The Coming of Sound

THE COMING OF

SOUND

THE COMING OF

SOUND A H I S TO RY

DOUGLAS GOMERY

Routledge New York • London

Published in 2005 by Routledge 270 Madison Avenue New York, NY 10006 www.routledge-ny.com Published in Great Britain by Routledge 2 Park Square Milton Park, Abingdon, Oxon OX14 4RN U.K. www.routledge.co.uk Copyright © 2005 by Taylor & Francis Group, a Division of T&F Informa. Routledge is an imprint of the Taylor & Francis Group. This edition published in the Taylor & Francis e-Library, 2005. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording or in any information storage or retrieval system, without permission in writing from the publishers. Library of Congress Cataloging-in-Publication Data Gomery, Douglas. The coming of sound : a history / Douglas Gomery. p. cm. Includes bibliographical references and index. ISBN 0-415-96900-X (alk. paper)—ISBN 0-415-96901-8 (pbk. : alk. paper) 1. Sound motion pictures—United States—History. 2. Motion picture industry—United States—History. I. Title. PN1995.7.G64 2004 791.43'0973—dc22 ISBN 0-203-99772-7 Master e-book ISBN

2004019686

Table of Contents Acknowledgments Photographs Preface: The Research Question, the Method, and the Data 1. A Preview: Order and Profit, Not Chaos 2. The Preconditions for Innovation 3. The Warner Bros. Innovate Sound 4. William Fox Innovates Sound 5. Warners’ Blockbuster: The Singing Fool 6. Paramount and Loew’s Wait, and Then Make Their Deal 7. The Rise of RKO: The Failure of All Others 8. The Diffusion of Sound in the United States 9. Diffusion of Sound Throughout the World 10. The Formation of the Studio System: Merger Mania 11. Mopping up the Loose Ends 12. The Coming of Sound: A Reinterpretation Endnotes Index

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vii ix xi 1 7 23 47 55 63 77 87 105 115 139 151 155 175

Acknowledgments I want to thank Edward Branigan, Bill Germano, David Bordwell, Eugene Smolensky, James P. Kraft, Chunying Cai, the Word Perfect company, and Marilyn Moon. I helped Edward and his colleague, Chuck Wolfe, start the AFI readers. This has, over two decades, become an excellent series, and Edward always pestered me to edit one. I said “no thank you,” and then said if you want one, I would do a collection of the essays I did on the coming of sound— many now hard to find. This proposal did not fit the AFI series concept, but Ed then put in a word with Bill Germano. I wrote a proposal and Bill Germano accepted it. Thanks, Bill. These essays began their life based upon my Ph.D. dissertation: J. Douglas Gomery, “The Coming of Sound to the American Cinema: A History of the Transformation of an Industry” (University of Wisconsin– Madison, 1975), which was inspired by the work of David Bordwell and Eugene Smolensky—an odd couple, one of the world’s foremost film theorists and a consummate public policy expert. I was lucky to find both at the University of Wisconsin at the same time. They taught me how to do research, and no words can ever thank them enough for offering to teach me that skill. As I decided whether to publish my classic essays, I discovered James P. Kraft’s “Stage to Studio: Musicians and the Sound Revolution, 1890—1950” in Johns Hopkins University Press’s Studies in Industry and Society series. This splendid book analyzes the history of the American Federation of Musicians union. I looked to see what Kraft used as his sources for the musicians and their replacement by talkies. It was my dissertation!

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Since then, Marilyn Moon and I sought jobs to maximize chances of getting tenure together, I had broken my dissertation into articles, and published a dozen. The strategy worked; we both went up for tenure the same year, the same day—and got it. But still scholars like Kraft were going back to the original. This is where I started again. So when Bill Germano kindly offered to publish my “classic articles” (his term), I asked my RA Chunying Cai to scan them into Word Perfect 6.1— the greatest writing program ever invented. Then I did more research. Thus, while this book started out as essays, it has been revised to be read as a continuous whole. I redefined my arguments based on 20 more years of research. Then Marilyn Moon again came to my rescue. She has long abandoned the academy, but is a skilled writer and researcher. (When someone you know is helped by Medicare, the world’s largest health insurance program, say “Thank you, Marilyn.”) Once I put together this new work, she looked at it again, and with much work, I revised it once more. Thanks again, Marilyn—for saving those precious 10 Word Perfect disks, and, of course, for providing the day-to-day inspiration that only a consummate professional can provide. Howard Hawks would have understood no higher compliment can be paid.

Photographs Plate 1 The four Warner brothers who pioneered movies with sound. Left to right: Harry, Jack, Sam, and Abe.

Plate 2 Adolph Zukor, head of Paramount, who made the final decision as to which sound system to adopt.

Plate 3 David Sarnoff (left), shown with G. M. Marconi. Zukor decided not to adopt the model of Sarnoff 's RCA, instead creating RKO.

Plate 4 Loew's head Nicholas Schenck surrounded by his employees and next to his wife. Left to right: Buster Keaton, Harry Rapf, Irving Thalberg, Schenck, Pansy Schenck, L. B. Mayer, Eddie Mannix, and Albert Lewin.

Plate 5 UA head Joseph Schenck, Nick's brother and partner in Hollywood. Left to right: L. B. Mayer, Sam Goldwyn, Joe Schenck, and unknown.

Plate 6 The brothers Cohn, heads of Columbia Pictures, who had to accept what Zukor and the Schencks decided. Left to right: Jack Cohn, Harry Cohn, and one of their accountants.

Plate 7 Will Hays, industry representative and broker of the Paris Agreement for world sound distribution.

Plate 8 MGM backlot, 1930, with enclosed sound proof stages to keep noise out and recorded sound on film.

Plate 9 The Paradise picture palace (4,000 seats) on the West Side of Chicago, Fall 1928: owned by Paramount, playing Warner's State Street Sadie (a part talkie) together with a Fox Movietone newsreel.

Plate 10 The acme of talkies, Saturday 17 August 1929 in New York’s Times Square. Advertising MGM’s The Hollywood Revue of 1929.

ix

Preface The Research Question, the Method, and the Data

The coming of sound in the late 1920s is a crucial segment in the history of film. In film production, important adjustments in directing and acting techniques occurred. Some significant film makers adapted easily; many others could not make the conversion. Significant new artists appeared and new genres evolved. Many aspects of film production had to be revitalized. Most film industries found it necessary to readjust patterns of distribution and exhibition. It became much more difficult to import and export films. In the silent era, retitling had made international exchange relatively easy, but with sound, dubbing and subtitling proved unsatisfactory substitutes. Yet throughout the period of transition, the U.S. film industry retained its power. Hollywood films continued to dominate screen time in Western Europe and command a disproportionate share of the market in the rest of the world. For many reasons, American films sustained their popularity. When sound first came to the American cinema, its impact was felt not only in the United States, but throughout the world. The U.S. film companies adopted sound and then exported these new films to foreign countries. In response, foreign film makers had to add sound or be faced with almost total elimination from their potential markets. Thus, an understanding of the conversion of the U.S. film industry to sound is basic to any understanding of this world-wide transformation. The U.S. film industry converted to sound primarily for economic considerations. Artistic, sociological, and psychological factors certainly affected the decision, but the arguments presented in this volume assume that the executives who controlled the U.S. motion picture industry were in busi-

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ness primarily for one reason—to maximize the long run profits of their companies. Long run profits are the residual share of the revenues from a film company after all payments to capital (interest), land (rent), and labor services, including management (wages).1 This is not the same as the accountant’s broader definition of profit, usually defined as current revenues minus estimated current costs. Corporations, I posit, wish to make as much in the way of profits they can in the long run. For example, as will be seen with Warner Brothers in Chapter 3, the corporation may accept losses in the short run to maximize profits in the longer run. Economists have developed a sophisticated set of tools for explaining the behavior of profit maximizing firms. One of these tools will be employed in this book: the theory of technological change. Here a company takes new knowledge and then brings it to the marketplace. It hopes that customers will prefer this new product to the current product, and then buy the new one. All this is done with the goal of increasing the profits of the corporation in the long term. This study assumes that not only did the firms in the U.S. film industry try to maximize their profits, but so did the giant communication firms which developed the new technology, such as American Telephone and Telegraph (AT&T) and the Radio Corporation of America (RCA) with which the film industry dealt. These assumptions explain why all firms involved in the transformation acted as they did. It frees this study to concentrate on the who, what, where, and how of the change.2

Previous Studies I hardly claim to be the first to take on the question of how, within five years, did the U.S. film industry so quickly transform from producing, distributing, and exhibiting silent film (with live sound accompaniment) to talkies with sound on film. Harry M. Geduld’s The Birth of the Talkies (1975) seeks to cover what I call the invention and innovation stages—but hardly from an economic perspective. Rather, with what I call a technologist approach, Geduld starts with the invention of the phonograph and ends with the demise of the silent film in 1929. On page three he points out The story of the marriage of sound and film begins before cinema —with the invention of the phonograph. Though its original purposes were in no way associated with cinema, the talking machine, either Edison’s or some variation on it, was to be used in most early attempts to provide sound accompaniment to motion pictures.

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This is certainly the case, but to make a narrative out of it—rather than economic analysis—sweeps the industry away and makes it a tale of inventors as stars. I argue that the Hollywood studio system was, first and foremost, an industry. In The Sounds of Early Cinema, Richard Abel and Rick Altman analyze the urge to marry sound and silent cinema. They describe over and over again the demand by the public for this technological innovation. It is no wonder when the successful innovation did take place in the late 1920s that it was so rapid. The demand has always been there, but a supplier was needed to transform the film industry. David Bordwell, Janet Staiger, and Kristin Thompson in their Classic Hollywood System (1985) also deal with the transition to talkies, but as driven by the demand for new and complex ways to tell stories. Their analysis of narrative change also makes the point that the demand was there. The public embraced cinema with live sounds. In the late 1920s, the industry standardized this and set records for earnings. Although this is a side point for Bordwell and his co-authors, I argue a necessary condition was that the industry figure out a way to make this transition work—thereby achieving greater profits.3 James Lastra’s Sound Technology and the American Cinema (2000) takes this demand to a new level, wrapping it in modernity. His book barely acknowledges that he is talking about an industry at all, but focuses instead on a new interpretation of technology. Although he claims he tracks the relations among financial capital, modern science, and cultural practice, he really just accepts an interpretation of capitalism which fits into his true interest—making a contribution about cultural practice. This is fine, but accepting a certain form of capitalist analysis—without spelling it out to the reader—simply moves past the issues of economic change to assume that this industry operates like all other capitalist industries and is not worth a separate study as an industry. Lastra uses these assumptions to move to his interest in theoretical questions of representation. He is not an historian, but a theorist who accepts others views of the past so he can get onto what interests him. In 1997, interest in the coming of sound intrigued two new authors. Scott Eyman’s The Speed of Sound: Hollywood and the Talkie Revolution (1997) tried to make the transition into an exciting narrative, gripping enough to sell as a trade book. His tome contains no notes, only a list of books used. His is a book filled with victims and victors. He begins with The Jazz Singer and then after waxing nostalgically about the silent film era, he states that sound changed everything—for the worse. He then tells his story through vignettes of those left behind. This means tales of woe

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spoken by aging silent stars whom wax on about the “good old days [of the silents],” lots of currying of previously published accounts, including mine. The Jazz Singer is at the centerpiece and he makes this the turning point of the narrative: “how could those pesky Warner brothers do it?” He has little about the moguls, save that they were dumb, as when a surprised Adolph Zukor was caught unaware when talkies proved so popular. There exists no organizing principle but chronology, and within that, snippets of time. These become usually the interviews a journalist would do, here from memoirs, oral histories, and the rare survivor. That he would take the word (accusation?) of Jack Warner, Jr. that Western Electric’s John Otterson was an anti-Semite. Even though it is a juicy bit of gossip, how does it help understand what motivated the entrepreneurs and scientists responsible for this industrial transformation? I cringe because, when he used my material it was always taken to add to the drama of his book, and performed no scholarly function. So we are to believe that the Schenck brothers were scamps, and had not made an agreement as teenaged immigrants to share all the money they made over the years, and that Nicholas Scchenck at Loew’s single handedly started Twentieth Century Fox for his brother.4 The other myth that needed to be dispensed with was that Marcus Loew was running his Loew’s/MGM empire until his death in September of 1924. Marcus Loew and Nick Schenck put MGM together, and the ever-growing sicker Loew elevated himself to figurehead CEO, while Schenck made all the key decisions after 1924. Zukor surely was the point person for the biggest companies, but Schenck, as always—until the end of his career in the middle 1950s—played best from behind the scenes. Sadly, the standard scholarly work has become Donald Crafton’s The Talkies, one of the Scribner’s series of the History of American Film project, supervised by Charles Harpole. Indeed I admit part of my motivation to get my essays back in print was to counter the work of Crafton who—to differentiate from my dozen articles and 1975 Ph.D. dissertation—turned his history into a reception study. He states, after his review of the literature, including dismissing my dissertation, seemingly unaware of the articles they spawned, that one element missing is the audience, and then follows Rick Altman’s theory of film reception analysis as his model, coupled with a chronology not unsimilar from Eyman. His first chapter—on the inventions—might have been a rehash of technical accounts or manuscripts from AT&T’s archives, but articles from Collier’s, The Ladies Home Journal, and lots of citations from a single trade paper—Film Daily. Although its annual yearbooks contain scores of data, the Film Daily was a headline service, a USA Today for the film business.

