1941: Motion Picture Industry

Influence of the War.

When the United States was drawn into the war, the motion picture industry was organized and ready to meet President Roosevelt's challenge by helping to maintain civilian and military morale.

The War Activities Committee of the Motion Picture Industry has wide ramifications in production, distribution and exhibition. Producers are making films for training army personnel. About a hundred reels had been completed by the year end and forty more were in production. More than 12,000 theatres are voluntarily cooperating by exhibiting defense films released under the aegis of the committee.

The war is, of course, an old story to the industry. It had been hit when the Nazi invasion of Czechoslovakia started the march that cut off most of the Continent from all save Axis commerce. After the first bombing of London, the motion picture theatres were blacked out because it was considered unwise to permit crowds to gather. George Bernard Shaw protested that the cinema was necessary to maintain morale. Someone high in government circles evidently agreed, because the ban was lifted within a month.

Ever since, the American motion picture industry has supplied the United Kingdom with the best of its entertainment. This has entailed some sacrifice on the part of American companies because England, faced with the necessity of using all available foreign exchange to buy food and munitions, impounded part of their profits. At the end of the fiscal year in October 1941, it was estimated that the American industry had something like $40,000,000 tied up. But successful negotiations have been completed for release of $15,950,000 of the impounded profits in the current fiscal year. As a matter of fact, the first half of the payment had already been delivered in New York, and the remainder is due in April 1942.

In addition, American companies will be permitted to withdraw up to $20,000,000 in profits for the current fiscal year, as compared with $12,900,000 for the previous year and $17,500,000 the year before that. The $20,000,000 of current profits and $15,950,000 of profits impounded earlier add up to the tidy sum of $35,950,000 that will be coming over to the American industry in the course of the fiscal year ending in October 1942.

Elsewhere abroad the picture is not so bright. Twenty-seven countries have been cut off from the American film market by the wars in various parts of the world.

Results of the Antitrust Suit.

Altogether, 1941 was an eventful year. The first eight months were taken up with preparations for a pretty thoroughgoing revision of industry trade practices under the terms of a consent decree signed by five theatre-owning companies — Loew's, Paramount, RKO-Radio, Twentieth Century-Fox and Warner Brothers.

Although the original antitrust suit was hotly contested, once the consent decree had been signed, the five companies conscientiously met its terms. Sales managers were, naturally, reluctant to disturb trade practices that had taken on a 'cake of custom.' Once they got to work, however, they saw that salesmen who had been getting lazy under the old routine were spurred on to better results.

Selling costs have been somewhat heavier. Hitherto, it was possible for a salesman to dispose of his studio's entire product on a single visit to a customer. This was no longer permitted after Sept. 1, 1941. Blocks of no more than five films could be sold at one time by the consenting companies and buyers must be given an opportunity to see them. Blind buying is legally out. This necessitated making blocks of five films in advance of sale, and the studios produced overtime early in the year to build up a backlog of product. At first, this put somewhat of a strain on financing, but now most of the studios have settled down to a regular routine under the decree.

The decree also set up an arbitration system administered by the American Arbitration Association under the supervision of one of Thurman Arnold's men in the Antitrust Division of the Department of Justice. This new system was available beginning in January, and by December some 160 cases had been handled.

Independent exhibitors under the aegis of the Allied States Association of Motion Picture Theatre Exhibitors were generally supposed to have filed the complaints with the Department of Justice which caused the suit to be brought. Now they are dissatisfied with sales practices under the consent decree, and they have taken the lead in an 'Industry Unity' movement looking toward a trade practice code similar to the one industry leaders were working on when the Department of Justice filed its antitrust suit.

The original suit named eight major producer-distributors, but three producer-distributors without theatres — Universal, United Artists and Columbia — refused to sign the consent decree. So an escape clause was attached which provided that, if the Little Three were not brought under the decree within a year, the Big Five would also escape its provisions.

Meanwhile, in a case brought against the Crescent Amusement Co. circuit of theatres, the government has charged certain monopolistic practices designed to eliminate local, independent competition, as government counsel put it in their argument before Judge Elmer Davies in the United States District Court for the southern district of Tennessee. Other cases are pending against the Schine circuit of theatres and against the Little Three. On the outcome of these will depend whether the escape clause is to be exercised.

Meanwhile, the net result of the peace and harmony meeting held in Chicago in December was the program adopted by the newly formed Motion Picture Industry Conference Committee, comprising representatives of the distributing companies and all exhibitor organizations. The program of the new organization calls for coordination of policy and action with regard to such matters as taxation, 'protecting the good name and integrity of the industry as a whole,' priorities and 'formulation of a program providing, if possible, for the adjustment or modification of the policies or practices of one branch or member thereof which are opposed by any other branch or a substantial portion thereof.' On paper, at least, the hatchet had been buried.

