer/executives in the history of the movie
business. Yet his is not a well-known name. He revitalised and sustained one studio, United Artists,
and was a co-founder of another, Twentieth Century-Fox. Joseph Schenck, as businessman and
film producer, helped define what we know as the classic Hollywood studio system. He and his
brother Nick operated behind the scenes. Little happened in the movie business between 1920 and
TWENTIETH CENTURY-FOX 117
1955 without their approval. The brothers Warner were more famous - after all, they had named
their company after themselves - but the brothers Schenck had more power - certainly during the
classic studio era as between them they ran two studios, not just one.
Joe Schenck was always a person who took advantage of an entrepreneurial situation. In April
1933 Darryl Zanuck, the audacious production chief at Warner, had quit his job after a violent
argument with Harry Warner. He walked out on his $5,000-a-week job. He had been head of pro-
duction and developed the formula for action-filled, fast-paced and topical pictures that charac-
terised the Warner output during the early 1930s: Little Caesar (1930), Public Enemy (1931) and
I Am a Fugitive from a Chain Gang (1932). He stepped away from Warners and was showered with
offers. Seeking out his old friend Joe Schenck for help in plotting his future, Zanuck was surprised
by Schenck's proposal that they team up to produce pictures for United Artists. 'I didn't know you
were still interested in production,' said Zanuck. 'I wasn't', Schenck replied, 'but with you, I would
4
be.' In the middle of April 1933, Schenck and Zanuck formed Twentieth Century Pictures, Inc.
Joe Schenck became president; Zanuck, first vice president in charge of production. On 13 July
1 933 Twentieth Century signed with UA to distribute its films where Joe was still president. To finance
the Twentieth Century product, the Schenck brothers put up $1 .2 million. UA would handle distri-
bution. It was a year-to-year deal, allowing Schenck and Zanuck to escape if they wanted to. For the
1933-4 season, 'Out of the twelve [productions]', said Schenck at the time, 'nine are big pictures and
successes. Three are mediocre pictures.' Among the money-makers were: The Bowery (1933), star-
ring Wallace Beery, George Raft and Jackie Cooper; The House of Rothschild (1934), featuring George
Arliss; and Bulldog Drummond Strikes Back (1934), with Ronald Colman. Twentieth Century was able
to maintain this production schedule because it had access to MGM's stars through a simple Schenck-
to-Schenck phone call. Although Twentieth Century saved UA, the UA owners would not give
Schenck or Zanuck stock in the company. Outraged, Joe Schenck looked to distribute elsewhere:
[We] are unquestionably producing a type of quality production that cannot be denied and we have
a growing business with real box-office personalities and everything in the way of a production organ-
ization to continue us to real success; therefore, I believe the time has come now when we should
think about our releases for next year. It is certainly not fair that we, the biggest contributors to United
Artists, should not participate as a partner in the profits. Other producers participate in the profits of
5
United Artists and there is no reason in the world why we should not.
Schenck was right on the money. UA made a profit of $ 1 . 1 million in 1 934 - based on a gross busi-
ness of $23 million, up $10 million from the previous year - and Twentieth Century accounted for
well over half that business. The famous UA stockholders - led by Mary Pickford - contributed
nothing, apart from declaring a $560,000 dividend for themselves, the largest ever, and killing UA's
long-run prospects by accepting Schenck's resignation on 21 May 1935. A month later he severed
all connections with UA by selling back his stock for in excess of $1 million. Now was Joe Schenck's
chance to build his own major company and vault from a minor - UA - into the Big Five. 6
The Twentieth Century-Fox Film Corporation merger took place as soon as Schenck and
Zanuck severed ties with UA in the summer of 1935 and Nick Scheck anted up the necessary
movies. The merger talks began far from Hollywood, in the grill room of the Plaza Hotel in Man-
hattan as Joe Schenck and Sidney Kent talked. (Zanuck was not part of these discussions as
Schenck spoke for him.) Both were just back from Florida, where they had been seen together daily
on the beach. The newspapers speculated they were mulling over plans to build a $10 million
cinema studio lot in Miami, and attempt to force California legislators away-from increasing income
taxes. Kent and Schenck saw the fit right away. Kent insisted that the deal be finalised by the end
of May - as on 30 May 1 935 Fox sales staff were to meet to work out strategies for the 1 935-6
movie season. If the product was to include Zanuck's films, they must know it. On 23 May 1935
7
the deal was closed.
Kent moved back to being VP for distribution while Schenck was named head of Twentieth
Century-Fox. As production VP, Zanuck moved into Movietone City. Over Memorial Day weekend
of 1935 word of the deal leaked out. 'Fox Film to Merge with 20th Century', Wall Street read in
The New York Times. As befitted the Schenck brothers, the press was caught by surprise. Schenck
and Kent issued a statement. 'We have concluded preliminary arrangements for a deal that calls
for the combining of the interests of our respective companies which will be finalized as soon as
the necessary final contracts can be drawn, regulations of various kinds complied with and necess-
ary corporate action taken.' All that remained was to combine the Twentieth Century production,
fire Fox's production team, and then let the Schenck connections and business savvy go to work.
Instantly the studio went from a Big Five member about to fall out of the club to a revitalised cor-
poration. The new Twentieth Century-Fox planned to produce a minimum of a feature a week per
8
year, Schenck said. This was the industry standard, as Schenck knew.
Schenck and Zanuck did their job with a skill and speed that impressed Wall Street and Holly-
wood. By 1940 Twentieth Century-Fox ranked behind only Paramount and Loew's. Zanuck skilfully
took over as production chieftain during the summer of 1935 and would end up supervising Twen-
tieth Century-Fox's studio production well into the 1950s. With the Schencks' help, he quickly
developed new stars. Though today she seems like an unusual choice, skating champion Sonja
Henie in her day was a movie queen. Her first feature. One in a Million (1936), was a smash, and
during her salad days of the late 1930s Henie reliably drew in millions at the box office. Zanuck
imported Alice Faye from the Broadway stage. Tyrone Power was Zanuck's first Fox-signed leading
man. Through films such as In Old Chicago (1938) and Suez (1938), Power moved to the top rank
of studio players and remained there, apart from a stint in the Marine Corps during World War II,
into the 1950s. Schenck and Zanuck could also, luckily, draw on the tried-and-tested talent of
Shirley Temple, who Fox Film still had under contract. (Will Rogers, the other Fox star, died in a plane
accident in 1935.) She soon became the most popular child star in studio system history. Without
9
Shirley Temple's fluff, Zanuck and Schenck would have had a mighty struggle to revive Fox.
Zanuck's greatest discovery was Betty Grable. Filmed in Technicolor, her films made Twentieth
Century-Fox a true powerhouse studio operation, a Hollywood colossus. Too long unappreciated,
these Zanuck-produced Grable spectacles rank among the most popular films of the Golden Age
of Hollywood, in particular Coney Island (1943), Diamond Horseshoe (1945) and Mother Wore
Tights (1947).
In 1938 the new Twentieth Century-Fox with Schenck and Zanuck running things had profits
per share nearly equal to Loew's and Paramount. It was a remarkable turnaround - one of the key
moments in the history of the Hollywood studio system. Zanuck and Schenck's Movietone City had
96 acres, nearly twice the size of MGM's lot. (Then there was the Western Avenue lot, 7 miles
away with 8 acres valued at $800,000, and used exclusively for B-films.) Schenck approved stand-
ing sets - as major investments. For example, there was a section of an ocean liner that Fox con-
structed at a cost of $60,000; and a vista of Manhattan, with the elevated railway at the corner,
which cost $135,000. Zanuck could use these or Schenck could rent them and bring a good price
- use of 'New York', for example, cost $2,500 per day. When Zanuck first arrived on the Fox lot
he found only five usable sound stages. Joe Schenck found the money, from his brother, to build
a half dozen more. All this meant that Zanuck and Schenck had a production base equal to
10
MGM's.
Joe Schenck even established a myth around Zanuck equal to Louis B. Mayer across town. He
convinced the world that it was Zanuck running the company. Zanuck was making movies, not
handling their distribution or exhibition or dealing with agents and unions. In this way Joe Schenck
had all the power but none of the public notoriety - the same model of management his younger
brother Nick was employing with Mayer at Leow's/MGM. Zanuck - the rare non-Jew with power
in Hollywood - worked constantly, with a Dictaphone nearby. (Only break: Sunday afternoons for
polo.) Wherever Zanuck went, there came his Dictaphone: his bedroom, his office, in the projec-
tion rooms for the dailies. He talked incessantly. Zanuck rose at 8.30am; at 10.30am he rolled in
through the gates of Movietone City prepared to work to at least midnight. First there were story
synopses to read - at the rate of 1 50 per week. He started with a 750-word version; if he liked it
then he would read a 4,000-word version. If he liked the longer version, he then sent it to the Hays
Office across town for preliminary approval. At 1 1.30am there was a daily story conference. One
of Zanuck's secretaries called in a writer and a producer team assigned to the particular produc-
tion. Zanuck went over the script they were working on - line by line. Then he made his 'sugges-
tions', and the next team arrived. The teams flowed in and out until 1 pm when Zanuck had lunch.
In the afternoon came dailies and casting. At 3pm Zanuck entered his screening room. About two-
thirds of the film had already been edited; a Dictaphone at Zanuck's elbow enabled him to make
orders for the directors and producers of the rushes he was seeing. With the telephone also by his
side, he talked to an editor in the projection booth, re-editing scenes after they were run. He
seldom made his way to a set - save by memo. He would leave the camerawork to the cinema-
tographer and director as long as they pleased him and stayed on schedule. As he started as a
writer, he monitored script narrative construction most closely. Zanuck laid down a rigid schedule
for his productions. And daily he conferred with Schenck on the expenses - with Schenck's final
11
approval necessary. They shared a common goal - maximising profits.
An assistant tracked the costs, with an elaborate system of accounts for each production that
told Zanuck and Schenck what production was spending day-by-day, department-by-department,
and production-by-production. Each picture was treated as a separate enterprise with its own
books. Once a story was approved for production, a computation of the cost was made; and then
Schenck approved the project. Two months before a picture went into production came a second
estimate, which set the parameters for full production. Three weeks before shooting began,
Schenck gave his final approval and only then would production begin: average production time:
12
thirty working days.
But like Paramount and Loew's, the Twentieth Century-Fox leadership system fashioned a full
range of genres: from the musicals of Alice Faye, Betty Grable and Shirley Temple to religious epics
such as The Song of Bernadette (1942) and David and Bathsheba (1951) to war films such as A
Yank in the R.A.F. (1941), A Wing and a Prayer (1944) and Crash Dive (1943). Wall Street lay the
credit for the studio's success properly at the feet of Joe Schenck. In March 1938, The Magazine
of Wall Street judged Fox nearly the equal of Paramount and Loew's. It noted that the Schenck
brothers we're running the Hollywood studio system at this point. Joe Schenck proved - like his
brother - that he could blend production, distribution and exhibition into a single organisation
capable of releasing on average one feature weekly throughout the year, the majority of which
gained substantial box-office acceptance at theatres not only throughout the USA, but through-
out the world. Salaries paid to many stars, directors and executives ran into eye-popping figures,
but Wall Street only focused on the bottom line - and profits were pouring in at record levels. In
1938 Twentieth Century-Fox even had the most valuable single asset in the industry in the person
of Shirley Temple. And it controlled National Theaters, a chain of about 850 theatres in the USA.
Finally, Wall Street loved that Fox had no debt. In three years, Joe Schenck had proved a miracle-
13
worker.
All this continued until 1942. Betty Grable glowed in Down Argentine Way (1941) and Moon
Over Miami (1941), both with costumes and settings that skilfully utilised all Technicolor's lavish
palette; Twentieth Century-Fox continued to grow like gangbusters. Then in 1941 Twentieth
Century-Fox lost its leader as Joe Schenck took the fall for his fellow studio bosses in a labour
bribery scandal. As we shall see in chapter 14, the studio leaders had been paying the projection-
ists' union hundreds of thousands of dollars per annum not to strike. Joe Schenck pleaded guilty,
so that Nick would not go to jail, and entered a penitentiary at Danbury, Connecticut. Then, in
14
1941, Sidney Kent unexpectedly died. And Zanuck entered military service. Fox seemed in trouble.
The Second Leader: Spyros Skouras

Fox needed new leadership, and experienced National Theaters executive Spyros Skouras replaced
Schenck and Kent. But a better-known figure was needed to represent the company to Wall Street
and the rest of the Hollywood studio system. In April 1942 Wendell L. Wilkie, the Republican can-
didate for president in 1940, became chairman of the board of Twentieth Century-Fox. Wilkie
served as little more than a figurehead in his two years as chairman (he died at age fifty-two in
1944). Immediately upon Wilkie's death, Spyros Skouras became the new Joe Schenck, President
and CEO. Throughout the remainder of the classic studio era, Skouras supervised from New York
while his brother Charles handled the day-to-day theatre operations. Joe Schenck returned - after
15
a presidential pardon in 1945 - but only as an advisor.
By 1942 Spyros Skouras had been in the exhibition end of the business - like Barney Balaban
and Nicholas Schenck - for his whole adult life. Starting with a St Louis nickelodeon, he and his
brothers Charles and George had built a regional theatre exhibition empire. As early as 1920 The
Moving Picture World stated:
We Have with Us Today Spyros Skouras, Whose Little Acorn Has Grown to Be 'Some Oak'. ... In St.
Louis, where the fight for picture theater supremacy is waging hotly, a cool, reserved and energetic
young man, broad in vision, with dynamic personality and action, is creating an enviable record. His
name is Spyros P. Skouras, the leading factor in the Skouras chain of theaters, which recently added
the New Grand Central Theater, one of the best equipped picture houses; the Central Theater, together
with the first National franchise for the St. Louis territory, which Mr. Skouras states were purchased
to protect his holdings. . . . Skouras was born [in 1896] in the small village of Skourahorion, Greece
. . . situated near historic Athens. He was educated in the state schools and later entered an export
office in one of the Mediterranean ports of Greece, where he served as an interpreter and learned the
rudiments of the export business, meanwhile becoming acquainted with the wonderful possibilities in
the United States. At the age of 19 he came to [the USA], determined to go into business. ... [By
16
1920 the Skouras brothers] took control of St. Louis exhibition.
Wall Street was satisfied. With Schenck sent off to jail, Zanuck to war and Kent to his grave, ana-
lysts found Twentieth Century-Fox Film [still a] favourably situated motion picture trade. The 1942
outlook for Twentieth Century-Fox Film is especially promising. Profits for 1941 amounted to $2.03
per share. Present indications are that, in spite of higher taxes, this showing should be topped
during 1942.' The Magazine of Wall Street said that recent releases had been well received and
the rearrangement of producing assignments could be expected to result in additional successful
pictures. To Wall Street, Twentieth Century-Fox Film was one of the 'Big Four' in the picture
industry (Wall Streeters having discounted the highly troubled RKO). The world-famous, always
filled, Fox-owned Roxy Theater at 51st Street and 7th Avenue symbolised a thriving company to
the millions who passed by it each year. The Magazine of Wall Street noted in October 1942 that
'With automobile travel curtailed, public is turning to the [movie] theater in larger numbers for rec-
reation.' Indeed, Fox's profit was heading for a record as William Goetz took Zanuck's place. He
17
had been Zanuck-trained, and kept the Fox production machine running.
Zanuck had also mentored a number of associate producers. For example, Nunnally Johnson,
a Georgia-born former newspaperman, had been under Zanuck for nearly a decade, helping to
write such hits as The House of Rothschild, Bulldog Drummond Strikes Back and Kid Millions
(1934). Zanuck promoted Johnson to producer in 1935. Johnson then supervised an extraordinary
string of hits, including Country Doctor (1936), Slave Ship (1937), The Grapes of Wrath, Chad
Hanna (1 940), Wife, Husband and Friend (1 939), Rose of Washington Square (1 939) and Tobacco
Road (1 941 ). Furthermore, The Grapes of Wrath brought needed prestige to a studio that had gar-
18
nered precious little during the 1930s.
Goetz continued to differentiate Fox products with Technicolor. Over the decade of 1938-48,
Twentieth Century-Fox made more than seventy-five Technicolor films. In that same period MGM
did the next most - sixty-two - then Paramount with but thirty-nine, RKO thirty-five, and Warners
only thirty-three. From 1940 until 1947 Fox consistently released more Technicolor films, year in
and year out, than any other studio - an average of six to eight per year, one-sixth of all Fox fea-
ture films produced. Betty Grable replaced Shirley Temple during World War II as star of these
Technicolor spectacles. For ten consecutive years, Grable ranked among the top ten money-making
stars. She was paid accordingly. By 1945 Grable ranked among the highest of all salaried persons
in the USA, and she reportedly received more than 10,000 fan letters per week throughout the
war. Schenck - in one of his last formal moves - had signed Grable to a seven-year contract in
1 941 . In all she made twenty-two Technicolor films for Fox, with Coney Island (1 943), Sweet Rosie
O 'Grady (1 943), Diamond Horseshoe (1 945), The Dolly Sisters (1 945), Mother Wore Tights (1 947)
Hollywood power and a star: Barney Balaban James Cagney, Nicholas Schenck and Fox head Spyros Skouras
and When My Baby Smiles at Me (1948) all finishing near the top revenue-generators for their
respective years. Except for Tyrone Power (1940) and Gregory Peck (1947), no other Twentieth
19
Century-Fox star of the 1940s made it into the annual top-ten ranking of stars.
After World War II, Skouras needed to learn to work with Zanuck, who in July 1943 had
returned to his post at Fox production after less than a year of service. Schenck, in his advisory role,
mediated, and still had final approval. The trio worked well together. Gene Tierney, who had been
on the lot since 1940, shone in Leave it to Heaven (1945), Dragonwyck (1945) and The Razor's
Edge (1946). Near the end of the decade, former stage actor Clifton Webb achieved movie star-
dom aged fifty-five when, in 1948, he portrayed the stuffy, middle-aged Mr Belvedere in Sitting
Pretty. A sequel, Mr Belvedere Goes to College (1949), thrust him into the top-ten stars of 1950.
Zanuck, Schenck and Skouras produced a non-traditional score of postwar films with significant
social themes. Apart from Gentlemen's Agreement, the eighth-highest grossing film of 1947, none
did very well at the box office. Narratives involving anti-Semitism structured Gentlemen's Agree-
ment (1947), racial prejudice defined Pinky (1949) and mental health The Snake Pit (1948). To add
realism, Fox began to send crews on location. In this way the studio added a distinctive touch to
20
its films noirs: Call Northside 777, Cry of the City and The Street with No Name, all in 1 947.
Along with its always-profitable Movietone newsreels, inherited from the previous regime,
during the 1940s Twentieth Century-Fox helped to popularise a new type of short with its March
of Time quasi-documentary series. Marc/7 of Time began on radio in 1 93 1 Instead of reporting the
.
news, it 'recreated' events using actors and a heavy-handed narration. The motion picture March
of Time served as an advertisement for Time and Life magazines. These controversial mini-dramas
ripped from the front pages proved a strange but popular hybrid. Skouras knew how to sell March
of Time as a short subject, not a newsreel, and March of Time ran successfully until killed by TV.
Skouras also supported Fox's B-picture unit. Even as Schenck and Zanuck were upgrading Fox's
high-end output, Sol Wurtzel cranked out Charlie Chans, Mr Motos, Jones Family comedies, Cisco
Kid Westerns, and detective series featuring Michael Shayne, the Falcon and Sherlock Holmes. The
Holmes series, starring Basil Rathbone and Nigel Bruce as Holmes and Watson, was clearly the
21
cream of Fox's B-movie crop.
The company was doing so well that Skouras could raise needed production funds internally
by issuing new preferred stock - no need to borrow. In May 1946 Skouras announced record
profits, with a first quarter of 1946 at $6.2 million profit. The previous year's first-quarter profit
had been $2.9 million. This was the corporate acme, and profits would only fall from these record
levels. Like all his counterparts, Skouras would have to deal with a world of television, suburbani-
22
sation and a baby boom.
Skouras: Coping Poorly with a New World

By the close of 1 948 The Magazine of Wall Street acknowledged Fox's revenues and profits were
falling rapidly. Skouras tried various options. In December 1948 he negotiated with Edward Noble
to buy ABC for its television stations and network. Fox had already applied for stations in San Fran-
-
124
I
dsco. Seattle, Kansas City. St Louis and Boston. But as with the other studios, the FCC stopped the
entry of Fox into broadcast television as a convicted anti-trust violator. Skouras then turned to video
projection for theatres through a co-operative research and development effort with RCA. But
"
nothing seemed to work on the television front -
Skouras then cut costs. He phased out Fox-produced B-ptctures. subcontracting production to
independent, low-budget producers. Let them take all the risks. Indeed, artistic realism was invoked
because it proved cheaper than m-studio production. Figures for 1946 -show that Betty Grable
remained Fox's highest paid star at a shade under $300,000 for that year, but in August 1947
Skouras announced that 600 staff would be lard off. By 1951 Fox's earnings had fallen by 50 per
23
cent Across-the-boa TO pay cuts were i nstituted.
Skouras continued to place his trust in Darryi Zanuck as production chief by signing him to a
twenty-year contract in 1952. The forty-seven year-old Zanuck sought to plan and guarantee his
future. He did not run the company and so needed an employee contract guarantee. It was
Skouras who decreed that Fox was committed to Cinema Scope pictures (an ultra widescreen
anamorphic lens process), with magnetic sound tracks. The two systems were calculated to spur a
return of customers to movie theatres that were suffering a disastrous decline of box-office rev-
enues owing to the sudden onslaught of television, with its small screens and tinny sound. Here
Skouras pioneered the so-called blockbuster picture, each one designed to be so astounding, so
overwhelming in magnitude that the event would draw fans to theatres, which had been reno-
vated to provide gigantic screens, stereophonic speaker systems and enlarged candy counters - all
a: atec : :«e: c :es < z~za~ z^~z ~z a — ^zzz a z~ Z "e~aSzzze 'eat^'e * on:o
the public The Kobe (1953). The Egyptian (1954). Beneath the Twelve-Mile Reef (1953) and The
Gladiator were among a seemingly endless series of 'bigger than life' pictures. This strategy seemed
to work for a time, but by the end of the 1950s it became clear to Skouras that he would have to
24
learn to live with TV permanently
The premiere of The Robe at the Roxy on 16 September 1953 signalled a new era for
Twentieth Century-Fox. The financial investment in CinemaScope came to a reported $10 million.
This did not include theatres making investments to convert projectors, screens and seating for
CinemaScope. Skouras had seen a demonstration of Cinerama, an alternative widescreen process,
in the autumn of 1 949 as he was trying to figure out a way to remedy Fox's falling theatrical rev-
enues. But his engineers advised that there were too many disadvantages to Cinerama for it to
work on a mass scale, and so Skouras passed. After a long search, on the final day of 1952,
Skouras approved an order for two lenses from Bausch & Lomb. Skouras then ordered his studio
boss Zanuck to cease planning on The Robe, which was just about ready to go into production,
and had his staff turn the unused number 6 stage on the Fox Western Avenue secondary studio
lot into a temporary theatre with 70-foot wide, laterally curved screeV Tests began in the early
25
months of 1953.
Simultaneously, the sets for The Robe were completed, and a series of camera tests made. On
29 January 1953 Skouras. Schenck and Zanuck viewed tests made both in colour and black and
white, and agreed to proceed. In conjunction with the earlier work, Twentieth Century-Fox's sound
department, notably L. D. Grignon, had developed a stereophonic magnetic sound-recording
method to be used with CinemaScope. On 18 March 1953 a second demonstration was held, at
which Skouras showed the process to executives of the other studios, and, for the first time, called
Fox's new process CinemaScope. Skouras authorised further orders from Bausch & Lomb on 3 April
1953, which, according to the president of Bausch & Lomb, was the largest commercial order in
this history of his industry (government orders during World War II had been larger). Skouras by
now had committed $2.5 million to the process. At the same time, Fox workers were getting
together enough lenses so that production of The Robe could start. The premiere came - as noted
above - at the start of the 1953-4 movie season in September. It seemed Fox had turned a
26
significant corner.
In 1951 Skouras signed a court-ordered consent decree and began to spin off its National
Theater chain. But here was a corporate fiction - the new National Theater chain continued to
work closely with Fox because Spyros Skouras's brother Charles had assumed its presidency. All
National theatres were equipped with CinemaScope and all made money booking the films of
Fox's newest star, Marilyn Monroe. From 1953 to 1960, Twentieth Century-Fox accumulated $60
million in profits, vying with Paramount for industry leadership. Skouras took more control of
scripts, a move that led to the departure in 1956, after more than twenty-one years, of Darryl
Zanuck, who went into independent production. Of course, Fox would distribute his films. Spyros
Skouras tried a number of new studio bosses, but none worked out. With Zanuck's exit, revenues
and profits began to decline again. Skouras was a skilled manager, but not a film-maker. He
needed to replace Zanuck, but probably Zanuck had bailed out at the right moment. No one could
27
have handled production as the nation took TV to its heart; by 1960 nearly every home had a set.
Also, Skouras rode his technological saviour too long. In October 1956, after three years of
CinemaScope, Spyros Skouras claimed more than 33,000 theatres throughout the world were
equipped for the process - half in the USA and Canada. In mid-October 1956 Skouras unveiled an
improved version with Carousel, filmed in CinemaScope 55, at the Roxy Theater. The larger 55mm
film was also printed on standard 35mm for most theatres. The King and I, another Fox musical,
was the second production to be filmed in CinemaScope 55. When The King and I was shown
during the summer of 1956, Skouras conceded he had overreached himself and standard 35mm
prints, rather than 55mm prints, would be distributed. To save face, Skouras added that beginning
next year Twentieth Century-Fox would film only about four productions annually in CinemaScope
55. None did well enough to justify the additional costs and limited bookings. CinemaScope 55
28
was abandoned for 35mm CinemaScope.
In 1956 Twentieth Century-Fox began the transition to the TV era. In May of that year, Skouras
raised cash by releasing fifty-two features to National Television Associates (NTA), which paid more
than $2 million for exclusive rights to the films for ten years, in addition to an undisclosed per-
centage of the television presentation contracts. Six months later Skouras tendered television rights
to 390 more features to NTA for $30 million plus the studio's participation in profits after a spec-
ified gross was reached. The Twentieth Century-Fox library, licensed for from five to seven years,
was divided into five packages of seventy-eight titles each, with one package sold exclusively to
one station per TV market per year. The 'free' cash certainly helped Skouras' balance sheets glow
- 29
as these deals, not normal operations - generated profits.
In May 1956 NTA salesmen began signing contracts, eventually amounting to 1 10 affiliated
stations. At the time of the initial NTA agreement, Skouras purchased a 50 per cent interest in NTA.
Most sales did not involve cash, but a minimum of ninety minutes of commercials a week that NTA
offered for sale to national advertisers. This'process - called barter syndication - included exclu-
sivity per TV market, clearances between runs, and as many runs as could be tolerated at a ratings
minimum so that NTA ctiuld profitably sell its bartered time to national, regional and local adver-
tisers. By 1962 Skouras was dealing with the networks as NBC premiered 'Saturday Night at the
30
Movies' with recent Twentieth Century-Fox colour films.
By the time of the NBC premiere - a ratings bonanza - Skouras was approaching seventy.
Despite cash infusions from TV sales, Skouras' balance sheets turned red thereafter. So on 27 July
1962 Skouras resigned as president of the trouble-beset company. The announcement was issued
during the longest and, according to participants, stormiest board of directors' meeting in Fox's
history. It was the climax of months of increasing dissension over top-level management, resulting
from the studio's operating losses of almost $35 million during the early 1960s. Skouras agreed to
retire only after several other board members had threatened to resign in protest, which would
have led to a proxy fight for control of the company. The official reason given for the resignation
was health (in May 1962 Skouras had returned to work after surgery for prostate cancer). His res-
ignation became effective on 30 September 1962. In the end Skouras had bet Cleopatra (1963) -
31
starring Elizabeth Taylor and Richard Burton - would save him. It did not.
In addition, in 1962 problems with actress Marilyn Monroe led to her being fired and the film's
(Something's Got to Give) cancellation, incurring losses of more than $2 million. In 1963, the board
placed Darryl Zanuck in charge of reviving Fox. He surely had the production experience, but knew
little about distribution, exhibition, television and financing. Yet the board was savvy enough to
give Zanuck only an eighteen-month contract. 32
Through the classic studio era, Schenck and then Skouras steered Twentieth Century-Fox to
the top of the Hollywood studio system. Schenck died in 1961; a year later, the board ousted
Skouras. In the postwar years they had failed to re-invent Fox - the new Hollywood studio system
was being re-invented by Lew Wasserman. They were clearly on the right track looking for a block-
buster, but it would be a dozen years until Wasserman used television to make a nation obsessed
with Jaws in 1975. Cleopatra in 1963 was ahead of its time. Schenck had given twenty-six years
of skilled leadership; Skouras only slightly less. But both stuck to the principles of classic Hollywood
and that system failed them in the end. They grew up on theatres, and never could fully adapt to
a TV world.
The myth persists that Darryl Zanuck was responsible for Fox's success. He was a mere pro-
duction employee and no expert in distribution and presentation, as his failure running Fox from
.
1962 to 1970 showed dramatically. All Zanuck did was set records for losing money over the
period. Yet this should have been expected. From 1939 to 1956 - when he went off as an inde-
pendent - Zanuck never generated a number-one box-office champ. His successors did better, as
in 1958 when Fox distributed South Pacific, number one in domestic grosses. Zanuck's skill was in
efficiently running a studio, rarely losing money, but never taking any big risks. Zanuck played a
role at Fox similar to Louis B. Mayer at Loew's - the front man, the cigar-smoking mogul - with
the real power standing invisibly behind him.
Notes
1 . Fortune, May 1 930, pp. 48-9.
2. Tino Balio, United Artists (Madison: University of Wisconsin Press, 1 976), pp. 75-1 1 0; Fortune, May
1930, pp. 108-10; The Magazine of Wall Street, 8 March 1930, pp. 760-1.
3. UCLA houses the Twentieth Century Fox Corporate Archive, which consists of four main categories -
scripts, stills, production/story files and legal files. The Twentieth Century-Fox Script Collection consists of
approximately 6,000 feature films and about 35,000 scripts. Each title may have some, or all of the
following: synopses, treatments, story outlines, rough drafts, revised drafts, final shooting scripts, post-
production continuities, dialogue scripts, master title sheets, production material, memos and
correspondence. Of the scripts from the later Fox Film Corporation, 1929-1935, the period from when
William Fox was ousted to the creation of Twentieth Century-Fox Film Corporation, Zanuck's notes on
the stories and final scripts are extensive - and have led to a number of well-documented studies of this
figure. Zanuck took over immediately as production head of Twentieth Century-Fox, a position that he
held until 1956. Yet Joe Schenck and Spyros Skouras ran the company, and they are the villains of the
collection - often denying Zanuck's proposals. At almost 6,000 linear feet, the Fox Collection focuses
only on production, and not the distribution or exhibition aspects, so the collection is limited for business
history.
4. Memorandum, by UA attorney Dennis F, O'Brien, 1933, series 1a, box 165, folder 3 of the United Artists
Collection, State Historical Society, Madison, Wisconsin; The New York Times, 19 April 1933, p. 1 5.
5. Letter from Joseph Schenck to the Trustees in the Dissolution of Art Cinema, 20 May 1 935, series 1 a.
Box 165, folder 2 of United Artists Collection, State Historical Society, Madison, Wisconsin.
6. The New York Times, 19 October 1933, p. 23; The New York Times, 2 December 1933, p. 9; The New
York Times, 28 May 1935, p. 33.
7. Fortune, December 1935, pp. 85-93.

8. The New York Times, 14 August 1935, p. 20; Business Week, 24 August 1935, p. 18; Motion Picture
Herald, 31 August 1935, p. 41; Motion Picture Herald, 20 July 1935, p. 71; The New York Times, 2 1 July
1935, section IX, p. 3; Motion Picture Herald, 3 August 1935, p. 30; Motion Picture Herald, 10 August
1935, p. 29; The New York Times, 16 August 1935, p. 23; Motion Picture Herald, 17 August 1935,
pp. 35-6; The New York Times, 23 August 1935, p. 25; Business Week, 24 August 1935, pp. 18-29;
The New York Times, 29 August 1935, p. 31
9. The New York Times, 8 July 1 936, p. 36; The New York Times. 1 6 July 1 936, p. 20; The New York Times,
19 July 1936, section III, p. 6; The New York Times, 22 September 1936, p. 31; The New York Times, 10
October 1936, p. 21; The Magazine of Wall Street, 6 November 1937, pp. 92-3, 123-4; The Magazine
of Wall Street, 22 May 1937, pp. 158-9, 194-5; The Magazine of Wall Street, 23 April 1938, pp. 20-1,
61 -2; The Magazine of Wall Street, 1 2 August 1 939, p. 448; The Magazine of Wall Street, 1 4 January
1939, pp. 362-3, 398-9; Barrons, 9 November 1931, p. 18; Barrons, 4 January 1932, p. 16; Barrons, 2
1 28
I
September 1935, pp. 6, 13; Barrons, 2 December 1935, p. 7; Barrons, 31 August 1936, p. 11; Bartons,
9 May 1938, p. 8; Barrons, 19 September 1938, p. 20; Barrons, 4 September 1939, p. 3: The New York
Times, 28 April 1933, p. 31 . Memorabilia and scrapbooks from Sonja Henie's career are in the Sonja
Henie Collection, Niels Onstad Art Centre in Oslo, Norway.
10. Fortune, December 1935, pp. 132-5; The Annalist, 4 March 1938, pp. 323-5, 350.
1 1 . Fortune, December 1 935, p. 1 34.
12. Fortune, December 1935, p. 136.
13. The Magazine of Wall Street, 26 March 1 938, pp. 770-2, 796-7; The Magazine of Wall Street,
5 November 1938, p. 86; The Printer's Ink, 25 August 1939, pp. 25-7; The Wilson Bulletin for
Librarians, May 1939, pp. 589-92.

14. The New York Times, 18 September 1942, p. 33; Fred E. Basten, Glorious Technicolor: The Movies'
Magic Rainbow (New York; A. S. Barnes, 1980); Raymond Fielding, A Technological History of Motion
Pictures and Television (Berkeley: University of California Press, 1967); Martin Quigley, Jnr, New Screen
Techniques (New York: Quigley Publishing Company, 1 953); Roderick T. Ryan, A History of Motion
Picture Color Technology (London: The Focal Press, 1977).
15. The New York Times, 1 April 1 942, p. 1 9.
16. Moving Picture World, 10 April 1920, p. 224; Moving Picture World, 12 June 1920, p. 1443; The
Magazine of Wall Street, 1 February 1936, pp. 446, 478.
1 7. The Magazine of Wall Street, 1 8 April 1 942, p. 29; The New York Times, May 942, section VIII, 1 1 p. 3;
The New York Times, 26 August 1942, p. 23; The New York Times, September 1942, p. 23; The
1
Magazine of Wall Street, 31 October 1942, p. 85.
18. The Nunnally Johnson papers are held at the Mugar Memorial Library at Boston University. Selected
letters were published in Dorris Johnson and Ellen Leventhal's The Letters of Nunnally Johnson (New
York: Alfred A. Knopf, 1981). Thomas Stempel's Screenwriter (New York: Alfred A. Knopf, 1980) has to
be considered a labour of love. Stempel's interviews for this biography are on deposit at the Research
Library of the University of California at Los Angeles. See also Pete Martin's profile, 'Hollywood's
Number One Wit', in the Saturday Evening Post of 2 and 9 November 1 946. See also The New York
Times, 9 February 1938, p. 16, and The New York Times, 26 October 1938, p. 12.
19. The New York Times, 1 8 July 1 941 , p. 1 7; The New York Times, 1 4 November 1 941 , p. 40; The New
York Times, 25 August 1944, p. 10.
20. Biography of Spyros Skouras, 1947, in Skouras file, Quigley Collection, Georgetown University,
Washington, D.C.
21. The Magazine of Wall Street, 1 6 January 1 937, pp. 428-9, 455; The New York Times, 6 July 1951,
p. 21 ; The Magazine of Wall Street, 1 7 July 1 937, p. 423. For details see Raymond Fielding's The
American Newsreel (Norman: University of Oklahoma Press, 1972).
22. TheNew York Times, July 943, p. 1 1 1 5; The Commercial & Financial Chronicle, 26 July 1 943, p. 1 2; The
New York Times, 7 July 1943, pp. 27, 31; The New York Times, 22 May 1946, p. 31; The Magazine of
Wall Street, 7 June 1947, pp. 285-6.

23. The Magazine of Wall Street, 4 December 1 948, p. 234; Business Week, 4 December 1 948, pp. 96-7;
The New York Times, 10 August 1949, p. 12; Variety, 30 June 1948, p. 1; Motion Picture Herald, 27
November 1948, p. 9; The Magazine of Wall Street, 16 August 1947, pp. 548-9, 561-2; The Magazine
of Wall Street, 20 December 1947, pp. 301-3, 313-14; The Magazine of Wall Street, 25 September
1948, pp. 664-45, 659-660; The Magazine of Wall Street, 18 December 1948, pp. 291-3, 304; The
Magazine of Wall Street, 1 9 June 1 949, pp. 286-7, 301 -2; The Magazine of Wall Street, 4 August
1 945, pp. 487, 509; The Magazine of Wall Street, 5 January 1 946, pp. 401-3, 418; The Magazine of
Wall Street, 30 March 1946, pp. 776-7, 797; The Magazine of Wall Street, 20 July 1946, pp. 452-4,
480-1, 483; Business Week, 7 December 1946, p. 22; Variety, 24 April 1946, p. 5; Motion Picture
Herald, 1 1 May 1946, p. 8; Motion Picture Herald, 27 September 1947, p. 23; Motion Picture Herald, 27
September 1947, p. 23; Variety, 5 November 1947, p. 9; Variety, 2 July 1947, p. 1; Variety, 13 August
1947, p. 1.
24. The New York Times, 10 October 1949, p. 18; Gene Fernett, American Film Studios (Jefferson, North
Carolina: McFarland, 1988), pp. 89-93.
25. John Belton, Introduction, Film History, vol. 2, 1988, p. 359.
26. Journal of the SMPTE, vol. 63 (July 1 954), pp. 1 -4.
27. The New York Times, 2 February 1 953, p. 47.
28. The New York Times, 25 February 1 956, p. 23.
29. Broadcasting, 21 May 1956, p. 52; Broadcasting, 5 November 1956, p. 48; The New York Times, 31 July
1959, p. 24.
30. The New York Times, 27 October 1955, p. 35; Broadcasting, 1 5 October 1956, p. 58; Broadcasting,
2 July 1956, p. 56; Variety, 5 June 1957, p. 27.
31 . Motion Picture Herald, 23 March 1 957, pp. 2 1 -2, 28-35, 66-8; Motion Picture Herald, 28 June 1 962,
p. 45; Motion Picture Herald, 25 July 1962, p. 44.
32. The New York Times, 16 May 1962, p. 44. On Skouras' career, see Douglas Gomery, 'The Skouras
Brothers: Bringing Movies to St. Louis and Beyond', Marquee, vol. 16, no. 1 (1984); Aubrey Solomon,
Twentieth Century-Fox: A Corporate and Financial History (1 988). An obituary is in The New York Times,
17 August 1971.
33. See rankings in Susan Sackett, The Hollywood Report Book of Box Office Hits (New York: Billboard
Books, 1990).
10
Warner Bros.
In 1930 Warner Bros, represented the sole family-run operation among the Big Five studios, with
eldest brother Harry as president, middle brother Abe supervising distribution, and youngest brother
Jack heading the studio in Burbank, California. This hierarchy would not change until Harry and Abe
sold out in 1956. The brothers Warner struggled to make money and succeeded only as a result of
their innovation of sound, and then later took full advantage of the prosperity of World War II.
1
Harry Warner: the Leader

Harry was always in charge. He built the company, and made all final decisions through 1956. His
was always the final word on matters of production, distribution and exhibition of films. His chain
of theatres dominated from northern New Jersey to Washington, D.C. Harry led because that was
the natural order in his traditional Jewish family - the eldest brother. Once Warners became a
member of the Big Five in 1 930, he successfully kept the business within the family throughout the
classic studio era. He never allowed it to go into bankruptcy like Paramount.

Scholars do not care that Warners lacked financial success. Instead, they typecast it; they see a
studio with a personality: social expose films (for example, / Was a Fugitive from a Chain Gang or
Wild Boys of the Road, 1933), gangster films such as Public Enemy and backstage musicals includ-
ing The Gold Diggers of 1933 and Footlight Parade (1933). But Harry Warner hated these films
because, from a box-office point of view, they helped his company to lose more than $30 million.
He preferred star-laden conventional genre films for their steady profits, films such as the Bette
Davis and James Cagney comedy The Bride Came C.O.D. (1941), the romantic Christmas in Con-
necticut (1945), starring Barbara Stanwyck and Dennis Morgan, the film biography of songwriter
Cole Porter, Night and Day (1945), starring Cary Grant and Alexis Smith, and Jane Wyman's Oscar-
winning performance in Johnny Belinda (1948). Harry wanted a studio that made profits, not
2
money-losing exposes, gangster films or musicals.
Harry Warner ran a low-cost operation, and stars hated to work for him because of his penny-
pinching. While a Paramount annual report could produce a list of twenty-five ranking stars (see
chapter 7) by paying them top salaries, Warner counted only three: James Cagney (late 1930s to
early 1940s), Bette Davis (same period as Cagney) and Humphrey Bogart (mid-1 940s). Only three
others, Joe E. Brown, Errol Flynn and Dick Powell, ever reached the industry's annual list of top-ten
stars. Indeed, for fully a quarter of the classic studio era Warners registered no one in the annual
top-ten poll of stars. Bette Davis may be celebrated for breaking the mould for female stars, but
WARNER BROS. 131
The massive Warner studio lot in a then rural Burbank
Harry Warner loathed her and urged her to be glamorous like Garbo, or a serious actress like
Norma Shearer. Bette Davis found her style playing waitresses, dowagers, spinsters or drunks. She
fought to play them. He liked Davis when she won her second Oscar for Jezabel (1 938), which was
3
Warners' answer to Gone with the Wind.
Harry Warner had a simple vision. He sought a cut-rate movie factory, which would produce the
required number of features and shorts for Warners' theatres each year. Warners operated on a
volume basis, trying to make a small profit on every film. But Harry Warner was not a classic Repub-
lican breed of conservative. He was one of the first executives of any major US corporation to make
a definitive stand on World War II, arguing that the USA should intervene. He strongly supported
President Franklin D. Roosevelt in 1932, arguing that a revolution might take place otherwise. But
this movie executive was no radical, often speaking out publicly against socialism; he personally
instituted a series of patriotic shorts that Warners released prior to and during the war. When war
came, under Harry Warner's direction, Warners reacted strongly. Confessions of a Nazi Spy, released
in May 1939, caused an immediate furore. He even courted controversy during a popular war -
4
Mission to Moscow, released early in 1943, supported United States help for the USSR.
Warners lagged in the production of feature films in colour. MGM, Paramount and Fox
annually produced twice as many colour films. Harry Warner did approve a few Technicolor
132
I
products, such as The Adventures of Robin Hood (1938). Yet from 1939 to 1948, Warners pro-
duced fewer colour films than any other major, at times even lagging behind Columbia and United
Artists. For Harry Warner the rental he had to pay to Technicolor, Inc. never dictated taking even
a little risk. Only after profitable years in 1946 and 1947 did Warners step up production of Tech-
nicolor films to match other members of the Big Five.
During the 1 930s this major company should have accounted for about 1 5-20 per cent of top
grossers. Instead, Warners achieved only half that proportion. Starting irT 1938 the studio did
better, but still finished behind MGM, Paramount and Fox more often than not. Warners' poor
showing in top-grossing features correlated with its low rank in terms of profits. The corporation
consistently finished behind Paramount, Fox and Loew's. During the postwar era, Warners made
great strides, doing best in 1 950, the only year it finished first in the profits race during the classic
studio era. At another studio. Jack Warner might have lost his job. Instead, he achieved the longest
5
tenure of any Big Five production boss.
Using data about feature-film production found in the Warner Bros. Archives at USC, John Sedg-
wick and Michael Pokorny demonstrate that Warners responded to changing economic and com-
petitive circumstances in a strategic fashion. The onset of the Great Depression caused Harry Warner
to green-light fewer films and alter the cost, genre and star characteristics of its annual studio pro-
duction. In particular, three distinct stages can be distinguished during the 1930s, as determined by
Sedgwick and Pokorny's statistical analysis. Harry went into survival mode following the onset of the
Great Depression when he reduced average film costs dramatically. Thereafter came a slow, meas-
ured return to producing more films at higher budgets. Finally, as World War II prosperity came,
Harry Warner moved to exclusive A-film production schedules. Warner adopted a cyclical pattern of
6
annual film production budgets and risks that mirrored the recovery after the Great Depression.
Surviving the 1930s

In June 1930, in a rare statement to the trade press, Albert Warner, speaking for his older brother,
painted a glowing financial state by declaring that 'The financial status of Warners [Bros.], as exem-
plified by its financial statements, places this corporation in an enviable position.' Then the Great
Depression hit Warners - hard. Corporate revenues fell from $130 million for the fiscal year ending
in August 1930 to $72 million for the year ending in August 1933. Losses piled up, but although
Paramount, RKO and Fox filed for court reorganisation, the brothers Warner refused. Assets were
sold; expenses trimmed; wages cut. Budgets for film production were pared to the lowest figure
for any Big Five studio. The number of theatres was reduced from 700 to 400. On 26 July 1930
Warners' stock price was above $2 a share, but it then fell to a low of 75 cents by June 1932. Then
it began a slow comeback, and by 1936 it was up to $16 per share, but then again fell with the
second late 1930s recession to less than $3 per share by November 1940, only to rise again with
the wartime boom. As early as 22 August 1930 non-family stockholders sued in the courts of
Wilmington, Delaware, asking for receivership for the company and charging the Warner brothers
with mismanagement. This and seven subsequent suits were dismissed or settled without loss of
WARNER BROS 133
control by the Warner family. Harry later defended himself: 'Listen, a picture, all it is is an expens-
7
ive dream. Well, it's just as easy to dream for $700,000 as for $1.5 million.'
From April 1930 Harry Warner did not report a profit until 1935. But he saved the family studio
- with the help of a bit of shady dealing. In May 1932 the brothers Warner admitted that they per-
sonally pocketed more than $9 million from insider trading. Harry Warner admitted under oath to an
inquiry by the US Senate that he and his two brothers sold short at $54 and later bought back at $23
a share. He bit his tongue while he denied that he and his brothers sold their stock at a time when
they knew earnings of the company were falling or that they knew dividends would cease. Warner
maintained that the stocks were sold to raise cash to advance to the company, and that the sales
were made when prospects were bright. Harry Warner, described by The New York Times as 'a soft-
spoken man who appeared to be about 40 years of age, [was] obviously nervous when subjected to
a barrage by news photographers'. (The only truth not shaded was, as he explained to the senators,
that he - not his more famous brother Jack - was the boss, with the last word on all decisions.) There
8
were no laws against insider trading then, but admissions by Harry Warner helped lead to them.
Harry even fired his former star production assistant, Darryl F. Zanuck, who moved on to Twen-
tieth Century in 1933; Hal B. Wallis took his place for the next decade. Wallis respected the writers
and didn't force them to accept orders they didn't agree with. Within the necessary limits of a cer-
tain discipline, decentralisation came to Warners. It would be Wallis - before he bolted for Para-
mount in 1944 - who initiated a string of hits for the studio starting with Sergeant York (number
one in domestic rentals in 1941), Dive Bomber (number five in 1941), Casablanca (number five in
1 942) and This Is the Army (number one in 1 943). It is no wonder that Barney Balaban made Wallis
a great deal to lure him to Paramount - lots of freedom, top budgets and no brother Warner
9
named Harry looking over his shoulder.
Actors and actresses balked at the workload at Warners' Burbank lot. Although the top players
and stars had astronomical salaries by Great Depression standards, they still received less than the
contract players at other studios. Men were better paid than women, even in films where the
women got equal billing. Bette Davis and Jimmy Cagney were particularly contentious. Both
walked out; Cagney even - unsuccessfully - established his own company, before Harry Warner
took him back. Long-time Warner player Pat O'Brien was asked to compare Warners to other stu-
dios: 'Columbia we used to call the gem of the Ocean. MGM were the aristocrats. We [at Warn-
ers] were the peasants, although we [actors] were getting a chunk of money. No one had a choice
in roles. They [the brothers Warner] were making lots of money . . .
'
Harry Warner never cared to
10
be known as a beloved boss but as a leader who consistently made profits.
In December 1937 Fortune declared:
People in show business, by and large, are inclined to resent the Warners. Many of Hollywood's first
citizens, especially over at the Metro-Goldwyn-Mayer studio, think that Harry's cut-rate dreaming is
the worst possible formula for making pictures. And yet by all movie standards - Hollywood's, the
box office's, and the critics' - Warners is conceded to make very good pictures indeed. . . . Harry,
.
1 34
I
backed by brother Abe and brother Jack, is still in both managerial and financial control. . . .
[Harry had] a nervous stomach, which keeps him at times on a light diet of steak and potatoes. . .
He is neither in Hollywood nor of it.
In 1937 Fortune placed him only second to Nick Schenck as a person of power in the studio
system. (Barney Balaban had yet to make his mark.) Fortune said: 'There are two things to remem-
ber about Harry Warner. One is that he is very shrewd; the other that he is very proud.' He was
also a -sad man, as his first-born child, a son named Lewis, the obvious heir to the top of Warners,
died in 1931 aged twenty-one, ending what Harry Warner told Fortune was his 'dream' of pass-
ing along the company.

As for the other top personnel, Warner theatres provided half the company's revenues - the
rest came from film rentals - and Abe Warner handled that end with great skill and diplomacy. He
played the good cop to Harry's bad cop in booking films. Jack Warner was simply 'the man about
town, with no real power'. Hal Wallis turned out the feature films. 'We're not running a museum,'
as Abe Warner put it. Of the 214 pictures released from January 1933 to the end of 1936, not one
lost money. Their cost was so low that no really large grosses were necessary. Harry insisted that
pictures be shot as written. Re-takes were rare. Actors simply acted, with no wasted rehearsal
11
time.
In 1937 the press found out about a holding company called 'Renraw' (Warners spelled back-
wards). This company was supposedly begun as a place where Harry would store his and his broth-
ers' salaries. He did not allow them to amass individual fortunes. Rather, with his permission, they
would take from the Renraw fund only what they needed for their executive lifestyles. The second
function of the company was to act 'as a sort of 6% Santa Claus toward Warners Pictures, Inc.,
whenever that company could not raise cash anywhere else. Renraw would then lend its money
to Warners without security at current banking rates or less.' Renraw was the financial means used
by Harry Warner to keep Warners afloat and in the family. He also skilfully used it as a vehicle for
12
insider trading. Stockholders continually sued - to no avail.
At the studio, Hal Wallis relied on a staff of associate producers, who would not receive screen
credit until 1942 but wielded considerable authority over A-class production at Warners. Many of
them - notably Henry Blanke, Robert Lord, Jerry Wald and Mark Hellinger - were former directors
or writers and were closely involved in all phases of production. Warners also had a staff of
capable, efficient directors - notably Michael Curtiz, William Dieterle, Lloyd Bacon, William Keigh-
ley and Raoul Walsh. A few of them had considerable authority over specific star-genre formula-
tions, for example Curtiz for Errol Flynn vehicles, and Bacon on Cagney's action pictures. Warners'
strategy, of relying on a half-dozen star-genre formulas for its A-class pictures, began to change
in the prewar era, for two main reasons. In late 1939 Paul Muni left to seek freelance status, leav-
ing Edward G. Robinson to fill in as resident bio-picture star. Meanwhile, the production if musials
was phased out when Busby Berkeley defected to MGM. But in the end, Wallis' skill was working
13
Davis and Cagney in genre variation after genre variation.
WARNER BROS. 135
Although Warners is remembered for its gangster pictures and films of social consciousness, a
survey of its output during the 1930s and 1940s conducted by John Davis reveals that the studio
produced close to thirty different types of pictures, which Davis categorised into six groups - crime,
the American scene, love, comedy, musicals and costume dramas. Harry loved spreading the risk;
Hal Wallis followed orders. Just like the other members of the Big Five there was no studio style.
That would have been far too risky. Harry approved features that seemed to generate profits, and
when one genre saw a downturn, then he turned to another. In particular, Harry Warner loved his
B unit, headed by Bryan Foy, which produced half the studio's pictures, around twenty-five a year
on a total annual budget of $5 million. Foy's strategy was to remake Warners' old silents and to
14
produce cheaper versions with sound. Harry Warner glowed when he read of their profitability.
The Rise to Prosperity

Even before war was declared, Harry Warner encouraged the creation of a series of patriotic fea-
tures and short subjects that celebrated the uniqueness of America. Harry Warner's mission
extended beyond the patriotic shorts and armed service comedies. It manifested itself in Warners'
six-minute cartoon classics, Looney Tunes and Merrie Melodies. Porky Pig, Daffy Duck, Elmer Fudd
and Bugs Bunny were mustered into service to do their patriotic part. Between 1937 and 1941 the
Warners animation unit produced twenty-three cartoons that dealt directly with the war in Europe,
the peacetime draft and preparedness. The wartime cartoons number among the most creative
and hilarious of the entire repertoire. The animation unit created a cartoon series for the US Army,
Private Snafu, and even parodied Warners' own patriotic features such as The Fighting 69th
15
(1940).
Harry Warner rarely gave interviews. In 1942 - possibly because of his rabid support of US
intervention in World War II - he granted Liberty magazine a long interview that was published in
two parts. Liberty praised him and also noted that he was one of the few movie power figures who
voted for FDR. Liberty called him 'the undisputed ruler' of a major studio on the rise - as MGM was
fading. Like his fellow studio bosses, the best image Liberty could paint of a typical image of Harry
at work was talking on the telephone to the coast, making deals, and approving plans and expen-
ditures for his company.
When Liberty asked and was granted a studio tour, Harry - a short, wiry, grey-haired man in
a blue double-breasted suit - apparently was a little ill at ease in a place jammed with Confeder-
ate soldiers, storm troopers, pirates and RAF flyers. As described in Liberty, he was walking slowly
along a narrow sidewalk. Every half-dozen steps or so he stopped, picked up something from the
ground, examined it carefully, and shook his head. 'Who is that little guy?' asked a huge Gestapo
man of his companion, a pretty young girl dressed in a silver lame court presentation gown. 'Oh,
nobody,' she said, giggling. 'Nobody at all - just the fellow who runs this studio.'
Liberty reported that 'Nothing about his appearance, manners, habits, or conversation suggests
a motion-picture magnate. In a crowd he would pass for a retired businessman living on a modest
income.'
136
I
Harry Warner, who had a weekly payroll of $600,000, was forever on the lookout for shoe
nails. He even dreamt of them. He told Liberty that at least once a month he woke up in a cold
sweat, having just had that nightmare again. For the nth time in his life he saw himself as he was
fifty-four years ago, an undersized kid of seven in a cobbler's shop, who always kept a fistful of
nails in his mouth so as not to waste time picking them up from the floor. He swallowed hard, he
choked, he woke up - in his comfortable bedroom in his mansion. Other men in the USA have
worked their way up from poverty to great riches. Harry Warner's case wa$ hardly unique. Like
Zukor, the Schencks and Barney Balaban, he had started at the bottom and wound up a rich man.
He was convinced that the 'good old days' were terrible and that Horatio Alger (writer of rags to
riches tales) was either a knave or a dupe.
He was willing to back that conviction with money.

Although Warners was a company capitalised at millions and millions of dollars - based on its
rising stock price in 1942 - Harry Warner's role was still the benevolent family tyrant. Everything per-
taining to the private lives of his employees concerned him, from physical ailments and new family
arrivals to the buying, selling and renting of houses to wedding anniversaries and graduation dates
- no detail was too small. He was known to order medicine for employees' head colds to keep them
on the job. He would send them unsolicited advice on locating the best insurance policies, to sug-
gest ways of reducing interest on their home mortgages, and even to help out with hospital bills.
He rewarded loyalty. Out of 3,41 1 men and women who were employed in the Warner studio
on the eve of Pearl Harbor, only 232 had been with the company for less than one year. More than
half had been on Warners' pay roll for a decade. While Nick Schenck was constantly lending out
stars to make more profits, Harry liked to project an image of a 'big happy family', which counted
among its members such prodigal sons, prima donnas and firebrands as Bette Davis, Errol Flynn,
George Raft, Ann Sheridan and Olivia de Havilland. When the latter, one of his (corporate) 'daugh-
ters', publicaly stated that she felt exploited because she had to work for $1,500 a week, Harry
would listen, and shake his head. Harry's principle was that stars came and went, but the studio
system remained. And he did all that was necessary to preserve Warners' place as part of the Big
16
Five - at the heart of the studio system.
During the war, Warners, as it grew, was considered more and more often by Wall Streeters
as one of the studio system's leaders. Wall Streeters were attracted to Warner's growing profits.
By June 1 942 Warners - because of the war boom - had doubled its business. Later that year, The
Magazine of Wall Street colourfully described excess demand, with lines in front of theatres show-
ing Warners' Captains of the Clouds (1 942), Sergeant York and Yankee Doodle Dandy (1 942). The
annual report for the fiscal year ended 31 August 1942 revealed new record profits. By May 1943
Warners' favourable earnings outlook saw the stock at double the price of a year earlier. Wall
Street noted only that Harry Warner had no shortage of film stock as his stockpiling was paying
off. He took criticism in the middle of 1943 for Mission to Moscow, and then cited a telegram from
the American Legion praising the film. He retorted by pointing to Casablanca (1942), his out-
17
standing success.
WARNER BROS. 137
Studio boss Hal Wallis (left) being congratulated by Warner corporate chief Harry Warner
The Warners feature-making machine - particularly before Hal B. Wallis left in 1 943 - worked
like an efficient clock, scheduled to produce a hit feature film each week within a Harry Warner-
determined budget and with contract talent. Typical was Casablanca. It is special now, but at the
time it was just another title on the studio's masterlist. Here was a pure studio product where the
convergence of artistic, corporate and historic forces combined to produce a film of apparent time-
lessness - with all decisions approved by Harry Warner.
The movie's genesis lay in a three-act play, Everybody Comes to Rick's, written in 1940 by
Murray Burnett and Joan Alison. In six weeks during the summer of 1940 they came up with a
melodrama set in a sleek nightclub, called Rick's Cafe American, in Casablanca, French Morocco.
Rick Blaine, an expatriate American, was a taciturn man of mystery. Only Sam, his black piano
player, and Rinaldo, the French prefect of police, knew of his background and his affair in Paris
with a beautiful woman named Lois Meredith. By the end of the play, Rick has helped Lois and
Victor Lazlo, a Czech patriot, to escape. 'I'm finished, all burned out,' he tells Lois. 'Victor's still
fighting and he needs you, Lois.' His self-respect redeemed, Rick surrenders himself to the Nazi
authorities.
1 38
I
Harry Warner spent a minimal sum to buy the play - $20,000 - and in December 1941 he
assigned the project to Wallis. During preparation for Casablanca, Wallis picked Michael Curtiz to
direct. A fairly private person, Wallis did not have a large number of intimates, but Curtiz was one
of them. Six feet tall, hawk-nosed and solid-bodied, the Hungarian-born Curtiz was an excellent
athlete, up at six every morning for a swim and a horseback ride around his ranch before report-
ing to the studio. To Wallis, Curtiz was the most efficient, versatile director on the lot. He could be
depended upon to keep to his shooting schedules, driving actors and himself relentlessly. Curtiz
once said of his role: 'I help out so the actors don't bump into each other.' Extremely loyal, Curtiz
always used the same crew; he was first on the set and the last to leave. He was a particular Harry
Warner favourite for his strict adherence to shooting schedules.
Curtiz's films were concise, with not a bit of wasted footage, and his pacing was the fastest
on the lot, giving the Warner films of the time a distinctive narrative swiftness. When Wallis
approached him, Curtiz was busy putting the finishing touches to Yankee Doodle Dandy. As Wallis
and Curtiz were discussing the project, the men got word of the attack on Pearl Harbor. Curtiz
came on board, and Wallis then called staff writers, the Epstein twins - Julius and Philip - and
asked them to simplify the plot, make it more topical, and rewrite the two leads to make them suit-
able for Humphrey Bogart and Ingrid Bergman. Wallis wanted the story to have the same kind of
romantic feel as Algiers, a 1938 success with Charles Boyer and Hedy Lamarr. He gave them a
working title: Casablanca. The Epsteins had just finished Yankee Doodle Dandy for Wallis, and he
regarded them as excellent writers.
One less-developed character particularly intrigued the Epsteins - the corrupt Vichy official,
Louis Rinaldo. They convinced Wallis to have them write the part for Claude Rains. What Rick is
doing in Paris and why the Germans were after him, they left purposely vague. The Afro-American
piano player and the song 'As Time Goes By' were left pretty much as originally conceived, but the
character of Lois Meredith was transmogrified from a glib American tramp into a romantically
yearning Swedish beauty named llsa Lund. Harry Warner got David Selznick to lend him Ingrid
Bergman, even though she protested because she felt Casablanca would do nothing for her career.
By late March 1942 the Epsteins had completed the first rough draft of the screenplay, a
budget was drawn up, sets were constructed and costumes designed. Still there was no ending.
Curtiz supposedly said, 'Don't worry vat is rough - 1 make it go so fast no one vill notice.' But Curtiz
immediately spotted a flaw: the screenplay had no villain, no tangible indication of menace. The
character of Rinaldo was too vague to be a useful villain, and besides Curtiz liked the wry humour
the Epsteins had given him. Curtiz recommended that the small part of the German official Strasser
be expanded to make him an evil Nazi. Curtiz's recent problems with getting some of his family
out of Hungary had brought home to him the refugee situation. He asked the Epsteins to work in
some vignettes that would point out the plight of refugees and allow him to make good use of
the atmosphere in Rick's cafe. Still the ending offered no required closure.
In mid-April 1942 a copy of the script was sent to Humphrey Bogart with the notation that he
would play the character of Rick, and that the part was still being rewritten. Bogart would soon
WARNER BROS 139
finish his latest film, /Across the Pacific (1942), so a starting date of 25 May 1941 was set for
Casablanca, giving Bogart only days to rest between the two films. The Epsteins had further
enhanced the atmosphere and had also given the love story a catch phrase: 'Here's looking at you,
kid.' Wallis had at his disposal an extraordinarily rich assortment of character actors, for example
Peter Lorre for the role of renegade Ugarte, and Sydney Greenstreet as Ferrari, leader of
Casablanca's black market. The character of Victor Laszlo had undergone virtually no change from
play to screen. Paul Henreid, while working on Wow, Voyager (1942), like Bogart, with a few days'
rest would go directly from one film to the other. The pivotal part of Louis Renault - a self-
described romantic, pragmatist and poor, corrupt official - had been tailored for Claude Rains. He,
too, would be coming directly from Now, Voyager.

Filming began, as scheduled, on 25 May 1942. Sunday script conferences at Curtiz's ranch
toyed with different endings: Rick leaving with llsa, llsa staying with Rick, Rick being killed while
helping Laszlo and llsa escape. At this point, the Epsteins late one night, as they were driving down
Sunset Boulevard towards Beverly Glen, turned to each other at exactly the same time and
shouted, 'Round up the usual suspects'. Closure was had.

When the editing was finished, Wallis took it to Huntington Beach for a sneak preview. The
audience was respectful but not wildly enthusiastic. One of the sales people at the preview
suggested changing the title because it sounded too much like a beer. Wallis was not amused. The
release date had been announced for June 1943, but in November 1942 the Allies landed in North
Africa, in Casablanca. Harry Warner ordered release, hard on the heels of Now, Voyager, in time
for a Thanksgiving opening at the Hollywood Theater, and the next day the reviewers were unan-
imous in their praise of the film. Casablanca played to 31,000 paid admissions in its first week. The
theatre had a seating capacity of 1 ,500, and even the standing room was sold out. It played at the
18
theatre for ten weeks and grossed $255,000 - both records.
By the middle of February 1943 Casablanca had opened in 200 theatres across the country and
by the end of 1943 had earned $3,700,000. Casablanca was the result then of the collaboration
of the best instincts of a large group of talented and diverse people - the Warners system at its
best. But in 1 942 it was just another job for Wallis and company. Harry Warner knew how special
the film was for gross revenues, which in the 1943 fiscal year reached a new high of $131 million,
against $119 million the year before and $102 million the year before that. In 1943 Warners'
results showed a gross profit margin of about 25 per cent. Wall Street loved him, while audiences
19
lined up to see Casablanca.
Postwar Blues and Harry Exits

By 1947 Warners stood atop the studio rankings in terms of grosses, but Harry was worried - like
all other executives - about the drop in audiences and revenues. He re-emphasised B-pictures.
Wayne Morris, Fred Clark, Mary Stuart and Lois Maxwell were assigned to the leading roles. Then
the bottom fell out. On 12 November 1948 - with the conclusion of the filming of Colorado
Territory (1 949), a Western remake of 1 941 Bogart hit High Sierra - Harry Warner announced that
1 40
I
the studio would cease production activities for the six weeks before 1 January 1949. Harry Warner
knew the studio had twenty-three films in the can and did not want to invest more until he fig-
ured out what to do next. In anticipation of the shutdown, Warners had been dismissing
employees over a five-week period beginning in early October 1948. It was reported in the shut-
down announcement that 300 more would be let go in addition to the 1,000 employees fur-
20
loughed. Christmas 1 948 was a bleak time for Warners workers.
During the war, Harry Warner had lost Hal B. Wallis to Paramount, so he started to sign out-
*
side film-makers. Howard Hawks was first and penned a five-year, five-picture deal at a salary of
$100,000 per picture, with his duties described as those of 'Director and/or Supervisor'. This des-
ignation gave Hawks authority over both scripting and editing, and each picture was to be billed
as 'A Howard Hawks Production' in a typeface 25 per cent smaller than that of the title. Hawks
was sufficiently comfortable with Harry Warner's offer that he signed an exclusive deal, which
21
meant that he could work for no other company while the contract was in effect.
Producers like Henry Blanke and Jerry Wald and producer-directors like Michael Curtiz and John
Huston got similar deals. In the long run the most significant of these was Wald, who hit his stride
with Mildred Pierce (1945). By 1950 he was personally producing eight to ten pictures per year.
Wald helped with Joan Crawford's pictures, and Blanke with Bette Davis vehicles, but clearly there
22
was no one on board to replace Wallis, who had run the studio up into the highly profitable era.
Considering it bad business, Harry Warner began phasing out the contracts with many of
its biggest long-term stars, including Bette Davis, Humphrey Bogart, Errol Flynn and Edward G:
Robinson during 1948-9. Warner embraced TV. In March 1945 he bought Cine-Television Studios
in New York, which was producing both shorts and features for TV stations. He had a Warner net-
work as his goal. Secondly, he purchased a 17-acre tract near Hollywood for the creation of a TV
studio and transmitter (Warners already owned a radio station in Los Angeles). The FCC even
granted permission to erect an experimental commercial television station in late 1944. But as a
defendant in the US v. Paramount anti-trust case, like all members of the studio system Warners
was thereafter denied a permanent television licence. Harry never did think theatre TV was a good
23
idea, and his mind turned to selling Warners to the highest bidder.
As early as October 1 948 - five months after the US Supreme Court announced Warners ef al.
would be forced to rid themselves of their theatre chains - Harry Warner had begun to plan to cash
out. He sold to the American Broadcasting Company Warner's secondary lot, principally used for
B-films and shorts, located in Hollywood and consolidated all operations to the Burbank lot. In
announcing the purchase ABC executives pointed out that nearly half the property was open land,
available for future development for additional indoor television studios or outdoor sets - in
addition to the two theatrical sound stages, both to be remodelled to suit the needs of television.
24
Harry could have bought ABC at this point, but decided not to as he wanted out.
When Barney Balaban spun off Paramount's theatres in 1949, it seemed obvious to Harry
Warner that it was time to get as much out of the required deal as possible. On 5 January 1951
Warners formally divorced and divested the theatre chain Harry Warner had built some two
WARNER BROS 141
decades earlier. The court approved the deal and the new production plus distribution unit - with
the three brothers - was to be called Warners Pictures, Inc. This was incorporated as a new
company in Delaware on 27 January 1953, while the new theatre company - called Stanley-
25
Warner - was chartered three days later.
During the spring of 1953 the other major studios - led by Spyros Skouras at Fox - began to
decide on widescreen processes; Harry Warner and his brothers waited. They had tried 3-D, but
that seemed not to work, so late in October 1953 Warners adopted Fox's CinemaScope process.
Without offering any explanations, Harry Warner simply announced to the trade press on 24 Octo-
ber 1953 that Warner would sign a contract with Fox, and make A Star Is Born (1954) as its first
26
CinemaScope film.
Bigger news had come a month earlier. On 27 September 1953 Harry Warner announced that
Humphrey Bogart was being set free from a fifteen-year contract he had signed with Warners in
1946, cancelling 'the longest contract in Hollywood history'. Warners began to make more and
more films with independent producers - following the model UA was pioneering - as Harry
searched for a buyer. In the meantime, blockbusters East of Eden (1955), Rebel without a Cause
(1 955), The Searchers (1 956), Giant (1 956) and Baby Doll (1 956) all made the company money and
27
kept the distribution pipelines flowing, thus raising the price Harry Warner was asking.
On 1 1 May 956 1 Harry and Abe Warner announced that they would be selling out to a group
of investors headed by Boston banker Serge Semenenko and including Wall Streeter Charles Allen,
Jnr, and exhibitor Sidney H. Fabian. The connection between Fabian and Semenenko had been
established when Semenenko, as senior vice president of the First National Bank of Boston,
financed the purchase of the Stanley theatre chain in 1953. Semenenko was called in and made
head of the investors only after the Department of Justice prevented Fabian from purchasing
Warners' interests on his own. The investors group acquired approximately 800,000 shares of
common stock held by the brothers at a price of $7.50 a share, representing a purchase price of
$22 million. This transaction caused a major split between, on the one side, Harry and Abe, and
28
on the other, Jack, who refused to give up his shares. He replaced Harry as president.
Semenenko etal. started by selling Warners' hard assets: its land, its old films and its new tele-
vision production arm. Jack Warner stayed on as a figurehead until Semenenko ended the new
owners' unsuccessful running of the studio in 1967. They sold what was left - the Burbank lot and
the international distribution system - to a Canadian firm, Seven Arts Ltd. Jack was not part of this
deal and retired, marking the end of the involvement of the brothers Warner in the studio they
had founded over forty years before. Semenenko etal. left their mark in their decade of owner-
ship, leading Warners into TV production, with such series as Cheyenne, 77 Sunset Strip and
29
Maverick - all based on scripts the studio already owned.
During the classic studio era Harry Warner - until 1951 - efficiently operated a vertically inte-
grated Big Five studio. But he did not have the skills or interest to learn how to run a company that
simply made and distributed films (and then television programmes). He had built the family
fortune, and cashing out was his greatest legacy. Harry was the equal of the Schencks, Barney
.
142
I
Balaban and Sypros Skouras in the classic studio age. Indeed, only he and Nick Schenck had kept
their companies out of court, and then Harry surpassed Schenck's abilty to make profits as the
classic studio era ended. Yet neither man knew how to make the transition into the modern Hol-
30
lywood.
Notes
1 . Anyone who has attempted to research the history of the Hollywood film studios knows that getting to
documents on film productions has in the past been an exercise in frustration. Warners is the most well-
documented studio in the literature of film studies, not because of any enlightened attitude on the part
of that studio, but because the Warners papers have been accessible for over twenty years at the
University of Southern California. The Warner Bros. Archives at USC contains studio materials, principally
on the production of films. The company was, however, vertically integrated until 1 951 , and so the
exhibition side and distribution side are mixed in and difficult to use.
2. Biography of Harry Warner, 1930, Harry Warner file, Quigley Collection, Georgetown University,
Washington, D.C.
3. Sales Management, 1 5 January 1946, p. 52; Variety, 4 October 1932, p. 19; Variety, 1 1 October 1932,
p. 19; Variety, 3 January 1933, p. 35; Variety, 28 March 1933, p. 6; Variety, 9 May 1933, p. 9; Variety,
16 May 1933, p. 9; press materials. United Artists Collection, series 448, reel 2, State Historical Society,
Madison, Wisconsin.
4. See published screenplay to Mission to Moscow (Madison: University of Wisconsin Press, 1 988), David
Culbert (ed.), preface.
5. For a case study, see High Sierra (Madison: University of Wisconsin Press, 1 981 ), Douglas Gomery (ed.),
preface.
6. Michael Pokorny and John Sedgwick, 'Stardom and the Profitability of Film Making: Warner Bros, in the
1930s' Journal of Cultural Economics,

, vol. 25 (2001), pp. 157-84; John Sedgwick and Michael Pokorny,
The Risk Environment of Film Making: Warner Bros. In the Inter-War Years', Explorations in Economic
History, vol. 35 (1998), pp. 196-220.
7. Barrons, 24 November 1930; Variety, 25 June 1930, p. 6; The Magazine of Wall Street, 6 November
1937, pp. 92-3, 123-4; The Magazine of Wall Street, 22 May 1937, pp. 158-9, 194-5; The Magazine
of Wall Street, 23 April 1938, pp. 20-1, 61-2; The Magazine of Wall Street, 12 August 1939, p. 448;
The Magazine of Wall Street, 14 January 1939, pp. 362-3, 398-9. US Congress, Senate Committee on
Banking and Currency, 'Stock Exchange Practices', Hearings on Senate Resolution 84, 72nd Congress,
1st session, 1932, part 2, pp. 650-60 summarises the precarious state of the company and the devices
that Harry Warner used to fend off bankruptcy.
8. Barrons, 3 1 August 1 93 1 , p. 21 ; The New York Times, 22 May 1 932, p. 1 ;

Barrons, 1 6 November 1931,
p. 27; Barrons, 9 November 1931, p. 18; Barrons, 4 January 1932, p. 16; Barrons, 2 September 1935,
pp. 6, 13; Barrons, 2 December 1935, p. 7; Barrons, 9 May 1938, p. 8; Barrons, 19 September 1938,
p. 20; Barrons, 13 February 1939, p. 9; Barrons, 4 September 1939, p. 3.
9. The Velvet Light Trap, no. 1 (1 971 ), p. 2. See rankings in Susan Sackett, The Hollywood Report Book of
Box Office Hits (New York: Billboard Books, 1990).
1 0. The Velvet Light Trap, no. 1 5 (1 975), p. 31
1 1 . Fortune, December 1937, pp. 110-13, 206, 208.
12. The New York Times, 22 May 1 932, p. 33; Fortune, December 937, 1 p. 21 0.
WARNER BROS 14
13. See contracts of Bette Davis with Warners - dated 7 June 1943 and 10 June 1943 - in Warner Bros.
Archives, USC.
14. The Velvet Light Trap, no. 1 5, pp. 56-60; Variety, 6 October 1937, p. 6; The New York Times,
22 February 1938, p. 19.
1 5. Harry Warner Speeches and Correspondence file and Nazi data file, Warner Bros. Archives, USC; The
New York Times, 30 July 1929, p. 18; The Velvet Light Trap, no. 4, (1972), pp. 23-5; The Velvet Light
Trap, no. 8 (1973), pp. 7-8; Variety, 12 March 1940, p. 46; The Velvet Light Trap, no. 5 (spring, 1972),
pp. 42-4.
16. Liberty, 31 October 1942, pp. 14-17.