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Again he tells the usual tale of industrial change, and gets down what the goal of the book really is—how the new talkies were received.5 One might expect his book to end in 1931, as that is part of the “1926— 1931” subtitle. Instead, his final chapter starts with a summary debunking the film Singin’ in the Rain as the beginning of his conclusion. He then goes on to speculate how all of this affected the audiences of the day. Before the conclusion, we do not find a discussion of sound in 1931, but an analysis of The Jazz Singer’s reception. This is a revision of previously published chapter, but assumes that the industrial corner was turned by release and reception of one film—The Jazz Singer. The box office record holder, The Singing Fool, is only noted for its bad acting, and not its record-setting revenues. In the end, all these books contain useful information, but all start and end away from the movie business as an industry. Here is where one ought to start. This was an industrial change—with vast social, cultural, and aesthetic implications. It is only by looking at the industry as a set of profit seeking companies, that we can understand how the U.S. film industry changed. We know why—to make higher profits. Yet prior writers focus elsewhere—from making dramatic tales of chaos and woe to reception case studies. I want to begin where it is logical to begin: How did this industry change as a new technology was innovated?

Required Data Past studies of the coming of sound not only lack a solid theoretical underpinning, but also have ignored original sources of data. Since this was, I assume, a financial and economic transformation, I look at the press not aimed at the film industry, but at investors who wanted information—as found in Barrons, Fortune, Business Week, and other publications—aimed at their gaming Wall Street. Here, The New York Times and The Wall Street Journal proved most helpful in covering economic change as the headquarters of the major film companies tended to be in New York City, not Hollywood. I then surveyed issues of Variety and Moving Picture World between 1905 and 1941 in detail. (Unlike Crafton, I found that these trade papers lengthy accounts often, but not always, checked out with the primary documents I uncovered.) Year-end summaries in The Film Daily Yearbook, The Motion Picture Almanac, and Moody’s Manual of Industrials also proved helpful. Other sources were more direct. Many of the financial and legal records of the United Artists Corporation (UA) are on deposit at the Wisconsin Center for Theatre Research in Madison, Wisconsin. These documents, especially those of legal counsel, Dennis F. O’Brien, provide direct evidence

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of one major firm’s reaction to the coming of sound. Because the majors acted in concert and copied all-important documents to all companies, United Artists’ files provide a record of this collective behavior during the diffusion and adaptation stages. And because UA lawyer Dennis O’Brien was copied on all legal conflicts, these documents take on an authenticity not found elsewhere. When I looked at the Warner’s collection at U.S.C., I simply found the same documents.6 Just as important were official governmental sources, where if data was presented and falsified, would constitute a felony. Between 1935 and 1937, for example, the Federal Communications Commission (FCC) investigated AT&T. As part of that investigation, the FCC examined AT&T’s activities in the motion picture industry. Past studies have included the congressional report that the FCC produced; this study employs the documents on which the staff report was based. These include corporate records, memos, and letters from Electrical Research Products Incorporated (ERPI), RCA, and many firms in the film industry. In addition, the FCC secured a large amount of direct testimony from film industry leaders. The FCC was not the only government agency to investigate AT&T’s tie to the film industry. In 1935, the House of Representatives Committee on Patents considered a bill providing for regulation of patent pools. AT&T’s ability to provide the film industry its sound system depended on an important patent pool. This House Committee also secured testimony of motion picture executives, subpoenaed contracts and letters, and compiled financial data directly from the corporate records of the firms involved. The 3,000 pages of documents the House Committee collected are part of the public record. The same can be said of the vast number of court records collected. These data are the product of the patent, anti-trust and contractual disputes concerning sound patent rights, exclusivity, and royalty fees. In the 1930s, AT&T, Warner Bros., and other members of the film industry initiated many suits over these rights. William Fox sued AT&T and the film industry over his Tri-Ergon patent rights. Warner Bros. sued AT&T for violation of antitrust laws in the sound field, and tangled with AT&T in a dispute concerning royalty payments. Even several major Warner Bros.’ stockholders sued the corporation for stock fraud. In all the cases, the plaintiffs and defendants supplied testimony, letters, agreements, and financial data concerning the transition to sound. All these data are part of the public record. A check with the AT&T archives proved only redundancies. It is with all these new primary and secondary sources, plus a new approach, that we can now write a more complete, systematic history of the transition of the U.S. film industry during this crucial period.

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Government and court records have one great advantage. They are obtained under the authority of law. If one offers false documents, the offending party can be cited and sent to jail. Because of our system of governmental checks and balances, and an adversarial system of legal actions, no corporate lawyer would dare release false documents. She or he might advise a client to withhold information, but with hundreds of court cases, and dozens of vast governmental investigations, there was too much primary information, not too little.

The Economic Study My study originated from the work of Industrial Organization economics, which I then adapted to historical analysis. I base this study upon the principles I laid out in “Toward a New Media Economics” found on pages 407— 418 of David Bordwell and Noel Carroll’s Post-Theory: Reconstructing Film Studies (1996). Following is a summary of these principles: 1. The Hollywood studio system is best understood as a part of mass media industries along with popular music, radio, and in the 1920s, vaudeville. These competed for the customer’s dollar and all were dominated by profit-maximizing corporations. Profit = revenues ⫺ costs. Profit maximizing means trying to make this difference as large as possible, in other words, the monies that the owners get to keep. 2. The studio system, like the rest of corporate America, was not controlled by financial institutions, but operated as powerful corporate institutions. That is, the focus of this study is corporate change. 3. The primary locus of action was not Hollywood, but New York City where the headquarters of these corporations lay. Executives in New York made all the final decisions, and contrary to the auteur theory, finally approved all script decisions, all selection of footage to use, all final cuts, and all decisions of how to release the films. The seeming chaos described over and over again by studio workers came from the strategic decisions from New York. To start any study of the coming of sound, we must first understand how these corporate strategies and decisions were made and instituted. Historians have too long been distracted by the supposed chaos on the studio lots and the tales of woe told by old timers. The heads of these corporations—led by Adolph Zukor— saw correctly the movie making process as one part of the system—which also included distribution and exhibition. To pretend that they did not allocate all corporate funds is to wipe away true analysis, so the historian can study what she or he loves—the films themselves.

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Chapter 1 debunks the usual conclusions of chaos and disorder as best exemplified by Donald Crafton and Scott Eyman. It was not chaos or disorder, but a basic rational transition that should be appreciated and understood for its rapidness and completeness. The transition needed to be framed in the terms of industrial change. This is nothing new to economic historians. The economic theory that deals with the introduction of any new product or process is called the theory of technological innovation.7 Sound films can be treated as a new product, or a new, better way of making the old product. This theory posits that there are three stages in the introduction of any new product or process. In each stage, all firms involved try to maximize their long run profits. To see the effect of a new product, such as talkies, on an industry, one should first establish the basic structure, conduct, and performance of that industry before the change began. Thus, it is necessary to establish the basic conditions of supply and demand, the market structure and corporate conduct in 1925, prior to the coming of sound. Hollywood did little research so it is just as important to compile this same information and construct an analysis for the communication giants that supplied the necessary inventions—led by AT&T and RCA. To complete this baseline it is necessary to analyze the state in 1925 of competing industries: radio, music, and vaudeville industries. These industrial organization analyses are the subjects of Chapter 2. Finally, in Chapter 2, I also survey sound films’ early failures—not as histories in themselves, but as examples of what was needed for a system to work as a mass medium. The first stage in any technological innovation is the development of the necessary inventions. Edwin Mansfield, a noted authority on technological change, has defined an invention as “a prescription for a new product or process that was not obvious to one skilled in the relevant art at the time the idea was generated.” This inventing was done outside the film industry and the sold to film corporations by AT&T, RCA, and many smaller corporations.8 Motion picture sound can be defined as a mechanical system of recording and reproducing clear synchronized sounds for broadcast with films in motion picture theaters. Sound reproduced under laboratory conditions provides no profit for motion picture producers, distributors, or exhibitors. Furthermore, sound recording and reproduction is, and always was, considered a system of inventions. Thus, the attempts to record and reproduce sound by simply linking up an acoustical phonograph never met the criteria in the definition. This primitive method could never be properly synchronized, or amplified for motion picture theaters. However, it is crucial to survey these early failures to understand the reluctant and rational behavior of the entrepreneurs of most motion picture companies in 1925.

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The second and most crucial stage is innovation—covered in Warners’ innovations (Chapter 3), and Fox’s innovations (Chapter 4). These two companies brought the inventions to the market place as new products— first as partial talkies, and then complete films with all mechanical sound. This freed the theater owner from a significant cost—providing live sounds to accompany “silent” film presentation.9 An invention, when first adopted for practical use, is an innovation. The innovator is the first firm to employ the invention in the marketplace. A firm’s leaders alter past methods because they determine that the adaptation of this invention is the potential investment with the highest expected rate of return. That is, this investment will add the most to the firm’s long run profit for the least cost, worth more than one dollar in the future. Then, the entrepreneur would calculate a rate of return. He would eliminate any projects he did not think would return as much as the firm was currently making in normal operations, or could make by investing elsewhere. Finally the corporate leader would rank the expected profit, selecting for implementation those with the highest returns, given the firm’s capital position.10 For any motion picture company, this decision rule involves a large number of difficult judgments. The firm must have the necessary managerial talent to organize and effect the change, and acquire the necessary financing to secure the new capital stock. On the supply side, many factors affect expected costs. These include the size of the investment, the new costs of production, distribution and exhibition, and the effects on costs of the firm’s existing product. On the demand side, future and current pricing policies, the characteristics of the new product, and expected future sales all influence potential revenues. Moreover, there exists the risk factor, here included in the rate of time preference. Many factors determine which entrepreneurs are risk loving, or risk averse. Considerations of firm size, market structure, the state of the business cycle, and the manager’s personality and previous experience are all important factors. Chapters 3 and 4 look at the two key innovators, the Warner Bros. and Fox corporations, determine the strategies to be used, and how best (that is, most profitably) add mechanical sound to motion pictures. But Warners demonstrated the power of their innovation not with the first hit—The Jazz Singer—as historians have repeated over and over again. Instead it was Jolson’s second effort—The Singing Fool—that proved that a feature all talkie could make far more profit than continuing to create and distribute silent films. Indeed the Singing Fool would set the record for film industry revenues in 1928 that would last a decade. This case study of the real economic key film in the innovation process is the subject of Chapter 5.

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But the corporate powers of the movie business did not sit around ignoring the actions of the innovators. Chapter 6 examines the behavior of the then dominant corporations—Famous-Players—Lasky/Paramount and Loew’s/MGM. The leaders of both decided to wait and not innovate. They would let Warner Bros. and Fox take the chances. In rational decision making, Adolph Zukor of Paramount and Nicholas Schenck of Loew’s weighed the advantages and disadvantages of waiting. The advantages lay in the ability to acquire new information, and to benefit from any new improvements in the product or process. Moreover, they could gather valuable data concerning expected revenues by observing the actions of the innovator, and new information concerning costs from the inventor. They reasoned their considerable market power would protect them in the long run—and they were correct and all signed on May 11, 1928, with AT&T. Next Chapter 7 deals with actions of the companies with sound technology who were unable to sign up Warner Bros. and Fox, or the other major companies. RCA had a sound-on-film system; others had versions of either sound on phonograph records (such as AT&T’s Vitaphone) or sound-on-film (such as the AT&T modification done by Fox). But post May 11, 1928, they were shut out. RCA then decided to start its own film company so it would have at least one client to use its sound system— Radio-Keith-Orpheum (RKO). But to be complete I also deal with multiple failures of corporations unable to compete with AT&T or RCA. They simply went out of business—but not for the lack of trying.11 Wide-spread use came late in 1928 through 1930. This is called diffusion as the film corporations looked for the type of product the public most liked. Diffusion through the United States is the subject of Chapter 8; international diffusion is surveyed in Chapter 9. This diffusion stage is concerned with learning about and deciding among various investment policies open to a firm. Rarely does an investment require a quantum leap. The firm’s entrepreneurs can always alter the speed of adjustment as they take into account new information. At the same time, the firm can change, or improve the invention, adapting it to its particular production function. Early versions of an innovation often have serious technological and marketing shortcomings. It takes time to work out these problems. These improvements and alterations may turn out to be as important as the invention itself. The diffusion process also involves a reallocation of resources on the part of the firm. The firm takes on new types of capital and labor to replace those in current use. For example, some workers lose their jobs, while the firm hires others with the appropriate skills. Since physical capital once constructed tends to be relatively inflexible, changes in its allocation take

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place largely through the building of a new plant and equipment. Here is where Kraft’s inspiration came in for the musician’s union. By 1930, the inventions of five years earlier had refined the film industry. Talkies were standard around the world. The process of technological change was complete. Yet the problems of adjustment for the U.S. film industry did not end as the implications—social and technological—played out. In Chapter 10, I analyze the continuation of the diffusion of sound— which lasted until 1941. In case after case, the collusive Hollywood studios stood together, and successfully faced down AT&T, William Fox, and a host of challengers. Finally, I contrast my new history with the current literature in Chapter 11 and provide the basis for aesthetic sites. Indeed, an example of this can already be found in Janet Bergstrom’s, “Murnau in America: Chronicle of Lost Films,” published in Film History, volume 14, 2002, where she constructs, on her own and with my help, a new interpretation of the pioneering filmmaking of F. W. Murnau at Fox as the company was transforming itself. Janet used my articles and dissertation; today she simply could have used the book you have in your hands.

