Record #1155

Date:
22/09/1937
Record Type:
Miscellaneous
Reel:
Reel 11
Frame Start:
11-1675
Frame End:
11-1700
Legacy ID:
1165
Legacy Year:
1937
Legacy Index:
Allied States

Allied States reports minor legislative victories for the independent exhibitors. They are campaigning for a regulatory act, "fashioned somewhat along the lines of the Bituminous Coal Act of 1937 (Guffey-Vinson Act). Includes a submission "Petition for Relief from Contracts Combinations Conspiracies and Monopolies in the Motion Picture Industry.Also a Petition for Relief from Allied to the House of Representatives Committee on the Judiciary, 10 February 1937, written by H.M. Cole. This is effectively an industry history written from the side of the independent exhibitors.

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Long Description:

There is a proposal from Myers, from the Allied States convention 22 September 1937, proposing "a regulatory act, fashioned somewhat along the lines of the Bituminous Coal Act of 1937 (Guffey-Vinson Act). " This set up a regulatory board of 7 members, - 2 ex-mine workers, 2 ex-owners, but none with current interests in coal production or any other occupation - i.e. he is proposing movie commissioners, some possibly ex-exhibitors and ex-producers, to enforce "a code which is, in effect, a legislative requirement that certain fair trade practices shall be observed." - and this is enforced by a punitive tax on all production if it is not complied with. "The criticisms issuing from certain quarters regarding some of Allied's milder legislative proposals, such as the Neely-Pettengill bill, the anti-playdate bill, and the divorcement bill, are 1. that they are not broad enough to accomplish any substantial reform; 2. that they can be readily evaded; 3. that they do not have 'teeth.' To these critics I tender a plan which, whatever other faults it may possess, cannot be challenged on the score of ineffectiveness. ... If the exhibitors of the United States want this form of regulation and will work for it, they can secure it. If they want some less drastic measure, they can have that. But they must make up their minds. A division of opinion after a measure has been introduced, however one-sided, will imperil their chances. "Also a Petition for Relief from Allied to the HoR Committee on the Judiciary, 10 February 1937, written by H.M. Cole. This is effectively an industry history written from the side of the independent exhibitors.It notes the Department of Justice (DoJ) has instituted 17 prosecutions against the motion picture industry under the antitrust laws during the past 25 years. 9 were won. Of those, only 3 were contested, 5 terminated in "ineffective consent decrees" and 1 dismissed "in consideration of concessions made by the defendants to the victims. The significant thing is that despite the Department's apparent timidity in dealing with this trust, it has never failed in any case decided by a judge. Only one of these cases, that brought against the Motion Picture Patents Company in 1912, was of any significance. The others dealt with minor or purely local manifestations of the monopoly. Despite all this apparent activity the trust marches on. "... during the period from 1915 to 1922 there were in most film centres from 20 to 40 exchanges to which an exhibitor could apply for films. The business during this period was characterized by free and open competition." Compulsory block booking did not exist, and first runs and protection were open to all who could afford them. Zukor was responsible for the formation of the MPPDA, once his construction of a monopoly was met with the resistance that led to the creation of First National, U.A., Loew's Metro and general exhibitor hostility. "A pre-existing trade association known as the National Association of the Motion Picture Industry, comprising all branches of the industry, was abandoned. The circumstances that certain unwholesome conditions in Hollywood had just come to light helped to obscure Zukor's real purpose ... [which] was to bring the warring factions in production and distribution together, to keep within due bounds the competition that was so menacing, to enable the industry to present a united front in opposing censorship and other regulatory measures, and to perpetuate for the group the monopolistic practices that had been evolved by and had proven so profitable to Zukor. That Zukor's purpose was as herein stated is attested by the fact that one of the first steps taken by the Hays Association following its formation was not, as the public had expected, to clean up the movies. Instead, it was to devise and put into general use a uniform exhibition contract and to formulate and put into operation compulsory arbitration and credit bureau systems, directed against the exhibitors and supported by blacklists, which were later struck down by unanimous decisions of the Supreme Court as flagrantly violative of the Sheridan Act." Describes consolidations during the 1920s, notes that Warner-First National was effected despite a suit filed by DoJ - which did frustrate Fox-Loews, but no action was taken when RKO absorbed Path and Fox absorbed Educational and Tiffany. "Lobbying activities: One of Hays' first acts was to employ C.C. Pettijohn, an Indiana politician, to supervise all lobbying activities. The efforts of Mr. Pettijohn and his regular staff are supplemented form time to time by politicians and persons close to the Administration recruited from whichever party is in power. The slightest intimation of any adverse action by Congress or any State legislature or other department or agency of government will bring a locust swarm of these lobbyists to the scene of action. A full disclosure of the