17. The Magazine of Wall Street, 4 May 1 940, p. 99; Barrons, 2 1 August 1 940, p. 1 9; The Magazine of Wall
Street, 31 May 1941, p. 197; Commercial & Financial Chronicle, 6 December 1941, p. 1001; The
Magazine of Wall Street, 21 June 1942, pp. 291, 306; The Magazine of Wall Street, 31 October 1942,
pp. 82-3, 99; The Magazine of Wall Street, 9 January 1 943, p. 372; The Magazine of Wall Street, 1 May
1 943, p. 96; Motion Picture Herald, 22 May 1 943, p. 25; The Magazine of Wall Street, 1 8 September
1943, p. 633; The Magazine of Wall Street, 15 April 1944, pp. 19-21, 50; Business Week, 9 December
1944, pp. 38-9; Business Week, 5 January 1946, pp. 41-2: Barrons, 8 October 1945, p. 6.
18. Casablanca files, Warner Bros. Archives, USC.

19. Hal Wallis wrote of his participation in his autobiography, Starmaker (New York: Macmillan, 1980). A
wealth of Curtiz materials lies at the Warner Bros. Archives at USC. See also The Magazine of Wall
Street, 15 April 1944, pp. 19-21 and Variety, 5 July 1944, p. 1 for Wall Street's reaction.
20. The New York Times, 18 January 1948, p. 33; The New York Times, 13 November 1948, p. 35.
21. Contract, 12 February 1942, The Big Sleep file, Warner legal collection, United Artists Collection,
Wisconsin Center for Film and Theater Center, State Historical Society, Madison, Wisconsin.
22. Variety, 5 January 1 949, p. 35. See also Jerry Wald and Henry Blanke legal files, Warner Bros. Archives,
USC.
23. Business Week, 1 1 November 1944, p. 95; Business Week, 24 March 1945, pp. 92, 95.
24. Motion Picture Herald, 9 October 1 948, p. 29.
25. The New York Times, 18 February 1951, p. 42; The New York Times, 18 February 1953, p. 33.
26. The New York Times, 25 October 1 953, p. 35.
27. Variety, 1 8 January 1 950, p. 1 ; Film Daily Year Book, 1 954, p. 59.
28. Business Week, 23 July 1956, pp. 63-4; The New York Times, 20 May 1956, p. 33; 77me, 21 May 1956,
pp. 96-7. The latter is hardly a primary source but does indicate how important this news was taken by
the general public at the time.
29. The New York Times, 24 July 1 956, p. 39.
30. The Los Angeles Times, 1 7 February 1 991 ,

Calendar, p. 91 (letter to the editor by Jack Warner Jnr).
11
RKO and Disney
RKO had the shortest, least profitable life of any major studio. During the first two years - 1929
and 1930 - of its unsteady existence, RKO reached an artificial peak. Thereafter the smallest and
weakest of the Big Five major studios struggled along until January 1957 when it ceased opera-
tions. Its main problem was its lack of a leader in the mould of Harry Warner or Barney Balaban. It
was run and owned first as an offshoot of RCA radio, then as an investment pure and simple by
Floyd Odium, and wrecked by Howard Hughes. Odium must be credited with saving RKO as he
bought the company when it was in bankruptcy and by 1940 had stabilised it. RKO prospered
during World War II, but Odium was always looking for a buyer; Hughes systematically destroyed
the corporation after he took over. Its theatre chain and world distribution network were the only
things that kept RKO in existence for so long.

1
RKO was not without its artistic successes. RKO means Fred Astaire and Ginger Rogers gliding
across gleaming black-and-white sets, King Kong climbing the Empire State Building, and
'Rosebud', the single most famous word ever uttered in a classic studio film (opening Orson Welles'
Citizen Kane, 1941). But when one looks at the bottom line - with no strong leader - RKO really
was a corporation with books mostly written in red ink. When Hughes cashed out, he pioneered
the sale of older Hollywood films to television, and the world rediscovered not only Astaire and
Rogers, and King Kong, but classics by John Ford (She Wore a Yellow Ribbon, 1949; Fort Apache,
1948; and Wagonmaster, 1950) and Orson Welles (Citizen Kane and The Magnificent Ambersons,
1942). It was at RKO that the Val Lewton unit gave new style and direction to horror films, turning
them from tales of ghosts, monsters and vampires into subtle psychological studies. Yet aesthetic
success never translated into economic success, and RKO as a member of the Big Five was an utter
failure. It was the lone studio of the classic era not in business as a film-maker as the twentieth cen-
tury ended.
The problem is easily identifiable: rarely was a management team in place for more than a few
years. Executives came and went regularly. For example, David O. Selznick's tenure at the helm
lasted from 1932 to 1933, and saw the creation of What Price Hollywood? (1932), and the awe-
inspiring King Kong (1933). Selznick brought Katharine Hepburn to RKO, where she gave an Oscar-
winning performance in Morning Glory (1933). But financially all he did was lower losses from $10
2
to $4 million. Like others after him, he quit and moved on.
RKO reached a profitable state only during World War II, providing a vivid example of how the
theatre chains of the Big Five raised all boats. Fans filled RKO theatres during the war, and the cor-
RKO AND DISNEY 145
poration made rare profits. But soon after the ending of hostilities, RKO plunged back into the red.
Then Odium sold to the most eccentric billionaire of the twentieth century, Howard Hughes, who
treated RKO as his play toy. Like the other studios, RKO struggled to deal with the new world of
television and suburbanisation, so it simply exited the business. If one identifies a corporate acme,
it last from 1942 to 1946.

No one was atop to leverage its vertical control of all parts of the film business. RKO depended
on outsiders. And so its most profitable film was Walt Disney's Snow White and the Seven Dwarfs
(1938), which it distributed. Disney needed RKO's distribution and theatres and depended on RKO
to stay alive through the classic studio era.
Too Many Bad Leaders

In 1930 RKO was the newest of the major studios, and was hamstrung by its lack of a long-
staying formidable leader to guide it through the Great Depression. While atop the other four
wholly vertically integrated rivals sat leaders who stayed for decades, the leadership of RKO was
measured in a few years. As early as 1934 The Magazine of Wall Street was able to summarise
RKO's corporate history: '[RKO has] been shunned by all the cinematic cognoscenti as just two
short jumps from the asylum and the sheriff. It may be set down here and now that while the intel-
ligentsia who decide stories must accept the fact that cleanliness pays, that does not mean that
3
they actually believe it, so they will go on experimenting . . . and losing money.'
William LeBaron, production boss from 1929, had a single hit - Cimarron (1931) - but his other
pictures were money-losers. So, after two years of trying, he told Hiram Brown, who had been
named president of RKO in October 1931, that he would produce only one or two films a year,
and renounce responsibility for the studio's output. Brown, a successful shoe manufacturer, had
been brought into RKO through connections with RKO co-founder Joseph Kennedy. A good busi-
nessman, Brown knew almost nothing about the vagaries of the film business. If RKO proved any-
thing, a strong leader had to stay a while, and had to have years of film-industry training. RCA's
David Sarnoff, and Owen D. Young, board chairman of General Electric, both heavy investors in
RKO, recommended that Brown hire David 0. Selznick. With co-owner David Sarnoff's assurance
that those back east would handle distribution and the theatre chain, Selznick agreed to become
vice president in charge of production in November 1931, and was instructed to effect as many
4
economies as he could, as the Great Depression deepened.
Selznick inherited a weak list of stars: Ann Harding (Devotion), Helen Twelvetrees (Bad
Company, Woman of Experience), Dorothy Mackaill (Kept Husbands), Mary Astor (The Royal Bed,
Sin Ship, Smart Woman, White Shoulders), Constance Bennett (Common Law), Betty Compson
(The Lady Refuses, Three Who Loved, A Woman Pursued) and Kay Francis (Transgressed). (All films
were released in 1931.) He immediately began trimming, reducing RKO's commitment to its
contract players to an average of four months, except in the cases of Harding and Bennett. He con-
solidated production operations under a new name, Radio Pictures. In his first year RKO produced
forty-seven features, and a like number of shorts at a cost of $10 million, $5 million less than
during the previous year. Selznick brought in new directing and writing talent, including George
Cukor, William Wellman, Ben Hecht, Dudley Nichols, Gene Fowler, Edgar Wallace and Zoe Akins,
and he tried to develop new personalities by signing unknowns Katharine Hepburn and Fred
Astaire.
During this period of change, Selznick had two able assistants. One was Merian C. Cooper,
whom he'd known from his Paramount days, when they were associated on the production of a
1 929 adventure spectacle called The Four Feathers. Cooper wanted to rflake a film from an idea
he had about a giant ape, and although Selznick didn't understand what he was talking about, he
authorised him to go ahead on what Cooper called Kong. Selznick's other assistant was a young
man, Pandro S. Berman, whose father had been one of the founders, with Joseph Kennedy, of
FBO. Berman had advanced through the cutting rooms to assistant director, and finally produced
two films under the LeBaron regime. But in December of 1932, Selznick, after just over a year in
the job, left for MGM. Cooper became the chief studio executive, with Berman as his assistant.
Bankruptcy came because of theatre mortages, as had happened to Paramount and Fox. In
1932 Business Week reported: 'It looks like a cold gray morning for the movie house landlords as
the receivers get to work on the leases [on theatre buildings] that gave them their jobs.' RKO went
into receivership on 20 January 1933. Equity receivers were appointed for RKO's 300 theatres. The
heart of the trouble can be seen in the announcement that the receivers' first job was to eliminate
debt. New RKO leader, former RCA executive M. H. Aylesworth, put it this way: 'Negotiations are
under way with landlords and mortgagees for readjustment of rentals and fixed charge require-
ments to a basis consistent with present business levels.' Soon after President Roosevelt signed
amendment 77B of the Federal Bankruptcy Act (June 1934), RKO filed for bankruptcy and, through
the 1930s, RKO hired more lawyers than stars; it would not be until the end of the decade that
5
RKO was out of court.
King Kong became a hit. Other than that, the studio's only financial successes were Little
Women (1933; directed by Cukor) and Flying Down to Rio (1933), notable for the first teaming of
Fred Astaire and Ginger Rogers. Losses piled up. Things had become so bad that Cooper was
instructed by the RKO board to close the studio as there was no money to pay salaries. Cooper,
feeling that it would be bad for morale to lock people out, instead ordered scrip issued in amounts
ranging up to $200, which could be used by studio personnel for their immediate expenses. He
backed the scrip with his own money, and it was a source of great satisfaction to him that all the
loans were paid back within days after the banks reopened in March 1933. But there was a bit of
hope. In 1933 the Rockefeller family became involved, acquiring 100,000 shares of RKO. John D.'s
son, Nelson, later vice president of the USA, was given the job of trying to straighten matters out.
He ordered Cooper to continue to slash negative costs by some 75 per cent, while he dealt with
the bankruptcy court. Bringing in independent producers helped - for example, John Ford came in
to do The Lost Patrol, the top RKO grosser of 1934. But just as his system was beginning to jell,
Cooper suffered a heart attack, and Berman became top producer. Films starring Constance Ben-
nett, Ann Harding, Irene Dunne, Richard Dix and newcomer Joel McCrea delivered improved box-
RKO AND DISNEY 147
office returns. But Cooper never recovered his health sufficiently to feel strong enough to continue
as production chief, so he resigned in 1934, after only sixteen months on the job. At least he had
lasted five more months than Selznick. Nelson Rockefeller proved he had no skills as a leader. His
accomplishments: lowering losses from the millions to the hundreds of thousands of dollars
and approving the signing of the team of Astaire and Rogers to make a series of sophisticated
6
musicals.
A Leader: Floyd Odium

A white knight was clearly needed. Enter Floyd Odium of Atlas Corporation, in October 1935. He
paid $5 million for half of Rockefellers' interest in RKO, with an option - which he later exercised
- to buy the rest. In its day, Atlas - started by Odium in 1929 just before the October crash - had
held portions in corporations as diverse as Greyhound bus lines, Hilton Hotels and Madison Square
Garden. Odium - forty-three in 1 935 - was a lawyer by education, but a first class entrepreneur in
practice. He built his stake through wise investments during the 1920s as a lawyer for Wall Street's
Simpson, Thacher and Bartlett. Then, in 1929 he cashed out and so when the Great Depression
struck, Odium's money was safe and he was ready to buy low, turn companies around, and sell
them at vast profits. As the economic slump deepened, he boldly bought up companies, like RKO,
whose prices had fallen far below what he considered to be their true value. By 1935 Atlas had
assets of more than $100 million. For thirteen years he did his financial magic at RKO, provided
some leadership at the corporation's top (he split his time among several companies) and finally
sold RKO to Howard Hughes, making a $17 million profit on his investment. Odium's thirteen-year
ownership would prove to be the studio's glory years - the Odium era. Odium appointed Leo Spitz
as RKO's president, while Pandro Berman, Lee Marcus and Cliff Reid stayed on as production
supervisors. Odium stopped all expensive productions. Within a year of purchasing the corporation,
he was actually able to report a profit. Odium consolidated RKO subsidiaries, sold new common
stock, and refinanced the corporation's debts. RKO began crawling out of its hole - towards its
7
golden age, from the middle 1930s to the middle 1940s.
Odium's timing proved to be impeccable. He made Pandro Berman head of production, and
released Top Hat, the 1935 Astaire-Rogers film, the biggest hit the studio had ever had. Leo Spitz,
president of RKO, had long experience in the film business and was considered to be the country's
foremost authority on bankruptcy law. (Curiously, Spitz rarely went to the movies, preferring to
relax at the racetrack.) While Odium and Spitz reorganised RKO's distribution and theatre chain,
they left production in Berman's more capable and experienced hands. Hits flowed: Roberta, Shall
We Dance? (1937), Alice Adams (1935), The Informer (1935), Stage Door (1937), Swing Time,
Follow the Fleet and A Damsel in Distress (1937). In 1937 Spitz invested in production, putting
money in B-films intended for the double-feature market. Having accomplished these goals, Spitz
tired of Odium looking over his shoulder - resigned to enter independent production.
In 1938, seeking higher profits and an escape route from his bankrupt theatre chain, Odium hired
George Schaefer to replace Spitz, and appointed Berman vice president in charge of production, a
position he had held in fact, if not title, for several years. Berman continued his string of successes:
Bringing Up Baby (1938), with Howard Hawks directing Cary Grant and Katharine Hepburn in one
of the first and best of the screwball comedies; Room Service (1938), with the Marx Brothers; and
Carefree (1938) the eighth Astaire-Rogers film, with music by Irving Berlin. Looking back, the core
of hits came from Fred Astaire and Ginger Rogers. Performing together for the first time in Flying
Down to Rio in 1933, Fred and Ginger went on to become an institution, dancing and singing in a
series of great musicals, including The Gay Divorcee (1934), Top Hat and Swingtime (1936). As a
team, they balanced each other: he was debonair, an unassuming and somewhat innocent man-
about-town, bent on winning her chivalrously if possible, but if not, not. She was bright, sassy and
suspicious, her chorine background somewhat shaded by his interest. He gave her class, and she gave
him sex-appeal. And did the public - and later serious critics - love their dancing? In 1 935, Fred and
Ginger made it to the top-ten star polls, where they remained until 1937. Odium was a skilled
8
enough leader to let his stars be stars.
As the 1930s came to an end, RKO experienced mixed fortunes. Schaefer delivered Gunga Din
(1939), a rousing adventure tale starring Cary Grant, Victor McLaglen and Douglas Fairbanks, Jnr,
which was the most expensive RKO picture to date, and a lavish remake of The Hunchback of
Notre Dame (1939), with Charles Laughton. A new talent appeared on the scene. Orson Welles
scared the country witless in 1 938 with his radio broadcast of H. G. Wells' The War of the Worlds,
and Schaefer hired him to make three films. The start of the war in September 1939 cut off the
lucrative foreign markets, and RKO, which had been generally solvent under Odium, was suddenly
unable to recoup its investment from Schaefer's big-budget spectaculars. During production of The
Hunchback of Notre Dame, Berman decided that this would be his last film for RKO. He had grown
tired from the endless changes of management, the constant money worries, and the long and
thankless hours. In addition, he disagreed with Schaefer's choice of hiring Welles. Ironically, as
Berman was leaving for MGM, Orson Welles and his Mercury Theater were beginning the process
9
of making Citizen Kane.
For Odium, Kane was simply trouble. He received a call from Nicholas Schenck on 1 1 April
1941, in which Schenck said: '[I am] prepared to pay you what it cost, which [I] understand is
$800,000, if you will destroy the negative and all the prints.' Odium knocked back the offer, the
Hearst press attacked the film, and it received few bookings outside RKO theatres. Thus, while
Kane received critical raves, it initially lost about $160,000. Odium's preference was for low-budget
series films based on continuing characters like the Saint (five films), the Falcon (eleven films) and
the Mexican Spitfire (eight films). Two other series, all favourites of radio audiences, were produced
by independents and released by RKO: the Dr Christian films with Jean Hersholt, and the Lum 'n'
Abner films with Chester Lauck and Norris Goff. Schaefer protested at the lowering of the quality
of an RKO product and Odium fired him, bringing in new production boss Charles Koerner. His
first big hit - the inflammatory, anti-Nazi melodrama Hitler's Children (1943) - cost only $200,000
to make but within a year of release had grossed RKO more than $3 million. Koerner was skilled
at making B-films, and approved the complex Val Lewton-produced horror films, Jean Renoir's This
The studio system at its best: stars and grace - Fred Astaire and Ginger Rogers (Top Hat, RKO Radio Pictures)
1 50 |
Land Is Mine (1943) and Robert Siodmak's The Spiral Staircase (1946). But Koerner died in 1946,
and yet another studio boss was needed. Koerner had kept production costs low, but Odium took
advantage of the surge in audiences during World War II to keep RKO in the red through growing
profits from the theatre chain. With the war boom, this worked, but then anything might have
worked, as citizens flocked to the box offices in record numbers. Odium succeeded - finally -
10
because all studios did.
In 1943 RKO showed a $7.6 million profit - ten times greater than the previous year. Odium
retired all accrued debt and began paying dividends in 1944. But in truth, Odium was setting up
RKO for his cash-out, and he began prowling. In July 1944 billionaire Howard Hughes incorpor-
ated the California Pictures Corporation. It took time for Odium and the eccentric Hughes to make
a deal but Odium knew he had a sucker on the line, as Hughes - who had made The Outlaw in
11
1943 - longed to return to the movies and was interested in buying a studio.
Odium offered Hughes not only a vertically integrated company, free of debt, but a unique
corporate strategy. Odium had embraced the independent producer, making RKO the haven for
the ambitious independent producer-director. It began in 1936 when Odium signed Disney and
Investor Floyd Oldum, the man who kept RKO alive

RKO AND DISNEY 151
continued in 1941 when he signed Sam Goldwyn - both away from UA. Under Odium's distri-
bution and exhibition skills, both prospered. Odium also approved deals with an impressive list of
film-makers: Rene Clair, John Cromwell, Edward Dmytryk, Richard Fleischer, Norman Foster, Joseph
Losey, Leo McCarey, Dudley Nichols, Nicholas Ray and Jacques Tourneur. He approved the tra-
ditional (The Bachelor and the Bobby-Soxer, 1947, a comedy with Cary Grant and Shirley Temple),
the controversial {Crossfire, 1947, starring Robert Ryan as an anti-Semitic murderer), films noirs
(Desperate, 1947, a taut Anthony Mann film with Raymond Burr as a vicious gangster), the home-
spun (The Farmer's Daughter, 1947, in which Loretta Young won a best actress Oscar), and even
high art as in Mourning Becomes Electra (1947, a rare Dudley Nichols-directed feature). In terms
of overall artistic ambitions and achievement 1947 was one of RKO's best years, but economically
it was a disaster. For the first time in over five years RKO lost money - $1 .8 million. Odium needed
12
to sell soon.
In 1947 Harry Warner made Odium a gift by paying $4 million to purchase RKO's newsreel div-
ision. Under the terms announced on 28 July 1947, Warner got the New York studio, the staff and
all equipment. The sale showed Hughes that Odium was willing to sell RKO in parts, the billionaire
13
had better decide soon if he wanted a whole studio.
Hughes' Destruction of RKO

Serious negotiations between Odium and Hughes began in January 1948. After many poolside
meetings, the pair completed the deal in May of that year. Odium had made his investment profit,
but thereafter RKO was doomed. Hughes made his alter ego, Noah Dietrich, president of RKO, and
assigned himself the new position of managing director in charge of production. Suddenly, West-
erns starring Tim Holt were back in (five in 1948), but Hughes eccentrically approved a mishmash
of features: Blood on the Moon (1948, a noirish Western with Robert Mitchum and Barbara Bel
Geddes); The Boy With Green Hair (1948, which gave Joseph Losey his first chance to direct); Joan
of Arc (1948, a ponderous adaptation of the Maxwell Anderson play starring Ingrid Bergman); They
Live by Night (1949, Nicholas Ray's outstanding first feature). Contributions to genre history
notwithstanding, Hughes viewed RKO as a play toy. He was so rich he cared nothing about
14
profits.
In retrospect, it is clear that from May 1948 to 1955 Hughes destroyed RKO. In 1949 he made
RKO the first of the majors to agree to sell its theatre chain. Production was cut from one release a
week to one a month. It became routine behaviour for RKO to announce a schedule of releases and
then never fulfil its promises. By 1953 Hughes had lost a total of nearly $40 million. He then dis-
mantled RKO in the mid-1950s: the studio lot went to the Desilu company (owned by Lucille Ball
and Desi Arnaz), the films to General Tire. RKO formally went out of the movie business in 1957. TV
was the driving force, as the broadcast holdings of General Tire motivated its purchase of RKO's film
library, and the hit show of Lucy and Desi motivated them to buy the studio lot. Production ceased
in 1957 when the lot was handed over. In January 1957 RKO disbanded its entire domestic distri-
bution system, closing its film exchanges, and contracted with Universal to distribute productions in
RKO AND DISNEY 153
the United States. Hughes had made studio system history as the first owner to take a member of
15
the Big Five out of business.
Disney's Rise to Full Studio Status

Floyd Odium's greatest deal at RKO had been signing away Disney from UA. In 1935 his backing
made it possible to complete Snow White and the Seven Dwarfs, a $1 million, feature-length pro-
duction that nearly bankrupted Disney. Without RKO's distribution and theatres, Snow White
would have never stood a chance. The film made vast profits for Odium and fashioned a positive
image for RKO. It broke the box-office record for US grosses then held by Warners' pioneering The
Singing Fool, and grossed far more than any other RKO release ever had - an estimated $8 million.
This made Snow White RKO's most profitable film of the year, and new owner Floyd Odium loved
it. Thereafter Disney never had such a big hit, but the company did whet Odium's appetite for
16
profits.
Snow White would soon lose its title as Hollywood's highest grosser to Gone with the Wind,
but Odium figured that he had turned Disney into a feature film-maker for children. Indeed, as
Odium looked at the receipts he knew millions had seen Snow White - but because many were
children, they paid an admission of only 10 or 1 5 cents. This was fine as long as Disney kept costs
in line. But Walt Disney wanted his company to expand. He hated owing his financial success to
Odium. In April 1940 Disney reorganised with its first public offering of 155,000 shares of 6 per
cent cumulative convertible preferred stock at $25 par value, and 600,000 shares of common stock
at $5 a share. Due to the company's reputation, based primarily on the phenomenal success of
Snow White, the stock sold quickly, giving Disney the capital it needed to continue with its works
in progress. From Odium's point of view, Disney and his stockholders now shared the future risks.
A pragmatist, Odium knew that Disney could not make one Snow White after another. Although
Pinnochio (1940) grossed well at the box office, no profits were made. Fantasia (1940) grossed
even more and piled up even greater losses. But Odium absorbed less loss than had Disney let him
17
manage the finances.
Nevertheless, Odium pressured Disney to cut costs. In 1941 Disney proposed wage cuts, engen-
dering a bitter strike. The result of the strike, settled after weeks of nil production, was the naming
of the Screen Cartoonists Guild as the official negotiator for Disney studio employees. This signalled
the beginning of a rocky road for Disney during the rest of the studio era (contrary to the myth of
a continuous rise to success Walt Disney always tried to perpetuate). Disney prospered during
World War II only with government contracts. In 1943 and 1945 Disney produced (and RKO dis-
tributed) two short, live-animated featurettes. Saludos Amigos (1943) grossed $1.2 million for a
cost of $300,000, while The Three Caballeros (1945) grossed $4 million for a cost of $2 million.
Disney - with Hughes as a thorn in his side after 1 948 - decided to re-tool, and turned to live fea-
18
tures, television programmes and an amusement park - Disneyland.
Still, Disney sought to make another Snow White. Peter Pan, which reached movie screens on
5 February 1953, cost an estimated $4 million. The film proved no money-maker. Walt Disney
Moustached Walt Disney, brother Roy to his left and their workers
never would be able to follow up Snow White, and thus regularly re-released it - as in 1952 when
it alone made the Disney bottom line turn black. But he then - smartly - used these profits to set
up of Disney's own distribution arm. 'The whole damn thing was', Disney told one reporter, 'the
fact that I was able to build an organization, and point it at certain goals and hold it together'.
19
Disney truly joined the studio system only in 1953 when it established Buena Vista Distribution.
Before Buena Vista, Odium had saved Disney by the distribution deal through RKO. Hughes
forced Disney to vertically integrate to remain a small but viable member of the studio system by
setting up Disney distribution. Walt needed an edge and so turned to horizontal integration though
theme-park development and TV production. Disney developed its own international distribution,
but never had to re-learn what to do after theatre ownership. Disney provided the model for what
to do in the modern Hollywood studio system. Together - Walt out front, his brother Roy with the
books - the Disney brothers provided the sort of leadership a well-run studio corporation needed,
although they were lucky, establishing vital international distribution just as RKO left an opening.
Disney's use of merchandising, television deals and theme parks pioneered the model for the
modern media conglomerate. Disney's rise in the 1950s signalled the end of the classic studio
system era as much as any single change in the history of the Hollywood studio system.
RKO AND DISNEY 1 5
Notes
1 . Richard B. Jewell with Vernon Habin, The RKO Story (London: Octopus, 1 982) stands as the sole picture
book history based on corporate records as Harbin remained corporate archivist well after RKO ceased
movie-making. The RKO studio archives for some years were preserved in a warehouse on Vermont Ave
in Los Angeles. Harbin was later succeeded as archivist by John Hall (both deceased in 2004). When in
the middle 1980s, Turner Entertainment purchased the RKO film library, the archives came into its
possession. For a time they were housed at the Turner office in Culver City (the former MGM lot), and
then later moved to Turner's corporate headquarters in Atlanta. Turner no longer allows scholars access
to this material.
2. Variety, 3 January 1 933, p. 4.
3. The Magazine of Wall Street, 1 4 April 1 934, p. 396; The Magazine of Wall Street, 29 September 1 934,
pp. 602-3, 625.
4. This is based upon Richard B. Jewell's intensive look at the RKO for his (JSC dissertation, 'A History of
RKO Radio Pictures, Incorporated, 1928—1942'. The records Jewell examined and Harbin lovingly took
care of were for production only. But the examination is the most thorough of any studio save Balio's on
United Artists. For this paragraph, see Jewell and Harbin, pp. 24-40. 1 shall not cite the Jewell
dissertation except in rare cases as it is unpublished; Jewell and Harbin inform all notes in this chapter.
5. Business Week, 1 August 1 932, p. 65; Floyd B. Odium, Selected Speeches of Floyd B. Odium -
1930-1960 (New York: Random House, 1960), pp. 33-7.
6. Barrons, 9 November 1931, p. 18; Barrons, 4 January 1932, p. 16; Barrons, 2 September 1935, pp. 6,
13; Barrons, 2 December 1935, p. 7; Barrons, 9 May 1938, p. 8; Barrons, 19 September 1938, p. 20;
Barrons, 4 September 1 939, p. 3; Poor's Industry Survey, Motion Picture Industry (New York: Poor's
Publishing Company, 1932), p. 23; The Magazine of Wall Street, 1 February 1936, pp. 446, 478; The
Magazine of Wall Street, 1 4 April 1 934, p. 396; The Magazine of Wall Street, 29 September 1 934,
pp. 602-3, 625; Christian Century, 8 January 1933, p. 183; Raymond B. Fosdick, Jnr, John D.
Rockefeller, Jr. A Portrait (New York: Harper & Brothers, 1956), pp. 265-9.
7. See Odium, particularly pp. 1 5-37 on his view of investments in the 1930s. See also Forbes, 1 5 March
1982, p. 126; Fortune, September 1935, pp. 50-1, 100; The New York Times, 4 May 1943, p. 33;
Variety, 25 November 1936, p. 7; Variety, 22 November 1941, p. 5; The New York Times, 19 June 1942,
p. 27; The New York Times, 20 June 1942, p. 8 Variety, 4 March 1942, p. 2; Business Week, 28 May
1955.
8. The New York Times, 1 5 May 1 938, p. 27; The Velvet Light Trap, no 1 0. (Fall, 1 973), pp. 1 7-22.
9. The Magazine of Wall Street, 6 November 1 937, pp. 92-3, 1 23-4; The Magazine of Wall Street, 22
May 1937, pp. 158-9, 194-5; The Magazine of Wall Street, 23 April 1938, pp. 20-1, 61-2; The
Magazine of Wall Street, 1 2 August 1 939, p. 448; The Magazine of Wall Street, 1 4 January 1 939,
pp. 362-3, 398-9.
10. Variety, 4 March 1942, p. 2; Variety, 22 December 1943, p. 33; Fortune, May 1953, p. 212; The 1943
Film Daily Year Book, p. 53.
11. Variety, 12 July 1944, p. 1; The Magazine ofWall Street, 22 July 1944, pp. 413-14.
12. Fortune, March 1945, pp. 153-4, 158, 200, 203.
13. Business Week, 10 May 1940, p. 47; Motion Picture Herald, 2 August 1947, p. 22; Variety, 8 January
1947, p. 1.
14. Variety 28 January 1948, p. 1; Variety, 1 1 February 1948, p. 1; Variety, 18 February 1948, p. 1; Todd
McCarthy and Charles Flynn (eds), Kings of the Bs (New York: Dutton, 1975), pp. 185-96 for a case
study of how Hughes operated.

156
I
15. Variety, 13 August 1947, p. 1; Variety, 24 March 1948, p. 1; Variety, 5 January 1949, p. 1.
16. 'Interim Letter to Shareholders', 31 March 1951 Correspondence and company records are
. at the Walt
Disney Archive in Burbank, Calif. But the studio permits only those who aim for positive analysis to
enter. I was able to gain entrance once - only because convinced them was only there to document
I I
Disney's pioneering efforts in the coming of sound. So we are generally forced to the business and trade
press, plus Bob Thomas' official biography - Walt Disney: An American Original (New York: Simon and
Schuster, 1976). Thus, to write the history of Disney's business operations one is forced to closely read
the trade and business press found in Variety, Business Week, Fortune, Motion Picture Herald and The
Wall Street Journal.
17. Variety, 3 March 1936, p. 1; Motion Picture Herald, 25 December 1937, p. 21; Motion Picture Herald,
12 February 1938, p. 16; Motion Picture Herald, 16 July 1938, p. 62; Motion Picture Herald,
28 September 1940, p. 85; Thomas, pp. 165-6; Jack Kinney, Walt Disney and Assorted Other
Characters: An Unauthorized Account of the Early Years at Disney (New York: Harmony Books, 1 995),
p. 157.
1 8. Motion Picture Herald, 1 3 March 1 943, p. 8; The New York Times, 1 2 August 1 947, p. 27,
19. Films in Review, May 1951, pp. 7-9; Thomas, p. 228; Daily Variety, 26 June 1998, p. 3.
12
The Minors: Universal, Columbia and United

Artists, plus the B-film Factories
Universal Pictures, Columbia Pictures and United Artists constituted the studio era's Little Three.
These corporations simply were never able to match the economic muscle of the Big Five because
they did not own theatres. The Big Five took the best theatre bookings, and then shared marginal
bookings with the minors. Thus grosses were limited - and hence so were profits. So these three
Hollywood studios produced and distributed, but had to deal with the major theatre owners, the
Big Five, to gain bookings to present their films. Their leaders were limited in the profit-making
strategies they could employ. Their key tool was distribution control: they could and did book films
throughout the world. The other major difference between major and minor studios has to do with
output. Major studios mostly made A-grade, high-budget films, with some B-grade, low-budget
films. A minor studio made mostly B-films, with an occasional A-film. The number and types of A-
films produced in a season depended mainly on the financial health of the company and the
strengths of its personnel. Studio budgets tell much of the story. MGM budgeted $500,000 on
average for each of its top-grade A-pictures during the Depression; Warner Bros., which referred
to itself as 'The Ford of the Movies', produced its
1
-films at half that amount; and the minors put up half that.
Universal
Universale strategy for film production during the studio era divides into five eras under five pro-
duction regimes: Carl Laemmle, Jnr (1930-5), Charles Rogers (1936-7), Nate Blumberg and Cliff
Work (1938-45), Leo Spitz and William Goetz (1946-50), and finally Edward Muhl (1951-9). Since
Universal owned no theatres, its New York office handled only booking the films around the world.
None of these talented men could - as much as they tried - vault Universal into major studio status.
Only in the 1960s, when Lew Wasserman's MCA acquired Universal, did the company ascend to
2
the top of the studio system.
By 1930 founder Carl Laemmle was ready to take a less active role in his business, having set
up Universal City fifteen years before. Universal was in weak shape as the Great Depression started.
Laemmle, aged sixty-three, then appointed his son, Carl, Jnr, to become the head of production at
Universal. Carl, Jnr, started big with All Quiet on the Western Front (1930), based on Erich Maria
Remarque's classic anti-war novel, signalling his intent to do what his father had not - carve a niche
for Universal in the first-run market. To help adapt the novel, Universal hired the playwright
Maxwell Anderson, the author of the famous anti-war drama What Price Glory? Produced at a cost
158
I
of nearly $1.5 million - a record amount for Universal - the film was critically acclaimed for its vivid
and graphic portrayal of World War I trench warfare. To make this landmark picture, Junior
Laemmle, as he was known, ordered the construction of a small town consisting of thirty-five sets,
and staged the battle scenes over a 1,000 acres Of the studio's Irvine ranch. His initial entry into
the prestige market won an Oscar for best picture, but gave false promise for the future. The
company had been making around $1 million per year in profits through the 1920s, but in 1930
3
with the massive loss - Universal lost nearly $2 million. *
Junior Laemmle, supported by his father, turned to lower-cost features. The two working
together never made a profit for Universal, even with popular productions of Dracula and Franken-
stein. This horror-film cycle began in 1930 when Junior signed Lon Chaney, Snr, to star in Dracula
(1931), based upon a recent Broadway play, which was itself based on the 1897 Bram Stoker
novel. Chaney died before production could start, so Bela Lugosi, who created the role on Broad-
way, stepped in. Dracula was a hit. Following this rare success at the box office, Universal turned
to another classic novel, Mary Shelley's Frankenstein. Junior Laemmle told The New York Times:
'The cycle that we started with Dracula and Frankenstein can go on indefinitely. It doesn't have to
go out of favor like gangster pictures.' He was right. The Mummy came in 1932, The
4
Invisible Man the following year and The Bride of Frankenstein in 1935.
But Universal was in dire trouble; losses steadily mounted. What Carl, Snr, had built was slowly
crumbling. The devastating impact of the Great Depression and the effects of gross nepotism (the
beneficient 'Uncle Carl' imported shiploads of relatives and friends from Germany to work at
Universal) wrecked the studio's profit margin. In March 1931 Laemmle fired 350 people and shut
down production entirely for six weeks until the end of April. At the end of 1932 he cut salaries
and dropped 400 more workers, because of the studio's $1 .2 million deficit for fiscal 1932. In fiscal
1933 Universal again faced an overall loss - some $1 million. Laemmle went looking for backers
so that he could keep his company. He obtained a loan from Standard Capital Corporation, which
enabled Universal to weather this financial storm but set in motion the ultimate end of his owner-
ship. Dracula's Daughter would be the last of the Laemmle green-lighted horror films when it com-
menced production in January 1936. By March 1936 Uncle Carl Laemmle had lost his company,
5
and with the change in leadership came a change in policy.
Universal was taken over by J. Cheever Cowdin - an investor who, like RKA's Floyd Odium
bought ailing companies to turn them around and then sell at a profit. To back his final loan, Uncle
Carl had given Cowdin's Standard Capital an option to buy his stock. Laemmle missed his payment
and Cowdin exercised his option; the Laemmles lost Universal. On 28 March 1936 it was formally
announced that Universal Pictures would pass from Laemmle to Cowdin on the morning of Thurs-
day, 2 April 1936. The Laemmles got $4 million in cash on the day of the transfer. Uncle Carl - and
6
his son - ended all association with Universal.
J. Cheever Cowdin was an Eastern blue blood who was simply investing in Universal. Cowdin
never planned to do anything but reorganise the company, wait and sell - which he did in 1 945. He
spent far more time with his other investments in other industries - chemicals, aviation and auto-
THE MINORS: UNIVERSAL, COLUMBIA AND UNITED ARTISTS, PLUS THE B-FILM FACTORIES | 159
mobiles - than with Universal. Universal was just another corporation, another investment, but it
was an investment Cowdin would do well with. For a year, he hired former Paramount executive
Charles Rogers to run Universal City, while Cowdin remained in New York handling distribution and
financing. Cowdin approved budgets and scripts and, once these were prepared, directors and pro-
duction supervisors had no power; they had to shoot as written. Rogers ended the production of
horror pictures entirely. Still the red ink flowed. Universal lost $1 .6 million in 1936 and then $1 mil-
lion in 1 937. Cowdin looked for someone who could do better than Rogers, and found Nate Blum-
berg, whom he appointed production head in 1 937. Yet Rogers left Blumberg something to work
with - fourteen-year-old Deanna Durbin. Over the Blumberg era - to 1 945 - Durbin made twenty-
one box-office hits. She became the centre of the Pasternak unit, which included producer Joe
Pasternak, director Henry Koster, musical director Charles Previn and cameraman Joe Valentine.
Together, they turned the new Universal into the black for the first time since 1 930 - as 1 938 ended. 7
In November 1939 Blumberg and Cowdin proudly announced a $1.5 million profit. Their
Universal had found its place as a profitable minor company, and the war years of the early 1940s
would provide the steady profits Cowdin needed to tempt a buyer. Blumberg's success had sur-
prised industry insiders as he only had experience in the exhibition end of the business. But that
background had worked for Barney Balaban and Nick Schenck - and so was tried at Universal.
Blumberg placed Cliff Work in charge of day-to-day production at Universal City. Work was
another experienced theatre man, who had worked for Blumberg previously.
From the ashes of the Laemmle empire rose the new Universal - that of Cowdin, Blumberg
and Work. Blumberg brought radio stars to the lot, for example Edgar Bergen and Charlie
McCarthy. He green-lighted B-films with Maria Montez and Jon Hall, in Technicolor. In 1942 Sher-
lock Holmes and the Voice of Terror became the first of twelve Universal films in a series featuring
8
Basil Rathbone as the famous sleuth and Nigel Bruce as Dr Watson.
But it was Cowdin and Blumberg's hiring of a minor radio team, Bud Abbott and Lou Costello,
in 1 940 that made the studio's fortunes. A Night in the Tropics (1 940) catapulted the duo to such
fame that they ranked with the stars of the Big Five in exhibitor polls. For Universal during World
War II Abbott and Costello's eleven wartime comedies were the studio's dominant money-makers.
The duo simply brought their long-prepared routines to the screen. Blumberg also cast them in
genre parodies, including Pardon My Sarong, a 1942 spoof of the wildly successful Paramount
Hope-Crosby Road pictures. Their box-office returns were consistently in the $2 million range, and
so the duo defined Universal to the public. Cowdin took a hard line on costs, never spending more
than $500,000 per picture, which would have been considered a low-budget film at MGM. Led by
Abbott and Costello, Universal saw corporate profits top $3 million per year from 1942 to 1947. 9
More short subjects were produced. The studio offered a new serial every three months, and
two newsreels per week (Universal was the only non-Big Five member to tender a newsreel serv-
ice). Throughout the war, Universal City was busier than it had been in any time in its history.
Cowdin began to think about selling. To attract a buyer, he poured money into assets, adding two
new sound stages to Universal City, and hiring stars and film-makers who created films such as
160
I
Rene Clair's The Flame of New Orleans (1941), with Marlene Dietrich; Alfred Hitchcock's Shadow
of a Doubt (1943), with Teresa Wright and Joseph Cotton; Pittsburgh (1942), with John Wayne
and Randolph Scott; and The Suspect (1944), with Charles Laughton. He even approved Univer-
sale first two films using Technicolor - Arabian Nights (1942), produced by Walter Wanger, with
Sabu, Maria Montez and Jon Hall, and a remake of Phantom of the Opera (1943), starring Claude
10
Rains. Universal by 1945 was beginning to look more and more like property ripe for sale.
On 31 July 1946 Cowdin announced he had sold Universal to Leo SpTtz and William Goetz's
International Pictures. Both buyers had long experience in the film business. Lawyer Spitz was
heavily involved in reorganising Paramount's theatre chain, and then ran RKO for a time (see chap-
ter 1 1). Goetz had a longer history in the business. In 1920, upon finishing high school, he took
up an offer from his older brother Benjamin, the VP of Herbert J. Yates' Consolidated Films (see
p. 168). In 1924, aged twenty-one, Goetz then landed a job as production manager for silent star
Corinne Griffith, who had just formed her own company. In 1930, he joined Fox as producer and
later wed Louis B. Mayer's daughter Edith. Goetz endeared himself to Mayer and Mayer's boss,
Nicholas Schenck. When Goetz lost his job at Fox in 1932, he made no attempt to seek a position
at MGM, even though it would have been the obvious solution to unemployment. Instead Goetz
approached Nick Schenck, who got him a job with his brother Joe's new company, Twentieth Cen-
tury Pictures. After the 1935 merger with Fox (see chapter 9), Goetz became production VP under
Zanuck. When Zanuck went off to World War II, Goetz temporarily replaced him. Zanuck returned
after a year and Goetz wanted to form his own company, but he knew that he had no experience
in distribution and exhibition matters. So he partnered with Spitz, who did. A new company needs
a distributor, and Spitz had not burned his bridges at RKO, which was anxious to pick up inde-
pendent producers. Anticipating appealing to foreign markets in the post-World War II era, Goetz
and Spitz chose International as their corporate name as it allowed for ad copy ('Good Entertain-
ment Is International'). Their first release was Casanova Brown on 3 August 1944. 11
Upon taking charge of production in the autumn of 1946 at the new Universal-International,
Goetz set an informal tone at Universal City. He seldom wore a tie, generally going to the studio
in polo shirts. His table in one corner of the commissary was always the scene of much levity during
the lunch hour. He enjoyed entertaining out-of-town visitors, exhibitors particularly, and frequently
would conduct them personally on tours around the massive Universal back lot. Yet this informal-
ity masked a shrewd entrepreneur. Spitz agreed that the seven-year contract was dying, and
so gladly dealt with agents. When Lew Wasserman, agent of MCA, offered James Stewart for
Winchester 73 for no salary, but half the profits, Goetz and Spitz grabbed the chance. Goetz told
The New York Times that 'some people laughed at me when they learned Jimmy Stewart made
$700,000, but they forgot Universal also made $700,000'. A splurge of such percentage deals fol-
12
lowed, and the studio system rules changed forever.
Goetz - with Spitz handling the distribution and financial matters - had no personal liking for
Abbott and Costello's work and even less for the menagerie of monsters he inherited, but was
keenly aware of their box-office power. So, between releasing prestige fare such as J. Arthur Rank
British imports Black Narcissus and Great Expectations (both 1946), Goetz begrudgingly gave the
go-ahead to such box-office bonanzas as the Abbott and Costello monster matches. This shotgun
marriage of art and popular entertainment, the uneasy compromise that Goetz and Spitz chose to
live with, saved Universal-International from a postwar demise. Goetz fired most of the old Uni-
versal staff - save for Cliff Work and producer Edward Muhl. Spitz and Universal-International
13
moved to new digs in New York City.
Spitz pressed Goetz to imitate RKO and seek independent producers. Universal-International
became the home of Diana Productions (Walter Wanger, Joan Bennett and Fritz Lang), which pro-
duced Scarlet Street (1946) and Secref Beyond the Door (1948), and a unit headed by Mark
Hellinger, which made The Killers (1946), Brute Force (1947) and The Naked City (1948). Average
budgets rose to $1 million. Universal-International seemed headed towards the big time. Unfortu-
nately, these successes notwithstanding, $4.3 million in losses piled up during 1948 and 1949. In
1949, Universal City closed temporarily. By 1950 - using only deals with Lew Wasserman - Uni-
14
versal-International was making profits again.
But Spitz and Goetz decided that they had had enough and wanted to cash-out. On 5 Novem-
ber 1951, The Los Angeles Times headlined: 'Decca Plans To be Largest Universal Films Stock-
holder'. In July 1952 Spitz and Goetz sold to Decca Records Corporation. Edward Muhl became
head of production, and looked for independent deals with clients other than Lew Wasserman's.
Wasserman's client James Stewart continued to create a number of fine money-making Westerns,
all directed by Anthony Mann. Other stars lured to independent deals with Universal-International
under Decca included Tyrone Power, Gregory Peck and Alan Ladd. Milton R. Rackmil, Decca's pres-
15
ident, took Spitz's place in New York, while Muhl became the new production VP.
During the remainder of the 1950s Decca did well with a combination of its low-cost series
and glossy melodramas such as Magnificent Obsession (1954), directed by Douglas Sirk and
starring Rock Hudson. Producer Ross Hunter became the studio's most reliable money-maker. His
Written on the Wind (1956), Imitation of Life (1959) and The Tarnished Angels (1958), all directed
by Sirk, starred the likes of Lauren Bacall, Dorothy Malone, Lana Turner and Robert Stack, and
made the new Universal-International under Decca a consistent profit-maker. In 1957 the Univer-
sal melodramas were honoured when Dorothy Malone won the best supporting actress Academy
Award for Written on The Wind. But in 1958 the red ink began to flow again. So on 18 Decem-
ber 1 958 Universal sold its 367-acre studio back lot for $1 1 .25 million to Wasserman's MCA, then
leased back studio space at $1 million a year. In June 1962 the MCA talent agency was converted
to a holding company, which acquired Universal. Ironically Universal's all-time biggest money-
maker prior to 1959 had been The Glenn Miller Story (1954), packaged for James Stewart by his
16
agent - Lew Wasserman.
Columbia Pictures
Columbia Pictures never did well in the 1920s but, with the dual strength of brothers Jack and
Harry Cohn, at least it survived. Jack established international distribution, and ran it from New
162
I
York City while Harry lorded over Columbia's tiny studio on Gower Street in the heart of Holly-
wood's Poverty Row. The Cohns never had the resources to even consider buying a theatre circuit.
From this humble beginning the Cohn brothers ruled Columbia until their deaths - Jack in 1956
17
and Harry in 1958.
Harry Cohn exemplified the tough negotiator, the ruthlessly successful studio boss, but it was
Jack Cohn back in New York handling distribution who had the harder job. Jack faced a situation
in which the five major studios owned all the key theatres in the USA. He^had to wait his turn to
show even Columbia's best films. Jack had to scratch and claw his way along the hard road
through the coming of sound and past the Great Depression until prosperity came for all during
the early 1940s. Columbia Pictures came of age in 1934 with the release of Frank Capra's It Hap-
pened One Night, starring Clark Gable and Claudette Colbert. Harry Cohn was able to sign these
two stars only because MGM and Paramount wanted to 'punish' the pair for refusing certain parts
and loaned them to this backwater studio. But without Jack Cohn exploiting these marquee names
to sell the film to normally reluctant exhibitors, It Happened One Night would not have swept the
1 934 Academy Awards. Nor would the company have always made a profit until Jack died.
During the 1930s, Columbia relied for the bulk of its profits on its low-budget B Westerns and
its even lower-cost shorts, serials and cartoons. Columbia is too often remembered for only its few
The small (compared to Fox and Warners) lot of a minor studio, Columbia Pictures
high-cost productions - principally the work of Frank Capra. Yet while Cohn-produced A-
features The Jolson Story (1946) and Jolson Sings Again (1949), set studio records for grosses
during the classic studio era, Columbia ought to be remembered more for its profitable B produc-
tions, with stars like Buck Jones in the 1930s and Gene Autry in Westerns, and characters such as
Blondie (based on the perennially favourite comic strip character), Boston Blackie (from a popular
radio show) and the Lone Wolf (from a successful novel). Serials included Batman, and Terry and
the Pirates, and then there were the comic shorts of the Three Stooges. With scripts that were con-
stantly recycled, B-filming rarely lasted more than a week and, with efficient editing and post-pro-
duction work, B-films could move from studio to theatre in less than a month. The Three Stooges
productions typified Columbia far better than It Happened One Night. Audiences seemed unable
18
to get enough of Curly, Larry and Moe.
The 1930s started well enough for Columbia, but by 1931 the company decided to suspend
dividends until May 1 934, although it was still making money. Wall Street noticed. In May of 1 932
- with the USA economy at its nadir - Columbia struggled to fashion a film a week. Barbara Stan-
wyck, Walter Huston and Jack Holt were listed in a press release as Columbia's major stars; Frank
Capra, James Cruze and Irving Cummings were the ace directors. All were willing to work on the
cheap. The weekly payroll for the whole company during the first six months of 1932 averaged
$10,000; in July 1933 the Cohns announced that the new demand for double features - made
- pushed the 19
possible by the National Recovery Act payroll to $35,000 per week.
Profits in 1935 topped the former record set in 1929, which was considered the best year for
the movie business to date. Wall Street praised a company that owned no theatres but still could
make $1 .8 million. The Cohns used a variety of cost-cutting methods. They took on few long-term
contracts with stars, instead borrowing or signing actors and actresses (writers and directors, too)
for short-term commitments of one, two or at most three films. Harry Cohn was skilled at spotting
fads and trends, taking full advantage when a cycle seemed on top, abandoning it on its decline.
The B-films and programmers cost from $50,000 to $100,000, the A-grade pictures, no more than
$200,000. The Cohns also kept executive salaries low. In a 1939 Securities and Exchange Com-
mission poll, Columbia had only fifteen of the top 550 salary earners in the movie industry (exec-
20
utives and stars included).
In 1935 Columbia was doing well enough for the Cohns to buy 40 acres of an eventual 88
acres of ranch land in Burbank, which was used for all types of location. At the Gower Street studio
legendary actress Louise Brooks recalled, 'There was an office set, a street where they ran cars up
and down, a penthouse and a nightclub. You could make all of Cohn's pictures on those four sets.'
In March 1 935 the Cohns were praised by Barrons and The Magazine of Wall Street for not having
dragged their company into bankruptcy (as were Paramount, Fox and RKO). The late 1930s are
remembered for Ronald Coleman, who starred in Capra's Lost Horizon (1937); The Awful Truth
(1937), starring Irene Dunne and Cary Grant; and Capra's You Can't Take it with You (1938), which
won Columbia its second best picture Oscar. But still none of these A features made the millions
generated by the B-film output and the shorts. The story is that one afternoon in the Columbia
164
I
dining room during the late 1930s, Harry Cohn assured his sycophantic aides that he (Cohn) could
tell whether a picture was good or bad by whether his fanny squirmed - and his legend com-
21
menced.
The late 1 930s were not as kind to the studio as earlier years in that decade. Profits fell steadily
from a $1.8 million high in 1935, reaching precisely $2,000 in 1939. Columbia simply lacked that
one A-feature hit per year it had relied upon earlier. Indeed, in 1938, the average length of a
Columbia feature came to only sixty-six mi.nutes (far below MGM's ninety-minute average). Series
such as Blondie, Lone Wolf, Boston Blackie and Crime Doctor always made profits - just not very
big ones. In 1940-1, the Cohns realised that a change of strategy was needed, and invested in six
A-films costing $500,000 each. These were a success, with Here Comes Mr Jordan top comedy of
1941, for example. The year 1942 saw profits rise with the wartime attendance boom. Pulling in
the crowds that year were Fredric March and Loretta Young in Bedtime Story, Joan Crawford and
Melvyn Douglas in They All Kissed the Bride, and Rosalind Russell and Janet Blair in My Sister Eileen.
Columbia's biggest star during the World War II boom was Rita Hayworth, who featured in You'll
Never Get Rich (1 942), You Were Never Lovelier (1 942) and Cover Girl (1 944). Profits returned to
22
the $2 million range.
The war boom helped Columbia quadruple its net profits between 1940 and 1944. In Feb-
ruary 1 943 The Magazine of Wall Street rated Columbia's stock as highly as it did Warners' and
The Cohn brothers, Jack, the financial man (left),
Harry, the studio boss (centre)

Twentieth Century-Fox's, and gave the company a higher rating than RKO. However, Columbia
remained one of the Little Three despite this acknowledgment of its prosperity - it did not have any
theatres. Yet Jack Cohn managed wartime demand so well that by 1 943 more problems were caused
by occasional difficulties in securing favourable times and places to show Columbia's pictures than
by a lack of stars to feature in them. And the Cohns smartly prepared for the postwar era and were
able to springboard to even greater financial success in 1947 - posting a $3.7 million record profit.
Motion Picture Herald, in reporting on Columbia's economic position, was careful to note that
'during the past several years Columbia has enjoyed a generally improved financial position'. The driv-
ing force was TheJolson Story, the studio's biggest single grosser to date - at $8 million. The sequel,
Jolson Sings Again, did almost as well, becoming the industry's top-grossing film for 1949 at $5 mil-
lion. But the coming of TV and suburbanisation caused a downturn in audience numbers, so Jack
Cohn reissued a number of older films (fully reaping the profits of these completely amortised prod-
ucts), sought more efficient ways to extract revenues from overseas markets, and looked more to
independent producers to supply films. All these strategies worked in the long run, and eventually
23
propelled Columbia into full parity with Fox, Loew's, Warners and Paramount one decade later.
In December 1947 the Cohns denied reports that 25 per cent of the production staff had been
given notice, but over 200 employees were, in fact, let go. In 1949 they created Screen Gems for
TV production, headed by Jack Cohn's son, Ralph. Jack Cohn observed:
Showmanship will always prevail and return its reward. We ought to bear in mind constantly the public
does not care who makes the product, but cares a great deal about how good the product is. At
Columbia we have built a successful company without theaters, primarily because we have kept our
eye on showmanship product.
Screen Gems started by making filmed advertisements for TV - for BVD underwear and Hamilton
Watches, among others. It continued to use TV to promote feature films. It even began slowly
releasing B-films for telecasting. As Nick Schenck etal. hesitated, and dealt with their anti-trust
conviction, the Cohns took advantage of the void in the TV market and initiated talks with NBC
and ABC for the direct output of TV films. Moreover, the studio announced plans to release 104
24
pre- 1948 films to TV through Screen Gems and to increase production for TV.
For feature films, the Cohns in March 1951 began to solely pursue independent deals. They
made a deal with Stanley Kramer for him to produce twelve prestige films for Columbia. Kramer's
Death of a Salesman, 5,000 Fingers of Dr T and My Six Convicts cost around $1 million each and
easily earned back their investments. The Cohns then signed independent producers Edward Small,
Wallace MacDonald and Louis Rochemont. The biggest deal came when the Cohns bought Wald-
Krasna Productions from Jerry Wald of RKO. Yet there were some risks the Cohns were not will-
ing to take. In 1951 they turned down 3-D as uneconomical. In fact, like all other studios,
the Cohns wanted to develop and own their own process for widescreen filming, and developed
25
VitaScope.
1 66
I
in March 1953 the Cohns announced the launching of 'a year of unparalleled studio activity,
with nine films budgeted over $10 million'. They found 1 953's From Here to Eternity, which won
the Oscar for the best film of the year. Then the end came. In 1 956 Jack Cohn underwent an oper-
ation to correct a hernia, then developed an embolism and died. He was sixty-seven. Harry Cohn
had to carry on alone. He made a protege in Mike Frankovich, who negotiated a contract for
William Holden to co-star in The Bridge on the River Kwai (1957) for $50,000 and a 7.5 per cent
share of the profits. The film swept the Oscars and earned not only great box office but pioneered
the major ancillary returns from television. By 1957 not even Screen Gems could have anticipated
the tremendous public response that greeted these films as they began their trek across the
nation's airwaves in the autumn of 1957. In 1958 Harry Cohn died aged sixty-six. Despite his
wishes for no services, hundreds attended his funeral on stages 12 and 14 at Gower Street. Long-
time assistants sought to replace the Cohns, and a new era began. Screen Gems's success gave
the Cohn replacements a head start. But Columbia would never be the same without the Cohns'
quarter century of continuous leadership. In their own colourful words Harry and Jack Cohn spoke
with a common philosophy: 'Every Friday the front door opens and [we] spit a movie out into
Gower Street . . . [We] want one good picture a year. That's [our] policy . . .and [we] won't let an
exhibitor have it unless he takes the bread-and-butter product, the Boston Blackies, the Blondies,
26
the low budget westerns and the rest of the junk we make.'
United Artists (UA)

By 1930 it was clear to UA president Joseph Schenck that his gamble to bring a clear and consis-
tent corporate strategy to UA had failed. There were simply too many egos to deal with. In the end
he could not manage them and make UA a haven for independent production. Despite Schenck's
enormous capabilities as a leader, despite the fact that over and over again he extricated the
company from financial crises, he could not salvage the careers of UA's founding stars, nor could
he, in the end, resolve the split between the producing and non-producing stockholders (the
27
founding stars).
The only things that cheered up Schenck in the early 1930s were the cartoons UA distributed
for Disney. In a brilliant move, Schenck had tempted Disney away from Columbia. Walt Disney
resented Jack Cohn's block-booking method of distribution, which lumped his Mickeys with
inferior cartoons. As Fortune said at the time: 'Mickey Mouse has become a personality so notable
and so powerful that his independence had become inevitable.' In 1931, therefore, Disney broke
with Columbia and signed with UA. Disney's contract called for the delivery of eighteen Mickey
Mouse cartoons and thirteen Silly Symphonies for the 1932-3 season. The terms for the Mickeys
were based on a sliding scale, beginning with a split of 70 per cent to Disney and 30 per cent to
UA for the first $50,000 gross on each cartoon to a 30-70 split on everything over $75,000.
Disney received slightly better terms for the Sillies because of their greater production costs. Disney
had the exclusive right to Technicolor's three-colour process for cartoon production until the spring
of 1935. Using colour for the Sillies increased their production costs by about $1,500 each but
gave Disney the edge on his competitors, who had to make do with inferior colour processes. UA's
share of the gross from the Disney product in the 1932-3 season was $1 million, enabling Schenck
to declare a corporate profit. The hit of the nadir of the Great Depression was The Three Little Pigs
28
(1933), which cost $22,000 and grossed ten times that.
In the early part of 1933, Schenck decided to bolt. He and former Warners production chief Darryl
F. Zanuck formed Twentieth Century Pictures, which in 1935 merged with Fox Films (see chapter 9).
UA never recovered, and slowly sank to minor status without Joe Schenck's brother at MGM
to be its guardian angel. Schenck's successors at UA struggled to obtain enough films to fill a
meaningful distribution schedule. Many notable producers came and went, including Walter
Wanger, Alexander Korda and David O. Selznick. But only Samuel Goldwyn created his best work
for UA, including Dead End (1937) and Wuthering Heights (1939). But Goldwyn did not want to
remain the lone contributor to corporate profits, and in 1941 he moved his independent produc-
tion unit to RKO. Thereafter, UA plunged into the red ink and played a minor role in the studio
system throughout the 1940s. The company even managed to lose money during the World War
II boom. Independents were finding better terms elsewhere, particularly at Universal and RKO. 29
In 1951 founders Charlie Chaplin and Mary Pickford agreed to sell to a syndicate headed by
two New York entertainment lawyers, Arthur Krim and Robert Benjamin. The Krim and Benjamin
United Artists hung out its shingle just as any number of independent producers began to seek out
distributors to handle their efforts. Within the first year of operation Krim and Benjamin picked up
Stanley Kramer's High Noon (1952) and John Huston's The African Queen (1951), and reinvented
UA. The new UA began as an experiment in 1951 whereby agents, actors, directors and producers
found a safe haven. A new corporate model for the studio system came into being with Krim and
30
Benjamin - leaders now catered to their clients' wishes.
The B-Film Factories

Below even the minors came the pure "'B"-film factories' - Republic and Monogram. The Big Five
took the best theatre bookings and willingly shared marginal bookings with the minors. Republic
and Monogram were founded to serve low-income neighbourhoods and rural USA after the
double feature redefined exhibition in the middle 1930s. These two tiny corporations produced
and distributed only the lowest of low-budget films. Herbert J. Yates at Republic and W. Ray
Johnston at Monogram were corporate leaders who had to carefully formulate strategies to just
stay in business. Neither corporation survived much more than a generation. Republic had the
advantage because it also processed film; Monogram simply clung on - really only remaining alive
as the World War II attendance boom boosted all companies.
Republic produced and distributed 468 films from its founding in 1935 to its cessation as a pro-
ducer twenty years later, at an average rate of about 30 per year, until it began to slow down in
1950. Of its acting talent, only Gene Autry ever made it into the top-ten most popular stars, voted
by the exhibitors of the USA. In contrast to the other stars, at Republic he never made a film with
31
a budget that ever approached a third of the average A-picture - including his star salary.
1 68
I
Republic Pictures had its beginnings with Herbert J. Yates, who began his career in film pro-
cessing in 1915. In 1924 he established Consolidated Film Labs. The coming of sound and the
Great Depression drove nearly all small producers under, all owing Consolidated thousands of dol-
lars in film-processing bills. Yates took what remained of these small producers, and in 1935
merged them into Republic Pictures. He saw a new demand unleashed by the rise of the double
feature. So, for example, Yates acquired Nat Levine and his Mascot Pictures, which produced B
Westerns, serials and cheap action films with stars from John Wayne and Harry Carey to Gene
Autry and Bob Steele. In 1933, Gene Autry, a singer of country music on a Chicago radio station,
had sent a letter to Nat Levine asking for the opportunity to appear in motion pictures. Autry was
signed up for $100 a Week and, after The Phantom Empire (1935) proved to be a hit, became
32
Republic's biggest star.
While Republic produced and distributed Westerns, serials and assorted low-budget genre pic-
tures, singing cowboys (Roy Rogers and Gene Autry) were the studio's dominant stars. But during
World War II, Republic did so well that profits soared beyond $1 million per annum, a figure
unheard of outside the Big Five. Yates then set out to become 'respectable', and produced several
prestigious A-pictures, including John Ford's Rio Grande (1950), Orson Welles' Macbeth (1948)
and Frank Borzage's Moonrise (1948). Only one, John Ford's The Quiet Man (1952), ever made
money. Republic released its final serial in 1955. All other classic era studios - apart from RKO -
33
survived and reinvented themselves in the 1950s. Republic simply went out of business.
Republic owner Herbert J. Yates and his wife Vera W. Ray Johnston, invisible president of Monogram,
Ralston, who never became a top star the only known photograph
The owner and chief executive of Republic, Herbert John Yates, was born on 24 August 1880
in Brooklyn, New York, to immigrants from England. Although Yates began attending Columbia
University at night, at nineteen he became a full-time salesman for the Virgin Leaf Tobacco
Company. He took to the tobacco business and eight years later was appointed assistant to the
vice president in charge of sales at the Liggett & Myers Tobacco Company. Yates was soon rich.
With his newfound wealth, he turned to the movies in 1910, financing several 'Fatty' Arbuckle pro-
ductions. He moved into film processing, and then film production, with Republic, supplying B-
films and serials to 10,000 rural and small-town theatres. Singing cowboys Gene Autry and Roy
Rogers may have been Republic's biggest stars, but his operation also featured 'Wild Bill' Elliott,
Allan 'Rocky' Lane, John Wayne, Ray 'Crash' Corrigan, Judy Canova and Joan Leslie. Yates divided
his time between his West Coast studio and his New York office. He was a one-man band. 34
By 1939-40, Republic was working in a wide range of genres, including a family series (the
'Higgins'), a lawyer series ('Mr District Attorney') and even an occasional musical. It routinely turned
out some two dozen features per annum on a production budget that was less than MGM spent
on a single top feature. By 1940-1, Republic was doing remarkably well, returning gross rentals
of $6-7 million per annum with profits usually in the half million dollar range per year. While its
profits were roughly on a par with Columbia's, Republic's assets were far less. But as a subsidiary
of Consolidated Labs, Republic did enjoy some financial stability. And Yates was ruthless at the
top. For example, by 1940 its top star - Gene Autry - ached to get out of his contract, and even
35
walked out then later let himself be drafted so as not to be further exploited by Yates.
Yates's response to Autry's grievances was simply to develop a replacement - Roy Rogers. Pub-
licity proudly sold him as a sensational discovery who had made his first film appearance for Repub-
lic with the starring role in Under the Western Stars (1938). Actually, Rogers (whose real name was
Leonard Slye and who hailed from Duck Run, Ohio) had followed Autry's route to stardom by
singing first on the radio as part of The Sons of the Pioneers. Yates hired The Sons of the Pioneers
to back Autry, and Rogers' first screen appearances were as a member of the group. Ironically, in
The Old Corral (1936) Rogers even had a fist fight with Autry, who then forced him to sing a song
at the point of a gun! For a while Autry resented Republic's 'build-up' of Rogers, even though
Autry remained their number-one star of Westerns. When Autry was away, Rogers simply stepped
36
into the formula as 'Roy'.
Yates had less success with a major female hillbilly-singer Judy Canova. The Canova capers
were money-makers, but Canova, the hillbilly queen of Republic Pictures, made a dozen films for
the studio between 1940 and 1955, although none with the success of Autry or Rogers. Like her
male counterparts, she started out on radio, as part of a group, with her brother Zeke and sister
Anne, the Canova Cracker Trio, in 1932. Audiences during the Depression took them to their
hearts. They worked network radio programmes, and in 1 937 went to Hollywood to appear in two
Paramount films. (As noted in chapter 7, Barney Balaban raided radio for many of his stars.) In
1940 Canova accepted an offer from Yates for a long-term contract. Her first Republic film was
Scatterbrain (1940), in which she played a hillbilly heroine from the Ozarks. Canova became one
,7.
I
TW£ HOLLYWOOD STUDIO SYSTEM
of the studio's top money-makers, along with Autry and Rogers, but was mwer a cross-oner star
in their vein. She stayed with Yates until the end,, even after he last Gene Autry to Columbia ih
1 947 and Rogers to tension in 1951 . She continued to portray the hillbilly character she had
37
developed over the years - a true star rn rural America.
After the war, profits fell, but Yates aspired for more. He neatly organised hs offerings as
Jubilee, Anniversary, Deluxe and Premiere - each with a top title but hardly offering, a top product
Jubilee pictures were almost always the Westerns of Gene Autry and Roy Rogers. Ite top of Repub-
lie's line. They were shot in a week at about S5D.O0O per film Republic typically cranked out two
Jubilees per month, thus fulfilling half its production quota. A step up were the Anmwersary pic-
tures, with two-week shooting schedules and budgets twice to four times Ite base Vfestam prod-
uct. Deluxes began after the war and were a double step above the Anrnwersary firms. The Pmemere
releases were almost the budget of films of the major studios and lepiesented Yates* strategy to
break out of the low-budget, low-profit mould. Here we find films by the likes off John Ford. Fritz
Lang and frank Borzage. Yates also hoped that the Premieres would enhance Republic's pubic
image. Beginning in the late 1940s, Republic a tieiTipted to produce at least two or Three fta iieres
a year. John Ford's Rio Grande, for example, the first of hs three Republic films, had a thirty two-
day schedule and a budget of $1 ,214,899. Similarly, Republic invested $849,452 and ihirly-one
days in Frank Borzage 's Moonnse; ths included a $100,000 salary for the director. Fritz Lang's
5ecret Beyond the Door (1949) was shot rn thrrty-three days on a $615,065 budget Edward
Ludwig's Wake of the Red Witch (1948), with John Wayne and extensive tank and special-effects
work, also fell into the Premiere class. Shooting took thirty-nine days, plus an extra fifteen days of
tank work. (In the 1 940s Republic's mrniatuTe and tank department, headed by Theodore and
Howard Lydecker, was widely regarded as the finest in Hollywood.) Wake was budgeted at
$1 ,200,343, including over $50, ODD for miniature and tank work. Other RepUblc Premiere pic-
tures were Orson Welles' Macbeth. Allan Dwam's Sands trftwoJima .(1949). Lewis Milestone's The
Red Pony (1 949) and John Ford's The Quiet Man. when won Oscars for drection and cinenraatog-
raphy. But it was only The Sands of two i/ma that ever got Republic a top-f we-ranked domestic
36
grossing film rn the studio's history
On 1 April 1958, the aging Yates told Republic's annual stockholder^ meeting that Repubfc
was 'trying to get out of the motion picture business by July 1., 1958'. Republic ireileases had
dropped from an average of forty per year in the 1940s, to twenty-seven ;
m 1957 and fourteen irm
1 958. Republic released its final film rn January 1959. Republic, unlike Monogram which became
Allied Artists, simply ended and became a set of items for sale, with ids firrrn properties the fimai
39
product which sustained the company.
Monogram
On 7 August 1936 W. Ray Johnston resigned from Republic Pictures to start Monogram Pictures
Corporation, which began busmess on 11 November 1936 wish Johnston as ufesafent and Scott
R. Dunlap in charge of production. Under Johnston. Monogram made 394 films tarn 1930 to
1954, including A- and B-Westerns, Western shorts and Western-themed serials. Yet Johnston
could never make Monogram a success - even by the terms of Republic, and hardly that of UA.
Monogram was at the bottom of the studio system, with assets of just under $1 million and a
40
stable of second-class stars.
Johnston had entered the movie business in the silent era. Born in Jamesville, Iowa, he gradu-
ated from the College of Commerce in Waterloo. After his schooling was finished, he went into
banking and real estate. It was in this capacity that he met Charles J. Hite, president of the
Thanhouser Film Company. Hite placed Johnston on the payroll as his personal secretary and he
was shortly appointed treasurer of the Syndicate Film Corporation. By 1924 he felt that his experi-
ence was broad enough to leave and he formed his own company, Rayart. Battling Brewster (1924)
opened his programme of chapter-play releases. The production of such films was farmed out to
smaller independents, with Rayart taking on the responsibility of distribution. Beacon Films, a cre-
ation of Robert Dillon and George Blaisdell, turned in chapter-plays such as The Flame Fighter
(1925), from a story written by Dillon. These were quite often on a par with the better independ-
ent serials. Johnston was a busy individual who had held several different positions in the motion
picture industry prior to acquiring an interest in the independent releasing firm. Among other pos-
itions, he was president of the Photoplay Finance Corporation, which provided funds for inde-
41
pendent film-making. He had the experience to lead Monogram Pictures.
'In 1938 and 1939, it is our intention', wrote Monogram president W. Ray Johnston, 'to release
a schedule of 26 features and 16 westerns composed of those box office elements that the the-
aters of our country are demanding'. Just what those theatres were demanding was anything that
would keep the ticket offices busy, of course. Johnston told the press that in line with his belief
that his little firm could produce hits, he announced two A-features starring Jackie Cooper (Streets
of New York [1939] and That Old Gang of Mine [1940]). But more significantly, the late 1930s
proved to be the period in which Monogram revived the 'Mr Wong Detective' series which had
been created in 1938. In its new form, the series offered Boris Karloff in the starring role. Four new
features of the series were announced, Mr Wong In Chinatown, Mystery of Mr Wong, Mr Wong
- Detective and Mr Wong at Headquarters. The company was far more famous for series than
42
stars: Charlie Chan, the Bowery Boys, the Cisco Kid, and Bomba the Jungle Boy films
By 1941 Monogram was concentrating almost exclusively on Westerns and 'actioners'. Gross
rentals nearly equalled $2 million per year and the company actually fielded a profit of $1 1,000.
Johnston rode the tide of wartime economic prosperity, and he was there for the heyday of the B-
film. Monogram, like the other studios, earned record profits in 1946 - $397,000. While minus-
cule by even UA standards, these profits were sufficient to encourage an upgrade in production.
In 1947 Monogram created Allied Artists, a wholly owned subsidiary, to make features in the
manner of Universal and Columbia. This strategy never worked, however, and Monogram went
43
out of business in 1958, although Allied Artists continued
The end of the B-factories signalled the end of the classic studio system. During the 1950s
double features disappeared; and the need for B-film factories disappeared, Republic and Mono-
. .
172
I
•
gram among them. They left a legacy of fascinating films, admired by film-makers from Jean Luc
Godard to George Lucas. It looked like the minors would go on to change Hollywood, led by the
red-hot UA. But thirty years later it was Universal that led the way to the new Hollywood; Colum-
bia that would survive despite ups and downs; and UA that would be nearly out of business.
Notes
1 . Howard T. Lewis, The Motion Picture Industry (New York: Van Nostrand, 1 933),-^pp. 83, 94; Variety,
3 January 1933, p. 4.
2. The New York Times, 1 9 May 1 937, p. 43; The New York Times, 1 December 937, 1 p. 27; The New York
Times, 7 January 1938, p. 29.
3 . Film Daily Year Books, 1 92 1 to 1 93 1

4. The New York Times, 1 8 December 1 930, p. 28; The New York Times, 27 March 1 932, section VIII,
p. 65; The New York Times, 3 April 1932, section VIII, p. 6; Roy Kinnard, Fifty Years of Serial Thrills
(Metuchen, NJ: The Scarecrow Press, 1983), pp. 129-65: The New York Times, 8 September 1940,
section IX, p. 4.
5. Films in. Review, March 1975, pp. 155-60.