CHAPTER

1

A Preview Order and Profit, Not Chaos

I argue that previous historians have misled us; the transition to sound films was rapid, but speed of change does not necessarily connote disorder, chaos, or confusion. The Hollywood monopolists cooperated to eliminate all-important problems, and insure maximum profits and growth for themselves. Consolidation and merger, not panic or anarchy, should be the labels we use to characterize the switch to sound by the U.S. motion picture industry. Cooperation was the order of the day. Paramount and Loew’s (and its production subsidiary MGM), the dominant companies, signed identical contracts—save for their inserted corporate titles—on the same day, May 11, 1928, in the same room, AT&T’s New York offices, and at the same time (an hour before then end of the business day). After months of bargaining with AT&T’s subsidiary, Western Electric’s newly formed subsidiary, Electrical Research Products Incorporated (ERPI), all other companies— save pioneers Warner Bros., Fox, and RCA’s Radio-Keith-Orpheum (RKO) —signed identical contracts. No chaos here. If there is a date key to the coming of sound it is the May 11, 1928, cooperative signing—not the October 1927 premiere of The Jazz Singer. Once signed, the true coming of sound proceeded. Paramount and Loew’s moved to create sound features first; soon after came newsreels and shorts. Warner Bros. and Fox had led the way—but only temporarily. Paramount, Loew’s, and even RKO caught up within one year. Paramount’s conversion was typical: it released its first feature with a musical score in August of 1928, its

1

2 • The Coming of Sound

first with talking sequences in September, and its first all-sound film in January of 1929. The majors distributed silent and sound versions of all films during the 1929—1930 season, and moved completely to full-sound features for the 1930—1931 season. MGM trailed Paramount by one month; Universal and United Artists followed 3 months later at each stage. The only significant exception to this quick one-step transition was RKO. Because the merger that created RKO occurred in October of 1928, time was needed to establish basic operations. By September of 1929, RKO caught up with Paramount and the other majors. Independent producers lagged six months to a year behind even the slowest major company. The first all-talkie independent feature was not released until July of 1929, a year after Warner Bros. and seven months after Paramount. The independents continued to produce and release silent films well into 1930. The transition for the majors was rapid (about one year) and smooth. The independents trailed the majors at every point, and were seemingly undecided as to corporate strategy well into 1930. For shorts and newsreels, the changeover was not as smooth or rapid; less profit was at stake. Only Warners and MGM initially moved into shorts. Consequently, there were opportunities for independent producers. Disney advanced significantly at this time. Fox led the way for sound newsreels. By the fall of 1929, Fox was releasing four different newsreels each week, and had seventy production units in the field. RKO, MGM, Paramount, and Universal followed and all-sound newsreels were commonplace by the spring of 1930. Small newsreel firms, such as Educational’s Kinograms, did not survive the conversion to sound.1 The Hollywood monopoly capitalists pooled information during the diffusion of sound, and minimized all potential problems. The Academy of Motion Picture Arts and Sciences (hereafter referred to as the Academy) coordinated the collection and transmission of all knowledge to the major Hollywood studios. On May 2, 1928, when it became known that the majors would sign the recording license agreements, the Academy held its first educational seminar. As early as June 5, 1928, 20 committees were established to gather and distribute information, and to consult with physicists and speech experts from the University of Southern California and University of California at Los Angeles. During 1929 the Academy formalized its activities and set up a school in which to train studio personnel on the fundamentals and newest advances in sound technology. Nearly 600 employees enrolled in sessions supervised by Irving Thalberg of MGM. Elsewhere, the Academy set up a special committee to solve the technical problems an individual studio could not solve on its own: silencing lights and cameras, finding the best materials for sets and props, and improving

A Preview • 3

release print quality. This committee, also supervised by Thalberg, worked for 12 months. It published the most significant findings and solutions in the Academy Technical Digest. In 1930, all reports were collected and published as a book.2 Individually, the majors took less than one year to plan and construct their new sound stages. The only setback came on January 16, 1929, when one of Paramount’s nearly completed sound stages burned to the ground. Paramount immediately initiated rebuilding operations, not even pausing for one day. The cost of the new Hollywood construction was enormous. Conservative estimates placed the investment at $23 million; others saw the total running closer to $50 million. All this came when the original studios, built over a 15-year period, were valued at only $65 million. Hollywood was not the only area that prospered. In order to minimize expenses for using Broadway, radio, and vaudeville talent, Paramount reopened its Long Island studio in July of 1928. During the summer of 1928, MGM, First National, Warner Bros., Universal, RKO, and Fox all activated studios in the New York City area. New York studios boomed throughout 1929 and into 1930. During a typical week, 10 features, and as many shorts, were in production. Paramount always led in activity; for example, in 1929 it produced over 30 percent of its output in New York.3 The distribution branch of the motion picture industry was the least affected by the coming of sound. The majors continued their dominance over national and international distribution. States’ rights distributors decreased in number as their operations became less profitable. The exchanges themselves became more careful in handling prints as any dirt, oil, or grease could severely distort the sound. There was one important change. Prior to the coming of sound, most films rented for a flat fee. Because revenues from silent films could not be used as a guide, distributors began to demand a percentage of box-office revenues supported by a minimum guarantee. The major producer-distributors would share in the excess profits if a film did well and be protected if it did not. Independent exhibitors vigorously protested for they did not wish to expose their accounts to constant surveillance by the majors. Still these independent exhibitors gave in quickly; they did not want to lose access to the highly profitable talkies. Producer-distributors then hired checkers to monitor audience size to guarantee accurate accounting.4 Immediate access to sound films increased the importance and profits of the theaters affiliated with the Hollywood major corporations, and accelerated the rate of disappearance of the independent house. Chains easily absorbed the additional costs of wiring, quickly substituted vaudeville acts recorded on film for live presentations, and lowered overall operating costs.

4 • The Coming of Sound

In response, during the fall of 1929, smaller independents began to add vaudeville presentations to their silent film shows as a counter-programming strategy. This only helped for a short time. Moreover, the automobile caused great difficulty for independent theaters in small towns. Roads had improved during the 1920s and thus significant numbers of patrons could easily drive to nearby cities to large chain theaters. Independent exhibitors began to complain to their representatives in Congress: the majors were now even more of a trust than before. To head off adverse governmental action, the Motion Picture Producers and Distributors Association, the film industry’s trade association, appointed a committee to monitor complaints, arbitrate disputes, and even compensate certain theater owners. Overall, the committee did little except generate reams of public relations releases arguing how fair the current system really was.5 In Hollywood, the Academy mediated all labor disputes and kept all difficulties to a minimum. Most workers quietly prospered with the increase in business. Consider the case of the actors. As is well known, Hollywood raided Broadway for speaking talent; over four hundred stage actors and actresses moved to the West Coast in 1929. Most stage personnel were members of Actors Equity (hereafter referred to as Equity). Equity had attempted to organize silent film actors and actresses in 1924 and 1927, but failed. The producers, through the Association of Motion Picture Producers, continued to recognize the Academy as the sole bargaining unit. In January of 1929, however, as more and more stage performers migrated to Hollywood, Equity’s new president, Frank Gillmore, sent a questionnaire to all members; an overwhelming majority desired a new effort to unionize Hollywood’s actors and actresses. On June 4, 1929, the assault began. Gillmore proclaimed that from then on, Equity members would sign only Equity-approved contracts. No member would work on a film unless all other actors and actresses belonged to Equity. Most employment contracts expired in the summer months. Thus, Gillmore knew that if this action was successful, Hollywood would become a closed shop during the summer of 1929.6 Within 24 hours after the announcement, Fred W. Beetson, secretary of both the Hays Office and the Association of Motion Picture Producers, called a meeting of the production heads of all the major studios in Hollywood. After a four-hour session, Cecil B. DeMille, representing the producers, issued a statement defying Equity: “We will continue to engage artists for our productions only under the fair and just form of contracts which was approved by representatives of both producers and motion picture actors. We decline to be restricted as to the sources of our talent.”7

A Preview • 5

The producers knew that only one-tenth of all of Hollywood’s currently employed actors and actresses belonged to Equity. Quickly the producers rallied important stars to their side: Lionel Barrymore, John Gilbert, Norma Talmadge, and Marie Dressler publicly declared that they knew of no labor abuses in Hollywood. Moreover, the major studios continued to operate normally, trading personnel when needed, and postponing no films. In July, Ethel Barrymore, Equity’s vice president, persuaded Gillmore to meet with the producers. Gillmore demanded a partially closed shop. The producers offered only an open shop. On August 11, 1928, Barrymore released a statement to the press accusing Gillmore of misleading the membership. Barrymore felt that the producers offered a reasonable settlement. This split Equity’s leadership, and quickly Equity’s membership broke ranks. Large numbers of players began to sign standard Academy contracts. The labor unrest was over. Equity retreated to Broadway. The Screen Actors Guild would not come until the U.S. federal government encouraged unionization through the National Recovery Act starting late in 1933. There was no real problem during the coming of sound.8 The switch to sound happened so rapidly because of the high profits the major companies earned on their new investments. Costs increased but revenues rose much faster. Accurate data for specific grosses are unavailable, but all reports indicate that Warners’ The Singing Fool, released during September of 1928, grossed a record $5 million. Other new sound films did nearly as well and thus the majors’ profits reached new peaks. In 1929, Warners made over $14 million, Paramount $15 million, Loew’s $11 million, and Fox $9 million. Moreover, growth in profits was phenomenal. From 1928 through 1929 Warners’ profits grew an incredible 609 percent, Paramount 78 percent, and Fox 59 percent. They used these new profits to acquire more theaters, and to stake position in the rival entertainment businesses. Here the actions of RCA and its subsidiary, RKO were best known. By 1930 RCA controlled two major radio networks (NBC Red and NBC Blue), a movie studio, the old Keith-AlbeeOrpheum vaudeville theater chain, and the Victor Phonograph Company. So although RKO never achieved great profits in movie making, other operations provided considerable profits, and kept the corporation afloat.9 The transition to sound by the U.S. film industry monopolists was fast, orderly, and profitable. All adjustments were made in fifteen months. The Academy, the Association of Motion Picture Producers, and the Motion Picture Producers and Distributors Association coordinated the flow of information, and arbitrated nearly all disputes in quick fashion. Profits skyrocketed and the motion picture monopoly capitalists expanded, absorbed other firms, and concentrated and centralized power into four large units.

6 • The Coming of Sound

Rather than confusion, these monopolists created more order by gaining control of the inputs to and outputs from their enterprise. The coming of sound facilitated this greater monopoly power, and shaped the structure of the U.S. film industry—a structure that survived both a depression and a world war well into the 1950s. But we must start first with the industry as it was in 1925, as analyzed in the following chapter.

CHAPTER

2

The Preconditions for Innovation

Many inventors and businessmen had unsuccessfully attempted to link sound to movies prior 1925. All of the motion picture leaders in the 1920s, primarily former exhibitors like Adolph Zukor, Marcus Loew, and Carl Laemmle, knew of these attempts and failures. In addition, these entrepreneurs closely noted all changes in the state of industries that provided close substitutes and complements for movies. In the 1920s the structure, conduct, and performance of the radio, music, and vaudeville industries were so volatile that by the 1925—1926 motion picture season, the popular entertainment mix was significantly more complex than prior to World War I. Knowledge of this combination weighed heavily in all investment decisions any motion picture entrepreneur would make. Finally, the structure and conduct of the motion picture industry in 1925 also supplied crucially important data for any change within that industry.

The Motion Picture Industry These three industries competed for the public’s entertainment dollar, but by 1925 the motion picture grossed more revenues than any of its competitors. Silent films with live sounds had become a billion dollar industry. By 1925 the motion picture industry was clearly divided into three basic sectors: production, distribution, and exhibition. Production of feature films, shorts, newsreels, and serials were centered principally in Hollywood, California. There was a three-tiered structure in production. On top were the “Big Two” producers: Famous-Players and MGM (the production branch of Loew’s), in that order.1

7

8 • The Coming of Sound

After that came a group of five led by Fox and Universal, followed by Warner Bros. and Film Booking Office (FBO). United Artists fit into a special category with its small exclusive production. First National was also an exception as it was group of theater owners producing movies for their theaters. This set of exhibitors loosely banded together to make movies for their circuits. But the trend—again led by Famous-Players—soon to be called by its distribution-exhibition arms Paramount-Publix (or simply Paramount), and Loew’s, took in the most revenues at the theater level and distribution level (nationally and internationally), and spent the most per feature film. They were vertically integrated, owning a strong position in production, distribution, and exhibition (theater ownership).2 All of these firms possessed national distribution. In the third category fell a large number of independent producers, all of which distributed regionally by what was called “states-rights.” In 1925, some 45 independents made an estimated 191 films. No one company created more than fifteen. The bigger companies fully dominated the most expensive features. The independents took a stronger position in short subjects. One—the Walt Disney Company—would survive by allying with a major studio until the 1950s when Walt finally went off on his own.3 In 1926 and early 1927 Loew’s/MGM and Paramount added newsreel and short film components to their production packages, either by beginning production themselves or contracting exclusively to distribute the production of others.4 Feature films still generated most of the profits, but the “Big Two”—led by Adolph Zukor and Nicholas Schenck—had come to realize they could gain extra monopoly profit by selling feature films, shorts, and newsreels as one package. The “Big Two” also dominated in terms of assets, sales, and profits. In assets, Famous-Players was almost twice the size of the next largest company, and more than ten times as large as a second-tier firm like Warner Bros.5 This structure was also reflected in the various trade organizations. The dominant group was the Motion Picture Producers and Distributors Association (Hays Office), led by Will Hays. All of the largest firms were members of the Hays’ group except FBO, primarily a producer of cheaper films. The alternative association, the Independent Motion Picture Association of America, was composed of the largest independent film producers. The membership of this association fluctuated greatly. With the ease of entry and exit from this segment of the market, new firms constantly emerged while others left the market.6 There was a rigid cycle in the production of motion pictures by 1925. The exhibition season began in late August and ran until May; the summer