activities of this branch of the Hays Association would provide a lesson in invisible government. "... Control of the MPTOA. ... Between 1922 and 1928 Paramount, Loew's, and Fox had acquired many theatres and circuits of theatres, and UA and Universal were joining in the movement. To render impotent the outraged exhibitors these chains became members of the MPTOA. At the Toronto convention 1928, representatives of the affiliated chains seized control of the association. for many years it has been maintained as a mere appendage of the Hays Association. The United States District Court in Nebraska has described it as "subsidized by and a subsidiary of" the Hays group. The membership consists almost wholly of producer-owned theatres and its expenses are paid by the chains through the Hays office. The president of MPTOA who no longer operates any theatres, spends a large part of his time appearing before legislative committees and other bodies opposing measures sponsored by the independent exhibitors and welfare groups to correct the evil practices of the Big Eight. Also claims the trade press are controlled by the monopoly through advertising."Theatre Grabbing: Prior to the Depression: Exhibitor opposition having been reduced to impotency the more powerful of the major producers - Paramount, Loew's, Fox and Warner - set about acquiring theatres in earnest. The pretense of acquiring theatres only in key cities for exploitation purposes was abandoned and theatres were grabbed wherever possible. Money being plentiful the process was made easy. In cases where the independent owner was reluctant to sell a threat to build in opposition to him usually was sufficient to change his mind. This process continued until 1931, when the depression finally caught up with the movies. It is estimated that by that time the companies named, together with RKO which had come in later, controlled upwards of 4,500 theatres. "Some of these they were forced to relinquish. This setback was only temporary, however, and soon they were again back on their course. They evolved an apt solution for their problem. Landlords and hotelkeepers were bulldozed into yielding enormous concessions. Theatres were tendered to these interests with the warning, 'You can have the theatres, but we control the product, so what are you going to do about it?' When expedient 'friendly' receiverships and bankruptcies were resorted to, the same individuals operated the theatres during the interim and these same people are running them since they were discharged by the courts. Numerous scandals grew out of these collusive proceedings some of which will undoubtedly be reported by the Sabath Committee."Since the Depression: Now exultantly free from financial worries and with money both plentiful and cheap, the Big Eight are again pressing for control of the field of exhibition. But this time they are not proceeding, as they did before, 'on a scale that was huge and in a manner that was wild.' Instead of tempting the theatre owner with a price too high to resist, they are employing a new technique - which is more subtle and far less costly. An independent exhibitor with a first class theatre in a good town, is approached by an agent of some theatre chain, either producer-controlled or a 'fairhaired child' [the Big 8 as a matter of policy or expediency frequently extent unusual favors to so-called independent chains comparable to those which they afford their own circuits. This is partly to curry favor because of the buying power of such chains and partly with a view to eventually taking them over. An independent chain rarely remains so after it has attained a certain size] with an offer to buy a controlling interest. Thereafter the transaction may follow either of two courses: "He agrees to sell: The chain gives him notes (executed by a subsidiary and of little value as bankable paper), paying over a number of years, with maturities spaced so that the same can be liquidated out of the chain's share of the normal profit. The exhibitor also is required to contract with the chain to buy and book for his theatre with no safeguards as to the rentals to be paid for such pictures. For this service the exhibitor must yield to the chain from 4% to 6% of the gross receipts. The chain can, and usually does, buy in bulk for its entire circuit and arbitrarily allocates to the exhibitor's theatre such proportion of the total film cost as it sees fit. This is the power of life or death and it can be and has been used to make unprofitable the operation of theatres and force their relinquishment to the chain on its own terms."He refuses to sell: The chain advises all of the Big 8 that it desires their film for use in the town in which the exhibitor has his theatre. If the exhibitor remains obdurate the chain will reopen some abandoned theatre, or build a cheap one, and the exhibitor's first-class house loses prestige and patronage for lack of major product. Sometimes a few of the major companies will stick with the independent and sometimes he loses all. He cannot even buy the individual pictures discarded by the chain house. Neither can he buy second or any subsequent run on the picture that the chain does use. For the most part he is forced to fall back on the inferior product of the few surviving state's rights exchanges. He can not even buy short subjects, (one and two reel fillers) of which there is a large surplus on the market. He is faced with ruin and sooner or later must make a deal. "An occasional variation is to permit the exhibitor to enter into an arrangement whereby the chain does his buying and booking without acquiring an interest in his theatre. For this 'service' the exhibitor pays the chain from 4% to 6% of his gross