6. The New York Times, 9 February 1 933, p. 1 5; The New York Times, 8 March 1 933, p. 1 8; The New York
Times, 8 December 1 933, p. 31 ; Poors Industrials (New York: Poors, 1 934), pp. 2034-6; The New York
Times, 1 5 March 1936, p. 35; TheNew York Times, 3 April 1936, p. 43; The New York Times,
13 November 1936, p. 35; The New York Times, 22 April 1936, p. 29; Motion Picture Herald, 28 March
1936, p. 66; Variety, 8 April 1936, pp. 5-6.
7. The New York Times, 26 February 1935, p. 1 5; The New York Times, 1 5 March 1936, p. 35; The New
York Tmes, 3 April 1 936, p. 4; The New York Times, 1 7 June 1 936, p. 29; The Magazine of Wall Street,
6 November 1937, pp. 92-3, 123-4; The Magazine of Wall Street, 22 May 1937, pp. 158-9, 194-5;
The Magazine of Wall Street, 23 April 1 938, pp. 20-1 ,
61-2; The Magazine of Wall Street, 1 2 August
1 939, p. 448; The Magazine of Wall Street, 1 4 January 1 939, pp. 362-3, 398-9. Universal is well served
by a listing of all its productions that can be found in Clive Hirschhorn, The Universal Story (New York:
Crown, 1983). For a flattering biography of founder Carl Laemmle see John Drinkwater, The Life and
Adventures of Carl Laemmle (New York: Putnam, 1931).
8. Variety, 1 6 February 1 944, p. 1 ; The New York Times, 25 July 1 960, p. 23.
9. See Universal files, New York Times, May 1938,

Abbott and Costello, USC, Los Angeles. See also The 1 1
p. 1 7; The York Times, New York Times, 2 September 939, p. 41

1 8 April 1 939, p. 27; The 1 1
1 0. The New York Times, February 941 p. 27; The New York Times, 5 March 941 p. 32; The New
1 1 1 ,
1 ,
York Times, 9 December 1941, p. 44; The New York Times, 5 June 1942, p. 22; The New York Times, 10
February 1943, p. 36; Matthew Bernstein, Walter Wanger (Berkeley: University of California Press, 1994)
-which from pp. 1 74-2 1 6 covers his years distributing through Universal, and then Universal-
International.
1 1 . Data from William Goetz Collection, held at the American Heritage Center of the University of
Wyoming, Laramie, Wyoming.
12. Variety, 20 August 1969, pp. 5, 27; The New York Times, 16 August 1969, p. 27; Dennis McDougal, The
Last Mogul (New York: Crown, 1998), pp. 154-5.
13. Variety, 31 July 1946, p. 3; The New York Times, 12 June 1944, p. 16; The New York Times, 29 August
1945, p. 17; Motion Picture Herald, 3 August 1946, p. 69; Variety, 31 October 1946, p. 3; New
The
York Times, 28 November 1945, p. 21; The New York Times, 27 June 1946, pp. 27, 36; The New York
. . 4
Times, 26 July 1946, p. 16; The New York Times, 31 July 1946, p. 22; The New York Times, 16 August
1946, p. 19; The New York Times, 24 January 1947, p. 35.
14. Motion Picture Herald, 23 August 1947, p. 28; Allen Eyles, 'Universal and International', Focus on Film,
volume 30, pp. 44-6.

15. Variety, 13 August 1952, pp. 16-17.
1 6. The New York Times, 5 June 1 949, p. 3 1
17. There is a picture history of Columbia in Rochelle Larkin, Hail Columbia (New Rochelle: Arlington House,
1975). A useful survey can be found in Ed Buscombe's probing 'Notes on Columbia Pictures
Corporation, 1926-1941', Screen, volume 15, number 1, Autumn 1975, pp. 65-82. Bob Thomas'
biography has too long served as the lone source of detailed information: see Bob Thomas, King Cohn
(New York: G. P. Putnam's Sons, 1967). A fair amount of production information can be gleaned from
Frank Capra's The Name Above the Title (New York: Macmillan, 1971). See also Time Line - Columbia,
Variety, January 1999, pp. 62, 64, 66, 68, 70.
18. Nation's Business, October 1938, pp. 20-2; Sales Management, 1 5 January 1946, pp. 52-3; Variety,
25 January 1999, pp. 52-4.

1 9. The New York Times, 24 May 1 932, p. 23; The New York Times, 1 9 July 1 932, p. 3; The New York
Times, 3 February 1932, p. 26; Variety, 3 January 1933, p. 4; The New York Times, 20 May 1934, section
II, p. 14; Variety, 25 January 1999, pp. 62, 64, 66, 68, 70.
20. The Magazine of Wall Street, 3 May 1 941 , pp. 88-9; Business Week, 6 September 1 941 pp. 32-3; The
,
New York Times, 2 June 1940, p. 33; The Magazine of Wall Street, 6 September 1941, p. 578.
2 1 . Moving Picture World, 2 June 1 934, p. 32; Barrons, 25 March 1 935, p. 1 4; The New York Times, 1
April 1935, section IX, p. 4; Barrons, 2 September 1935, pp. 6, 13; Barrons, 2 December 1935, p. 7;
Barrons, 9 May 1938, p. 8; Barrons, 19 September 1938, p. 20; Barrons, 4 September 1939, p. 3.
22. The New York Times, 9 June 1 941 , p. 24.
23. Barrons, 29 July 1940, p. 22; Barrons, 26 January 1942, p. 12; Barrons, 1 1 August 1941, p. 3; The
Magazine of Wall Street, 20 February 1943, p. 484; Columbia Pictures Corporation, 21st Annual Report,
issued 30 June 1944. Business Week, 24 March 1945, pp. 92, 95; Variety, 7 March 1945, p. 8; Motion
Picture Herald, 22 December 1945, p. 12.
24. Motion Picture Herald, 23 July 1949, p. 28: Ross Reports, January 1950, p. 29; Variety, 24 December
1947, p. 16; Variety, 12 March 1953, p. 7; Variety, 1 1 November 1953, p. 5; The New York Times, 19
July 1955, p. 55; The New York Times, 31 December 1955, p. 1; The New York Times, 19 October 1955,
p. 40.
25. Variety, 25 June 1952, p. 18; Variety, 19 April 1953, p. 3.
26. See David N. Bruskin's massive (nearly 500-page) interview - The White Brothers (Los Angeles: Directors
Guild of America, 1 990) - for a rare candid set of comments from the long-time producers of The Three
Stooges.
27. United Artists Corporation Income History, series 2c, United Artists Collection, State Historical Society,
Madison, Wisconsin, passim.

28. Fortune, November 1934, pp. 22-6, 146, 148.
29. Variety, 5 January 1944, p. 13; Motion Picture Herald, 29 January 1944, p. 33; Motion Picture Herald,
11 November 1944, p. 29; Variety, 1 November 1944, p. 3; Variety, 18 February 1942, p. 3.
30. The New York Times, 3 April 1 952, p. 33.
3 1 . Variety, 27 March 1 946, p. 1
32. For a complete history of Mascot, see Jon Tusca, The Vanishing Legion (A History of Mascot Pictures,
1927-1935 (Jefferson, NC: McFarland, 1982).

.
1 74
I
33. Alan G. Barbour, Days of Thrills and Adventure (New York: Collier Books, 1 970), and Raymond W.
Tedman, The Serials (Norman: University of Oklahoma Press, 1970), provide good nostalgic overviews of
this seeming side line of the movie industry in the studio system.
34. Biography of Herbert John Yates, February 1954, Yates file, Quigley Collection, Georgetown University,
Washington, D.C.
35. Motion Picture Herald, 16 November 1940, p. 33; Motion Picture Herald, 28 June 1941, p. 18; Motion
Picture Herald, 1 1 October 1941, p. 13.
36. The New York Times, 1 1 August 1 95 1 , p. 7; The New York Times, 7 November +95 1 , p. 39.
37. Mary Aufwack and Robert K. Oermann, Finding Her Voice: The Saga of Women in Country Music (New
York: Crown Books, 1993), pp. 121-34.
Books, 1990).
39. Charles Flynn and Todd McCarthy, (eds), Kings of the Bs (New York: Dutton, 1975), pp. 13-43.
40. Variety, 27 March 1946, p. 1
41 . Kalton C. Lahue, Bound and Gagged: The Story of Silent Serials (New York: Castle Books, 1 968),
pp. 89-92.
42. See Motion Picture Herald, 23 September 1933, p. 36.
43. W. Ray Johnston as told to Terry Ramsaye, Motion Picture Herald, p. 3; Motion Picture Production
Encyclopedia (Hollywood: Hollywood Reporter, 1952), pp. 637-8; The New York Times, 12 September
1936, p. 26; Gene Fernett, Poverty Row (Satellite Beach, FL: Coral Reef Publications, Inc., 1973), p. 55;
The New York Times, 1 3 April 1 935, p. 1 1 ; Martin Quigley (editor). International Motion Picture
Almanac, 1951-52 (New York: Quigley Publishing, 1951), p. 369; Variety, 12 April 1944, p. 7; Variety, 9
January 1946, p. 36; Motion Picture Herald, 16 November 1940, p. 33; Motion Picture Herald, 28 June
1941, p. 18; Motion Picture Herald, 1 1 October 1941, p. 13.
13
Industry Advocates: Will Hays and Eric Johnston
The leaders of the classic Hollywood system loved to foster the notion that theirs was a highly com-
petitive industry. In reality, the system was made up of a small set of corporations, whose leaders
chose to openly collude to protect their joint interests. Through their trade association, the Motion
Picture Producers and Distributors of America, Inc. (MPPDA), they dealt with censorship and distri-
bution threats by domestic and foreign governments. They were also successful in keeping out
major competitors after 1 930. Two advocates - Will Hays and Eric Johnston - led the MPPDA (later
simply MPAA) through the classic studio era.
The End of the Will Hays Era

As analysed in chapter 6, the MPPDA was set in motion in 1922, when Republican insider Will
Hays had direct access to the White House, and potential threats to the studios, such as govern-
mental censorship, could be countered by informal methods. This situation ended in March 1933
when Franklin D. Roosevelt became president. Now an outsider after a dozen yeas of success,
advocate Hayes had to resort to more formal means to hold off federal censorship legislation and
placate pressure groups. In 1934 he set up the Production Code Administration (PCA), a mech-
anism to enforce the 1930 Production Code (popularly known as the Hayes Code), which laid
down what could and could not be portrayed on screen. Member producers (the Big Five and
Little Three) were obliged to submit all scripts and films to the PCA for approval; infractions of the
Code could result in $25,000 fines. Since the Big Five controlled the key theatres in which all films
sought to play, non-approved films were denied access to significant sources of revenue and
hence rarely made. Indeed, MPPDA disapproval guaranteed - in all but a few cases - box-office
failure. In this manner, the Big Five and Little Three continued the industry's self-regulation of all
film-making.
Hays was constantly placating reform groups, local women's clubs and church groups from all
faiths, successfully using the presence of state and local censorship boards to halt any federal inter-
vention. He portrayed the studios as sticking rigidly to a straight-and-narrow, moralistic path. The
PCA - paid for by the studios - dictated what all could see and hear. In Hollywood's cinematic
world, sin would automatically bring retribution, crime never paid, the government always deserved
our respect, families were never dysfunctional and even married couples kept to twin beds. Some-
times it seemed that the PCA was running the studios. This skilfully masked the fact that the stu-
1
dios paid for this cover.
1 76
I
The PCA workings were quite simple. The staff under Joseph Breen, a well-known Roman
Catholic layman, was made up of seven men, including four professors, two former office man-
agers and a former theatre owner. Their job was to secretly review all materials that the studios
proposed for filming and the final films themselves, and delete anything contrary to the Code. They
met daily with Breen; their chief areas of concern were depictions of sex, crime and brutality; use
of vulgar expressions; and demeaning remarks about religious groups. The Code office reviewed
story properties and film scripts before studio production began. Often they laboured as uncred-
ited collaborators suggesting inoffensive ways of saying and showing questionable points. They
could (and did) demand retakes of scenes that went out of Code bounds. Only in exceptional cir-
cumstances was the Code bypassed, as in Gone with the Wind (distributed by Loew's) when Rhett
Butler says, 'Frankly, my dear, I don't give a damn.' Though forbidden by the Code, the world
'damn' was allowed on screen, the official justification being that it was part of a famous speech
from a best-selling novel. In fact, Nicholas Schenck, head of Loew's, had pushed the PCA to have
the 'damn' allowed - an illustration of who was actually in charge.
With the prospect of government censorship receding, another threat to studio profits
appeared on the horizon. More and more small-town independent exhibitors complained to their
Democratic representatives and senators about the power of the major studios. The independent
exhibitors bitterly resented the distribution exchanges of the Big Five, which co-operated to estab-
lish runs, zones and clearances for all cities and towns in the USA (as discussed in the part II intro-
duction). They hated being the last run. The US House of Representatives and US Senate were at
that time weighted in favour of rural USA, and fans in tiny towns across Texas, for example, com-
plained constantly to the Speaker of the House, Sam Rayburn, who then openly pressured FDR and
Hays. Hays then had to run the MPPDA under a constant political cloud.
Pressure on the government to break up this system mounted. In the summer of 1938 FDR
approved his Attorney General to file the landmark US v. Paramount et al. anti-trust case, which
threatened the very heart of the classic studio system. Hays then had to back down on studio-
stipulated admission prices. Block-booking and blind-buying tactics, in which the Big Five forced inde-
pendent theatres to take groups of films, sight unseen, were outlawed with a 1941 consent decree.
Apart from anti-trust problems, Hays also had to face the challenge of keeping open foreign
markets during the prewar period. He sometimes seemed to treat the interwar US State and Com-
merce departments as messenger boys, in New Dealer Josephus Daniels's inimitable words. But
FDR set new limits. He would no longer permit his administration to directly represent the studios
in negotiations with foreign regimes - as the Republicans had in the 1920s. But the power and
attraction of the classic Hollywood narratives did the job for Hays - Hollywood movies were now
so popular that attempts to stop their import were futile.
Then came World War II. Most nations had to devote most of their resources to simple survival.
In the US, Hays fought his own version of the war. At first the conflict in Europe hurt the film
industry because foreign business declined. As hostilities spread around the world, the studios saw
overseas box-office revenues plummet. To offset these losses the movie industry focused on South
INDUSTRY ADVOCATES: WILL HAYS AND ERIC JOHNSTON 177
and Central America. The US Department of State's 'Good Neighbor Policy' attempted to promote
feature films with positive Latin American figures. Films with Latin stars and Latin locales flooded
American screens. Biopics of revered leaders such as Benito Juarez and Simon Bolivar were made;
stars such as Carmen Miranda, Desi Arnez and Cesar Romero were featured; and films like Week-
2
end in Havana (1941) and Down Argentine Way became commonplace.
In the USA, film fans flocked to the movies in record numbers. But here Hays had to constantly
fight with FDR's Department of Justice over anti-trust matters. As the expanding war economy
increased grosses at the box office, the stakes for small-town theatre owners grew. The severe
restrictions of a war economy limited production of most goods and the continuation of many serv-
ices. New housing and household appliances were simply not available. The studios did agree to a
consent decree in 1941, outlawing some practices.
For a time, Hays' main problem was gaining needed film stock, since silver, a significant ingre-
dient in film stock, was also basic to many war materials. Many studios had stockpiled raw footage.
Stars were another matter. On 8 February 1942 the selective service director, General Louis Her-
shey, declared the motion picture industry an 'essential industry', which meant that its male
employees could apply for deferments as 'irreplaceable' workers. Even so, most volunteered; Hol-
lywood was oftentimes left dependent on dogs (Lassie), horses (Flicka) and ageing heroes (sixty-
six-year-old Charles Coburn won the Academy Award for best supporting actor in 1943). Hays
made sure that the studios catered to the troops, seeing to it that movies were shipped abroad
and shown even before they were screened in theatres at home. For example, within days of the
capture of Bougainville, a tent theatre was set up and Hollywood's latest fare was on the screen;
shells were still bursting within earshot. The famous pose of Betty Grable, her back to the viewer,
looking over her shoulder, seemed to say that Hollywood was what troops were fighting for, the
3
ultimate moral booster.
Hays tried to cultivate influence with the Democrats. He found someone in the Roosevelt White
House who agreed with him about the power of the movies - the president's spouse. Eleanor
Roosevelt had significant personal ties to the Hollywood movie business. In 1939 Sam Goldwyn
had hired her son James, in large part so that Goldwyn could brag that the son of the president
worked for him. James drew his mother into Hollywood society, and through him, she was a
special guest at the premiere of William Wyler's Wuthering Heights at the Pantages Theater on
Hollywood Boulevard. In 1940 James moved on to create his own independent motion picture pro-
duction company. His controversial film, Pastor Hall (1940) told the tale of a German pacifist, and
the film's prologue was read by his mother and penned by playwright Robert Sherwood. But it was
his mother who became a newsreel star. When Shirley Temple came to visit the first family in Hyde
Park, newsreel cameramen captured all the festive activities. The March of Dimes polio charity also
enabled her to regularly meet Hollywood's brightest stars at the annual 'Birthday Ball' fund raisers.
Nicholas Schenck made sure Robert Taylor, Judy Garland and Mickey Rooney assisted Eleanor Roo-
sevelt in raising monies to fight polio. But in the end, this connection never paid off. Hays could
4
never get to dazzle FDR himself.
178
I
In 1944 the Department of Justice, under pressure from rural representatives and senators,
reopened the anti-trust case. Thomas Clark had become the new Attorney General, and saw the
case as a way to gain favour with fellow Democrats. He knew first hand of the complaints from
Texas, his home state. The studio bosses thought they could win on appeal and the case made its
way to the US Supreme Court. Balaban, Schenck and company continued to fight, thinking they
would at worst be fined or forced to stop certain monopoly practices. But the courts - appointed
by FDR - were liberal, and constantly ruled that each of the Big Five must sell its theatres and split
5
in two.
But these tactics were to cause a split in the usually united studio front. In June 1945 Harry
Warner resigned his company's membership in the MPPDA, marking the first time in the twenty-
three-year history of the organisation that a studio member had broken ranks. Hays was stoically
silent as there had been rumours since the beginning of 1 945 that Warners was about to drop out.
This resignation demonstrated that deciding tactics for the anti-trust case had caused a split in the
MPPDA. Thus divided, against a liberal court, Hays quit and let his successor deal with the fall-out
6
from what Hays anticipated would be a loss in the Supreme Court.
The Eric Johnston Years

On 22 September 1945 Eric Johnston became president of the MPPDA, effective at 1pm on a
Wednesday afternoon. Hays then quietly disappeared from the scene. Johnston knew an office in
New York was no place to fight the association's legal battles, and thus formally moved the
Will Hays' famous successor, Eric Johnston,

who helped Hollywood navigate the turbulent
post-World War II years as head of MPAA
INDUSTRY ADVOCATES: WILL HAYS AND ERIC JOHNSTON |
179
MPPDA to the nation's capital. He also simplified the name to the Motion Pictures Association of
America (MPAA). Eric Johnston, head of the United States Chamber of Commerce, was, like Hayes,
a Republican, but he had good connections in the Democrat White House, now under President
Harry S. Truman. The studio owners got what they wanted - an insider - who signed for a period
of five years at a reported annual salary of $1 50,000 and an expense arrangement of $50,000 a
year. Barney Balaban and Nicholas Schenck had their first choice.
Johnston issued his first press statement:
I have been attracted to the motion picture industry because it offers unlimited opportunities to work
for peace and prosperity at home and abroad. These are the two goals for which all mankind yearns
today. The motion picture has been aptly described as the greatest way of telling a story ever devised
by man. In a relatively short period of development, the film has become a medium of mass enter-
tainment and enlightenment, unigue in world history. Its appeal is universal. . . . Each week, 80,000,000
people in the United States, and millions abroad, go to the motion picture for entertainment, infor-
mation and inspiration. Through their eyes and ears, they receive new ideas and first became acguainted
with new products - products that are luxuries today but are necessities tomorrow. We have learned
that American motion pictures are, and they must continue to be, America's greatest salesmen, her
most natural and convincing ambassadors of goodwill. ... I learned from personal experience that in
many countries, the only America the people know is the America from the motion picture. We intend
always to keep that in mind. It is our aim to foster an industry program that will make motion pictures
an even better reflection of the American design of living. ... As practical businessmen, we shall want,
of course, a fair share of foreign markets. America has no artificial barriers against motion pictures
from abroad. In this same spirit, we expect that other countries will not erect barriers against Ameri-
can pictures. Free interchange of motion pictures is the best means to bring the people of the world
7
closer together.
When he started, he was serving his fourth term as president of the US Chamber of Commerce,
heading a nationwide organisation encompassing of 1 ,400 chambers of commerce and 400 trade
associations with an underlying membership of nearly 1 million entrepreneurs. Yet as a Republican
he easily crossed party lines as a member of FDR's Committee for Economic Stabilization, a
member of the Management-Labor Policy Committee, and a member of the Business Advisory
Council to the Department of Commerce. Born in 1896, Johnston was reared in the state of Wash-
ington, and educated in the schools of Spokane and at the University of Washington. He entered
the Marine Corps during World War I, retiring with the rank of captain after five yeas of service. In
1 922 he returned to Spokane - to try door-to-door sales - and then in 1 924 entered the electrical
business, later purchasing a business which he renamed the Brown-Johnston Company. He

remained its president while rising in the US Chamber of Commerce, initially as a member of its
national committee on taxation in 1935. He became a Chamber VP in 1941, and the following year
was elected to his first term as Chamber president. He reached out to the New Dealers. They
1 80
I
appointed him US Commissioner for Inter-American Development, in which capacity he worked

closely with the State Department. FDR proclaimed: 'Members of the United States Chamber of
Commerce may well be proud of the contribution they have made under valuable leadership I have
a
had opportunity to know of and appreciate. . .
.'
Although he had been spokesman for 1 million American business leaders, and now for eight,
Johnston tried to remain on good terms with labour chiefs. He wanted management and owners
to work with labour to create 'a people's capitalism'. 'I am for capitalism
4
^ wrote Johnston, 'and
almost all labor leaders I know are really just as much for it as I am. They do not go along with the
idea that capitalism is bad. They know that either private business or government bureaucracy must
save this country when the war is over; and they prefer private business.' 'Labor and business',
9
Johnston continued, 'can be firm allies in preventing the governmentalization of this country.'
Johnston publicly listed his goals that autumn of 1945 as the war was ending. At the top of
the list was the settlement of the ongoing US v. Paramount anti-trust case. He tried to reach out
to disgruntled exhibitors: 'I hope that we can accomplish much, not only for the exhibitors but for
the industry as a whole. If we achieve our objectives more than 50 per cent to begin with we will
have made a success.' This was his message: settle the anti-trust case in the Big Five's favour and
all would be better off - including small-town exhibitors. But he failed, and the first significant
decision of his administration came with the loss at the US Supreme Court. His Big Five clients
10
would have to rid themselves of their valued theatre circuits.
He did better with escalating restrictions proposed against Hollywood free trade. He was a
staunch advocate of free trade, as Hays had been. He initially worked to have studio backlogged
films (i.e. those not exported to Europe and Asia) play off in the defeated countries. As Johnston
put it, he fought 'monopolistic pressures [that] have hamstrung the American [film] industry'. He
successfully enlisted three key federal agencies to assist the MPAA. The Commerce Department
directly assisted foreign trade, owing to its interest in movies as a means to promote overseas sales
of other American goods. The Justice Department agreed to relax its trust-busting efforts in the
area of the integrated majors' export sales, and that co-operation never was part of US v. Para-
mount etal. And the State Department was interested in what The Wall Street Journal termed the
11
'propaganda value of the typical American films in portraying the democratic way of life'.
Revenue figures were often ambiguously stated and interpreted, but the most commonly cited
figure is that in the late 1940s and well into the 1950s, approximately 40 per cent of the studio
system's theatrical revenues were generated overseas. Great Britain was the most important single
national market. Continental European nations were next, followed, from 1950, by Japan. One US
Department of Commerce survey suggested that by the early 1950s, cinema audiences in several
European countries, including Great Britain and Italy, were more faithful film-goers than in the
USA. In 1954, for example, in the United States there was a cinema seat for every fourteen people,
compared to a seat for every twelve people in the United Kingdom and one for every eleven people
in Italy. This overseas sales success wedded Johnston to both Democratic (until 1953) and Repub-
lican (until 1961) administrations. After World War II, Hollywood's basic dilemma was how to
convert and get pounds, lire, francs or marks back into the USA as dollars. Governments every-
where were reluctant to see this drain of currency, and so the studio system found itself in frequent
12
disputes with foreign governments.
A most conspicuous instance of Johnston-led co-operation with the Truman administration

came with the negotiations for the General Agreement on Taxes and Tariffs hammered out in
1947. This agreement and the creation of the International Trade Organization were important
because they helped usher in the free flow of goods and services. What is perhaps most interest-
ing about the documents surrounding the negotiation of Article 1 5-B of the General Agreement,
which related specifically to the distribution of motion pictures, was the way in which the State
Department essentially adopted Johnston's suggestions verbatim. Official USA policy became: play
down the national cultural sovereignty issue of film exports, which was the major concern for some
of the nations on the other side of the bargaining table, and have them treated like other exports.
Johnston triumphed at this; there are frequent references to his 'shrewdness and vitality' in the
State Department documents. In other words, the US government now had a mechanism for work-
13
ing with the studios that became official US policy.
During the Eisenhower era of the 1950s, the US government was overt in its desire that films
exported promote a positive image of the USA. The magazine American Mercury, stated:
The right kind of film can present a picture of this nation, its culture, its institutions, its method of deal-
ing with social problems and its people, which may be invaluable from the political, cultural and
commercial point of view. On the other hand, the wrong kind of picture may have the opposite effect.
... For all these reasons, the Department of State and its representatives in foreign countries desire
to co-operate fully in the protection of American motion pictures abroad, especially in the difficult
postwar era. In return, the Department confidentially expects that the industry will co-operate with
our Government with a view to insuring that the pictures distributed abroad will reflect credit on the
14
good name and reputation of this country and its institutions.
Only rarely did government officials stipulate outright that certain feature films ought to be made.
Most recommendations from the State Department were related to controlling the supply, rather
than the content of motion pictures.
With fellow Republicans in charge, Johnston worked any angle he could. For example, in 1953,
the US embassy in Greece reported on the local reception given to Billy Wilder's dark vision in his
The Big Carnival (1951; US title: Ace in the Hole). This film depicted the carnival atmosphere that
came to surround the tragedy of a man trapped in a deep well. The embassy reported that the film
gave 'a rather damning picture of the American character and feared it would afford powerful
propaganda ammunition to those who declare the Americans to be lacking in sentiment and
human feelings and concerned only with making money. . . . This film in two hours cancels out
two years of [departmental] work.' In response, Johnston had the film's world distribution limited
15
and title changed.
182
I
The following year, the US embassy staff in Oslo reported that they were pleased that the Nor-
wegian film censor had banned Columbia's The Wild One (1953; starring Marlon Brando). The
Public Affairs Officer in Oslo wrote that he was:
thankful that the film will not be shown in Norway. It presented practically all the standard miscon-
ceptions about America that our enemies stress, such as claims that we are uncultured, rude, bombastic,
impatient, lawless and addicted to mob violence. Films of this type when~exported are harmful by
presenting false or distorted impressions of American life as a whole.
Johnston did not need a world task force as he had Eisenhower's embassies doing the work of the
16
studios.
Eric Johnston summarised the way in which consumer culture and the American way were
inextricably intertwined. In 1958 he told the story of refugees from Hungary who had been encour-
aged to leave their country by Hollywood:
In every picture they saw, however indirectly, the young men found a message or an indication of
what lay beyond Hungary's frontiers, in the world of free societies. Even in the shabbiest gangster film,
they noted that in the free world the policeman was not an enemy of the people but a protector of
the people. They saw that the free world had a far better standard of living than any they had ever
known - [with] washing machines and gleaming kitchens in homes of modest circumstances . . . shops
full of wonderful things beyond the reach of all but the wealthiest party members in their country.
Johnston skilfully used Hollywood's ability to powerfully project this image of the US - particularly
against Communists - for help from the Eisenhower administration in trade matters. He was far
17
more effective that Hays had ever been.
While foreign distribution remained open, the studios' transition to a new era domestically
never went as well. Johnston tried to mediate the deals the Big Five formed to spin off their theatre
chains. He could do little to help the studios gain an advantageous position in the emerging tele-
vision industry. Hays was known for creating the Code and its clamping down on what the industry
could portray; Johnston loosened the Code so as to offer what TV dared not. Johnston sought
more adult films. The key event came seven years into his tenure with the Miracle case, whereby
the US Supreme Court concluded on 26 May 1952 that 'expression by means of motion pictures
is included within the free speech and free press guaranty of the First and Fourteenth Amend-
ments' to the United States Constitution. This decision reversed the 1915 Mutual case where
movies did not qualify as free speech. Johnston proudly told in his 1952 annual report that under
him the MPAA won this battle. But Johnston succeeded best at foreign relations, opening the
world to the hegemony of studio distribution. Indeed, a dozen pages of the MPAA's 1952 annual
report - typically - described the problems and successes around the world, region by region.
Domestic issues were allocated a page or two. 18

.
Variety properly labelled Johnston the 'MPAA Prez Who Sold Hollywood Around'. Eric John-
ston was a brilliant man with style and elan, asserted Variety, noted for an outgoing, vigorously
extroverted personality. He had a Rolodex full of contacts - which he used around the world for
the studios. While Hays had been known as the czar of the movies, Johnston was its 'Ambassador',
strongly advocating freer world trade, in which he had first developed an interest through his work
with the Chamber of Commerce. He spent countless hours negotiating trade agreements to keep
open world markets so that the distribution advantage the studios could offer would remain
unconstrained. Johnston, a lean man of seemingly inexhaustible energy, like his predecessor, was
19
perhaps the film industry's number one traveller.
Johnston died in August 1963. In the meantime someone had to run the MPAA. That job fell
to a reluctant Ralph Hetzel, Jnr, Eric Johnston's chief lobbyist since 1951 . Hetzel served as interim
president of the MPAA until Lew Wasserman found Jack Valenti in the Johnson White House and
20
appointed him new head of the MPAA in May 1966.
Notes
1 . Gregory D. Black, Hollywood Censored (New York: Cambridge University Press, 1994); Gregory D. Black,
The Catholic Crusade Against the Movies, 1940-1975 (New York: Cambridge University Press, 2002);
Variety, 1 January 1935, p. 1.
2. Estimates of the gross revenue returned by the foreign market between the wars vary from 25 per cent
to 50 per cent, with most analysts, including the United States Department of Commerce, settling on an
average of 35 per cent. In 1927 Sidney R. Kent, general manager of Paramount, nominated a figure of
25 per cent when addressing a group of Harvard University students. His estimate seems surprisingly low
considering the fact that his company had a particularly wide-ranging foreign network: in the same
speech he referred to 1 15 foreign exchanges in 73 countries. Sidney R. Kent, 'Distributing the Product',
in Joseph Kennedy (ed.), The Story of the Films (Chicago and New York: A. W. Shaw Company, 1927),
pp. 203-32. C. J. North and Nathan D. Golden of the Motion Picture Division of the Bureau of Foreign
and Domestic Commerce in the US Department of Commerce, estimated in 1932 that the Depression
had caused a fall in foreign revenues from 30-40 per cent of the gross to 25 per cent: see C. J. North
and Nathan D. Golden, 'The European Film Market -Then and Now', Society of Motion Picture
Engineers Journal, vol. 18 (1932), p. 442. By 1936 Golden's estimate was back to 30-40 per cent:
Nathan D. Golden, 'Brief History and Statistics of the American Motion Picture Industry', Motion Pictures
Abroad, 14 August 1936, p. 2. In 1937 and 1938 he quoted a figure of 40 per cent as seen in Nathan
D. Golden, 'Brief History and Statistics of the American Motion Picture Industry', Motion Pictures
Abroad, 1 August 1937, p. 2, and Nathan D. Golden, 'American Movies Still Conquering Obstacles
Abroad, Says Nathan D. Golden', World Wide Motion Picture Developments, 28 October 1938, p. 1
3. The New York Times, 10 October 1943, p. 33; American Consul General, Tokyo, 'The Japanese Motion
Picture Market in 1938', Motion Pictures Abroad, 1 December 1938, p. 20; Wolfgang Reinhardt,
'Explanatory Note', 1 5 February 1 938, Juarez file, Warner Bros. Archive, USC, Los Angeles.
4. Eleanor Roosevelt, 'Film Folk I Have Known', Photoplay, vol. 53, no. 1 (January, 1939),
pp. 10-11, 83.
5. This information is based upon notes of an interview I had with Robert L. Wright at his home in
Bethesda, Maryland, on 2 July 1985. Mr Wright was the lead attorney in the Paramount case for the US
government. See also US v. Crescent Amusement Co., etal., 323 U.S. 173 (1944); The New York Times,
.
24 October 1945, p. 23; Hollywood Reporter, 24 October 1945, pp. 1,10; The New York Times,
12 June 1946, p. 29; results of the trail recounted in Film Daily Yearbook 1947, p. 41
6. Agreement between Warner Bros, and Hal B. Wallis, 12 January 1942 and 2 February 1942, both in Hal
Wallis legal file, Warner Bros. Archive, USC, Los Angeles. See also The New York Times, 1 June 1945,
pp. 37 and 33.

7. Motion Picture Herald, 22 September 1 945, pp. 1 3- 1 5.
8. Biography of Eric Johnston, November 1954, Johnston files, Quigley Collection, Georgetown University,
Washington, D.C.; Motion Picture Herald, 29 September 1945, p. 10. ^

9. Eric Johnston, America Unlimited (Garden City, New York: Doubleday, Doran, 1944) provides the basic
philosophy and biographical tales of the man before he became the head of the MPAA. See also
Business Week, 2 May 1942, p. 16; Business Week, 8 August 1942, pp. 19-20; and Business Week,
21 February 1943, p. 99.
1 0. Eric Johnston, We're All in It (New York: Dutton, 1 948), p. 1 68 for quote and whole book for more of
Johnston's version of capitalism. See also Motion Picture Herald, 6 October 1945, p. 14; Variety,
1 October 1 945, p. 1 ; Motion Picture Herald, 5 December 1 945, p. 1 ; Motion Picture Herald,
15 December 1945, p. 21.
1 1 . Motion Picture Herald, 1 3 April 1 946, p. 1 4; The Wall Street Journal, 1 1 July 1 946, p. 1 ; Variety,
21 August 1946, p. 3; Jack K. McFall to United States Senator Allen J. Ellener, United States National
Archives, Record Group 59, College Park, Maryland.
12. Nathan D. Golden and Earl H. Young, 'World Survey Shows Record Foreign Business for US Films',
Foreign Commerce Weekly, vol. 55, no. 4 (28 February 1955), pp. 14-16.
13. Film Negotiations, 27 August 1947, Box 60, International Trade Organization: Subject Files, International
Trade Files, United States National Archives, Record Group 43, College Park, Maryland; Agency for
International Development, Special Media section, Media Guaranty case, United States National
Archives, Record Group 286, College Park, Maryland; Motion Picture Reporting, Serial #724, United
States National Archives, Record Group 59, College Park, Maryland.
1 4. American Mercury, vol. 60 (April 1 954), pp. 407-1 5.
1 5. M. S. Wright, Public Affairs Officer, Dispatch #99, United States National Archives, Record Group 59,
College Park, Maryland.
16. W. R. Auman, Public Affairs Officer, Dispatch #669, United States National Archives, Record Group 59,
College Park, Maryland; miscellaneous reports, United States National Archives, Record Group 59,
College Park, Maryland.
1 7. Eric Johnston file, Library of Lincoln Center for the Performing Arts, clipping from The Morning
Telegraph, July 1958, no page given.
1 8. The New York Times, 1 5 December 1 946, p. 32.
1 9. Variety, 28 August 1 963, pp. 4, 22, 63; Variety, 4 September 1 963, p. 3.
20. Motion Picture Herald, 29 April 1 964, p. 20; The New York Times, 23 January 1 994, p. 30.
14
The Rise of Labour Unions
Unions played a small roll in the Hollywood of 1930. Indeed, the studios had set up the Academy
of Motion Picture Arts and Sciences (see chapter 6) to defuse unionisation and ensure that workers
were paid as little as possible, with no set rules or rights in place (the only exception was movie
theatre projectionists, who were already unionised before the Academy came into existence). To
safeguard their profits, the small set of corporations that made up the studio system worked
together to deny workers the right to organise. Each successful powerful leader agreed on an anti-
union strategy.
Then came FDR's first decisive move to alleviate the Great Depression, the 1933 National Recov-
ery Act, which made it compulsory for participating industries - including the studios - to recognise
unions to gain government help. This set off a wave of unionisation in production and signalled the
end of the company union that was the Academy of Motion Picture Arts and Sciences - save as an
Oscar presenter. Union organisers could not have asked for better timing. In 1933 Paramount, Fox
and RKO were in bankruptcy, and as the National Recovery Act passed into law in June 1933 and
industrial codes were negotiated, Variety noted that the studio system seemed to be at its weakest.
1
Variety deemed this the nadir and predicted that quiet labour relations were a thing of the past.
During the Great Depression, the studio leaders reacted the only way capitalists in crisis do -
by cutting wages and firing unprotected workers. 'Morale was already low', stated Variety, as it
observed the surge in unionisation, 'and the 50% cut to men [and women] who had already taken
two or three cuts, seemed the last straw'. As the Great Depression ground on, studios laid off more
than one in five of their workers. The companies in bankruptcy court were the most ruthless. For
example, Paramount shut down its Long Island studio, and laid off almost 5,000 employees who
had been earning between $35 and $50 a week. The number of unemployed and underpaid extras
in Hollywood became front page news. As a result of such economising, the annual cumulative
payrolls of the studio companies dropped from $150 million in 1931 to $50 million by 1933. 2
The workers needed the countervailing power of unions to deal with the studios' monopoly
power and hence stop unilateral cost cutting. Once the National Recovery Act forced the corpor-
ate leaders' hand, the heads of the studios still continued to fight unionisation, but knew - as they
observed in other industries - that they would lose. Still, the studio leaders put up a struggle
between 1933 and 1946. This made unionisation a constant variable throughout the classical studio
system era and coincided with the rise of the labour movement in the USA. The Hollywood studios
may have seemed different to companies in other industries - more glamorous and fantasy-based
- but in terms of labour organising what occurred after 1933 was no different from the struggles
3
in Detroit (automobiles) or Pittsburgh (steelmaking).
The National Recovery Act became law on 16 June 1933. Title I established the National Recov-
ery Administration (NRA) to institute and supervise the codes for 'fair competition' for all US indus-
tries. The studios accepted the code for the movie industry and, in return, the government waived
existing anti-trust laws. For labour, under the National Recovery Act section 7, each code had to
permit employees to organise - and bargain collectively, outlaw company unions and stipulate,
explicitly, maximum hours, minimum wages and working conditions. The gates for labour organ-
4
ising opened.
In the Beginning: Only IA

But studio system labour organising did not begin in a total vacuum. A Studio Basic Agreement
had been signed on 29 November 1926 between the studios and five international unions (IATSE,
United Brotherhood of Carpenters and Joiners, International Brotherhood of Electrical Workers,

International Brotherhood of Painters, Decorators and Paperhangers, and the American Federation
of Musicians). This two-page document - offering minimal rights and guarantees - remained the
cornerstone of industrial relations in the movie industry until the NRA was passed. IATSE, or IA as
5
it is commonly known, was there to remind other workers that union power was possible.
The coming of sound brought a hint of the forthcoming struggle: who could organise the
workers who operated sound equipment during film-making? Both the International Brotherhood
of Electrical Workers and IA laid claim to them. When IA went on strike because the producers
refused to recognise it as the bargaining agent for the sound technicians, the electricians' union
signed up the sound specialists and furnished them to the studios. IA was badly shattered, and its
membership in the studios dwindled to only projectionists as the National Recovery Act passed.
Although studio system leaders publicly feigned disinterest, Variety reported that one boss admit-
ted that the sound technicians' jurisdictional conflict had cost the studios $2 million. But all studio
chieftains agreed that it was worth the price because they felt that they would recoup many times
this amount during the next few years through cuts in salaries. Wrongly, the studio chiefs figured
5
that they had busted the union movement in Hollywood.
But with its membership of projectionists, IA retained enormous power. By preventing the pro-
jection of films, IA could tie up the studio system. IA leaders decided to exercise this power in the
1930s as more and more men from the theatrical side took top leadership positions in the studio
system. One did not have to explain to Barney Balaban the power held by IA. When Balaban was
made head of Paramount, he knew from personal experience how the threatened shutdown of
Chicago theatres had forced him to the bargaining table, resulting in higher wages. Organised
crime in Chicago also knew of lA's potential power, and in the 1930s the mob successfully took
over IA - placing George Browne and Willie Bioff in charge. While Browne and Bioff are remem-
bered for their mob ties and bribery, they nevertheless revitalised IA. They began the expansion of
IA in 1937 by embracing back room and front office workers in the vast network of film distri-
THE RISE OF LABOUR UNIONS 187
bution exchanges throughout the USA, and cashiers, doormen, ushers and other front-of-house
employees at the theatres. Thus, IA could close down not only exhibition - where the money came
7
in - but also distribution, where insiders knew the true studio lay.
Early in 1934, IA Local 2's business agent George Browne and his partner, William Bioff,
decided to work with, rather than against, Balaban. Balaban refused to restore a 'temporary' 25
per cent pay cut for stagehands at his theatres on the agreed-upon date; instead he offered to
fund the IA soup kitchen for unemployed stagehands and pay Browne $1 50 per week to overlook
the permanence of the 'temporary' wage reduction. Browne and Bioff agreed, but demanded a
one-time payment of $50,000, which haggling with Balaban's attorney Leo Spitz reduced to
$20,000. Balaban paid for what he later called 'insurance'. In the autumn of 1935 Nicholas
Schenck in New York City followed suit, giving Browne and Bioff $1 50,000 for their promise to
veto a strike vote by IA Local 306 (New York projectionists). As international president, Browne had
constitutional authority to bestow or withhold sanction and financial support for strikes by IA
locals. The corruption began. Following the examples set in Chicago and New York, Balaban and
Schenck convinced their fellow studio leaders to regularly pay IA leaders to prevent further
8
demands - other than periodic wage increases - in exchange for a no-strike guarantee.
The pay-offs helped Browne and Bioff rebuild IA by having Balaban, Schenck and the others
agree early in 1936 that IA would have jurisdiction over studio camera operators, lab workers,
grips, stage carpenters, property people, lamp operators and sound technicians. Studio leaders
granted IA a closed shop for the unions that signed the Studio Basic Agreement. The IA meta-
morphosed suddenly into a union with muscle. Studios after 1936 enforced a closed shop that
restricted many professions to IA members, and allowed stewards from IA locals to enter the lots
to check IA workers' dues cards. If members who were behind in their dues did not bring them up
to date within a specified period, the studio fired them. When the efforts of IA members to reform
their union from within aggravated Bioff and Browne, studio leaders obliged by firing the vocal
protestors. For example, in 1937, Joe Schenck, Nick's brother and head of the new Twentieth Cen-
tury-Fox, discharged two IA prop-makers within a week after they signed up to sue to gain local
autonomy from the international IA. Neither man could find work again for several years. At Bioff's
request, Harry Warner fired an employee who protested the lA's 2 per cent assessment on his earn-
ings. Nick Schenck made sure an MGM carpenter likewise lost his job after complaining about the
9
assessment. And so it went.
Browne and Bioff then demanded more - $2 million in cash from the studios. The duo were
already getting yearly payments of $50,000 from each of the Big Five, and $25,000 from each
minor studio. In return, studio leaders received assurances that Browne and Bioff would not
demand wage increases. The two IA leaders served the studios by insisting that only international
union representatives could negotiate with management, by fighting union locals' attempts to act
autonomously of the international, and by splintering Hollywood labour coalitions. The two IA
leaders prevented workers from pressuring industry leaders about working conditions or seasonal
unemployment by allowing only top union officials to negotiate with management. IA international
188
I
president Browne endorsed industry executives' refusal to deal directly with local union represen-
10
tatives.
IA dissidents came together as the Federated Motion Picture Crafts union (FMPC). This coali-
tion, representing 16,000 workers and fortified by the 1 1 April 1937 US Supreme Court decision
upholding the constitutionality of the National Labor Relations Act (N.L.R.B. v. Jones & Laughlin
Steel Corporation, 301 U.S. 1), went out on strike on 30 April 1937. The spectre of a broad-based
rank-and-file revolt against IA caused severe jitters in Wall Street, and studio leaders then set out
to break the FMPC. Browne and Bioff did all they could to undercut the dissidents. As soon as the
Studio Utility Employees (SUE) joined the FMPC strike, IA representatives offered SUE members IA
work cards, free initiation and a raise from 60 to 82.5 cents per hour. Furthermore, Browne and
Bioff told SUE members that they had to have IA work cards within a few days or they would lose
their jobs. Over 300 former SUE workers accepted this 'invitation'. Browne and Bioff also offered
work permits and wage increases to painters, make-up artists and hairdressers who would cross
picket lines and join IA. According to Variety, this tactic worked especially well at Fox and MGM as
the Schenck brothers saw a return for their IA pay-offs. Browne boasted that he 'was cooperating
11
with [studio leaders] to keep production moving'.
Browne and Bioff earned their pay-offs and helped defeat the FMPC strike. When the FMPC
unions gave up, dissolved their federation and began bargaining, they found IA president Browne
sitting alongside the management negotiators. A veteran MGM carpenter told the California
Assembly Capital-Labor Investigating Committee in November 1937 that the committee would
have no impact on IA because it seemed there was not a leader of a Hollywood studio who would
dare make a picture without IA approval. And if a film were made, it wouldn't be shown in any
theatre in the USA. Nicholas Schenck under oath in court testified in 1941 that he bowed to IA
12
demands for fear that the union would ruin the industry by having projectionists strike.
Browne and Bioff saved the studios millions of dollars. Indeed, under oath studio executives
later testified that by dealing with Browne and Bioff they saved approximately $15 million. It was
estimated by another insider that had studio system members not paid Browne and Bioff, the stu-
dios might have had to pay up to ten times that amount in higher wages. Bioff and Browne fig-
ured that if 25,000 to 30,000 studio employees had managed to bargain raises of $10 per week
every two to three years, the total would have come to an additional $250,000 to $350,000 per
week. By any calculations, the studio leaders negotiated a very generous deal with IA. They also
set up a significant barrier to entry by new firms. By holding smaller motion picture companies to
union wage scales and crew requirements, IA strengthened the major studios' economic power. 13
In short, as the Great Depression ended, the studio leaders' deal with Browne and Bioff
enabled them to buy a cheap and steady supply of qualified craft labour from the IA. As the pre-
siding judge at a later trial put it: 'The payers [studio leaders] knowingly and willingly paid over the
funds . . . and in a sense lent encouragement, and participated with full knowledge of the facts in
the activities of Browne group.' But with enough dissidents complaining, government prosecutors
got involved. Bioff and Browne were convicted in November 1941 on charges of extorting
$550,000 from the major studios. Bioff later testified that he actually received more than $1 mil-
lion in total from just Nick Schenck and Barney Balaban. Bioff under oath verified that IA got
$50,000 per year from the major studios, and $25,000 a year from the minor ones. He also stated
that by the end of the 1930s, lA's ranks totalled some 40,000 members in 849 studio and exhibitor
unions in the USA. And by this time Joseph Schenck, chairman of the board of Twentieth Century-
Fox, was under investigation by the IRS for not paying federal taxes - he seemed to have deducted
his pay-offs! In April 1941 Joe Schenck made a deal. He pleaded guilty; in return, his brother (and
the other studio leaders) would stay out of jail. To lighten his prison sentence, he implicated both
Bioff and Browne, who were also convicted of extortion. Joe Schenck - one of the studio system's
most powerful leaders - was tried in March 1 941 found
, guilty on two counts of income tax eva-
14
sion, and sentenced to a year in prison.
The lid had come off lA's hold, and in stepped the progressives, led by Herbert Sorrell, busi-
ness agent of the painters' union. He began organising the cartoonists, and chartered them as
Local 852 in 1940. The cartoonists at the Walt Disney Studios went on strike in the spring of 1941,
and were joined by Disney machinists, office employees and film technicians. After a nine-week
strike, during which the cartoonists at both MGM and Schlesinger's (cartoon-makers for Warners)
were granted recognition and union shop conditions without resort to strike action, Disney capit-
ulated. The unions involved in the strike, discovering common interests, then formed the Confer-
ence of Studio Unions (CSU), which was later joined by other important studio locals, including the
electricians, carpenters, publicists, story analysts, office employees, set decorators, camera opera-
tors, costumers and even studio restaurant workers. This victory over Disney, and the election of
Richard F. Walsh as head of IA, brought peace among the crafts unions. Walsh would remain pres-
ident of IA through the remainder of the classic studio era and beyond. 15
The Screen Writers Guild

IA covered all those workers who considered labouring in a studio to be a 9-5 job rather than cre-
ative film-making. Writers, actors and directors had only the Academy. Yet the Academy proved
to be of no help during the Great Depression, when the studio leaders in 1932 notified their screen
writers - most often easterners who came west to pen scripts for talkies - that they would give
only one week's notice before termination. And to save costs, studio leaders stipulated that all of
the writers who participated in a film's screenplay were to have twenty-four hours to reach a unan-
imous decision on the allocation of two on-screen credits. Then came the National Recovery Act,
and the Screen Writers Guild (SWG) was formed in 1933. After some struggle, the studios agreed
16
to negotiate with the SWG.
The struggle involved the issues of notice of termination and screen credit. Writers did not want
to learn if they received screen credit by attending the film's premiere. Demand for an official credit
system caused Eddie Mannix, the MGM representative on the bargaining committee (which also
included Loew's studio leader and Nick Schenck's man in Hollywood), to stand up in indignation and
say, 'I am not going to sit here and listen to this snot nose tell us that we violate anything.' And he
1 90
I
stormed out of the room. For a moment, there was stunned silence. He had played bad cop. The rest
of the studio representatives then quickly settled with the shaken representatives of the new SWG. 17
Movie fans now saw various kinds of screen credits: 'Based on ', 'Adaptation by ',
'Screen Story by ', 'Story by '

and 'Screen Play by '. The National Labor Relations
Board (NLRB) studied the situation, and on 8 August 1938, after years of negotiations, the leaders
of the studio system certified the SWG as the sole bargaining agent for writers employed by the
studios. This was followed by nearly two-year period of working out how the new credit system
should best work, during which the SWG formally filed charges of unfair practices against the stu-
dios before the NLRB. At long last, in May 1940, the guild shop was established and an agreement
concluded which established a minimum wage, made the SWG the sole arbiter of screen credits,
and granted many other concessions. Variety noted that this agreement represented 'a major vic-
18
tory for the scribes', but it was a bitter, hard-won victory.
The Screen Actors Guild

The Depression also badly affected actors and actresses. In March 1933 the studio leaders imposed
50 per cent pay cuts on all contract players. With no organisation to speak on their behalf - other
than the studio-controlled Academy - the actors and actresses had to swallow their pride at the
height of the Depression and take these cuts. However, on 30 June 1933 six actors - Ralph Morgan,
Grant Mitchell, Berton Churchill, Charles Miller, Kenneth Thompson and Alden Gay
Thomson - none major stars - met and sought to form the Screen Actors Guild (SAG) just after the
National Recovery Act came into effect. As well as pay, SAG members wanted to protest the long
working hours required of them. When it came to confronting the studios, SAG had an ace in the
hole that the SWG did not have - major movie stars. Eddie Cantor became SAG's first president
(1933-5), followed by Robert Montgomery. James Cagney headed SAG at the acme of his career,
1942-4. Actors' Equity union supporters from the East, who had joined the Hollywood film-making
community with the coming of sound, were major early supporters. They included Boris Karloff,
19
Graucho Marx, George Raft, Jeanette MacDonald, Spencer Tracy, Paul Muni and Miriam Hopkins.
Counterattacking, the studio leaders tried to fragment the actors' discourse of opposition by
asserting their own morality, patriotism and commitment to quality motion pictures. Using the trade
press, fan magazines and even films as platforms, the studio leaders tried to move SAG's demands
aside and have the public know that this was all about money: '[Stars] were victims of extravagance
gone awry. [Such greedy behaviour] was out of step with the national recovery program.' In 1935
they planted an article in a fan magazine that quoted a fan letter allegedly sent to a prominent,
though unnamed, star stating that she and other loyal fans were 'shocked and disturbed by the big
salaries the stars earned . . . when so many people have fallen on hard times. I don't begrudge you
your fine salary, but don't you think all big salaries might be lowered a bit - maybe to $1,000 a
week?' Again the stars came through. Eddie Cantor, a long-time supporter of FDR, paid a visit to
the president to plead the actors' case. To avert a highly publicised labour dispute that might
adversely affect public acceptance of the NRA, the president sided with the actors and actresses.
Still, the studios did not formally recognise SAG until 15 May 1937. SAG won minimum pay rates,
guarantees of continuous employment and twelve-hour rest periods between calls. SAG's first
official action was to repay its stars' efforts by opposing any federally enforced ceiling on actors' or
actresses' salaries. Yet because of the infamous seven-year contracts, the studio leaders still con-
trolled the actors' or actresses' ability to move, working hours, and all other conditions of labour. 20
In the spring of 1941 SAG made public the results of a survey of the earnings of 300 'Class A'
members of SAG for the years 1937-9. (Class A players were defined as those ranging from stars
down to bit players, as distinguished from extras, or Class B performers.) The median figure for this
group was $4,700 annually. While the average income among the 300 players was $14,867, the
report explained that that figure was due to the higher salaries in the upper brackets and pointed
out that only 6 per cent of the survey group earned more than $1 ,000 a week. Most earned less
21
than $500 a week.
The Screen Directors Guild

In the early 1930s the studio leaders made all the decisions on films to be made. The director shot
as ordered. The leaders saw the director as someone who merely put the script onto celluloid using
the material that he or she was given. Some, like Howard Hawks, moved from studio to studio so
that they could exercise some choice. Loew's, led by Nick Schenck, was notorious for treating direc-
tors as anything but artists. Once, when William Wellman asked to be allowed to direct a Tarzan
movie, only to be informed by Schenck that such things were beneath the dignity of a William
Wellman, the mediation got so difficult that Schenck sat him down and refused to give him any
work at all. And yet Schenck would not let Wellman out of his MGM contract. Lacking power, direc-
tors risked losing their jobs if they questioned studio decisions. It is surprising that directors took so
long to organise, but on 25 January 1 936, some 1 75 of them got together and did what the writers
22
and actors had done before them: they formed a union, the Screen Directors Guild (SDG).
At this first meeting, the question came up as to whether the SDG should align itself with the
SAG and SWG. The decision was made that no such alliance should be formed. This decision was
attributed to the fact that both of the other guilds had gained radical reputations, and the directors
did not wish to commit themselves to such a stand. It is important to realise that the directors who
formed the SDG were not interested in a revolution against the studio system. What they wanted,
rather, was recognition of their own contribution within the system. It was not without good reason
that the directors at that first meeting were led by now fabled auteurs, John Ford and Howard
Hawks. Money was never the issue; the SDG wanted participation in the preparation of scripts, and
the same requirement for cutting of the final release. The first major action of the SDG came in 1936,
when the directors, led by Ford, joined the writers and actors in boycotting an Oscar banquet. 23
This tactic did not get them very far. The more militant unions were prepared to go farther,
but the SDG, reluctant to take action such as calling strikes, found itself in a dance led by the studio
leaders. With no strike threat looming, Nick Schenck etal. would not even meet with SDG repre-
sentatives. For two years there was no real movement on even the limited agenda originally set by
Producer Hal Wallis getting award from Ronald Reagan, then president of the Screen Actors Guild
the SDG. By 1938 the time had come for the guild to take drastic action, or face defeat. The first
step that the SDG took was to arrange for a hearing in front of the National Labor Relations Board.
What they needed then was a president who could shake up the producers and force an agree-
ment. Surprisingly the Academy's president, Frank Capra, wanted recognition for the SDG. On 9
February 1939, he met with Joe Schenck, but Schenck continued to stall. Capra walked out. 24
Capra went back to his SDG board on 15 February 1939 and told of the run-around he was
getting from Schenck. Capra then proposed a double-barrelled attack. First, there would be dis-
ruption of the Oscar ceremony (by then broadcast nationally on radio) at which Capra was to be
master of ceremonies. There was less than a week until the banquet. If he did not show up, the
ceremony would not be able to go off as scheduled. Second, a strike would take place on the fol-
lowing day, 16 February 1939. Capra then resigned from the Academy, and gave the studio
leaders twenty-four hours to recognise the SDG, or the strike and Oscar boycott would commence.
After confiding with his brother back in New York, Joe Schenck called Capra and at 6pm on 15
February 1939, the studio leaders agreed to recognise SDG as the sole bargaining agent for direc-
tors. Joe Schenck announced the agreement with the following statement:
The relationship between the directors and the producers is most cordial. The negotiations that have
been in progress were being continued with the full expectation that an agreement satisfactory to all
concerned will be concluded within a few weeks. There has been a thorough discussion of all points
and we expect to reach an understanding which will not be only fair to the directors and the producers,
25
but will be beneficial to the industry as a whole.
Final provisions included a minimum wage scale: $1 50 a week for unit managers; $137.50 a week
for first-assistant directors; and $61.20 a week for second-assistant directors, who were hourly
workers. No one could be forced to work more than forty-four hours a week, unless overtime
wages were paid. For the first time, directors would be permitted to sit in with writers in the prep-
aration of scripts. They would be given a voice in the selection of casts. They would even be
allowed to help edit their pictures. SDG finally had power and a place in the Hollywood studio
26
system's strategy to make movies and profits.
The Post-World War II Strikes
These unions and guilds accepted the federally dictated wage restrictions imposed during World
War II. The immediate postwar years were a different story. In October 1945 a violent riot erupted
outside Warner Bros.' Burbank studios when Harry Warner hired thugs to descend on picketing
members of the Conference of Studio Unions (CSU), dissidents not part of the labour movement
analysed above. It was the ugly climax of a seven-month strike, and though CSU won some con-
cessions in the lengthy settlement of the dispute, a year later it would fall victim to a lockout, engi-
neered by the studios and rival IA. This led to its demise - but not without a struggle.
1 94
I
CSU's set decorators had gone on strike in March 1945 over a jurisdictional dispute with IA, a
union built on the more traditional industrial model. (There were often comical evocations of the
hairsplitting logic of such disputes: 'If glue were required, grips would claim jurisdiction; if wallpa-
per paste were involved, the painters would claim jurisdiction.') At the centre of the drama was
Herb Sorrell, a progressive unionist who had taken on Disney in 1941 . On the morning of 5 Octo-
ber 1945, after a highly emotional strike meeting the night before, hundreds of strikers gathered
before the labour gate of the Warner Bros, lot in Burbank. Several carloads of workers attempted
#
to enter the lot in spite of the picket line. The strikers overturned their cars. Soon both sides were
throwing one another down the street and kicking one another in the face. Harry Warner brought
out his fire hoses, playing them from studio stage buildings roofs not only onto the sidewalk but
also onto the pickets. Mobile loudspeakers on the opposite side of the avenue urged the strikers to
hold their ground. The police then let fly with tear gas. The prevailing wind blew it back into their
faces. Soon the fracas broke up. The lines had been drawn. A week later the NLRB ruled and ended
the strike on 31 October 1945. Still with the 'Battle of Burbank', labour peace seemed far away. 27
Both sides in the dispute claimed victory. Yet the basic jurisdictional issues remained unresolved
until a special committee of the American Federation of Labor's executive council adjudicated the
respective jurisdictions in December 1945. The committee ruled that set decorators belonged to
the painters' union. It also awarded the construction of sets to IA, at the expense of some 300 jobs
held by the carpenters' union, a member of the CSU. The vision of people's capitalism espoused
by Eric Johnston at the MPAA seemed in for a severe test. As IA pushed, CSU struck again for its
carpenters - a strike characterised by considerable violence, bad publicity, and an extensive con-
gressional committee hearing dealing with the issue of jurisdictional strife. In the end, IA won and
CSU lost. This proved the end of the strikes; as the movie business began its downward postwar
economic descent, the unions and guilds - led by IA - turned to preserving jobs and wages. In
1945 the studios employed 30,000 IA workers; by 1948 they hired only 13,000. The studio system
28
became a site for job preservation.
On the final day of July 1 946 - as strike activity was winding down in postwar Hollywood Disney,
the film industry's major cartoon producer, dismissed 459 of his 1,073 employees in what Walt Disney
described as a 'retrenchment move so we can see where we stand'. This followed the signing of a
pact with the Cartoonists' Guild, in which the guild had won a 25 per cent increase in wages retroac-
tive to 1 January 1946. For the cartoonists the firings were the last straw. Similar increases had been
won by other guilds and unions under a general labour settlement in June 1946. In conjunction with
the lay-offs, Disney announced that production would cease on all feature-length cartoons except the
four nearest completion - Song of the South, Fun and Fancy Free, How Dear to My Heart and All in
Fun. Such features as Peter Pan, Alice in Wonderland and Cinderella, which were not scheduled for
release until 1949 and 1950, were shelved until necessary adjustments could be made. Disney openly
declared that it planned to abandon short subjects entirely. Walt Disney simply hated dealing with
unions, and only gave in after strike action. But in the future, as Disney changed, Walt sought to mini-
29
mise his dealings with unions and pressed for the anti-labour laws such as the Taft-Hartley Act.
Labour Peace: Sort of

Thereafter, the decline of box-office takings and with it jobs - plus more and more work in tele-
vision production - led to less frequent jurisdictional battles. Demands for TV work and residual
payments commanded the scene under the 1959-60 SAG president Ronald Reagan. Every tech-
nical change sparked strikes. Union members wanted a share of the new technologies that were
changing movie-making. In 1960 SAG struck for six weeks and gained adequate compensation for
30
movies sold to television.
The star talent wanted their own representation, somebody to negotiate special terms of
employment with the studios, and help them handle their 90 per cent tax brackets. By 1950 nearly
all stars had hired their own agents, and this system spread to directors and writers. The studios
were happy to no longer have seven-year contract commitments. And in 1945 the US Supreme
Court handed down the de Haviland decision, which declared that the studios could no longer con-
tract players for more than seven years. By 1 950 SAG's jurisdiction over filmed TV became a major
issue. Labour peace came in spurts because of the need to find a new way to adjudicate labour
31
demands in a changing studio system.
Agents changed everything. In general, the studio bosses had ignored agents until James Stew-
art's agent, Lew Wasserman, convinced Universal to pay the actor nothing to star in Winchester
'73 in 1950 - in exchange for a percentage of the profits. Such agreements soon became
common. Wasserman would revolutionise the industry and re-invent the ailing studio system. He
perfected the use and need for agents and also brought an era of union peace. The apparent wind-
fall for the studios from the exhibition of films on television led, however, to their greatest and
most tangible problem, namely the writers' and actors' strikes of 1960. On 16 January 1960 the
writers went on strike primarily over the issue of whether or not they would receive a share of the
profits from the sale of post-1948 movies to television. The actors soon followed. The studio
leaders had anticipated this. For instance, in the 18 June 1958 issue of Variety, Barney Balaban
stated that revenues from television belonged solely to the producers, and that the talent guilds
32
would get no share. That was the old school talking.
In order to try and forestall a strike by the actors, the presidents of the major companies met
with representatives of the Screen Actors Guild on 19 January 1960. Nonetheless, SAG went on
strike on 7 March, the first time SAG ever struck the majors. The strike was taken enormously
seriously by both sides; the actors were suffering from a decline in the number of films being made,
and sought to strengthen their position. For the studios, the prospect of a long-term strike threat-
ened to worsen radically their already falling revenues. United Artists' method of financing and
distributing independent companies' products effectively eliminated what had been the traditional
concept of the studio. The SAG strike was settled in just over a month on 8 April 1 960. The three-
year pact provided the actors with 6 per cent of income from films made after 31 January 1960,
after the deduction off a 40 per cent distribution fee (or a 10 per cent deduction for films sold out-
right to television) in exchange for a relinquishment of claims on films made from 1948 to 1960.
Pension, health and welfare funds were set up for the actors by the studios, and the minimum
. .
1 96 |
wages for all classes of actors were raised as well. On 10 June 1960 a similar agreement was
reached with the Writers Guild. Behind the scenes Lew Wasserman, the agent to many of these
actors and writers, had played the key role in mediating a solution, making the studio bosses see
the new world. Wasserman had the respect of both sides. Soon to be a studio leader, he would
reshape the Hollywood studio system for labour, and then - the subject of Part III - the whole
studio system itself during the 1960s and 1970s.
Notes
1 . Variety, 1 March 1 933, p. 48; Variety, 29 December 1 93 1 , p. 1
2. Variety, 2 January 1934, p. 2; Variety, 14 March 1933, p. 7.
3. See John Kenneth Gailbraith, American Capitalism: The Concept of Countervailing Power (Boston:
Houghton Mifflin, 1 962) for the basis of countervailing power and Daniel Nelson, Shifting Fortunes
(Chicago: Ivan R. Dee, 1 997) for a concise overview of the labour movement in the USA. See also Hotence
Powdermaker, Hollywood: The Dream Factory (Boston: Little Brown, 1950).

4. Business Week, 1 6 December 1 939, p. 24.
5. Murray Ross, Stars and Strikes: Unionization of Hollywood (New York: Columbia University Press, 1 941 ),
pp. 14-18.
6. Variety, 25 July 1 933, p. 2; Variety, 3 October 1 933, p. 1 1
7. Murray Ross, 'Labor Relations in Hollywood', Annals of the American Academy of Political and Social
Science, November 1947, p. 59; The Los Angeles Times, 1 October 1929, p. 25; 'IA, 1893-1973, a
History', The Official Bulletin of the International Alliance of Theatrical State Employes and Moving Picture
Operators of the United States and Canada, no. 482, pp. 16-17; Variety, 25 July 1933, p. 5; Variety,
5 May 1937, pp. 3, 46; Variety, 8 August 1933, pp. 42, 7; Michael C. Nielsen, 'Towards a Workers'
History of the U.S. Film Industry', in Vincent Mosco and Janet Wasko (eds), Critical Communications
Review, vol. 1 (Norwood, NJ: Ablex Publishing, 1983), pp. 54-5; Louis B. Perry and Richard S. Perry, A
History of the Los Angeles Labor Movement, 1911-1941 (Berkeley: University of California Press, 1963)
pp. 322-30; Richard Lester, As Unions Mature: An Analysis of the Evolution of American Unionism
(Princeton: Princeton University Press, 1958), pp. 28-9, 48, 65-6, 109; Variety, 8 December 1931, p. 1 1;
Variety, 25 July 1933, p. 27; Ross, Stars and Strikes, pp. 27-9, 63, 94-105; Variety, 15 December 1931,
p. 6; Variety, 1 August 1 933, p. 48; Variety, 3 October 1 933, p. 5; Variety, 24 October 1 933, p. 6; Variety,
7 November 1933, p. 6; Variety, 15 May 1934, p. 25.
8. George H. Dunne, Hollywood Labor Dispute: A Study in Immorality (Los Angeles: Conference Publishing,
1950), pp. 5-14, 43; The New York Times, 20 March 1943, p. 30.
9. Variety, 1 1 December 1933, p. 5; Variety, 8 January 1936, p. 7. On studios favouring IA, see Variety,
16 August 1939, p. 7; Variety, 20 September 1939, p. 25.
1 0. Malcolm Johnson, Crime on the Labor Front (New York: McGraw-Hill, 1 950), pp. 29-30.
11. The Hollywood Reporter, 3 April 1 937, p. 1 ; The Hollywood Reporter, 5 April 1 937, pp. 1 , 8; 77ie
Hollywood Reporter, 26 April 1937, p. 3; The Hollywood Reporter, 29 April 1937, p. 1; Variety, 5 May
1937, p. 2.
12. The Hollywood Reporter, 1 May 1 937, p. 3; Herbert Sorrell, You Don't Choose Your Friends (UCLA Oral
History Project, 1963), p. 25; The Hollywood Reporter, 10 May 1937, p. 3; The Hollywood Reporter, 19
May 1937, p. 3; Variety, 5 May 1937, p. 23; Variety, 26 May 1937, p. 2; New Leader, 29 June 1946, p. 9.
13. Nation, 7 October 1939, p. 375; Variety, 31 May 1939, p. 39; Variety, 18 March 1936, p. 25; Ted Pierce,
'A Study of the Position of the Independent Talent Guilds of the Motion Picture Industry', undated mimeo
. .
THE RISE OF LABOUR UNIONS 1 9
[1938-9], p. 4, found at the Motion Picture Urban Archives Center at California State University,
Northridge, California. Unlike the IA studio locals, Los Angeles stagehand and projectionist locals
negotiated their own contracts with management. See Variety, 1 February 1 939, p. 5; Variety, 29
December 1937, p. 11; Variety, 24 November 1937, p. 20; Variety, 12 January 1938, p. 7; Variety, 28
February 1933, p. 27; Variety, 1 July 1936, p. 7.
14. Variety, 25 July 1933, p. 5; Variety, 1 5 September 1937, pp. 5, 23; Variety, 22 September 1937, p. 7;
Variety, 19 April 1939, p. 5; Variety, 26 April 1939, p. 16; Variety, 18 February 1939, p. 29; Variety, 25
August 1939, p. 1; Motion Picture Herald, 8 June 1940, p. 8; Motion Picture Herald, 15 March 1941,
p. 33; Motion Picture Herald, 1 9 April 1 941 , p. 9; Motion Picture Herald, 1 5 November 1 941 , p. 12. Ross,
Stars and Strikes, pp. 1 32-6, 1 96; Perry and Perry, History, p. 246. The list of books on the corruption of
IA keeps growing but usually simply adds little to accounts found in Elmer L. Irey, The Tax Dodgers (New
York: Greenberg, 1948) and Malcolm Johnson, Crime on the Labor Front {New York: McGraw-Hill, 1950).
See Gerald Home, Class Struggle in Hollywood (Austin: University of Texas Press, 2001) as the latest
interpretation of these events.
15. Bob Thomas, Walt Disney (New York: Simon and Schuster, 1976), pp. 16, 123, 171; Harper's, January
1979, p. 37; The Los Angeles Times, 2 January 2000, Sunday, p. B3. For a summary of the trials and
exposes of the IA scandal, see The New York Times, 26 October 1947, p. 33.
16. Larry Ceplair, The Writers Guild Redeems Itself, Emmy, January/February, 1983, pp. 6, 44.
1 7. This description is based upon participant Maurice Rapf's autobiography, Back Lot (Lanham, MD: The
Scarecrow Press, 1999). Still the best overall account of the rise of the SWG remains Nancy Lynn
Schwartz, The Hollywood Writers' Wars (New York: Knopf, 1982).
1 8. Variety, 1 8 June 1 941 , p. 5.
1 9. Ross, Stars and Strikes, pp. 89- 1 1 9; Hugh Lovell and Tasile Carter, Collective Bargaining in the Motion
Picture Industry (Berkeley. University of California Institute of Industrial Relations, 1955), pp. 40-50; Perry
and Perry, History, pp. 318-61
20. The Nation, 2 April 1 938, p. 383; David Prindle, The Politics of Glamour (Madison: University of Wisconsin
Press, 1988), pp. 1-32.
21. The New York Times, 1 2 March 1 94 1 , p. 34.
22. The New York Times, 26 January 1 936, p. 55; Todd McCarthy, Howard Hawks (New York: Grove Press,
1997), pp. 248-60.
23. The New York Times, 5 April 1936, section IX, p. 3.
24. Frank Capra, The Name Above the Title (New York: Macmillan, 1 97 1 ), pp. 1 87-8, 266-7; Joseph
McBride, Frank Capra (New York: Simon and Schuster, 1992), pp. 375-87.
25. Variety, 22 February 1 939, p. 44.
26. Daily Variety, 23 January 1936, p. 1; Variety, 8 March 1939, p. 33; Variety, 3 September 1986, pp. 83,
90-1, 94, 98, 100; McBride, Frank Capra, pp. 388-408.
27. Variety, 7 May 2001, p. 75.
28. The New Republic, 5 November 1945, pp. 597-9; Murray Ross, Annals, 1947, pp. 62-4; Motion Picture
Herald, 5 February 1949, p. 1 5; IA website, www.iatse-ntl.org, as of 2003.
29. The New York Times, 30 July 1 946, p. 37.
30. The New York Times, 25 December 1949, section 10, p. 5.
3 1 . Ross, Annals, p. 64; official website for SAG, www.sag.org, as of 2003.
32. Variety, 18 June 1955, p. 1; The New York Times, 1 1 November 1994, p. B4. See Irving Lazar, Swifty (New
York: Simon & Schuster, 1995) for an autobiography that at its heart tells the rise of agents in the studios.
33. Dennis McDougal, The Last Mogul (New York: Crown, 1 998), pp. 376-81
Part III
The Modern Hollywood Studio System

4
Contrary to many assertions, the Hollywood studio system never died - it was simply transformed.
The Hollywood studio system is still made up of a small set of corporations that produce, distribute
and present films for p'rofit. It is just that each film corporation is now part of a media conglomer-
ate that also creates a wide array of other media products and services. Each successful corporation
still needs a powerful leader to formulate strategies to maximise profit and maintain the long-run
power of the studio corporation inside the media conglomerate. Vertical integration, the bedrock
of the classic era, is still part of the basic strategies, but the emphasis now is on horizontal inte-
gration to capture synergies with other media businesses.
Whenever you see a movie blockbuster - such as George Lucas' regular creations - a close
examination of the final credits reveals the continuing economic power of the Hollywood major
studios. George Lucas alone cannot distribute his films; he needs Rupert Murdoch's Twentieth
Century Fox, one of the Big Six. His only other choices, the sole corporations that still distribute
around the world, are (in alphabetical order): Disney (owned by the Walt Disney Corporation), Para-
mount Pictures (owned by Viacom), Sony Pictures (owned by Sony), Universal Pictures (owned by
General Electric) and Warner Bros, (owned by Time Warner). All compete to produce and release
the top hits, but all co-operate to make sure that the game is played only among each other.
Lew Wasserman provided the impetus and model for the modern media conglomerate by co-
opting television as the basis of the new studio system, and then formulating the blockbuster to
revitalise the movie side, bringing the feature film back to the centre of popular culture. He did this
against a constant theme of the press during the 1960s that the old studio system was dead; yet,
movies as a popular medium have never been more alive. Film students line up to write and/or
direct features. Modern methods of filming and editing have given movie-makers the freedom to
make almost any image. Studios are no longer the only places where movies are made - only
financed and distributed. Profits for the studio system have steadily increased since 1970, when
Wasserman established the new system.
He transformed Universal from a minor studio (see chapter 12) to a major, and showed others
how to do it. Wasserman redefined the studio system as much as Adolph Zukor had done in his
time. Beginning in 1962, Wasserman showed how to use a flexible system of production, how to
exploit television, and how to increase the studios' market share in nation after nation around the
world. Three achievements establish Wasserman as the leading executive of his age.
First, he initiated independent production, whereby others - principally agents - developed and
produced films with their clients, ranging from stars like James Stewart to directors like Alfred Hitch-
THE MODERN HOLLYWOOD STUDIO SYSTEM 199
cock. Wasserman then green-lit those films he reasoned Universal's distribution arm could best sell
around the world. In the process, the studio as factory disappeared. Further, Universal accumu-
lated a library of film titles, to sell and re-sell to broadcast TV, pay-TV and, in the 1980s and
beyond, as home videos and DVDs.
Second, Wasserman pioneered movies made specifically for television. With TV movies, Univer-
sal became the largest supplier of network broadcast television programming. Selling to TV became
the basis on which he could take the necessary risks to fashion strings of expensive blockbusters.
Finally, Wasserman pioneered the blockbuster motion picture, beginning with Jaws (1975). The
blockbuster was of an altogether different magnitude to the hit movie. Universal's record-setting
E.T.: The Extraterrestrial (1982), for example, generated grosses measured in the billions of dollars.
He coupled mass-saturation advertising on television with simultaneous bookings in cineplexes
across the world. Advertising on television became the key to turning a feature film into a block-
buster, enabling the studio distributor to make millions and millions of dollars from ancillary rights,
from selling toys and allying with fast food chains, to milking later revenues from pay-TV, home
video and DVD sales. A successful blockbuster feature film could yield a billion-dollar pay-off - well
in excess of revenues made by any film distributed during the classic studio era.
Lew Wasserman, who retired in 1990, upon reflection should now be called the leader who re-
invented a second studio system Golden Age - an age that is still with us. At times during the 1 950s
and 1960s it did seem as if the studio system were dead. Then Wasserman re-invented the system
both through tools of vertical and horizontal integration. Audiences flocked to blockbusters, while
TV production and other media production offered a more stable economic base. The Wasserman-
invented package system prepares and makes the films, while the studios hold dominion through
world distribution. Ancillary presentation markets provide the bulk of the revenues. Wasserman
created the modern Hollywood system - just as Adolph Zukor invented the classic studio system.
The Modern Major Studios

In the past, eight major and minor studios dominated Hollywood, but MGM/UA marginalised itself,
RKO went out of business, and Disney rose to major status. By the beginning of the 21st century
each of the Big Six studios effected a different business strategy, reflecting the personality of the
studio chief as well as the financial condition and strategic objectives of the parent company.
Disney, one of the world's largest media companies, led by CEO Michael Eisner for nearly two
decades, is best understood as a well-oiled machine, fashioning films in an almost paramilitary
manner. Whether under the brand of mainstream Hollywood Pictures, or Touchstone Pictures, or
specialised 'independent' fare from its Miramax division, during the 1990s Disney led the way as
a major Hollywood power. Eisner tried to continue his amazing streak of making Disney's profits
grow quarter after quarter.
Paramount, a division of the Viacom Corporation, reflected an overall policy pursuing less
riskier films as deemed by CEO and owner Sumner Redstone. Unlike Disney, where no single share-
holder controlled the company (even Michael Eisner), Sumner Redstone effectively controlled
200
I
National Amusements, Inc., the owner of Viacom. And he was a classic executive owner who did
not like to take risks, even purchasing dominant home video renter, Blockbuster, to guarantee
access to that important market segment.
Sony took over Columbia Pictures in 1989, and still seeks to make consistently profitable its
grand experiment of marrying a movie studio and an electronics maker. Through the 1990s it
seemed that Sony's vast success as an innovator and seller of electronics products could not rub
off on the movie division and make the synergy work. Yet by hiring n£w executives, the Sony
movie-making and distribution subsidiary remained profitable.
Twentieth Century-Fox, like Paramount, is under the control of one man, Rupert Murdoch,
owner of international media empire, News Corporation. The difference between him and Sumner
Redstone (another owner and CEO) is that Murdoch is a greater risk taker. No better example can
be highlighted than his massive bet on Titanic (1997), the greatest financial success in Hollywood
history as of 2004.
Universal, owned since 2004 by General Electric and partnered with NBC as a media con-
glomerate within one of the world's biggest corporations, sought synergies simply between tele-
vision and film-making.