The Preconditions for Innovation • 9

was a slack period because of a lack of air conditioning. To feed into this schedule, the major producer-distributors sold films to exhibitors from March to May preceding the exhibition season. They staged elaborate sales conventions, usually in April, to introduce the exhibitors to the new films. Heavy advertising in trade papers supplemented this strong salesmanship. By July, most sales were set. The majors then instituted heavy national advertising campaigns in national general interest magazines such as The Saturday Evening Post, newspapers in large cities, and numerous fan magazines. To feed into this sales pattern, most studios finished their films by the March preceding the August premieres. The peak months for production were in the summer and fall, with sporadic production in the winter and spring. Spring was the planning season for the following year. By 1925, as the studios became larger and more “business like,” this cycle became more and more rigid.7 In the second segment of the film industry, distribution, the nine large producers again held almost complete control. Paramount and Loew’s/MGM had distribution networks in the United States and all over the world. The viable smaller studios also distributed all over the world, except through networks, not as extensively as the “Big Two.” Only United Artists and Pathe, for its newsreels, also had international distribution. Educational, for its shorts, had an extensive national network. These large networks developed because of economies of scale. Major producers discovered that the average cost of distribution falls as the network expanded, given the most efficient scale (here the world). The independents did not possess the necessary strength to take advantage of such costs savings. They had to distribute through “states-rights” (regional) distributors, pay a higher average cost, and still not obtain international exposure, unless they distributed through one of the major firms. There were at least 40 such “states-rights” distributors in 1925. Like the independent production market, it was very fluid and competitive. Many firms entered and exited each year.8 The Hays Office coordinated world distribution. In the principle 32 U.S. Exchanges (offices), seven Canadian, one Cuban, and one Mexican exchange centers, a cooperate film board of trade, dominated by Paramount and Loew’s/MGM’s representatives, arbitrated disputes, distributed publicity and generally facilitated the operation of the large national distributors. The “states-rights” distributors had no such help. Furthermore, in disputes before the film boards of trade, independent producers, distributors, and exhibitors usually came out on the short end. The film boards of trade generally voted in favor of the monopolistic practices of the national distributors.9 The major producer-distributors increased their economic power with their control over the foreign market. Estimated to be in excess of $90

10 • The Coming of Sound

million in 1925, foreign sales constituted 25 to 30 percent of the gross of the major firms.10 In fact, the foreign market for motion pictures was larger than many other major U.S. exporters including paper and electrical supplies, for example. Most revenue came from Europe—an estimated 65 percent. An estimated 15 percent came from Latin America, 12 percent from the Far East, and 8 percent from Africa and the Near East. U.S. films dominated most of these markets. Of all films shown in England 95 percent were Hollywood produced. France and Germany showed 70 percent and 60 percent, respectively, of Hollywood-produced films.11 Of these countries, only Germany had established import restrictions. Furthermore, imports from foreign countries into the U.S. market were very small. In 1925 less than three percent of the total, as measured in raw stock, was imported; in terms of revenue, it was only one percent.12 The final branch of the motion picture industry was exhibition. In 1925, there were at least 15,000 theaters devoted exclusively to motion pictures, with 5,000 showing movies part-time. Average attendance was 46 million per week, but growth was much slower than it had been in the 1910s.13 Attendance was not evenly divided among theaters. First, potential customers were not evenly distributed. Motion Picture News estimated that one-half of America’s movie theaters were in towns with a population of 5,000 or less. Moreover, 39 percent were in towns of less than 2,500 people. Twenty-eight percent were in medium-sized cities (5,000 to 100,000), but only 22 percent were in cities with a population over 100,000 persons. These urban-based theaters also existed in states which had well-developed transportation systems. Meanwhile, Southern and certain Western states had the bulk of the smaller theaters. For example, New Jersey had only 29 theaters in towns less than 15,000 in 1926, but Kansas, with a much smaller population, had 241 theaters.14 Actual attendance estimates reflected this distribution. Motion Picture News found in 1926 that, on the average, over 51 percent of each week’s audience was recorded in the 3,300 first run theaters in the 79 cities with populations over 100,000. In other words, one-half of the audience went to one-fifth of the theaters. For the 1,000 most important theaters in America in 1925, seven million attended weekly. That is, 6.5 percent of the theaters captured 15 percent of the audience.15 In turn, a small number of important chains controlled these important first run theaters. The 1926 Film Daily Yearbook estimated that eight large circuits, all owning 100 theaters or more, controlled eight percent of the theaters in America. These circuits owned theaters in virtually all major cities: KeithAlbee, North American (San Francisco and Seattle), Loew’s, Northwest Theater Circuit (Minneapolis), Publix, Universal, Stanley (Philadelphia and

The Preconditions for Innovation • 11

Washington, D.C.), and West Coast (Los Angeles)—the latter two allied under the banner of First National. This does not include the powerful Balaban and Katz chain of 93 theaters that owned Chicago’s biggest theaters. On the other hand, 63 percent of the theaters in the Unites States were owned by individuals. These were the small, rural theaters. The exhibitor who was not part of a combine saw his power decrease in the twenties. Unable to protect themselves from the monopolistic practices of the larger producer-distributor-exhibitor and unable to take advantage of discounts available to chains, these theaters, as transportation improved, became marginal economic units.16 The 1925—1926 season was the beginning of a second wave of theater buying and construction. The first had occurred between 1919 and 1921. The majors could best take advantage of the economies of scale for distribution by controlling the essential first run theaters in large cities. Moreover, they then had a weapon to battle the large monopolistic independent “booking combines.” Famous-Players began the expansion in the spring of 1925 by announcing it would spend $20 million constructing 22 new first-run theaters, including one on Times Square.17 Famous-Players acquired several small circuits of its own including the Gray and Gordon theaters in New England. In the fall of 1925 Zukor scored a major triumph. Famous-Players acquired complete control of the Chicago market by purchasing the 93 theaters in the Balaban and Katz circuit. Following this, Zukor created Publix and merged all its 547 theaters into one chain by 1925.18 Loew’s reacted quickly to Famous-Players latest move. In 1926, despite owning over 150 theaters in key locations, Loew’s began construction of 20 new theaters in crucial medium-sized cities. It also purchased theaters in Egypt and France. Fox had only 45 theaters in poor locations in 1926. To remedy this, it set out on a $20 million building spree to construct 30 new first-run theaters in the largest cities in America. Begun in November of 1925, this expansion culminated with the construction of the 6,200 seat Roxy Theater in New York City during the winter of 1926.19 Programming for motion picture theaters changed significantly in the 1925—1926 season. Up until this time the large first-run theater had presented a variety of vaudeville acts before the feature. In the 1925—1926 season exhibitors, led by Roxy in New York City, and Balaban and Katz in Chicago, established a formula for stage presentations. The show opened with an overture, usually 8 to 10 minutes long, followed by a presentation of 15 to 20 minutes, then a newsreel of 7 minutes, a short of 10 minutes, and then the feature filled the remaining two-hour period. Many times exhibitors shortened the feature to fit into the required two-hour period.20 A subset of the pure presentation was the prologue, in which the central theme was linked to the theater’s feature film. So a nautical theme was used

12 • The Coming of Sound

with Buster Keaton’s The Navigator, including a singer costumed as a diver, suspended from cables, surrounded by girls in sailor suits.21 Balaban and Katz’s stage designers Frank Cambia and John Murray Anderson pioneered the pure presentation. Los Angeles exhibitor Sid Grauman championed the prologue. Roxy offered the alternative variety show in which several highly vaudeville acts filled the twenty minutes. Initially this strategy was a cheaper alternative but soon grew just as expensive when more important vaudeville names were secured. Marcus Loew presented yet a third alternative, the headliner. One singer like Gilda Gray, or a popular band like Paul Whiteman or Vincent Lopez would fill the 20 minutes. Smaller theaters tried to copy these strategies whenever possible. Most usually followed Roxy’s plan, using the cheapest available vaudeville acts. Costs for presentations reached incredible proportions by 1925 as exhibitors bid away major stars from Keith-Albee and Orpheum, and the new competitor, radio.22 Paramount was the first large firm to try to systematize the production of presentations. In December of 1925, shortly after the Balaban and Katz merger, Paramount set up a special department to produce and distribute presentations to all the Publix theaters. Each presentation would be specially designed in New York City and then go on the road to play each major Publix theater. The route would begin in New York and go west. Paramount established 20 of these presentation units. Using this method to produce pure presentations enabled Paramount to employ the best talent, and thus create the most popular shows, all at a relatively low price. Paramount simply spread the fixed cost of producing one presentation over 20 or more theaters. Loew’s Nick Schenck quickly followed Adolph Zukor’s Paramount’s lead and set up its own distribution system of presentations in January of 1926. Loew’s, however, sought star attractions, vaudeville artists, and big bands that would draw on their name alone. This strategy was a complete break from the cheaper popular vaudeville and movies Loew’s had previously run. Popular vaudeville was now reserved for subsequent run theaters. Loew’s’ and Paramount’s units generated large profits, although industry trade papers continually speculated the merits of both strategies.23 Only Fox of the “Smaller Six” had a significant number of theaters with which to set up national distribution of presentations. Fox expanded the most, and generally adopted the big names strategy. Soon independent theater owners in large and small cities began to follow the lead of the majors. Most believed this was the only way to effectively compete with Publix or Loew’s. A group of independent theaters in the New York City area, through the Theater Owners Chamber of Commerce, even set up a small presentation network. Although most could not afford week-long presentations, all could support it for at least part of a week, also known as split-weeks.

The Preconditions for Innovation • 13

The potential innovators of sound motion pictures did not operate in a vacuum. By 1925, there existed much data concerning the future of sound movies. The history of past innovative attempts predicted failure in the minds of all the key motion picture executives. From Edison’s first probings to Gaumont, Cameraphone, and Edison’s 1913 attempts through Kellum and De Forest in the 1920s, Adolph Zukor, Marcus Loew, and their rivals knew that every effort at talkies had ended in large losses. Their understandable skepticism caused a desire to move cautiously and with much preplanning in any change in the magnitude of talkies. The changing entertainment mix in the early 1920s mitigated this conservativism. The phonograph industry, despite a highly concentrated structure, had successfully innovated new electrical sound recording by the spring of 1926. The public responded with enthusiasm to clear, distortionfree recordings of popular musical artists. Many a reluctant motion picture entrepreneur must have silently speculated at the potential for talkies. Radio was just beginning to make a significant impact. By the fall of 1925 it was providing free entertainment in the homes of millions. Radio could boost film attendance with powerful advertising, or vigorously compete and take away part of the market. But regardless of its ultimate effect, radio also acclimated the public to quality sound reproductions of major musical and variety talent. It is no wonder Loew’s experimented with combining radio and the movies in the summer of 1925. Film programming was also changing in 1925. All film exhibitors became more selective in their use of musical accompaniments and sound effects. By 1925, the first-run exhibitors employed large orchestras and widely advertised the musical portions of their show. The American Society of Composers, Authors and Publishers (ASCAP) collected large performance fees. Mechanical sound recordings of the most popular music could supply all exhibitors, not just first-run theaters, with the ability to present the best music for films at the lowest cost. Motion picture theaters also began to provide vaudeville presentations as part of the show. When they did—with movies at one-half the cost to the public—vaudeville attendance severely declined. Slowly, the major motion picture firms integrated vaudeville performers into units strictly working in motion picture theaters. Mechanical reproduction of the most popular acts, again, could cut costs, and at the same time, feature the most popular entertainers in many theaters simultaneously. With talkies, movie producers could even replicate hit Broadway plays. Thus, contrary to past failures, the changing role of complements and substitutes for movies suggested the public might be ready for electrically recorded music and vaudeville acts with movies in 1925. The structure of the motion picture industry in 1925 almost dictated which firms would most likely try such experiments. It would not be one of

14 • The Coming of Sound

the “Big Two.” They had the most to lose. Only with rigid safeguards might they defy the historical precedents, and fit sound films into the extremely profitable cycles of production, distribution, and exhibition. The independents did not have the capital necessary for such bold actions. It would most likely be a firm from the smaller group—Universal, Fox, FBO, or Warner Bros.—that would innovate the new products. They had the necessary production, distribution, and exhibition facilities and personnel to challenge the “Big Two.” They only lacked the large amounts of necessary capital and large-scale plan for such bold action. The innovative activities of which pushed the U.S. film industry into the era of sound were Warner Bros. and Fox.