The Nye-Wheeler Senate Investigation.

In the realm of government relations, life in the industry during 1941 was made up of marble and mud. Happily it was mostly marble, and even the mud-slinging had its constructive aspects. The governmental mud-slinging came first when Senators Wheeler and Nye launched successive attacks on the industry for what they termed warmongering. In due course Senators Nye and Bennett Clark jointly introduced a resolution asking for an investigation of war propaganda in the movies. The resolution was referred to the Senate committee on Interstate Commerce, of which Senator Wheeler is chairman. He appointed a subcommittee consisting of Senators D. Worth Clark, Tobey, Brooks, Bone and McFarland. Of the five, only Senator McFarland had consistently supported the President's foreign policy, and he was to prove a tower of strength in securing a fair hearing for the industry's side.

Industry witnesses appeared under protest because, as Wendell L. Willkie of film counsel pointed out, of the dubious legality of the hearing. Although it was ostensibly an investigation to determine whether an investigation should be held, the subcommittee prepared to stage what appeared to be a full dress inquiry. The plan called for a week of isolationist witnesses; then the industry spokesmen could have their say. By that time the public would have the isolationist story and it would be difficult if not impossible for the industry version to catch up with it.

That was the plan. But the isolationists had not reckoned with the resourcefulness of Mr. Willkie in reaching the public through the press and radio. When Senator Nye began his charges of warmongering before the committee, Willkie made countercharges by means of press and radio releases. He charged that the committee was attacking freedom of the screen, and Washington correspondents generously interlarded their dispatches on the hearing with Willkie quotations. Questions from Senator McFarland brought out the fact that witnesses had not seen the pictures which they said contained war propaganda.

When it came to the industry's turn, its spokesmen were Nicholas M. Schenck, Harry M. Warner, Barney Balaban and Darryl F. Zanuck. After denying charges of concerted warmongering, they defended freedom of the screen and free enterprise in forthright terms. Before they had finished, public opinion had rallied to the support of a free screen and the hearing was pretty well discredited.

Twentieth Anniversary of the Industry.

In 1942 the organized industry observes the twentieth birthday of the Motion Picture Producers and Distributors with Will H. Hays as president. The anniversary is a good vantage point from which to survey the industry's development.

Edison's laboratory baby was born in 1889 and was first projected on a theatre screen in 1896. In the early 1900's small business men were taking up the novelty as a promising vehicle of business enterprise. When the restraints imposed by the old Film Trust were lifted by court decree in 1915, the independent film pioneers began to expand and integrate their holdings. Today the business of making, distributing and showing motion pictures is an industry with a capitalization of $2,050,000,000 in the United States alone. Of this, $1,900,000,000 is invested in theatres, $125,000,000 in studios and $25,000,000 in distribution facilities.

Statistics.

In the course of the year 1941, moviegoers paid $1,000,000,000 — plus $100,000,000 amusement tax — into the box-offices of more than 18,000 film theatres of the country. It is estimated that some 85,000,000 tickets are sold in the United States in an average week. In order to supply entertainment for this vast audience, the industry employs 193,600 workers of hand and brain on an annual payroll of $322,500,000. Theatres alone employ 145,600 projectionists, ushers, managers, janitors, charwomen, cashiers and doormen. Selling and distribution account for 14,300 persons, and 33,700 more are employed in the studios. This does not take in others outside the industry who contribute of their skill, including some 276 arts and crafts inside and outside the studios.

The film industry is in essence a service industry which sells shadows on a screen. A drama enacted on a studio stage in Hollywood is recorded on film and later reenacted in a theatre by the magic of the movies. This requires expensive equipment in each theatre, and the patron must be provided with a seat in a comfortable auditorium. All of which adds up to about 65 per cent of the price of the ticket, which is retained in the community as local theatre expense and profit. That accounts for the large spread between the gross income of theatres and the gross income of producers and distributors, whose 35 per cent of the patron's admission gives them an estimated gross income of $350,000,000 in the United States.

With the world war going on, the domestic revenue is all that the management of the industry can count on with any degree of certainty in planning production. Despite the sharp curtailment of foreign markets, however, the industry is making money. That is a practical tribute to the ingenuity of management in solving the difficult problem of maintaining the quality of pictures in a shrinking world market. This feat has been accomplished by greater efficiency all around, combined with the creative art known as showmanship.

One company rose from a loss of a $1,000,000 in 39 weeks in 1940 to a net profit of $1,500,000 in the same period in 1941. Another doubled its earnings over the previous year. Net incomes of $4,000,000, $5,430,000, $6,000,000, $8,500,000 and $11,000,000 without benefit of frozen funds that have been released, were announced by other companies.

So despite the fact that the country has been drawn into the war, the industry is reasonably optimistic. See also MOTION PICTURES.