Warner Bros, was caught up in the greatest attempt at media synergy ever, when Time Warner
merged with AOL in 2000. Before that Warner Bros, had become part of the Time Warner media
colossus, a 1990s experiment, that worked. As the world's largest media company, Warners has
had a long, profitable record, but the merger with AOL has so far proven to be an utter failure.
Pretenders have not succeeded, although the DreamWorks SKG experiment continues on the
margins. Dozens have tried and failed; so the odds against DreamWorks SKG are long indeed.
MGM absorbed UA in 1981, and from that point MGM/UA dropped out of the majors, unable to
match the power of the Big Six. MGM/UA is a throwback to the past - it is not a media conglom-
erate - and has been continually bought and sold over the last few decades.
Corporate strategies came and went, but the Hollywood studio system remained. During the
1990s and into the 21st century, this six-member oligopoly retained tight and firm control. We can
still most easily see the power of the Big Six by examining the activities of their trade association -
the Motion Picture Association of America (MPAA). As it did in the past, the MPAA of today deals
with common concerns, from rating films to smoothing the way for international distribution and
protecting the studios' valuable copyrights around the world. While critics of the film industry
usually focus only on the MPAA's ratings system, its long-time head, Jack Valenti, earned his $1
million a year salary by helping the Big Six expand global revenues. Indeed, until his retirement in
2004 Valenti could more often be found abroad, far from his home office at 16th and 'I' Street in
Washington, D.C., two blocks from the White House. The MPAA's total budget (an estimated $60
million per annum) would make and market but a single modest blockbuster, and the Big Six know
what a bargain this represents in return for protecting their turf and expanding their markets.
The biggest change has come from an expansion of what was formally called exhibition, but
now is properly called presentation. The Hollywood studio system - as embedded in media con-
THE MODERN HOLLYWOOD STUDIO SYSTEM 201
glomerates - still uses classic price discrimination, releasing a film so as to maximise the revenues
from each separate window. Basically, this means that the Big Six release films in the following
order: theatres, home video and DVD, pay-per-view, pay cable and, finally, broadcast and basic
cable television. Each window in this sequence is an exclusive. A new window opens only when all
value of the previous window has been captured. Customers know that if they wait the cost they
pay at that window will be lower than the prior one. Home video and DVD also allow the customer
to view the film whenever she or he desires. If one waits long enough, one could purchase a blank
tape and copy the film from free over-the-air broadcast television. While theatrical premieres drew
the most publicity, by the close of the twentieth century most of the studios' revenue came from
home video and DVD sales or rental.
The Big Six's raw power also continues to derive, as it has since the 1920s, from their unique
ability to distribute films around the world. At considerable expense, all six maintain offices in more
than a dozen cities in North America and up to fifty overseas, where their representatives are in
constant contact with the heads of the dominant theatre chains. A studio's 'hit parade' record at
the box office is what impels theatre owners (a conservative lot with most of their assets invested
in real estate) to consistently rent its products. Most movies are funnelled through Hollywood's Big
Six. Thus, although much has changed in other parts of the industry, distribution worldwide has
remained the same.

In the end these two forces have led the Big Six to integrate horizontally and vertically. The Big
Six generate considerable profits from a wide spectrum of mass-media enterprises, including theme
parks (Universal and Disney in particular), recorded music (Universal, Sony and Time Warner), and
all forms of television production, and presentation. Each area helps the movie division. Movies
inspire theme park rides and their soundtracks supply hits for the music divisions, while television
supplies pre-sold stars and stories. This horizontal diversification has generated enormous revenues
for the Hollywood majors, and will continue to do so. Consider that Disney, Paramount, Warners,
GE's Universal, Sony and Twentieth Century-Fox - all of the Big Six - instantly became the defining
producers in home video at the end of the twentieth century, and DVD as the 21st century opened.
But how should we go about writing a history of the new studio system when we are still living
through it? Since the major corporations so benefited from fashioning themselves into or joining
as part of a media conglomerate, it is important first to analyse them as a group, as has been done
in this chapter. The following chapters are organised in a similar fashion to the chapters in the first
two parts of this book, the analysis focusing on leadership, structure, ownership, finance and
assets. Important changes in ownership usually precipitated changes in types of films produced,
while little was varied in distribution and exhibition. New owners and managers alike recognised
the source of industry power and profit. I end Part III with an analysis of the MPAA, and the place
in the system of unions and agents. Then I provide a Coda. This is no longer history, but an attempt
at best to figure out the trends of the modern conglomerate studio era as of the middle of 2004.
Lacking historical perspective, it is very much speculative in nature.

15
Universal
Lew Wasserman took over Universal in 1 962 and headed it into the 1 990s. He took the company
into the major league of studios, bringing record profits. More than this, he reinvented the studio
system by developing the strategies that still define the industry. He married television and film with
other media production, distribution and presentation. He pioneered the feature-film blockbuster,
with Jaws in June 1975. He showed the studio system how to use a flexible system of production,
and how to exploit television, and how to increase its market share in nation after nation around the
world. All of these strategies were copied by his contemporaries and by those who came after.
Like the moguls of the 1 930s and 1 940s, he was a powerful and insightful leader who initiated
strategies to maximise profit and ensure the studio's longevity. There was a difference, though.
The leader was now in charge of a media conglomerate in which the studio (now for both film and
1
TV production) stood at the core.
Lew Wasserman habitually wished to remain invisible, never letting even his photograph be
published without his permission. He avoided all publicity and credit - saying his stars and films
were for the public eye, not his life. Consequently, he rarely gave interviews. But when noted jour-
nalist Sander Vanocur called in early 1977 he agreed to talk. Vanocur was impressed, titling his
short piece: 'Is He the Smartest Man in Hollywood?' Vanocur wrote:
After an hour with MCA Inc. chairman Lew Wasserman, a reporter has two options. He can lie down
and rest his brain or he can award himself an instantaneous Ph.D. in mass communications. Wasser-
man is regarded by most people in the entertainment business as the smartest and most powerful
man in Hollywood. He sits in his office in Universal City behind an antique desk that is always devoid
of paper.
Note the latter observation: it was all in Wasserman's head, as Fitzgerald had described in The Last
Tycoon.
For Vanocur:
Most of us spend our lives at desks filled with the night soil of paper - unanswered phone messages,
long memoranda that lead to meetings where grown men and women sit around making indecisions,
and letters that will never be answered and never should have been sent. Wasserman sits behind his
desk making decisions and offering hir opinions when asked.

UNIVERSAL 203
Vanocur had come to Wasserman's paperless office seeking his reaction to the phenomenon of
Roots, the unexpected TV hit of January 1977. Vanocur asked him what impact Roots would have
on future patterns of television programming and what it tapped in the viewing audience. Wasser-
man replied:
Roots is an extension of what happened a year ago with [Universal's] Rich Man, Poor Man. It was well
done and brilliantly programmed. That, combined with a thing called the weather [an exceptionally
cold January], developed the largest audience in the history of television. . . . Both of them [his Rich
Man, Poor Man and Roots] became events that were out of the routine television viewing pattern.
Television has evolved greatly in the 30 years it's been around. In the early days, it was almost a carbon
copy of radio. Then, as events developed in television ... the long form of television such as 90-minute
programs . . . became much more similar to movies than to radio. Therefore, the event on television
is going to parallel or exceed, as Roots has, the event in the movie business, if you can have a big block-
buster on television akin to The Exorcist or Sting or Jaws or Towering Inferno you are going to have
that translated into enormous viewing. Roots certainly fits that category. And without taking anything
away from ABC, you had people locked in because of the weather.
Vanocur then asked Wasserman if viewers were now more desirous of continuous narrative rather
than the hour or weekly half-hour episodic forms of detective shows or situation comedies. 'I think
they may be', Wasserman answered,
if you can do it in a continuous form as they did in Roots - namely, every, night, so the retention factor
does not become a problem. It's much easier to remind people of what was on the previous night than
the previous week. . . . [This had] been done before, but not in the dramatic area. Certainly the Olympics
became the kind of event I'm describing . . . and if the weather works for you, you'll get big ratings.
Finally Vanocur asked him if he was against efforts to bust up NBC, ABC and CBS. He ended the
short interview by saying: 'Yes. I'm too old [then sixty-four] to fly blind. What will they put in their
place?' Short sweet and to the point - and then Vanocur was escorted out so that Wasserman
2
could get back to work.
Conglomeration Wasserman-style clearly strengthened Universal so that during the 1970s
Wasserman's model of leadership became the model all others copied. The key lay in media con-
glomerates, that is, very large corporations that own related media companies, rather than non-
media ones. Studios needed to produce mass media that were related, and then cross-sold and
cross-promoted. The media leaders of the early 21st century - Sumner Redstone of Viacom, Rupert
Murdoch of Fox, and Michael Eisner of Disney - were through the 1 970s all learning their lessons
3
from Lew Wasserman.
What is most remarkable is that over and over again Wasserman bent the Hollywood studio
system to his own design. As an agent in the 1940s, he helped destroy the classic studio system
that had made actors and artists the chattel of powerful bosses. In the 1950s, he moved a recalci-
trant film industry into the television age. In the 1960s, he was the midwife to the TV movie-of-
the-week, the TV miniseries, the one-hour serial, and brokered an agreement among his fellow
studio chieftains that created the movie industry's rating code. In the 1970s, Wasserman perfected
a revolutionary marketing formula called the blockbuster - and changed the way movies were
made and sold. Like the leaders who preceded him, Wasserman was never beloved. Many feared
him; others held him in awe. 'He could act coldly, harshly, hardly benevolently', stated Barry Diller,
studio boss at Paramount and then Fox, and who grew up with Wasserman's only child, Lynne.
4
But he was always 'a very honest and honorable man, but a tough, tough guy'.
Lew Wasserman: Innovator and Leader

Wasserman was born at home on 22 March 1913, in the Jewish ghetto of Cleveland. His parents,
Isaac and Minnie Weiserman, who had fled Russia five years earlier, failed time and again in their
efforts to run a small restaurant profitably. Wasserman attended Cleveland's Glenville High School,
contributing to the family coffers by working as a movie usher - the 3pm to midnight shift - at a
downtown picture palace. This is where he learned to love movies. Accepted into Ohio State and
Western Reserve Universities, he skipped college because he could not afford it. He quickly found
his niche and supported his family as a publicity director for the Mayfair Casino, a Cleveland night-
club. Wasserman then felt rich enough to get married. On 5 July 1936, aged twenty-three, he mar-
ried Edie Beckerman, whose well-off Cleveland father was a lawyer. Edie wanted to be a dancer,
but no 'good Jewish girl' would ever be allowed do that as a profession, she said in 1998. She later
loved to tell people that Lew came from the wrong side of the tracks, and she came from the right
side. 'We met in the middle because my father was broke,' she said. As a pre-teen, she had a
chequebook and a weekly allowance of $125. 'That lasted till the Crash when I turned 19 years
old.' 'Lew didn't lose anything,' she remembered, because he didn't have anything. When they
met, Edie was working at the May Company downtown department store for $18 a week. 'I just
5
knew he was going to be successful,' she reflected.
Soon after their wedding, in December 1936, in a story that has reached legendary status,
Wasserman was called to an interview in Chicago with Jules Stein, who had a big-band agency
called the Music Corporation of America (MCA). Before Wasserman got his coat off, Stein hired
him to be head of advertising. A private company that let out little information, by the 1930s,
according to one former MCA agent, the company represented something like two-thirds of the
major bands in the USA. MCA agents could persuade hotels to sign exclusive booking contracts.
It was common knowledge that if a hotel didn't sign such a contract, it just didn't get MCA's best
clients. Control of the band business led quite naturally into representing singers, comedians and
other performers. Soon MCA was packaging complete shows for both nightclubs and radio. The
war years pushed MCA into the big time. Between January and November 1942 a fan in Chicago
could have heard a roll call of MCA clients: the Glenn Miller Orchestra, the Artie Shaw Orchestra,
6
the Jimmy Dorsey Orchestra, the Benny Goodman band, the Kay Kaiser band.
UNIVERSAL
In 1938 Stein sent Lew and Edie Wasserman to Los Angeles. Edie had found a home. 'I never
felt so open and free in my life,' she recalled. 'Beverly Hills was a wonderful one-horse town.' They
lived in an apartment adjacent to Beverly Hills. *We didn't have any money to give in those days,'
she would remember. She never envisioned that, by the end of the 20th century, officials at UCLA
would take the couple out to lunch, and in the middle of a somewhat painful pitch, Edie would
painfully looked at Lew, who looked at their hosts and asked, 'If I give you $1 million, will you
7
stop? . . . Just send me a little memo, and I'll send you a check.'
By 1940 Wasserman had expanded agency business by taking on disgruntled actresses Bette
Davis and Joan Crawford. He must have been doing a good job. He was making $350 a week
when he was called to meet Louis B. Mayer. He went to the famous cream office at MGM, where
Mayer gave him a yellow pad and told him to take dictation. 'A firm seven-year contract,' began
Mayer that Lew reckoned meant a new contract for a client. '$5,000 a week,' said Mayer. 'Vice-
president in charge of marketing,' stated Mayer, staring straight at Wasserman through his rimless
glasses. 'That's what I'm offering you to come to work here next Monday.' Wasserman turned
Mayer down cold - adding to his legend.
MCA's studio system breakthrough came in 1945 when it acquired the prestigious Hayward
agency with 200 clients, most notably James Stewart, Gene Kelly, Myrna Loy, Billy Wilder, Henry
Fonda, Judy Garland, Montgomery Gift, Gregory Peck, Helen Hayes, Fred Astaire, Alfred Hitchcock
and Dashiell Hammett. Lew made them all rich. Now, with a list that also included Clark Gable and
Joan Crawford, Wasserman could bargain from a position of strength. This gave Wasserman an
entry into the studio system, and the ability to make his star clients rich by cutting their tax through
innovative deals. Ten years after he had been hired, the energetic Lew Wasserman - on 1 6 Decem-
ber 1946 - became president of MCA, now not so much a big band booker, as an agency which
8
could out-William Morris William Morris.
The Agent Conquers Hollywood

Wasserman serviced his star list well, but needed some sort of new service to become the king of
agents. He found it in the tax code for one of the great actors of his era - James Stewart. Wasser-
man used the tax code to change the studio system. Stewart and director Anthony Mann made
seven films (from 1952 through 1955) in partnership, all packaged by Wasserman. And he made
Stewart the highest paid actor in Hollywood by brokering a deal in which Stewart took a share of
the profits rather than a salary. It was a little trick of creative bookkeeping he had learned in the
radio business. In the mid- 1940s, William Paley's CBS radio network was being beaten soundly by
NBC. Paley needed a lift, and believed he could get one by luring some of NBC's stars to CBS. But
Paley had a problem - he couldn't afford a bidding war. Enter Wasserman. Instead of putting the
stars under standard labour contracts, Wasserman advised Paley to 'buy' them as incorporated
enterprises. This way, the star's salary could be sheltered from stratospheric personal income taxes
(77 per cent of everything over $70,000), and taxed instead at the much lower capital gains rate
(25 per cent). The stars would thus keep more of their income, and Paley wouldn't have to pay
206 |
appreciably more for their services. That's how Wasserman brokered client Jack Benny to multi-
millionaire status, and with Benny's deal set an industry precedent. Soon all his client movie stars
lined up to have Wasserman perform his magic for them. Jack Benny aptly summed up client feel-
ings when he wrote: 'The president of MCA was Lew Wasserman, a dynamic gentleman who
combines a shrewd business sense with a real creative show business flair and who takes a strong
9
personal interest in his clients.'
Wasserman learned how to maximise commissions by selling the agency's talent in packages
- a writer plus a director plus stars - so a single movie would pay multiple fees. Packaging was one
of his prime innovations, and thereafter became standard operating procedure in the modern
studio system. Film Historians traditionally point to the May 1948 Paramount decision as the end
of the studio system, but packaging's introduction was the end of the classic studio era. Packag-
ing could also mean a new image for a star. Take James Stewart. His 1930s and 1940s persona
had been a faltering, perpetual adolescent. From that endearing, small-town fella, came a colder,
edgier individual, an obsessed neurotic distrustful of the conventions of society. The public
embraced this new screen image. Later in the 1950s, Hitchcock would take advantage of the 'new'
Stewart in Rear Window and Vertigo (1958) as did John Ford a few years later in The Man Who
Shot Liberty Valance (1962) - all MCA packages. His creative freedom improved, attracting the
attention of actors and directors, who now demanded a stake in the films they made. Here
Wasserman gave birth to a true auteur system, and the studio system would never be the same
10
again. Wasserman redefined what it meant to be an agent. His client list turned solid gold.
He insisted MCA agents rid themselves of their image of 'flesh peddlers', to use his own
phrase. Instead of the usual agent's dress of plaid suits and bright-coloured shirts, he made his
agents dress as he did, in dark suits, white shirts, dark narrow ties and black oxfords, and emulate
his long working hours, keeping themselves available to clients at any time, day or night. He man-
aged to keep out of the news Clark Gable's arrests for drunk driving and Betty Grable's premari-
tal pregnancy. But it was Wasserman's successful assault on the seven-year contract system that
endeared him most to clients. His confrontations with the studio leaders of the 1950s gave stars
and directors the creative freedom they long desired. MCA stars were able to choose their films,
11
to order script changes, and to keep a percentage of box-office revenues.
In time, he decided to involve his agency in television production. 'I felt our organization was
capable of earning more than 10 per cent, and that we could do better on the other side of the
table,' he once said of his next innovative strategy. In 1950 Wasserman formed Revue to showcase
his clients. There was one obstacle: a conflict of interest for talent agencies to act as producers.
Screen Actors Guild policy prohibited agencies from engaging in production. The guild would grant
waivers to this policy on a case-by-case basis, but the SAG board, which included guild president
Ronald Reagan and his wife, Nancy - both MCA clients - granted a blanket waiver to MCA. This
allowed MCA to act as a TV producer without requesting individual waivers for each production.
SAG members were happy for the work. This decision gave Wasserman an advantage in television
production. By 1954 gross revenues from Revue exceeded those from the talent agency. Revue
UNIVERSAL 207
produced star vehicles with established MCA clients who Wasserman urged to make the transition
to television. If a series aired for three years in prime time and generated at least 100 episodes, then
MCA's gross revenue after syndication would be around $7 million, and the client's share would
be around $2 million - hardly something SAG members did not appreciate. The TV entry capstone
came in 1958 when Lew shrewdly out-negotiated Barney Balaban and purchased the TV rights to
Paramount's film library. A year later, MCA's annual gross revenues had grown to $58 million, with
$12 million from commissions, and $46 million from television. Lew had made a television company
from a talent agency, while the studio rivals tried to figure how to keep the old studio system
12
going. Thereafter television production would be at the centre of all Wasserman-led enterprises.
In October 1955 MCA's first Alfred Hitchcock Presents appeared on CBS, and the series ran for
a decade. Of the 350 episodes, Hitchcock directed only twenty, but he introduced them all, and
his wry prologues and epilogues, delivered in a deadpan style to identifiable theme music (Gained's
'Funeral March of a Marionette') made this movie-maker a national celebrity. What did Hitchcock
get in return? The freedom to make his own movies. Protected by Lew Wasserman and his TV
series, masterworks of the cinema regularly appeared from this artist who was at the top of his
form: Rear Window, The Man Who Knew Too Much (1955), Vertigo and Psycho (1960). Classic
Hitchcock cinema of the 1950s must be thought of as Wasserman and Hitchcock production - the
13
perfect partnership.
Wasserman was involved in all phases of the creative process. In all these Hitchcock classics,
Wasserman made the deal, approved the scripts, watched rushes and approved the final release.
He loved making movies, screening them constantly during his sixteen-hour work days - either at
his screening room at home or at the studio. He was a business leader par excellence, but he
always loved - like Zukor, Balaban and Schenck before him - making movies. Wasserman, the
dark-suited agent, was the image; behind the scenes was a skilled leader who loved to work with
Hitchcock making movies and making money. In 1962, as Wasserman moved from agent to studio
head, he paid Hitchcock 1 50,000 shares of MCA stock for the rights to Psycho and all Hitchcock's
TV shows. Suddenly behind MCA's founder, Jules Stein and Wasserman himself, Hitchcock became
14
the third largest holder of MCA stock.
But the basis of Hitchcock's bankability was his TV show. Lew Wasserman taught the studio
system to make peace with the television industry. Slowly, in fits and starts, every other leader fol-
lowed suit. By 1960 the Hollywood movie industry had been remade into a nascent form of the
modern studio system by making and selling two products: films and TV series. After Hitchcock
came additional MCA hits in classic TV genres: the Western (Wagon Train, NBC), the sit-com (Ozzie
and Harriet, ABC) and the reality show (This Is Your Life, NBC). Wasserman and MCA worked
closely with NBC and in time would help that network innovate a new television genre - the movie
made for television. Warner Bros, and Disney usually get all the credit for bringing TV production
15
to Hollywood, but Lew Wasserman really did. He brought TV west - to stay.
Wasserman was well aware of the importance of the star system. To a questioner from the LBJ
Library for a 1973 oral history:

Having spent my entire adult life in the image business, as it were, having to do with personalities that
hit or miss - the most talented actors or actresses are not necessarily the most popular, and the most
capable performers, in a great many cases, are unemployed. This has to do with their failure to trans-
mit or to communicate. On the other hand, there are certain personalities that never read a script until
five minutes before they're going to play a very emotional scene and, because of the strength of their
personality . . . have the capability of going on camera and playing a very difficult scene as though they
had rehearsed it for two weeks. It's the mystery of what the public will or will not accept. And again,
history has taught us. [The] history exists in the cinema, which goes back about sixty years, [shows]
we've run the gamut from the pretty boy, back in the silent days of John Gilbert and Gilbert Roland and
Rod LaRock and [to] very attractive, continental types to the strong, he-man, American types, the Clark
Gables and Spencer Tracys et cetera, to the glamorous American types, Gary Cooper, Cary Grant, Jimmy
Stewart, to the ail-American boy [types like] Henry Fonda, through the modern type, the Marlon Bran-
dos and Steve McQueens, unattractive males. And at the moment I personally think we're on the trend
of the attractive male. I would guess that Robert Redford will be the next superstar in Hollywood.
16
He was, of course, right.
By October 1957 MCA-TV ranked behind only CBS and NBC in terms of television power. MCA
represented more top TV stars than any other agency, and it also represented top-flight writers,
producers, directors, musicians and singers, whom MCA agents packaged for TV broadcasts, TV
films and movies. In fact, the odds were better than 50-50 during the late 1950s that any time a
viewer in the USA saw a television show, or went to the movies, MCA had had a hand in it.
Advertisers loved MCA products: Wagon Train (sponsored by National Biscuit, R. J. Reynolds and
Ford), Riverboat (Corn Products), General Electric Theater and Bachelor Father (American Home Prod-
ucts and American Tobacco), Alfred Hitchcock Presents (Bristol-Myers), and Tales of Wells Fargo (Proc-
ter & Gamble and American Tobacco). NBC was Wasserman's top client, with Wagon Train, This is
Your Life, M-Squad, Truth or Consequences, Tales of Wells Fargo, The Restless Gun, Suspicion and
Dragnet. Chairman Robert Sarnoff called a meeting of the network's programming executives one
spring night in 1957. After they had assembled, the door opened and in walked MCA vice president
David A. (Sonny) Werblin. Without any preliminaries, Sarnoff said: 'Sonny, look at the schedule for
next season; here are the empty spots, you fill them.' The rest of the evening the NBC executives
meekly watched Werblin rearrange their schedule and insert new shows. When finished, the sched-
ule showed fourteen-series (eight and a half hours a week) in prime-time product that MCA had pack-
aged. MCA sold two of its new 1959-60 shows - Riverboat and Laramie - to NBC without making
a pilot (a film made to show prospective customers what the series would be like). Sarnoff stated pub-
licly that he dealt so much with MCA because he thought MCA produced the best shows. 17
The power of MCA often brought about strange TV programming circumstances. So, for
example, on Sunday night, 22 September 1957, NBC's chief Robert Sarnoff decided to use The
Steve Allen Show to display NBC's wares for the new season. It made a pretty impressive show-
case and most of it was MCA talent. What made CBS uncomfortable was that Ed Sullivan, who
UNIVERSAL 209
was practically MCA's favourite son, occupied the time slot opposite Allen. Variety gleefully head-
lined the predicament, 'It's MCA Versus MCA!'

One survey indicates that ten of the top dozen highest-rating series from 1956 to 1996 came
from MCA. They are, in chronological order, with the highest rank in the ratings: Alfred Hitchcock
Presents (number 6, 1956-7); General Electric Theater (number 3, 1956-7); 7a/es of Wells Fargo
(number 3, 1957-8); Wagon Train (number 1, 1961-2); The Virginian (number 10, 1966-7);
Adam-12 (number 8, 1971-2); Kojak (number 7, 1973-4); The Rockford Files (number 12,
1974-5); Rich Man, Poor Man (number 2, 1975-6); Magnum PI (number 3, 1982-3); and Murder,
She Wrote (number 3, 1985-96). 18

MCA usually managed to get a very sizeable share of any TV's show's income. For example,
the first three years of Wagon Train, starring MCA client Ward Bond, which was budgeted at about
$100,000 a week, brought MCA about $17 million. Earnings of this magnitude explain why pro-
duction was so important to MCA. For the company to have grossed $17 million in agency com-
missions it would have to have got 10 per cent of $170 million of client salaries. MCA clients
Marlon Brando, Gregory Peck, Jimmy Stewart and Clark Gable combined probably did not earn
that much in commissionable income MCA was the only company that was
in their entire lifetimes.
at once a talent agency, a producer and a lessor of production facilities. This gave MCA a tremen-
dous advantage. attracted new clients among actors who figured that
It they used MCA as their if
19
agent they stood a better chance of getting parts in Revue series.
One television executive, who did not want his name used, stated in 1960:
It's on these package deals that MCA is really making the money. Through its subsidiary, Revue Produc-
tions, MCA produces the package. On shows destined for network use, after Revue makes the pilot,
the network will usually finance the rest of the production, but Revue adds 20 per cent to the total
estimated cost for production overhead. But then MCA will get another 10 per cent for selling the
package. And later, if it's syndicated, MCA-TV gets another 10 per cent for distributing it.
MCA client Ed Sullivan stated in 1957:
Here's an example of how a big agency like MCA can be of tremendous help to you. This summer
[1957] I went over to Europe for two weeks. There's a nightclub in Paris called the Lido; the best shows
in Europe play there. There was an act called the Nit-Wits, a musical act from London. They do pantomime;
it's sort of the English equivalent of Spike Jones. I wanted to get them over here on the show. The first
step was to arrange with the Lido, which holds a year's contract for them, to let them come over here
for a couple of weeks. This worked out with the Lido through friendships and past favors. Then
I we
had to get an okay from [the musicians' union], because technically the Nit-Wits' coming here could
cost some American musicians some employment. So MCA, with its offices in London, worked out a
deal for me with the British musicians' union so an equal number of American musicians could appear
in Europe. It happens that Spike Jones has nine men, the same number as the Nit-Wits. So MCA booked
2 1
I
Spike Jones in Europe while the Nit-Wits are here. They're going to be on the show here 24 November
1957 and 1 December 1957. An individual agent couldn't swing a deal like that.
As Lew Wasserman was overheard stating at a cocktail party in 1957, telling the reason for MCA's
20
success: 'We know more and we work harder.'
MCA Becomes the Universal Studio Conglomerate

*
In 1959 Wasserman took the next logical step. He purchased from Decca the Universal Studios lot
for $12 million in cash. Outsiders were surprised, as few had ever heard of this man Wasserman -
despite the fact they' were watching his shows on TV, from Leave It to Beaver to Dragnet, sixteen
series in all during prime time. Now Wasserman had a studio lot and a library of films and TV series,
a library he knew would become another cornerstone of the new Hollywood studio system. A tele-
vision station with nothing but properties of MCA-TV Film Syndication could programme for 804
consecutive hours without a single rerun. Television Age praised Wasserman's vision: The MCA-
TV Film Syndication Division was big not only in volume of product: it is big in its conception of
operation.' Wasserman possessed the largest film and television libraries in the changing studio
system. He boasted: 'We can guarantee that an MCA-TV salesman will be able to reach any client,
any place in the nation, within 24 hours of the time he is called.' And with a host of product no
studio could tender. Business was so good and MCA so profitable that when a vice president of a
large bank interested in television was asked about financing TV, he remarked: 'If [Lew Wasser-
man] walked in and asked us for $1 million, we probably wouldn't demand security. We'd just
hand the money over to [him].' It was pure Wasserman - an original organised system, figured out
by him, executed by his staff, monitored by him, and integrated within his agency operations. 21
By the beginning of the 1960s, MCA was in the unusual position of both selling talent (via the
agency) and buying it (via Revue). Rivals complained. The Kennedy Justice Department also found
this situation unusual - if not illegal - and so ordered MCA to divest itself of either its TV holdings
or its agency. Wasserman's Revue Productions earned $72 million in 1 961 ; his agency only took in
$7 million. The choice was clear - the potential for growth in the new television and film studio
system seemed unlimited. The forced divestiture did not displease Wasserman for it allowed MCA
in 1962 to go ahead and acquire Universal Pictures (adding the studio's library of past motion pic-
tures) to make Wasserman's Universal instantly a major studio. In 1964, Revue was renamed Uni-
versal City Studios, and Revue Productions became Universal Television. Lew Wasserman stood at
22
the heart of Hollywood television production and movie-making.
Wasserman began to innovate. Progress was slow, steady and sure. Success followed success.
In 1962 NBC premiered television's first ninety-minute Western, The Virginian - a Universal TV pro-
duction. The following season Wagon Train expanded to ninety minutes. In 1964 came the debut
of Project 120, the first in a series of two-hour movies made for television. The initial two, See How
They Run and The Hanged Man, were broadcast on NBC's Wednesday Night at the Movies. In
1966 Universal Television introduced its World Premiere movie series on NBC-TV. These films, made
UNIVERSAL 211
especially for television like the Project 120 entries, became a huge success and hundreds were
churned out, often as pilots for series, as was the initial effort, Fame Is the Name of the Game. In
1968, Universal Television brought another innovation to TV: a ninety-minute series called The Bold
Ones which was the umbrella title for three rotating series (The Doctors, The Lawyers and The Pro-
tectors). Three rotating characters (one appeared each week) were connected by a common place
of employment. In 1970, Wasserman brought together four series with divergent themes under
the umbrella title of Four-in-One: McCloud, Rod Serling's Night Gallery, The Psychiatrist and San
Francisco International Airport. The following season, Universal Television unveiled the NBC Mys-
tery Movie, a series of ninety-minute rotating programmes in the detective genre. One week view-
ers tuned in to Columbo, the next week to McCloud, and the following to McMillan and Wife.
Then came the era of the miniseries. In 1971, Wasserman unveiled Vanished, a two-part, four-
hour made-for-TV movie, and soon the miniseries was TV prime-time staple. The year 1976 was an
important one for Universal Television as it marked the premiere of the studio's first genuine mini-
series, Rich Man, Poor Man - a sensation. During the 1978-9 season, Wasserman green-lighted Uni-
versal Television's biggest project: the miniseries of James A. Michener's massive novel Centennial.
At a running time of twenty-six hours, it was the longest miniseries ever. At a cost of $25 million, it
was the most expensive show in TV history. Universal Television became the base for Wasserman's
media conglomerate. Talent brewed all around the lot: Richard Levinson and William Link created
the TV movies My Sweet Charlie (1970), That Certain Summer (1972) and The Execution of Private
Slovik (1974); Steven Spielberg cut his teeth with Duel (1971); Peter Falk became Columbo; Roy Hug-
gins fashioned The Rockford Files. But the master of this TV empire was Lew Wasserman. 23
He cross-pollinated, moving talent from TV to film, and vice versa. For example, without the
TV movie Duel, there probably would never been the first true movie blockbuster, Jaws. Steven
Spielberg made Duel for $425,000, which included the 25 per cent Universal overhead in fourteen
shooting days. This caught Wasserman's attention and he took a chance and assigned Spielberg
to Jaws. Indeed, in an American Film Institute interview in 1974, Spielberg advised young film-
makers that they should start in TV, just as Wasserman had structured Universal to operate. It is
too often forgotten that Wasserman green-lighted American Graffiti (1973). Spielberg told eager
film students to pay attention and please the man with the real power - in his case, Lew Wasser-
man. Wasserman always watched the dailies, even for Spielberg's TV movie; he never communi-
cated with Spielberg, and the film-maker knew he was doing OK. 24
Once he acquired Universal, Wasserman renovated twenty-three of the studio's old sound
stages and built thirteen more. He also built a fourteen-storey headquarters know as the Tower.
He told TV Guide: T believe that there's going to be a lot more leisure time and more people to
25
enjoy it. We're [at Universal] dedicated to filling that need.'
With TV business as Universal's studio lot foundation, Wasserman slowly built up Universal's
ailing film division. In 1963 Gregory Peck received an Academy Award for best actor in the film
adaptation of Harper Lee's To Kill a Mockingbird. No blockbuster here, but lots of prestige -a call-
ing card for a new Universal. Wasserman also began to green-light films now considered to be clas-
UNIVERSAL 213
sics, foremost among them Hitchcock's The Birds (1963) and Marnie (1964). He was making Uni-
versal a name as a top movie studio, but also seeking a way to reinvent what the studio system did
in terms of film-making. He was nothing if not eclectic, giving the green light to Play Misty for Me
(1971), Clint Eastwood's first film as director; Family Plot (1976), Hitchcock's last film; National
Lampoon's Animal House (1978), initiating the gross-out era; and Coal Miner's Daughter (1980),
26
the biography of Loretta Lynn, beloved country singer.
Wasserman added a new profit centre in July 1964 by opening the Universal Studios Tour. He
had seen Disney succeed with Disneyland down the road. Why not create a studio tour in which cus-
tomers saw only staged events? In time the Universal Tour would become the second largest tourist
destination in southern California, but as usual Wasserman started slowly with just two drivers, two
guides and one ticket seller. The price of admission was $6.50 for two adults and a child. As crowds
grew, special trams were designed, restrooms and food courts were installed, and by 1965 the Uni-
versal Studio Tour was a profitable addition to the very definition of a media conglomerate. 27
Movie-making became Wasserman's final triumph. He green-lighted producers Richard Zanuck
and David Brown to make Jaws - from a best-selling book - helmed by a TV director on the lot
named Steven Spielberg. In 1975, when Jaws was released, Universal stood at the top of the film
business. Later came what we now know was the crest of the Wasserman empire - E.T.; The Extra-
Terrestrial (1982). Jaws cost about $8 million and grossed nearly $200 million in the USA. Wasser-
man planned a massive advertising campaign. He took out a thirty-second ad on every show on all
three of the networks three days prior to the 20 June 1975 opening. In the first seventeen days,
Jaws grossed $36 million, and broke all the records. In May 1975 when the saturation TV adver-
tising plan became known, the leading TV trade paper headlined: 'Jaws looks to TV spots for
clincher; Universal plans blockbuster buy for three days for movie that will open in 500 theaters.'
The start of a national television advertising campaign revolutionised motion picture marketing.
Lew Wasserman spent $1 .8 million and made a movie into a blockbuster. 28
At one time, first-run movies opened in major cities, with subsequent openings soon thereafter
in other markets. First-run showings commonly amounted to 125-150 theatres. However, Jaws
opened on 500 screens in the new multiplex era. Normally, the movie studios provide co-op money
for use by exhibitors in promoting the first-run openings locally. The Jaws campaign also included a
four-colour spread in TV Guide on 14 June 1975. Lew Wasserman figured the risk was minimal as the
29
public had loved the novel, which had been on the best-seller list for a number of months in 1 974.
Richard Zanuck and David Brown produced Jaws for Wasserman. Brown told an AFI audience
in September 1975 that:
In the case of Jaws, as you know, we had the world's press arriving at Martha's Vineyard. Seventy
personalities, among them Walter Cronkite, John Chancellor, Mike Wallace, and Dick Cavett, [who
regularly vacationed there] stood on the set just to see what was going on. Time, Paris Match, German
television came in by every boat and plane. The real problem is what to do when shooting ends, during
that year or nine-month period between the end of photography and the release of the film.
That was the summer of 1974. That is where Lew Wasserman's TV campaign came in. When asked
who planned the brilliant, innovative ad campaign, Richard Zanuck told AFI students:
It was a joint decision between David and me and Universal [that is Lew Wasserman], which had final
say, obviously, since they're the distributors. Jaws had gotten a massive release in about 500 theaters
with a very intensive television campaign, probably the biggest, I would say, of all time. The deals
Universal has made are extraordinary. The shortest deal in any theater is nine weeks.
Brown agreed: '[The ad campaign] was devised by Universal and it's revolutionary. . . . When you
have a film like Jaws, why make audiences wait six months or a year? Why make them stand in
line with no hope of getting in? If you have enough seats for a film, you can probably do as well
30
as or better than the old exclusive engagement pattern.'
To the general public, Universal turned the June, July and August of 1 975 into the 'summer of
the shark'. The film inspired false sightings, pop songs, and brisk sales of posters, T-shirts, beach
towels and shark-tooth pendants. The stock of Universale parent company, MCA, doubled - based
solely on Jaws. Suddenly one film, largely marketed through the 'rival' medium of television could
break box-office records, generate millions of dollars in ancillary sales, fashion a profitable year for
its distributor studio, and generate a rise in stock price which made investors into instant million-
aires. Studios initiated a new way of doing business, never 'killed' by TV, but aided by it. A new
era for industry practice had begun as studios looked for that single film with which to convert a
UNIVERSAL 215
poor year into a record one. Movies became special pop culture attractions, generating predictable
cash flows that, in the long run, needed ten figures to tally the total revenue intake. Lew Wasser-
man innovated the blockbuster as a business practice that would transform the studio system. It
had taken Wasserman ten years to create a new blockbuster-making empire - about the same time
31
his predecessor Adolph Zukor had taken to create his.
Politics Helped
By the late 1960s there was no question that Lew Wasserman stood as the most important person
in the modern studio system. He wanted to avoid any government intervention in his startegies
and so cultivated politicians in Washington, D.C. Consider what Wasserman did for LBJ when the
president visited Los Angeles in 1967. He remembered it this way:
And I said [to White House staffer], 'Well, why are you calling me?' [The staffer] said, 'I talked to Jack
Valenti, and he said if we had any problems to call you and you'd take care of them.' . . . 'Where are
you now?' He said, 'I'm on the lawn of the [Los Angeles] City Hall with a portable telephone.' I said,
'Well, call me back in an hour.' I rang back to the production officer and said, 'Do we have a new
dressing room?' And he said, 'We have one we're finishing.' And I think it was for Doris Day or Cary
Grant, one or the others. I said, 'Where is it?' He said, 'It's back in the paint shop.' So I said, 'Okay, I'll
be back to see it.' ... I got in the car and went back to the paint shop. We had this beautiful what
we now call huge mobile homes which we use on the premises for stars, with washroom facilities,
sitting rooms, et cetera. So I said to this man, 'What do you need to connect this?' And he said, 'A
four or six-inch sewer pipe and a hundred feet of electric cord. We carry everything else.' I said, 'Well,
get it ready, and I'll have it picked up in an hour.' And I left. By the time I left, the heads of produc-
tion had arrived. It was quite an event for me to be in that particular department. I went back to my
office, and the phone rang, and it was the security man. And I said, 'Get ready.' And this man came
storming in, the head of the department, said, 'You don't understand, Mr. Wasserman. We can't take
this off the premises. It's too wide; it's too heavy; we haven't got a license, because it's only used on
the premises.' And I said, 'Don't worry about it. How heavy is it?' I said, 'What do you need to pull it?'
He said, 'But you can't take it out, you can't go out on the streets with it.' And I said, 'Have a couple
of security men here, and we'll give you the rig to take it down, but want you I to know it's against
the law. ... I said, 'Don't worry about that.' I couldn't tell this department head what it was going to
be used for for security reasons. So the next day I decided to go down and see what was going on.
And, sure enough, this motorcade arrived with President and Mrs. Johnson and Governor and
Mrs. Brown. There must have been a quarter of a million people in the area; and they got out and
went into this trailer, and everything was fine. The President got up and made a speech. And when it
was over, I went up and said hello, and he told me, 'I understand you arranged all this.' And I said,
32
'Well, I helped a bit.' He turned to Jack Valenti and said, 'I want one of these at every stop!'
21 6
I
He had done his first political favour. Ever the pragmatist, Wasserman had the true businessman's
non-ideological stance of supporting the candidate who could do the most for his studio. But
Wasserman had his opinions and told politicians his ideas straight and true. He even dared tell LBJ
what he certainly did not want to hear. In 1973, in' his oral history at the LBJ Library, Wasserman
was asked: 'Did [LBJ] ever talk to you about the problems of distance among students and blacks
and so forth, the types of people that, in a sense, he had tried to help and, in one way, turned on
him? Do you think he understood the reasons?' Wasserman replied: *
Yes. I believe he understood that the reason was Vietnam. I also believe that he felt that if there was
a way to communicate the real issues in Vietnam, that the reasons would be answered or understood.
But there was just no way to communicate. I don't believe that anyone realized the depth of the feel-
ing for Vietnam. I tried to point out on a few occasions that we that deal with the public and the mass
media, mainly in television, have found that there is a thing called the fatigue factor that sets in. A
given program can be on television very successfully up to a given point and then, for some inexpli-
cable reason, it starts to disintegrate; and research has indicated that it's called the fatigue factor. That,
I believe, is the one thing that the Administration failed to understand about the Vietnam War. We
checked and, I believe, in the California area there was actually on television in every twenty-four hour
33
period over an hour of war film, seven days a week.
Over the next decade Wasserman forged close ties to politicians on the state and national
levels, including senators Lloyd Bentsen and Edward Kennedy, and California Governor Jerry Brown.
As a result, whenever there was pending legislation that impacted on the industry, Wasserman was
at the top of their call sheets. In 1976, when the little-known governor of Georgia, Jimmy Carter,
decided to make a run for the presidency, the watch-and-wait crowd in Hollywood held back its
endorsement. But Wasserman stepped right out front and backed Carter and continued to do so
even in the 1980 campaign when the incumbent president was in disfavour. Carter also reportedly
offered him a cabinet position. And again in 1988, when the town scratched its collective head
about whether Michael Dukakis was a viable Democratic candidate, Wasserman tossed in the first
big chunk of money ($100,000) towards his candidacy, helping to spur others into giving.
Politics also awakened Wasserman on another level. The uncommonly sharp businessman
developed an affinity with office holders, whose view of the world was larger than the Hollywood
fish bowl. He fancied these men as his equals and revelled in political gossip. He paid deference to
them, the way an agent does to a valued client he is courting or a woman he is trying to impress.
Wasserman never spent a great deal of time in Washington, D.C. His allies alerted him to relevant
matters and MPAA head Jack Valenti was the faithful industry watchdog. Wasserman's efforts are
believed to have influenced the scuttling of legislation that would have given the three major net-
works a larger chunk of syndication fees for reruns. And he spearheaded the industry effort to get
the government to agree that film and TV programming qualified for investment tax credits. Per-
haps his most deft political maneouvre, however, was his rapprochement with Reagan, who forced
UNIVERSAL 217
the FCC to pull back from changing the rules that prevented the networks syndicating network
hits. That was reserved for the studios. Here Wasserman asked for the favour in return for what
34
he had done for Reagan's career. The president paid him back.
His power came from his extraordinary ability at fund raising. 'At a typical fund raiser at Lew's
there would be an enormous cross section of powerful Southern Californians: aircraft industry
people, retailers, writers, entertainers to be sure . . . heads of other studios, people who had some
inherited wealth,' said one former MCA executive. 'Lew's grasp of who's who in California and his
friendships with them are quite extraordinary, quite far-reaching. It was precisely the opposite of
the old days, totally, totally the opposite.' Wasserman's work for Lyndon Johnson put his name on
the lips of the men who ran the Democratic Party; it became a building block of his legendary
35
power - in and outside the studio system.
He continued this until the end of his life. He gave money for and was the leader of the Friends
of Bill (Clinton), contributing hundreds of thousands of dollars. While most corporate leaders in the
USA were staunch Republicans, Wasserman never forgot his Cleveland roots and never wavered
from Democratic Party causes. He also knew union leaders would trust him because of this. He stayed
in the Lincoln bedroom of the White House on numerous occasions. He openly contributed to the
Clinton impeachment legal defence fund. His generosity was returned as President Clinton backed
international treaties favourable to the studios. When in California, Clinton dined at the Wasserman
36
estate. Wasserman bet right, and the economy - and his studio system - benefited mightily.
Lew Wasserman and wife Edie exiting a White

House reception
*
Universal at the Top

By the 1980s Lew Wasserman's achievements had made him a legend. Wall Street assessed the
legend when he turned seventy, on 22 March 1983, noting that while other media conglomerates
had their ups and downs, MCA just kept piling one spectacular year on top of another. Revenues
nearly doubled to $641 million between 1970 and 1974, that is, before Jaws. Wasserman, who
already had a reputation for running the trimmest ship in the Hollywood studio system, aimed to
keep things going that way. He turned his attention to his record division, -which accounted for 33
per cent of Universale pre-tax profits in 1974, compared with less than 10 per cent in 1970. Also
before Jaws, he cleared Universale books of debt. Wasserman had brought Universal to the top
37
and reinvented the diversified modern studio system.
Wasserman was the king of the studio system. Upon his arrival at the studio he received
grosses from everywhere on his desk which accountants prepared overnight. He sometimes still
made quirky decisions - but always with an eye to commercial possibilities. In 1978 the Universal
boss known for his black suits and conservatism green-lighted the raunchy college frat movie
National Lampoon's Animal House, which unlikely as it may seem, was recognized a quarter cen-
tury later as one of the most influential movies, the first of a wave of what one critic called sub-
versive film comedies. Wasserman took a chance with a cast of nearly unknown actors, releasing
Animal House in 1 978, when fraternity life was heavily mocked and out of favour on college cam-
puses. The timing of the film was ahead of the revitalisation of the frat scene, incidentally the core
audience Universal was trying to reach. Wasserman was impressed by the movie's impressive box-
- more than $140 38
office grosses million in North America.
The peak of Universale success came with E.T., released on 1 1 June 1982. In its first thirty days
E.T. earned $102,643,889, becoming the first film to top $100 million in a month. Five months
later, its box-office takings neared $300 million, smashing all records, even before it had premiered
overseas. Merchandising kicked in. In those pre-VHS days, millions came in from sales of E.T. dolls,
sheets, posters, books and an entire range of licensed character merchandise. 'Based on what's
happened to date, we think his will be as big as anything in the licensed merchandise field, and
that includes Charlie Brown/Snoopy, Disney and Star Wars,' stated Stanley Newman, an MCA vice-
president. Because the movie was produced under such secrecy, few merchandising arrangements
were made before its opening. And those few companies that were able to make arrangements
weren't permitted to let customers know until the movie officially opened. 'Customers [called] in
orders sight unseen,' stated Astrid Kalnar, executive vice president of Kamar International, a Tor-
rance, California manufacturer of stuffed dolls and animals - to the tune of $1 5 million by Christ-
mas, 1982, equal to sales of $60 million, doubling the company's sales of the year before. And
there was a knock-on effect for non-licensed products - Hershey's Reese's Pieces became a house-
39
hold brand name just because of E.T.
Jaws and E.T. made Steven Spielberg a household name. But this 'movie brat' wrongly gets all
the credit for the runaway success of these movies. It was Lew Wasserman who laid the foun-
dations of the studio system that enabled these films to become blockbusters. With Jaws, Wasser-
UNIVERSAL 219
man took maximum advantage of the economies of scale provided by the invention of the multi-
plex. A complex with twelve screens (rather than one or two) gives greater flexibility, allowing rev-
enues to be maximised when a movie, its popularity fanned by widespread television advertising,
becomes a blockbuster. The blockbuster can be shifted to the largest auditorium in a multiplex, a
less popular film to a smaller one. Economies of scale of operation also allow the owner of a
theatre (now a Hollywood company) to garner additional profits from concession sales. Popcorn
sales alone in the 1980s consistently earned more than $300 million per year. A well-run conces-
sion stand, it has been found, can generate as much as seventy-five cents of profit for each and
40
every ticket buyer
Wasserman had perfected the new blockbuster strategy, but he knew he could never do a Jaws
or E.T. every summer. He always sought to diversify Universal. So, for example, by 1981, Wasser-
man had made the 'Universal Studios Tour' a must-do stop for the tourist in southern California.
By 1981 Wasserman had counted 32 million visitors since the tour began in 1964. The studio was
working - producing films and television - while visitors paid to ride trams, guided by low-paid col-
lege students telling of the wonders of production. He even claimed an educational purpose: '[You]
41
come away with a better understanding of how Hollywood works its special kind of magic.'
Wasserman could list thirty-three separate divisions of MCA in 1983. His billion-dollar company
employed 18,000 people - making not only films and television, but also recording and selling
music, publishing books, licensing characters to all who would pay, and operating tourist attrac-
tions from the Universal Studios Tour to the concessions at Yosemite National Park. Wasserman
bragged to his shareholders on 22 February 1983:
For the year [that] ended December 31, 1982, your Company reported the highest revenues, operat-
ing income and net income in its history. Revenues were $1,587,618,000 as compared to
$1,328,988,000 for 1981; operating income was $251,336,000 as compared to $87,526,000 for
1981 and net income was $176,198,000. . . . Your Company's record results for the year are primar-
ily attributable to the Filmed Entertainment Division which reported the highest revenues and operating
income in its history as a result of the success of Steven Spielberg's E.T.: The Extra-Terrestrial - as well
as the success of On Golden Pond and The Best Little Whorehouse in Texas. [As of February 1 983] E. T.
has already earned the highest world-wide theatrical rentals of any film in history.
He then went on to remind the shareholders of MCA's history. In 1962 when MCA finally took
42
control of Decca, revenues were $200 million per year; twenty years later they were $1.5 billion.
Business Week had it right in 1985 when it headlined: 'MCA'S Hit Factory Keeps Grinding them
Out.' Some of the hottest shows on network television were Miami Vice, Simon & Simon, Knight
Rider, Magnum, P. I. and Murder, She Wrote - all Universal productions. Altogether, MCA had nine
and a half hours of prime-time programming on the air, more than any other Hollywood studio.
MCA's roster had its competitors drooling. Analyst Alan Kassan of First Manhattan Wall Street said:
'TV is the company's gold mine. MCA's Television Group provided the most dramatic example of a
220 |
4
fact of life in the multi billion-dollar film industry. Movie-making, despite the hype surrounding it,
is an unpredictable producer of profits. But successful TV series can provide a stable source of enor-
mous income. Indeed, even if MCA'S film division fails to escape the doldrums that seem to have
stalled it, analysts expect that the company will report higher profits this year.' Success in TV was
always the cornerstone for Wasserman. Hits like Jaws and E.T. came and went. But through the
1 980s, MCA cashed in on its TV treasure trove by selling reruns of its current crop of hits to pro-
gramme-hungry stations and new cable networks. In 1986 sales of Magnam reaped a record $200
million from five years' worth of shows. Wasserman bargained each episode for $1.6 million.
Reportedly, NBC spent an average of $850,000 per episode on Miami Vice, and Universal put up
about $350,000. Wasserman had fifty television producers under contract, a situation reminiscent
of the days of the producer system at a Paramount or MGM when he started in 1 938. He negotiated
long-term contracts, which gave him the stability to nurture programming concepts to profitable
maturity. Producers loved the MCA lot and its numerous sound stages - no less than forty-four -
offering a variety of outdoor settings, as well as typical New York, Western, suburban and European
43
streets. So while NBC called with the idea for Miami Vice, most of it was shot at Universal City.
Retirement
Lew Wasserman began to lose some of his drive after turning seventy in 1983. He had revolu-
tionised the studio system in the forty-five years since he moved west in 1938. The problem was
that he could not patent his ideas and strategies, which were being widely copied. From 1985,
rumours spread of his desire to sell MCA. The stock was at an all-time high, but few in the studio
system actually believed he would sell. On 14 July 1986 Wasserman announced his retirement -
in an odd way. He threw a Hollywood party to celebrate his fiftieth wedding anniversary, and one
could feel he was beginning to look back instead of forward. He staged it as he did all his pack-
ages, in a style so overwhelming, that few could appreciate its real significance. In a dazzler of a
Hollywood event Lew and Edie celebrated their anniversary with 700 close friends who included
the studio systems' leaders and the Democrats he had been so loyal to. Lady Bird Johnson and
Universal Star Don Johnson were among the 'Js' ( for example. Even a staunch Republican like
Walter Annenberg crossed party lines to honour the couple. Stars were everywhere: TV's Barbara
Walters, Lucille Ball, Bob Hope, Cary Grant and Jimmy Stewart wandered about with the likes of
Henry Kissinger and President Ronald Reagan. Lew staged this all on the back lot, on the 'New
York City street' standing set, which guests entered dressed for 1936. Wasserman's advice to the
crowd at the end was: 'Show up for work every day on time for 50 years and you will be
44
rewarded.'
Thereafter, Wasserman seemed to go into a shell, protecting what he had built while others
were seeking new variations of the strategies he had pioneered. He was in a protective mode,
rather than a building one. He did not seem up to the daily grind required by the system he
created. He made errors of judgment. For example, in 1985 he began a pointless battle with Disney
over a proposed expansion of Disneyland. Wasserman thought he was protecting his beloved
UNIVERSAL 221
Universal Studios Tour. He even authorised four flyers seeking to derail a proposed multi-million-
dollar Disney retail-entertainment project. The flyers, sent to thousands of southern California res-
idents, were just the latest skirmish in what industry wags called 'The Rat Wars', adopting a
derogatory term that a few MCA officials applied to Disney's biggest star, Mickey Mouse. The MCA
flyers attacked the proposed Disney project and the city's agreement to grant Disney exclusive
negotiating rights to develop the 40-acre site. As part of the project, Disney would move to Bur-
bank, and Wasserman, based in nearby Universal City, did not want to look out the window and
see Disney making money. Flyers led with a photo of the urban sprawl near Disneyland, with the
comment, 'It's a nice place to visit, but you wouldn't want to live there.' The Lew Wasserman of
- 45
the past would have never approved such a PR disaster a public fight he was bound to lose.
On 12 February 1988 Donald Trump announced he might buy up to 24.9 per cent of MCA,
putting the company in play. Ever since the year before when Wasserman spent twenty-one days
in hospital, rumours had it that the likes of CBS, Carl C. Icahn and Sony were suitors for MCA.
Wasserman took it all seriously. 'It is a company with great assets that is just not performing the
way it should,' stated Lisbeth Barron, a vice president at Balis Zorn Gerard of Wall Street. Wasser-
46
man sat back and waited for the right offer.
On 27 November 1990 the front page of every major newspaper announced the sale of MCA
for $6.13 billion to Matsushita (pronounced mot-Soosh-ta) Electric of Japan. Wasserman took this
offer because it gave him a stake in running the company, and kept Universal in one piece, with
himself, he thought, at the helm. The headlines at the time stressed that this was the biggest
takeover of a US corporation by a Japanese company. Wall Street applauded the marriage, which
would combine the creative genius of MCA with the manufacturing and distribution power of
Matsushita, best known for its Panasonic, Technics and Quasar electronics. Insiders assured the
press that in the short run MCA would not change as a result of its new Japanese owner. The
company would retain the MCA name and management and employ Wasserman on a long-term
contract. At the press conference in Japan, Akio Tanii, Matsushita's president, said MCA's present
management would be supported and given creative independence. (This proved false.) Wasser-
man touted the future: 'The combination of MCA's creative talent with Matsushita's high-tech-
nology research and manufacturing capabilities will create strong, long-term participation in an
47
increasingly global marketplace.'
But Lew Wasserman had waited too long. In 1990 MCA had revenues of $3.4 billion, while
Matsushita took in $37.8 billion. William Rifkin, co-head of mergers at Wall Street's Salomon
Brothers said: 'It's strategic. It's a cross-border transaction with a well-capitalized buyer. It's a classic
pre-1986 deal.' That seemed on the mark. Indeed, Wall Street - after it had crunched the
numbers - thought the Japanese got the better deal. Said one arbitrageur of the deal: '[The details]
clearly tell you that buyers are dictating the shots.' For tax reasons, Wasserman agreed to forgo
the cash portion of Matsushita's offer and exchange his five million MCA shares for new preferred
shares having the same value. Finding a way to ease the tax bite for Wasserman had been a stick-
ing point in the negotiations. Globalisation was the buzz word of the late 1980s, and Wasserman
2 22
I
seemed not to see past this. He got his tax break and his company left in rich hands - complete as
43
he had formed it.
In less than two years the deal began to unravel. Lew Wasserman was a leader, not a follower.
Leaks told of his unhappiness. MCA's new owners had stopped him from purchasing Virgin
Records - this was just never done to Lew Wasserman. He had had the final say for fifty years. He
had been MCA's king, now Matsushita seemed to want to make him into just another division
head. Neither side trusted the other. Making movies required a leader ike "Wasserman I in his prime;
making electrical appliances demanded other skills. Wasserman may have been worth $325 mil-
lion, but he was being treated like a junior agent again. He still had an office in a building named
after him, but it was just a place to go each day for the final years of his life. Every morning at
8am he materialised in his office, a tall, slender, imperious presence with a swath of silver hair. He
drove himself to the studio every day, having lunch in the commissary - finished off as always with
49
cherry pie. To his death he was a true working professional.
It must have been frustrating - no longer being able to keep up with younger executives. With
money flowing in from MCA's movies, TV shows, books, records and theme parks. Universal - the
Japanese version - was doing acceptably, but no hits were forthcoming. Wasserman later admitted
that selling out was the dumbest decision of his career. Fox head Barry Diller pointed out that 'His
moment passed when he sold his company.' In time, Wasserman came to agree with Diller. He had
ended up where he had started - a mere employee. He was no longer Hollywood's king, and his
treatment by his former 'subjects' changed. Lew - a stickler for punctuality - and Edie were seen
sitting awkwardly at a table set for four at the old-guard restaurant Chasen's in the early 1990s.
Looking angrily at his watch, Wasserman grumbled, 'Our guests are fifteen minutes late.' A few
minutes later, Ronald and Nancy Reagan belatedly joined the couple at their table. He would wait
50
only for former clients and/or former presidents. Lew Wasserman was not exactly the retiring type.
Wasserman died on 3 June 2002, aged eighty-nine. 'There won't be anyone like Lew Wasser-
man again because these companies are too big,' said Robert Daly, once head of the Warner
studio. 'It was an industry town and totally controlled by the studios and the networks. He was the
guy that was the No. 1 guy at the networks and the No. 1 guy in Washington for the industry.'
Daly characterised Wasserman as the 'town marshal who made sure the law was enforced' in what
was then a simpler time. 'It reminds me of the old westerns because you knew who wore the white
hats and who wore the black hats,' Daly said. 'That's the way the town was. It's not like that any-
more. In your own companies, you aren't sure who is wearing the black hat. In your own company
51
people have different agendas.'
Lew Wasserman's example continues to inspire. Producer Dick Wolf learned his trade from
Wasserman - how to make quality TV evergreens that audiences would want to watch over and
over again. Back in 1986 Wolf had counted himself lucky to be at Universal producing Miami Vice.
In 1988 Wolf wrote the pilot for Law & Order and Wasserman green-lighted it. By May 2003
Wolf's Law & Order had aired its 300th episode as it completed its thirteenth season on NBC - the
very network MCA had fed for so long. Wasserman would have been proud to learn that Wolf
.
UNIVERSAL 223
Films was by then headquartered in two of the largest buildings on the Universal lot. 'One of the
things that makes me proudest of Law & Order', Wolf said of his hit and two spin-offs, 'was a com-
pliment from Lew Wasserman. I used to have lunch with Lew every two months, because he loved
Law & Order. And what Lew Wasserman said one day was that Law & Order [was] the ultimate
development of the Universal Television ideal. What did Wolf learn? Make a series where [each]
episode is a stand-alone hour of television that you can tune into and then maybe not see the
series again for a year, two years, two months, or two days. But when you come back to it, you're
getting a complete hour of television that stands by itself. . . . That's the [Wasserman] formula on
52
which Law & Order was modeled - the [Wasserman] ideal.'
Matsushita, Seagram, Vivendi and GE-NBC

Lew Wasserman's skills were of such a high order that none of his successors could come close to
matching him. The Matsushita brass had bought Universal for its film and television library, and
hoped to use this 'software' to increase sales of its VHS machines. But they failed. In 1995 Mat-
sushita sold to liquor giant Seagram of Canada. Edgar Bronfman, Jnr, heir to the fortune, bought
so many record labels that Universal became the largest record (really cassette and CD) distributor
in the world, but the promised synergy never materialised and Bronfman sold to a French water
giant, Vivendi. This deal made no sense on its face, and imploded almost instantly. By 2004 Gen-
eral Electric had acquired Universal, and was going to do what Disney had failed to do with ABC,
and what Viacom (Paramount) had done well with CBS - combine a major US television network
(its NBC) with a major studio. Would this experiment work? The advantages seem obvious, opti-
mism reigned as the deal closed early in 2004.
Notes
1 . In 1994 published the
I first scholarly account of Wasserman's accomplishments, in an edited volume by
Steve Neale and Murray Smith, Contemporary Hollywood Cinema (London: Routledge, 1998),
pp. 47-57. About a decade later I revised my perspective; see 'The Hollywood Blockbuster: Industrial
Analysis and Practice', in Julian Springer (ed.). Movie Blockbusters (London: Routledge, 2003),
pp. 72-83, for my take on Lew Wasserman. Standard biographies by 2004 came to three: Dennis
McDougal, The Last Mogul (New York: Crown, 1 998); Connie Bruck, When Hollywood Had a King (New
York: Random House, 2003); Kathleen Sharp, Mr. and Mrs. Hollywood (New York: Carroll & Graf,
2003). Each tells the same story, from a slightly different angle, based upon whom they interviewed.
McDougal found the relatives, for Bruck Wasserman talked about himself (a little) and she dug into
court records of trials Wasserman and MCA were part of. Sharp took a feminist angle, arguing wife Edie
was as important as Lew. Thus, Bruck is superior, if one wants to know scandal; McDougal for the
anecdotes of power; Sharp for the social networking of Hollywood.
2. The Washington Post, 6 March 1977, pp. L1 , L1 1
3. For Lew Wasserman there exist no archives of personal papers, diaries or accessible corporate files.
Instead the historian must rely on the public record: corporate annual reports, government Security and
Exchange records, and extensive commentary in the financial press, as best exemplified by the day-to-
day coverage in The Wall Street Journal.

. . . . .
224 |
4. The Washington Post, 23 July 1 995, p. G1

5. The Los Angeles Times, 1 5 July 1986, part 5, p. 1
6. Motion Picture Herald, 28 November 1953, p. 37; Fortune, July 1960, pp. 40-5; George T. Simon, The
Big Bands, 4th edition (New York: Schirmer, 1981), passim.
7. The Los Angeles Times, 3 November 1 998, part E, p. 1
8. Business Week, 4 December 1948, pp. 20-1; Broadcasting, 14 November 1955, p. 107; Brooke
Hayward, Haywire (New York: Knopf, 1977), pp. 78-9; The LA Weekly, 30 May 2003, p. 38.
9. Jack Benny and Joan Benny, Sunday Nights at Seven (New York: Warner Books? 1 990), p. 238; The
Washington Post, 23 July 1 995, p. G 1
1 0. Biographers of Lew Wasserman's clients usually properly credit him. For James Stewart's appreciation dip
into the dozens of citations in Donald Dewey's James Stewart: A Biography (Atlanta: Turner Publishing,
1996). Alfred Hitchcock was another long-time Wasserman client as can be seen in Donald Spoto's The
Dark Side of Genius: The Life of Alfred Hitchcock (Boston: Little Brown 1 983), and Stephen Rebel's
Alfred Hitchcock and the Making of Psycho (New York: Dembner Books, 1990). In both books we learn
Hitchcock vacationed with Wasserman, exchanged advice about finances, and in the end became a
major stockholder of MCA. For the details of the l/V/nc/iesfer '73 deal, and the others he made with
Stewart and Universal, see Universal production files at the University of Southern California.
1 1 . Presidential Medal of Freedom Recipient Lew Wasserman, found at website
<www.medaloffreedom.com/LewWasserman.htm>.
12. Fortune, July 1960, pp. 160-5; Television, September 1963, pp. 36-46.
13. Dan Auiler, Vertigo: The Making of a Hitchcock Classic (New York: St. Martin's, 1 998), pp. 1 8- 1 9, 24,
26, 49, 64, 127; Daily Variety, 13 September 1991, p. 3.
14. Rebello(1990), pp. 26-38,41, 163, 181-2; Spoto(1983), pp. 387,420-1, 504, 506.
1 5. Remarkably Christopher Anderson's book, Hollywood TV: The Studio System in the Fifties (Austin:
University of Texas Press, 1994), mentions Revue only in passing, and fails to mention Wasserman at alll
16. Lew Wasserman Oral History, LBJ Library, done by Joe Frantz on 21 December 1973, p. 23.
1 7. The New York Times, 5 July 1 963, p. 33.
1 8. Tim Brooks and Earle Marsh, The Complete Directory to Prime Time Television Network and Cable
Shows, 1946-Present (New York: Ballantine, 1999), passim.
1 9. Fortune, July 1 960, pp. 1 1 4-20.

20. Television Magazine, October 1957, pp. 53-5, 98, 101-3.
2 1 . Television Age, October 1 955, pp. 61 ,
68-9, 72.
22. The Wasserman biographies by Bruck, McDougal and Sharp cover this in some detail.
23. Jeb H. Perry, Universal Television (Metuchen, NJ: The Scarecrow Press, 1983), Introduction.
24. The American Film Institute, Dialogue on Film, vol. 3, no. 7 (July 1974), pp. 2-31
25. TV Guide, 25 July 1964, pp. 8-11; TV Guide, 1 August 1964, pp. 15-17 (two-part series).
26. Television, September, 1961, pp. 58-68; The New York Times, 25 November 1981, p. 13; The New York
Times, 30 April 1981, p. 22; Variety, 23 May 1973, pp. 3, 35; The Hollywood Reporter, 30 April 1981,
pp. 1, 4; Box Office, June 1981, pp. 25-6; The Los Angeles Times, 21 May 1995, Sunday Magazine,
pp. 9-11; Clive Hirschhorn, The Universal Story (London: Octopus Books, 1983), pp. 256-9, 272-7.
27. The Los Angeles Times, 21 May 1995, Sunday Magazine, pp. 9-11.
28. The New York Times, 8 July 1975, p. 55.
29. Broadcasting, 12 May 1975, pp. 38-9.
30. American Film, October 1975, pp. 51-2.

Books, 1990).
. . . .
UNIVERSAL 22
32. Lew Wasserman Oral History, LBJ Library, done by Joe Frantz on 21 December 1973, pp. 27-8.
33. Lew Wasserman Oral History, LBJ Library, done by Joe Frantz on 21 December 1973, p. 21
34. Daily Variety, 1 5 March 1 993, Special Section, p. 1
35. The Los Angeles Times, 2 December 1990, Calendar, p. 8.
36. The Washington Post, 3 November 1988, p. A29; Broadcasting, 9 November 1992, p. 13; The
Washington Post, 8 March 1993, p. A13; Variety, 25 October 1993, pp. 69, 149; Business Week,
27 February 1995, p. 8; The Washington Post, 10 March 1997, p. B1.
37. Business Week, 18 August 1975, pp. 98-9.
38. The New York Times, 25 August 2003, pp. B1 B5. ,
39. The New Yorker, 9 August 982, pp. 15-16; The Wall Street Journal,
1 9 November 1 982, p. B1 0;
Advertising Age, 19 July 1982, p. 16; Variety. 28 July 1982, p. 3; The Wall Street Journal, 19 July 1982,
p. 20; Business Week, 5 July 1982, p. 88; Variety, 1 1 November 1991, p. 76; Variety, 21 August 1994,
pp. 7, 12; Variety, 26 September 1994, pp. 1,14; Variety, 26 June 1995, p.1; Variety, 29 April 1996,
p. 153; Variety, 5 October 1992, pp. 5, 8; Variety, 16 January 1995, pp. 1, 107; Variety, 4 September
1995, pp. 1, 80; Variety, 17 November 1997, pp. 1, 82; Variety, 23 February 1998, pp. 1,4, 66, 72;
Variety, 9 November 1998, p. 18; Variety, 4 January 1999, p. 28; Variety, 10 January 2000, p. 1.
40. Wide Angle, vol. 5, no. 3 (1 983), pp. 52-9. In my book. Shared Pleasures: A History of Movie
Presentation in the United States (Madison, Wl: University of Wisconsin Press, 1992), the blockbuster
figured centrally in the changes in movie presentation. One of my contributions in Geoffrey Nowell-
Smith's The Oxford History of World Cinema (Oxford: Oxford University Press, 1 996) enabled me to
reflect on the blockbuster in the early 1 990s.
41 . Universal Studios Tour (Universal City, California: MCA, 1981), pp. 2, 7, 11, 16-17 - copy in possession
of the author.
42. Annual Report to Stockholders, MCA, 1 982, pp. 3-5.