The Other Mass Media Entertainment Industries Prior to the Coming of Sound In order to examine the changes that occurred during the transition to sound by the U.S. motion picture industry, it is crucial to understand exactly what changed. The motion picture industry did not operate in a vacuum in the mid-1920s. It had important economic connections with a wide spectrum of entertainment industries. Three of these entertainment industries in 1925 directly competed with the movies for the mass entertainment dollar—radio, popular music as sold by records, and live vaudeville entertainment. The latter and the song writing and publishing industry, Tin Pan Alley, were both a complement and a substitute for film entertainment. The structure, conduct, and performance of each of these four industries directly affected the coming of sound. I shall analyze these three first and then end this chapter laying out the structure of the film industry in 1925—in the period just before Warner Bros. began to innovate films with sound. The Radio Industry The competitive inroads of radio began to take away business from the movies beginning in the middle 1920s. The radio boom began in 1922 as RCA began to sell sets and broadcasting equipment. By the end of the 1920s about half the households in the United States had sets.24 Adolph Zukor, Nicholas Schenck, Harry Warner, and William Fox all watched the rise of an important competitor in the 1920s. The sales of radio sets, parts, and accessories grew rapidly in the first half of the 1920s. This growth was most spectacular in the 1923—1924 period, but even as it slowed down, the rate of expansion was still very high. The audience also expanded in spectacular fashion, so that by the end of 1926, radio’s potential audience was almost one of every five persons, even without adjusting for collective

The Preconditions for Innovation • 15

or institutional listening habits. The greatest concentration of ownership was in the Northeast, upper Midwest, and Pacific coast states.25 Furthermore, a person living in a city was more likely to have a set. Upper middle class families owned the most sets. By 1925, the home radio had replaced the amateur crystal set. Radios now came with phonographs or in wooden cabinets designed in the latest furniture style. Tuning systems became simpler, averaging, by 1926, only two dials per set. The only factor slowing down further diffusion was radio’s high price, an average of $80 per set—a price affordable to only the wealthy. Because radio’s growing audience was very similar to that of the first-run theater, its impact on the movies was even greater than a broad sales pattern might have indicated.26 In 1926 RCA was still the only radio stock sold on the New York Stock Exchange, and it had gross sales of $61 million, 12 percent of the industry’s total. Supported by its founders, the huge corporations called Westinghouse, AT&T, and General Electric, it was also in the best position to survive financial strains, innovate new methods and secure the necessary capital to expand.27 Yet as RCA and others sold more sets, it gradually became clear that radio would become an advertising medium presenting high priced entertainment. The movies had a strong new foe. In February of 1922, AT&T, owner of the largest station, WEAF, announced it would accept advertising under its toll concept of broadcasting. This practice was not accepted immediately on an industry-wide basis; most owners of stations still used programming principally to sell radios. However this reluctance was short lived. Smaller stations began to die out and powerful stations began to dominate the market.28 Coupled with this was the development in 1923 and 1924 of chain or network broadcasting. After a successful six station broadcast of President Calvin Coolidge’s message to Congress in December, 1923, AT&T discovered that it was much cheaper to present quality programs via a network than for several large stations to compete. Furthermore, AT&T already owned the long lines necessary to distribute such programs. RCA challenged AT&T’s monopoly, and after lengthy bargaining, the two merged forces. RCA would operate the network, the National Broadcasting Company, and AT&T would provide the long lines. The first coast-to-coast broadcast on November 15, 1926, included noted opera singer, Mary Garden, Will Rogers, and the New York Symphony Orchestra.29 By November of 1926, RCA not only dominated the sales of sets, but also could distribute the best concert, stage, and vaudeville talent nationwide. The popularity of radio partly resulted from its ability to present musical and variety talent to an enormous audience at one time. In 1923, radio

16 • The Coming of Sound

presented programs to advertise night clubs, movie theater shows, or plays. On April 11, 1923, WEAF broadcast the first act of the musical comedy, “Wildflower,” direct from New York’s Casino Theatre. For weeks afterward the play was sold out, and sheet music and records of its songs sold better than before.30 In December of 1924, the Victor Talking Machine Company, realizing the publicity value of radio, signed an agreement with WEAF to promote Victor’s artists. Victor would compensate the artists and gain profits from the extra sales of records. The concerts began in January of 1925, and were broadcast every Thursday night to eight key Eastern cities. It was an instant success. Irish tenor John McCormack’s song “All Alone” rose to the top of sheet music and record sales after only one appearance in this series. Even as late as the spring of 1925, most of the talent on the radio consisted of vaudeville acts or bands that took on the names of their sponsors for indirect advertising.31 At this time, radio paid wages, but usually kept quiet about such remuneration. Later, when more firms realized the relative value of radio’s publicity, radio began to compete for more famous talent, and thus had to pay directly for it. In March of 1926, Paul Whiteman and his orchestra signed to do a one-hour show for $5,000.32 At this time stars whose only fame came from the radio began to make records and appear in live concerts. On December 9, 1925, WEAF’s principle stars, Graham MacNamee, the Silvertone Cord Orchestra, the Ever Ready Quartet, and six other acts appeared on a New York City concert stage. By March of 1926, radio broadcasting was a thriving commercial enterprise, especially in the large urban areas. The programming in New York City was 75 percent composed of musical or variety acts. New York, by far the largest city in the United States, was the home of RCA, and the center of the live performance entertainment industry.33 From the beginning of the development of commercial radio, the motion picture industry reacted in two ways toward its new rival for the public’s entertainment dollar. The positive side, most strongly set forth by Samuel Rothefel, “Roxy,” preached cooperation. As early as November 19, 1922, WEAF originated programming from the Roxy-managed Capital Theatre. Roxy and his gang soon became Sunday night regulars with Roxy constantly inviting listeners to come to his theatre. He was convinced that these broadcasts helped his business and the industry in general. By November of 1924, all of Broadway’s major motion picture theaters had followed Roxy’s lead and were broadcasting their stage shows. Major theaters in many other cities followed suit. In Chicago, the major Balaban and Katz house and The Chicago, not only broadcast its shows, but added a special organ concert by its star organist, Jesse Crawford.34

The Preconditions for Innovation • 17

Yet many theatre owners found radio competition hurt business. Even use of Roxy-type advertising failed to increase attendance. For example, a major house in Providence, Rhode Island, The Majestic, dropped Roxy-like exploitation after a year. Moreover the Victor music programs also hurt The Majestic’s business. On the Friday of their broadcasts, box-office receipts were measurably lower. This was also true in Philadelphia and Boston. A meeting of theatre owners of the Famous-Players chain expressed the skepticism best when it passed a resolution praising radio advertising, even though it hurt business. However, by the 1925—1926 season, most exhibitors accepted this new tool. In 1926 Paramount even installed a radio broadcast center in its new Times Square building. Roxy planned one for the new Roxy theatre. By 1926, the movies even began to discover new ways to use radio. First National studio broadcast a playlet without an ending to tease listeners to see the film.35 Nick Schenck, once he took over for ailing Marcus Loew in 1924, embraced radio. With his approval, MGM’s vice-president, Major Edward Bowes, set up an MGM radio club. MGM presented stars, fashions, and studio news on a 15-station network. By the end of 1926, the show connected to 24 of the largest stations in America.36 Loew’s even attempted an early experiment in talkies. On July 14, 1925, at the San Francisco Loew’s Warfield theatre, the world’s premier of A Slave of Fashion presented a reel of film synchronized with a broadcast over KPO-AM. Each star presented a three-minute talk about their experience making the film. Receipts rose 20 percent due to the experiment. MGM repeated it in Los Angeles a month later using station KFI-AM. This second try was not a success, due to coordination of all the variables proved too difficult. Clearly the movies had an uneasy relationship with this new rival. Motion picture executives maintained a tentative truce, awaiting the results of more complete diffusion of radio.37

The Popular Music Industry In 1925, firms in Tin Pan Alley composed and published most of the popular music in the United States. A large number of small, competitive companies, usually partnerships located in New York City, made up this industry. No one firm produced more than 10 percent of total sales. New firms could enter and exit the market with relative ease. By the early 1920s, song plugging had drastically changed from its turn of the century origins. The jazz band or an orchestra playing in a club, hotel, vaudeville, or movie theatre had replaced the roaming singer and pianist. Moreover, the important popular orchestras of Paul Whiteman and Vincent Lopez also began to make records and appear on the radio.38

18 • The Coming of Sound

The Broadway musical also emerged as an important place to advertise songs. Beginning with Jerome Kern’s Sally, with its popular “Look for a Silver Lining,” the hits poured off the Broadway stage from 1920 to 1926. If a show earned a long run in New York, its songs would go on the road and sheet sales would be stimulated nation-wide. The important composers in this field were familiar names, Jerome Kern, the Gershwins, Irving Berlin, Vincent Youmans, and the team of De Sylva, Brown, and Henderson. Also in this section of the market were composers of operettas such as Rudolf Friml, Sigmund Romberg, Victor Herbert, Richard Rogers, and Cole Porter. Tours of Broadway hits played in every major city in the United States.39 No longer was a hit song measured in terms one million sales of sheet music; the yardstick became hundred thousand record sales. Beginning in 1918, record sales for certain hits reached half a million. In 1919, Eddie Cantor’s “You’d Be Surprised” sold a million discs. By 1923 sales of Paul Whiteman’s “Whispering” topped two million. Major artists and orchestras began to commission Tin Pan Alley firms to produce songs.40 Tin Pan Alley also began to use the radio to plug its music. One radio program could reach millions of people. The year 1926 was crucial. RCA’s National Broadcasting Company formed its two networks, and Victor introduced new electrical recordings. Tin Pan Alley’s royalties again rose. Radio popularized new artists such as the Happiness Boys and Whispering Jack Smith, and added to the popularity of current stage stars such as Eddie Cantor and Al Jolson. A popular artist’s theme song began to provide almost a guarantee of sales of 500,000 records and 100,000 music sheets.41 Because popular music had always been used to accompany stage melodramas and vaudeville acts, it was not unexpected when it was also used in conjunction with motion pictures. Competition in the exhibition between motion pictures and vaudeville induced exhibitors to offer large orchestras with varied and specialized music as early as 1908. As the orchestras grew in size during 1908 through 1915, smaller theaters would furnish as large an orchestra as possible. Many also furnished sound effects, provided by a member of the orchestra who used bells, horns, whistles, and machines capable of producing the special sounds.42 By 1913 music had become an important branch of motion picture exhibition. Motion picture trade papers devoted regular columns to dispensing practical suggestions to exhibitors and to evaluate the changes occurring in musical presentations. As producers began to realize the increasing value of appropriate music, they began to send out cue sheets. Finally, many theaters also installed church organs. By 1917 special organs had become elaborate enough to simulate all instruments of the orchestra and provide stunning sound effects.43

The Preconditions for Innovation • 19

With the success of The Birth of a Nation’s commissioned score, more studios began to regularly produce special music for their films. FamousPlayers Lasky, in connection with G. W. Eeynon, a composer, and the music publishing house of Chimer, Inc., produced and distributed cue sheets for 116 orchestral scores between 1915 and 1920.44 Victor Schertzinger and Victor Herbert composed for other studios. As more studios began to own their own theaters, they began to take a stronger interest in musical arrangements and presentation. Moreover, the large deluxe first run picture palaces earned great profits and could hire more and more competent musicians. If a theatre could not afford an orchestra, it at least provided an organ. Even the poorest theaters could offer a piano player or automatic piano. By 1917 Tin Pan Alley began to take notice of this new market for its products.45 Until the spring of 1917, exhibitors and their musicians were able to use any popular music with no financial restrictions. In March of 1917, two months after the handing down of the Supreme Court decision, Herbert v. Shanley, the American Society of Composers, Authors and Publishers (ASCAP), the performing rights society, started to assert its right to collect fees for the use of music by motion picture exhibitors. In April of 1918 the Motion Picture Exhibitors League of America lost a test case specifically contesting ASCAP’s right to collect such fees.46 To simplify tabulation, ASCAP set up a schedule of license fees to exhibitors as a decreasing function of the number of seats in the theatre. The amounts ranged from seven to ten cents per seat per year. This rate schedule remained intact until 1923. Then, after long negotiations between the Motion Picture Theatre Owners of America, a national trade group with a membership representing 80 percent of America’s Theaters, and ASCAP, the license fees became ten cents per seat per year for all theaters.47 Despite these disputes over the commercial rights, music in motion picture exhibition played an increasingly more important role in the early 1920s. Samuel Rothefel and Hugo Riesenfeld innovated and developed new methods of using music; by the 1925—1926 season music accompaniment had become institutionalized in New York City and imitated, as costs would allow, all over the country.48 For the deluxe first-run picture palace, music served two primary functions. First, every show opened with an overture, usually tied in theme to the feature to be presented. In the two hours allocated for the show, the overture would usually last 8—10 minutes. Next came an act that might include a musical soloist, or another type of performance needing musical accompaniment. Finally, the comedy short, the newsreel, and the feature all received musical accompaniment.49

20 • The Coming of Sound

However, even the biggest theater could not afford a full orchestra with shows at noon, 2:00 P.M., 4:00 P.M., 7:30 P.M., and 9:30 P.M. The noon and late afternoon shows normally used only a grand organ. These organs could imitate an orchestra, any single instrument, and provide varied sound effects.50 Handbooks were acceptable for program pictures, but for more important films, the major film companies provided special cue sheets. Scores for Ben-Hur and The Big Parade took over one month to compose. It was common by the 1925—1926 season for 12 films per year to have specially composed scores. Many exhibitors adopted mechanical devices to guide the orchestra and its leader to insure perfect synchronization. Inventor Carl R. Blum developed a tape to run past the orchestra’s leader. Ultimately, mechanical recording would insure the best possible music with no cost for musicians.51

The Live Performance Vaudeville Industry The most direct rival to the movies in 1925 was vaudeville.52 In 1925 the vaudeville industry ranged from “big time” with high-price acts in large, luxurious theaters to “small time” or “popular” vaudeville, at cheap prices, usually accompanied by movies. The Keith-Albee circuit in the Eastern United States and the Orpheum circuit in the Western States dominated “big-time” vaudeville. Although separate companies, they were interrelated in terms of booking acts and ownership of theaters. These two organizations controlled the industry through their ownership of the largest, most important theaters. “Big time” vaudeville talent was immensely popular. Many of these performers, with acts no more than 20 minutes long, could command salaries over $1,000 per week. Single person dancers or singers were most popular. Headliners like Al Jolson, Sophie Tucker, or Paul Whiteman’s orchestra drew over $100,000 per year. These high priced acts produced steady earnings for the Keith-Albee and Orpheum circuits in the first half of the 1920s. Each circuit earned net incomes slightly in excess of two million dollars per year from 1923 to 1926.53 Directly below the “big time” were several hundred independent theatre circuits producing “popular” vaudeville. That is, in contrast to the KeithAlbee and Orpheum circuits that presented two shows a day of primarily live vaudeville acts, these theaters had three to five shows per day. Moreover, “popular” vaudeville included live acts and movies. “Popular” vaudeville circuits were regional, not national. For example, the Poli circuit was in New England, the Pantages circuit in the Far West, and the Loew’s circuit primarily in New York City.54

