The Hollywood Studio System

A History

Douglas Gomery

• Publisher: British Film Institute
• Year: 2019
• ISBN:
  9781839020209
• Edition: 1
• Topic: Mezzi di comunicazione e arti performative
• Subtopic: Storia e critica del cinema

Despite being one of the biggest 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 entitles which produce and distribute most 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 dernise of this system after the Second World War. 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 realized 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 the book also features over 150 box features illuminating aspect of the business.

Part I

The Rise of the Studio System 1915–30

While the movies as a new technological form were invented during the latter half of the 19th century, and innovated early in the twentieth century, it was only during the late 1910s and early 1920s that a small number of companies with production based in southern California and distribution based in New York City began to dominate the world 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 present 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 popular and profitable 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 monopoly. 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 1912 when the US federal government filed an anti-trust action against the 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 1915 when the US Supreme Court refused to overturn 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 studio system’s power.¹

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 movie business. Borrowing the star system from vaudeville, and world distribution from the French, Zukor did two things: he took the star system and classic story-telling and made films in a factory-like system; and he developed a distribution division (Paramount) to sell his wares throughout the world. Only later did he react to monopolising theatre owners and develop the largest theatre chain in the USA. All this became possible because of the boom in movie interest that started in 1905. By 1915 Zukor, who started in the theatre end, was consolidating movie-making and distribution under his Paramount Famous Players Company (hereafter Paramount), and the studio system came into being.²

Zukor was not alone in entering the infant industry. He was simply the skilled leader that Fitzgerald identified. The nickelodeon business was an easy one in which to start out. The brothers Warner, William Fox and Marcus Loew (creator 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 stigma 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 Pathé, which was not only the largest, most influential French film company, but the first acknowledged global filmic empire in cinema history. By 1897 Pathé had become a corporation worth 1 million francs. Until 1900, its phonograph division, run by Emile Pathé, contributed 90 per cent of the revenue. Brother Charles Pathé worked on the technical and marketing problems involving cameras, projectors and film stock. They soon realised that films had greater commercial value than music and set about to mass produce them like canned goods. By the late summer of 1905, the Pathé brothers could turn out a title a day, making their French company the first in the world to achieve such a high level of regularised mass production. This production led the Pathé brothers to set up a global network of film distribution by 1906. Pathé 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, Pathé monopolised Central Europe as well as the colonised areas of India, Southeast Asia, Central and South America, and Africa.

In the USA, by October 1906, Pathé’s film sales averaged seventy-five copies each of sometimes a dozen film titles per week, constituting from one-third to one half of the growing US market. The company could rightly boast that it had ‘boomed the film business’ in the USA and that, for both quality and quantity, Pathé films were ‘tops in the world’. By the outbreak of World War I in 1914, no other film company was as successful as Pathé. No wonder Zukor was studying its operations. The war stopped Pathé in its tracks, and gave Zukor his opening to copy the French company’s methods. He would execute production and world distribution on a more far-flung basis than Pathé ever did.³

Surprisingly, the war did not disrupt the flow of films outside Europe. But the centre of distribution 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 second run. He 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-clearance system soon took shape.⁴

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 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. Pathé and Gaumont sold their US and international business, left film-making and focused on distribution in France. The eleven largest 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 system.⁵

In the end Zukor and his followers developed a set of operating principles. Their industry – symbolised by their Hollywood studios – would be made up of a small set of corporations that produced, 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 powerful 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 Fox had built a Big Five company, but mortgaged it far too much and lost the company by 1930. The other member of the Big Five was the leaderless RKO, which was never successful. The leaders of the Little Three were Universal’s 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 straightforward: 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 Hollywood studio system had been established.

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, 1953); Will Irwin, The House that Shadows Built (New York: Doubleday, 1928).

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 feature 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 sixte...