43. Business Week, 1 1 February 1985, pp. 76-7.
44. The Wall Street Journal, 18 October 1985, p. 6; Variety, 21 May 1986, p. 61; The New York Times,
2 February 1988, Business, pp. D1, D6.
45. The Wall Street Journal, 1 3 November 1 987, p. 20.
46. Business Week, 29 February 1 988, p. 20.
47. The New York Times, 27 November 1 990, p. 1 ; The Washington Post, 27 November 1 990, p. A1 The ;
Los Angeles Times, 21 November 1990, p. A1 See headlines

. in every major newspaper and all of the
related daily business press. See also The Wall Street Journal, 25 September 1990,
pp. B1, B10.
48. Investor's Daily, 27 November 1990, pp. 1, 34; The Washington Post, 27 November 1990, pp. A1, A6;
The Wall Street Journal, 28 November 1990, pp. A3, A16; Broadcasting, 1 October 1990, pp. 30-1; The
Wall Street Journal, 26 September 1990, p. A1. The Wall Street Journal, 27 March 1990, p. 1, exposes
the sweetheart Yosemite deal that, coming out into the open, hurt Wasserman's bargaining power.
49. The New York Times, 3 May 1 992, section 3, pp. 1 , 6.
50. The Los Angeles Times, 7 June 1987, Financial Section, p. 1 1; Variety, 26 November 1990, pp. 3, 79;
The Los Angeles Times, 28 December 1 990, p. D1 ; The Washington Post, 23 July 1 995, p. G 1
51 . The Los Angeles Times, 4 June 2002, p. A1

52. The Baltimore Sun, 4 May 2003, p. 8F.
16
Paramount
Barney Balaban hung on the longest of the moguls of the 1930s and 1940s. In 1962, red ink
appeared on the Paramount balance sheet for the first time. Outsiders, seeing an undervalued enter-
prise, attempted to take over the company. Rather than fight, Balaban retired in 1965, and in the
autumn of 1966, Charles Bluhdorn's zinc-sugarcane-auto parts conglomerate. Gulf + Western
Industries, purchased Paramount. 1
All the studios at this time were trying to reinvent themselves. Approaches varied greatly; we
have seen how Lew Wasserman did it successfully at Universal. Bluhdorn followed the trendy busi-
ness model of the 1 960s by folding Paramount into a conglomerate of wholly unrelated businesses.
This experiment using a pure conglomerate approach would ultimately fail - but not until after a
generation of testing it. In 1983 Bluhdorn died before his experiment was over. His hand-picked
successor, Martin Davis, played it more conservatively. That year, with Wasserman at the top of his
power, Davis dismantled the Gulf + Western pure conglomerate by selling off all non-media-related
divisions, and proceeded to reshape Paramount into a Wassermanesque media conglomerate

during the 1980s. But Davis was not a great leader and, after ten years, sold out to Sumner
Redstone's Viacom media conglomerate.
The First Leader: Charles Bluhdorn

Upon the f inalisation of the 1 1 October 1 966 acquisition, Bluhdorn installed himself as Paramounf s
president and hired former actor Robert Evans to revitalise the studio in California. Evans increased
film production, but early - according to conventional accounts - produced only box-office failures
such as Darling Lili (1970), staring Rock Hudson and Julie Andrews, and Paint Your Wagon (1969),
starring Clint Eastwood and Lee Marvin. But in 1970 Paramount's Love Story finished at number 1
in domestic box-office grosses, and Paramount's comeback was secured by the 1972 release of
Francis Ford Coppola's The Godfather. For the first twenty-six days of release. The Godfather
brought in an unheard of $1 million per day at the box office. Paramount was back - under new
2
studio boss Evans. This conventional account discounts Bluhdorn's role and needs to be revised.
The transition had not been easy. When he acquired Paramount, Bluhdorn found he owned 51
per cent of Famous Players Canadian Corporation, Canada's largest theatre chain; the International
Telemeter Corporation, pioneering subscription TV; Chromatic Television Laboratories, developer

of a colour television tube; Famous Music Corporation and Paramount Music Corporation (music
publishers); and Plautus Productions, a television producing unit; plus the necessary international
PARAMOUNT 227
Charles Bluhdorn, creator and conglomerator

of Gulf + Western
distribution apparatus and the production lot on Melrose Avenue. Bluhdorn found only seven pro-
ductions in process. Thus, Paramount, which was celebrating its fiftieth anniversary (1916-66), had
3
fallen to near the bottom of the studio system.
Early in 1967 Bluhdorn began to move. He acquired Desilu Productions for $517 million from
a now-divorced Lucille Ball and Desi Arnez. The purchase included the lot adjacent to Paramount's
and gave Paramount an instant presence in television production. From his New York City office,
Bluhdorn wielded final approval on all projects. So, a 'civilian', Bluhdorn, without any real show-
business experience, took the reigns of a major film company, and looked to lead it into the 1970s.
And lead it he did. Bluhdorn stressed the need for bankable stories, and would carefully choose
the director, producer and writer. In January 1968 Bluhdorn announced an annual production goal
of twenty major films to be made in the USA, and eight films to be made by the European division.
Two hits came in the same year, 1 968, with The Odd Couple and Rosemary's Baby. These two
films went head to head during July and August, wrestling for the number one earnings spot. The
Odd Couple was first in July and third in August; Rosemary's Baby was second in July and first in
August. Both films grossed well over $15 million during their respective runs and ended up fourth
and sixth, respectively, in the year-end grosses for 1968. Then Barbarella was released at the begin-
ning of October 1968 and soon found itself atop the weekly gross statistics. It captured the
number 1 ranking for the month of October, revitalising Paramount - but 1969 brought losses
from Paint Your Wagon and Darling Lili. Romeo and Juliet (1968) - from Europe - also found its
way into the top ten and would capture Academy Award nominations for best picture, best direc-
228
I
tion, best cinematography and best costume design. In May 1967, when Bluhdorn took effective
control over Paramount, the company's weekly domestic income averaged $800,000. By October
1968 that figure had soared to the staggering total of $1 .5 million a week. Paramount was slowly
4
digging itself out of a financial and filmic hole.
Through the remaining seventeen years of his life, Bluhdorn was an absolute owner and leader.
He loved the hands-on dealing at Paramount. (He died on 19 February 1983 of a heart attack aged
fifty-six.)
Born in Vienna, 20 September 1926, Bluhdorn immigrated to the USA in 1942 and served
in the Army Air Force. He then studied at CCNY, but did not earn a degree. After World War II,
Bluhdorn started his business career as a $15-a-week employee of a cotton brokerage firm and
began to build his fortune. In 1949 he formed his first company. Aged thirty-one, in 1957, he
merged his auto-parts manufacturing company in Grand Rapids, Michigan, with a Houston auto-
parts distributor to become Gulf + Western. In its first year, Gulf + Western - essentially an auto-
parts manufacturer and distributor - reported a net loss of $730 on sales of $8,400,000. But
Bluhdorn foresaw the prosperous 1960s and used this unlikely base to construct a conglomerate
which, at the time of his death, reported sales of $5.3 billion. Paramount Pictures, which he bought
when he was forty, was simply the most visible of his acquisitions. Bluhdorn was described by Gulf
+ Western executive vice president Martin S. Davis as being 'strong-minded and strong-willed' but
'always willing to hear the other side of an argument' and 'willing to delegate authority'. He had
5
no hobbies - 'only the company and his family'.
As Lew Wasserman would do five years later with Jaws, Bluhdorn adapted a best-selling novel,
Love Story, and released it during Christmas 1970 to earn over $45 million in rentals before the year
had ended. Largely due to the film's success that year, Paramount recorded the highest domestic
motion picture revenues in its history: $95 million, a 65 per cent increase from the previous year. Yet
then the unpredictable Bluhdorn took conservative measures in 1 971 as the monies from Love Story
poured in. He made fewer movies. The company's production fell in 1971 to fifteen from twenty-five
features the previous year. In 1 972 Paramount produced only nine films, only one of which really
mattered - The Godfather. Rentals matched and then exceeded those of Love Story, and NBC paid
Paramount $ 1 million for the right to broadcast the film over two nights. Paramount profits soared:
from $2 million in 1970, and $22 million in 1971, to $31 million in 1972. The Godfather won best
picture and best actor of 1 972 at the Academy Awards, while best story was given to the scriptwriter,
Mario Puzo. On behalf of Gulf + Western, Bluhdorn stated: 'We are very thankful to Paramount for
6
Love Story and The Godfather ... but at this point, we'd still be viable without them.'
Vice president Peter Bart had this to say about The Godfather.
If Godfather had been made in an orthodox way - and that was considered - it would have been a
failure. Our key decision was not to make it as an exploitation gangster film for $2-million. [The] fortune
was made when [Bluhdorn] decided to spend $6-million. ... [He was] willing to spend money to
achieve a big smash. After all, Love Story and The Godfather together [brought in] nearly $200 million.
PARAMOUNT 229
Two years later, in 1974, The Godfather Part II firmly established Paramount's cinematic financial
prosperity. The headline for the 18 December issue of Variety read, 'Like "Godfather", Like Son at
Box Office', and the accompanying story detailed the impressive box-office debut of the sequel.
The Godfather Part II would prove to be critically just as successful as its predecessor, although it
7
earned only one-third of the original's take. Still, sequels never did as well as their predecessors.
Bluhdorn saw Universal's success and knew he needed a TV production base. He struggled at
first, as Universal had the TV production market locked up, but a opportunity came with ABC's $3
million offer for the broadcasting rights to Love Story- which then set record Nelson ratings in
1977. Elsewhere in television. Paramount was producing (or co-producing) five shows, four of
them successful, for the 1972-3 season: The Brady Bunch, Love American Style, Mission, Imposs-
ible and The Odd Couple. Bluhdorn had done what he had aimed to do - purchase an ailing studio
at a low share price, and revitalise it. In a not-so-surprising move in late September 1974, Bluhdorn
announced that he pulling back from micro-managing Paramount to concentrate on other Gulf +
Western holdings. He then handed the reins to thirty-two-year-old Barry Diller, who had previously
been VP in charge of prime-time programming at ABC, a role that had often involved him with
8
Paramount Television. Robert Evans gave way to Frank Yablans, who gave way to Diller.
The mid-1970s success at Paramount seemed a fitting monument to Adolph Zukor, who died
on 10 June 1976, at the age of 103. During his lifetime, Zukor had witnessed his company's rise
from a small producer of silent films in an infant industry to a creative and financial leader in both
9
motion pictures and television. He went to the New York office until the very end.
Diller had the skill to hire a great staff, ultimately called 'Diller's Killers'. Shortly after Michael
Eisner was hired as VP in charge of production, Eisner called a meeting. 'We're going to go into a
room', Eisner announced, 'and we're not going to come out until we have twelve movie ideas.
Even if we have to stay here till midnight. Leave if you want to, but don't bother coming back.'
Think up movies? Weren't you supposed to buy movies? Buy agent-fashioned packages as Lew
Wasserman had taught?' Remembered producer Don Simpson, who was then a young production
assistant: 'You couldn't smoke, and you were afraid to go to the bathroom.' During this meeting,
Simpson nervously suggested a movie about a cop from tough, gang-ridden East Los Angeles who
pursues a criminal into Beverly Hills. They could call it something like Beverly Hills Cop. It would be
a fish-out-of-water story, a genre Simpson loved. Why? He was from Alaska - as far as he knew
the only Alaskan in the movie business. 'I was living the life', Simpson later said, 'of a fish out of
water'. This type of movie would become one of the hallmarks of the studio. More than eight
hours passed before Eisner adjourned that first meeting. It had lasted from nine in the morning
until seven at night. And at the end they had fifteen ideas for movies. Eisner told his troops that
he didn't want somebody like top agent Michael Ovitz picking the movies Paramount would make.
Backed by Bluhdorn, Diller was willing to out-spend the master Lew Wasserman for PR. But it
took Eisner's new operating principles to jump-start Paramount Pictures in 1977. Beginning in late
1977 and 1978 came a series of record-breaking hits: Looking for Mister Goodbar (1977), Satur-
day Night Fever (1 977), Grease (1 978) and Heaven Can Wa/Y (1 978). Grease alone made over $ 1 60
230
I
million and surpassed The Godfather as Paramounf s biggest grosser. Add to this the mountain of
profits gleaned from two Bad News Bears sequels (1977 and 1978) and Paramounf s earnings were
phenomenal, pleasing Bluhdorn greatly. Diller gambled on small number of films. Paramount
released only fourteen pictures in 1978 and sixteen in 1979. However, the percentage of his films
that succeeded was higher than even mighty Universale record across town. Additional Diller hits
of the late 1 970s included the Star Trek: The Motion Picture (1 979). based on the TV series, and
Robert Redford's impressive directorial debut, the family drama Ordinary People (1980). which
received four Oscars, including best supporting actor (Timothy Hutton) and grossed more than $60
10
million worldwide. Suddenly Lew Wasserman had met his match.
All this success in 'movies masked an equally important area of growth for Paramount - tele-
vision. Gulf + Western's annual reports showed that Paramounf s television production increased
from six series in 1977 to twelve in 1979. Bluhdorn and Diller embraced the new forms of TV then
emerging. By 1978 Paramount had become an important distributor to the pay-television net-
works. And the company plunged into home video. In response to Roots, Paramount acquired the
rights to James Clavell's Shogun and fashioned a hit miniseries from it. The Paramount Television
division also produced some of the top-rated series, such as Happy Days. Laveme and Shirley. Mode
and Mindy and Taxi. When Paramount began offering Happy Days for syndication in the USA on
a competitive bidding basis, to everyone's surprise, it received record bids, going for as much as
$35,000 per episode. In 1 979 Paramount's domestic syndication division expected sales of Happy
Days to earn as much as any film except Grease and The Godfather. Then Laveme and Shiney sold
at fees 50 per cent higher than the Happy Days numbers. Paramounf s profits jumped when these
11
syndication earnings hit the bottom line between 1979 and 1981.
Even during the early 1980s recession. Paramount continued to make money. Paramount Tele-
vision was continually profitable to the corporation as syndication gross incomes rose each year.
The film library grew almost exponentially during these years. Paramount TV invested cable,
becoming part-owner of the USA Network. On the motion picture side, the year 1982 brought
popular sequels: Star Trek U: The Wrath of Kahn. Grease 2. Friday the 13th Part III in 3-D and Air-
plane II: The Sequel. Star Trek II set industry records for opening night and an opening weekend.
But the other parts of Gulf + Western were struggling to make a profit. Bluhdorn had great suc-
cess with D i tier, but the rest of his diverse conglomerate was a different matter. He was forced to
sell Famous Players theatres of Canada to keep the conglomerate afloat
At Paramount, grosses were up 1 3 per cent and all its operations brought in a total of $750
million. Diller in 1982 signed an exclusive contract with Eddie Murphy that gave the actor $1 mil-
lion up-front for his first film, as well as the power to develop his own projects. TVs Happy Days
was in its tenth season in 1982. Laveme and Shiney in its eighth and Taxi in its fifth. Two success-
ful mmrsenes, Shogun and The Winds of War. were produced. Paramount was - along with Uni-
versal - at the apex of the studio system. Then came the shocking news on 19 February 1983 -
Charles W. Bluhdorn. Gulf + Western's flamboyant founder and CEO. had died of a heart attack
on a corporate jet 12
PARAMOUNT 231
With all his manifold business enterprises, Bluhdorn had loved the film business for itself as
much as for the huge profits Paramount contributed to Gulf + Western after a rocky start in 1966.
What now? Paramount was a well-structured company, but it was not altogether free of power
cells and rivalries.
The Second Leader: Martin Davis

It was clearly understood that Paramount chairman Diller had the ear and the confidence of
Bluhdorn, who had vacated the Paramount chairmanship so that Diller could occupy it. But things
were not as they seemed. Barney Balaban PR man Martin Davis had stayed on after the Gulf + West-
ern takeover as Bluhdorn's key aide. Martin Davis was a corporate lifer. Bluhdorn had promoted him
to executive VP of Gulf + Western. And unknown to Diller, Bluhdorn had arranged for Martin Davis
13
to take charge if he died; no one, of course, expected the succession to occur so early.
Davis had seemed mild mannered as a PR man, but in his new role he proved as ruthless as his
teacher Bluhdorn. Davis was going to shed Gulf + Western assets and build a Universal-like media
conglomerate. But he wanted to put his mark on Paramount and as long as Diller was there, he
would be overshadowed. So, he bided his time, and eased Diller out by the end of the summer of
1984. Davis then announced a complete reorganisation, whereby Paramount was separated from
14
Gulf + Western, and appointed Frank Mancuso president of Paramount.
Michael Eisner was shocked. In his autobiography he claimed:
It was Marty Davis, [Diller] told me, who had moved to consolidate power, in part by trying to create
rifts among the top executives within each of G&W's subsidiaries. . . . Barry explained that within a
few months of taking over, Marty called him and said, point-blank, 'I have to be comfortable with the
executives in this company, and I don't like Eisner.' To Eisner this made no sense as Paramount was
headed toward another record year in profits. 'If what you're saying is that I should fire Michael, then
you're going to have to toss me first,' Barry said. To which Davis responded, without hesitation, 'I'm
quite prepared to do that.
This was, to Eisner, Davis' method of asserting total control over his top people. Eisner immediately
began too look for another job, and was prepared when Disney came calling. Diller followed,
15
taking Murdoch's offer to run Fox.
From 1983 to 1986, under the guidance of its new CEO, Gulf + Western divested companies
with sales of $4 billion. Davis reduced debt by $765 million, repurchased $19.3 million of
common shares, and consolidated seven divisions into Publishing and Entertainment. Paramount
Pictures Corporation remained at the core. Davis did little but copy Wasserman, but he did add
his own wrinkle - he led the way to direct selling of home video. Davis' marketing abilities con-
tributed to home video becoming an important and growing source of revenue for the company.
Paramount remained at the forefront of video production, and was a major force in strengthen-
ing the ratio between video sales and rentals through its creative marketing programmes and
232
I
aggressive pricing strategies. While Paramount's pricing of its releases significantly below industry
norms provoked angry responses from its competitors, consumer response was excellent. In
March 1983 it released the video of Airplane (1980) at $29.95, the first time a major title entered
the market at such a low price. Cut-rate prices boosted Paramount Home Video's volume by 50
per cent in just a year. Paramount, under its new president, Frank Mancuso, captured an incred-
ible 22 per cent share of US motion picture box-office revenues in 1986, twice that of its closest
competitor. In addition, Paramount had five of the year's ten top-grossing films: Top Gun with
Tom Cruise and Kelly McGillis; Crocodile Dundee, starring Paul Hogan; Star Trek IV: The Voyage
Home; The Golden Child, starring Eddie Murphy; and John Hughes' Ferris Bueller's Day Off. Davis
harkened back to the old days when in 1986 he purchased the Mann and Trans-Lux theatre
chains with cash he was accumulating from sales of Gulf + Western's other divisions. By 1987
Paramount had come full circle since the heady days of vertical integration fostered by Adolph
16
Zukor.
By 1986-7 Davis, the up-from-the-streets man from New York City, was building his legend.
The summary: the coldest, most vicious, most ruthless S.O.B. on earth. The son of a real estate
agent who had emigrated from Poland, Davis grew up in the Bronx and made his reputation in
the shark-eat-shark New York movie business. At Paramount in the 1960s he became known for
firing dozens of executives and support staffers and for intimidating countless others. As chief
executive of Gulf + Western since 1983, he had won few friends by laying off staff. When inter-
Martin Davis, who inherited Gulf + Western

from Charles Bluhdorn, renamed it Paramount
Communications and then sold it in 1994 to

Sumner Redstone
PARAMOUNT
viewed as one of America's ten toughest bosses in 1984, he told Fortune: 'I don't want people
weaker than I am.' Davis ('Call me Martin, I hate being called Marty') had left high school at six-
teen to join the army. After getting kicked out because he'd lied about his age, he worked part
time until he was eighteen, and then signed up again. Though he later earned his high school
degree and took some college courses at night, Davis never liked school. 'I didn't think I was learn-
ing anything,' he said. When his thirty-month stint ended, Davis landed back in New York City
after World War II. Answering a newspaper ad for an office boy, he got a job at Samuel Goldwyn
Studios in Manhattan. For his part, Davis had no romantic ideas about the movie business. 'I just
wanted a job,' he said. He soon became enthralled. The studio system provided an ideal window
on the world for a smart, aggressive young man. 'The motion picture business was probably the
greatest testing ground in business,' recalled Davis. 'You got thrown into everything, including
finance and production. The door was open to me.' Davis started out clipping newspapers in the
publicity department, but was quickly spotted by James Mulvey, president of the studio and Sam
Goldwyn's right arm. Mulvey took it upon himself to teach Davis about negotiating with Holly-
wood's creative types. 'He'd call me into his office and say, "This is how you do a deal,'" Davis
remembered. 'Then he'd send me out to do my own, and yell at me when blew I it.'
After eight years, Davis left Goldwyn and, after a year at Allied Artists, he become director of
sales and marketing at Paramount. The management was tradition-bound under Barney Balaban
and his fabled team. Typically, Davis found an opportunity to shine. In 1965 Paramount became
the target of a hostile takeover by two dissident shareholders. Since Davis' job included investor
relations, he was put in charge of the defence. Having already cultivated such large shareholders
as Seagram's Samuel Bronfman, Davis was able to mobilise enough support to fend off the raiders.
But the company was too shaky to remain independent and needed a white knight. Enter
Bluhdorn.
Davis served Bluhdorn loyally and then, when given his chance, moved quickly to disassemble
the company Bluhdorn had built. By the mid-1980s Davis ran Gulf + Western by giving his senior
executives lots of rope while still keeping a tight grip on his end. In his office on the forty-second
floor of the Gulf + Western building on Manhattan's West Side, Davis kept a framed New Yorker
cartoon. In it, an executive sits at a big desk. On his right is a tiny version of the executive dressed
like an angel; to the left another tiny figure, dressed as the devil. Davis liked the cartoon because
it summed up his philosophy of people in 1987 when Fortune was permitted in his office. 'There's
good in all of us, and bad in all in all of us. Everybody can be a devil. Everybody can be an angel.'
7
Everybody? Davis: 'Everybody. Even me,' he told Fortune.^
Wall Street gave unwavering support for Davis' radical restructuring of Gulf + Western. The
stock soared, despite management disarray at Paramount Pictures. Where Charles Bluhdorn was
the ultimate diversifier, leading his company into a veritable polyglot of unrelated businesses and
investments, Martin Davis was a consolidator. Their styles were as different as their strategies.
'Charlie was an iconoclast - under Charlie, there was no warning down the road as to what would
happen,' said George A. Smathers, a former Florida senator who served on the Gulf + Western
234
I
«
board. 'Martin's mind is entirely different. He began to put the square pegs in the square holes. It
18
is not as exciting as it used to be. I don't want to say it is dull, but it is more conventional.'
But after creating his version of a Wassermanesque media conglomerate, the newly named
Paramount Communications, Inc., Davis had no desire to run it. By late 1989 Davis began to look
for a means to cash-out. Armed with $3 billion in cash since selling Associates First Capital, Gulf +
Western's final non-entertainment unit to Ford, the Paramount chairman began openly seeking
buyers for his media empire. He figured that Paramount - slimmed down^cash-rich, and worth as
much as $10 billion - and would attract a bid even more dramatic than Sony's $3.4 billion pur-
chase of Columbia Pictures in 1989. The movie and publishing giant's future depended to an
unusual degree on the nerve and agility of its sixty-two-year-old chief executive to find a suitable
19
replacement.
Davis' Paramount studio had had a great 1980s. Eddie Murphy alone - in Trading Places
(1 983), The Golden Child, 48 Hours (1 982), Coming to America (1 988) and Beverly Hills Cop (1 984)
and its sequels - had added in the neighbourhood of $1 billion in revenues. In the vein of Flash-
dance (1983), another pop-rock musical, Footloose (1984), starring Kevin Bacon, raced up the box-
office and music charts. And on television, in 1987 Paramount's Star Trek: The Next Generation
20
premiered in syndication, becoming the most Emmy-honoured syndicated fiction series.
During the summer of 1 989, Davis attempted to disrupt the Time-Warner merger with his own
eleventh-hour bid for Time Inc. He could merge, and then sell out at a premium. This effort caused
detractors to argue that Davis' supposed devotion to maximising stock value was simply a cover
for his own lack of vision or, worse, convenient rhetoric. 'I'm afraid you're becoming used to play-
ing with the truth,' Time's chairman and CEO Richard Munro chided Davis in a widely quoted letter
pointing out that Paramount's own earnings would have been depressed for years if its Time bid
21
had succeeded.
He lost his bid for Time, out-manoeuvred by Warner's Steve Ross (see chapter 17). He then
seemed to lose all judgment. The end of Martin Davis as Paramount's boss began with his firing of
movie studio boss Frank Mancusoon 18 March 1991. From 1984 to 1991 Mancuso was the studio
chief with the golden touch, a winner whose reputation in Hollywood seemed neatly summed up
by the title of one of his hits: The Untouchables (1987). Mancuso had turned Paramount Pictures
into the most successful shop in town. But Davis bluntly stated that while Mancuso was invited to
stay on, he ought to quit. According to conventional wisdom, Davis had struck again. Seven years
earlier, he had driven out a production team still considered one of the most talented in Hollywood
history: Barry Diller, now chairman of Fox, and Michael Eisner and Jeffrey Katzenberg, the duo who
revived Disney. Davis simply could not handle success by an employee.
In May 1991 Vanity Fair ran a story entitled 'Why Hollywood Hates Martin Davis', which
accused Davis of again 'wreaking havoc' by engineering Mancuso's exit. To please his boss, Man-
cuso had green-lighted three films before he left: The Two Jakes (1990), Flight of the Intruder
(1991) and The Godfather Part III (1990). All performed far below expectations. Paramount
reported a $7.3 million loss in the first quarter of fiscal 1991, a result Davis blamed on Mancuso.
PARAMOUNT 235
Davis finally decided to cash-out. He simply could not bring himself to be a partner, rather than
the boss. At one point he and Lew Wasserman talked about merging Paramount and Universal.
But Davis was no idiot. He knew who would be in charge: Lew Wasserman. Selling was the only
22
real alternative for Davis.
In 1993 Forbes asked if Paramount was for sale - knowing where the future of Paramount lay
under Martin Davis. Forbes noted that when writing about prominent business people, reporters
routinely seek the judgment of associates, friends, competitors - and, yes, enemies. Writing about
Davis presented special problems in this regard. Forbes reporters could find no one willing to speak
frankly about him - except under conditions of absolute anonymity. Why? Again and again people
who know Davis told reporters: 'He's a vindictive man. If he takes umbrage at anything I say, he'll
try to make me pay.' So while Forbes spoke with dozens of people for a December 1992 profile,
its reporters had to promise many of them not to quote them by name. Nor did Forbes speak with
Davis, who claimed he was too busy, citing his preoccupation with the aftermath of the resigna-
tion of his studio chief, Brandon Tartikoff. Paramount was sold in February 1994 to Sumner
23
Redstone's Viacom, Inc.
The Latest Leader: Sumner Redstone

By the end of the twentieth century, Paramount had fully become enveloped into the National
Amusements conglomerate, which in turn owned Viacom, Inc. Unlike most of the studios of
the late twentieth century, where no one shareholder controlled the company, Sumner Red-
stone owned National Amusements, Inc. And although he operated a conservative company,
his Paramount movie studio did take one of the 1990s' biggest financial risks by making Titanic
(1997), which cost more than $200 million. Paramount split the costs with Fox, proving once
again that one blockbuster could make the corporate bottom line glow like few other mass
media investments in the United States. Redstone melded Paramount into his vast diversified
corporate empire, which includes TV networks such as MTV, The Movie Channel, Showtime,
and the United Paramount broadcast TV networks and CBS (acquired in 1999), and book pub-
lishing with Simon & Schuster. During the struggle for Paramount, Redstone even acquired
video rental leader Blockbuster as a logical extension - vertical integration - of the revenue gen-
eration of Paramount's movies. With his single control the trade paper Variety properly called
24
Redstone 'the vicar of Viacom'.
Continuity of senior management was a problem for Redstone's Paramount, as it had been for
Davis'. Managers chaffed under Redstone's control - the owner always judging them. Many came
and went. 25
The succession is also on the cards. Redstone turned eighty in 2004, and the best guess is that
on his death control will pass to his daughter, who was fifty in that year. Business Week wrote:
Sumner's daughter, Shari, was playing an increasingly large role in the world's third-biggest media
company. There are some things only a daughter can know. Consider the telephone call Shari E.
. .
236
I
Redstone received from her father August1999. Redstone had just been approached by Mel Karmazin,
then the head of CBS who offered to sell the broadcasting giant to Viacom.
After consulting his daughter, Sumner Redstone offered the $40 billion for the acquisition. There-
after Redstone pere tried to work with subordinates, but only trusted Shari, who was quietly - and
surprisingly - emerging from the shadows at Viacom. A one-time criminal defence attorney, Shari
Redstone, by 2004, had been on Viacorn's board for a decade and its executive committee. She
told Business Week: 'This isn't my job - this is my life.' Her children were grown; she was divorced;
26
she was apprenticing herself to her father, who was training her to keep Viacom in the family.
Notes
1 . The company was originally called Gulf & Western. Then in the 1 970s the new owner made the '&' into
'+' and that what use throughout. See John Douglas Eames, The Paramount Story (New York:
a is I
Crown, 1988), pp. 220-30.

Books, 1990).
3. The Journal of the Screen Producers Guild, September 1966, pp. 9-10; Variety, 4 May 1966, pp. 5, 20;
The New York Times, 20 October 1966, p. 33.
4. Life, 27 February 1970, pp. 38-44.

5. Variety, 23 February 1983, pp. 4, 24; The New York Times, 23 February 1983, p. 44.
6. The New York Times, 26 July 1972, p. 88; American Film, November 1975, pp. 14-18.
7. Charles Bluhdorn, The Gulf + Western Story (New York: The Newcomen Society, 1973), pp. 1-23;
Business Week, 23 June 1973, p. 122; Variety, 12 February 1975, p. 7; Peter Biskind, The Godfather
Companion (New York: Harper, 1990).
8. Michael Eisner, Work in Progress (New York: Random House, 1998), pp. 72-99; George Mair, The Barry
Diller Story (New York: Wiley, 1997), pp. 49-70.
9. As a graduate student, starting in 1972, 1 would send Zukor birthday cards. He always responded with a
note of gratitude. He even wished me good luck upon finishing my PhD dissertation.
10. Eisner (1998), pp. 92-118; Mair (1997), pp. 86-7.

1 1 . Gulf + Western Annual Reports, 1977-81; Eisner (1998), pp. 58-89; Variety, 25 May 1977, p. 57.
12. Fortune, February 1983, pp. 67-77; for Michael Eisner's shock see Eisner (1998), pp. 109-12.
13. Martin Davis Appointment, 1 December 1960, Paramount Picture releases, in Davis file, Quigley
Collection, Georgetown University, Washington, D.C.; Variety, February 23, 1983, pp. 4, 26.
14. The New York Times, 1 2 September 1 984, p. D1

15. Eisner (1998), p. 111.
1 6. Box Office, July 1 987, pp. 28, 30.

17. Fortune, 21 December 1987, p. 108.
18. The New York Times, 23 February 1 986, section 3, pp. 1 ,

8-9; Fortune, 2 1 December 1 887,
pp. 105-12.
1 9. Business Week, 24 April 1 989, p. 31 ; The New York Times, 1 1 June 1 989, section II, pp. 1 , 9.
20. Variety, 1 5-21 July 2002, pp. 1 , 88.
21 . The Los Angeles Times, 1 2 November 1 989, p. D1

22. Vanity Fair, May 1991, pp. 34-6; Forbes, 4 February 1991, pp. 39-40; Mine, June 1991, pp. 26-7.
4
PARAMOUNT 2
23. Variety, 9 December 1996, p. 74; Variety, 12 April 1989, pp. 1,4; Business Week, 28 January 1991,
pp. 52-4; Forbes, December 7, 1992, pp. 44-6.

24. The annual editions of International Motion Picture Almanac (New York: Quigley Publishing Company)
provide a succinct and up-to-date summary of the recent activities of the studio. See Variety, 28 April—
May 1997, p. 1.
25. This is a history - change over time - not a snapshot of the industry at a point in time. For such a
snapshot, at the end of the twentieth century see Benjamin M. Compaine and Douglas Gomery, Who
Owns the Media? (Mahwah, NJ: Lawrence Erlbaum Associates, Inc., 2000), pp. 359-436.
26. Business Week, 3 April 2000, p. 44.
17
Warners
The last Warner brother, Jack, left Warner Bros, in 1967, after the studio, under his leadership, had
struggled for more than a decade since the 1956 sale to investors (chapter 10). Jack simply did not
possess the leadership skills of his older brothers, Harry and Abe. Jack sold his interest in the
company to Seven Arts, a Canadian corporation, for $32 million. Ken Hyman, a thirty-eight-year-
old film producer, became the chair of Warner-Seven Arts. The Seven Arts ownership did no better
than the last Warner, however, and on 9 July 1969 an outsider - Steven Ross of New York - bought
Warners for his Kinney Corporation. A new era of prosperity commenced. 1
The Leader: Steven Ross

Until the July 1969 takeover, Steven Ross was head of a pure conglomerate based in New York
City, the Kinney Corporation. Ross had seen what Lew Wasserman had wrought. He envisioned
Warners as a diversified media conglomerate with the studio at its core, and by the 1990s this vision
had become a reality - his corporation was the equivalent of Universal. His key strategies were
those Wasserman had perfected at Universal: (1) horizontally capture other businesses as needed;
(2) vertically control all parts of the film business; (3) maintain power over all aspects of the media
business through careful strategies By 1 990, after the merger with Time, Ross was at the helm of
a media conglomerate second to none.

Ross was an unlikely candidate for a studio system leader. Born Steven J. Rechnitz on 5 April
1927, he grew up in the Flatbush section of New York, attended college for a short time, and then
in the heady days after World War II went to work for an uncle in New York's garment district. He
learned, like Wasserman, to make deals, in his case in the funeral home, car rental and parking lot
industries. Ross had passed his fortieth birthday before he consolidated all these operations into
Kinney, Inc. In 1969 Ross used the cash being generated from Kinney's successes to pay $400 mil-
lion for an ailing Warner studio. He then never stopped making deals. Through the next two
decades Ross expanded the studio operations and acquired new divisions in order to vertically inte-
2
grate his growing media conglomerate.
At first Ross needed help. He hired former agent Ted Ashley to manage Warner studio opera-
tions. Ashley was born in 1924, left school in 1935 to work in the mailroom of the William Morris
Agency, and aged twenty-three, created Ashley Famous Agency, whose clients included Tennessee
Williams, Arthur Miller, Perry Como, Allen Funt and Henny Youngman. He copied MCA, and his
agency became known for packaging and selling network television shows, including The Danny
WARNERS 239
Kaye Show, The Doris Day Show, Mission: Impossible, Get Smart, The Carol Burnett Show, Star
Trek, Dr Kildare, Name That Tune and The Twilight Zone. Then, aged thirty-five, he met Steve Ross,
who had just acquired Warners. Ross named Ashley studio CEO, and Ashley, like Wasserman
before him, spun off off his talent agency. Ashley and Ross worked from 1969 to 1980 to turn
Warners from a drab studio into a model of success. Under Ashley and Ross, Warners was respon-
sible for the box-office successes of Clint Eastwood and the ability of director Stanley Kubrick to
work within the studio system. By 1976 Ashley had brought in David L Wolper, who went on to
produce television's most-watched miniseries, Roots. Ashley reportedly was paid $200,000 a year
plus six-figure bonuses through the 1970s. When he retired in 1981 aged fifty-six, Ross gave him
an additional $2.7 million in Warner stock. Ashley then helped Ross hire Robert Daly and Terry
3
Semel as his successors, and continued to serve as vice-chairman of the Warners board until 1988.
Ashley and Ross took on independent companies and gave them a studio home. For example,
John Wayne's company, Batjac, settled at Warners. Ashley also packaged deals from inside Warn-
ers - his The Summer of '42 (1971) cost only $1 million, but grossed more than $25 million. Warn-
ers' biggest hit of the Ashley years proved to be The Exorcist (1973), based on William Peter Blatty's
best-selling novel. This was the film that proved to Ross that Warners was capable of producing a
blockbuster. (Two years later Lew Wasserman demonstrated how to do a real blockbuster with
Jaws.) Ross befriended stars and directors and tempted them to the Warners studio. He had great
personal charm, and film-makers liked, trusted and wanted to work for him. They rewarded him
4
with blockbusters.
Steve Ross, the maker of the Warner

Communions and then Time Warner media
conglomerate
240
I
As a business leader, he cautiously invested. He built the Warner colossus slowly and carefully.
For example, one of Ross's first investments was Panavision, a camera company. Founded in 1954
by Robert Gottschalk, Panavision made a big splash with its first products, projection lens attach-
ments and camera lenses that eliminated distortion in widescreen motion picture images. Panavi-
sion introduced the first Panaflex camera just before Ross acquired the company. This camera
revolutionised film-making because its lightweight, silent operation and flexibility gave cine-
matographers greater shot-making capabilities. Ross liked Panavision's adherence to its guiding
principle - it only rented and never sold its equipment. But, while he made profits with this tech-
nological investment, Ross sold Panavision. He wanted companies that could supply story materials
for his films, companies like National Periodical Publications (publisher of sixty-three magazines and
comics, including Mad, Superman and Batman). To raise cash from 1969-72 he sold all the non-
media subsidiaries of Kinney for $500 million and renamed the enterprise Warner Communica-
tions, Inc. He expanded into TV production, and began to fashion a media conglomerate. Armed
with $65 million, Ross and Ashley acquired the rights to the successful novel, The Exorcist, and
fashioned the most profitable film in Warner corporate history - it returned $89.3 million in domes-
tic rentals alone. By 1973, under Ross and Ashley's leadership, Warners had increased domestic
film rentals to theatres and television by 56 per cent (from $124.3 to $193.3 million) and profits
by 40 per cent (from $11.1 to $ 1 5.8 million). Ashley explained his leadership style:
First you must set your budget in relation to how well the proposed picture can be expected to do in
its three principal markets - domestic theaters, foreign theaters, and broadcast TV. . . . [Then] you
must decide if the creative persons available can execute the picture to make a profit [for the projected
5
cost].
Ross also began to hone his skills at finding talented directors who could also make profits. He
backed Alan Pakula's 'paranoid trilogy', consisting of Klute (1971), The Parallax Wew(1974) and
All The President's Men (1976) when commercial prospects seemed highly uncertain. All became
hits. Ross and Pakula had caught the national mood, and were vindicated when the tale of Richard
Nixon's fall became the fourth-highest earner of the year, returning $31 million in domestic rentals.
He was developing his deal-making skills on the job. Lew Wasserman had been in the talent busi-
6
ness for more than a third of a century; Ross learned his craft from Ashley in a half-dozen years.
Ross diversified. He pushed cash into Warners' small music division, which by 1972 was gen-
erating nearly two-thirds of pre-tax profits. Ross built up Warner Bros. Records Inc., and Warner
Bros. Music Publishers Holding, Inc. which together constituted one of the world's six major music-
makers. By the mid-1970s, Ross was spreading his investments in three media: film-making and
TV production; music; and cable TV. Cable TV, the biggest gamble, in time became a core profit
producer. These three divisions defined the core of Warner Communications. In distribution, Ross
embraced what was then called the post-theatrical market. Television rights to films attracted Ross.
Consequently, the promotion of a Warner film was not based on traditional patterns. Instead, each
WARNERS 241
film received individualised treatment based on anticipated television ratings, cross-promotion pos-
sibilities with the music division and, later, merchandising deals. Ross sought to maximise a film's
ancillary rights within the Warner organisation, whether the film was independently produced
jointly produced or internally produced. Theatrical, network television, and domestic or inter-
national television syndication were merely Warner subsidiaries. In fact, the production of motion
pictures at Warner Bros, was often referred to within the company as 'the creation of software',
to supply the market in the television, musical recording, publishing and, later, electronic games
7
divisions.
Ross saw the future of ancillary markets in cable TV. He took on the American Express
Company as a full partner and began the Warner Amex Cable Communications Company. He
drew upon American Express's considerable experience with computer technology and consumer
credit, skills that were fundamental to selling products via television. He also purchased the
Knickerbocker Toy Company, the manufacturer and owner of the soft toy rights to Raggedy Ann,
Holly Hobbie and Sesame Street characters, giving Warners its own merchandising division. Soon
Warner cartoon characters - Bugs Bunny, Daffy Duck and Elmer Fudd - were as ubiquitous as
Disney's - Mickey Mouse and Donald Duck. With investments in cable TV and in-house merchan-
dising, Ross pushed ahead of his tutor Lew Wasserman, who never had any dealings with cable
TV, and no internal merchandising division. By the mid-1970s Ross realised that media conglom-
erates must have stakes in multiple media industries, and it became rare that one of his Warner
divisions was not at the top of its particular medium. Ross pursued the talented creators who were
vital to making blockbusters. Indeed, he successfully wooed Steven Spielberg away from Wasser-
man. For his part, Spielberg was so taken with Ross that he dedicated Schindler's List (1993) to
him. Spielberg told interviewers that he thought Oskar Schindler reminded him of Ross, and Spiel-
berg had the movie's star Liam Neeson, study home movies of Ross. Like most of the talent Ross
tempted to Warners, Spielberg was truly mesmerised. Here was a business CEO the equal of any
character the film-maker had ever created on screen. 'He [Ross] had silver-screen charisma, much
8
like an older Cary Grant. . . . [Ross] had style. ... He had flash.'
On 1 January 1981 Ted Ashley resigned. Immediately, Ross chose former TV man Robert Daly
as Ashley's replacement. Terry Semel, already on board, was teamed with Daly, and the duo would
still be working together in 1992 when Ross died. Thus the films up to 1983 must be credited to
Ross and Ashley, and those after to Ross, Daly and Semel. These men presided over a Golden Age
for Warners. Both its A Star is Born (1 976), staring Ross's friend Barbra Streisand, and The Enforcer
(1976), starring Clint Eastwood, another Ross pal, were in Variety's top ten films of 1976, gross-
ing more than $61 million for the company. Eastwood's next picture, The Gauntlet (1977), did just
as well. Ross used any tool to make fans want to line up at the box office. When the United States
Catholic Conference blasted The Gauntlet for its violence, language and sexual content, Ross apol-
ogised and then sat back and watched the film gross more than expected - on the back of the free
publicity - and Eastwood's stardom grow, as did his loyalty to Ross. It seemed that Ross was ready
9
for his blockbuster.
242
I
The Blockbuster
By the summer of 1978, all talk at Warners seemed to focus on Ross's cross-pollinated potential
blockbuster. Superman, based upon a comic character Warner already owned. Ross asked
exhibitors for blind bids on the New York engagements of the film. The high price paid for a film
sight unseen meant that during the opening three weeks, ticket prices had to be raised to $3 for
adults and $2 for children. In its opening week, Superman set records for both Warner Bros, and
the filmed entertainment industry's pre»Christmas week business. It grossed $12 million on 508
screens, with a top ticket price for adults in Minneapolis reaching $4. Ross had his blockbuster.
Ross exploited Superman even more than Wasserman had Jaws because he embraced home
video, pay-television and cable TV. In Lew Wasserman's era, movie theatres supplied more than
three-quarters of the revenue for an average Hollywood feature film. By the time Steve Ross had
innovated new marketing and distribution arms, movie theatres provided only a quarter of the ulti-
mate total. What had once been 'ancillary' monies had become the leading contribution to the
revenue stream of a Hollywood blockbuster. Ross also made an art form of selling movie-related
merchandise. Ross had developed what became known as a franchise. One thousand items were
deemed worthy of the Superman name, including a Superman bubble-bath decanter, Superman
house slippers, even Superman underwear. Superman comic books, now available in fifteen
languages, saw their sales soar to 13 million.
Each of Warners' arms would do its bit for Superman. Warner Bros. Television released short
films about the making of Superman, employing more than thirty hours of behind-the-scenes
footage as well as filming the Washington, D.C., world premiere benefit for the Special Olympics.
Warner Records pre-released John Williams' soundtrack and two Paul Williams singles that were
among the very last items edited into the film. Warner Books put eight Superman-related titles on
the market. The main two were the novelisation of the screenplay, but other more avid interests
were served by The Great Superman Book, The Superman Blueprints, The Official Superman Quiz
Book, The Superman Portfolio, The 1979 Superman Calendar and even a Superman scrapbook.
And to make sure that none of these efforts got lost in the shuffle, Ross had his staff cross-pro-
mote relentlessly: the records division hyped the books, the books division reciprocated. 'As far as
merchandising goes', summed up one Warners executive off the record, 'this is the most heavily
exploited film in the history of the [new studio] business'.
Ross boasted that Superman was destined to become 'the licensing event of the century'. That
was boasting, but the fact that Warners pioneered and took the new studio system to new rev-
enue heights - even before home video and cable kicked in significant monies - needs to be recog-
nised as Ross's contribution. Even the theatres themselves, then relatively merchandise-free, were
used in the barrage. National Screen Service, a firm which usually limited itself to distributing trail-
ers and ad material, arranged to set up 'Movie Madness' displays in 475 theatres to sell inexpen-
sive Superman items, including chunks of glow-in-the-dark Kryptonite, to the impulse buyer. All of
which led Andrew Fogelson, Warners' executive vice president for worldwide advertising and pub-
licity, to proclaim, 'From my point of view, it's heaven. This is really the first time we've had the
WARNERS 243
opportunity to work on a total entertainment package. It makes you regret you ever had to do it
any other way.' Ilya Salkind, the film's producer, was cheered by the palpable enthusiasm of a New
York meeting: 'I saw the dollar people, their eyes clicking away like computers, like adding
machines.' It was the Ross personality and the money flow that Salkind as a producer could
appreciate. 'Without being too optimistic', he said as the 1970s ended, 'there's a good chance
Superman can get up to Star Wars at the box office and make even more than Star Wars in mer-
10
chandising, because they started late'.
Most importantly, Ross fully embraced home video. He believed that the pre-recorded home
video market would be an expanding income stream of the future. Early in 1980 Ross alone
seemed to understand the viability of home video. While Wasserman went to court suing Sony,
11
Ross was turning millions from home video. He was not bound by the exhibition system.
The Trouble
Ross invested heavily in video games by acquiring Atari in 1976 from founder Nolan Bushnell for
a piddling $28 million. But the move ran into trouble when, in July 1982, Merrill Lynch removed
Warners from its recommended list because analysts reasoned that the video game market was
becoming over-saturated. (It was later learned that Ross had been given insider information con-
cerning the Merrill Lynch announcement and sold some of his Warner Communications shares
before the stock began to lose value.) Ross had lost credibility. Wall Street found a lot of other
problems, principally centred on Atari. Atari had burgeoned into a world-beater with sales of $1
billion, and uninformed investors were delighted as Warners' stock shot up from $1 .87 to $58.50
a share, in just over six years. Then the bubble burst. On 9 December 1982 Warner stock did not
open on the Big Board until 3.32pm as Wall Street learned of Ross's insider dumping. Ross had
ridden the growth of Atari, which through the first half of 1982 had the home video-game market
virtually to itself, and later he admitted: 'It lulled us into a false sense of security. And that was an
expensive error.' There were other mistakes. Atari missed the chance to exclusively license game-
system graphics, allowing other companies to catch up. Warners had been hard pressed to meet
demand for game cartridges in the 1981 holiday season, so rather than taking chances, retailers
and distributors in the autumn of 1982 turned to other suppliers. Warners, meanwhile, over-
ordered to cover anticipated shortages - except that there turned out to be no such shortages.
Ross had a wrenching Christmas of 1982.
Still Ross innovated. He started an all-music channel, MTV. But this required a vast initial invest-
ment and so profits did not materialise for several years. The same was true with wiring the USA
for cable. Warner alone sank over $200 million into the enterprise, and one analyst calculated its
estimated 1982 loss at over $40 million. The year 1983 was pivotal. By the end of the first quarter
of 1983, Atari, alone, presented Warner with a $19 million loss. Operating earnings peaked at
$1 50 million in the third quarter of 1983 and fell straight down, past zero into the $300 billion loss
territory. By the end of that year, a takeover of Warner Communications was in play, and Rupert
Murdoch - looking to establish a beachhead in Hollywood - bought one-fourteenth of the stock
244
I
- for $ 1 00 million. Speculation mounted that Warners was worth more broken up than as the syn-
12
ergistic whole Ross had been building since 1969.
To add to the company's financial woes, tragedy struck the Warners-produced Twilight Zone
in May 1983. During filming, a helicopter killed actor Vic Morrow and two children. Suits were filed
and investigations launched. The helicoter pilot claimed that the chopper was under the control
and guidance of director John Landis and producer Steven Spielberg, and that the accident hap-
pened because explosives were poorly placed. The parents of the minots killed filed suit. Landis
and Spielberg were suddenly spending more time in court than making movies. Warners survived,
13
but not without a wave of bad publicity.
Despite all this, during the summer of 1983 Superman III entered the box-office charts at
number two, unable to dethrone Fox's Return of the Jedi. Other Warner summer hits included
National Lampoon's Vacation, Twilight Zone and Risky Business. At one point the Warner studio
had 41 per cent of the total domestic box-office take. Despite this good news, Warner Bros, studio
profits could not offset the losses incurred by Atari. Ross fought successfully to save his company
and paid clearly to re-acquire its shares owned by Rupert Murdoch. The cost to end Murdoch's grab
amounted to $172.6 million. In late July 1984 Warner Communications reported a second-quar-
ter loss of $437,620,000, mostly due to Atari. The lack of profit resulted in 250 employees being
fired and Atari being sold at a substantial loss. Yet the Warner studio captured a 23 per cent share
of the domestic box office between Memorial Day and Labor Day 1984, shattering the previous
14
summer record set by Wasserman's summer of 1981 which had been dominated by £.7~.
After seeing off Murdoch, Ross faced another unwanted outsider - Herbert Seigel. Well known
for his strategic friendships among Hollywood's more powerful actors, directors and producers,
Ross overcame a 1987 attempt by Siegel to challenge his position as head of Warner Communi-
cations by bringing Steven Spielberg to that year's shareholder meeting. Spielberg told the share-
holders present that 'As long as Steve Ross remains skipper of this battlewagon, I will never leave
my station.' Spielberg also read a letter from Clint Eastwood that stated: '. . .all we need to assure
continued success is Steven and his management.' With this testimony, Ross managed, by the end
of the meeting, to increase Ross-friendly seats on the board of Warner Communications by two at
15
the direct expense of Siegel's representation.
Warner profits increased again - by 40 per cent for 1 985, reflecting record profits in the movie,
TV and record divisions. This came about because Atari was gone and much of the cable wiring
completed. Indeed, the cable TV division was beginning to show a profit and so Ross bought out
his partner, American Express. Total revenue increased past the half a billion mark. In 1985 Wall
Street had only praise. 'The company looks very good and strong in every division,' said Susan
Watson, an analyst at Morgan Stanley who noted that the third quarter typically is strong because
of the summer movie season, in which Warners' box-office performance this year was better than
that of the other studios. Successful movies included Eastwood's Pale Rider, Mel Gibson's Mad Max
Beyond Thunderdome and National Lampoon's European Vacation. Record results were helped by
strong sales of recordings from artists including Madonna, Dire Straits and Phil Collins. Earnings
WARNERS 245
from the publishing division rose by 1 5 per cent. Improvements at Warner Cable added to an oper-
ating profit of $6.4 million for 1985, compared with a $6.2 million operating loss a year earlier.
Ross again had turned the corporate corner; his Warners media conglomerate was making money
again - lots of money. He proved he could survive poor judgment and hostile takeover attempts,
16
and return to concentrate on building his company again.
Ross at the Top Again

On 3 March 1987 it was announced that the Warner board had met the prior day in New York,
and approved a lucrative new contract for its chairman and chief executive officer, Steven Ross,
over the opposition of dissident Warner shareholder Herbert Seigel. Six directors representing Siegel
voted against the new ten-year agreement, which was to pay Ross a minimum of $800,000
annually plus 1 per cent of Warners' after-tax profit. Nine Ross-friendly directors approved the con-
tract, while Ross, who had been working without a contract since his last one expired in Decem-
ber 1983, abstained from voting. The contract also granted Ross stock-appreciation rights and set
up a stock-equivalent programme that paid him cash with improvements in the performance of
Warner stock. Ross, at fifty-nine years old, planned to head the motion picture, record and cable
17
concern at least until sixty-nine. He saw no reason to retire.
This reaffirmation of Ross did not settle the internal battle. In a Delaware courtroom in
the spring of 1987, an attorney for Siegel explained that his client made a friendly investment in
Warners forty-two months earlier, yet Siegel had only five votes on the fifteen-member Warner
board. To Wall Street, the feud between Ross and Siegel was fundamentally a clash of styles. Ross
was a dealer - expansive and always seeking growth; Siegel was cost-conscious and conservative.
'Herb is entirely expense oriented, while Steve is revenue oriented. He will spend to earn,' said
Arthur Liman, a New York attorney who knew both men. Ross proved right as Warners was a busi-
ness that depended on creative artists, which meant spending plenty of money to keep these tal-
ented people happy. Friends described Ross as charismatic and a master of the personal touch,
which won him loyalty from both his troops and Warner stars. In June 1987, in the midst of
another fight with Siegel, Ross flew to Spain, where Spielberg was directing a movie for Warners,
and spent two days there. Siegel was outraged. Streisand stated for the record that Steve Ross was
an 'extraordinary human being'. She said she would leave Warners if Ross left the company. 'Who
is this guy Herb Siegel?' she added. 'Doesn't he run a boat company?' (Seigel's company was called
18
Chris-Craft, but had long ceased making boats.)
Siegel had no effect on Ross's strategy. In May 1988 Ross purchased Lorimar, a television
company, famous for the hit show Dallas. Though the purchase was initially perceived as disad-
vantageous for Warner Communications because of Lorimar's weak financial situation, it also
allowed Ross to finally break into first-run television syndication. Now, together, Lorimar and
Warner supplied the largest amount of original network programming in the USA.
During the summer of 1 989, Steve Ross and Bob Daly finally hit another blockbuster home run
-with Batman. This character, which had been part of the Warner comic book repertoire for almost
246
I
•
twenty years, had its beginnings in 1939, when comics cost a dime and the bad guys only came
out at night. National Comics wanted a new superhero. An eighteen-year-old cartoonist named
Bob Kane had an idea: 'a vigilante within the law'. The Bat-Man, as he was then known, made his
first appearance in Detective Comics No. 27. Fifty years later bat-fever gripped the land as antici-
pation built for the 23 June premiere of director Tim Burton's $35 million movie. Kids descended
on cineplexes, asked which theater was showing the 'Batman' trailer, and bought tickets regard-
less of what was playing there. A Washington theatre chain sold thousands of advance seats two
weeks before the premiere. And everywhere you turned, there were bat logos. 'It's the biggest
thing I've ever had in 19 years,' said Stuart Taylor of Billerica, Massachusetts, a distributor of movie-
licensed merchandise. 'It's . .

.'
And here Taylor paused, groping for precisely the right analogy so
that we may fully grasp the enormity of the thing: '.

. . bigger than the California Raisins'.
The summer of 1989 was one of bat-craziness, and bat-fashions - batomania! Fashion initiated
the craze: 'That's really what started the merchandising,' an industry insider stated. 'It was very big
during the summer of 1989 with skateboarders in LA, and in the East Village in New York.' The
street popularity of Batman perked up what Warners' worldwide merchandising president Dan
Romanelli called 'a classic license'. Ross inspired the film's producer, Jon Peters. 'When we got into
this I thought, what a great opportunity to have this guy kick some ass,' said Peters later. 'This
Batman would be a comic-book Gothic, a dark fable that would restore Bob Kane's original
gloomy luster to the story of millionaire playboy Bruce Wayne. Tim and I wanted Gotham to be
disquieting, forbidding, [and] dangerous. We took the worst aspects of New York and condensed
them, and then stretched them up vertically.'
Jack Nicholson, everyone agreed, was born to play the Joker. And then there was the question
of casting the lead. Tim Burton wanted a hero who would be as far from Zap! Pow! as possible.
He would be above all a loner (sidekick Robin was cut out of the picture entirely). Going back to
Kane's original comic, screenwriters Sam Hamm and Warren Skaaren dusted off a flashback
sequence in which young Bruce Wayne sees his parents murdered by a street punk. Ross agreed:
'Loneliness is a big part of it. The kid's 10 years old and he sees something very bad happen, and
he shuts down. He becomes a very lonely, very isolated person.' Ross picked Michael Keaton, 5
feet 10 inches tall with a receding hairline and 'not the squarest jaw in town', to play Batman. Even
Bob Kane was convinced: 'On the set I saw a great transformation. He was sitting there one day
reading a newspaper and looking unobtrusive. He had the suit on but not the cowl. When he put
19
on the cowl he straightened up and he became Batman.'
Months ahead of schedule, Ross had the film-makers cut a trailer and screen it in Los Angeles.
It was a hit, even among 300 bat-fans who showed up for the late show. Ross knew he had his
second franchise. When the trailer went into general release at Christmas 1988, word of mouth
spread among the fans and beyond. Retailers began to sense a bump in interest. Warners Licens-
ing began to sprinkle just enough new movie-licensed goods into the marketplace - hats, T-shirts
and pens - to freshen buyers' interest. 'By the start of [1989]', recalled Rob Friedman, Warners'
president of worldwide advertising and publicity, 'there was a feeding frenzy that we took
WARNERS 247
advantage of, and to a certain extent, fueled. Toward the end of production we had the mer-
chandisers in - hundreds of them. . .
.'
Back home Ross had the Warner PR folks continue to seed
the ground through the spring of 1989, plastering the bat logos across big-city billboards and
movie theatre one-sheets. On the night of 23 May 1989, Ross staged a $1 million ninety-second
national TV buy on network, local and cable outlets.
Ross planned no more TV advertising until late June, immediately before the opening. 'There's
a fine line that you have to be careful not to cross,' Warners' Friedman stated. It worked. By the
summer of 1989 promotion, word of mouth and the tides of street fashion combined to make
Batman the man of the hour. There were more than 100 licensees for Batman products for 300
different items. (The memorandum listing all products licensed with Batman characters was twenty
pages long, single spaced.) T-shirts, as is generally the trend, were the biggest sellers: forty Los
Angeles-area J. C. Penney stores reported selling 40,000 Batman-licensed T-shirts in May 1989.
Macy's Manhattan flagship opened a Batman boutique on its street level; Joker items sold almost
as well there as Batman items. (Nicholson liked to wear his Joker T-shirt under another shirt. 'That
nice green hair showing from under something else,' he commented. 'That's a real fine fashion
item.') About a quarter of Batman's 100-plus licences were newly issued and covered goods
specifically based on the movie, as opposed to the comic character. Warners merchandising pres-
ident Dan Romanelli particularly liked 'the Batmobile, the little electric car the kids can get in and
ride around'. (It sold for about $150.) A nationwide tie-in with Taco Bell began on 3 July 1989 with
employees wearing Batman T-shirts and give-away Batman drinking cups. The winner in the mer-
chandising boom was clearly Warners, which in addition to reaping prodigious publicity benefits
received a percentage of merchandising revenues. Ross had out-Wassermaned the mighty Lew. He
20
had his Jaws and E.T. now and Warners was atop the studio system.
The Merger
While working on Batman, Ross had been in secret negotiations to make a media colossus second
to none. On 5 March 1989 Time, Inc. and Warner Communications announced their intention to
merge. At the time, the coverage of the merger praised Ross for bringing together two US-based
companies - and not another Japanese takeover. The other stated advantage was the fabled syn-
ergy, with Ross convincing the public that the combined conglomerate would amount to more
than the sum of the two companies parts, or 1 + 1 = 3! Wall Street valued the deal at $15 billion,
making Ross's creation the largest studio system conglomerate in the world. The proposed merger
made the headlines of all newspapers and TV talk shows. All contained the same spin. Time had
the most to gain as its biggest money-maker, HBO, would have instant access to Warner cable sys-
tems and that HBO would be able to work with the Warner movie studio. Indeed, the movie and
21
TV divisions were at the heart of the deal.
Ross hoped that the deal would close officially by September 1989. The unanticipated counter-
offer for Time by Martin Davis of Paramount only served to raise the debt attached to the deal and
delay it by six months. The new Time Warner was never in doubt, but to the world it looked like
248
I
I
Ross had given up his throne. In reality, this deal-maker at the top of his game was not going away,
but positioning himself to take full control after he had Time under his wing. At first, Ross would
- with Time's CEO Nick Nicholas - be co-leader, and Time's name would come first. But few knew
of Nicholas, and the flamboyant Ross slowly and skilfully eased him out, took over the whole
company, and kept the debt manageable. Ross became a sort of folk business hero as he had an
ail-American company, and had not sold out to the Japanese, as Lew Wasserman had.
New York City and Burbank, California, Time Warner ha'b' the studio at its core,
Based in
Warner Home Video (described then as the largest worldwide distributor of videocassettes in
Warner's Annual Report), feature films like Batman and Beetle Juice (1988) and licensing rights ad
infinitum. In 1990 Time Warner issued 150 licences for its cartoon characters. At the time, some
observers noted the distinct possibility of licensing overkill. However, in 1990 the company 'confi-
dently predicted that by 1992, its $50 million licensing revenue posted in 1990 will double'. And
it did. Ross knew the magazines of Times, Inc. did not matter, it was HBO and their cable opera-
tions that were worth the price, fitting nicely with Warners' operations. Terry Semel and Robert
Daly headed the Warner Bros, studio, as president and chairman respectively. They were trusted
by Ross and represented unusual executive longevity within the movie industry. Further contribut-
ing to executive stability was the fact that Steven Ross has presided over Warners' parent
companies for more than twenty years. Warner the studio was the most stable and successful at
22
the time of the merger.
Passing the Torch

Steve Ross died on 20 December 1992 from complications arising from prostate cancer. He had
taken a small family business and turned it into a media conglomerate of global proportions, and
was lauded for his clarity of vision, exceptional intellect and personal magnetism in creating Time
Warner, and securing its leadership in global media and entertainment. Ross had been on a leave
of absence for many months while he underwent treatment for the disease. And as his time came,
he begrudgingly relinquished day-to-day supervision of the world's largest studio conglomerate in
June 1992 to his hand-picked choice, Gerald Levin.

In his career, Ross gained a reputation as a world-class deal-maker, whose crowning achieve-
ment was the 1989 merger of Warner and Time. 'He was one of a kind', said Robert Daly, chair-
man of Warner Bros.,
a visionary, an unbelievably brilliant strategist and negotiator. Most importantly, he was a great friend
and always thought about the people in the company. The record of our company's longevity of
management was a philosophy that came from Steve. He set the tone for the rest of us to follow.
Ross had followed Lew Wasserman up the mountain and ran past him - as Wasserman cashed-
out. For in 1 990 there was only one true major media empire and that was Time Warner, Inc. And
23
Steven J. Ross was its architect. This was Ross's legacy.
WARNERS 249
Ross stuck by his executives - a very unusual practice in the studio system. Over the years,
under the stewardship of the longest-running studio executive team, Robert Daly and Terry Semel,
Ross had built Warners' film division into Hollywood's most consistent revenue-generating unit,
producing such blockbusters as Batman, the Lethal Weapon series, a host of Clint Eastwood action
films and several Spielberg hits. Warners' record division under Mo Ostin (twenty years) included
an enviable roster of top talent, such as Madonna and Prince. Warner television was second to
none as a producer - at Ross's death, sit-com Murphy Brown was the big hit. Emanuel Gerard, a
former Warners executive, said: 'I think Steve wanted the respect of the business world more than
anything else ... but he was too out-of-the-mold.' Social register, he became - but was not born.
Ross told one interviewer that his father lost his home-building business in the Depression and
changed the family name from Rechnitz to Ross in order to get a job as an oil burner salesman.
The sales genes were there, but Ross upped his father by a magnitude few would have imagined
24
of a non-Ivy league, non-MBA-trained entrepreneur.
His hometown newspaper, The New York Times, quoted him as saying: 'If you're not a risk-
taker, you should get the hell out of business.' Ross always insisted there was no basic difference
between the funeral parlour business and the entertainment world. Both, he said, were 'people
businesses', in which the key was the ability to empathise. 'You learn to say, "Hey Charlie, I don't
want to talk business today," or, "Susie, I don't want to talk business today, tell me what your
problem is,'" he once said. 'That is the important thing, that is the guts of the business, whether
in Hollywood or a funeral parlor.' He was also an extraordinary manager. 'Steve delegates a lot,'
his friend Felix G. Rohatyn, the financier with Lazard Freres & Company, once said. 'That is his
strength in dealing with talent and his weakness in dealing with adversity.' 'You know what busi-
ness is about?' Ross liked to say. 'Basic common sense and basic faith in people.' His management
style was unusually generous. He rewarded both employees and stars lavishly. 'Incentive compen-
sation', he once said, 'is the most important thing in business.' The rewards often brought results,
with Warners showing consistent growth through most of Ross's stewardship and benefiting from
his sure instinct for popular taste. He gambled on the music video channel MTV and on the Nick-
elodeon cable service of children's programming when most other corporate leaders thought cable
was just a piece of thick wire. He knew how to let talented movie executives get on with their busi-
ness, ensuring that Warners was an unusual island of stability in Hollywood. Ross liked to describe
himself as risk-taker - seeking to contrast himself with the nuts-and-bolts MBA managers obsessed
only with the short term. Ross saw short-term profit maximising as the bane of the studio system
he had inherited. This is what he learned from Lew Wasserman: ignore the old rules and fashion
25
a system that works for you.
Throughout his two decades of innovating new business practices in Hollywood, Ross contin-
ually sought to take greater and greater advantage of the power that vertical integration offered:
reducing costs of sales and transactions, and thereby increasing profits. His vertically integrated
corporation would sell films and TV shows to itself, and thus not have to absorb the expenses
associated with bidding for product from others. Thus even if the new Warners sold no more than
250 |
in the past, with lower costs the company would still make more profit. Ross recognised the
importance of market control, and joined Wasserman and Bluhdorn in leading the new Hollywood
studio system in this direction, and into a new era. While Wasserman was counting his money from
Jaws, Ross was placing his bets on cable TV. Ross's final experiment, planned during the months
before his death, was the trial of a new Time Warner system in Orlando, Florida. The system,
trialled in 4,000 homes, offered a full 500-channel cable television service, complete with video
games and movies on demand, multiple interactive shopping channels, arTd information including
news and reference guides as desired. This would be the ultimate vertically controlled outlet for
Time Warner's ever-growing array of moving image products. The failure and ending of this exper-
iment in 1997 signalled the end of the Ross era at Time Warner and the beginning of the Gerald
26
Levin epoch.
Time Warner Struggles

From 1992 to 2000, Ross's successor, Gerald Levin, proved he lacked the required leadership skills.
Levin had fashioned HBO for Time, Inc., but became a Ross man once the merger was done. He
pushed Time Warner in many directions, but none with any of the success of Ross. He played it
conservatively. While Warners never fell out of the studio system, it never prospered as it had in
the Ross era. That Levin failed can be seen in the fact that he sold Time Warner to AOL in 2000.
Suddenly it was AOL Time Warner, and Levin stepped aside. AOL managed the merger miserably,
and by 2004 the board had dropped the AOL name. The core business, even fifteen years after
Time and Warners merged, still lay in the studio system. By 2004, under Richard Parsons, the media
colossus faced a vast challenge. On Wall Street no one was sure where the company was headed.
Notes
1 . The New York Times, 25 July 1 967, p. 33; The Journal of the Screen Producers Guild, September 1 966,
p. 13.
2. The considerable accomplishments of Steven J. Ross are recent and thus, like all of contemporary history,
elusive at best. Despite extensive press coverage surrounding the Time and Warner merger, and his
supposed excessive salary, there exists a single scholarly, footnoted, logical account devoted to the rise
of Time Warner: Robert Gustafson, 'What's Happening to Our Pix Biz? From Warner Bros. To Warner
Communications, Inc.', in Tino Balio (ed.). The American Film Industry, revised edition (Madison:
University of Wisconsin Press, 1985), pp. 574-602.
3. Associated Press, printed in The Washington Post, 28 August 2002, p. B6.
4. The New York Times, 1 1 September 1978, pp. 1, 23; Variety, 13 September 1978, pp. 2, 1 18; The
Hollywood Reporter, 1 1 September 1978, pp. 1, 4; Motion Picture Daily, 12 September 1969, pp. 1, 3;
The Hollywood Reporter, 20 September 1980, pp. 1, 29.
5. Variety, 2 1 January 1 970, p. 202; Business Week, 23 June 1 973, p. 1 1 8; The New York Times Magazine,
7 August 1977, p. 18. Connie Bruck's Master of the Game: How Steve Ross Rode the Light Fantastic
from Undertaker to Creator of the Largest Media Conglomerate in the World (New York: Simon &
Schuster, 1 994) is the basic text on the life of Steve Ross.
6. Variety, 28 November 1973, p. 3.

. .
WARNERS 2
7. Variety, 1 March 1972, p. 3; Business Week, 23 June 1973, p. 122. Ross understood the value of his
growing film library. In a three-page post-Time Warner merger interview published in Electronic Media,
1 1 June 1990, pp. 1, 22, 24, he stated over and over again its core value.
8. Bruck (1 994), pp. 1 78-200, 362-8.

9. The Hollywood Reporter, 20 November 1 980, pp. 1 , 29.
10. American Film, December-January 1979, pp. 49-52.

1 1 . International Motion Picture Alamancs, 1 979, 1 980 and 1 981 (New York: Quigley Publishing).
12. Fortune, 1 January 1 983, pp. 81 , 83; Business Week, 1 January 1 983, p. 82; The Wall Street Journal,
13 January 1983, p. 20; The Wall Street Journal, 21 April 1985, p. 59; The Wall Street Journal, 20 July
1983, p. 55; Business Week, 8 August 1983, pp. 70-1; The Wall Street Journal, 5 December 1983, p. 5;
Business Week, 12 December 1983, p. 1 18; Business Week, 19 December 1983, p. 101.
1 3. This era of the early 1 980s and the accidents are the subject of Stephen Farber and Marc Green,
Outrageous Conduct (New York: Morrow, 1988). The book is sensational, but well documented with
court records and financial reports.
1 4. The Hollywood Reporter, 2 1 June 1 985, pp. 1 , 1 6.
15. Variety, 1 July 1987, pp. 3, 19.
1 6. The Wall Street Journal, 22 October 1 985, p. 44; The Wall Street Journal, 5 November 1 985, p. 46.
17. The Wall Street Journal, 3 March 1987, p. 24; Variety, 4 March 1987, p. 26; Broadcasting, 16 March
1987, pp. 48-9; Fortune, 13 April 1987, pp. 57-9; The Hollywood Reporter, 21 June 1985, pp. 1,16.
1 8. The Wall Street Journal, 1 8 June 1 987, pp. 1 , 1 7.
1 9. The Wall Street Journal, 29 November 1 988, p. A1

20. The Wall Street Journal, 1 3 June 1 989, pp. B 1 , B6.
21 . The New York Times, 5 March 1 989, pp. A1 , A38; The Wall Street Journal, 6 March 1 989, pp. A1 ,
A5;
The New York Times, 6 March 1989, p. D12; The Wall Street Journal, 7 March 1989, pp. B1, B6, B7.
22. The New York Times, 1 1 May 1975, pp. 33-4; The Wall Street Journal, 1 June 1990, pp. A1, A6;
Variety, 30 April 1980, pp. 3, 50; Variety, 5 July 1989, p.1; Business Week, 20 March 1989, pp. 34-5;
The New York Times, 7 June 1989, pp. A1, D5; The Wall Street Journal, 7 June 1989, pp. A3, A22; The
New York Times, 12 June 1989, pp. D1, D3; Variety, 10 December 1986, pp. 1, 30; The Wall Street
Journal, 1 May 1990, p. B1; Variety, 4 November 1991, p. 1.
23. 1990 Securities and Exchange Form 10-K filed by Warner Communications, Inc., Fortune, 20 November
1989, pp. 164-6, 170, 174-5, 178, 182-3, 186, 190, 194, 198, 202, 206, 208, 210.
24. The Los Angeles Times, 2 1 December 1 992, p. A1 ; The Wall Street Journal, 23 June 1 995, p. B4.
25. The New York Times, 2 December 1 1 992, p. A1

26. Broadcasting & Cable, 5 May 1997, p. 68. The importance of vertical integration is discussed in the
concluding chapter of my book, Shared Pleasures (Madison: University of Wisconsin Press, 1992).
27. The annual editions of The International Motion Picture Almanac (New York: Quigley Publishing
Company) provide an up-to-date summary of the recent activities of the studio. For Time Warner post-
Ross until the AOL takeover see Benjamin M. Companie and Douglas Gomery, Who Owns the Media?
(Mahwah, NJ: Lawrence Erlbaum Associates, 2000), pp. 394-7.

18
Twentieth Century Fox
Rupert Murdoch, Fox's present owner, is the epitome of the global media conglomerate boss. It
seems as if the studfo under Murdoch has been with us forever. Yet from 1962, when Spyros
Skouras resigned, to Murdoch's takeover in 1985, no studio was less stable in its ownership and
leadership than Fox. Only when Australian-born (now US citizen) Murdoch took over was the
necessary leadership provided. Murdoch went on to test a new model of global media conglomer-
ation, beyond what Lew Wasserman had innovated.