The Preconditions for Innovation • 21

However, of these circuits, only Loew’s was most directly involved in the motion picture industry. The others only rented motion pictures. “Popular” vaudeville was much cheaper than its larger rival. “Big time” frequently charged from $1.25 to $3.00; “popular” vaudeville, at fifty to eighty-five cents, only slightly exceeded the movies in cost.55 Below “popular” vaudeville were the “small time” theaters and burlesque. Both were unimportant institutions by 1926. The movies offered superior entertainment at a lower price. The final segment of live performance included the legitimate stage, primarily drama, musicals, and revues. In economic terms it was a small part of the market. Only 140 theaters regularly presented dramas or musicals, and over 40 percent were located in New York City. Most others presented road shows. Revues began in 1905. They were very popular in the 1920s led, of course, by the Ziegfeld Follies. In total, they were really few in number. 56 It was Broadway that made up the bulk of this market. In the early 1920s business was good for Broadway. From the 1920—21 season through the 1925—1926 season, total productions increased steadily from 94 to 178. This was an 89 percent increase, or 17.8 percent per year. Musicals, however, were relatively more expensive and decreased four percent during this period. Theatre weeks grew less dramatically, 5.4 percent per year. There were more productions, but each lasted a shorter period of time. The number of companies on tour rose 18 percent. If one developed a hit, the potential earnings were phenomenal.57 By the 1925—1926 season, vaudeville began feeling competitive pressure from mechanical substitutes, especially the movies and radio. As early as 1921, Edward F. Albee, the operating head of the Keith-Albee chain, refused to allow his vaudeville performers to appear on the radio, even for remote broadcasts.58 By the 1924—1925 season, this restriction had become a permanent part of all the Keith-Albee contracts. The National Concert Managers’ Association and the National Musical Managers Association supported these restrictions.59 An uneasy relationship continued through the rest of the 1924—1925 season, despite the public stand taken by Albee against radio. By the 1925— 1926 season, radio began to lure away major vaudeville stars. Albee dropped all limitations and began actively to bid against radio for talent. By 1926 Albee had followed Roxy’s lead. Keith-Albee began to advertise on radio and even broadcast shows from Keith’s theaters.60 Motion picture theaters also actively bid for vaudeville talent. By 1925 exhibitors had developed elaborate stage shows, called presentations, to precede the feature film. When, in 1925 Van and Schenck broke from

22 • The Coming of Sound

Keith-Albee, it signaled the effective end of boycott. For vaudeville performers, the trend was to play for the highest salaries, either in motion picture theaters, “big time” vaudeville, or radio.61 The silent movies also began to raid legitimate and musical theater in earnest. By 1925 a large number of Broadway hits were directly transferred into movies. By 1926, the large Hollywood studios, were actively financing Broadway shows, yet the trend was not clear. Movies could not replicate vaudeville acts or Broadway hits. Sound would give the movies this ability.62

CHAPTER

3

The Warner Bros. Innovate Sound

The myth remains: Warners was broke and thus gambled on talkies. Harry, Abe, Sam, and Jack Warner had no other choice. But investigating this myth, I found it made no sense and was not supported by the data. The innovation of sound by Warners’ Vitaphone, from a strictly economic point of view, spells out that Vitaphone was a carefully conceived business strategy that revealed itself in a series of cautious, steady, expansionary steps. Although the success of The Jazz Singer may have exceeded the Warner expectations (and everyone else’s, for that matter), that success could be properly exploited because the Warners had laid the basis for further expansion. Without such prior planning, one hit film could have never thrust Warner Bros. to the top of the film industry with Paramount and Loew’s/MGM.1 My approach in this chapter emphasizes economics. I assume that the entrepreneurs of the U.S. film industry converted to sound to increase their profits. The giant communications firms that developed and supplied the sound equipment, such as AT&T, were also eager to maximize long-run profits. These assumptions explain why all the firms which contributed to the transformation acted as they did, and thus frees the historian to concentrate on the who, what, where, and how of the change. The economic theory that treats the introduction of any new product or new production process is called the theory of technological innovation. This theory develops three different stages of change: invention, innovation, and diffusion. Even more important than the creation of the necessary inventions is the innovative activity of the entrepreneur who revamps his or her firm’s means of production and devises ways to market a new 23

24 • The Coming of Sound

product based on the new technology. An executive will take such actions because he or she determines that the adoption of these untried methods is this firm’s best avenue of expansion (i.e., this investment will add the most to the firm’s long-run profit for the least cost). Such a change requires many practical judgments. A firm must have the necessary managerial talent to organize and effect the innovation. Its managers must estimate the future costs for the needed capital investment and for needed changes in production, distribution, and exhibition. On the demand side, they must estimate the effects of new pricing policies and marketing techniques. Finally, there is the risk factor. It takes a bold entrepreneur to undertake such speculative activity. Later, other entrepreneurs imitate the innovator and industrywide diffusion occurs. This historical approach provides fresh and basic insights only if there is adequate primary evidence with which to work. Fortunately, for studying the coming of sound, such data exist in congressional investigations of the AT&T Corporation, including the testimony and exhibits in court records and motion picture trade papers such as Moving Picture World, Motion Picture News, and Variety. We can now describe and analyze how Warner Bros. handled the issues posed by the theory of technological innovation.

Early Talking Picture Failures The Warners could never have been first because as soon as the film industry began as an industry during the latter years of the ninteenth century and the early years of the twenntieth century, many inventors and businessmen tried to connect sound with motion pictures in an effort to increase their profits. This type of experimentation continued until at least 1915. None succeeded, and there were many, and the entrepreneurs who did finally create a world of talkies knew of these repeat failures, provided the basis for a reluctance to jump into talkies in 1925.2 Some even tried having actors stand behind the screen and read the parts of the actors “speaking” in the silent film. Like many of the mechanical counterparts, live sound failed at the box office after its initial novelty value. For example, William Fox booked J. Frank Mackey’s company of actors into his City Theater in New York City to accompany Uncle Tom’s Cabin, a Vitagraph production. This attraction lasted only two weeks. Most importantly, Thomas Edison attempted the marriage of the phonograph and the motion picture. He toyed with the idea in 1889, but despite his claims made in the late 1920s, his brilliant assistant, William K. L. Dickson, never did demonstrate a workable apparatus in the fall of 1889.3 There is no doubt that Edison and his associates attempted from 1888 to 1895 to perfect such a system. But even as late as September 9, 1893, Edison

The Warner Bros. Innovate Sound • 25

refused to present a public demonstration of his Kineto-Phonograph because he was not satisfied with its laboratory performance. Success actually came in the spring of 1895. The combination, however, was not a kinetograph linked to a photograph, but both contained in one box, a peep show, with rubber tubes for the ears. These machines did not become popular enough to justify the extra expense and Edison abandoned the project in the fall of 1895. His early system attempted no synchronization, but was primarily for musical accompaniment of silent pictures.4 The next important attempted innovation appeared in 1902. Labeled the Chronophone, inventor Leon Gaumont first demonstrated it before the Société Française de Photographie. It went through three stages of commercial development. From 1905—1907 it was frequently presented as part of variety (vaudeville) shows. For example, in 1907 a short film of Sir Harry Lauder appeared at London’s Hippodrome for 16 weeks. Despite this long run, the Chronophone met with only a mild amount of economic success. The second phase of its development began in October of 1908. At this time Gaumont made a strong push to introduce it to the U.S. market. Attempting to sell it to both moving picture and vaudeville theaters, he marketed short recordings of Sir Harry Lauder and British vocalist, Victoria Monks.5 In addition, Gaumont presented excerpts from operas and specialized vaudeville acts such as whistling solos, recitations, and dances. He even recorded dramatic sketches. Mechanically, the Chronophone linked the projector and two phonographs via a series of cables. A dial adjustment served to speed up the phonograph if frames were missing. The two phonographs provided maximum volume; they could be used together, or alternated, to ensure a continuous program. The length of the records provided sound for 1,500 feet. Gaumont then affiliated with the Motion Picture Patents Company, which wanted standardized products and so abandoned the Chronophone in 1908.6 In 1907, inventor E. E. Norton and entrepreneur Carl Herbert first presented their system, the Cameraphone. It was almost identical to Gaumont’s apparatus; it even had the dial adjustment control. Norton, a former mechanical engineer with the American Gramaphone Company, and Herbert booked shorts of recorded vaudeville into several theaters, the most famous being Oscar Hammerstein’s Roof Theater. The shorts lasted only one day at the Roof.7 Undaunted, Norton and Herbert continued to market their products and expanded manufacturing operations. To gain the maximum profit, he rented rather than sold the necessary apparatus. In a New York City studio, Herbert recorded a large number of vaudeville turns, including some dramas, all under 3 minutes in length.8

26 • The Coming of Sound

Norton and Herbert encountered many difficult problems in their innovation quest. Herbert found it almost impossible to record vaudeville acts on phonograph records. Most performers lacked experience with mechanical recording. He observed in March of 1909 that “Most prominent vaudeville actors and actresses make poor records, especially talking acts. So true is this that of a score of high salaried ‘headlines’ so employed, barely two or three have proved more than provoking disappointments.” Technologically the phonograph at this time was accepted for home use in small rooms, but in the larger halls, built with little consideration for mechanical reproduction, the phonograph proved a poor substitute in clarity and tone for the human voice. There were other significant problems on the exhibition level. Most screens at this time were walls. To reproduce clear and loud sounds it was essential to use a porous sheeting of some type. The thinner the sheet, the better the sound. The result however was a dingy picture, lacking contrast. Most exhibitors continued to use the wall, and placed the phonographs to the side of the screen area, thus calling attention to the artificial sounds.9 The most important drawback was the expense to the exhibitor. Instead of the normal cost of a purchase price of ten to eleven cents per foot, a Cameraphone talkie cost from fifteen to twenty cents per foot. In addition, it required a specially trained operator at a higher salary. The necessary phonographs also increased the outlay. In total, where the usual film expense was $30 to $60 a week, a talkie doubled that price. This precluded use by small “store” theaters and caused larger theaters to demand exclusive rights, even in a metropolitan area. Few Cameraphones appeared in cities of less than 75,000. Only in cities over 200,000 was more than one outlet possible. Thus, by the end of the 1909—1910 season, the Cameraphone Company was out of business, remembered only for the large amount of money it lost.10 A much cheaper device using the same principle was the Cinephone. First brought to the United States from England in March of 1909, it was much simpler than the Cameraphone, and could be operated by an ordinary projectionist. Unlike the Cameraphone, the Cinephone employed a combination of a quick starting projector with an unusually heavy double spring to facilitate acceleration to full speed simultaneously with full volume. Synchronization was obtained without an electrical connection, but by coordinating the film’s leader with a mechanical control on the phonograph. Thus synchronization, theoretically, could be attained before the film began, and then set for the length of the reel. However, this simpler method did not significantly eliminate projectionist’s errors.11 Cinephone did possess a valuable link to the Victor Talking Machine Company. Victor provided not only phonographs and records, but also

The Warner Bros. Innovate Sound • 27

most of the performers. Victor had exclusive contracts with all the most important operatic and popular singing talent in the United States. However, this bond was unable to help Cinephone increase profits. Even with its English variety and stage talent, Victor artists, and numerous, wellpublicized demonstrations, Cinephone went out of business in 1911.12 The Chronophone, Cameraphone, and Cinephone made the greatest commercial impact of all systems introduced between 1907 and 1913. They also had competition. In 1911 Englishman Cecil Hepworth offered an alternative method. His Vivaphone employed a system of red and green lights to warn the projectionist of synchronization difficulties. The apparatus also was self-corrective using a system of electromagnets. Unfortunately, this improvement rarely worked, and manual adjustment remained necessary. Vivaphone’s comparative advantage lay in the cheap installation and ease of operation. Exhibitors rejected this device as they had the others, but Hepworth continued to develop and demonstrate it until as late as 1922.13 In the summer of 1909, Carl Laemmle, then a theater entrepreneur in Illinois and Indiana, imported yet another system, the Synchroscope, from Germany. Laemmle tried to build up attendance in this usually slow part of the year. He continued the experiment for only one summer because profits did not improve. The mechanics of the system differed from the Cameraphone, Cinephone, and Vivaphone only in small details. In all, at least nine other similar systems appeared between 1907 and 1913 with even less success; none lasted more than one week. But in 1913 a major change happened: Edison revived his interest in the phonograph motion picture linkage.14 By January of 1913, the fabled Edison had his new system was ready. On January 4, 1913, he first publicly displayed two short subjects in his West Orange, New Jersey, laboratory. They included a man explaining the invention and demonstrating its power by breaking china, and a scene from Shakespeare’s Julius Caesar. Edison’s Kinetophone possessed three advantages over its predecessors. It employed a microphone sensitive enough to pick up sounds from 300 feet away.15 Earlier inventors had overcome the problems of insensitive microphones by recording the sound cylinder or disc first, then have the performer lip sync as they were replayed. Unfortunately, this technique increased the probability of distortion and missed synchronization. Thomas Edison’s second improvement was a mechanical power amplifier which, coupled with a larger, oversized phonograph, increased the volume considerably. This necessitated delicate mechanical adjustments, however, and proved especially difficult to operate.16 Finally, Edison provided a new automatic synchronizing system. An assemblage of identical gears linked the phonograph and projector to cause