receipts. In most cases this is of no benefit to the exhibitor except as it protects him against invasion and annihilation. "This invasion by the highly organized producer-distributors of the field of exhibition, thereby becoming competitors of the theatre owners dependent on them for necessary supplies of film is one of the principal evils of the business today and the root from which most of the unfair trade practices spring. "Protection ... The time specified often is materially enlarged by the circumstance that the number of prints of any given picture supplied by the distributors to the exchanges has been greatly reduced in recent years and it frequently happens that after the protection period has expired no print is available to the exhibitor until the lapse of a further period of some 14 to 60 days. Protection has been fortified by a rigid control over the admission prices charged by the subsequent run theatres, and this control is exercised by the exchanges at the behest of the chains regardless of whether the pictures are played on a percentage or flat rental basis." - other complaints involve percentages, which guarantee the distributor additional profit while taking no risk, preferred playing dates, block booking, blind selling, and Duress: The explanation offered by the trust as to all of these oppressive trade practices is that, since they are embodied in exhibition contracts between the distributors and the exhibitors, they are merely a matter of barter and sale and are not imposed on the exhibitors against their will. The answer is that there are a limited number of worthwhile pictures and the theatre owners are dependent on the Big 8 for the backbone of their program. Thus the exhibitors really have no choice. Unless they sign on the dotted line the distributor puts them under duress by threatening to build in opposition. If they still remain obdurate, the chain moves in."The current situation has involved a reduction in production "to a point where there is a definite shortage of pictures." In 1935 only 356 from the Big Eight and 138 features from independents and state's rights. "With the resumption of theatre grabbing the community of interest among the Big Eight has become more tangible and pronounced. Competition among them in the operation of theatres has been limited to the larger cities. Even there, with rare exceptions, not more than two have theatre representation, and in many of these situations they have pooled the operation of their houses. It would appear that the aim has been to restrict invasions of the field of exhibition to independent situation. Each of the Big Eight enjoys a valuable business in supplying pictures to the others to be used in competition with the independents. The contracts between the different members of the Big Eight are cogent evidence of their community of interest. These contracts, sometimes called franchises, are often for a term of years and bear little resemblance to the yearly exhibition contracts offered the independent exhibitors. They do not impose compulsory block booking but on the contrary, provide for wide selectivity. Under these contracts first runs and in the metropolitan areas second and even third runs are made the exclusive possessions of the chain theatres. The protection to afforded the chain theatres is frequently expressed therein. "He produces an analogy to explain the terms on which they do business: "Let me assume, therefore, that A, a dealer in men's clothing, should apply to the several clothing manufacturers for a stock of specified models of suits and overcoats and receive the following reply, not from one, but from all: 'You may have our line of suits and overcoats but we have no samples or descriptive matter and you must agree to take all of the garments of whatever design we see fit to make during an entire year. Not only must you take all of our suits and overcoats but all of our shirts, neckties and collars as well. Also, you must buy all of your advertising accessories from us. We have or may have a store of our own in the same town with you and you will be permitted to offer our styles to the public from 30 to 365 days after they have been introduced in our store. We can not tell you just what you will have to pay for our products as we reserve the right to base the price on a percentage of the total receipts of your store. Of course, you will have to guarantee us a minimum price, as we are willing to share your profits but not your losses. We reserve the right to designate the particular day or days of the week on which you may sell certain models and we will regulate the prices charged so as to protect our store against your competition. Some models may be reserved for our store exclusively. If we decide to expand in your territory, or someone comes in that we like better than we like you, we will take the line away from you altogether. It is only fair to warn you that with returning prosperity and a cheap money market, we contemplate increasing our retail outlets very materially in the near future. 'This may sound fantastic but it illustrates exactly the conditions under which independent exhibitors are forced to do business at the present time. "Commends the attitude of Attorney General Cummings in the prosecution of the Warner Case in St. Louis, and his deputy, Russell Hardy - but since that case Hardy has been superseded by Paul Williams, "who appears to be deaf to the appeals of the complaining exhibitors." Notes that "Chain depredations are most flagrant" in the South and that "there are indications that the complaints of independent exhibitors are forwarded to the legal representative of the Big Eight for comment".

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