Murdoch saved Fox and moved it into the elite of the twenty-first-century studio system. He
made the Fox studio a powerful and profitable industrial force, breaking new ground as he did so.
He used all the tools at his disposal, for example: horizontally taking over other businesses as
needed; ruthlessly maintaining power in all aspects of the film business through careful strategies.
No one else before him, for example, not even Lew Wasserman, was able to build a fourth tele-
vision network and marry it to a movie studio. Murdoch pioneered this studio-network alliance in
The Australian who rebuilt Twentieth Century-

Fox: Rupert Murdoch
TWENTIETH CENTURY FOX 253
1986 and today all studios, with the exception of Sony, have aped Murdoch's model. Murdoch
was truly a late twentieth-century media conglomerate pioneer.
But Murdoch's innovations cannot be the subject of historical analysis. What came before him
can. In the years after 1962, only a brief stay atop the studio system with Star Wars (1977) in the
late 1970s provided an exception to Fox's downward trajectory. Three leaders tried and failed in
the long run to stabilise Twentieth Century-Fox. Darryl F. Zanuck, the final tie to the studio's past,
had a hit with The Sound of Music in the 1 960s, while during the 1 970s Dennis Stanf ill begat Star
Wars. In the early 1980s oilman Marvin Davis failed after only four years. The historian cannot know
how Murdoch's ownership will finally pan out, so this chapter concentrates on pre-Murdoch Fox.
This chapter starts by analysing how Fox operated under its three leaders from 1963 to 1985,
how none of these could fashion a Wassermanesque media conglomerate, and how each in his
own way failed. The final section of this chapter is an economic analysis of contemporary events,
but it cannot place Murdoch in proper historical perspective; unanticipated changes in his strat-
egies await us.
Leader I: Zanuck Fails
As discussed in chapter 9, Spyros Skouras had by 1962 fostered a corporate mess at Fox. In that
year the sixty-year-old Darryl F. Zanuck returned to head his former company, assisted by his
summer of 1962 -
1
twenty-seven-year-old son, Richard. In the two months after Spyros Skouras'
resignation - the Zanucks temporarily shut down Fox's operations, fired 300 people, and ceased
green-lighting new film production. Cost reduction was a strategy understood by most Fox stock-
holders as the proper first step for an ailing corporation, of any type. On 25 July 1962 Darryl was
formally elected president and Richard was named executive vice president in charge of worldwide
production. By 1964 cost-cutting and selling assets - particularly selling recent colour fare to NBC
for Saturday Night at the Movies - enabled the company to report a small profit. It was television
that saved Fox. In 1963 Fox had no series on television; in 1964 it had five; the following year it
2
had ten.
Fox's financial statement for 1963 indicated net profits of about $9.1 million. This compared
with losses of $22.5 million in 1961, and $39.8 million in 1962. The profits, Zanuck said, did not
come from film production, but from television, film processing by the Deluxe Laboratories div-
ision, music publishing and oil investments. Then came The Sound of Music (1965).
The Sound of Music had been a 1950s Broadway hit, but it hardly seemed 1960s blockbuster
material. This was a time of civil rights marches, an escalating war in Vietnam and riots in virtually
every major city in the USA. The now familiar narrative followed a good-natured, flighty novitiate
(played by Julie Andrews), hired to care for the seven children of a militaristic, icy, widowed Aus-
trian captain (Christopher Plummer), who ultimately wins the hearts of the children - and the cap-
tain. And they all escape from the Nazis. Fox's marketing slogans cried: 'The Happiest Sound in All
the World.' Baby boom audiences embraced the film. Records were set for repeat attendance:
3
some people claimed they saw the film - then only available in theatres - more than 1 00 times!
254 |
The Zanucks sponsored The Sound of Music with great success, and it looked as if they had
saved Twentieth Century-Fox. In a mere three years they pushed corporate profits to over $15
million. In retrospect we now understand that without planning to do so, they had created a nas-
cent blockbuster. Indeed, while the 1960s are portrayed as a radical period, the distinctly unradi-
cal The Sound of Music would pass Gone with the Wind as the top box-office attraction of all
time. Darryl F. Zanuck seemed to be the dynamic CEO and corporate president who would con-
sign losses to the past and save the company he had helped found thirty years earlier. The Zanucks
even embraced television, as Lew Wasserman was doing across town. By 1965 - equally as import-
ant as the unexpected success of The Sound of Music - Fox had accelerated its television produc-
tion to some ten hours of prime time for the three major networks. Even the disastrous Cleopatra
was climbing towards the break-even point because of sales to television and unexpected success
overseas. Money also came from interests in foreign theatres, phonograph records, a film library,
and income from oil and gas recovered on Fox-owned property. Revenues in 1965 were derived
as follows: theatrical film rentals 63.9 per cent; television rentals of feature films 1 1 .4 per cent; TV
series 24.7 per cent. But the Zanucks did not come close to controlling enough stock to control
their own destiny. Fox's board - dominated by institutional investors - pushed to see profits now,
4
and then in the future.
But Darryl Zanuck was no Lew Wasserman, and after the 1965 film's enormous success,
he unwisely invested Fox's new millions in three highly unprofitable, big-budget musicals: Dr
Doolittle (1967), Star! (1968) and Hello, Dolly! (1969). Star!, in particular, proved Zanuck was out
of touch with a changing Hollywood. No one cared about the life of Gertrude Lawrence. In the
end Fox lost millions of dollars despite the millions pouring in for admissions to The Sound of
Music. In retrospect, the main problem was Zanuck's lack of experience in running an entire studio
operation - particularly the financial side, which he had always left to others (Joe Schenck and
Spyros Skouras). He had prospered when those two headed Fox, but when he went out on his own
as an independent producer, his films The Sun Also Rises (1957) and The Roots of Heaven (1958)
fared poorly at the box office. But he was a major stockholder in the company and, the non-studio
system types naively believed, the only realistic choice as leader. In the longer run, however, the
management techniques Zanuck senior had used so successfully during the 1930s and 1940s
did not work in the 1960s. The failure of Tora! Tora! Tora! (1970) was the final straw. In 1970
Twentieth Century-Fox lost a record $77 million. The company seemed on the verge of having to
5
declare bankruptcy.
The downfall of the Zanucks became the stuff of tabloids during the final months of 1 970 and
early months of 1971. In December 1970 the Fox board of directors forced the resignation of
Richard D. Zanuck. The hatchet man was his own father, Darryl, chairman of the board. Richard
and his mother, both significant Fox stockholders, mounted a proxy battle. They forced Darryl to
be kicked upstairs into a powerless board position, chairman emeritus. Sick of reading red ink, in
1971 the board brought in Dennis Stanfill as chairman of the board and Gordon Stulberg as pres-
ident. Zanuck left Fox in horrible shape, as Wasserman, Charles Bluhdorn and Steve Ross were all
by then assembling media conglomerates that made Zanuck's Fox look like a corporate creature
6
from the past.
Leader II: Dennis Stanfill
In April 1971 the Fox board appointed Dennis Stanfill, an Annapolis graduate, Rhodes scholar and
Wall Street financial up-and-comer, to head Twentieth Century-Fox. He stayed in New York and
appointed experienced Hollywood producer Gordon Stulberg as president to run the Westwood
studio. Through the early 1970s they righted Fox and in 1973 in a quiet move - hardly noticed by
the press - hired Alan Ladd, Jnr, thirty-six years old, to head creative affairs. The son of the well-
7
known actor was to figure out how Fox could appeal to the youth audience.
In 1971 Stanfill pushed for a major restructuring of Fox, modelled on what Lew Wasserman
was doing at Universal. Stanfill inherited MM*5*H(1970) and Pattern (1970), both of which did
well in theatres and washed away some of the red ink. Stanfill turned M*A*S*H into a hit tele-
vision series, which washed away more red ink. (It is estimated the TV series alone earned the
company, by the turn of the century, in excess of $1 billion.) Stanfill and Stulberg then green-
lighted The French Connection (1971), The Poseidon Adventure (1972) and The Towering Inferno
(1973). None proved to be as profitable as Jaws, but they did make Fox a respectable player in
the modern studio system then evolving. In 1974 Stanfill boasted of net earnings of $1 1 million.
8
Twentieth Century-Fox was back on a solid footing, and the board was pleased.
Sanfill looked to TV as Wasserman might have advised him. M*A*S*H was his cornerstone and
profit river. But there was little else. Alan Ladd, Jnr, would save Stanfill. In January 1976 a string of
Stulberg box-office failures led Sanfill to appoint Ladd as Stulberg's replacement. His low-key style
made him unlike most Hollywood producers. Like many of the new generation of studio execu-
tives, he had been an agent, and had long harboured the desire to produce. A Russian co-
production of a 1 940 Shirley Temple vehicle (the only one of her films to fail) The Blue Bird (1 976)
became another Stulberg-initiated fiasco. The George Cukor-directed feature starred Elizabeth
Taylor, Jane Fonda, Ava Gardner and Cicely Tyson in cameo roles and went way over budget. Stan-
fill and Ladd then gambled on The Omen (1976) and Mel Brooks' Silent Movie (1976). Both were
successful. After a losing streak, Fox was recovering its reputation as a viable studio. More import-
antly, Ladd was solidifying his position and his ability to attract top talent to Twentieth Century-
Fox. The board was pleased. Then came more Ladd hits, most notably The Silver Streak (1976).
Gene Wilder - who Ladd persuaded to come to Fox for an ongoing relationship - had begun
in 1974 with Young Frankenstein (which Wilder wrote and starred in) and The Adventures of
Sherlock Holmes's Smarter Brother (1975) (which he wrote, directed and starred in). With Wilder
in the lead, Jill Clayburgh for romantic support, The Silver Streak became Fox's 1976 Christmas
9
release. It cost $5.5 million and took in $50 million in worldwide rentals.
Then fate intervened. George Lucas, a 1967 graduate of the University of Southern California
Cinema Department, had made American Graffiti for Universal in 1973. Its budget of $900,000
was minuscule compared to the lofty $56 million in domestic rentals it grossed. Lucas, however,
2 56
I
could not convince Lew Wasserman to finance his next project, an $8.5 million homage to the Sat-
urday matinee serials he saw as a child. Star Wars struck a chord with Alan Ladd, Jnr, and he
immediately put it into production. Wasserman was at least partially right to be cautious - it cost
$10 million to make. It was well worth it. When Star Wars was released in 1977, it produced
unheard-of weekly grosses. Fox marketing executives, led by Ashley Boone, had followed a policy
of building a want-to-see movie, and it was released in limited engagements playing high-quality
70mm prints with the new Dolby stereo sound system. Rather than opening in 1,500 theatres at
once to get maximum grosses, Fox let the picture build through word-of-mouth. Endless lines in
front of theatres only gave the movie more of a cachet. It became an event. It didn't hurt that Time
magazine had featured a story on Star Wars or that the reviews were almost unanimously
favourable. Lucas and Ladd had shrewdly tapped into audiences of all ages - those who were too
young to remember the 1940s serials, as well as those who fondly recalled them. With a little-
known cast including Mark Hamill, Harrison Ford and Carrie Fisher, Star Wars relied on special
effects gimmickry developed by Lucas and a talented team of artists, resulting in a credit roster
longer than any in the history of movies to date. Twentieth Century-Fox saw its stock rise from a
low of $6 per share in June 1976 to nearly $27 a share after Star Wars' release. By the close of
1977 Star Wars had racked up revenues in excess of $300 million. Kenner Toys put out a hugely
successful line of Star Wars figures that would dominate the toy market for years to come. 10
After the success of Star Wars, Ladd asked for more freedom and money. Stanfill balked, and
Ladd left for Warners. In 1979 Sherry Lansing was made president of Twentieth Century-Fox. A
former actress, Lansing had been a production executive at Columbia where she was reportedly
responsible for developing such hits as The China Syndrome and Kramer vs. Kramer (both 1979).
By the time she settled in, there were few features ready for release for 1980. Luckily, one
holdover from the Ladd regime, Nine to Five, starring Jane Fonda, Lily Tomlin and introducing Dolly
Parton to the screen, became a huge hit. A $10 million budget brought in $100 million. The rest
of the release slate was filled with pick-ups, and to keep the pipeline full Stanfill looked for more
independent deals. Most successful of these many pick-ups was All That Jazz, co-financed and
released in Europe by Columbia Pictures, but distributed in the USA by Fox. The Bob Fosse-directed
$12 million semi-autobiographical drama with music drew in healthy, but not overwhelming
11
domestic rentals.
The only undisputed box-office champion of 1980 was Fox's sequel to Star Wars, The Empire
Strikes Back. Although the final deal for The Empire Strikes Back was never revealed to the public,
industry sources placed Fox's distribution percentage at the higher than usual 35 per cent distri-
bution fee or about $60 million. In addition, in that pre-home-video era, the original movie was
reissued every year until 1980. So much cash was pouring in that Stanfill's major problem became
fending off uninvited takeover threats. To see off an unfriendly takeover, Stanfill announced a plan
to take Fox private. Fearing the worst, Stanfill battened down for a battle. But on the horizon, a
white knight appeared. Marvin Davis, an oil billionaire from Denver, would soon be the first indi-
12
vidual since Howard Hughes to own a major Hollywood studio.
Leader III: Marvin Davis

On 8 June 1981 Davis purchased Fox for $722 million and took it private. Stanfill seemed to have
found his white knight. The new owner of Fox had made his money in oil investments. Marvin
Davis was born on 28 August 1925 in Newark, New Jersey. His father became wealthy manufac-
turing women's dresses. In his teens he was a partner in the family's Jay-Day Dress Company.
(Although there was a gap of several generations, Marvin Davis would eventually own the motion
picture company founded by another garment manufacturer, William Fox.) Davis' father also
invested in oil wells through a friend. Marvin spent the summers of his youth learning the oil busi-
ness and later began to explore the Denver Basin for his own wells. After several years of bad luck,
he struck it rich in the late 1960s with finds in the Wyoming Powder River Basin. When in the
1970s the cost of crude oil soared, Davis became one of the richest men in the oil industry. During
the first six months of 1980, the Davis Oil Company was the seventeenth most active in the
country. Davis' investments in oil wells, real estate and business holdings brought him billionaire
13
status.
The 6-foot 4-inch, 300-pound Davis developed an appetite for a good investment that might
be fun - to paraphrase Citizen Kane about running a newspaper. Davis secretly allied with the fin-
ancier Marc Rich to offer to buy all of Fox's stock at $60 a share, well above the $53 market price.
Stanfill and the board of directors embraced the offer. Davis appeared to be exactly the rescuer
Stanfill needed to keep Fox out of hostile hands that might loot the company and sell off its assets
for a quick profit. As well, Stanfill stood to make an estimated $6.67 million profit on the options
and stock he owned. And the stockholders were ready to cash-out since the stock had appreciated
by 709 per cent since Stanfill took over in 1971 . On 8 June 1981 a formal merger agreement was
presented to stockholders for approval. Using techniques for financing acquired in his oil business,
Davis gathered the $722 million. There were celebrations at Fox when the deal was approved. It
looked like the company was safe. But when Davis appeared at his first Fox executive meeting with
Stanfill two weeks later - on 23 June 1981 - the new owner's intentions became clearer. The
company was now his and he would not be the absentee landlord Stanfill had anticipated. On 29
June 1981 Stanfill handed Davis his resignation. Davis had his own ideas about the movie business
and considered running a studio to be like running an oil company: 'They're all creative people,
and they're all dealing with the unknown. Failure is the rule and success comes rarely.' But he also
acknowledged differences. 'This is the first time in my life I've ever had to go out for public accept-
ance. If I get a dry hole in the oil business, I lick my wounds and go home, and that's the end of
14
it.'
Davis saw the purchase as an entree to glamour - and a real estate deal. Tucked within the
framework of the Fox Film company were a bevy of lucrative assets, including some of the choic-
est real estate in the world, most of which was carried on the Fox books at well below what the
assets might fetch in the 1981 marketplace. Wall Street understood. 'If you took all the assets of
this company and sold them off piecemeal', stated Anthony Hoffman, a securities analyst at A. G.
Becker, 'you'd probably get a good deal more money than Davis is preparing to pay'. The offer of
258
I
$722 million seemed quite reasonable. Fox listed total assets in 1980 at $758 million, though Wall
Street estimated the true market value of the assets at $1 .26 billion, principally in real estate hold-
15
ings.
In the studio system, Davis was an amateur.' This was not the oil business, and he relied on
Sherry Lansing. Porky's (1981) was a hit, with a domestic gross of over $100 million. Add to that
moderate-grossing pick-ups like Fort Apache, the Bronx and Mel Brooks' History of the World Parti
(both 1981), and Fox seemed stable. But Lansing's slate of 1982 releases was downright depressing.
The deals might have looked good on paper but somehow when they got to the screen most of
these films met with scathing critical reviews and dismal box office. Both Author! Author!, starring
Al Pacino and Dyan Cannon, and Kiss Me Goodbye, a romantic comedy starring Academy Award-
winner Sally Field with James Caan and Jeff Bridges, proved to be box-office busts. The controver-
sial Making Love, about a doctor who leaves his wife for another man, was another 1982 flop. Even
independent producers who had deals with Fox were experiencing bad luck. The Frank Yablans-pro-
duced Monsignor, starring Christopher Reeve and Genevieve Bujold, and based on a best-selling
16
novel, never even made back its production costs. And so on. The filmic oil wells had run dry.
Davis aggressively positioned his company to take advantage of recent expansions in pay-cable
and home video. With approximately 1,500 features in Fox's library, and thousands of episodes of
television series, Fox was in a perfect position to benefit from the video revolution. Referring to the
television rights, Davis boasted: 'We're sitting here with a library we undervalued by 50%. Coun-
tries you would not think of need product. We just sold Star Wars to Australia for $2 million, . . .
and M*A*S*H is unbelievable.' Even though Fox lost $16.9 million in 1982, a good deal of earn-
ings had been masked by funds used to service the debt load Davis needed to acquire the
17
company. Davis still felt Fox was the 'steal of the year'.
In December 1982, after two years of disappointing results, Davis replaced Sherry Lansing with
Joe Wizan, a one-time agent and long-time producer. Wizan's tenure atop Fox production would
make Lansing's look like a success story. His Two of a Kind (1983), starring John Travolta and Olivia
Newton-John, bombed and began a streak of losers. Only Porky's II - The Next Day (1 983) made
money. Then George Lucas came to the rescue. It had been three years since a Fox release had
scored a direct bulls-eye. Now Return of the Jedi (1983), costing $32.5 million, became another
smash. Lucas for the third time brought Fox back to a high-profile position in the studio system.
With its astronomical domestic rentals, Return of the Jedi became the third-highest-grossing
motion picture ever. Twentieth Century-Fox now released three of the top six highest-grossing
18
films of all time - Stars Wars and its two sequels.
In 1983 Davis' investment looked brilliant. Fox's earnings in 1983 soared to $776.5 million, and
Davis now fancied himself as the next Lew Wasserman. He was not. The year 1984 would prove
that. Without Lucas and the cash infusion of M*A*S*H, Davis - determined to develop and finance
more movies in-house to partake more substantially of the hits - proved that all he could do was
let costs escalate. The prime example was Rhinestone (1984), budgeted at $18 million. The
Sylvester Stallone and Dolly Parton vehicle cost $28 million - almost half of which went to Dolly
and Sly - and domestic rentals barely topped $ 1 million. It was by and large downhill from there.
So, for example, Johnny Dangerously (1 984), a spoof of gangster movies starring Michael Keaton,
cost $9 million and grossed $9 million domestically. With losing pictures vastly outnumbering win-
ners, it was time for another executive change. Wizan was out. The Los Angeles Times reported a
studio observer saying that 'The word was out on the street that after Labor Day [1984] ... I guess
Davis had just had it.' Davis hired Lawrence Gordon, an independent producer who had been
responsible for Eddie Murphy's successful debut feature, 48 Hours. He took over the production
19
reins in August 1984.
Davis did find a talented executive - Barry Diller, who had been a great success at Paramount,
then clashed with Martin Davis (see chapter 16) and wanted out. Fox's Davis reportedly offered
Diller a $3 million annual salary as well as a substantial number of shares he could buy at well
below the stock market price in Fox, worth upwards of $50 million. Diller snapped it up and was
20
revitalising Fox when Davis decided to cash-out in 1985.
Leader IV: Rupert Murdoch

In early 1985, Marvin Davis sold the 50 per cent ownership to the Australian-born international
newspaper magnate, Rupert Murdoch for $162.5 million plus an $88 million advance to the Davis
family holding company. Six months later, Murdoch agreed to pay $325 million more for the other
half. Murdoch, with Barry Diller's help, saw Twentieth Century Fox (they jettisoned the hyphen) as
more than just a producer of motion pictures and television entertainment. They wanted to out-
Wasserman the master. After purchasing Davis' interests, Murdoch spent an additional $1.6 bil-
lion to acquire the Metromedia group of television stations. With five strong major-city stations as
a core group, Fox would attract other affiliates to its proposed fourth broadcast TV network. It was
combined under the new Fox, Inc. banner as Fox Broadcasting - all under Murdoch's News Cor-
poration. 'This is a long-term investment,' Barry Diller reported. 'We're not going to be jumping
out of any windows if we don't show a profit in six months.' Certainly, with losses projected at
$50 million for the first year of operation, Murdoch and Diller meant business. Fortunately, the
studio turned out two successful movies: Jewel of the Nile (1985) and Aliens (1986), a sequel to
Alien (1979). By April 1987 Murdoch and Diller had the Fox studio off the critical list and rejoining
21
the studio system as a major player.
Rupert Murdoch, now well into his seventies, is still running Fox. A final assessment of his time
at Fox cannot yet be made - we are still too close to events, and changes in strategy may await us.
Only a couple of things can be said with certainty. The first one is that Murdoch - who, like Sumner
Redstone of Viacom, owns enough stock to run his company regardless of what his other stock-
holders think - plans to hand over News Corporation eventually to his children, Elizabeth and
Lachlan, who he began training in the 1990s. Wall Street expects a smooth transition. The second
thing is that, in the words of a Wall Street analyst, '[Murdoch's] a one man band, and he's not pas-
sive, collaborative.' Deal after deal was reported in which Murdoch himself was always there for
22
the final negotiations.
260
I
Murdoch, we know, continually sought synergies. A late 1990s project was to fashion the hit
Fox TV show, The X-Files, into a successful feature film. Here the Fox worldwide pipeline could
work its magic. There had been very few successful precedents for this sort of thing, whereby an
ongoing TV show was expanded into a movie. Certainly the success of Paramount's Star Trek
movies was a positive sign. But there were a few built-in problems with The X-Files. One was the
creator of the show, Chris Carter, who believed his TV series represented not just good storytelling,
but high art. Carter intended to write the script and have one of his key TV directors shoot the
movie. The editing, scoring and other facets of the movie would also be done by the show's exist-
ing TV staff. The Fox movie executives bit their lips and kept quiet because they knew Carter rep-
resented an important franchise to Fox TV. The movie turned out to be a hit when released in
1998, and the likelihood is that Fox will try to milk it as Paramount has done with Star Trek for
23
many years.
Murdoch also picked up independent films, and attempted to turn them into hits. Returns
could be considerable. The Wall Street Journal reported in 1 998 that The Brothers McMullen
(1 995), made for $300,000, earned $10 million at the box office in the United States. But it would
never have had this success without Twentieth Century Fox's Searchlight division picking it up and
distributing it. More typical were high-side, lower budget films like Fox's There's Something about
24
Mary (1998), which cost $23 million and grossed nearly $200 million by the end of 1998.
As the twenty-first century began, Murdoch was still running his billion-dollar corporation as
rf it were a small business where he was in charge of every major decision. F. Scott Fitzgerald would
have loved Murdoch's absorbent mind. He has continued to expand, buying satellite DirecTV in
2004. He is the quintessential media entrepreneur, but only by buying in. Murdoch's empire may
25
be global, but his methods of operation are personal and private.
In 2003 he told Variety, 'I've never felt better in my life. And I'm not going anywhere.' While
the subject of succession is a non-issue as far as his public utterances are concerned, Murdoch is
effusive in his respect for the management skills of Peter Chernin. But then continuity of manage-
ment has not been a problem at Murdoch's Fox. Murdoch shows no signs of slowing down. He is
still focused on the bottom line, where it counts: in 2003 the Fox Film studio passed $1 billion in
annual revenues for the first time. With the 'whole equation of pictures' in his head, Murdoch was
the new Lew Wasserman. 26
Notes
1 . My main source for this section is the Academy of Motion Pictures Arts and Sciences, Margaret Herridc
Library, Dam/1 F. Zanudc Collection. This spans the years 1937-71 and encompasses half a linear foot.
The collection contains six general files: a 1971 appointment book; a cumulative file of contracts
between Twentieth Century-Fox and Zanudc from the early 1960s, with photostats of contract
summaries from 1949 to 1964.

2. The New York Times, 12 February 1964, p. 51; The New York Times, 5 July 1964, p. 33.
3. The New York Times, 21 February 1964, p. 43.
4. The Journal of the Screen Producers Guild, September 1 966, pp. 11-12.
. . . .
5. The fall of the Zanucks is detailed in Stephen M. Silverman, The Fox that Got Away: The Last Days of the
Zanuck Dynasty at Twentieth Century Fox (Seacaucus, NJ: Lyle, Stuart, 1988). See also The New York
Times, 14 December 1981, p. D1; Variety, 1-7 February 1989, p. 34. George F. Custen, Twentieth
Century Fox (New York: Basic Books, 1 997), adds some extra details. See also Variety, 3 December 969, 1
p. 1 ; The Los Angeles Times, 1 7 March 1 971 , p. 1
6. Variety, 5 August 1 970, p. 3; The Magazine of Wall Street, 3 January 1 972, pp. 34-5; Silverman (1 988),
pp. 170-80. This book dramatises these final days, but does offer a wealth of detail.
7. The Wall Street Journal, 22 April 1971, p. 22.
8. Aubrey Soloman, Twentieth Century-Fox (Metuchen, NJ: The Scarecrow Press, 1988), pp. 176-7.
9. Business Week, 23 June 1 973, pp. 116-18.
10. Soloman (1988), pp. 197-8.
11. The New York Times, 1 4 December 1 98 1 , p. D1
1 2 . Soloman ( 1 988), pp. 1 99-200.
1 3. Variety, 1 August 1 977, pp. 3, 30; Business Week, 9 March 1 981 , p. 29; Facts on File World News
Digest, 9 May 1981, p. 317.
1 4. Business Week, 1 9 April 1 982, p. 93.
15. The New York Times, 24 February 1 98 1 , p. D1

16. Soloman (1988), p. 196.
17. Business Week, 19 April 1982, p. 93.
1 8. Soloman (1 988), pp. 1 98-9.

19. The Los Angeles Times, 1 1 September 1984, part IV, p. 93.
20. Business Week, 19 April 1982, p. 93; The Los Angeles Times, 19 April 1987, p. B1; George Mair, The
Barry Diller Story (New York: The John Wiley & Sons, Inc., 1 997), pp. 96- 1 1
21. The Los Angeles Times, 19 April 1987, p. B1; Mair (1997), pp. 114-17.
22. Variety, 21-7 July 1997, pp. 1, 50; Variety, 28 July-3 August 1997, pp. 1,14; Variety, 26 May-1 June
1997, pp. 1, 92; The Wall Street Journal, 5 May 1998, pp. B1, B4; Variety, 25-31 March 1999, pp. 1,
14; The Wall Street Journal, 23 February 1998, pp. B1, B7.
23. Variety, 28 July-3 August 1 997, p. 4; Film Journal International, October 1 997, p. 8.
24. The Wall Street Journal, 1 5 May 1 998, p. W5; The Wall Street Journal, 1 1 November 1 998,
pp. B1, B4. For a snapshot of the Fox empire in 2000, see Benjamin M. Compaine and Douglas Gomery,
Who Owns the Media? (Mahwah, NJ: Lawrence Erlbaum Associates, Inc., 2000), pp. 359-436.
25. Variety, 22-28 March 1999, p. 4; Variety, 14-20 April 1997, p. 106; Variety, 8-14 September 1997,
p. 8; Variety, 1 1-17 August 2003, p. 46.
26. Variety, 11-17 August 2003, pp. 5, 8.

19
Disney
In 1953 Walt Disney and his brother Roy split from RKO and formed their own international distri-
bution network. This created the basis for the rise of the Walt Disney Corporation to major studio
status. What strategies did the Disneys use to reach that status? Rather than directly take on the
powerful majors of the day, they diversified. Like Lew Wasserman, then also an outsider, Walt and
Roy Disney turned to television and a theme park. By reinvesting the profits from these ventures in
the company, they turned Disney into a diversified media conglomerate and then revitalised
Disney's film-making to enter the studio system. Wasserman had carefully calculated his entry into
the system; Walt and Roy Disney did it by the seat of their pants because they were desperate.
By the time of Walt's death in 1 966, and Roy's in 1 971 ,
Disney was a solid member of the Hol-
lywood studio system. But with their passing, the family enterprise hit the skids. No executive knew
what to do but ask: what would Walt and Roy have done? Through the 1970s, Disney remained
part of the studio system - but barely. By that decade's end, Disney was really just a theme park
operator. They went on a search for a Lew Wasserman type. In 1984 the stockholders found him
in the shape of Michael Eisner, in whose era we are still living. This chapter has four parts: the
restructuring of Disney, the nearly bankrupting of it, a rescue by Eisner and then another decline
as Eisner barely held onto power. Analysis of Eisner's time at the top requires more historical per-
spective, so the emphasis is on the pre-Eisner period. A coda summarises as best as I can the first
twenty years of the Eisner era.
Disney Becomes a Major

Once Walt Disney created his own distribution arm, Buena Vista, in 1953, separate from RKO (see
chapter 1 1), the company prospered. In 1965 the Disney Corporation summarised its past dozen
years of accomplishments. We can see how far Walt and Roy Disney had taken their company.
Mary Poppins (1964) was a box-office success, and Disney as a film-maker and distributor had
become a core member of the Hollywood studio system. Disneyland was moving into its second
profitable decade, with a second park for Florida in the early planning stages. One of the import-
ant elements in the company's continuing success was its closely knit management team: Roy 0.
Disney, president and chairman of the board, was on top of all the company's activities, working
closely with creative brother Walt. The company was in fine financial condition, having exceeded
$100 million in revenues. Wall Street admired its corporate stability; Disney's executives measured
their tenure in decades. Below Roy and Walt, the top three executives were Donn Tatum, VP for
DISNEY 263
administration, who was entering his second decade with the company, and Card Walker, VP in
charge of marketing, in his fourth decade. Disney was considered to be a model of a diverse, well-
managed member of the studio system.

1
Walt was always an underrated maker of profitable movies. While observers often focus on
Snow White as the number-one hit of 1939 - and the biggest-grossing movie ever, until it was
eclipsed by Gone with the Wind - they often forget that in 1941 Pinocchio was also number one.
Disney had a consistent run of hits in the early 1950s: Cinderella (1949), Alice in Wonderland
(1951), Peter Pan (1953) and the ground-breaking, non-animated, special-effects pioneer, 20,000
Leagues Under the Sea (1954). It was no wonder that Walt started Buena Vista so that he could
distribute features through a Disney-owned company - rather than through the dying RKO. Disney
had a remarkable thirteen films in the top-five grossers from 1959 to 1969. Sleeping Beauty as
number two in 1959 might not surprise an industry observer, but The Shaggy Dog finished at
number three in domestic grosses in 1959. In 1960 Swiss Family Robinson ranked first in domes-
tic grosses, while The Absent-Minded Professor (1 961 ), The Sword and the Stone (1 963), That Darn
Cat (1965) and The Love Bug (1968) all finished in the top five of their respective year of release.
2
The big hit was Mary Poppins - number one domestic grosser in 1964.
To fill its Buena Vista distribution channel, Disney began to commission and release non-
animated films. Indeed, the first effort for the new Buena Vista was a documentary, The Living
Desert (1953) - made for $300,000 and quickly grossing more than $1 million. Disney was on its
way to becoming a major studio now that it had an international distribution arm. 'A twenty-hour-
a-dayjob,' Walt Disney recalled in 1953.
1 tried to keep my wife from knowing how hard I was working - so we'd go out to dinner, then we'd
casually stop by the shop and I'd turn the clock to eleven while she took a quick nap on the couch. At
2 or 3 in the morning I'd wake her, tell her it was 1 1 o'clock, and we'd go home.
He surely was a workaholic in the manner of Lew Wasserman. It was this dedication and labour
that made Mickey Mouse into an international star - known as Michel Snuffs in France, Topoiinn
in Italy, Miki Kuchi in Japan and Miguel Ratoncito in Spain. Walt Disney understood the star system.
'There'd be no beautiful studio like this without him,' said Walt, his eyes gazing at the 51 acres
that made up the lavish Disney studio in Burbank. 'I owe it all to Mickey and I'm plenty grateful.'
But by the middle 1950s, Mickey's stardom was fading and new features, starting with cheap
3
documentaries, were making real profits.
As Walt and Roy crafted Buena Vista, they reasoned that they would need more than a film
studio as TV swept the USA. So they branched out, and simultaneously entered television produc-
tion and the theme park business. The television series began in October 1954, and Disneyland
opened in July 1955. His television show was divided into the four divisions that defined the park
- Fantasyland, Adventureland, Frontierland and Tomorrowland. He was synergising TV production,

4
film-making and the theme park business. Each division advertised and popularised the other.
264 |
•
To go into TV and theme parks, the company needed a major infusion of capital. Walt Disney
therefore went to the leaders of the two major TV networks in 1953 with his ideas - first David
Sarnoff at NBC and then William Paley at CBS. Both turned him down cold. ABC's Leonard Gold-
enson was smarter and more desperate. He had taken the opposite tack a year earlier, when he
had asked the major studios of 1952 to make programmes for and with ABC-TV. He too was
rejected. According to Goldenson's autobiography, Nick Schenck of Loew's (see chapter 8) turned
to Goldenson as he entered the meeting room and snarled, 'You're a traitor to the motion picture
business!' Goldenson, shocked, listened to Schenck's tirade. 'Obviously, you're going to go after
writers, producers and directors that make movies and try to get them into television,' raged
Schenck. 'It's going to increase our costs, and you'll be competing with movie theaters for the audi-
ence's time. You'll drive us out of business!' Goldenson replied: 'Nick, if I were to tell you today
that I could get a trailer for MGM's next Clark Gable picture . . . into virtually every home in
this country, what would you give?' 'I'd give a fortune,' returned Schenck. 'I rest my case,' said
Goldenson. Still Schenck remained unconvinced, an attitude shared by his peers.
In 1953, when Walt Disney came calling, Goldenson was desperate to get Hollywood involved
in television. A television station, he believed, was like a theatre with audiences multiplied by sev-
eral thousand. If you gave the audience a good show, they'd watch it. Goldenson knew something
about good shows. During his years as head of Paramount's theatres, he had seen practically every
movie released in the country. So when Walt Disney told him he had hocked his life insurance to
pay for a scale model of a pipe dream called Disneyland - both a TV show and a theme park -
Goldenson was intrigued. Disney thought that building the park would cost a few million dollars,
and when asked directly, 'How much do you think you'll need?', Goldenson remembered Walt
Disney shot back, 'Four, maybe five million, tops.' 'Not nearly enough,' said Goldenson. 'You'll
have to staff up, train people, and operate for a while at a loss. I'd say you need more like $15 mil-
lion.' Goldenson - as he related in his autobiography - convinced his board of directors to back
Disney. In return, ABC would get 35 per cent of Disneyland, but 100 per cent of the food conces-
sions for ten years - a gold mine, even if the park never turned a profit. Far more importantly, he
also got a commitment from Disney to produce an hour of weekly TV programming. 5

Goldenson and the Disney brothers lucked out. In 1955, along came Davy Crockett, King of
the Wild Frontier (1955), which began as a three-part Frontierland episode on the Disneyland tele-
vision show. As Walt Disney would later recall:
We had no idea what was going to happen to [Davy] Crockett. Why, by the time the first show finally
got on the air, we were already shooting the third one and calmly killing Davy off at the Alamo. It
became one of the biggest overnight hits in TV history, and there we were with just three films and a
6
dead hero.
Wanting to milk the sudden success of TV's Davy Crockett, the Disneys decided to piece together
the three episodes into a feature-length theatrical film, complete with a catchy theme song that
DISNEY 265
studio composer George Bruns had written for the television show. The 'Ballad of Davy Crockett',
as the song was known, became a hit in its own right, occupying the top spot on the hit parade
for thirteen weeks and selling 10 million records. Davy Crockett's popularity spawned a merchan-
dising phenomenon: in particular, young baby boomers bought hundreds of thousands of coon-
skin caps and put millions of dollars into the Disney corporate bank account. The film, Davy
Crockett, King of the Wild Frontier, strategically released at the beginning of summer 1955 so as
to get the widest audience of school-age children, earned a profit of $2.5 million and inspired a
successful sequel, Davy Crockett and the River Pirates (1956). Other Disney releases cashing in on
the theme of the American past were The Great Locomotive Chase (1956), set during the Civil War,
Westward Ho the Wagons! (1956), a classic Western, Old Yeller (1957), depicting the American
West, a boy and his dog, and Johnny Tremain (1957), exploring a boy's understanding of the
American Revolution. The most lucrative of these was Old Yeller, a sensitive and realistic retelling
of Fred Gipson's classic story of two boys coming to terms with the death of their beloved dog
after it contracts rabies. The film grossed $8 million in domestic showings alone. As RKO was going
7
out of business, Disney was replacing it as a core member of the studio system.
The Disney television show went on the air on Wednesday nights on ABC beginning in Octo-
ber 1954; it moved to Sunday nights in 1960, and would remain a Sunday night fixture for more
than two decades. ABC-TV had its first top-ten ratings hit, seeing the Disney show finish sixth over-
all in the ratings for the television season that ran from September 1954 through May 1955.
Thereafter, the Disney show rarely fell out of the top ten. It finished fourth during 1955-6, and
thirteenth during 1956-7. This successful television series kindled interest in the Disneyland theme
park, which opened on 17 July 1955 and was an instant success. In short, the fundamental nature
of the studio system changed that hot July day as Disney and ABC linked film-making, TV produc-
tion and the amusement park business. Lew Wasserman would do this more systematically a half-
dozen years later, but the Disneys and Goldenson must be given their proper credit as the pioneers,
even if that is not what they had in mind as their short-run goal. On 24 December 1954 Time had
8
Walt Disney on its cover as Father Goose.
To make full use of the Buena Vista distribution pipeline, the Disneys began to re-release its
backlog of animated features - their costs now fully paid for - in seven-year intervals to new gen-
erations of children. Other studio films might be shown on Saturday Night at the Movies, but
Disney feature-length animation classics, such as Snow White, could only be seen during the hol-
idays in theatres. And the profits were spectacular. For example, Snow White and the Seven Dwarfs
was re-released in 1958 and 1967, and gathered nearly $50 million in pure profit from worldwide
release. By the end of the 1950s, Disney was ready to make big-budget live features and compete
head on with the other members of the studio system. Released on 19 March 1959, the comedy
The Shaggy Dog told the ludicrous story of a boy who turns into a large, fuzzy sheepdog after
being placed under a magical spell and, with the help of his little brother, solves an important mys-
tery while in his new guise. The film, which was so modestly budgeted that it was released in black
and white, raked in over $8 million at the box office and catapulted Fred MacMurray, who played
266
I
the role of the boy's father - a dog-hating mailman - to Disney stardom, a decade after he had
been a young leading man for Paramount. The Shaggy Dog proved to the Disney brothers that
they were capable of making comedies equal at the box office to anything Paramount or Warners
was releasing. However, two Disney dramas, Darby O'Gill and the Little People (1959) and Third
Man on the Mountain (1959), which were produced at greater expense, both proved disappoint-
9
ing at the box office.
The Disneys intensified their commitment to television production in the mid-1950s. While the
Disneyland Show continued to showcase Disney's theme park, promote company movie releases,
and keep alive Disney's cartoon characters in circulation for another generation, the Disney broth-
ers embarked on other television efforts. On the afternoon of 3 October 1955, The Mickey Mouse
Club reached the air on ABC. This show, which depended on the recognition and popularity of
Disney's favourite animated character, represented a new concept in television programming: it
was a show designed exclusively for children. However, Disney cautioned his staff:
We're not going to talk down to the kids. . . . Let's aim for the twelve year old. The younger ones will
watch because they'll want to see what their older brothers and sisters are looking at. And if the show
10
is good enough, the teenagers will be interested, and adults, too.
He was right. The Mickey Mouse Club turned out to be a variety show for youngsters, and it
included cartoons, singing and dancing, newsreels about children's activities, informational material
of use to children, and serials of children's books. Most important, the show featured a group of
youngsters dubbed 'The Mouseketeers', who wore mouse-ear caps, introduced the show by
singing its a theme song that was soon to become well known, and participated in various seg-
ments. Disney instructed his producer Bill Walsh to avoid child actors for the show but instead
to seek normal, unassuming, spirited youngsters. He did, and almost overnight children all over
the USA were emulating the Mouseketeers by wearing mouse-ears and chanting 'M-l-C-K-E-Y
M-O-U-S-E'. One of the Mouseketeers, Italian-American Annette Funicello, went on to bigger
things. The daughter of a gas station attendant, she was discovered in a children's dance class and
went on to become a major TV and movie star - receiving as many as 6,000 fan letters a month.
The Mickey Mouse Club occupied ABC's weekday 5pm slot, following American Bandstand,
for three years, and at the peak of its popularity reached 75 per cent of the nation's children. Spon-
sors flocked to ABC to pay for the right to have this select audience learn jingles to repeat to their
11
parents.
Then came 20,000 Leagues Under the Sea - a true hit. Walt Disney was intrigued by Jules
Verne's classic science-fiction tale of the great submarine of tomorrow, and - for once - Roy Disney
shared his brother's enthusiasm for a daring project. The brothers knew from the outset that pro-
duction costs - which included construction of a submarine set, underwater filming and novel
special effects - would be expensive. Walt first predicted that the film would cost $3 million, but
costs steadily mounted. The tank in which underwater sequences were shot, which measured 60
DISNEY 267
by 125 feet with a depth of 3 to 18 feet, cost $300,000; and the Nautilus sets cost another
$250,000. For the film's climactic scene - a battle between a giant squid and the submariners -
special effects technicians had to co-ordinate wind machines and dump tanks with a water cannon
in the massive tank built on Disney's Stage 3 - costing another $200,000. In the end, 20,000
Leagues Under the Sea cost $4.5 million. Wanting to inspire as many people as possible to see the
film, the Disneys devoted an entire Disneyland TV episode to promoting it, and audiences
responded favourably when the film was released on 23 December 1954. The film was also the
inspiration for a Disneyland attraction. On 14 June 1959 the Submarine Voyage was unveiled in
Fantasyland, thereby giving visitors to the park the opportunity to board a submarine and explore
12
lost undersea worlds.
From the TV and the theme park businesses, the new Disney studio media conglomerate
experienced a boom in profits, cresting at $12 million in 1966 (on a gross of $1 10 million). Wall
Street valued the theme park plus the TV and film studio at $100 million, and suddenly a minor
studio had become a major. We might think of the 1930s as the initial Golden Age for Disney
animation, but for making money a true Golden Age did not begin until the building of Disney-
land and the commencement of the Disney TV series. During the heady days of the 1960s, the Dis-
neys moved from a simple niche movie-maker to a corporate studio giant. Disney had successfully
transformed itself from a minor player dependent on RKO into a core Hollywood studio. 13
The Disneys did not abandon making feature-length animated features. Lady and the Tramp,
released on 16 June 1955, was the first animated feature to be shot in CinemaScope. Adding con-
siderably to the film's $4 million cost, this widescreen technique allowed for filming greater back-
ground details and interaction among characters. Although critics were not taken by Disney's
romance, audiences warmed to the love story of a refined cocker spaniel from an exclusive part of
town and a worldly mongrel from the wrong side of the tracks. In particular, the film's songs, among
them 'He's a Tramp', sung by Peggy Lee, helped to make Lady and the Tramp a bona fide hit.
Inspired by the audience response to Lady and the Tramp, Disney set out to make an animated fea-
ture that he hoped would mark the pinnacle of his career. His credo for the production of Sleeping
Beauty (1959) was to spare no expense in making it perfect. All told, the feature cost $6 million
(one-third more than Lady and the Tramp), making it the most expensive animated film ever made
14
to that point in studio system history.
The 1960s saw the emergence of a stable of Disney regulars whose popularity was designed
to keep audiences attending film after film. Fred MacMurray, who had demonstrated his procliv-
ity for comedy as the father in The Shaggy Dog, helped the Disney studio to establish its identity
as a producer of live-action comedies with his well-timed performances in The Absent-Minded
Professor and its sequel, Son of Flubber (1 963), as well as Bon Voyage (1 962) and Follow Me, Boys!
(1966). Tommy Kirk and Kevin Corcoran, MacMurray's on-screen sons in The Shaggy Dog, both
appeared in subsequent Disney films. Kirk played the lead role in the comedy The Misadventures
of Merlin Jones (1964) and its sequel, The Monkey's Uncle (1965), both of which also featured
former Mouseketeer Annette Funicello as Kirk's love interest; he also appeared in Swiss Family
268 |
Robinson (1960). Kevin Corcoran, another Swiss Family Robinson alumnus, also secured the lead
role in Toby Tyler (1 960) and in the same year played the orphan boy Jimmy in Pollyanna. It was as
if Disney had a stock company.
Pollyanna showcased the extensive talents of British actress Hayley Mills, the daughter of actor
John Mills, who starred in the Disney feature Swiss Family Robinson in the same year. Then came
true fame and stardom with The Parent Trap (1961), In Search of the Castaways (1962), Summer
Magic (1963), The Moon-Spinners (1964)4 and That Darn Cat. The last of these, released in 1965,
grossed a $9.5 million, a fitting ending to her sizeable contribution to the Disney studio during its
most profitable decade to date.

Released in August 1964, Mary Poppins became Disney's greatest cinematic box-office suc-
cess, far surpassing Snow White. The Disneys now had a reliable in-house money-making director,
Robert Stevenson - who had made The Absent-Minded Professor and In Search of the Castaways
- and he would make a hit from Mary Poppins. The Disneys, who understood how important the
lead would be, rejected Bette Davis and Mary Martin, and signed Julie Andrews (who had failed to
gain the film role to the Broadway stage hit which made her a household name - My Fair Lady).
TV star Dick Van Dyke played the chimney sweep Bert. Mary Poppins premiered on 27 August
1964, at Grauman's Chinese Theater. The Disneys had a hit of monumental proportions: the film
15
took in more than $75 million worldwide, making it a nascent blockbuster.
To the Disney brothers, they had finally made it. They had their follow-up to Snow White -
finally. They had built a studio system empire. But at the peak of success, Walt, who was working
on his second park, died on 1 5 December 1966 aged sixty-five. A heavy smoker all his life, Disney
succumbed to an acute circulatory collapse a month after he underwent surgery for lung cancer.
Roy Disney took the helm as chief executive officer and vowed to carry out his brother's plans. In
his words, 'It's strictly a team effort now. We're trying to be as smart collectively as Walt was indi-
vidually.' Several films bearing Walt Disney's name as producer or executive producer were released
in 1967, including The Jungle Book, The Adventures of Bullwhip Griffin, The Gnome Mobile and
6
The Happiest Millionaire.^
After Walt
Walt Disney left his brother with a major corporate hole - there was no longer a visionary pitchman.
But Walt's corporate strategies were in place. While many movie studio executives immediately
rejected television as a threat to their livelihood, Disney had a different credo: 'I thought we movie-
makers ought to get into TV ourselves and make it work for us.' He left Roy with that plan centred
on Disneyland as the ultimate vacation destination; his films were must-sees for a baby boom gen-
eration. These three assets - TV, film and theme parks - offered the first real example of interlock-
ing synergies in Hollywood. But the beloved Uncle Walt was gone. The studio media conglomerate
17
had been built, but could Roy and his assistants maintain its place in the Hollywood studio system?
Roy followed the businessman's credo: stick with what was working. Beginning in 1967, he
continued to green-light movies and TV series, but revenue from the theme parks became more
DISNEY
important. During the 1970s the company made millions of dollars of profits, but less and less
came from its TV and movie operations. Indeed, after the release of Mary Poppins, the company
began to fall from its near-top spot in the studio system. Brother Roy as top executive always
seemed out of place. He had opposed every major move in Walt's career - the decision to make
Mickey Mouse talk in synchronised sound, to offer the Silly Symphonies in Technicolor, to create
full-length animated features, to produce series for network television, and to build theme parks.
The brothers always fought, and then Roy would add his accountant's reality to Walt's plans. But
Roy never learned from the success of his brother's risk-taking; he remained always the fiscal real-
ist. He and Walt complemented each other. Now only one side of that balance was left, and it was
18
not the side that had pushed the company forward.
Roy Disney elevated Donn Tatum and Card Walker to co-manage the new Disney, the three of
them were soon known around the studio system as the 'Disney Troika'. For five years after Walt's
death, the trio oversaw the construction of the new Magic Kingdom in Florida. But Walt Disney
Productions could not run on autopilot indefinitely. Roy, by his own admission, missed his brother's
passion and sales ability. Roy had been the steady metronome to Walt's wild improvisations. Alone,
he shrank from responsibility and sought consensus, creating layers of committees. The company
operated like the Roman Catholic Church, but without a pope. Ward Kimball, one of the 'Nine Old
Men' (key animators from Snow White days), later remarked:
I think that any organization that was built by one man, one man's tastes and choices, will have a
tough time adjusting to the rule of the committee, where decisions are split among a group of people.
That's the advantage of having one man. Good or bad, he makes a decision and you run with it.
Roy died in 1971, and that left only Walker and Tatum - hardly a pair of Lew Wassermans. The
family now pushed for one of their own: Ronald W. Miller, who was married to Walt's daughter
Diane. Miller was on the record as viewing himself as a 'protector of the way Disney should do
19
things'. While it must be recognised that in his five years in power, Roy Disney had managed to
double the company's net worth, and open Disney World, in Orlando, Florida, Miller, Tatum and
Walker did nothing to respond to the new media conglomerate world Wasserman was fashioning
across town. They clung to the belief that audiences still wanted family films like The Aristocats
20
(1970) and Herbie Rides Again (1974).
Tatum and Walker consistently refused to produce hard-PG and R-rated films, although they
knew that the new teenage audience wanted more sex and violence than the G rating would
allow. The old Disney would have embraced Star Wars, but now Fox was releasing it. The 1970s
saw Miller, Tatum and Walker drag the Disney studio down. As late as 1979, for example, they
refused to deal with agents and to grant profit points in making deals with producers. Steven
Spielberg and company knew Wasserman and Universal would do a better job than Disney with
a family movie like E.T. The studio system had changed; Wasserman had his all-time top grosser;
and Disney seemed lost - although the theme parks were doing well. Hal Vogel, Merrill
270 |
Lynch's veteran Wall Street analyst, had it right: 'They had a mold that they clearly couldn't
21
break out of.'
In June 1980, in the face of growing stockholder disapproval, Walker and Tatum announced
a reorganisation of Walt Disney Productions, Inc. Family stockholders prevailed and Walker and
Tatum announced that Miller, then forty-seven, would try to take Walt's place as CEO. He was
charged with broadening the corporate base of operations and with reviving its image as a motion-
picture producer. Although Miller had be,en with Disney for more than twenty years, he was only
appointed to this position of power because he was married to Walt Disney's daughter and the
family supported him by voting their shares. As he watched key animators leave, he bet the
company on a Star Wars clone, the $20 million The Black Hole (1979). Miller would be Walt and
Walker, sixty-four, and Tatum, sixty-seven, would play the Roy Disney role. Nothing had really
22
changed in terms of corporate strategy. The plan would ride on Miller's skill as an executive.
Miller was incompetent at best. The Black Hole, Watcher in the Woods (1980), Tron (1982),
Night Crossing (1 982), Tex (1 982) and Running Brave (1 983) were box-office busts. The worst year
came in 1983 when write-offs for Something Wicked, This Way Comes (1982) and Trenchcoat
(1983) dictated a multi-million-dollar operating loss for the Disney film division. To studio system
observers the reason seemed obvious: Miller had lost touch with the core movie-going audience.
By the early 1980s the teenage, repeat-viewing audience could make (or break) a blockbuster.
Miller tried to manoeuvre into this new movie marketplace, and always failed. He was not up to
the task at hand. Disney's audience had grown up. So Miller's Midnight Madness (1980), an imi-
tation of Universal's Animal House, took in less than $5 million. The Disney horror film, The
Watcher in the Woods (1982), was so universally panned that the company quickly pulled it and
substituted Mary Poppins. By the early 1980s the Disney share of the movie audience had slipped
23
to less than 4 per cent.
Moreover, by 1984 attendance at Disneyland was at its lowest in a decade. Through Wall
Street, rumours began that Disney would be sold to the highest bidder. Noted corporate raiders,
including Saul Steinberg, Irwin Jacobs and Sid Bass, made bids. Disney became a real-estate target
- for its amusement parks. Wall Street saw only one number: the theme parks that were grossing
roughly $1 billion annually. Then family relations entered. Miller and Diane Disney had separated.
The arbitragers held no loyalty to Miller. Through a Disney spokesman, Diane Disney Miller said she
would vote her shares to find new management. The headhunters went out, and found a dis-
gruntled Michael Eisner at Paramount (see chapter 16). Miller, ironically, on 22 September 1984,
presided over a board meeting that voted to hire Eisner as his own replacement. The board gave
24
Eisner carte blanche to return Disney to its former glory.
A New Leader - Michael Eisner

Eisner had the brains and leadership skills to plug in the Lew Wasserman model and instantly revive
Disney. He even took Walt's place hosting the Disney Sunday show. He deserves credit for saving
Disney, but in the longer run, his record is less certain. In 1999 he squared off against his former
DISNEY 271
studio chief, Jeffrey Katzenberg, in a legal battle brimming with anger, petulance and name-
calling. But while the two Hollywood titans were tussling over millions, another drama was also
taking place. That one featured Kim Masters, the dogged Vanity Fair and Time magazine enter-
tainment reporter, who was involved in her own dust-up with Disney. Random House, with whom
Masters had a contract for a critical book on Eisner, had rejected her manuscript. This, Masters
claimed, was a result of pressure from Disney. (Perhaps not so coincidentally, Random House was
also the publisher of Eisner's autobiography, Work in Progress.) Although the publisher vigorously
denied being pressured by Disney, Masters hired Bert Fields - the same lawyer Katzenberg was
using in his suit against Disney - to pursue her grievances. Both suits were settled out of court, and
Masters' book was published in 2000, its title capturing the feeling in Wall Street about Disney and
25
Eisner: The Keys to the Kingdom: How Michael Eisner Lost His Grip.
Eisner did stabilise Disney, but for all his inventiveness, he simply took up common business
strategies. He lucked out and cashed in on the home video market with the inherited Disney film
library. Eisner placed Bambi and even Fantasia into video sell-through so that every family could
buy and own a copy. He purchased the Wrather Corporation for its valuable land next to Disney-
land to expand (although according to his opponent in these negotiations, Bonita Granville
26
Wrather, he paid much more than he should have).
And not all was sweetness and light at Walt Disney World. In 1988 Florida state regulators
charged Eisner with improperly storing paint, solvents and other hazardous materials used in the
theme park's expansion. Two years later, United States environmental officials ordered Disney to
stop its use of a wetlands sewage treatment area. This Walt Disney World expansion was simply
producing more dangerous nutrients than the already overcrowded Orlando ecosystem could
handle. Such occurrences, like the Wrather deal, also do not fit into the Eisner-as-rescuer myth.
Yet in the 1980s the myth seemed real. 'Disney Earnings Surge' was the story as 1987 ended.
Financial reports glowed. Just before Thanksgiving 1987, Disney reported record earnings and rev-
enue for its fourth quarter and year, citing strong results from theme park operations and sharply
higher earnings from film entertainment. Profit in the quarter, ended 30 September 1987, jumped
67 per cent, to $ 1 35.3 million from $81.1 million a year earlier. Revenue climbed 2 1 per cent, to
$758.6 million; profits rose 80 per cent to $444.7 million from $247.3 million a year earlier.
Investors were happy; Eisner was a hero in the making; Disney was back atop the studio system. 27
On 30 June 1993 Eisner purchased Miramax Films, with its 200-strong film library and the
expertise of the company's co-founders, the Weinstein brothers. Thereafter came such untradi-
tional Disney films as Pulp Fiction (1994), Sling Blade (1996) and The English Patient (1996). In-
house the brands were Hollywood Pictures, Touchstone Pictures and Walt Disney Pictures, offering
entertainment from traditional Disney G-rated films to R-rated fare. In 1995 Disney and Pixar signed
28
a co-production and distribution deal to make animated films.
The Pixar deal came after the departure of Jeffrey Katzenberg, Disney animation's head. It was
a serious loss. Starting with The Little Mermaid in 1989, Katzenberg's animators produced a string
of hits: Beauty and the Beast (1 991 ), Aladdin (1 992) and The Lion King (1 994). Eisner's Disney set
industry records as it sold baby boomers and their children millions of copies of animated video-
tapes. In 1 993, for instance, Aladdin sold 10.6 million copies in its first three days on the shelf, en
route to an astonishing 24 million sold (a record at the time). In 1994 Disney re-issued Snow White
and the Seven Dwarfs, which surpassed the Aladdin totals, and generated $300 million in home-
29
video revenues - a significant boost to the growing corporate profitability.
Eisner was at his best replicating past Disney successes, and in the 1990s he took Disney's
theme parks to other parts of the globe. Somewhere on this planet, perhaps deep in a New Guinea
jungle or an Amazon rainforest, there may be three or four people who have never heard of
Disneyland or Walt Disney World. They stride through life totally unaware of Mickey and Minnie
and Donald, of Sleeping Beauty Castle and the Haunted Mansion. As for the other 4 billion or so
folks, they can roughly be divided into those who have visited the parks designed by Walt Disney
and his heirs and those who have not. Euro Disneyland was an Eisner project, which opened on 12
April 1992 some twenty miles east of Paris. The park had the same layout as the original Disney-
land with Tomorrowland eliminated for Discoveryland. While it attracted 1 1 million visitors in its
first year of operation, making it the top tourist attraction in Europe, it came not without contro-
versy. Eisner had over-extended Disney to build it and despite its popularity, Euro Disneyland lost
30
money for its first five years. The park had to be financially reorganised in 1994.
But if nothing else, Eisner in the mid-1990s remained bold. Ten years later it is possible to look
back and see that Disney began to slip after 1995, when Eisner began over-extending the media
conglomerate and bought ABC for an estimated $19 billion. His promises of producing synergies
in a decade never came about. But Disney stockholders were satisfied and so granted Eisner a new
contract entitling him to $300 million in stock and salary over ten years. Since Eisner had taken
over as CEO in 1984, the value of Disney stock had soared from a collective worth of $2 billion to
a staggering $50 billion. One critic noted that it would take a Haitian worker 16.8 years to earn
31
Eisner's hourly income of $9,783.
The problem was that Eisner could not control all the parts of the new Disney. He was a good
movie-making manager, but lacked what F. Scott Fitzgerald so admired in keeping the now-
massive Disney colossus in his head. Errors and PR disasters became regular events. In the late 1990s
there even came a term - 'mouse*ke*fear' - to label a Disney corporate culture that feared any
public criticism. It was coined after a disastrous attempt at self-censorship at Disney-owned ABC.
In 1998 David Weston, president of ABC News, killed an investigative news story which alleged
that Disney hiring practices at its theme parks allowed convicted paedophiles to work at the parks.
Journalists had already completed work on the story, confirming suspicions that the story would
have aired save for Disney's ownership of the network. The other media descended and while
'there was no proof that Disney honchos ordered David Weston ... to kill a critical report about
the entertainment giant. They didn't have to.' The whole mess - which Eisner could not control -
validated the viewing public's worst fears about conglomerate ownership of major news outlets.
In this case, an otherwise powerful, prestigious news operation has shown itself incapable of cov-
ering - or unwilling to cover - a major cultural and economic force in American life. Just days
DISNEY 273
before the story was killed, Eisner candidly gave his view from the top. In a 29 September 1998
interview on National Public Radio's Fresh Air programme, Eisner said, 'I would prefer ABC not to
cover Disney. ... I think it's inappropriate for Disney to be covered by Disney. . . . We don't have
,' 32
a written policy, but. .
By 1999 Disney seemed to be a company in transition. Eisner terminated dozens of animators,

who through the early 1990s had been among the hottest corporate talent. Eisner told those
whose contracts were up for renewal that they could take a pay cut of as much as 25 per cent or
leave. In April the company reported a 41 per cent drop in earnings for the most recent quarter (as
compared to the same quarter in 1998). The glow on constant earning growth was over by 2000.
The promised turnaround of ABC never came to pass; nor did another Lion King. Eisner was set-
ting himself up for a fall; it had been a long time since he had saved the company from Miller's
33
debacle.
In February 2004 the lid came off Eisner's continual pleadings that Disney was just about to
return to its 1980s glory days. Disney saw the collapse of its lucrative partnership with Pixar in
2004, and looked vulnerable. Then Comcast, the largest cable operator in the USA, launched a
surprise $66 billion bid for Disney in a bold and opportunistic attempt to grab the media group
and create a new force in television and film distribution. The offer represented the most serious
challenge to Michael Eisner. Brian Roberts, chief executive of Comcast, unveiled the bid after Eisner
three days earlier rebuffed his offer to explore an agreed deal. If successful, the bid would create
the world's largest media group by market value - overtaking Time Warner - by combining brands
such as Disney, ABC and ESPN with a pay-TV platform that reached 21 million subscribers in the
USA. Roberts remarked: 'We think we're ready for the logical next step and that of course is enter-
34
tainment and content.'
Eisner, after two heart attacks, was not the leader he had been twenty years earlier. Roberts'
main selling point was contrasting Comcast's solid track record in management with the problems
Disney was experiencing in several of its divisions. He also pointed to the numerous profitable ways
Disney's content could be funnelled down Comcast's cable and Internet pipes. Roberts promised
35
that Comcast could bring back the lustre Disney had lost.
Roberts pointed out that Eisner had paid $19 million for ABC, but did not know how to run a
TV network. Eisner had passed on The Apprentice, a reality-TV programme celebrating the cor-
porate wisdom of Donald Trump. It became a hit for NBC, averaging 20 million viewers a week
and pulling in more high-income viewers than any other series, saving NBC's Thursday night line-
up. But The Apprentice had once belonged to ABC. Said Mark Burnett, the show's producer, and
former producer of Survivor: 'I honestly get a sick feeling there,' he said, adding, 'It's awful to
go over there [to Eisner's office].' This was just one of the stories that began to circulate after
Comcast announced its offer. Eisner's top-down micro-managing was just not working. By 2004
he had lost half a billion dollars for ABC. He personally was doing script approval, wasting his time
while other divisions languished. At CBS, its head Les Moonves called the shots, not owner Sumner
36
Redstone. Eisner was a liability, not an asset.
.
But here I must stop. Will Eisner - the former boy wonder who saved Disney - be able to
manage the Disney media conglomerate? A shareholder revolt cost him his job as Disney's CEO
and he was now reporting to a split board. The industry consensus was that like many before him
he simply could not acknowledge that he had extended himself beyond his abilities, and that he
should retire. '[Disney] was paralyzed because everyone was afraid of making a decision until
Michael Eisner weighed in,' said a former Disney TV executive. He did not have the ability to micro-
manage such a large company, but he tried to do so because he did not trust his subordinates.
When Eisner was stripped of some of his complete power at a March 2004 board of directors
meeting many were surprised because this was a rare occasion when the board stood up to him.
Agent Bernie Brillstein recommended retirement, but it's likely that he will not go quietly. He
37
fought off Comcast's bid, but there surely would be others. Disney's future: cloudy at best.
Notes
1 . The Journal of the Screen Producers Guild, September 1 966, p. 7.
Books, 1990).
3. There exists a well-organised Disney corporate archive, but the company screens all users. I began my
research with a close reading of the trade press found: Business Week, Film Journal, Forbes, Fortune,
Motion Picture Herald, Variety and The Wall Street Journal. The following books are essential: Leonard
H. Goldenson, Beating the Odds (New York: Charles Scribner's Sons, 1991), a revealing autobiography,
and the official Walt Disney biography, Walt Disney by Bob Thomas (New York: Simon and Schuster,
1976).
4. Randy Bright, Disneyland: The Inside Story (New York: Abrams, 1 987), pp. 33-4.
5. Goldenson (1991), pp. 121-4.

6. Leonard Maltin, The Disney Films (New York: Popular Library, 1973), p. 122.
7. Thomas (1976), p. 270; Maltin (1973), p. 146 for the Walt Disney quote.
8. The cover article of 7Vme, 27 December 1954, pp. 27-30, symbolised that Disney was changing things
in a public way. See also Goldenson (1991), pp. 125-30.
9. Thomas (1 976), pp. 295-3 1 5.
1 0. Quote from Thomas (1 976), p. 290.
1 1 . Paul Peterson, Walt, Mickey and Me (New York: Dell, 1 977), chronicles the hard and exhausting work
the youngsters put in on this show.
1 2. Cinefantastique, March 1 983, pp. 36-7, 41
13. Elizabeth Leebron and Lynn Gartley, Walt Disney: A Guide to References and Resources (Boston: G. K.
Hall, 1979).
14. Maltin (1973), p. 154.
15. Maltin (1973), p. 232.

16. Thomas (1976), pp. 225-7.
1 7. Diane Disney Miller, The Story of Walt Disney (New York: Dell, 1 956), p. 206; Walt Disney's official
obituaries can be found in The New York Times, 16 December 1966, and Variety, 21 December 1966.
1 8. Joe Flower, Prince of the Magic Kingdom (New York: John Wiley & Sons, 1 991 ), interview by the author
quoted on p. 52.
19. Business Week, 31 July 1978, pp. 58-62.

DISNEY 2
20. Flower ( 1 99 1 ), interview by the author quoted on p. 51
2 1 . The New York Times Magazine, 1 August 1 976, pp. 32-6; Flower (1 991 ), interview by the author
quoted on pp. 59-60.
22. The New York Times, 4 June 1 980, p. D1
23. United States Securities and Exchange Commission, The Walt Disney Company, form 10-K, 1983.
24. The best survey of what happened in 1 984 can be found in John Taylor, Storming the Magic Kingdom
(New York: Knopf, 1987) and Ron Grover, The Disney Touch (Homewood, Illinois: Business One Irwin,
1991). For the dismal state of Disney in 1984, see Walt Disney Productions Annual Report, 1984, and
Forbes, 4 June 1984, pp. 31-2.

25. Kim Masters, The Keys to the Kingdom: How Michael Eisner Lost His Grip (New York: William Morrow,
2000).
26. I knew new Ms Wrather when we served together on the AFI board and she spoke often of this deal to
me.
27. The Wall Street Journal, 1 3 November 1 987, p. 20.
28. The Wall Street Journal, 25 February 1997, p. B10; Variety, 6-12 October 1997, pp. 9, 12.
29. The Wall Street Journal, 25 February 1997, p. B10.
30. The HarperCollins Guide to Euro Disneyland (London: HarperCollins, 1 992), p. 1
31 . Standard and Poors Industry Survey, 20 May 1 999, pp. 1 -2; Variety, 23-9 June 1 997, pp. 5, 1 0.
32. 'Mouse*ke*fear,' Brill's Content, December 1996-January 1997, pp. 95-6.
33. Variety, 3-9 May 1 999, pp. 1 , 1 02; The Wall Street Journal, 29 April 1 999, pp. C 1 ,
C2; The Wall Street
Journal, 2 April 1999, p. B2; The Wall Street Journal, 6 July 1998, page A20.
34. Financial Times, 1 2 February 2004, p. 1
35. The Wall Street Journal, 1 7 February 2004, pp. B 1 , B8.
36. The New York Times, 8 March 2004, pp. C 1 C2

,
37. The New York Times, 8 March 2004, pp. C 1 C2.

,
20
Columbia and Sony Pictures
With the deaths of the Cohns (Jack in 1956, Harry in 1958), management of Columbia Pictures
passed into the hands of Jack Cohn's long-time aides, Abe Schneider and Leo Jaffe. They proved
that the Cohns had been excellent managers because - with the notable exception of Lawrence of
Arabia (1962) - initially they generated only enough income to keep the studio alive. Late that year,
ABC-TV paid Columbia a record $82 million for two showings of producer Mike Frankovich's The
Bridge on the River Kwai, and a recovery began, catalysed by a series of British-made hits, includ-
ing A Man for All Seasons (1 966), To Sir, With Love (1 967) and Georgy Girl (1 966), and two popu-
lar big-budget musicals, Oliver! (1968) and Funny Girl (1968). This instability contrasted remarkably
with the leader of the new modern studio system - Lew Wasserman's Universal. Columbia has
always been an experiment in progress.
In September 1968, to protect itself from takeover threats, Columbia's board merged its Screen
Gems subsidiary and movie studio and became Columbia Pictures Industries, Inc. But the board let
go the man who was helping make Columbia profitable, Mike Frankovich, and Schneider turned
the studio over to his sons, Stanley and Bert. Out came Dennis Hopper's Easy Rider (1 969), but one
profitable film a studio does not make. In fact, Columbia's films of the late 1960s and early 1970s
produced mostly red ink, most notoriously its disastrous remake of Lost Horizon (1973), which
earned only $3.8 million against its $ 1 2-million negative cost. Despite cost-cutting measures - such
as combining with Warner Bros, to share Warners' Burbank lot in 1972 - by the end of 1973,
Columbia Pictures again neared bankruptcy. Losses during 1970-2 alone added up to $87 million,
the exact sum total of its profits since its founding in 1924. Through the rest of the 1970s it was
again on a roller-coaster ride, so after a scandal and more losers than hits, the post-Cohn Schnei-
der-Jaffe regime of Herbert Allen sold out to Coca-Cola, one of the best-run corporations in the
1
world.
The Coca-Cola Experiment of the 1980s, whereby MBAs tried to run a studio, failed. Lew
Wasserman could have told them that it would never have worked. Coke never was able to find a
leader like Wasserman and after nearly a decade of pouring good money after bad, sold to elec-
tronics giant Sony. We are still living with this experiment of combining software (translation: the
films and TV shows) and hardware as I write in 2004. Sony proved it could follow Wasserman's
strategies, but it could not find a leader with his skills. All three experimental eras had one thing in
common: none of the owners and leaders ever did take Columbia down. It remained within the
studio system. It must be ranked last because it never pioneered, but always copied what Lew
COLUMBIA AND SONY PICTURES 277
Wasserman did - a decade or so later. It never had the type of leader F. Scott Fitzgerald so
admired.
After the Cohns

The Cohn brothers' loyal employees, Leo Jaffe and Abe Schneider, brought Columbia into the
modern studio age. Jaffe, born on 23 April 1909 in New York City, took his first job at Columbia
in the summer of 1930 while he was still an undergraduate studying business at New York Uni-
versity. He joined Columbia's auditing department shortly afterwards - hired and trained in the
movie business by Jack Cohn. Jaffe's greatest skill was as a survivor - he spent his entire career at
Columbia. With the passing of the Cohns, in 1959 he was named treasurer of Columbia, executive
vice president in 1962, president in 1967 and chairman in 1973. He survived a scandal involving
David Begelman, a president of the studio who misappropriated money from Columbia in the late
1970s, and retired in 1981 when Coke bought the company. Herbert Allen, whose family owned
most of the stock during the Jaffe years, commented on the chairman: 'He was an old-fashioned
company man. He lived and breathed Columbia Pictures. In fact, up until a month or so ago when
I saw him last, he still talked about the pictures we're putting out.' Jaffe was an accountant pure
and simple, and was never known as an executive with a keen eye for a script or a talented actor.
He was a loyal, committed lifer - taking no risks, pioneering no new corporate strategies. 2
And he worked well with others, most notably Abe Schneider. To those who worked with
them, Schneider and Jaffe functioned as a team; they were almost inseparable. They spoke with
one voice, and if there was any disagreement between them, their colleagues and associates never
got wind of it. Their only visible competition was on the golf links or at the gin rummy tables.
Schneider had been hired just before Jaffe to work in Jack Cohn's bookkeeping department, and
like Jaffe stayed with the company for more than half a century. Like Jaffe, he worked his way up
the corporate ladder in the New York office, developing a reputation as one of the shrewdest
financial experts in the business. Both eschewed publicity, and remain unknown today, even
3
among those who make a living studying the history of the studio system.
If Schneider had a speciality it was that he knew the television side better than Jaffe. So while
the studio was in continuous flux, the Cohns' pioneering position in television production was kept
up, maintaining the company during times of crisis. Schneider's friend and ex-colleague Gordon
Stulberg remembered him as a quiet man 'who was always kind of in the shadows. He was the
opposite of the flamboyant Harry Cohn.' Stulberg said Schneider 'was one of the pioneers of stu-
dios working with independents', including Stanley Kramer and the team of Harold Hecht, James
Hill and Burt Lancaster. That's when Columbia really burst out in the independent production area,
with films like Birdman of Alcatraz (1962; producers: Hecht-Hill-Lancaster), Stanley Kramer's Ship
of Fools (1965) and Richard Brooks' The Professionals (1966). MPAA president Jack Valenti cred-
ited Schneider for his unwavering principles. 'The thing I most admired about Abe is that he had
convictions which he never strayed from and that was the definition of quality in movies. ... I have
nothing but loving memories of Abe Schneider,' Valenti told Daily Variety. Valenti knew, however,
-
278
I
that neither Jaffe nor Schneider ran Columbia in any way that could be compared to Lew
Wasserman at Universal. It was as if Jack Cohn, not Harry, had passed Columbia to them as his
4
surrogate corporate sons.
In the early 1950s Harry Cohn had begun to craft Columbia on the model of United Artists. He
made production deals with independents. Jaffe and Schneider stuck with that strategy. This,
together with Schneider keeping television going, meant that Columbia never went bankrupt,
although it sometimes seemed that way, because they signed more losers than winners. Colum-
bia came to rely on television, but not on purpose as Wasserman was doing with Revue at Uni-
versal City. Always accountants at heart, on 25 February 1960 Jaffe and Schneider laid off a
5
hundred staff to strip their business to its essentials.
In 1959 Columbia bought Colpix Records, but the investment failed, and in 1961 Columbia
purchased KCPX, a radio/television combo. This media diversity only brought in tiny profits at best.
The crown jewel of Columbia Pictures Corporation's non-film ventures grew more and more to be
its TV production unit - Screen Gems. As the 1960s started, Screen Gems accounted for $45 mil-
lion of Columbia's approximately $1 16 in annual revenues. It produced half-hour cartoon pro-

grammes (such as The Yogi Bear Show and The Flintstones), as well as various half- and full-hour
live-action series (Father Knows Best, The Donna Reed Show, Route 66), all prime-time TV hits.
Screen Gems also made more money distributing long ago fully amortised packages of old short
6
films, such as those by The Three Stooges.
By 1961 Columbia was known as an independent film-maker's haven. To save money, Jaffe
and Schneider eliminated departments of research, unit publicists, and sound and music. While
Screen Gems kept its stages busy, independent productions sometimes helped as well. In 1961
Carl Foreman's The Guns of Navarone ranked as one of the year's most popular films. Jaffe and
Schneider were willing to let Foreman write, direct and produce this Columbia release. Yet
Foreman's next film, The Victors (1963), was a failure. Jaffe and Schneider looked for bankable
writer-director-producers. For example, they offered Richard Brooks unlimited creative authority
for his $2-million-dollar production of Lord Jim (1964). Brooks was not required to submit his script
to Columbia, nor his dailies; he was even guaranteed final cut of the film. The film proved to be
weak at the box office, but Jaffe and Schneider had their Cohn model and stuck with it. They
actively sought films from outside the USA, such as British comedies The Mouse that Roared (1 959)
and Our Man in Havana (1960). By 1961 just over a third of the films Columbia distributed had
been produced outside the studio system; the following year, Columbia released thirty-one films,
sixteen of them from other countries. Similarly, Jaffe and Schneider aligned themselves with Ital-
ian mogul Dino de Laurentiis, and released his $9-million epic Barabbas (1962) in all territories
7
except its native Italy.
The British-made Lawrence of Arabia was 1962's major release. Costing $13.8 million, it was
the most expensive release in Columbia's history. Producer Sam Spiegel had made many critical
and popular films for Columbia, including its biggest and one of the last green-lighted by Harry
Cohn, The Bridge on the River Kwai. Fully aware of the picture's box-office potential, Jaffe and
Schneider undertook an extensive marketing campaign. They successfully demanded that exhibitors
play the film for a minimum of a month; they road-showed and hard-ticketed. Mail orders for the
film were taken in advance, and the picture established what was then a record for ticket prices:
$4.80. The film was hugely successful, and also a critical winner, taking the Academy Award for
8
best picture.
In 1964 Jaffe and Schneider hired a bulky, extroverted bear of a man named Mike Frankovich
to revitalise in-house feature-film production. He has been properly lauded for making some prof-
itable pictures like Cat Ballou (1965) and Ship of Fools. Frankovich presided over his domain from
an elegantly panelled office, its shelves lined with books and resplendent with the Oscars he had
earned. Jaffe and Schneider allowed him wide latitude for two years as he sought to carry out their
orders to maintain a balanced studio programme of features, rather than a quilt of pick-up deals.
By 1 966 Frankovich had produced A Man For All Seasons, To Sir with Love and The Taming of the
Shrew (he took a chance on the latter film since Richard Burton and Elizabeth Taylor were taking
expenses but no salary). His key decision seemed risky at the time, but it would change Columbia
forever. He green-lighted the biography of Fanny Brice, Funny Girl (1968), starring an unknown
Barbra Streisand, and produced by Ray Stark. Frankovich would be fired two years later, but Stark
would continue his relationship with Columbia and prove to be the company's best asset through
9
the years before the Coca-Cola takeover.
In 1967 Stark hung out his shingle at Columbia. In time, he produced more than 125 films for
Columbia, including Funny Girl, The Way We Were (1973) and The Sunshine Boys (1975). He had
begun his career as a literary and theatrical agent, and became deft at pairing the right stars with
the right adaptation of a popular book or Broadway comedy or musical. His best-known collabor-
ations came with actress Barbra Streisand and playwright Neil Simon. During an eighteen-year span,
Stark produced eleven Simon scripts, and gave Streisand her film debut. One friend remembered:
'Ray used to say that the problem with the new Hollywood is that the creative people on top don't
have time to teach the younger people.' He learned from Lew Wasserman and adapted to the new
Hollywood. 'He felt that talent was the most important thing, so he treated his stars like stars,
whether they were actors, director or writers. So they loved working with him again and again.'
In the 1970s Stark became a powerbroker as Columbia's top and most consistently profitable
film-maker. He was Wasserman in miniature, able to keep many projects in his head, but not a
whole media conglomerate. Often he stated: '[I] only did publicity for [my] films, not [for myself].'
Stark never ran Columbia, but he did become a major stockholder, a power behind the throne. 10
Jaffe and Schneider also green-lighted In Cold Blood (1 967), based on Truman Capote's book,
and Spencer Tracy and Katharine Hepburn's final film together, Guess Who's Coming to Dinner?
(1967). Still, the film division of Columbia Pictures could not turn a profit, and Screen Gems was
making up for its losses. The Man From Uncle and Batman became cult TV hits. As the 1960s
ended, Abe Schneider's son Bert brought the company a piece of the counter culture - Easy Rider.
Leo Jaffe's daughter recalled: 'The executives [her father and Bert's father] in the eleventh-floor
command were all very conservative men, with neckties and gray suits. Bert used to look exactly
280 |
*
like they did. But then one day, in he walks with a leather jacket, open shirt, and beard.' In 1965
he left Screen Gems, set up shop in Los Angeles with his friend Bob Rafelson, and created The
Monkees TV show, which financed Easy Rider, the Peter Fonda-Dennis Hopper road picture that
inaugurated a cycle of hugely profitable low-budget youth movies. Five Easy Pieces (1 970) and The
Last Picture Show (1971) followed, both collecting a bevy of Oscar nominations. But by 1972, Bert
11
had run out of steam. Easy Rider proved to be an aberration, not a new direction for Columbia.
According to New York Stock Exchange figures, Columbia did show alairly steady growth until
the end of 1 967. By May 967 1 Screen Gems reported that it owned a library of 1 ,000 feature films
available for television, which were, themselves, worth more than the entire company at that time.
The possession of these films, along with the continued popularity of Screen Gems' television
series, such as / Dream of Jeannie, Hazel and Bewitched, made Screen Gems the most valuable seg-
12
ment of Columbia as it peaked financially in 1967.
Overall - ceding the consistency of Ray Stark - the early 1970s were not kind to Columbia. The
studio lost $30 million in 1971, $4 million the next year and $50 million in 1973. Cost-cutting
became the order of the day. With Columbia $220 million in debt, in 1973 Jaffe and Schneider
turned to Wall Streeter Herbert A. Allen to rescue the company. Allen brought in Alan Hirschfield
and David Begelman, to set in motion the scandalous business environment that would force Allen
to sell to Coca-Cola. But at the time, Hirschfield, a Harvard MBA, seemed right for Columbia. Allen
and Hirschfield made a great initial decision. In 1974 they purchased Ray Stark's production
company, RaStar. Screen Gems, renamed Columbia Pictures Television, launched a hit - Police
Woman on NBC, starring Angie Dickinson. In 1975 Variety summed up the year: 'Nice Box Office
]3
for Columbia' with films including Shampoo, Taxi Driver, Tommy and Stark's Funny Lady
Hirschfield, as a new executive, helped to increase sales, and also instituted cost-cutting. He
began to sell assets, principally selling the television stations Columbia owned. He cut the staff by
1 1 per cent. And he sought to milk Columbia Pictures Television for as much as he could. Here he
followed Lew Wasserman's basic principle of concentrating on television production. This unit of
Columbia was already generating seven hours of network television per week; Hirschfield doubled
that, making Columbia the second-largest supplier of fare to network television - behind only
Wasserman's Universal. Ironically, while Columbia seemed to be doing better throughout the
1972-5 period, Allen and Hirschfield failed Wall Street by refusing to report more than the mini-
mally required fiscal information. As the trade journalist A. D. Murphy stated in 1975: 'A company
trying to impress stockholders, Wall Street and banks with revitalized management looks peculiar
14
when it continues [to fail] to show its fiscal reporting face.'
By not disclosing such information as divisional sales or internal profit data in its fiscal reports,
Columbia earned the reputation as the studio with something to hide. As stated in the 12 Febru-
ary 1975 edition of Variety:
There is absolutely no indication, either in data tables or covering statement, if the slowly rising prof-
itability is coming from features, TV shows, music publishing, records (there's talk that Clive Davis
already has the latter in the black, but in the absence of numbers, it's just talk), TV sales from licens-
15
ing, interest on investments, or any combination of these.
Wall Street was right to be suspicious. In January 1975, it emerged later, David Begelman began
stealing funds from Columbia; the amount would eventually add up to about $61,000 over two
and a half years. The bulk of this amount, approximately $40,000, was taken through forged
cheques, the rest by exaggerating his expense account. Eventually, as I detail below, in October
1977 negative press was so bad that the Allen-led Columbia suspended Begelman, then quietly
reinstated him two months later. They valued his money-making ability too much to fire him. In
16
1978 Begelman was arrested on four counts of forgery, and finally resigned.
What the widely publicised scandal did was mask the increasing value of Columbia. Its net
worth rose; it had bounced back to profitability from the nadir of 1973's $50 million loss; the book
value of the common shares tripled. Under Begelman, in 1975 the feature film production division
grossed a record $201 million. In 1979 Kramer vs Kramer became the studio's first US-produced
Oscar winner in twenty-five years. Still, scandal, intrigue and financial vicissitudes characterised the
period between 1976 and 1980 for Columbia Pictures. In the wake of Watergate, the financial
improprieties at Columbia drew much attention to the pattern of questionable financial practices
throughout the entire motion picture industry. (This could have been found as easily at Charles
Bluhdorn's Gulf + Western, but as he owned the company, no one could blow the lid off his pub-
licly traded stock; Bluhdorn had the votes to pass whatever he wanted at any meeting.) Most
importantly, in 1977, Columbia reached a non-exclusive licensing agreement with Home Box Office
(HBO). Columbia not only had regained its financial health but achieved the highest profits and
17
revenues in its history.
In 1977 Columbia Pictures would soon experience the most spectacular event in its history, the
world premiere of Steven Spielberg's Close Encounters of the Third Kind, yet during the same
week, the company would experience the climax of the Begelman affair. While the grosses and
profits of Close Encounters overwhelmed any losses from the Begelman embezzlements, at the
time the press from outside Hollywood focused only on the scandals. At the annual spring 1977
meeting of Columbia Pictures Industries' stockholders, Allen and Hirschfield sketched the
company's bright financial future and kept mum on Begelman. Operating earnings for the first
quarter of the current fiscal year had risen 400 per cent to new record levels from the same period
of the previous year. The company planned to resume cash dividends. Close Encounters promised
to become Columbia's highest-grossing film of all time. Yet all that Allen and his allies wanted was
18
for the Begelman scandal simply to go away.
All came to a head on 7 February 1978, as The Washington Post headlined: 'Movie Executive
Begelman Quits Post at Columbia.' The announcement came from Allen's New York headquarters.
Allen paid him $400,000 to go away. Begelman's resignation - he was replaced by Daniel Melnick
- caused Columbia's stock to rise 30 per cent in a day. Allen knew Columbia had gone too far
when the Carter administration, despite Lew Wasserman's pleading, opened an investigation into
282
I
Columbia in particular and the studio system in general. (Nothing would come of the investigation
because in 1981 Ronald Reagan came into office and, as Wasserman's former client, ordered the
19
matter dropped in the name of deregulation.)
Alan Hirschfield tried hard to save his job. He sought investors to buy out members of the
board who opposed him. He failed. Once it was announced that lawyer T. (Fay) Vincent had
emerged as the top candidate for Columbia's presidency, on 20 July 1978, the board voted to fire
Hirschfield. Few firings of studio executives drew more publicity. But things like this happened all
the time; Columbia Pictures moved on. No single employee could force it out of its place in the
studio system. Close Encounters had moved to eighth place on Variety's listing of all-time theatri-
20
cal box-office champion films in North America.
Despite the Begelman scandal, Columbia stood in excellent financial shape as the 1980s began.
It was having its second best year in history. The company had $50 million cash on debt-free books
and an increased line of credit, up from $75 million to $200 million. The Wall Street Journal named
Fay Vincent the outstanding CEO in the motion picture industry. Columbia Pictures Television had
another excellent season, selling more pilots than any other studio. And Columbia's syndicated
television division had set a record of $1 50 million in worldwide sales, due to Barney Miller and
Charlie's Angels in the USA, and Soap, Hill Street Blues and The Flintstones overseas. The feature
film division showed a strong performance, with profits up 31 per cent over the previous year.
21
Allen figured his investment was at its acme and it was time to cash-out.
The Coca-Cola Experiment