28 • The Coming of Sound

both machines, even if manually operated, to move at the same rate. To correct synchronization malfunctions Edison inserted an adjustment dial. The phonograph, located behind the screen, or in vaudeville theaters just below the level of the stage, was attached to the projector by a belt and a set of metal pulleys. The belt was a black, waxed silk cord about the size of a heavy fishing line. In most theaters it passed through the ceiling over the proscenium arch to the stage. At every corner, the pulleys were encased in metal to insure little wear. Each installation had a duplicate set of belts.17 Noting these improvements, Edison persuaded powerful vaudeville entrepreneurs, John J. Murdock and Martin Beck, to install a Kinetophone into four of Keith-Albee’s New York, vaudeville theaters, the Colonial, the Fifth Avenue, Union Square, and the Alhambra.18 On February 13, 1913, Kinetophone premiered at the Colonial, a fashionable vaudeville theater at Broadway and Sixty-second Street in New York. Only the later addition of dramatic sketches would alter the programming strategy that Edison, Murdock, and Beck began at the premiere. First, a lecturer appeared and explained the system. He smashed a plate, played the violin, piano, and bugle, and had a dog bark—all demonstrating the volume and power of the new invention. Then a minstrel act, Mr. Bones and Mr. Jambo, sang “When the Midnight Choo Leaves for Alabam’,” and an unnamed tenor presented “Silver Threads Among the Gold.” The show ended with a chorus of the “Star Spangled Banner.” These vaudeville shorts thrilled the audience. They applauded for 15 minutes.19 Edison and the United Booking Office of America, Keith-Albee’s distribution branch, formed on October 1, 1912, as the American Talking Picture Company. Murdock and Beck put up $500,000 and agreed to lease 50 Kinetophones. Although the American Talking Picture Company operated in full cooperation with the Motion Picture Patents Company, only a few motion picture houses exhibited the Kinetophone.20 American Talking Picture stressed the famous vaudeville stars it had recorded. In the spring of 1913 it expanded its vaudeville attractions to include playlets such as The Transformation of Faust, Act 1, Scene l, and Wolsey’s soliloquy from Shakespeare’s Henry VIII. Political and industrial leaders provided more drawing power. During April 1913, the mayor of New York City and his police and fire commissioners recorded three minute talks. Even Andrew Carnegie recorded a speech. The New York Times, several general interest magazines, and vaudeville trade papers waxed eloquent over the importance of this new marvel. They noted its value as an educational tool. The only cause for alarm were the unknown potential effects on the legitimate theater and vaudeville.21 That threat never materialized. Despite the distribution facilities and backing of the United Booking Office, Kinetophone failed. The seeds of its

The Warner Bros. Innovate Sound • 29

demise emerged in the second week of its New York presentation. At Keith’s Union Square Theater the audience booed the Kinetophone portion of the program. The synchronization, due to an inexperienced projectionist, was, at times, off by as much as 10 to 12 seconds.22 In addition, the phonograph emitted a harsh, metallic sound, and its volume was never sufficient to fill the large vaudeville theater. The audience seemed to resent this lack of volume and reminder of its phonographic origins. By the spring of 1914, Murdock and Beck had abandoned the project altogether. Moreover, in December of 1914, the Edison factory in West Orange, New Jersey, burned to the ground. Although Edison quickly rebuilt the rest of his manufacturing complex, he did not replace the Kinetophone operation. By 1915 all operations of the Edison’s Kinetophone had ceased.23 Edison’s failure signaled the end of the wave of phonograph linked sound systems; thereafter no inventor could convince an entrepreneur to duplicate past failures. The leaders of the emerging motion picture industry and of the major vaudeville circuits had learned their lesson. Moreover, both industries were generating greater than normal profits and did not need risky new products. Thus further experiments continued only sporadically until 1923 when Lee de Forest presented his sound-on-film system. There was only one major exception. D. W. Griffith did experiment with sound for his Dream Street in May of 1921 when he moved it to the then empty Town Hall (a convention hall in New York City) from the Central Theater. Two sound vaudeville shorts, Irwin Cobb’s jokes and Miller and Wheeler’s song, preceded the feature in its new setting. Dream Street employed a mechanical musical accompaniment and one vocal number in which the star, Ralph Graves, sang. Previously, Griffith had experimented with additional singing and talking sequences, but had dispensed with them prior to the original opening. Despite the original publicity, the experiment failed to generate additional revenues and after the Town Hall run of three weeks, Griffith halted the experiment.24 But it was de Forest who achieved a breakthrough toward a successful sound-on-film system in 1923. A major inventor in the electronics field, de Forest had first attacked the problem of recording sound on motion picture film in 1918. In June 1921 he had become obsessed with these new experiments, sold all his stock in de Forest Radio Company and left the United States, temporarily, to work full-time in Germany. By August of 1922 he was ready to demonstrate his variable-density sound-on-film method. He first exhibited it to the Berlin press to polite reviews; the system was still crude and far from perfect. He returned to the United States that same month to promote and market his new invention.25 Arriving in New York on September 20, 1922, de Forest convinced Hugo Riesenfeld, musical director of New York’s Rialto and Rivoli Theaters, to try

30 • The Coming of Sound

his new invention. Riesenfeld secured a laboratory, the old Joe Schenck Studio at 318 East 48th Street, and De Forest began in earnest to commercially exploit his system. In November of 1922 he formed the de Forest Phonofilm Corporation and the de Forest Patent Holding Company. On March 13, 1923, he held his first demonstration for the U.S. press at the East 48th Street Studio; on April 4, de Forest exhibited his system before the New York Electrical Society.26 Both showings consisted of vaudeville and musical short subjects. On Sunday, April 15, 1923, after a month of delays, Phonofilm opened at Riesenfeld’s Rivoli Theater. The three nonsynchronous shorts came immediately after the overture, as part of the vaudeville presentations. The first, The Gavotte, simply presented a man and woman dancing. There were no sound effects, just a nonsynchronous musical accompaniment. The Serenade, four musicians playing, preceded the final unnamed short of an Egyptian dancer. A New York Times reporter expressed only mild interest.27 Despite repeated failures, de Forest continued to create publicity to sell films. In the spring of 1924, Phonofilm announced its usefulness in the upcoming presidential election campaign. By July of 1924, de Forest’s company secured contracts from a number of the major political candidates of the day. On June 21, 1924, Governor Al Smith of New York spoke for six minutes via Phonofilm to the delegates of the New York State Democratic convention.28 On July 12, 1924, President Calvin Coolidge recorded a speech, funded by the Republican National Committee. Democratic presidential candidate, John W. Davis, followed suit by recording a brief address on August 31, 1924. Speeches by Coolidge, Davis, and progressive candidate, Robert La Follette, opened at Hugo Riesenfeld’s Rivoli Theater on September 18, 1924.29 Throughout this period, de Forest and his agents continually tried to interest leaders of the film industry, stock promoters, and bankers in the Phonofilm system. Adolph Zukor, Sidney Kent, William Fox, vaudeville magnate Edward F. Albee, and even Harley Clarke, who would later head the Fox Film Company, all turned de Forest down. The risk-loving Fox came the closest to a deal. He even made a deposit of $100,000, but in the end, reneged and forfeited the money.30 By the spring of 1926 it became clear Phonofilm faced an insurmountable block of problems. In February of 1926, de Forest desperately placed an all-new management team in charge. But this did not solve the key financial and distribution problems. de Forest needed money to set up a permanent system of exchanges to replace the awkward “road-show” method of exhibition. Phonofilm could never overcome its reputation as a vaudeville novelty.31

The Warner Bros. Innovate Sound • 31

Lee de Forest’s failure capped two decades of failure—a set of objective lessons to major motion picture executives: there existed no profit potential in talking pictures.32

AT&T’s Inventions Warners had nothing to do with the inventions. The sound apparatus of inventions used by Warners took AT&T’s Western Electric scientists 13 years to develop. Starting in 1912 the Western Electric Engineering Department, under Frank B. Jewett, secured the rights to de Forest’s audion tube. This device provided the necessary amplification for practical repeaters for long distance telephone calls. To test this new apparatus Jewett decided to attempt to develop new methods of recording sound. Jewett’s Engineering Department began research in two directions, sound-on-film and soundon-disc. A broad-based team of the best Western Electric research engineers began to improve on both these methods by employing an informal coordinated team approach. As early as 1913 both the sound-on-film and sound-on-disc systems were in use in laboratory experiments.33 However, the United States involvement in World War I altered Western Electric’s priorities. The federal government asked Western Electric to develop airplane and submarine detection systems. The invention of sound recording and reproduction devices went to the back burner.34 At the end of the First World War, Jewett and his new chief assistant, Edward B. Craft, initiated a formal project system in which teams of scientists worked directly on specific projects. Jewett assigned two teams to the sound recording project. One group, under I. B. Crandall, concentrated on sound-on-film experiments, while another, headed by Joseph Maxfield, undertook the development of a sound-on-disc system. Other project teams dealt with additional telephone-related problems; this was the genesis of the Bell Laboratories, formally created as a separate division in December of 1924.35 Within three months after the armistice, one essential element for a sound system was ready, the loudspeaker. It was first used in the “Victory Day” parade on Park Avenue in 1919, then at the 1920 Republican and Democratic national conventions, and finally, in a nearly perfect state, at President Harding’s inauguration in March of 1921. Later in 1921, AT&T added this loudspeaker to its long distance telephone system. Thus, via long lines, President Harding’s speech of November 11, 1921, at the burial of the Unknown Soldier in Arlington Cemetery was simultaneously broadcast to New York’s Madison Square Garden, and the Civic Auditorium and Plaza in San Francisco. More than 150,000 people heard the address; clear transmission of sounds to a large group of people was a reality. New York theater

32 • The Coming of Sound

impresario, Samuel Rothafel (Roxy), was so impressed with these loudspeakers, he permitted Western Electric engineers to install an experimental set in his Capital Theater.36 Western Electric engineers continued to perfect more components of a sound recording and reproducing system. E.C. Wente developed a highquality microphone. Wente had almost perfected the invention prior to the war. After that interruption, he and I. B. Crandall improved the diaphragm, and increased the microphone’s frequency response to 15,000 cycles. This condenser microphone was used in radio broadcasting and for loudspeaker broadcasts.37 In 1922 Wente produced an improved light valve that assured flawless recording, even on film moving at high rates of speed. Maxfield’s team continued to develop a disc system. A single drive shaft using a turntable of 331/3 rpm answered one key need. This feature depended on the theory of matched impedance, developed by H. C. Harrison, yet another Western Electric engineer.38 Using extremely complex principles of physics, Harrison eliminated the tinny sound of the usual phonograph and perfected a special filter and rubber line-recorder which eliminated all problems of resonance due to variations in speed of parts. The new sound-on-disc system could clearly record frequencies as low as 40 cycles and as high as 5,000 cycles. Harrison also eliminated the problem of overtones. A complete disc system was ready by 1924; it included a high quality microphone, a nondistortive amplifier, an electrically operated recorder and reproducer, a high quality loudspeaker, and a synchronizing system free from speed variation.39 In 1922, in the midst of these developments, Edward B. Craft pressed Jewett to consider some commercial applications. Western Electric did advertise and sell the microphones, vacuum tubes, and loud speakers in its radio merchandising, but Craft was interested in using the new developments for phonographs and sound movies. Employing the more trustworthy sound-on-disc method, he produced the first motion picture using Western Electric’s new sound system. The film, Audion, was an animated cartoon, originally created as a (silent) public relations film. Craft added a synchronized score. Since Western Electric had not yet developed a synchronized gear system, Audion, the demonstration film employed only approximate synchronization.40 Craft first presented Audion in Yale University’s Woolsey Hall on October 27, 1922. He followed this demonstration with more experiments. On February 13, 1924 at a dinner at New York’s Hotel Astor given by Western Electric’s president, Charles Dubois, Craft presented a second sound film, Hawthorne, again using a disc system. By this time the gear system was also ready. As a result Hawthorne, a public relations film about

The Warner Bros. Innovate Sound • 33

Western Electric’s plant in Chicago, had almost perfectly synchronized sound. Improvements in the spring of 1924 by H. C. Harrison and T. L. Dowey corrected all remaining synchronization problems. Thus, the sound-on-disc system was complete by the fall of 1924.41 The sound-on-film research team also had achieved success. Now under Donald MacKenzie and E. C. Wente, it solved the key problems of the light valve adjustment and the printing of positives by May 1923. In the summer and fall of 1923, the engineering unit produced several experimental shorts. Using the talents of the laboratory staff, several members including Joseph Maxfield and C. R. Sawyer spoke and sang. In November of 1923 they recorded a short comedy act. By 1924 this system had also reached laboratory perfection, but conservative Western Electric engineers continued laboratory experiments. They considered the sound-on-disc system more traditional and hence safer.42 Laboratory success did not differentiate Western Electric’s systems from those of de Forest and others. Other considerations in 1925 did. AT&T ranked with United States Steel as the largest private corporation in the world. Total assets numbered over $2.9 billion while total revenues neared $800 million. At this time America’s national income was only $76 billion and government receipts totaled only $3.6 billion.43 Western Electric, although merely an AT&T subsidiary, was a corporate giant in its own right with assets of $188 million and sales of $263 million. Compared to the largest force in the motion picture industry at the time, Famous-Players Lasky, Western Electric had greater assets and sales. Absolute economic power was not AT&T’s only advantage. It had always spent enormous sums to develop basic patents necessary for telephone services; unfortunately its management could not predict what its scientists would develop. Moreover, AT&T could not prevent others from discovering patents that might prove valuable to its monopoly position. Thus, to protect its monopolistic position from outside threats, AT&T’s management actively encouraged the development of nontelephone patents to use for bargaining with potential competitors. Between 1920 and 1926, AT&T crosslicensed many of its new broadcasting related patents to the “Radio Group,” those firms primarily interested in radio broadcasting: General Electric, Westinghouse Electric and Manufacturing Corporation, and their off-spring, RCA. In return, the “Radio Group” agreed not to threaten AT&T’s monopoly on wire communications. Consideration of prestige and direct profit played only minor roles in this patent decision.44 AT&T felt threatened by the rise of several new electronics patents after World War I. Western Electric, General Electric, Westinghouse, and the Marconi Company of Great Britain had developed many new inventions. Encouraged by the United States Navy, General Electric eliminated the for-