In January 1982 Allen announced that he had sold out to the Coca-Cola Company for $823 mil-
lion in a friendly takeover. Coke paid nearly twice the stockmarket value for Columbia's stock and
initiated one of the greatest studio system experiments ever - trying to apply MBA management
methods to maximise profits. If a high-school graduate Lew Wasserman could do so well, what
about the mighty marketer of soft drinks? Coke executives believed that they could bring efficiency
to the studio system. The Begelman scandal fooled Coke executives into thinking that running a
studio would be an easy task. Moreover, Coke executives figured it was time to diversify, and what
more natural candidate than the studio-of-the-moment Columbia Pictures? If Coke could sell soft
22
drinks, it could easily use the same methods to sell movie magic.
Roberto O. Goizueta, who had become chairman and chief executive officer of Coca-Cola the
previous March, had indicated that he would diversify Coke into new areas. 'Coke is very enthusi-
astic about being in the movie business,' Goizueta said at the announcement of the takeover. In
previous years, as the American market for soft drinks had levelled off, Coke had diversified into
such fields as ocean farming and orange groves, but this would be its first big venture into enter-
tainment. Goizueta made clear that he hoped to put his personal stamp on Coca-Cola by expand-
ing into entertainment and leisure-time companies. He had spoken of spending an amount equal
to 10 per cent of Coke's annual revenue for a major acquisition, and Columbia came in at just
above that target based on Coke's previous year's sales of $6 billion. By the time Coke bought in,
Vincent had negotiated more than $155 million in licensing contracts with pay-TV, TV networks
and local television stations (for syndication of such television programmes as Fantasy Island). Wall
Street was sceptical about the takeover, but if any outsider could make the studio system run like
other businesses, it was Coke. Allen, who had acquired his stock at an average cost of $4 a share,
23
or $3 million total invested, brought home a capital gain of $50 million.
Goizueta had gambled because he'd had to - he was always an outsider at Coke, and took
risks previously unknown to the company. The son of a rich Cuban emigre family, he struggled to
establish himself at the Cheshire Academy prep school in Connecticut and found that the best way
to master the English language and American manners was to go to the movies. He, like all the
potential moguls, instantly acquired a love for the products of the studio system. The guy's gone
Hollywood,' said one Wall Street analyst, who figured Goizueta paid 15 per cent more than he
should have. Goizueta responded by stating that he was in the movie business 'for the long pull',
characteristically commenting that: 'an acquisition is like a marriage. You look at the bride and you
like her. She comes from a good family. You think you're going to be happy with her. So the last
thing you talk about is the dowry.' That kind of talk did not make Wall Streeters feel better. In
1982 Coke was the world's largest soft drinks company, claiming 35 per cent of the world market.
The Columbia bid was an unprecedented risk - the first attempt by Coke to enter completely new
24
territory.
Business Week headlined: 'The question is how Coke's marketing will mesh with Columbia's
creativity?' The lavish commercials that Coca-Cola uses to sell its soft-drink products have made it
seem that the Atlanta corporate colossus is invincible. Indeed, the Coke era did start well. In 1982
Coca-Cola made a deal with CBS and HBO to create TriStar. In the deal, HBO would pay 40 per
cent of a film's theatrical rental fees in exchange for exclusive pay-TV licensing rights. HBO would
also pay 20 per cent of the fees for the films that it did not have exclusive rights to, and would put
down 30 per cent of the cost for the negatives on all of the studio's films. TriStar had the financial
capital to produce thirty-five films a year because of the financial commitment of HBO. The deal
was attractive to CBS because they wanted a place in the film industry - having failed in the past
(see Coda) - and Coke liked the fact others were picking up much of the costs. Victor Kaufman
25
was TriStar's chief. In 1984 Ghostbusters became Columbia's most profitable motion picture
ever, grossing theatrically nearly a quarter of a billion dollars in the USA and Canada.
Yet this prosperity was undermined by a game of musical chairs at the studio's top. In 1981
Goizueta named Guy McElwaine, a former agent, as Columbia's president. Out came Gandhi
(1982) and Tootsie (1982), both critically praised but they were hardly blockbusters. Dissatisfied
with the bottom line, Goizueta replaced McElwaine in 1981 with attorney Richard C. Gallop. His
Ghostbusters proved to be an exception. Goizueta turned his attentions to TriStar and replaced
Victor Kaufman with Jeff Sagansky, a former NBC executive. Goizueta then threw more money at
his investment, paying $485 million for Norman Lear and A. Jerrold Perenchio's Embassy Television,
producers of The Facts of Life and Silver Spoons. Still looking for more feature-film blockbusters,
in 1986 Goizueta chose British film producer David Puttnam to head Columbia.
284 |
Synergy always proved to be elusive - for Puttnam and for the Coke-trained MBAs. Puttnam
then complained to the press about the lack of final say, turning the whole of the studio system
against him. Silence was golden, as Lew Wasserman preached. Puttnam was concerned enough
to go and see Wasserman, who tried to reassure the newcomer. Wasserman was being nice. Why
help the competition? The Hollywood establishment became increasingly angry with Puttnam's
quoted attacks on their way of life. Each successive interview turned him further into a self-
appointed prophet on a rock, banging onâbout the sins of Gomorrah. Then one evening in 1986,
Goizueta turned on his TV and saw Puttnam on the screen. It was a segment on the soft-news CBS
show West 57th, which had invited Puttnam to discuss the marketing of movies, but the inter-
viewer chose to focus more on Puttnam's war with the Hollywood system. Goizueta was surprised
and, more than that, his deepest article of faith had been called into question. Puttnam did not
26
know it, but he was history then.
Puttnam never understood corporate doublespeak. But the clincher was Bill Cosby, who was
endorsing Coke's products. Cosby made it very clear that he was unhappy with Puttnam's failure
to support him sufficiently on his movie Leonard Part 6, and to remove the producer, Alan
Marshall. Cosby told Coke, 'Puttnam can't run the studio - he's killing it,' and walked to Warner
Bros, with his next picture - a loss of face for Coke. Goizueta fired Puttnam in September 1987.
Puttnam had lasted less than two years, and the experience had convinced Goizueta that he had
made the wrong investment in buying Columbia. Goizueta started looking for a buyer. Interim
head Dawn Steel put on game face for Puttnam's Ishtar, which cost $50 million, and grossed $12
million. The Coke experiment ended in October 1989 when Sony purchased Columbia for $3.4 bil-
lion. The methods to sell soft drinks did not work in the studio system. Coke had proved that with-
out a leader like Lew Wasserman, there was no way even one of the most efficiently run
companies in the world could tame the studio system. Goizueta never found anyone close to the
skills that Wasserman possessed. Still, Goizueta could tell his stockholders that Coke broke even
27
on the investment.
Sony
A new experiment commenced when Sony took over Columbia (in 1991 renaming it Sony Pictures
Entertainment). Could a maker of electronics successfully marry a movie studio? The innovator and
seller of the Walkman, Trinitron TV sets, and everything else that was good in mass electronics
wanted to try to increase sales of its hardware by taking control of a 'software' company - Colum-
bia. Sony had no comparative advantage in Hollywood movie-making, but it had now acquired
hard assets such as a movie and television studio lot, and a library of nearly 3,000 movies and
23,000 television episodes. However, through the early 1990s, Sony was unable to turn this Hol-
lywood studio into a money-making operation. Its Betamax technology lost in the battle to Mat-
sushita's VHS, and by November 1994, Sony wrote off nearly $3 billion. Thereafter, Sony simply
turned to operating a movie studio. This policy - letting Hollywood be Hollywood in Wasserman
media conglomerate fashion - by 1997 paid off when Sony Pictures finished as the top-grossing
studio in Hollywood. Hits included Jerry Maguire (1 996), My Best Friend's Wedding (1 997), Men in
28
Black (1997) and Air Force One (1997).
The faceless (and publicity-shy) Sony corporate executives in Tokyo at first could not find a
studio head to turn out hits. Initially, Sony spent $700 million to acquire the services of studio exec-
utives Jon Peters and Peter Guber. But with no hits, Peters left in May 1991 and Guber in Sep-
tember 1994. Successor Mark Canton left in September 1996 before anyone realised he had
engineered a comeback. In 1997, with Canton's successor, John Calley, Sony reached $1 billion in
North American revenue from box office in record time, only the second studio in the system to
reach that figure. (In 2004 Calley was still running the studio as Wasserman might have advised
him.) Calley inherited Jerry McGuire, and counted up Sony's earnings from the record 1997
summer. Here seemed positive proof that simply staying in the Big Six would, in the long run, mean
vast profits for some manager. To be sure, neither Canton nor Calley were perfect. When Canton
trumpeted a three-picture acting-plus-producing deal with actress Alicia Silverstone soon after she
vaulted to fame in the 1995 hit Clueless, Calley had to live with the dud Excess Baggage (1997)
that the deal produced. But Calley proved he had the skills to make Sony Pictures Entertainment
- 29
into a studio success story at least in the short run.
But short-term success cannot predict long-term profitability. In May 2002 Sony's blockbuster
Spider-Man earned a record-shattering $114 million in its weekend debut. This seemed to be a
turning point for the studio. Fuelled by big changes in the distribution of movies and a marketing
machine so potent that it could spend more than $100 million in just three days, Spider-Man
trounced the initial weekend grosses a year earlier by Warners' Harry Potter and the Sorcerer's
Stone. Calley did change one Wasserman rule; his early May premiere beat the other major stu-
dios to the Memorial Day summer season starting line. But otherwise Calley simply followed what
Wasserman had taught all in 1975 - make a hit by making a movie with unusually broad appeal -
teenagers and young adults - while at the same time winning good notices from critics who had
long been harsh on Hollywood's event-and-franchise movie trend. 'It's kids taking their parents to
the movie,' offered a father standing in line at 1 1am. Calley copied Spider-Man's romance-plus-
action formula from Titanic. He enlisted a raft of 'promotion partners' with their own advertising
campaigns, and Spider-Man toys and paraphernalia clogged toy stores and market aisles. An image
30
of Spider-Man greeted Yahoo home-page users.
By 2004 Sony Corporation had long stopped using the word synergy to justify owning Sony
Pictures. Sony executives and Calley held their own by not overextending the studio as did the AOL
Time Warner merger and Matsushita, Seagram and Vivendi did with Wasserman's Universal. Sony's
solid core in the electronics and games businesses gave it overall profit results with a steadiness
that its rivals lacked. As the new century began, all three main legs of Sony Corporation were doing
well. The company's movies, notably Spider-Man, had been successful at the box office; demand
for consumer electronics was steady; and PlayStation 2 game consoles were selling well. But these
positive threads seemed only coincidentally connected. There was no evidence that enthusiasm for
Spider-Man bolstered anything other than movie ticket sales, or that the film's release on DVD did
. . . ..
286
I
sales of Sony's disc players any good. In 2004 Sony's chair Nobuyuki Idei worked well with Calley.
'It took nearly 10 years since we acquired the different culture', Idei said about the former Colum-
bia studio, 'before we started talking positively to each other'. The great hardware plus software
experiment - as I write in 2004 - continues.
Notes
1 . Variety, 26 January 1 999, pp. 70,72, 74, 76, 78.
2. The New York Times, 2 1 August 1 997, pp* A30.

3. Stephen Faber and Marc Green, Hollywood Dynasties (New York: Delilah Books, 1984), pp. 276-9.
4. Daily Variety, 23 April 1993, p. 8.
5. The New York Times, 29 March 1 958, p. 23; The New York Times, 3 1 July 1 959, p. 24; Variety,
6 January 1960, p. 55; Variety, 2 March 1960, p. 3; Variety, 31 August 1960, p. 3.
6. Variety, 31 January 1960, pp. 3, 38; Variety, 17 August 1960, p. 3.
7. Variety, 22 March 1961, p. 4; Variety, 26 January 1999, pp. 70, 72, 74, 76, 78.
8. Variety, 1 3 June 1 962, p. 1 ; The Journal of the Screen Producers Guild, September 1 966, p. 6.
9. Variety; 20 March 1966, p. 45.
1 0. The New York Times, 1 9 January 2004, p. A1 9; Variety, 26 January- 1 February 2004, p. 40.
1 1 . Variety, 6 April 1966, pp. 3, 24; Variety, 26 January 1999, pp. 70, 72, 74, 76, 78; Faber and Green
(1984), pp. 266-9.
12. Variety, 13 January 1967, p. 5.
13. Variety, 1 1 September 1974, pp. 3, 26; Variety, 26 January 1999, pp. 70, 72, 74, 76, 78.
14. Box Office, 4 November 1975, p. 3; Variety, 28 August 1974, p. 3; Variety, 16 October 1974, p. 28.
1 5. Variety, 1 2 February 1 975, p. 3.
1 6. Variety, 26 January 1 999, pp. 70, 72, 74, 76, 78.

1 7. Too much has been written about the Begelman affair, which was uncovered by the investigative
journalism of David McClintick, which became Indecent Exposure (originally published in 1982, and
available in 2002 from HarperBusiness of New York). See in particular pp. 26, 49, 53-4, 134, 219, 265,
297,317.
1 8. McClintick (2002), pp. 220, 304.
1 9. The New York Times, 4 October 1 977, p. 55; The New York Times, 5 February 1 978, p. 55;
The Washington Post, 7 February 1978, p. A1

20. Fortune, 28 August 1 978, pp. 39-42; Financial Times, 30 September 1 979, p. 1
21 . Variety, 1 July 1 98 1 , p. 42; The New York Times, 20 May 1 984, p. C 1 7.

22. Variety, 23 June 1 976, pp. 1 , 30; The Wall Street Journal, 20 January 1 982, p. 1
23. The New York Times, 24 January 1982, Sunday, Section 3, p. 1; New York, 1 February 1982, pp. 11-12;
The New York Times, 23 June 1 982, p. D4; Variety, 20 January 1 982, p. 1
24. Financial Times, 23 January 1 982, p. 21
25. The New York Times, 19 January 1982, p. A1; Variety, 16 February 1983, pp. 5, 36; Variety, 14
November 1984, pp. 3, 36.
26. The New York Times, 5 July 1 986, p. 33; American Film, October 1 986, pp. 39-41 ,
43-5, with
quotations on pp. 40 and 41 . Quotation of overseas percentages made at board meeting of the
American Film Institute on 18 June 1986. The author served on the AFI board 1986-8.
27. Business Week, 1 February 1982, p. 27; Variety, 7 April 1982, pp. 3, 36; Vanity Fair, April, 1988,
pp. 96-102, 155, 157-8, 160-6; Variety, 25 May 1988, pp. 7-9; Variety, 18 May 1988, pp. 7-9, 30;
Variety, 26 January 1999, pp. 70, 72, 74, 76, 78.
28. The Wall Street Journal, 26 May 1998, p. B1 1; Variety, 21 November 1994, p. 7; Nancy Griffin and Kim
Masters, Hit and Run (New York: Simon & Schuster, 1996), on the early Sony years; 'Columbia Pictures',
Tracy Stevens (ed), 2007 International Motion Picture Almanac (New York: Quigley Publishing, 2001),
p. 637. Here I venture into contemporary history, but refer the reader to a snapshot of the industry at
the end of the twentieth century: Benjamin M. Compaine and Douglas Gomery, Who Owns the Media?
(Mahwah, NJ: Lawrence Erlbaum Associates, Inc., 2000), pp. 359-436.
29. Variety, 28 July-3 August 1 997, pp. 4, 72; The Wall Street Journal, 1 2 April 1 999, pp. A1 A1 ,
5; Variety,
24-30 November 1997, p. 29; Film International Journal, October 1997, p. 8; The Wall Street Journal,
10 November 1997, p. BU; Japan Update, November 1997, pp. 12-13.
30. The Wall Street Journal, 6 May 2002, pp. A1, A4; The Wall Street Journal, 25 June 2004, pp. B1, B3.
31. The New York Times, 25 July 2002, pp. W1 W7;
, The New York Times, 3 May 2004, pp. C 1 C 5.
,
21 ll
Industry Advocate: Jack Valenti
In the tradition of Will Hays and Eric Johnston, the major studios continued to collude on common
issues - most notably industry self-censorship and opening new markets. But this became more and
more difficult as the major studios fashioned themselves into media conglomerates or joined exist-
ing ones. From 1966 to 2004, as the studio leaders changed, one man retained his job: Jack Valenti.
Valenti came on board as head of the MPAA in April 1966 when Lyndon Johnson was president,
and Warners was still headed by a Warner brother. By 1 July 2004, the date of the announcement
of Valenti's replacement, former Secretary of Agriculture Dan Glickman, Johnson had been dead
for more than three decades, Time Warner was one of the world's largest media conglomerates,
impolite language was omnipresent in public discourse, and Valenti - the 5-foot, 7-inch titan who
invented the US version of the movie ratings - had long been Washington's highest-paid lobbyist.
Before Valenti took the job, others reportedly considered for it included Adlai E. Stevenson and
Richard M. Nixon, and among his suggested successors has been a politically adroit movie fan
named Bill Clinton. For years, Valenti avoided grooming any potential successor, and when he
retired in July 2004, a shadow loomed over Glickman. Would Glickman ever be able to live up to
a legend? 'I think there won't ever be another like him because one of the reasons why he is so
credible in his advocacy for the entertainment industry is because he is so personally theatrical,' said
Hilary Rosen, long Valenti's counterpart for the recording industry. 'He's a showman himself. He's
his own kind of P. T. Barnum, and think he made people

I in Washington feel like they were touch-
1
ing the business more than they would have with the typical head of a typical trade association.'
Valenti's first task was helping to negotiate whether Richard Burton could utter the words,
'Hump the hostess' in Who's Afraid of Virginia Woolf? (1966). In 1968 he and Wasserman used the
British ratings system as a basis for a new US system that replaced the outdated 1930s-era Produc-
tion Code. All parties went along with the change because Lew Wasserman brokered the deal.
Thereafter, Wasserman and Valenti weathered the advent of the videocassette recorder, and changes
in the financial relationships between movie studios and television networks. Through the years,
Valenti took his orders from Wasserman. In the early 1980s, for example, Valenti - as did Wasser-
man - denounced the videocassette recorder as 'a parasitical instrument', then later back-pedalled
as video sales soared (videos and DVDs now account for about 40 per cent of a film's gross receipts).
His secret, beyond having Wasserman there, was his theatre, a plush screening room at the associ-
ation's headquarters, two blocks from the White House. Around the nation's capital it became the
place to see a movie, well before it was released to the general public. Valenti always tastefully
INDUSTRY ADVOCATE: JACK VALENTI 289
catered screening events and kept the audience to seventy-five, and so powerbrokers who did not
have the time to go to a lot of movies, got to combine what they thought of as work (shmoozing)
with going to a movie, and take their families, too. No lines, and bragging rights to having seen the
next blockbuster weeks before its national opening were the prizes handed out to a select few.
Valenti regularly played host himself for members of Congress, and then when the time came for a
crucial vote or hearing he always had easy access. From the 1970s on, he was considered the top
2
lobbyist in the nation's capital while hardly representing the nation's largest industry.
From 1966 to 2004, Valenti successfully held off all regulations, expanded the system's power,
and made the system far stronger than it was during the so-called Golden Age under Will Hays.
He had the uncanny skill to work well with Republicans and Democrats. As a protege of Demo-
cratic President Lyndon B. Johnson, it was thought that in 1980, when conservative Ronald Reagan
entered the White House, doors would be closed to Valenti. But Lew Wasserman had been
3
Reagan's former agent, and Valenti never lacked access.
For members of Congress of both parties, Valenti was able to deliver movie and TV stars for
appearances during tight election races. With Congress and the president covered, Valenti and his
studio clients continued to dominate world film and television markets. For decades he gained
international trade advantages by working with both Republicans and Democrats. While the public
thought of Valenti only as the master of the agency that imposed ratings, his studio bosses knew
it was Valenti - with Wasserman at his back - who buttered up the government, mediated intra-
4
studio system conflicts, and generally made all the studios better off in the end.
Valenti: Life as Training
How did such a person become so skilled a politician in this unique job? Valenti certainly came to
his job via strange circumstances and serendipity. Jack Joseph Valenti, the grandson of Sicilian
immigrants, was born into a working-class family in Houston on Labor Day 1921 . His father worked
as a clerk at the Harris County tax assessor's office; they lived in a little wooden bungalow near the
railroad tracks, then as now on an unpaved street bordered by open drainage ditches, in a neigh-
bourhood populated predominantly by Greek immigrants. According to family lore, by 1924
Valenti was reciting nursery rhymes and thereafter reading voraciously. 'When was I a small boy,
10 or 1 1 years old, my great goal was to be a lawyer,' Valenti told a reporter. 'I used to go around
to political rallies and tack up posters when Percy Foreman ran for district attorney. He lost and
then became the greatest and most famous American criminal lawyer. Big shaggy hulk of a man.'
He admired two legal giants of his era, Louis Nizer, who was general counsel of the MPAA, and
Washington, D.C. -insider Edward Bennett Williams, who for many years negotiated Valenti's per-
5
sonal contracts.
Valenti was a movie fan par excellence. In a 1997 interview, he had this to say:
When I got out of high school at three o'clock each day, I went to work giving away movie passes and
hanging up posters in barbershops and drugstores for coming attractions at the Iris or the Texan or
290
I
the Ritz theaters in downtown Houston. Unfortunately, when graduated

I I didn't have any money to
go to college, so I worked full-time at the Iris as an usher and a janitor and a popcorn maker and a
ticket taker and a general handyman. I led a monastic life. Then, when was I finally able to start at the
University of Houston, I kept my job and went to school from six-thirty to nine-thirty every night. It
took me seven years to get my undergraduate degree, but movies stayed on my mind all that time in
the sense that I grew up in movie theaters; I must have seen hundreds and hundreds of movies. I loved
6
the cowboy stars: Buck Jones, Ken Mayna/d, Hoot Gibson. God, I loved 'em! Of course!
After a non-elite education in Houston, Texas, he served in World War II, and returned and used
the Gl Bill to obtain an MBA from the Harvard Business School, and start an advertising/public
relations firm in his native Texas. As his father was a clerk in the county courthouse, he was
'brought in contact early' with political figures. Valenti would run errands for campaigns, all the
while reading about the great barristers of antiquity and discovering, as he pronounces it to a
reporter, Greek 'lit-ra-toor'. He worked for the then dominant Democratic Party in Texas, and
eventually met Senator Lyndon Johnson. On 22 November 1963 Valenti was in the Dallas motor-
cade when President John F. Kennedy was killed; his patron Johnson became president. Valenti
was seven cars behind Kennedy, and was whisked off in Air Force One to Washington. 'The new
President ordered me aboard Air Force One and hired me that day as his special assistant,' Valenti
7
recalled in a 1998 interview.
Jack Valenti as a young White House assistant

about to take over the MPAA
Of his LBJ training, Valenti wrote, 'I bring you one asset: Loyalty.' His mother had taught him
to take abstract issues and humanise them. LBJ would often say about some speech: 'I want it
Valentiized! I want it made human!' Valenti stayed by Johnson's side until wooed by studio bosses
-who had not been able to agree on a replacement for Eric Johnston, who had died in 1963. He
got a visit from Lew Wasserman during the spring of 1966. Valenti later remembered: 'Of course,
when your office is next to the President; you get to meet everybody.' That included Wasserman.
Valenti recalled:
My office was right next to the president's, and to get into the Oval Office you had to go through my
office. All the moguls came to the White House, and that's how I got to meet Lew. [He] came into the
White House and said to me want you

'I to be the leader of our industry; the job is open, and [I] want
you to do it.' I turned him down three times because I didn't feel like I should leave the president. But
Lew persisted. He said, 'You know, this [job at the White House] is a temporary job, and you have to
leave when the Sun King [LBJ] leaves.' He said: 'What do you want to do with the rest of your life?'
8
Wasserman had him - just another deal.
In April 1966 Jack Valenti became the third head of the MPAA, and one can really mark the
start of the modern Hollywood studio system with his appointment. He - with Wasserman's help
- did whatever was necessary to make the Hollywood studio system far stronger than it had been
under his predecessor and even under Hays. Even his enemies could appreciate his considerable
skills. In one-time Paramount studio boss David Puttnam's words: 'He is a brilliant and indefatiga-
ble lobbyist for the American film industry.' 'He's bright, quick, extremely articulate and he has
great intensity,' recalled a former nemesis, FCC chairman Charles Ferris. 'Those are all the ingredi-
9
ents of a true professional.'
From the start, Valenti knew where the studio system power lay. He had cultivated Johnson as
his patron and he used the same skills to cultivate his new patron, Lew Wasserman, whom Valenti,
in later years, habitually referred to as 'the tallest redwood in the movie forest'. Before anyone else,
Valenti understood that the modern Hollywood epoch belonged to Wasserman. And Wasserman,
as analysed in chapter 1 5, was determined to forge a more potent connection with Washington
than the industry had had in the past. And he did. In 1966 Wasserman gave Valenti his orders: first
10
lobby to fix the collapsing Hays Code and then expand the studios' global markets.
The Hays Code was his first test under fire. On 1 November 1968 Valenti announced a 'vol-
untary film ratings system of the motion picture industry' to be overseen by the MPAA's Rating
Board. The calls for government regulation quickly died down. Valenti's rating system of G, M, R
and X changed somewhat over time (M became PG, which split into PG and PG-13, while X
11
became NC-17). He devised a nearly identical TV rating system in the 1990s.
According to Richard Heffner, the chairman of the Rating Board between 1974 and 1994,
Valenti always turned to Wasserman when a crisis came up. So, for example, on 22 April 1982
Heffner and his Rating Board colleagues saw the movie Poltergeist, produced by Steven Spielberg,
292
I
and gave it a unanimous R, a rating that greatly narrowed the potential audience and therefore
profits. As Heff ner said in an oral history interview:
When I got home, there was a message from jack Valenti to cal Nm first thing in the morning. I caled
. . . [and] he begged me to reconsider. MGM was at that time in dke financial straits, and the think-
ing was if MGM didn't get a PG for Potterg&st. it wasn't going to be puled out of its financial doldrums,
it would go down the drain, it would not be able to contribute its dues to the MPAA. Anyway, he said:
Go back and look at it again, Dick, please.'
Heffner said that Valenti also asked him to go to MGM following the re-screening, to give the
decision to MGM's top executives, and to Spielberg himself. Once again. Heffner and the board
voted for an R rating. He went to MGM and reported the. Then in stepped Wasserman. 'Everyone
knew Jack Valenti was Lew Wasserman's man.' Heffner recalled. Spielberg, a Wasserman protege,
meanwhile, argued that the movie should be PG because 'the film is all threat and fantasy, no
reality ... no language, no murder, no nudity, no sex'. Heffner recalled. Heffner told Spielberg that
if there were another rating between PG and R - one that restricted younger children from seeing
the movie unaccompanied - he would have thought it appropriate. Spielberg drove him to the air-
port, and stated according to Heffner 'Listen. I want you to know that I know you need another
rating. I'll get that for you.' Heffner was sceptical, but Spielberg went to Wasserman and there
quickly emerged a new category, PG-13 (parents strongly cautioned). MGM executives also met
with Wasserman, who recommended another appeal. By a vote of twenty to four, the Rating
Board agreed with MGM and the R was changed to a PG rating. 12
Valenti commissioned study after study to back his claim that parents loved his ratings system.
His researchers seemed to always find that 80 per cent of parents found the ratings system "very
or fairly useful'. Valenti had famous defenders, including stars when needed. In August 1999 long-
time Valenti fnend Kirk Douglas wrote a letter to the editor of Variety:
I am astounded at the attack on the current voluntary movie rating system and the attack on Jack
Valenti. When Jack Valenti became the third president of MPAA n 1966. a vacuum existed The Stale,
City and County Censorship Boards rated movies and enforced the ratings laws and ordnances. Imagine
what would happen if that existed today! Valenti counteracted with a movie industry serf-regulation
system and a classification ratings design. The enlarged freedom of the screen and made a pledge to
parents to enable them to select movies for their children. AM these government boards are gone. We
don't want them to return. Valenti has been the sole defender of the movie industry in Washington.
Recently, he fought the concerted efforts m Congress to give the Federal Trade Commission power to
design a new ratings system. Do you want that? I've been acting, producing and rjrecting for over
half a century and can I testify that thanks to Valenti' s vision, the screen is freer today than it has ever
been. I have known Valenti since he first came here. I have admired his wisdom, tenacity, and his
energy that has taken him a* over the world — many times — to battle rxracy and work for the nterest
INDUSTRY ADVOCATE: JACK VALENT! |
293
of motion pictures and television. We ought to be giving Valenti a medal instead of having to read
attacks on him by a few. Oh yes, there seems to be an absence of criticism by the folks for whom the
13
movie ratings system was intended: parents.
The Skilled Lobbyist

The highest paid lobbyist in Washington, D.C. through the 1990s was not the representative of
some military-industrial empire but the man from the movies - Jack Valenti. And many would say
he is the most effective member of any special interest group. The whole studio system could fit
inside IBM and hardly rate as a significant profit centre. Valenti the lobbyist was able to use the
prestige and sparkle of the film business to extract favours and influence unparalleled in US his-
tory. Wasserman's chief assistant Sid Sheinberg stated bluntly in an interview:
Jack knows how to introduce the most right-wing Republican to the most left-wing Hollywood group.
. . . You get the feeling that he's their best friend, they're his best friend. He says they're doing great
things for our industry. They start out by saying, 'Do you know what a great job this man is doing for
14
your industry? If there's anyone who can get me on the phone at 1am, it's Jack Valenti!'
Valenti cultivated ideological foes with special fervour. '[Ultra-conservative Senator] Jesse Helms
has been an unbelievable friend to me on issues that are important,' Valenti said. Their affinity
stems from an MPAA screening, many years ago; it was a full house, with not a seat to spare,
Valenti recalled, and Helms' young grandsons were among the guests. 'I told them, "You sit with
me." We talked about movies, sports. I didn't chat with any of the senators. The next day, Helms
called me and said, "appreciate it so much.'" Indeed, according to a friend of Valenti, Helms told
him that day, 'You have my marker.' He had learned his lessons from LBJ and Lew Wasserman. 15
Valenti tried to explain his formula to The Washington Post: 'Figure out what is unique about
whatever it is you're trying to sell. And then say it over and over and over again.' Valenti never
forgot that simple concept. He also did his best to shed the image of the lobbyist. He sought to be
seen as a pundit. When he made public pronouncements he frequently spoke in terms of principle
(artistic freedom, or the First Amendment) and the public good, rather than of the economic
interests of his bosses. He cast the cloak of the creative community around management's shoul-
ders, and made himself a celebrity in the process. He never called in a favour unless absolutely
needed and always took care to praise his adversaries. Valenti's rhetoric was reminiscent of his
response, half a century ago, to another political figure: Lyndon Johnson. So much in Valenti's life
went back to LBJ, and the lessons he learned from him. Valenti stated over and over again that
everything he knew about politics he learned from LBJ. If it weren't for this stint he would not have
been offered the MPAA post, nor would he likely have had the political skills required to hold onto
that job for three decades. LBJ even 'asked Lew to take care of Valenti', according to one of
16
Valenti's long-time associates.
294 |
Translating the power of the studios into votes in Congress was Valenti's cardinal task. Every
lobbyist tries to court the representatives and senators whose votes he covets; Valenti was the con-
summate courtier. His phone number always had its red light on. Wasserman understood:
Jack had the pick of the pictures, and he'd match the guests to the pictures. He wouldn't invite far-
right congressmen to see half-naked women. A new president came in, and he'd put himself in the
center of the process of getting movies to, the president. He'd get so excited. He'd call Wasserman
and say: 'The President is going to Camp David! We've got to get him [fill in the latest Hollywood
17
hit]!'
In one interview, leaning forward in his chair, using his fingers to count, he laid out the precepts
he learned from LBJ and Wasserman.
Rule number one. You must answer the phone call of every senator and congressman who calls you
that day. Number two. When you get them on the phone you treat them with respect and deference,
because they're elected, and none of you guys ever ran for an office. Number three. Treat them all
alike. Republican or Democrat, rookie first-termer or herd bull [committee chair]. Number four. Break
your ass to see how fast you can do whatever it is they ask you to do. Number five. If you can't do it
18
don't shove the dagger in, don't draw blood. Do it gentry. Say no gently.
At the top of Valenti's list of studio issues was extending and making tougher the copyright laws
in the USA and around the world. Lew Wasserman had taught him the value of film libraries as the
basis of the studio system, and it became the common goal - and Valenti's job - to protect that
legal monopoly. So in January 2001 he issued one of his classic pleas in a speech prepared for the
International Trademark Association:
As the 107th Congress convenes, there looms the onrush of a collision between copyright, rooted in
the Constitution, illuminated by its huge value to the nation's economy, and the rowdy, assertive
babble of those who are determined to shrink and possibly exile the concept of copyright in order to
grab material without paying for it.
He made it seem like a congressman would be a traitor to vote against maintaining copyright
19
protection.
Valenti could cultivate Democrats easily and Republicans skilfully. He knew Ronald Reagan
loved the studios, and owed much to Lew Wasserman. Reagan assistant Michael Deaver knew this
as well. He said in 1990: '[Reagan] would talk [more fondly] about [his Hollywood days], much
more than about the Presidency.' When reporter Connie Bruck asked Wasserman more than a
decade later about his attempt to lobby Reagan, Wasserman replied, 'Most things in Washington
that are done are done quietly, because if you do it publicly, in the House or in the Senate, it can
be very difficult.' His implication was clear: Ronnie and I talked and he paid me back one. Robert
Daly, then the co-head of Warner Bros., who became Hollywood's chief negotiator in financial
interest and syndication delay - which helped the studios - recalled: 'The relationship between Lew
and Reagan was really the thing. I remember this meeting,' Daly continued, pointing to a framed
photograph of President Reagan with Wasserman, Valenti, himself, and three other studio heads.
'It wasn't to discuss the issue of the [fin-syn] rules, it was to bless [their continuation]. And Reagan
had a great line. He said, "If I had this much attention from so many studio heads, I never would
have run for office! "' Reagan then personally stepped in and overruled the FCC. The White House
issued a statement declaring that although Reagan still favoured 'vigorous competition', he sup-
ported a legislatively mandated two-year study. Reagan directed his Commerce and Justice Depart-
ments to immediately stop supporting the FCC, switch sides, and argue that the administration
favoured Hollywood's position. Wasserman would not see the rules changed until after he had sold
20
out.
Valenti the Diplomat
In 1981 Valenti acknowledged that his six members - Disney, Sony, Paramount, Fox, Universal and
Warner Bros. - each tried to 'kill each other every day in the marketplace. It's the most virulently
competitive group of companies I have ever seen in my life.' He, however, only rarely noted pub-
licly that on many issues, through the MPAA, they worked closely together. 'They are united fight-
ing against barriers governmentally imposed all around the world,' Valenti stated in a rare moment
of candour.
I spend about 65 percent of my time on foreign problems. From 45 to 48 percent of all the theatrical
revenues of the motion picture industry in America come from markets beyond the rim of our shores.
We're in about 1 1 5 countries. The American film literally dominates world screens; there is no known
duplicate for the American film. I am really a small State Department.
Valenti declared: 'Every day, cables come from all over the world' containing news that could affect
the American motion picture and television export industry, which has a sales volume measured in
the billions of dollars - and he proudly announced that his group brought in millions a year 'in sur-
plus balance of payments'. This was in an era when the US balance of trade was continuously
negative. 'Every country is looking for two things: a national airline and a movie industry. It's easier
21
to get an airline.'
Valenti made sure that the MPAA had offices around the world to assist the studios' inter-
national distribution offices. Distribution, the least visible part of the Hollywood studio system, is
as important as any other part - and is perhaps the most essential. Valenti made sure it hit no
snags. When asked about his greatest achievement in his three decades at the helm of the MPAA,
Valenti had no doubt: 'Making sure that the American movie can move freely around the world,
and to let its fate rests not with governments or [foreign] film industry people but with audiences.'
When asked if he would not agree that Hollywood has a huge competitive advantage when it
comes to showing its films throughout the rest of the world, Valenti insisted that the reason Hol-
lywood exercises such a huge influence over cinemagoers has nothing to do with budgets or mar-
keting or stars. 'What it comes down to is: are you telling a story that people like. Is your dramatic
narrative compelling? Nobody has a monopoly on ideas. Nobody can bully the audience.' But
someone could make sure that foreign governments did not put up barriers to prevent audiences
22
paying to see Hollywood studio films.
He worked diplomacy at warp speed, for example, on 1 December 1*^97 Valenti arrived -
according to his schedule released by the MPAA - in Singapore as the first stop in an unprece-
dented two-week visit to Asia. Two days later he was the keynote speaker at the CineAsia Con-
ference to receive the 1997 CineAsia International Distinguished Service Award. Three days later,
after constant meetings, he departed for his first trip to Vietnam. While in Hanoi, Valenti met with
Deputy Prime Minister Nguyen Manh Cam, Culture Minister Nguyen Khoa Diem and Nguyen Van
Su, chief of the national film import and export organisation in Vietnam. Valenti pleaded for strict
implementation of the recent copyright accord between the US and Vietnam, as well as an open
market for studio system films, videos and television programming. Two days later, he departed
Vietnam for Hong Kong to meet with Tung Chee Hwa, chief executive of the Hong Kong Special
Administrative Zone of China, and other leaders. In Hong Kong, Valenti was the guest of honour
at a reception hosted by US Consul General Richard Boucher. Then after those two hectic days in
Hong Kong, on 8 December Valenti travelled to Beijing where he met with several key Chinese
ministers to broaden trade between the studios and China. Valenti concluded his trip with a visit
to Kuala Lumpur where he met with Malaysian Prime Minister Mahathir to discuss joint efforts
between the Malaysian government and the studios to step up enforcement against film piracy.
Prior to his meeting with the prime minister, Valenti was feted at a dinner hosted by former US
ambassador to Malaysia, Tun Omar. Ambassador Omar, an old friend of Valenti from the LBJ days,
personally shepherded Valenti on his trip to Kuala Lumpur. After meeting after meeting, dinner
after dinner, in less than two weeks he had done Asia, and was back in his Washington office -
23
job well done. Quite a job!
He dealt nation by nation. In April 1999, for example, Valenti publicly told of his continuing
frustration at being unable to gain full, complete and free access to the vast market of China.
Despite his best efforts, China still refused to give Hollywood full access. 'There were no pledges,'
Valenti stated in an interview held in Shanghai on 31 March 1999 when asked if Chinese officials
would allow more Hollywood films to be shown in China. Valenti had proposed that Chinese offi-
cials allow seventeen US films to play each year; China permitted only ten. Chinese officials, includ-
ing Premier Zhu Rongji, also refused to make any commitments to allow US firms to build theatres
in China. Despite his failure to open up the Chinese market, Valenti did promise to back a Chinese
film festival in the USA. And we can be sure his successor at the MPAA will continue Valenti's quest
24
to 'open up China', so his studio members can take advantage of their considerable power.
After Valenti?
Valenti adapted as the media world changed during the 1990s. The media conglomerates that
controlled many of the studios were growing ever larger, and the media world was consolidating
into fewer players. Robert Daly, who left Time Warner in 1999 to become chairman of the Los
Angeles Dodgers, recalled that in the 1980s, when he and Terry Semel headed the Warner studio,
'It was, really, the last time there were real studio heads. It was so different from today, when stu-
dios are such small parts of such big companies.' In those days, Daly continued, the studios and
the networks were enemies. But, once the fin-syn rules were finally abolished in 1994, the studios
(or their parent companies) began to buy networks. The MPAA's member companies were no
longer the homogeneous, if fractious, group they had once been. 'It was easy when we had a
common enemy,' Daly said. 'But it got to a point in the last eight or nine years that I recommended
to Jack not to get us all in the room at the same time.' By the 1990s the only uniting 'enemies'
25
that all MPAA members had in common were film pirates and copyright violators.
Valenti told Congress over and over again: 'We produce for this country huge amounts of sur-
plus balance of trade at a time when the country bleeds from trade deficits.' Valenti continuously
called on Congress to take special note of an economic study showing that the movie business and
other copyright-based industries were the country's greatest asset. As the twenty-first century
commenced, Valenti stated:
This confirms one of the great truisms of this age. We are no longer in a society that lives off of goods
that people make with their hands. We're now in the intellectual century. This means from Congress'
standpoint, if it does anything to shrink, diminish or enfeeble copyright, which is the engine that drives
all of this, it inevitably diminishes the economy of the United States.
In the 1990s it seemed that Valenti would go on forever. In February 1996 Daily Variety headlined:
'Valenti Reupped Forever', a reference to his bosses signing him to a year-to-year 'evergreen' con-
tract that extended his tenure in perpetuity. Wasserman was gone, and Valenti looked to retire.
But, lacking Wasserman's decisiveness and authority, it took two years for the MPAA to come to
26
an agreement on a successor.
Finally, on 1 July 2004 Hollywood's most powerful lobbying group announced it had selected
as its new chief Dan Glickman, a former Democratic lawmaker from Kansas and agriculture sec-
retary under former President Bill Clinton. Glickman, fifty-nine, had lobbied on behalf of Disney,
and his son was a movie producer. He took over formally on 1 September 2004, when he stated
that his priorities would be fighting piracy and guaranteeing Hollywood's ability to market and sell
films overseas - just like Valenti. Valenti confirmed Glickman's salary would be 'in that alluring
range of seven figures'. Glickman was replacing a legend: a very difficult task.
. ;
Notes
1 . The New York Times, 1 1 April 2004, p. 1 3.
2. The Los Angeles Times, 3 September 1985, part 6, p. 1; The New York Times, 24 November 1982,
p. A20.
3. In an under-reported series of meetings at the White House, Wasserman spoke privately with the man
he had made rich, Ronald Reagan, and convinced the President to rule in favour of the studios.
4. The Washington Post, 1 4 July 1 991 , p. W1 0.

5. The Washington Post, 14 July 1 991 , p. W1 1 .
6. Texas Monthly, June 1 997, p. 28.
7. The Washington Post, 8 July 1981, p. C1; Film Comment, January-February 1990, pp. 12-14; Billboard,
26 June 1 993, p. 9; Daily Variety, 1 5 June 1 993, pp. 5, 43; The Hollywood Reporter, 1 5 June 1 993,
pp. 3, 10.
8. The Hollywood Reporter, 22 September 1 994, p. 1 ;

Variety, 27 April 1 966, p. 1 4.
9. The Los Angeles Times, 3 September 1 985, Calendar, p. 1 ; The Independent (London), 25 June 1 998,
p. 15; The National Journal, 17 December 1994, p. 2948.

10. Lew Wasserman Oral History, LBJ Library, done by Joe Frantz on 21 December 1973, p. 33; The
Hollywood Reporter, 22 September 1 994, p. 1
11. The Baltimore Sun, 24 January 1 997, p. 2A.
12. The New Yorker, 1 3 August 2001 , p. 59.
13. Daily Variety, 1 5 November 1 996, p. 5; The Washington Post, 6 November 1 988, p. G 1 PR Newswire,
;
21 October 1998, NEXIS; Daily Variety, 24 August 1999, p. 15; Variety, 27 September 1999, p. 6.
14. Variety, 21 April 1966, p. 1 . To understand Valenti's style, I interviewed Joseph Laitin, who worked with
Valenti in the LBJ White House. I also used material from the National Archives and the presidential
libraries of LBJ, Richard Nixon, Gerald Ford, Jimmy Carter and Ronald Reagan, made a close reading of
the trade press, and conducted interviews with several former MPAA employees. See also Variety, 21
April 1966, p. 1, and The New Yorker, 13 August 2001, p. 46.
1 5. The New Yorker, 1 3 August 2001 , p. 48.
1 6. The Washington Post, 14 July 1 991 , p. 44; The New Yorker, 1 3 August 2001 , p. 42.
17. The New Yorker, 1 3 August 2001 , p. 45.
18. The Washington Post, 14 July 1991, p. W10.

1 9. The Hollywood Reporter, 23 January 2001 , p. 3.
20. The New York Times, 1 October 1 990, p. D1 ; The New Yorker, 1 3 August 2001 , p. 54.
21. The Washington Post, 8 July 1 981 , p. C1 ;

Daily Variety, 9 March 2001 , p. A5.
22. Toby Miller, Nitin Govil, John McMurria and Richard Maxwell, Global Hollywood (London: BFI Publishing,
2001), offers example after example of the power and influence of distribution around the world.
23. PR Newswire, 1 December 1997, NEXIS.

24. The Washington Post, 8 July 1981, p. C1; Daily Variety, 9 March 2001, p. A5.
25. The New Yorker, 1 3 August 2001 , p. 56; The Toronto Star, 1 2 November 2000, Sunday, Entertainment,
p. 1.
26. Film Comment, January-February, 1990, pp. 12-14; Billboard, 26 June 1993, p. 9; Daily Variety, 15 June
1993, pp. 5, 43; The Hollywood Reporter, 15 June 1993, pp. 3, 10; Daily Variety, 21 February 1996,
p. 1 ; The Washington Post, 8 November 2002, p. C3; The New York Times, 21 October 2003, p. B1
Variety, 29 March-4 April 2004, p. 16; The Washington Post, 24 March 2004, p. E2; The New York
Times, 30 May 2004, section II, pp. 1,14.
27. The New York Times, 2 July 2004, pp. C1, C3; The Washington Post, 2 July 2004, pp. El, E10.
22
Unions and Agents
The studio system in its modern form accommodated labour unions and thrived with them. Lew
Wasserman saw to this, taking the lead in labour negotiations from the 1960s to the 1990s. 'One
of his great strengths', said Ned Tanen, who worked under Wasserman, 'was his ability at the last
moment to stop a strike, to get the union and the companies together and bang heads'. Other
studio chiefs agreed with Wasserman: satisfied unions were a fact of life. The question, Wasser-
man explained to his associates, was how to view them: friend or enemy? The nice thing about
deciding that they were friends is that when you help your friends, they generally help you.
1
Wasserman knew things from the other side: he pioneered representation of stars and devel-
oped the role of the agent in the studio system. He was the legend who made James Stewart rich
and provided representation through his MCA, assuring basic rights for stars and directors. On the
agency representation side of the business, Wasserman formulated this aspect of the modern studio
system - by teaching young agents their lessons. Get the most stars under one roof; package them
to the studios; collect percentages from everyone.
But for unions and agents alike, the studios were always the centre of power and Wasserman
became studio leader only when he took over Universal. In 1962 he left agenting to others and
dealt with unions so there would be relative labour peace. No one could replace him, although
Michael Ovitz, modelling himself on Wasserman down to the dress code, tried, and while he gained
a reputation as a powerful leader in the 1980s, he knew that he had only the ability to make
agency deals. Labour unions could go on strike and Ovitz at his days at Disney in the 1990s proved
he did not know how to transfer his agent's skills to dealing with unions. He could learn some
things from Wasserman, but there was a limit to his skills. He simply could never keep that much
2
information in his head as required by the principle F. Scott Fitzgerald laid out.
Agents represented stars; unions represented the rest of the studio system's workers. Both
faced off against the massive media studio corporations. The leaders of the major corporations
had to deal with both groups, as Wasserman taught, balancing corporate interests with agency
and union power as two types of countervailing economic force. But while labour unions and
agents could affect individual deals and could strike for payments from their work as later sold in
the form of new technologies (residuals), neither could do much to counter the massive corpor-
ate power wielded by the conglomerates. Thus, both unions and agents constrained media con-
glomerates only on the margins. Their vitality highlighted the concentrated power of the studios
to operate together when faced with common problems - as the MPAA did on censorship, for
example. Unions and agents both constrained how these new massive media studio corporations
3
operated.
Labour Unions
Wasserman proved that while crushing unions was a strategy, a better one was to make offers so
that union members were satisfied and did not stop the studio system from operating. Unions and
guilds - founded in the 1930s and analysed in* chapter 14 - remained active, seeking a fair share
of the increasing revenues. Through the modern studio era, there was relative peace and contin-
uing union power in the system at a time when union activity declined in other industries. But while
unions remained relatively static, the guilds did not. One need only note the fact that, when on 10
March 2002 Martha Coolidge became the first female president of the Directors Guild of Amer-
ica, all four guilds were run by women. These guilds were seeking to be somewhat progressive.
None of the major studios were female-led. The traditional union of the non-star workers con-
tinued to be IATSE (or IA), headed by men, and studios still would sign a Basic Agreement with IA.
Just as the studios acted as one, the guilds and unions held together and faced off for guaranteed
wages, pension benefits and health insurance - all based upon the threat that they could strike to
gain a share of the extra, unexpected monies coming into the system first from broadcast tele-
4
vision, then cable television, home video and DVD revenues.
Unions are nearly all under IA, which is kept happy by the studios, who pay regular wage rises.
Wasserman had taught the studio leaders to see a wage increase, even if higher than desired, as
an insurance policy against labour unrest. A Basic Studio Agreement was signed regularly with IA
for its multitude of members: studio mechanics, script supervisors, projectionists, wardrobe atten-
dants, film editors, make-up artists, hair stylists, grips, studio secretaries, office workers, cine-
matographers, photographers, film technicians, sound, cine-technicians and TV engineers, motion

picture costumers, production office co-ordinators, accountants, studio electrical lighting tech-
nicians, set painters, scenic and title artists, motion picture screen cartoonists, set designers, and
model makers, story analysts, script supervisors, art directors and costume designers. (This list will
be surely out of date as soon as you read it as IA reorganises constantly as the technology of pro-
duction changes.) The Basic Agreement defined the hours in a working week, legal holidays, start-
ing times, rest periods and minimum wages. In both New York and Los Angeles the Teamsters are
the ace in the hole that keeps the studios from breaking the rules - the Teamsters alone could close
down a studio by not crossing IA picket lines. All studio-produced films must have the IA five-
5
triangled 'bug' at the end of the credits.
IA quietly keeps the system going, but headlines are generated when action is taken by the
four guilds (a higher-class name for unions): the Directors Guild of America, the Producers Guild
of America, the Screen Actors Guild and the Writers Guild. (The latter had the most strikes as the
writers were seen by studios as the least important of the four professions, and so regularly, about
every decade, the Writers Guild struck for greater creative participation and higher minimum
wages.) A person could use union minimums and protections, but still had to find a job on his or
UNIONS AND AGENTS 301
her own. The Basic Studio Agreement helped lA's members, but not the guilds'. The new studio
world was one for the four of casual (or flexible) employment. In the Wasserman era studios came
to rely upon a large and diversified labour pool, much of it employed on a short-term basis and
shifted from studio to studio as production schedules changed. The job-tenure of a major actors,
writers, producers and directors varied with the number of films in production. They prospered
when the studios were at full production, and suffered when studio leaders green-lighted fewer
6
films.
Casual employment effects, and collective bargaining relationships in the motion-picture
industry cut in two ways. First, as in the building and maritime industries, IA becomes responsible
for supplying competent workers as needed. Second, jurisdiction over jobs becomes a matter of
extreme importance, partly because administration of the bargaining agreement requires that prop-
erly qualified workers are hired for the kinds of duties specified in the agreement, and partly
because the number of jobs filled by the individual union has a direct effect on the employment
opportunities of its members.
Two underlying factors must always be considered. First, the studio system is a speculative one.
There is no formula for success, no way of knowing in advance whether a production will make or
lose money, no way of determining whether additional expenditures for talent, sets or publicity
will pay off. However, those who have in the past demonstrated an ability to make profitable
movies are likely to do so again in the future; from a studio's point of view, they are worth high
salaries because as individuals they mean box-office success. This gives the guilds their clout - as
long as their star members stick with the guild. Success depends not on the talents of any single
individual, but on collaboration among producers, directors, actors and writers. Under such cir-
cumstances it is difficult to establish clear and distinct lines of authority, and on occasion subtle
abilities are required to secure co-operation between contributors jealous of their individual spe-
cialities and reputations.

Second, the studio system has a flexible cost structure. For the studio, the high salaries of key
talent are fixed costs for the film or TV series, but the wages of IA workers are variable costs that
depend to a large extent on the amount of time spent in actual production. This means that while
even minor work slippages or delays can have major effects on costs, at the same time, as Lew
Wasserman taught, regular wage increases are negotiated with relative ease. If wages seem fair to
the IA workers, then they are willing to work as efficiently as possible to lessen shooting time. The
lone variable to disrupt these two factors - regular work and satisfactory wages - comes when
7
new revenue streams open up. This causes the high-profile disputes, strikes and walkouts.
Wasserman had already taught his key lessons of co-operation through a compromise with the
Screen Actors Guild (SAG). In 1952 Wasserman, as his MCA-Revue was entering television, hired
Ronald Reagan to host General Electric Theater. As discussed in chapter 1 5 (see page 206), he
secured a blanket waiver from Reagan, who was president of SAG, as the actors wanted to have
work, and secondary stars like Reagan were happy to move to television. But it must also be
remembered that as SAG president in 1959-60 it was Reagan who took the union on a five-week
strike in 1960 to gain residuals for older films shown on television. For settling the strike, SAG got
pension and health insurance rights, as well as securing residuals for its members for all films made
8
after 1 960 (see also chapter 1 4, page 1 95).
This was a classic case of union power as countervailing economic force. As long as the actors
stood together against the studios, deals always came down to a compromise. Lew Wasserman
was a master at this as he could figure in an instant what the trade-offs were.-And he set up the
model that would be worked out thousands 'of times. For example, sound technicians are not
allowed to set up lights, so grips have to be hired; if an afternoon's shooting lasts longer than six
hours between lunch and dinner, all IA members collect a meal penalty; business travel on Sunday
must be counted as overtime - paid at time-and-a-half - with first-class airfare. Unions and guilds
alike sought minimum salaries and working conditions to get their members as much as possible
from each job. One official stated the obvious: 'Let's face it. In the film business, everyone wants
to plead poverty - even the richest studios.' And studios know that infractions of the rules are not
taken lightly - union projectionists have refused to screen films without the IA bug. And woe
betide the studio that lists SAG- and agent-backed actors in the wrong order in a film's credits.
9
And so on.
IA officials always understood that its bargaining strength came from its complete coverage of
all the crafts involved in production. IA members were involved in every phase of a production,
from its conception through every aspect of its execution. That principle of complete coverage and
unanimity of purpose has been applied by the IA with ever-increasing success to each new tech-
nical form. At each stage of technical change, IA would assert its jurisdiction. This unity principle
was essential. In union there is strength, and when every branch of an industry is united, that
strength becomes considerable. Wasserman understood their leverage and was always willing to
pay. Other studio heads constantly complained that he was being taken for a ride, but that was
for show. They also understood leverage and were glad Wasserman was able to keep the long-
10
term peace.
But sometimes negotiations got tricky. For example, practices like closed industry rosters were
obvious signs of tension among the three geographically divided camera locals. No less a light than
two-time Academy Award-winning cinematographer Haskell Wexler recalled in a July 1 996 letter to
International Photographer how he had been a member of Camera Local 666, in Chicago, since 1 947.
Yet, when Wexler was offered a transfer to the newly opened Chaplin Studios in Hollywood in 1 958,
LA-based Local 659 refused him entry. As Wexler recounted in his letter to the magazine, considered
the bible of the camera craft: 'They [659] would not accept a transfer, even though IA bylaws had
procedures for transfers. I camped in IA President [Richard] Walsh's outer office for I don't know how
11
many hours, but I still could not get in.' Long negations were held and Wexler finally gained entry.
The Basic Agreement is still the foundation of the Hollywood unions. As Wasserman showed,
it was best to use this to obtain peace with IA, the largest union. So, for example, on 16 Novem-
ber 2002, IA and the studios successfully concluded negotiations for their Hollywood Basic Agree-
ment, and IA officers stated:

Much of our focus during these negotiations was on benefits. With the rising cost of health care in
this country, we believe we were able to maintain a level of health care benefits that our members are
accustomed to. And, the fluctuating stock market has been a concern in terms of retirement benefits
for our members, but we believe we have reached an agreement which will secure their future.
The studios knew that by settling negotiations early they could plan for productions in the future
and avoid a possible strike. The settlement was so routine that it was barely mentioned in the trade
12
press.
The guilds had less power than IA, a situation that has led to their involvement in several
strikes. There were two major strikes in 1960, both stemming from television revenues. In January,
the Writers Guild of America went on strike; in March, the Screen Actors Guild followed suit. Both
groups contended that they deserved part of the additional revenue from their films' sales to
television. As we have seen, the actors reached a compromise agreement, brokered by Lew
Wasserman, in April of that year. By June, screenwriters agreed to a similar settlement, also bro-
kered by Wasserman. From this point on, Wasserman routinely took a leading role in Hollywood
labour negotiations. His pre-eminent position was formalised a few years later when he was named
chairman of the studios' collective bargaining unit. But even Wasserman could not keep the guilds
13
off the picket lines when new revenue streams emerged.
Yet as a whole the guilds prospered. For example, the Writers Guild of America, East (with
headquarters in New York City), and Writers Guild of America, West (in Los Angeles), have nego-
tiated and administered Minimum Basic Agreements with major film producers and broadcasting
networks and stations, covering theatrical and television films, live and tape television, documen-
tary film, and radio. Members enjoyed the benefits, privileges and protections under the various
national Minimum Basic Agreements in effect in the field of radio, television and motion pictures.
By the 1980s the total membership was approximately 1 1,000. In 1985 the Writers Guild of Amer-
ica, East and West, joined sister guilds in the English-speaking countries of Great Britain, Canada
and Australia (and later New Zealand), in an affiliation that made this one of the few truly
international unions in the world. Members of each union may transfer automatically to the
foreign guild in whose jurisdiction they are employed. Writers could not be shut out of run-away
14
productions.
Over time, the writers came to realise their centrality in TV production and began to demand
more. For example, on 7 March 1988 the Writers Guild of America began a 1 54-day strike. As in
1960, the actors joined the writers, but this time the writers took the lead. The issue: payments for
shows repeated on cable TV. The studios were shuttered as IA and its Teamster allies would not
cross the picket lines. Yet in the long run it hardly caused a ripple in the studio's power base.
Studio leaders had backlogged products and the writers gained a small share, but nothing near
what they had demanded. The studio leaders - buttressed by their new conglomerate power -
simply outlasted the guilds. It was a new era. Those who ran the new media conglomerates - like
15
Rupert Murdoch - were not as benevolent as Wasserman, and held the writers in line.
Outside of money, no topic generates more discussion in Hollywood than credit: whose names
appear up there on the screen, how big and in what order. Through the conglomerate era,
Wasserman and company were more willing to give away credit than money. But by the early
twenty-first century, with credits running ten minutes or more, it seemed that this had got out of
hand. Consider the case of the Producers Guild as it began to struggle with the problem of bogus
producing credits. 'It's embarrassing when you see 10, 12, sometimes 14 people credited as pro-
ducers on a movie,' said Mark Gordon, a producer on Saving Private Ryan (1998). 'It's become a
joke.' There were executive producers, line producers, co-producers and co-executive producers.
'Sometimes studios have a tough time holding the line,' said the producer Laurence Mark,
particularly when a negotiator can say, 'Look, rather than giving this guy X dollars, let's give him a
producer credit.' A major director or a star, in extreme cases, can say, 'Oh, to do this movie I need to
have a producer credit for my hairdresser.' Unfortunately, to the producers actually doing the job, it's
a tad unseemly.
The issue of credits was among the chief flash points in the 2001 contract talks between writers
and the major studios. Many writers have long begrudged directors who, seizing on the conven-
tion that a director is a movie's true 'author', have taken 'Film by' credits and made them as
common as car chases. One result of those negotiations was that the writers, directors and others
16
agreed to form a group to thrash out all sorts of credit issues.
As the twenty-first century began, this relatively peaceful climate between studios, and unions
and guilds - perfected by Lew Wasserman - still seemed in place. Unions and guilds will continue to
seek a share of the new monies that the studios make from films every time a new form of presen-
tation arises. For the media conglomerate studios, the revenues from these innovations represent
found money, flowing directly to the bottom line. But unions will inevitably seek their fair share. In
2001 the Writers Guild of America, representing more than 1 1 ,000 writers, went into battle to try to
win a bigger chunk of DVD revenue for its members as part of contract negotiations with the studios.
Writers and studios reached a compromise. This has been the pattern in the past; whether it will con-
17
tinue in the face of challenges by anti-union owners like Rupert Murdoch remains to be seen.
Agents
The history of the modern Hollywood studio system is also the history of the rise of the agent. The
stars, directors and writers all had agents as well as guild membership. All knew that Lew Wasser-
man, pioneering agent, changed Hollywood forever as he created sweet deal after sweet deal for
his clients. But he quit in 1962 and others took MCA's place. Michael Ovitz, for a time in the mid-
1980s, seemed to have reconstructed MCA - by following Wasserman's methods. He convinced

the world that he was the powerbroker of Hollywood. He was not, and in the mid-1990s he was
hired by his friend Michael Eisner at Disney to help run the studio, and failed after eighteen months
- and then disappeared from the Hollywood scene. Wasserman and his followers could not make
Alfred Hitchcock's The Man Who Knew Too Much, packaged by agent Lew Wasserman
a star, only create a lucrative deal for a client. Agency power in Hollywood has been overrated,
save when MCA after World War II had all major stars and directors under contract. Michael Ovitz
had but a tiny portion of MCA's postwar power. 18
Wasserman got his opportunity with the De Havilland case of 1945. In 1943 actress Olivia de
Havilland challenged Warners when her seven-year contract was completed. She had become a
big star on a loan to Selznick with Gone with the Wind, but this made no difference to Jack
Warner when De Havilland returned to the Warners lot. On 13 August 1943, while on loan to
Columbia, she walked off the picture. She and her agent found a clause in California labour law
which, they held, freed her from Warners' control. This started two-and-a-half years of legal strug-
gle. Following a hearing in November 1943, the court ruled in her favour. Warners then lost all
appeals. By 1 945 she had set the precedent that actors were free to construct their careers deal by
19
deal. The era of the agent began, and in stepped Lew Wasserman.
The giant MCA agency, with Wasserman as chief, was winning profit participation for its
clients (and itself, thereby), and the major talents began forming their own corporations for tax
reasons. Following World War II, personal incomes in Hollywood were being gouged by about 77
per cent. The US government fought a continuing war against what it considered to be tax dodges,
and in the early 1950s, the Treasury Department outlawed the 'liquidate-the-corporation' trick, but
20
it never eliminated the main thrust of Wasserman's brilliant tactic.
Wasserman made being an agent an honourable profession, a part of the studio system,
although never at its core. Out of the talent and literary agency ranks came replacements for studio
chiefs. No longer would the Cohns, the Warners, the Schencks and the other leaders of the classic
studio system bar agents from their lots. Agency training - following Wasserman's example -
became the needed step to studio power. Ted Ashley of Warners, David Begelman of Columbia,
and a host of others - including Ovitz himself at Disney - would grab studio power when offered.
The list could be extended; but even this limited roll call represents a startling picture of change,
one that would require a large-sized canvas indeed to include all those who started out as agents.
All of them, to a greater or lesser degree, were recognised as possessing rare qualities of show-
21
manship and business acumen. But they were the rare exceptions.
The agent was necessary because the deal became the centrepiece of the new studio system.
Packages of story and stars and other talent, were shopped around the studios seeking the best
deal. As Institutional Investor commented in 1991:
Hollywood is about making deals - and movies on the side. And to watch the money move, you need
go no farther than the right restaurants. At Le Dome, Mortons, the Palm Court, within marbled and
mirrored walls, behind palms, amid the tingling of cell phones, billions of dollars are spent brokering
22
talent, distribution rights, film libraries, whole companies
The skill of the agent was in creating top packages. So during the 1970s the leader seemed to be
ICM, but then came CAA, creating the most powerful agency since the MCA days. Indeed, CAA's
founder Michael Ovitz modelled his agency on the lessons of Lew Wasserman. Yet Ovitz left for
Disney, Guy McElwaine left ICM to become chairman of Columbia Pictures, and Creative Man-
agement Associates (CMA)'s Freddie Fields went on to become president of MGM/UA. Wasserman
had shown the agent his or her true place in the Hollywood studio system - necessary and lucra-
23
tive, but hardly as powerful as a studio leader.
Any analysis of the agent's role comes back to Lew Wasserman. In 1950 he really began the
new Hollywood studio system, in which the studio usually did not develop its own projects, but
received pitches from agents. Stars, the directors and finally writers all signed with agents, and they
created packages so that their agent could pitch them to studio leaders. Wasserman was so suc-
cessful that he decided he knew the agency business better than anyone, so why not run a studio
and use what he knew to make even more money? The modern studio system was born. Wasser-
man spoke bluntly to The New York Times: 'We have done what other agencies did or tried to do,
only we did it better, I think.' He changed the studio system as drastically - perhaps more so - as
the coming of television, or the innovation of the blockbuster.
Notes
1 . The Los Angeles Times, 21 May 1995, Sunday Magazine, pp. 9-11.
2. Biographers of Lew Wasserman's clients usually properly credit him. For James Stewart's appreciation dip
into the dozens of citations in Donald Dewey's James Stewart: A Biography (Atlanta: Turner Publishing,
1996). Alfred Hitchcock was another long-time Wasserman client as can be seen in Donald Spoto's The
Dark Side of Genius: The Life of Alfred Hitchcock (Boston: Little Brown 1 983), and Stephen Rebello's
Alfred Hitchcock and the Making of Psycho (New York: Dembner Books, 1 990). In both books we learn
Hitchcock vacationed with Wasserman, exchanged advice about finances, and in the end became a
major stockholder of MCA. For an Ovitz overview see Forbes, 12 June 1989, p. 54.
3. Daily Variety, 4 June 2002, p. 44.
4. See George S. Bain and Robert Price, Profiles in Union Growth (New York: Oxford University Press,
1980).
5. Anthony Slide, The American Film Industry (Westport: Greenwood Press, 1 986), entry unions; Shmuel
Bensen, The Producer's Masterguide 2000 (New York: BPI, 2000).
6. Hugh Lovell and Tasile Carter, Collective Bargaining in the Motion Picture Industry (Berkeley: Institute for
Industrial Relations, 1955), pp. 3-4; Daily Variety, 17 January 1969, pp. 10, 16; Emmy, January/February,
1983, pp. 6, 44.
7. Irving Bernstein, Report of the Motion Picture Industry, AFL, 1 957, pp. 1 -40.
8. Variety, 14-20 June 2004, p. 55.
9. The New York Times, 24 August 1 977, p. 22.
1 0. Official web page of IATSE.
11. IA website, 2003; The New York Times, 4 February 1956, p. 35; 'I.AT.S.E., 1893-1973', Official Bulletin
of the International Alliance of Theatrical Stage Employes and Moving Picture Operators of the United
States and Canada, No. 482, pp. 16— 1 7.
12. IATSE official website; American Film, December 987, 1 pp. 33-8.
1 3. The New York Times, 1 1 June 1 960, p. 45.

14. Donna Craft and Terrance W. Peck (eds). Profiles of American Unions (Detroit: Gale Publishing, 1998),
pp. 1 183-4. Both writers guilds maintain websites - <www.wga.org> and <www.wgeast.org> 'The
1 973 WGA Theatrical & Television Basic Agreement' - in possession of the author.
15. Premiere, November 1988, pp. 24, 26-7.
1 6. The New York Times, 29 May 2001 , pp, B1 , B3.
17. The Wall Street Journal, 5 April 2001, pp. B1, B4; The Washington Post, 16 April 2004, pp. E1, E3.
18. Harper's, vol. 193 (October 1946), pp. 337-43.
1 9. American Classic Screen, vol. 6, no. 3 (1 983), pp 34-7.
20. American Film, July 1 979, pp. 29-33.
21 . Variety, 9 January 1 974, pp. 9, 56.
22. Institutional Investor, vof. 25, no. 13 (November 1991), p. 69.
23. The New York Times, Magazine, 9 July 1989, pp. 24-7, 46-53; Business Week, 1 5 October 1990,
pp. 114-15.
24. 77ie New York Times, 1 May 1 962, p. 45.
Coda: The Modern Media Conglomerate Studio
System
When Lew Wasserman reinvented the studio system, leadership skills grew harder to find and the
number of modern studio conglomerates boiled down to six, as discussed in chapters 1 5 to 20. All
adapted to new flexible production, all maintained a stranglehold on international distribution, and
all skilfully adapted to new technologies for presentation to a mass audience. The studio system is
firmly entrenched. In 2004 the six studios were all part of diversified media conglomerates, were
prospering, and more powerful and profitable than ever in history.
In 1930 Paramount, Loew's/MGM, Fox, Warners, RKO, Universal, Columbia and United Artists
defined the studio system. Only one new entrant has come aboard, Disney; one has dropped out,
RKO; two have combined into MGM/UA, but this merger denuded the combined company and it
had fallen out of the majors by 1990. In this chapter, I analyse the MGM/UA debacle, ask why no
new entrants have succeeded, and finally summarise what the modern studio system is as I write
in 2004.
The MGM/UA Failure
MGM may be the most fabled name in studio history, but it has been fading as an economic force
since the mid-1950s. In contrast, United Artists opened the system to more packagers - alongside
Lew Wasserman - and did well. Yet at the time of writing, Kirk Kerkorian, owner of these corpo-
rations, seems to be doing to MGM/UA what Howard Hughes did to RKO - dismantling a marginal
studio. Until the 1960s, such a scenario seemed hardly possible. In 1951 Robert Benjamin and
Arthur Krim gambled and began to revive UA. They embraced independent producers, directors
and actors. They did well until the 1960s when they decided that they did not want to fall behind
in the conglomerate race, and merged with the diversified conglomerate TransAmerica. That proved
their undoing, as Krim and Benjamin were at the height of a ten-year run of success. But just as the
Gulf + Western experiment never worked, so the TransAmerica takeover of UA was a failure. UA
had to be deemed a success story. For the UA of Krim and Benjamin, its major hits started to flow
in 1960 with Exodus (number four in domestic rentals) and The Alamo (1960; number five). There-
after, the rate of hits slowed, but Fiddler on the Roof was first in domestic rentals in 1970 and One
Flew Over the Cuckoo's Nest first in 1975. And that was it. UA's twenty-year Golden Age was
1
over.
In contrast, MGM seemed by the 1960s to be going nowhere. It became Wall Street's favourite
takeover play in the studio system, continually weakened by proxy battles. While MGM would have
310 |
. THE HOLLYWOOD STUDIO SYSTEM
the occasional hit like DrZhivago (1965), it was never consistently successful enough to regain the
power it had under Nick Schenck (chapter 8). Indeed, in 1966 the key profit centre was the
company's music publishing activities. Wall Street viewedMGM in the mid-1960s as a corporate
container of parts which all seemed to be worth more individually than as a whole operating
company. Billionaire Kirk Kerkorian arrived on the scene in 1969. He simply wanted the studio
so that he could use its fabled MGM logo for his new Las Vegas hotel. Hejater bought UA,
and would sell the studios several times throdgh the rest of the twentieth century and into the
twenty-first.
He caused a splash in May 1970, in a widely publicised auction where Kerkorian sold the props
from bygone MGM classics. He also disposed of MGM's studio in Great Britain, its theatres in
Australia, MGM phonograph record subsidiary. In October 1973

South Africa and England, and the
he even took MGM out of movie distribution - for a decade. MGM came back in the early 1980s
when Kerkorian merged it with United Artists. Then in a stunning turn of events in 1985, Kerko-
rian temporarily sold the MGM half to Ted Turner, who desperately wanted the classic MGM
movies to show on his TBS SuperStation. Few were surprised when a year later Turner sold all that
remained of MGM back to Kerkorian. More sales and repurchases defined MGM/UA through the
late 1980s and the 1990s. Kerkorian proved to be a master at making millions selling and reac-
quiring his two movie companies for the rest of the century as he made vast profits from his MGM
Grand Hotels. As a latter-day Thoreau might say, 'If you make a better deal, money will beat a path
2
to your door.' Kerkorian was another Howard Hughes.
By 2004 MGM/UA was again in play, with rumours swirling about which studio would buy it.
The Wall Street Journal knew why: 'To See Why MGM Is In Play, Just Take A Look in Its Vault.'
Cable TV, home video and DVD were pouring in revenues to a studio not making hits in the new
century. For example, in 1989, Patrick Swayze starred in Road House, an action film about a
bouncer with a philosophy major that quickly disappeared at the box office. But the movie has
since gone on to become a cable-TV hit, airing sixty-five times from 1 994 to 2002 with consist-
ently strong ratings. That's why television networks are still willing to pay as much as $600,000
for the right to air a film like Road House up to a dozen times a year. It's also a reminder of why
as late as 2004 MGM/UA, with its vast library of already-released movies, remains a prime acqui-
sition target. Through 2004, MGM/UA - wholly controlled by Kerkorian - had been negotiating a
possible sale with all of the members of the Big Six, at an asking price of $3 billion plus assump-
tion of $2 billion in debt. This seemed to be the eighty-seven-year-old Kerkorian's final move. He
had run out of time; he had sold and re-sold his MGM/UA six times in just over thirty years, always
back to him. By 2004 MGM/UA had no studio lot, only a library of more than 4,000 movies.
'Instead of treating its library as the unwanted stepchild of movie production, MGM made it the
Number 1 focus,' said Chief Operating Officer Chris McGurk, mouthing what Kerkorian would say
if he gave interviews. It was all that was left. MGM/UA's library was generating about $400 mil-
lion of cash a year, making Kerkorian look like a financial genius - but not an innovator like Lew
3
Wasserman.
CODA: THE MODERN MEDIA CONGLOMERATE STUDIO SYSTEM
Trying to Break in: AIP, CBS, DreamWorks

While Kerkorian was making himself very rich by taking a studio out of the majors, many outsiders
were trying to get into the studio system. There were three common strategies. All failed.
The first strategy was to make films cheaper than the majors. American International Pictures
(AIP) - started in 1954 by Samuel Z. Arkoff and James H. Nicholson - tried to catch fads and exploit
them. Some of its more successful productions included The House of Usher (1960), Beach Party
(1963) and 77>e Wild Angels (1966). AIP gained an early reputation for low-budget exploitation
movies in popular-selling genres such as horror, science fiction and Westerns. But by the 1970s
Nicholson was dead, and alone in 1975 Arkoff became the president and CEO and decided to pro-
duce higher-budget films. These included The Island of Doctor Moreau (1 977) and The Amityville
Horror (1 979). He failed without his partner. In 1 979 AIP was dead, and merged with yet another
pretender - Filmways - which was eventually taken over by Orion Pictures, which eventfully went
out of business and sold its film library to MGM/UA! Wasserman was at his peak during the
4
1975-81 period, and AIP never had a chance. A low-cost strategy did not work.
Maybe a TV power could enter? By the 1 960s, the USA was a TV nation, consistently led in the
ratings by CBS. CBS tried to leap the barriers to entry of the studio system. But in less than four
years CBS's Cinema Center Films lost more than $10 million. In 1972 William Paley, CBS board
chairman, and long used to dominating the prime-time TV ratings, threw in the towel. It was not
that CBS did not make interesting films, such as Little Big Man (1970), starring Dustin Hoffman,
and Big Jake (1971), starring John Wayne. 'But a half-dozen hits could not compensate for losses
incurred perhaps by 20 other films,' an official PR release stated bluntly. One Wall Streeter put it
even more bluntly: The theatrical production of motion pictures is a different and difficult busi-
ness. Out of 8 or 10 pictures that may be prepared, about one film on average is a genuine suc-
cess. The public taste is wildly uncertain and so [are making] profits.' In truth, CBS never found
anyone close to Wasserman's leadership skills to run CBS Cinema Center. With bad management,
it just cost too much and was too risky to enter the elite of the studio system. CBS could never even
afford to set up its own distribution system and on the cheap sent its output to theatres and tele-
5
vision through Warners' exchanges and sales staff.
If making cheaper features or exploiting television did not work, perhaps investing billions of
dollars might work. Thus in 1994 came DreamWorks SKG, founded by director Steven Spielberg
(the S), former Disney executive Jeffrey Katzenberg (the K) and billionaire record mogul David
Geffen (the G). Spielberg as the blockbuster film-maker and Katzenberg the animation genius at
Disney needed Geffen's billions to launch the company. With billions behind the venture, Dream-
Works SKG was able to sign a ten-year, $1 billion HBO licensing agreement, a $100 million pro-
gramming partnership with ABC, a $50 million animation studio co-founded with Silicon Graphics,
and a $30 million joint venture with Microsoft to produce interactive software. The first feature
film release was The Peacemaker, in September 1997, starring George Clooney. In a surprise move,
DreamWorks SKG devised a self-distnbution plan rather than going through one of the six big stu-
dios. The fledgling company managed to silence many of its critics during the summer of 1 998
with Saving Private Ryan - the company's first real blockbuster. But it never had a studio per se,
instead renting space at Universal City, so in a sense it is really not independent, but a company
6
operating out of one of the six studios - Universal and the ghost of Lew Wasserman.
While Katzenberg produced animated hits, live-action hits only occasionally filled the distri-
bution pipeline. In particular, Spielberg never returned to the days of Jaws and E.T. as he had no
Lew Wasserman to help him. With the May 2004 release Shrek 2, DreamWorks SKG enjoyed the
benefits of something that has lately been in exceedingly short supply: a successful sequel to a hit.
DreamWorks SKG's television production business has not had a hit in years, its music division was
sold off in 2003, the internet ambitions went down at the end of the twentieth century with the
rest of the dot-comers, and the live-action movie division is significantly smaller than those of all
the major studios. The rare successes came because of Katzenberg - who at Disney had produced
The Lion King - and DreamWorks Animation became by 2004 the most marketable part of the
company. Simply investing billions did not work, as after a decade of trying, David Geffen con-
cluded: 'Our eyes were bigger than our stomachs,' referring to the company's original 1994
dreams. 'We did what we could do. We started a number of things that turned out not to be good
ideas. The world has changed a great deal in 10 years.' That was a nice way of blaming outside
7
forces. Better would have been to admit that they never found a leader with the necessary skills.
By 2004, of the hundred top-grossing films of all time, only one was not from the major stu-
dios. IFC's My Big Fat Greek Wedding, the $5 million independent film phenomenon that no one
in the studio system wanted, premiered off season in April 2002 and grossed nearly $250 million
at the domestic theatrical box office. IFC Films, a niche film distribution company launched in 2000,
sought to do what AIP had failed at - to bring independent and specialised films (read: cheap) to
theatres, cable, home video and DVD. IFC was dedicated to realising the visions of independent
film-makers and released twelve pick-ups per year, about half the output of a major studio, but
with production costs closer to the $5 million of My Big Fat Greek Wedding than the average
studio picture at $50 million. My Big Fat Greek Wedding is a fluke at best. Many bits of luck had
to come together to even bring it to the screen.
'It's the gift that keeps on giving,' said Rita Wilson, who got the ball rolling by dragging her
husband, Tom Hanks, to a performance of Nia Vardalos's stand-up comedy act, and then sug-
gesting that he help her produce a movie from it. 'This was a movie that a lot of people turned
down and didn't want to have anything to do with,' Wilson recalled. Wilson convinced Hanks to
start the ball rolling by getting Hanks' Playtone, a film and television production company, to con-
sider Nia Vardalos's script. The trio shopped the script around Hollywood, and found no takers until
Warners' HBO Films, which has a strong relationship with Hanks based on its From the Earth to the
Moon and Band of Brothers miniseries, agreed that the film might make a direct-to-cable comedy.
Gold Circle Films, a minor movie production company, agreed to split the costs with HBO. Hanks
and Wilson produced. A cast was assembled, with Nia Vardalos in the lead. While filming unfolded,
Paul Brooks, president of Gold Circle, felt that the movie should open in theatres. 'Paul was saying
he thought it could do $20 million or more, and he was really pushing for it,' said Jonathan
CODA: THE MODERN MEDIA CONGLOMERATE STUDIO SYSTEM 313
Sehring, president of IFC Entertainment, an independent distribution company, part of the Inde-
pendent Film Channel, which in turn was financed by the cable colossus Cablevision Systems Cor-
poration. This was key as Cablevision Systems had the clout to get it shown on cable. HBO gave
the go-ahead for a theatrical release. IFC signed on to distribute the movie.
The odds remained long for producing a blockbuster. 'On the day the movie opened, I was
going in to read for a voiceover part in a Kraft cheese commercial,' Vardalos recalled. 'I didn't get
it . . . and I really needed it. It was $378.' Once the film was a hit, there was plenty to spare. Profits
are being split in three, among Playtone, HBO and Gold Circle - with IFC collecting the third off
the top for the distribution fee. How much money is there to split? Probably in the $250 million
range. And that is without the anticipated tens of millions to come from foreign distribution, home
video, DVD and other outlets. The grand total should exceed well over $1 billion. IFC suddenly had
a hit. If it could attract similarly popular pick-ups, independent films and generate original fare, IFC
could join the majors. But the odds are against it as there are a number of one-hit-wonder studios
of the past. (In the 1980s Vestron had a hit with Dirty Dancing, but a decade later it was out of
business.) One-hit-wonders simply give hope to others. It seemed possible to break the lock of the
8
studio system. But this was a fluke; history had shown that.
The Future of the Media Studio Conglomerate

With Jaws in 1975, a new studio system began. Lew Wasserman started it, and then other leaders
followed and imitated him. In 2004 we simply do not know when and if this new system has
ended and another new era has begun. Thus I must stop my history and leave the analysis to those
with methods suited to and aimed at contemporary affairs. Historical analysis informs those studies,
but cannot define them. We can see in the many failures to enter and remain in the new studio
system some basic principles. If anything, the Hollywood studio system was growing ever more
powerful, more concentrated and stronger.
The 1 990s did prove to be an exciting time for the titans of Hollywood. The decade began with
the $1 5 billion consolidation of Time and Warner, making Hollywood's Warner Bros, studio the
core of the largest media company in the world. Halfway through the decade Disney spent $19
billion to purchase Capital Cities/ABC. By the early days of the twenty-first century, Matsushita,
Seagram and Vivendi all had taken over - and then sold - MCA's Universal Studios; Viacom had
acquired the Paramount studios; Rupert Murdoch's Twentieth Century Fox studio had expanded;
and Sony's Columbia Pictures had reorganised. Change has not stopped, but what will last and
what will prove a passing moment no one can yet say.
The modern studio system is still a classic oligopoly - in 2004 - of six. The successes and riches
associated with the economic power of these major operations provide incentives so that every
few years bold pretenders will come along and try to create a new major Hollywood studio. The
six Hollywood media studio conglomerates possess a host of advantages that enable them to main-
tain their considerable economic power and keep out the competition. If there seems to be new
trend, which will turn into a historical turning point, it was the acquisition of the major US TV
1
networks by the studios, with Twentieth Century Fox's Fox (1986), Disney's ABC (1995), Viacom-
Paramount's CBS (1998) and Universale NBC (2004).
In the middle of 2004, if one looks at the list of blockbusters in unadjusted dollars, it reads like
a list of recent hits - all but one from the major studios: Titanic (Paramount and Fox), Star Wars:
Episode IV-A New Hope (Fox), E.T. (Universal), Star Wars: Episode I - The Phantom Menace (Fox),
Lord of the Rings: The Turn of the King (Warners), Harry Potter and the Sorcerer^ Stone (Warners),
Spider-Man (Sony-Columbia), and so on. It is the lone exception - My Big Fat Greek Wedding -
that is easy to spot. If one adjusts for inflation, then the hits of the past come into play: Gone with
the Wind (produced by Selznick, yet distributed and owned by Loew's), The Sound of Music (Fox),
The Ten Commandments (Paramount), Jaws (Universal) and Snow White and the Seven Dwarfs
(Disney produced, RKO distributed). These highlight the heyday of the classic studio system that
included RKO and Loew's, but otherwise the studio corporations read the same as they did when
9
Snow White came out.
Still, while the names remained pretty much the same, as the twentieth century ended and the
twenty-first began, the Hollywood studio system as industry continually redefined itself, principally
by adding to its technological bag of tricks. Indeed, through the history of the Hollywood studio
system technical innovation is constant and steady, despite the heralding of particular moments
such as the coming of sound or the introduction of colour. Consider the case of the introduction
of computers to film-making: this enabled film-makers to craft special effects, a set of film-making
possibilities simply not available before. Will this lead to a studio system change? No. Surely
others will seek to alter the current studio system, or modify it to their advantage as Zukor and
Wasserman did. We cannot say until we have more historical distance. We do know that any new
entrant will need a leader of the ability of an Adolph Zukor or Lew Wasserman - a type F. Scott
10
Fitzgerald recognised some three generations ago.
Yet the media conglomerates of today - with a studio at their core - are works in progress. No
one can accurately predict the system's future. When a conglomerate worked well - as with Rupert
Murdoch's Fox - riches abounded. When it suffered - as Disney did through the first years of the
current century - one wondered if a new business model and new leadership were needed. Indeed,
while hazarding predictions is risky, it seemed that the first years of this century were the turning
point for the media conglomerate. But we simply do not have enough historical distance to know.
1
Nothing, as the twenty-first century started, threatened the basic Hollywood studio system oli-
gopoly that was formed in the late 1920s. The major studios will continue to enjoy their powers.
Their style, form and genres will vary slightly as each looks for an edge over the other while basi-
cally colluding. Indeed, there seem only two possibilities to disrupt and significantly alter the oli-
gopoly. The first, technological change, always gets the greatest press coverage, but this seems
doubtful because the oligopoly has survived many changes (broadcast TV, cable TV, home video)
and turned new forms of presentation into additional Hollywood studio power. The second possi-
bility is also unlikely: government anti-trust action forcing the oligopoly to spin off a unit, and thus
12
lose some of its considerable power.
The unions and guilds have lined up to demand their share of the new loot. Talent agents are
also demanding that studios abandon their long-standing formula of calculating profits, in which
only 20 per cent of revenues from DVDs and videos are used to calculate profit participation for direc-
tors and top actors. The question has also become a principal focus of negotiations with actors being
asked to participate in re-releases. In the autumn of 2003, the supporting cast of the Warner hit tele-
vision series Seinfeld refused to give interviews for the DVD compilation until they were included in
a share of the profits. What no one knows is how long the windfall will last, whether DVD is a con-
sumer bubble that will burst once the studios finish releasing the films and TV shows in their libraries,
13
or whether it will remain a strong current in the entertainment industry profit stream.
The advantages of DVD seem considerable. Each disc can hold the information of a typical full-
length (translation: not more than two hours) Hollywood feature film. DVD discs provide far
superior sound and picture quality over the VHS videotape system. DVD also promises a longer
shelf life, and so can become a preservation medium to store family memories. DVD also enables
customers to rapidly access any part of the movie, in the same way that compact audio discs
enable listeners to move to their favourite track. There is no need to rewind or fast forward; slow-
ing down the image is simple and distortion free. In addition, a single DVD can carry up to eight
audio tracks and thirty-two subtitle (or karaoke) tracks, along with alternative takes of a shot. 14
But not all change is as obvious as DVD. The late 1990s brought downloading movies through
the internet. Amazon.com and its competitors converted the internet into the world's largest video
and then DVD sales centre. Why buy only at Blockbuster or the local grocery store when all tapes
(or discs) could be browsed from, items selected, and then shipped to the home via the web? But
what about instituting a strategy of downloading DVDs directly through the internet and having
fans pay their admission fees this way? The MPAA called this piracy, as the studios were not paid
for the new copies. Indeed, it is safe to say that Jack Valenti quit in 2004 because he could not
figure out this vexing problem. We can only speculate what Dan Glickman and his studio employ-
15
ers will do to gain a share of the this 'file sharing'.
Wall Streeters concluded that the 2004 version of the media conglomerate had 'run out of fresh
ideas'. The media conglomerate version of the expanded studio system seemed to have run its
course and a new Lew Wasserman was needed. Variety judged studios on seven criteria: 'depth of
bench; transparency; corporate governance; vision; leadership and operations; creative manage-
ment; and financial returns'. Rupert Murdoch took away the honours with the best average score
across all categories. Murdoch's skills as a leader were rated just above those of Robert Wright,
leader of NBC-Universal, and Sumner Redstone, owner of Viacom (Paramount). Time Warner was
still stumbling from its AOL acquisition, and Disney was suffering from Eisner fatigue. The studios
seemed to lack the leadership F. Scott Fitzgerald identified. The criticism of the executives - save
Rupert Murdoch - sound very familiar in terms of the history of the Hollywood studio system.
Shareholders are holding management to higher operating and strategic standards and demanding
accountability from once-omnipotent moguls. Besides Rupert [Murdoch] . . ., the rest of the
CNBOrtMes m the EsturJo] group are too wedded to busnesses the^ been m their entire iwes. and
refuse to see the changes corrimg dowr* the p©e They either need to get with rt or share the fale of
Very simlar sentiments were uttered when the studio system faced the Great Depression, the
coming of TV and the development of the Wassemiarvstyte rneria avig^

utter stagnation. By the start of the summer 2O04 peak monegang season. Variety noted:
The average media congbiiiei dte {stock] tradejd] today at the same pnce they cfcd fme years ago {the
brjom ecoromc penod of 19991 What wwestorsoweriooied >i boom times can*t be ignored when
-
rrrsce— >o.-, r: a r?.v arc sra~i "Cr* raz'.y.i -i ; -=s_- ~-e 33-. 5 r "e-o £ver_f .es
;y i-a~o€ isr*-'. -an. r .-.nr.- ~e.fr see-e:: r=r.-ciuec " rer rrrres. ~e } ne e~0'-; ~:oa> 5
merJa chefs must curry favor with many constituencies, from a more skeptical breed of Wal Street
analysts to "~cre actiwst corporate boards, as wei as ther own employees and customers, 16
The key to success remains the same: a skifled leader The Hollywood stuck) was made up of
a small set of corporations that produce, distribute and present films m order to maximise the
profits of their corporations. Now they are allied horizontally with other media products -
driven by television. Each successful corporation still needs a skilled leader who could formu-
ate stialegies to max-mrse profit and maintam the Hong-run power of the studio corporation.
His or her key tools remain: (1) horizontally to integrate other media businesses into the con-
glomerate. (2) vertically control ai parts of the film business, including TV presentation (cable.
VHS and DVD); (3) maintain power over al aspects of the film business through careful strat-
egies and plans for the future. As of the summer of 2004. the final variable - and the lead-
ership it demanded - was mussing from the track record of the leaders, save for that of Rupert
Murdoch, the only executive who seems to be able to keep the whole business picture m his
head as F. Scott Fitzgerald so admired. Profits - the money the leaders and their corporations
get to keep - were strii the name of the game as David Bordwell asserted, but corporate
structure and operation remain problematic The system is ready for a new. innovative leader
irr the manner of Zukor and Wasserman. who buit and reinvented the studio system over its
17
history.
1. lte Journal of tfie Screen ftafcc^

Apart &xk of te Office fits riNie« Yrj^ «
2 The Vev. Yfar* Times. 16 May 1981. 1. The Economist. 13 February 1982. p 77, Martoattan *jc.
September 1988. pp. 99-106. Busness Week 24 Aprl 1995. p 39.
3 The rta/ 5c=ec.cumaf. 7 JuV 2004. pp. Al. A6.
4. Myaanuntisbased jpor rkr^dban f rJKrmsly cotePed tn Mart Thomas McGee. faster and
ûrexser (Jenersan. INC. McfartandL 1964)- harrjy scholarly, but fifcd with base data.
5. Variety, 29 April 1969, pp. 3, 78; The New York Times, 9 January 1972, p. 33; Sally Bedell Smith, In All
His Glory: The Life of William Paley (New York: Simon and Schuster, 1 990), pp. 467-8. Note Paley's own
autobiography, published in 1979, simply failed to mention this failed experiment. See also Variety,
25 October 1967, pp. 5,21.

6. Forbes, 16 April 2001, p. 56.
7. The New York Times, 1 7 May 2004, pp. C 1 , C8.
8. The New York Times, 28 November 2002, pp.B1, B18; IFC website: www.ifcfilms.com.
9. Websites of The Movie Times <www.the-movie-times.com>, Movie Web <movieweb.com> and the
Internet Movie Database <www.imdb.com>.
1 0. The New York Times, 1 7 May 2004, pp. C 1 C6.
,
11. For an analysis of the studio conglomerates at the end the of twentieth century, see Benjamin M.
Compaine and Douglas Gomery, Who Owns the Media? (Mahwah, NJ: Lawrence Erlbaum Associates,
Inc., 2000), pp. 359-436.
12. The Wall Street Journal, 22 March 1 999, p. R1 3; Film Journal International, March 1 999, pp. 52-3.
13. The New York Times, 20 April 2004, pp. B1, B8; The Washington Post, 1 1 July 2004, p. M3.
1 4. Business Week, 26 May 997, 1 pp. 1 72-3; The Wall Street Journal, 8 April 1 999, pp. B 1 , B1 0.
15. The Wall Street Journal, 2 October 1 998, pp. B 1 , B4.
16. Variety, 7-13 June 2004, pp. 1, 54.
1 7. The annual editions of International Motion Picture Almanac provide an up-to-date summary of the
recent activities of the studios.
Bibliographic Guide
This guide seeks to fulfil two functions. First, it lays out the resources used to research this book.
Second, it provides suggestions for further reading, organised by the subject matter of individual
chapters.
Primary Resources
A great deal has" been written about the history of the Hollywood studio system. Numerous biog-
raphies and autobiographies of directors (for example, Alfred Hitchcock and D. W. Griffith), and
stars (for example, Charles Chaplin and Katharine Hepburn) can help industrial historians learn
much about how directors and stars coped with the studio system. But these people did not run
the studios, and concentrating on them can create a misleading picture of the system. Thomas
Schatz in his The Genius of the System (New York: Pantheon, 1 988) offers the most skilled and thus
most easily misunderstood of this type of limited studio analysis, which often tries to simply boil
down a studio to its seemingly most powerful studio boss. Like others, he has set the action in
Hollywood, not New York, which until Lew Wasserman changed it, was the real centre of power.
Unfortunately, work on the business history of the film industry largely consists of anecdotes
about such figures as MGM's studio chief Louis B. Mayer or the notorious head of production at
twentieth Century-Fox, Darryl F. Zanuck. I have worked to fill these gaps and omissions. The
archives of Warners at the University of Southern California, Fox and RKO at the University of Cal-
ifornia in Los Angeles, and Disney on the studio lot (the latter so well guarded that no scholar can
really use it, and containing only pro-Disney material), help little as they are production oriented.
They are not the business records per se. This is production oriented with separate files on films,
directors and other creative persons.
There is one exception. That is the United Artists Collection at the State Historical Society, Madi-
son, Wisconsin, which consists of the company's financial records. This mountain of material has
been summarised by Tino Balio in his United Artists: The Company Built By the Stars (Madison: Uni-
versity of Wisconsin Press, 1976) and his follow-up history, United Artists: The Company that
Changed the Film Industry (Madison: University of Wisconsin Press, 1 987). Balio's books are based
upon real business records, and since the corporations worked together, these business records
offer not only what UA did, but also what the other oligopolists did as well.
Since there are few corporate records archived, I relied upon five key lodes of documents on
which I based my analysis.

BIBLIOGRAPHIC GUIDE 319
Corporate reports
Most studios have been public companies listed on the New York Stock Exchange, and Wall Street,
rather than controlling the studios, really spent most of its time trying to figure out what they were
up to. An invaluable source of corporate reports is the Securities and Exchange Commission, in
Washington, D.C.
Court records
The major corporations of the US film industry of this era were involved in hundreds of lawsuits.
The evidence presented in these cases provides much useful information and can be found in
regional branches of the National Archives in Chicago, and Bayonne, New Jersey, in court records
and the Chancery Court of Delaware where these corporations are incorporated. The richest of
this type are usually the records provided during an action in a civil or criminal court case. The
major motion picture corporations, fortunately, were in court quite often. Several thousand cases
are listed in Dennis Hartman, Motion Picture Law Digest: Indexing All Court Decisions from 1900
to June 1947 (Los Angeles: privately printed, 1948). The case that produced the most useful
material was the ten-year anti-trust proceeding United States v. Paramount Pictures 334 US 131
(1948). This case's records fill nearly three full reels of microfilm. A first-rate study of the actions in
and impacts of this particular legal struggle can be found in Michael Conant, Antitrust in the
Motion Picture Industry (Berkeley: University of California Press, 1960). The case that inspired Zukor
to begin the studio system is Motion Picture Patents Co. v. Universal Film Co., 235 F. 398. As an
example, William Fox has remained an elusive figure - socialist Upton Sinclair has solely told his
story. But Fox - ousted from the company that kept his name - proved the most litigious of the
movie moguls and his life and decisions are well chronicled in a slew of cases in the 1930s.
Personal executive collections
A small number of special personal executive collections are kept at the Heritage Center of
Wyoming (Paramount and Columbia executives). There are the Dore Schary papers at the State
Historical Society in Madison, Wisconsin. There is also a wonderful set of photographs held at the
Quigley Collection in the Rare Books room at the library of Georgetown University, which also con-
tains numerous public official biographies of all the studio owners through the 1960s. But sadly
this is all hit or miss. The most important of the studios - Universal, with Lew Wasserman's re-
invention of the second Hollywood studio system - lacks an archive, corporate, university or gov-
ernmental. There exists a Paramount collection, started in 1995, but this is only for its music.
Governmental studies
Governmental studies, such as NRA and Congressional investigations, have provided mountains of
primary materials. In 1933 the US federal government passed the National Recovery Act. Towards
administering that law two studies surveying the state of film production, distribution and exhi-
bition in the United States were completed (see Daniel Bertrand, 'The Motion Picture Industry',
Work Materials no. 34, Industry Studies Section, Division of Review, Office of National Recovery
Administration, Washington, D.C., February 1936, and Daniel Bertrarrd, 'The Motion Picture
Industry', Evidence Study no. 25, Division of Review, National Recovery Administratjon, Washing-
ton, D.C., November 1935). For background on this valuable matenal see Louis Nizer, New Courts
of Industry: Self-Regulation Under the Motion Picture Code (New York: The Longacre Press, 1935)
and Douglas Gomery, 'Hollywood, the National Recovery Administration and the£uestion of Mon-
opoly Power', Journal of the University Rim Association, XXXI, no. 2 (spnng 1979), repri n ted in
Gorham Kindem (ed.), The Amencan Movie Industry (Carbondale: Southern Illinois Press, 1982).
Another important governmental study was commissioned in 1940 as part of the US federal gov-
ernments massive study of monopoly m Amenca. The National Economic Committee devoted one
of forty-three reports solely to the film industry. See US Temporary National Economic Committee,
The Motion Picture Industry: A Pattern of Control, Monograph 43 (Washington. D.C.: 1941). Amo
Press has reprinted this valuable document The Justice Department investigations into MCA
becoming Universal are very useful.
Trade and business press
Finally, there are data found in the trade papers of the industry (Vanety and Motion Picture Herald.
for example), and the business press of the day (for example Fortune and Business Week). Add to
this all the information about pubiidy traded companies (all the majors save UA; generated by Wall
Street and the investment community. Base data on ownership and assets, profits and esses «ere
1
published yearly in Moody's Manual of Industnals for publicly held corporations But what stock-
market players wanted were dear and concise analyses of the state of the pubiidy held mcvie
companies and recommendations as to whether to invest or not Such analysis was widely dis-
seminated throughout the studio era in such publications as 77re Annalist Barrons, Busness Week.
Fortune and The Magazine of Wall Street. Easy access to artides in these and other business pub-
lications is available through the annual Industnal Arts Index. Of particular significance are the cor-
porate profiles published m Fortune, which started with the magazine m the 1930s and nave
continued. The film industry's trade papers are: Vanety (1905 to date). Daily Vanety 1933 to ( date.',
Motion Picture Herald ( 1 930-72, and its predecessors, inducting the most accessible. Moving flfer-
ture Worid), Rim Daily ( 1 922-70), Hollywood Reporter 1930 to date) and Box Office (1932 to
(
date). Each, to a different audience, provided reports about production (Daily Vanety, HaHyvtoasi
Reporter), exmbition (Motion Picture Herald, Box Office) and the industry as a «hole (Vanety, Rim
Daily). Throughout the penod the Quigiey organisation, publishers of Motion Picture Herakt issues
a year book in the Motion Picture 4/manac the Rim Daily corporation made up and sold the miai
Rim Daily Yearbook. Each is indispensable for study of the studio era. Ftn^n there is the financial
daily press. The Wall Street Journal and 77re New York Times. Since the Hollywood studios by and
large were run from New York City, The Wall Street Journal and The 77mes, both published front
New York City, are very helpful.
Further Reading
Further reading about the studio era should begin with several important studies by social scien-
tists of the period. Only rarely during the 1 930s and 1 940s did scholars apply their analytical tools
to the film industry. The best of these studies is by economist Mae D. Huettig in her Economic Con-
trol of the Motion Picture Industry (Philadelphia: University of Pennsylvania Press, 1944). For a
description of the industry at the beginning of the studio era by a professor of business at Harvard,
see Howard T. Lewis, The Motion Picture Industry (New York: D. Van Nostrand, 1933). Twenty-five
writers looked at the state of the industry in November 1 947 in a special issue of The Annals of the
American Academy of Political and Social Science. Be forewarned that more than half the material
in this 1 72-page collection deals with the effects of censorship on industry conduct. Arno Press has
reprinted this volume.
Also useful are two collections of articles about the history of the US movie industry: Tino Balio
(ed.), The American Film Industry (Madison: University of Wisconsin Press, 1 984, revised edn), and
Gorham Kindem's anthology noted above. In the Balio anthology are two of my essays, one of
which analyses the coming of sound to the American cinema, while the other traces the rise of
movie exhibition before 1930. Three more of my essays are reprinted in Kindem's volume, exam-
ining film exhibition, corporate relations among the Big Five, and the interaction of the major movie
corporations with the US federal government. In addition, Balio reprinted material from Conant
and Huettig, already noted, plus several pieces from Fortune. Both Balio and Kindem provide first-
rate bibliographies. A third collection is Paul Kerr (ed.), The Hollywood Film Industry (London: BFI
Publishing/Routledge & Kegan Paul, 1986). Benjamin M. Compaine and Douglas Gomery, Who
Owns the Media? (Mahweh, NJ: Lawrence Erlbaum Associates, Inc., 2000), outlines the studios as
of 2 January 2000, the date on which the failed AOL Time Warner merger was announced. The
only significant change came in 2004 with NBC, the television network owned by General Electric,
buying Universal.
Taking the studios, industry advocates, unions and agents in that order, the best literature in
most accessible form comes as follows:
Paramount
For the studio that provided the model, Adolph Zukor's creation has inspired little scholarly work.
Two picture-book overviews are I. G. Edmonds and Reiko Mimura, Paramount Picture and the
People Who Made Them (San Diego: A. S. Barnes, 1980) and Leslie Halliwell, Mountain of Dreams:
The Golden Years at Paramount Pictures (New York: Stonehill Publishing, 1976). The best material
on the studio can still be found in two articles in Fortune: 'Paramount Pictures', 15 (March 1937)
and 'Paramount: Oscar for Profits', 35 (June 1947). An almost useless tool is Adolph Zukor's auto-
biography (written with Dale Kramer), The Public Is Never Wrong (New York: G. P. Putnam's Sons,
1953). A good deal of production information can be gleaned from James Curtis, Between Flops: A
Biography of Preston Sturges (New York: Harcourt Brace Jovanovich, 1982). Quite valuable for the
1930s and 1940s is the autobiography of Leonard Goldenson, who was long head of Paramount
theatres under Barney Balaban, but became more famous for his creation of ABC (and its many deal-
ings with the studios in the 1950s- 1980s): Beating the Odds (New York: Charles Schribner's Sons,
1991). Barney Balaban has had little written about him save by me. His successor, Charles Bluhdorn,
at least wrote his version of the rise of Gulf + Western for the Newcomen Society, who published
it in 1972. Michael Eisner's Work in Progress (New York Random House, 1998) is a self-serving
account of his career, but is good on his rise at Paramount. George Mair does far better with Eisner's
boss at Paramount in The Barry Diller Story (New* York: John Wiley, 1997).
Loew's/MGM
For an overview and list of all the MGIvl features made before 1975, see John Douglas Eames, The
MGM Story: The Complete History of Over Fifty Roaring Years (New York: Crown, 1 976). All other
data about Loew's usually originates with Bosley Crowther, The Lion's Share: The Story of an Enter-
tainment Empire (New York: Dutton, 1957) and Lillian Ross' Picture (New York: Reinhart &
Company, 1952) MGM's production bosses
-
. Irving Thalberg and Louis B. Mayer have generated

several book-length studies. See Bosley Crowther, Hollywood Rajah: The Life and Times of Louis B.
Mayer (New York: Holt, Rinehart & Winston, 1960); Gary Carey, All The Stars in Heaven: Louis B.
Mayer's MGM (New York: Dutton, 1981); and Samuel Marx, Mayer and Thalberg: The Make-
Believe Saints (New York: Random House, 1975). Two valuable case studies of well-known MGM
productions are Aljean Hatmetz, The Making of The Wizard of Oz (New York: Alfred A. Knopf,
1981) and Donald Knox, The Magic Factory: How MGM Made An American in Paris (New York:
Praeger, 1973). A nice collection of popular magazine articles about Loew's and MGM can be
found in BFI Dossier Number I - MGM (London: BFI Publishing, 1980).
Fox and Twentieth Century Fox
Tony Thomas and Aubrey Soloman, The Films of Twentieth Century-Fox: A Pictorial History
(Secausus: The Citadel Press, 1979) lists all features, 1935 to 1979. For information on Fox before
the twentieth Century merger, see Glendon Allvine, The Greatest Fox of Them All (New York: Lyle
Stuart, 1969). A corporate history can be found in Aubrey Solomon's Twentieth Century-Fox
(Metuchen, NJ: The Scarecrow Press, 1988). An informative book on Fox production chief Darryl
F. Zanuck is Mel Gussow, Don'f Say Yes Until I Finish Talking (New York: Doubleday, 1971). Less
informative is Carlo Curti's gossipy Skouras: King of Fox Studios (Los Angeles: Holloway House,
1967). The fall of Zanuck and Skouras is adequately covered in Steven M. Silverman, The Fox that
Got Away: The Last Days of the Zanuck Dynasty at Twentieth Century-Fox (New York: Lyle Stuart,
1988). There is too much drama, but considerable detail. The biographies of Rupert Murdoch are
numerous and all out of date.
Warner Bros.
A good comprehensive list of features is given in Clive Hirschhorn, The Warner Bros. Story (New
York: Crown, 1979), and Arthur Wilson, The Warner Bros. Golden Anniversary Book (New York:
Dell, 1973). An adequate studio history can be found in Charles Higham, Warner Brothers (New
York: Charles Scribner's Sons, 1975). To learn more about the brothers as Hollywood mogul types
see Michael Freedland, The Warner Brothers (London: Harper, 1983). This portrait concentrates on
the flamboyant Jack Warner, drawing a great deal of information from Jack Warner's rather self-
serving autobiography, My First Hundred Years in Hollywood (New York: Random House, 1964).
The Velvet Light Trap has devoted two complete issues, numbers 1 and 1 5, to studies of the studio,
its stars and directors. My own work has concentrated on the corporation's adoption of sound, as
found in Douglas Gomery, The Coming of Sound (New York: Routledge, 2004). The considerable
accomplishments of Steven J. Ross are recent and thus like all of contemporary history elusive at
best. Despite extensive press coverage surrounding the Time and Warner merger, and Ross's sup-
posed excessive salary, there exists a single scholarly, footnoted, logical account devoted to the rise
of Time Warner: Robert Gustafson, '"What's Happening to Our Pix Biz?" From Warner Bros. To
Warner Communications, Inc.', in Tino Balio (ed.), The American Film Industry (Madison: Univer-
sity of Wisconsin Press, 1985, revised edn). The 1990 creation of Time Warner caused a great deal
of complaining from the Time, Inc. side. Former Time magazine editor Richard M. Clurman aptly
titled his resentment To the End of Time: The Seduction and Conquest of a Media Empire (New
York: Simon & Schuster, 1992). He could not come to grips with Ross's formidable accomplish-
ments as a corporate chieftain, a rare CEO who could adapt and innovate. Connie Bruck's Master
of the Game: How Steve Ross Rode the Light Fantastic from Undertaker to Creator of the Largest
Media Conglomerate in the World (New York: Simon & Schuster, 1994) is the basic text on the life
of Steve Ross.
RKO
This short-lived studio inspired the best of the picture book histories, Richard Jewell with Vernon
Harbin's The RKO Story (New York: Arlington House, 1982). The authors had the actual records
for a short time. Howard Hughes has inspired many books, all poorly documented. For biographies
see Donald L. Bartlett and James B. Wilson, Empire (New York: W. W. Norton, 1979); John Keats,
Howard Hughes (New York: Random House, 1966); Noah Dietrich and Bob Thomas, Howard: The
Amazing Mr Hughes (Greenwich, CT: Fawcett, 1972); and Albert B. Gerber, Bashful Billionaire
(New York: Lyle Stuart, 1967). Other RKO owners have inspired far less interest, but see Eugene
Lyons, David Sarnoff(New York: Harper & Row, 1 966); Carl Dreher, Sarnoff: An American Success
(New York: Quadrangle, 1977); and Floyd B. Odium, Selected Speeches of Floyd B. Odium, 1930
to 1960 (New York: Random House, 1960). The best account of Hughes taking RKO out of busi-
ness remains a chapter in Richard Austin Smith, Corporations in Crisis (Garden City, NY: Double-
day, 1966).
Disney
The man and his studio have inspired a mountain of material. The best summaries are in Leonard
Maltin, The Disney Films (New York: Crown, 1973) and Bob Thomas, Walt Disney: An American
,I4| THE HOLLYWOOD STUDIO SYSTEM
Original (New York: Simon & Schuster, 1976). A coffee-table tome, which adds little, is Christo-
pher Finch, The Art of Walt Disney: From Mickey Mouse to the Magic Kingdom (New York: Harry
N. Abrams, 1973). Debunking the Disney myth provides the focus for Richard Schickel, The Disney
Version (New York: Simon & Schuster, 1968). A bibliography, circa 1977, of some 700 references
to all aspects of the man and his studio (plus a complete filmography) can be found in Elizabeth
Leebron and Lynn Gartley, Walt Disney: A Guide to References and Resources (Boston: G. K. Hall,
1979). For the well-documented Eisner era, see Ron Gover, The Disney Touch (Homewood, IL:
Business One Irwin, 1991); Joe Flower, Prince of the Magic Kingdom (New York: John Wiley &
Sons, 1991); John Taylor, Storming the Magic Kingdom (New York: Alfred A. Knopf, 1987); and
Michael Eisner, Work in Progress (New York Random House, 1998), which is a self-serving account
of his career before it fell apart so is far better on his rise (at Paramount) than his rise and fall at
Disney.
Universal
The best start comes with an annotated listing of all Universal productions, which can be found in
Clive Hirschhorn, The Universal Story (New York: Crown, 1983). An inadequate substitute is
Michael G. Fitzgerald, Universal Pictures: A Panoramic History in Words, Pictures and Filmographies
(New Rochelle: Arlington House, 1977). For a flattering biography of founder Carl Laemmle (it
should be flattering, he paid for it) see John Drinkwater, The Life and Adventures of Carl Laemmle
(New York: Putnam, 1931). A survey history of Universal in the 1910s and 1920s is the subject of
I. G. Edmonds, Big U: Universal in the Silent Days (New York: A. S. Barnes, 1977). In 1994 I pub-
lished the first scholarly account of Wasserman's accomplishments, in Steve Neale and Murray
Smith (eds). Contemporary Hollywood Cinema (London: Routledge, 1998). About half a decade
later I revised my perspective in 'The Hollywood Blockbuster: Industrial Analysis and Practice', in
Julian Springer (ed.), Movie Blockbusters (London: Routledge, 2003). Three biographies exist
in 2004: Dennis McDougal, The Last Mogul (New York: Crown, 1998); Connie Bruck, When
Hollywood Had a King (New York: Random House, 2003); and Kathleen Sharp, Mr. and Mrs. Hol-
lywood (New York: Carroll & Graf, 2003). Each tells the same story, from a slightly different angle,
based upon whom they interviewed. McDougal found the relatives; for Bruck, Wasserman talked
about himself (a little) and she dug into court records of trials Wasserman and MCA were part of;
Sharp took a feminist angle, arguing wife Edie was as important as Lew. Thus Bruck is superior, if
one wants to know scandal; McDougal for the anecdotes of power. Sharp for the social network-
ing of Hollywood.
Columbia
Rochelle Larkin, Hail Columbia (New Rochelle: Arlington House, 1975), plus Ed Buscombe's prob-
ing, 'Notes on Columbia Pictures Corporation, 1926-1941', Screen, 15, no. 1 Autumn 1975,
reprinted in the aforementioned Paul Kerr anthology provide the proper basis for study. Bob
Thomas' biography has too long served as the lone source of detailed information: King Cohn (New
York: G. P. Putnam's Sons, 1967). A fair amount of production information can be gleaned from
Frank Capra's The Name Above the Title (New York: Macmillan, 1971). David McClintick, a decade
into the Watergate era, tried to be Woodward and Bernstein for the Begelman scandal in Indecent
Exposure (originally published in 1982, and available in 2002 from HarperBusiness, New York). He
made a great scandal out of classic Hollywood miscounting where the studios understated the
amounts on which talent's percentages were based; there was also a bit of skimming off the
Columbia book. The book's best use is as a rare portrait of this important studio. Bernard Dick's
two books Columbia Pictures: Portrait of a Studio (1992) and Harry Cohn of Columbia Pictures
(1993), for the University of Kentucky Press cover Harry Cohn in Hollywood and the studio's his-
tory. For the difficult transition when Sony took over, written as the new 'scandal de Hollywood',
see Nancy Griffin and Kim Masters, Hit and Run (New York: Simon & Schuster, 1996).
United Artists
As noted above, we have two comprehensive histories based on primary documents: Tino Balio,
United Artists: The Company Built By The Stars (Madison: University of Wisconsin Press, 1 976) and
its follow-up on the Krim and Benjamin years (less analytical as he wrote it in full co-operation with
the parties involved) United Artists: The Company That Changed the Film Industry (Madison: Uni-
versity of Wisconsin Press, 1987). Both volumes miss the point; the first book misses the mana-
gerial skills of Joe Schenck and the second misses the lessons Krim and Benjamin learned from Lew
Wasserman, who really did change the industry. From the UA papers comes Gaizka S. Usabel, The
High Noon of American Films in Latin America (Ann Arbor: UMI Research Press, 1982), a rare look
at global distribution long before that term became a buzz word.
Republic and Monogram

For a start, see Richard Maurice Huest, Republic Studios: Between Poverty Row and the Majors
(Metuchen, NJ The Scarecrow Press, 1979); Gene Fernett, Poverty Row (Satellite Beach, FL: Coral
Reef Publications, 1973); and Todd McCarthy and Charles Flynn (eds), Kings of the Bs (New York:
E. P. Dutton, 1975). These studios simply attract no scholarly work, only the writings of ageing film
fans.
Industry Advocates
Hays, Johnston and Valenti have all had their lives documented, but Hays has attracted by far the
most attention. Will Hays' autobiography The Memoirs of Will H. Hayes (Garden City: New York:
Doubleday, 1955), is invaluable, as are his papers held at the State Library in Indianapolis; these
were published as eighty-five microfilms. The United States government helped Hays and his suc-
cessors, and these government reports populate many major research libraries and fill many boxes
at the National Archives, now housed in College Park, Maryland. See also Eric Johnston, America
Unlimited (Garden City, NY: Doubleday, Doran, 1944), and his We're All in It (New York: Dutton,
1948). Jack Valenti retired in September 2004, and we can expect a spate of biographies.
Unions
All studio unions and guilds have published publications throughout their history, the most valu-
able being the Journal of the Screen Producers Guild. Their websites provide invaluable data, par-
ticularly lA's. Since the US federal government stimulated unionism with section 7 of the National
Recovery Act the unions' relations with the studios have been well documented. The best summary
can be found in Donna Craft and Terrence W. Perk, Profiles of American Unions (Detroit: Gale,
constantly updated).
Agents
Surprisingly for all the power of the agent, little has been written about this secret club. They have
no association, and all have followed the model of Lew Wasserman (see his three biographies
above, under Universal), and put out much data about the client, not themselves. They were - even
MCA, and later Michael Ovitz's CAA - small operations compared with the studios, and as this
book is being finished as 2004 ends, the ongoing trial in Delaware Chancery Court on Ovitz's
excessive buy-out after failing at Disney will provide the sole believable data on Ovitz, his myth and
his inability to help Eisner run Disney.
Index
Abel, Richard 10 Association of Motion Picture Berlin, Irving 133

Abbott and Costello 159 Producers 187-90 Berman, Pandro 146-8
Abrams, Hiram 1 Astaire, Fred 71 Bernstein, David 106-7
Academy of Motion Picture Atari 243 Better 'Ole, The 50
Arts and Sciences (the Autry, Gene 167-9 Big Five 71-6
Academy) 68 Ayers, Lew 105 corporations 71-3
Adam's Rib 110 distribution 73-5
Adventure 108 Babes in Arms 106 exhibition 75-6
Adventures of Robin Hood, The Babes on Broadway 1 07 Big Parade, The 33
132 Bacon, Lloyd 134 Bioff, Willie 186-8
Air conditioning 24-5 Bakker, Gerben 10 Biograph 12
Allen, Charles Jnr 141 Balaban and Katz 18-19,22-5 Blackton, J. Stuart 37
Allen, Robert C. 35 Balaban, Barney 4, 81-96 Blanke, Henry 134
Altoona Publix Theaters, Inc. et Band Wagon, The 110 Bloom, Edgar S. 50
al. vs. American Tri-Ergon Bank night 77 Blossom Time 42
Corporation et al. 45 Bankruptcy 88, 146 Bluhdorn, Charles 226-31
American Federation of Banks, Monty 47 Blumberg, Nate 157
Musicians (AFM) 68, Bara, Theda 38 Bogart, Humphrey 130-1
185-8 Barrons 55 Bordwell, David vii, 1, 6,
American International Pictures Barrymore, Ethel 102 316

311 Barrymore, John 49 Boys' Town 106
American Telephone and Barrymore, Lionel 19, 102 Branded Woman, The 66
Telegraph (AT&T) Bathing Beauty 108 Brady, William A. 27
48-50 Batman 245-7 Breen, Joseph 176

Anchors Aweigh 108 Battleground 110 Bride Came C.O.D., The 130
Anderson, Robert 10 Beery, Wallace 102, 107 Bridge on the River Kwai, The
Andy Hardy series 105 Begelman, David 281-2 166

Anna Christie 06 1 Belasco, David 1 5, 40 Bringing Up Baby 1 48
Annie Get your Gun 1 1 Bell Telephone Laboratories 48 Bronson, Betty 52
Anthony Adverse 71 Bells of St. Mary's, The 83 Browne, George 186-8

Arbuckle, "Fatty" Rosco 21, Ben Hur (1925) 33 Browning, Tod 33
66-7 Beneath the Twelve-Mile Reef Bruce, Nigel 123
Arliss, George 1 1 124 BuenaVista (distribution arm of
Ashley, Ted 238-9 Benny, Jack 76 Walt Disney Company)

Asphalt Jungle, The 110 Bergman, Ingrid 83 154
3 9
Bulldog Drummond Strikes Connecticut Yankee in King Duffy's Tavern 83

Back 117, 121 Arthur's Court, A 92 DuMont, Inc. 4, 93-6
Business Week 5 consent decree 79
Byrd, Richard 42 Coolidge, Calvin 65 E T: The
. Extraterrestrial 1 99,
Cooper, Gary 86 218-19
Call Northside 777 123 Cooper, Jackie 102 East of Eden 141
Canova, Judy 169-70 Cooper, Merian C. 146 Easy to Wed J 08
Cantor, Eddie 42 Country Doctof 122 economies of scale (world
Capra, Frank 162 Covered Wagon, The 20-1 distribution) 5-6, 16,
Carousel 125 Cowdin, J. Cheever 158-9 295-6
Carrier, Willis 78 Crash Dive 120 Eddy, Nelson 102
Carroll, Noel 6 Crawford, Jesse 24 Edison, Thomas A. 12
Casablanca 92, 136-9 Crawford, Joan 33 Eisenhower, Dwight 94
Case, Theodore 41 Crosby, Bing 81, 92 Eisner, Michael 270-4
Cassady, Ralph, Jnr 10 Cry of the City 123 Egyptian, The 124
CatBallou 279 -
Curtiz, Michael 134 Electrical Research Products
Catchings, Waddill 49-52 Incorporated (ERPI) 50-2
Caught in the Draft 92 David and Bathsheba 120 Electrical Research Products
Censorship 66-7 David Copperfield 71 Incorporated vs. Vitaphone
Chad Han na 122 Davis, Bette 1 30 Corporation 55
Chaplin, Charles 2 Davis, Martin 231-6 Ever Since Eve 65
Charlie Chan series 123 Davis, Marvin 257-9
Cheney, Lon 33 Decca Records Inc. 161 Father of the Bride (1950) 110
CinemaScope 124-5 Demarest, William 52 Fairbanks, Douglas 61-2
Cisco Kid series 123 DeHavilland, Olivia 136, 195 Family Affair, A 106
Citizen Kane 1 44 DeMille, Cecil B. 19, 81, 92-3 Famous Players-Lasky, Inc. 7-9
Clarke, Harley 44 Diamond Horseshoe 1 1 Federated Motion Picture Crafts
Clayton anti-trust law 20 Dickinson, Angie 280 Union 188
Clock, The 110 Dieterle, William 134 Fancy Pants 92
Coal Miner's Daughter 2 1 Diller, Barry 229-30 Fiesta 109
Coca Cola Company 4, 282-4 Dinner at Eight 107 Film Daily 320
Cochran, Robert 58-9 Disney, Roy 262-9 Film Daily Yearbook, The 320
Cohn, Harry 9, 60-1, 161-6 Disney, Walt 262-8 film exchange 18
Conn, Jack 9, 60-1, 161-6 Dive Bomber 1 33 First Auto Race, The 51
Colman, Ronald 117 Dixie 83 First National Corporation 18

Columbia Broadcasting System Dolly Sisters, The 122 Fitzgerald, Barry 94
(CBS) 93, 311 Don Juan 50 Fitzgerald, F. Scott 1, 9, 75, 315
Columbia Pictures Inc. 60-1, Double Indemnity 92 Flynn, Errol 136
161-6, 276-84 Down Argentine Way 20 1 Follow the Fleet 71
'coming attractions' 78-9 Dr Jekyll and Mr Hyde 88 Footlight Parade 130
complementary good 78 Dr Kildare series 105 Ford, John 40, 122, 144, 170,
concession stand 77-9 Dracula 158 206

Coney Island 119 Dragon wyek 123 Fortune magazine 5
Conference of Studio Unions DreamWorks SKG 311-13 Four Horsemen of the
189 Dressier, Marie 102, 106 Apocalypse 30
INDEX 329
Fox, William 8, 37-45, Great Waltz, The 1 06 Hubbard, Lucien 104

Fox Theaters 38-44 Great Ziegfeld, The 71, 104 Hughes, Howard 144-52
Fox-Case Corporation 41-3 Greatest Show on Earth, The Hunchback of Notre Dame, The
Fox Film Corporation 38-44 81 60
Fox studios (Eastern) 41-2 Green Dolphin Street 1 09 Hutton, Betty 94
Frankenstein 158 Griffith, D. W. 12, 61-2
Frankovich, Mike 279 Gulf + Western 226-31 IMP studio 59-60
Freed, Arthur 110 Gulliver's Travels 91 / Was a Fugitive from a Chain
Freeman, Y. Frank 81-4 Gunga Din 1 48 Gang 130
Frohman, Daniel 14 In Old Chicago 118
From Here to Eternity 1 66 Hackett, James K. 14-15 In Old Kentucky 72
Hail the Conquering Hero 83 Independent film production
Gable, Clark 72 Hale's Touring Car 1 47

Garbo, Greta 72 Hampton, Benjamin 63 industrial analysis 4-5
Garland, Judy 102 Harding, Warren G. 65 Ingram, Rex 60
Garson, Greer 102 Hardy, Oliver 102 International Alliance of
Geffen, David 311-13 Harlow, Jean 102 Theatrical and Stage

General Talking Pictures Harvard Business School 11-16 Employes and Motion
Corporation et al. vs. Harvey Girls, The 1 08 Picture Machine Operators
American Telephone and Hawks, Howard 2 (IATSE or IA) 66, 1 86-9
Telegraph Co. etal. 45 Hawley, Clifford B. 66 International Pictures, Inc. 160
Gen tlemen 's Agreemen t 123 Hays, Will 64-8, 175-8 Iron Horse, The 40
Germany 67-8 Hazen, Joseph 92 Ivanhoe 110
Giant 141 Hellinger, Mark 134
Gladiator, The (1954) 124 Henie, Sonja 118 Jaffe, Leo 277-82
Glickman, Dan 297 Hepburn, Katharine 2 Jaws 199, 213-15
Goddard, Paulette 86 Hepworth, Cecil 9 Jazz Singer, The 42
Godfather, The 226, 228-9 Her Cardboard Lover 1 07 Jesse L. Lasky Feature Play
Goetz, William 157 Heritage Center of Wyoming 5 Company 17
Going My Way 81 Hertz, John 21 Jolson, Al 50-53
Goizueta, Roberto 0. 282-4 Hetzel, Ralph Jnr 183 Jolson Sings Again 1 63
Gold Diggers of 1933 130 Hiawatha 59 Jolson Story, The 1 63
Goldenson, Leonard 84, High Sierra 139-40 Johnny Belinda 130
264-5 Hirschfield, Alan 281-2 Johnson, Van 1 08
Goldman Sachs 46-51 Hitchcock, Alfred 2, 160, 205, Johnston, Eric 179-85
Goldwyn, Sam 61-2 206, 207, 213 Johnston, W. Ray 1 70-2
Gone with the Wind 1 06 Hodkinson, William 17 Journal of the Screen Producers
'Good Neighbor Policy' 177 Holden, William 94 Guild 3
Grable, Betty 118-19 Holiday Inn 83 Judge Priest 72

Grand Hotel 106 Hoover, Herbert 65
Grapes of Wrath, The 122 Hope, Bob 81, 91 Kane, Robert 57
Grayson, Kathryn 108 Hopkins, Miriam 94 Katz, Sam 21, 24-5

Grease 229-30 horizontal integration 4 Katzenberg, Jeffrey 271-2,
Great Depression 71-5,133-4 Horse Feathers 88 311-13
Great McGinty, The 83 House of Rothschild, The 117 Keaton, Buster 32
9 1 1 9
Keighley, William 134 'The Lions Roar' (NBC radio) Metro Pictures Inc. 30-1
Keith-Albee-Orpheum 57 108 Midsummer Night's Dream, A
Kelly, Gene 108, 111 Little Three 79-80 72
Kelly, Grace 95 Loew, Arthur 28 Mildred Pierce 140
Kennedy, Joseph P. 26, 56-7 Loew, David 28 Miller, Ronald W. 269-71
Kent, Sidney 21 Loew, Marcus 8, 27-31 Mills, Haley 268
Kerkorian, Kirk 309-10 Loew's, Inc. 27-35, 99-114 Min and Bill 107
Kid Millions 121 Loew's State Theater building Miracle of Morgan's Creek, The
Kindem, Gorham 10 30-1 83
Kinetoscope 10 Lord, Robert 1 34 Miramax Films 271
King and I, The 125 Los Angeles Times 5 Mitchell, Thomas 94

King Kong 1 44 Louis, Joe 72 'Modern Hollywood Studio
King Solomon's Mines 1 1 Louisiana Purchase 92 System' 198-201
Kinney Corporation 238-9 LoveBug, The (1968) 263 Monsieur Beaucaire 92
Kiss Me Kate 110 Love Finds Andy Hardy 1 06 Moody's Manual of Industrials
Klangfilm 67-8 .
Love Me Forever 71 320
Klaw and Erlanger, Inc. 14 Loy, Myrna 102 Monogram Pictures
Koplar (Scharaf et a/., Lubin, Sig 1 Corporation 170-2

Interveners) vs. Warner Lubitsch, Ernst 49 Monroe, Marilyn 125
Bros. Pictures Inc. 55 Lucas, George 255-6 Moon, Marilyn vii
Luring Lips 65 Moon Over Miami 1 20

Ladd, Alan 94 Moore, Owen 66
Lady and the Tramp 267 MacDonald, Jeanette 102 Mother Wore Tights 1 1
Lady Eve, The 83 Madame Curie 1 08 Motion Picture Herald 5

Laemmle, Carl 9, 57-60 Magazine of Wall Street, The 34 Motion Picture Patents
Laemmle, Carl Jnr 1 57 Maisie series 105 Company 7, 10

Lamour, Dorothy 83, 92 Mannix, Eddie 32, 102 Motion Picture Patents Co. vs.
Lancaster, Burt 94 March, Frederick 91 Universal Film Co. 10

Lang, Fritz 161 March of Time series 1 23 Motion Picture Producers and
Lansbury, Angela 94 Marie Antoinette 104 Distributors Association
Lansing, Sherry 258 Marin, Edwin L. 105 [MPPDA] 3, 64-7

Lasker, Albert 87-8 Mark, Mitchell 1 Motion Picture Association of
Lasky, Jesse L. 1 Martin, Dean 94 America [MPAA] 107-84,
Laurel, Stan 102 Martinelli, Giovanni 50 288-98
Lawrence of Arabia 278-9 Mary Poppins 262 rating system 291-3
Leave it to Heaven 1 23 Mast, Gerald 69 Movietone 41-4
Lebaron, William 145 Mastbaum, Jules 52 Movietone City 43-4
Lee, Davey 53 Matsushita 221-3 Movietone News 42-3
Leopard Woman, The 65 Mayer, Louis B. 2, 33-4 Moving Picture World 1 9-20
Lewin, Albert 32 McCarey, Leo 92 Mr Belvedere Goes to College
Lewis, Howard T. 26 McMurray, Fred 90, 92 123

Lewis, Jerry 94 media conglomerate 210-15 Mr Moto series 1 23
Life's Show Window 38 Meet Me in St Louis 108 Mrs Miniver 107
Lights of New York, The 45 Metro-Goldwyn-Mayer (MGM) Mrs Parkington 108
Lindberg, Charles 24 27-^5, 99-114, 309-10 Muni, Paul 134
INDEX 33
Murdock, John J. 56-7 Pale Face 92 Puttnam, David 283-4

Murdock, Rupert 198,259-60 Paramount building 23
Murphy, Eddie 234 Paramount Communications Queen Christina 1 06
Music Corporation of America Inc. 231-6 Queen Elizabeth 14-15
(MCA) 204-22 Paramount Famous Players- Quiet Man, The 170
Mussolini, Benito 42 Lasky Corporation 1 2-15 Quigley, Martin 69
Mutiny on the Bounty 71 Paramount-Publix Corporation Quigley Collection
My Big Fat Greek Wedding 25-6 (Georgetown University)
312-13 Paramount Pictures Corporation 25, 184, 318

My Favorite Blonde 92 11-26, 81-98
My Favorite Brunette 92 Paris Agreement 68, 175-6 radio 76, 92
My Four Years in Germany 47 The Passion Play 1 Radio Corporation of America

My Friend Irma 92 Passion's Playground 66 (RCA) 56-7
My Wife's Gone Away 52 Pathe, Charles 8-9 Radio-Keith Orpheum (RKO)
Pathe Inc. 8-9 56-7, 144-53
National Broadcasting Peck, Gregory 123 Raft, George 1 1
Company (NBC) 93 People's Vaudeville Company Random Harvest 1 07

National Lampoon's Animal 28-9 Ranous, William 59
House 213 Petrillo, James C. 188-9 Rapf, Harry 32
National Recovery Act 163, Photoplay magazine 40 Rappe, Virginia 66

185-7 picture palace 9 Rathbone, Basil 123
National Television Associates Pickford, Mary 15, 61-2 Razor's Edge, The 1 23
(NTA) 125-6 Pinky 123 Rear Window 95
Naughty Marietta 104 Pixar 271-2 Rebel Without a Cause 1 41
Neptune's Daughter 109 Plaything of Broadway, The 66 Red Badge of Courage, The
New York City 3 Pokorny, Michael 132 99-101
New York Times, The 5 Poli theatre chain 40 Redstone, Shari 235-6
New Yorker, The 99-101 Politics 106 Redstone, Sumner 235-6
newsreels 42-5 Popcorn 77-9 Reducing 106
No Woman's Man 65 Popeye 91 Reed, Donna 94
Now Voyager 139 Porter, Cole 130 Regan, Charles 84-5
Powell, William 102 Ren raw 134
Oberammergau, Germany 12 Power, Tyrone 1 1 Republic Pictures Inc. 167-70
O'Brien, Dennis 69-70 Powers, Patrick 60 Restless Sex 66
O'Brien Margaret 108 Presley, Elvis 96 revue television 208-11
O'Sullivan, Maureen 105 Princess and the Pirate, The 83 Richardson, Ralph 94
Odium, Floyd 144-51 Prisoner of Zenda 14 Roach, Hal 112-13
Old San Francisco 51 Production Code Road to Morocco 92
On an Island with You 1 09 Administration 175-6 Road to Rio 92
On the Town 1 1 profits 73, 150, 164, 316 Road to Singapore 92
One in a Million 1 1 Big Five 93 Road to Utopia 92
Otterson, John 52 projectionists 68, 186-8 Road to Zanzibar 92
Publix Opinion 97 Robe, The 124
Painted Veil, The 72 Publix theatre chain (see Roberta 71
Pal Puppettoons 85 Paramount Publix, Inc.) 25 Robinson, Edward 134
332
I
Rogers, Ginger 71 Sergeant York 1 33 Stewart, James 95, 102, 206

Rogers, Will 116-17 Seven Brides for Seven Brothers Stone, Lewis 106
Rooney, Mickey 102, 105-8 110 Story of Louis Pasteur, The 72
Roosevelt, Franklin D. 79, Shaggy Dog, The 265-6 Street with No Name, The 1 23
177-8 She Wore a Yellow Ribbon 1 44 Streisand, Barbra 279
Rose of Washington Square Shearer, Norma 106 Strike up the Band 107
122 Sheehan, Winfield 38, 44 strikes 193-4
Rosenwald, Julius 21 Sheridan, Ann* 136 Stromberg, Hunt 104
Ross, Lillian 99-101 short subjects 49-50 Sturges, Preston 83
Ross, Steven 238-50 Sinatra, Frank 108 Suez 118
Roxy (Samuel Rothefel) 24 Sinclair, Upton 44 Sullivan, Ed 112, 209-10
Roxy theatre 24 Singing Fool, The 46 Sunrise 42
Run-Zone-Clearance system 20 Sitting Pretty 123 Superman 242
Russell, Gail 94 Skelton, Red 108 Swing Time 71
Skouras, Charles 115, 120-7
Sampson and Delilah 81 Skouras, George 115, 120-7 'talent raids' 205
San Francisco 71, 107 Skouras, Spyros 1 1 5, 120-7 Tarzan series 102
Sanders, George 94 Skouras Bros. Enterprises Tatum, Donn 269-70
Sarnoff, David 56-7 120-1 Taylor, Elizabeth 108
'Saturday Night at the Movies' Smith, Alfred 42 Taylor, Robert 102
(NBC) 126 Smith, Courtland 42 Taylor, William D. 19
Schaefer, George 147-50 Snake Pit, The 123 Technicolor 119
Schary, Dore 100-1 Snow White and the Seven Telemeter 95
Schenck, Joseph 9, 61-2, Dwarfs 153 television 93-6
116-20 Solomon's Children 52 Temple, Shirley 72
Schenck, Nicholas (Nick) 2-3, Song of Bernadette, The 120 Ten Commandments, The
28-35, 73, 99-114 Sony Pictures Entertainment (1923, C. B. DeMille) 21
Schenck, Pansy 32 198, 284-6 Tenderloin 52

Schmeling, Max 72 Sorrell, Herbert 189 Thalberg, Irving 32
Schneider, Abe 277-82 Sorry Wrong Number 92 That Darn Cat 263
Scott, Lizabeth 94 Sound of Music, The 253-4 They Live by Night 151
Screen Actors Guild 190-1 Southern, Ann 105 Thin Man, The 1 04
Screen Cartoonists Guild 153 South Pacific 127 This is the Army 133
Screen Directors Guild Spielberg, Steven 211,311-13 This Land is Mine 1 50
(Directors Guild of Spitz, Leo 105, 132-6, 157 Thompson, Kristin 70
America) 191-3 Sponable, Earl 41 Three Musketeers, The 1 09
Screen Gems 165 Sportlights 85 Thrill of a Romance 08 1
Screen Writers Guild 189-90 Stanfill, Dennis 255-6 Tierney, Gene 94
Searchers, The 141 Stanley Company of America Time Warner Inc. 247-50
Sedgwick, John 71 52 Tinker, Edward 116
Seigel, Herbert 244-6 Stanwyck, Barbara 91 Tobacco Road 122
Seitz, George B. 105 Star Spangled Rhythm 83 Tobis-Klangfilm 67-68
Selig, Inc. 12 Stark, Ray 279-281 7bofs/e 283
Selznick, David 145-7 Steamboat Round the Bend 72 Top Hat 71
Semenenco, Serge 141 Steiner, Max 138 Tracy, Spencer 1 02
INDEX 333
Tron 270 Universal Pictures Corporation 231-2, 242, 252, 254,

Truth About Husbands, The 66 57-60, 157-61, 202-23 255, 260, 270, 280, 284,
Tugboat Annie 107 Universal-International 291, 293, 294, 299-306,
Turner, Lana 108 Corporation 160-1 313-16
Twentieth Century-Fox Universal Weekly Newsreel 60 We Were Dancing 1 07
115- 28 University of California at Los Webb, Clifton 123
Twentieth Century Fox 259-61 Angeles (UCLA) 127 Welcome Stranger 81
Twentieth Century Pictures University of Southern Weissmuller, Johnny 105
116- 18 California 322-3 Weltner, George 85
20,000 Leagues Under the Sea unusual occupations 85 West Coast Theaters 115-16
266-7 Western Electric 48-9
Valenti, Jack 288-97 Westwood, California 43
Unconquered, The 81 Valentino, Rudolph 60 What Price Glory? 40
unions 68, 86, 185-95, Valley of Decision, The 107 When My Baby Smiles at Me
299-304 Variety 5 123
United Artists Corporation (UA) vertical integration 4 White Christmas 95
61-62, 166-72, 309-10 Viacom Corporation 4 Why Girls Leave Home 66
United States Congress Vidor, King 88 Wife, Husband and Friend 122
House Committee on Patents VistaVision 95 Wild Boys of the Road 130
45 Vitaphone 52-5 Wild One, The 182
United States Department of Wilkie, Wendell 120-1
Commerce 65-6 Wagner Act 185-7 Williams, Esther 108
United States Department of Wald, Jerry 134 Wing and a Prayer, A 120
State 177, 180-1, Walker, Card 269-70 Winters, Shelley 94
288-98 Walker, Robert 108 Wisconsin Center for Film and
United States Federal Wall Street Journal, The 5 Theater Research 5
Communications Wallis, Hal 92 Wolf, Dick 222-3
Commission (FCC) Walsh, Raoul 134 World Warll 107-8, 176-7
Telephone Exhibits 45 Walt Disney Company, The Wrigley, William Jnr 21
United States Federal Trade 153-4 Written on the Wind 161

Commission (FTC) 19 War of the Worlds, The 1 48 Wurtzel, Sol 123
United States Justice Warfield, David 28 Wyman, Jane 130
Department 43 Warner, Abe 46-54, 115-28
United States Supreme Court Warner, Harry 9, 46-54, Yank in the RAF, A 120
7, 182 115-28 Yankee Doodle Dandy 1 36
United States Temporary Warner, Jack 46-53, 115-28 Yates, Herbert J. 167
National Economic Warner, Sam 46-52 Yeager, Charles 77
Committee 96 Warner Bros. Pictures, Inc. Yearling, The 109
United States vs. Fox Theaters 47-54, 130-42 Young, Loretta 91
Corporation etal. 45 Warner Communications Inc. Youngman, Henny 93
United States vs. Paramount 239-47
Pictures etal. 5, 93-4 Washington Post 5 Zanuck, Darryl F. 61, 253-5
Universal Chain Theaters Inc. Wasserman, Lew vii, 1, 95, Zukor, Adolph 1,7-10, 11-26,
60 147, 161, 183, 195-196, 81-8

Universal City 57-8 198-9, 202-23, 228-9,
Despite being one of the most influential industries
in the United States, indeed the World, the internal
workings of the 'dream factory' that is Hollywood is
little understood outside the business.
The Hollywood Studio System: A History is the first
book to describe and analyse the complete

development, classic operation, and reinvention of
the global corporate entities which produce and
distribute mos.t of the films we watch.
Starting in 1920, Adolph Zukor, head of Paramount

Pictures, over the decade of the 1920s helped to
fashion Hollywood into a vertically integrated

system, a set of economic innovations which was
firmly in place by 1930. For the next three decades,
the movie industry in the United States and the rest
of the world operated by according to these
principles.
Cultural, social and economic changes ensured the

demise of this system after World War II. A new way
to run Hollywood was required. Beginning in 1962,
Lew Wasserman of Universal Studios emerged as
the key innovator in creating a second studio
system. He realised that creating a global media
conglomerate was more important than simply
being vertically integrated.
Gomery's history tells the story of a 'tale of two

systems' using primary materials from a score of
archives across the United States as well as a close
reading of both the business and trade press of the
time, together with a range of photographs never
before published.
Douglas Gomery is Resident Scholar, Library of

American Broadcasting, and Professor of Media
Studies, University of Maryland.
Publishing

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THE HOLLYWOOD STUDIO SYSTEM

THE HOLLYWOOD STUDIO SYSTEM

Copyright © Douglas Gomery 2005

Set by Fakenham Photosetting Limited, Fakenham, Norfolk

Cover design: Mark Swan

British Library Cataloguing-in-Publication Data

ISBN 1-84457-064-9 (pbk)

Part I: The Rise of the Studio System 1 91 5-30 7

Part II: The Classic Studio Era 1931-51 71

10 Warner Bros. 130

Part III: The Modern Hollywood Studio System 198

Coda: The Modern Media Conglomerate Studio System 309

Bibliographic Guide 318

The book has three parts: part I

of the modern conglomerate studio era as of 2004.

Hollywood studio system, to be closer to the truth and more accurate.

expected, but which thankfully led me to Marilyn.

F. Scott Fitzgerald, The Last Tycoon

David Bordwell, The Chronicle of Higher Education

the studio system.

lary' businesses run by each of the major corporations after 1930.

and the studios).

to maintain Hollywood's economic power base.

history of corporations that at their core are economic institutions.

The Rise of the Studio System 1 91 5-30

France The eleven large st

granted the publicity and booking in a major picture palace.

wood studio system had been established.

Shadows Built (New York: Doubleday, 1 928).

Southern Illinois University Press, 1982).

5. Gerben Bakker, 'Entertainment Industrialized', unpublished PhD dissertation, European University

Adolph Zukor: the Leader and his Invention

He went on lecturing to the Harvard students:

the negatives. So we had to shut down [after three years].

the films he wanted:

there would be no moving picture industry [in 1927].

Zukor hit it big as an exhibitor with The Passion Play:

to do with the pictures shown. We also advertised in the newspapers.

He was already pioneering. 5

hours as they would a play.

their business. So we made thirty pictures a year.

Here he had added economies of scale to his set of strategies.

The Biggest Film Enterpise in the World

He then boasted of recent hits:

ending stream of pictures of the type I have named.

breaking Dox-ottice"7e^orcfracross the USA. On an investment of $336,000 the company had

Hn Marcn 1923 ZukorJoiliated-a-goncort rd r ffort t n n rqn r r theatres at a previously

Adolph Zukor in the late 1920s, a captain of

lifted high above the tiny adjacent shop fronts.

respected, institutional architecture of the past.

office on the top floor

1930 he was proved right. Zukor said to his shareholders:

1 0. Moving Picture World, 1 1 July 1 91 4, p. 208.

12. The New York Times, 29 June 1 9 1 6, p. 33

1 8. The New York Times, 1 September 1 921 , p. 1

1 9. The New York Times, 25 June 1 92 1 , p. 1 1

20. The New York Times, 19 September 1926, section IV, p. 5.

20 January 1945, p. 10.

24. Barrons, 16 December 1929, p. 10.

25. Kennedy, pp. 55-76.

Broadway impresario William Brady, Zukor announced one day in 1902

Loew: the Man and his Mission

distinctly popular priced field of vaudeville combined with moving pictures.