34 • The Coming of Sound

eign Marconi threats by forming RCA in November of 1919. To prevent potential conflict over patent rights for long distance telephone transmission, AT&T signed a cross-licensing agreement with General Electric, Westinghouse, and RCA on July 1, 1920. Under this agreement the “Radio Group” and AT&T crosslicensed all the basic patents for the radio, telegraph, and telephone industries. Then they restricted each other’s activities to certain markets. AT&T secured protection for its telephone monopoly, while RCA secured a stronger position in radio. Research scientists worked too fast, and conflicts developed at once. The cross-licensing agreement of 1926 settled the major disputes. AT&T withdrew completely from radio broadcasting. For the new field of sound recording, AT&T obtained exclusive license for use over telephone wires, while the “Radio Group” secured a total monopoly for one-way radio transmission. In addition, the “Radio Group” captured the rights for sound recording in conjunction with any non-commercial motion picture. The two exchanged nonexclusive licenses for sound recordings for motion pictures for all other purposes. Thus, by late 1925, AT&T had rights to not only its own patents, but also those of General Electric, Westinghouse, and RCA.45

Selling the Inventions In the spring of 1924 Western Electric’s general sales manager, George E. Cullinan, and his chief assistant, Elbert A. Hawkins, began to try to license electrical sound. By the fall of 1924 Cullinan and Hawkins had interested and licensed the key phonograph and record manufacturers, Victor and Columbia. They were not successful with the motion picture industry, so they hired an intermediary, Charles S. Post. Post also could not change the film industry leaders’ decisions. Zukor knew the past system had made him a multimillionaire and his company, Famous-Players, the fledgling studio system’s leader. Why risk this? In November 1924 Hawkins met Walter J. Rich, a New York based, freelance entrepreneur, then head of a small manufacturing operation of automobile speedometers. In December of 1924 Rich witnessed his first demonstration of the Western Electric system at its laboratories on West Street in New York City. He was favorably impressed and opened negotiations with Cullinan and Hawkins.46 On May 27, 1925, Rich signed an agreement in which he agreed to undertake commercial exploitation of the system for nine months. For this period he would have exclusive rights. Western Electric would continue to pursue further technical research and development. Rich set out to find a motion picture producer to make, distribute, and exhibit talking motion pictures. This would first lead to Warners and then later Fox.47

The Warner Bros. Innovate Sound • 35

Connecting with Warner Bros. Previous historical research has conclusively established that Warner Bros. innovated synchronized-sound movies—not out of desperation or nearing bankruptcy, but as part of a well-planned strategy of expansion. Warner Bros. imposed a substantial short-term debt on itself to enable its rapid expansion. In 1924 Warner Bros. was a prosperous, albeit small, production company. Their lack of size, lack of a national distribution network, and lack of a theater chain made it quite difficult for Warner Bros. to acquire financial backing for production. Prior to 1925, Warner Bros. used two methods to raise the necessary capital. One was to seek out a rich individual and trade a percentage of the firm’s potential profits for part of the necessary capital. As a consequence, real interest rates effectively ran well in excess of 100%. More frequently, Warner Bros. followed the franchise technique. First, Warners’ divided the United States into 28 franchise zones and secured from each “franchise holder,” usually a major exhibitor, backing for five to ten films. Then, Warners’ guaranteed each “franchise holder” first rights to a fixed percentage of the profits. Here again the effective rate of interest usually approached 100 percent. It was no wonder that in 1924, Harry Warner, president of Warner Bros. and the eldest brother, sought an alternative method of financing. In December 1924, he met Waddill Catchings, head of the investment division of Wall Street’s Goldman, Sachs. Catchings was famous for his willingness to back small firms he thought could grow into giants; from 1914—1924 he assisted Woolworth’s and Sears Roebuck grow from small, regional businesses into large, national chains. Moreover, by 1924 Catchings had reasoned that the motion picture industry was ripe for expansion. During December of 1924, Catchings carefully scrutinized the operations of Warner Bros. Previously, because they doubted that upstart movie moguls could enforce reasonable limits on the cost of films, Catchings and other partners in Goldman, Sachs had not been confident enough to finance a motion picture concern. Warners’ rigid accounting procedures, especially its day-to-day audits, made Warners’ Bros. far more attractive than the other firms Catchings had investigated. However, in February 1925, just before Harry Warner and Catchings were able to consummate a deal, the Warner Bros. franchise holders rebelled; they had heard rumors of a Warner-Goldman, Sachs alliance. Normally unorganized, they appointed a committee to meet with Harry Warner; they did not want Warner Bros. to terminate what had been an extraordinarily profitable relationship. At this point, Harry Warner devised a counter strategy. He knew that Vitagraph, a pioneer motion picture concern with an international network of exchanges, was verging on bankruptcy.

36 • The Coming of Sound

Harry approached Vitagraph president, Albert E. Smith, and offered to relieve the corporation of its current liabilities of $980,000 and to purchase enough shares to acquire majority control. Smith agreed, and on April 22, 1925, Harry advised the franchise holders’ committee that Warner Bros. now had 26 exchanges in the United States, 24 in foreign countries, a new studio in Brooklyn, and another in Hollywood. This bold action broke the Warner dependency on the franchise distribution and financing system. Catchings was impressed and decided to use the resources and power of Goldman, Sachs to orchestrate and support all future financial operations of Warner Bros. Catchings immediately set out to obtain permanent financing for production. Initially, he established a revolving credit line of $3 million; then he raised $4 million more through a bond issue. Both Catchings and Harry Warner agreed that if Warner Bros. was to become more profitable, it must also expand its holdings in distribution and exhibition, becoming completely vertically integrated. Thus, in the fall of 1925 Warner Bros. opened two new distribution exchanges in the United States and 29 more in foreign countries. In 6 months Warners’ had created a distribution system equal to those of Famous-Players and Loew’s/MGM. At the same time, to guarantee theaters in which to book its new films, Warners purchased ten first-run houses to form the basis of a chain of theaters, including Broadway’s Piccadilly theater (renamed Warners’) as the flagship. Harry also leased a half-dozen first-run theaters in key locations, beginning with the Orpheum in Chicago’s Loop. Distribution and theatrical expansion were part of the Harry Warner and Waddill Catchings plan, and thrust the current profits into current losses. But that was part of the plan. As part of this wave of expansion, Warners acquired a Los Angeles radio station. Through this deal Sam Warner met Nathan Levinson, a salesman of Western Electric radio equipment. The two became fast friends, and in April 1925 Levinson introduced Sam to the new Western Electric system for recording and reproducing sound motion pictures. Sam was fascinated, and in May 1925 he and Levinson tricked Harry into attending a demonstration. Harry almost did not go, for, as he later recalled,“if [they] had said talking picture, I never would have gone, because [talking pictures] had been made up to that time several times, and each was a failure.”48 A recording of a five-piece jazz band sparked Harry’s interest, and within a week he had conceived of a plan to use this new invention. He explained to Catchings, “If it can talk, it can sing.”49 Here was the plan. Warner Bros. could record the greatest musical acts and present them in their theaters. This would provide their theaters with the best-added attractions, albeit on film, currently available. It was an

The Warner Bros. Innovate Sound • 37

entrepreneurial vision that would require the large amounts of financing which only an investment banker as skilled as Catchings could provide. At once Harry Warner and Catchings opened negotiations with Western Electric’s agent, Walter J. Rich. The three met with executives from Western Electric throughout June 1925. On June 25, 1925, Warner Bros. and Western Electric signed a letter of agreement calling for an experimental program of at least a year’s duration. Experiments began in October. Slowly, Sam Warner and his assistants integrated the Western Electric inventions into a workable production system. During this experimental phase, Warner Bros. did not cease its other expansionary activities. In fact, it began to experience some return on these other investments. Ernst Lubitsch’s Lady Windemere’s Fan established box office records in its debut in January 1926 at the Warners’ theater in New York City; The Sea Beast with John Barrymore opened the following month to the same reception. To extract the maximum revenue from these hits and to overcome Warners’ lack of first-run theaters, Harry even rented a number of legitimate theaters to “road-show” these and later films at a two dollar admission price. Even more important were the immediate returns from foreign distribution operations. Despite these improvements, it was not surprising that Warners’ yearly financial statement, issued in March 1926, stood in the red. The loss was a large $1.4 million. Yet the company did not face bankruptcy. Its loss was self-imposed, for now Warners’ possessed an international distribution network, owned a growing chain of theaters, was producing higher-priced films, and had established the line of credit necessary to continue its climb to the top of the industry. By December of 1925, the experiments were going so well at the Brooklyn studio that Rich proposed to Harry Warner and Catchings that negotiations for a permanent agreement begin immediately. By the end of 1925, all the interested parties had come to substantial agreement. However, as they hammered out the specific details of the contract in January and the early part of February, an important change in the negotiators took place. John E. Otterson became Western Electric’s sole representative. Upon assumption of power, Otterson expressed his disappointment that Western Electric was not negotiating with Paramount or Loew’s/MGM. Otterson began to try to rectify Western Electric’s mistake. In order to assure Western Electric of a maximum profit, he demanded complete authority over any future developments and immediate control of all prices to be charged to exhibitors for equipment. Otterson was unable to secure such power however as the backing of Goldman, Sachs gave Warner Bros. the strength to command parity with Western Electric. Thus, on April 20, 1926, Western Electric signed an

38 • The Coming of Sound

exclusive agreement with Warners’ newly created subsidiary—Vitaphone— for sound-film production and distribution. Western Electric granted Vitaphone a permanent license and established eight percent (of Vitaphone’s gross revenues) as its royalty fee. An annual minimum, ranging from $40,000 for the first year to $100,000 by 1930, was also fixed. The agreement looked to a gradual sale of apparatus to theaters: the sale of sound-film equipment to 160 theaters in 1927 and to a total of 2,400 theaters by 1931. To satisfy Otterson, Warner and Catchings granted Western Electric a permanent representative on Vitaphone’s board of directors and guaranteed that Goldman, Sachs would stand behind all Vitaphone debts for at least five years. As the trade papers were announcing the first news of the alliance, Vitaphone was organizing its assault on the marketplace. Harry signed a great number of the popular musical artists monopolized by the Victor Phonograph Company, negotiated contracts with the stars of the Metropolitan Opera, and secured the New York Philharmonic to record orchestral accompaniments for feature films. By June of 1926 Vitaphone was ready to begin recording musical shorts and orchestral accompaniments for features to be released during the following season. Because of Otterson’s insistence, Vitaphone moved its studio to the vacant Manhattan Opera House on 34th Street in New York City. Sam Warner and his crew rewired the theater, added lights, and even built a deck over the seats in the orchestra section. To keep costs to a minimum, Vitaphone rented part of the building to the Shriners for evening meetings. Vitaphone’s August 6, 1926, premiere reflected the strategy that Harry Warner had been following for more than a year. A “Vitaphone prelude” replaced the overture, vaudeville acts, newsreel, and comedy short usually presented at a first-run theater. There were seven numbers in the prelude. The first presented Will Hays congratulating Warner Bros. and Western Electric for their pioneering efforts. The stage “illusion” was complete; Hays bowed at the end, anticipating applause. Next came the overture from Tannhauser, played by the New York Philharmonic. Conductor Henry Hadley also bowed. Six acts in a colossal headliner presentation followed. Five performed serious music. Only Roy Smeck, with his harmonica and banjo act, provided an alternative. Tenor Giovanni Martinelli’s aria from I Pagliacci was the hit of the evening, his segment receiving a two-minute ovation. Harry Warner’s strategy of providing the most popular musical stars had begun very conservatively. No one could object to a new mechanical device that would bring classical music to the masses. Moreover, because the shorts cost an average of only $12,000, they provided a cheap way to experiment with sound while still ensuring a large audience.

The Warner Bros. Innovate Sound • 39

After a 10-minute intermission came the feature film. Performances established a record gross for the Warners’ theater. In the short run, Vitaphone seemed an immediate success but its future remained still very much in doubt. When the 1926—1927 motion picture season opened in September 1926, Warner Bros. was clearly on its way up in the American film industry. Only the Vitaphone operations expanded at a slow rate. This infuriated John Otterson; repeatedly, Harry Warner tried to reassure Otterson and convince him that Vitaphone should continue at its present rate of growth. Harry argued that for the present he should book sound films only in a selected number of large cities throughout the United States. Each first-run theater need not be the largest, but should be big enough to attract attention, yet cheap enough so Vitaphone could continuously present a show before the public for at least one season. Following up on that publicity, Vitaphone should gradually place shows in smaller, surrounding cities. By this time, Vitaphone would have increased production so that any theater could have a continuous flow of the Vitaphone product. Simultaneously, Vitaphone would adapt its shorts and later its features to meet maximum audience approval. Thus, in the not too distant future, with Vitaphone’s resources for production and distribution of sufficient size, Warners’ could reap the maximum rewards from a hit Vitaphone show. Following this strategy, on September 6, 1926, Warner Bros. opened the Don Juan package at the Globe Theater in Atlantic City. The show drew a packed house, an especially good sign because Atlantic City was a popular summer resort. Next Vitaphone rented the McVickers Theatre in Chicago’s Loop and opened the Don Juan package to overflow crowds. In October Vitaphone repeated this process and opened the Don Juan show in more than a half-dozen major U.S. cities. A second Vitaphone package, with the feature The Better ‘Ole, premiered at Moss’s Colony Theatre in New York on October 7, 1926. This not only gave Vitaphone two shows on Broadway, but more importantly, represented a major shift in programming strategy. The program’s shorts all featured vaudeville artists whom (according to Variety estimates) only the four largest motion picture theaters could have afforded to present live. The show opened with another overture,“The Spirit of 1812.” Variety estimated that the New York Philharmonic would cost $6,000 per week. The Four Aristocrats came next and would cost $1,000 per week. Then recordings of four of the most popular vaudeville stars of their day appeared; the aggregate salaries of such stars could total $25,000 per week. The first was George Jessel, who performed a short monologue and sang Irving Berlin’s “At Peace with the World and You.” Elsie Janis followed with

40 • The Coming of Sound

four songs. Mordaunt Hall of the New York Times found this Vitaphone recording so convincing that “one forgot all about the Vitaphone in listening to the distinct words of the songs . . . it was just as if Miss Janis were on the stage.” This was high praise for a vaudeville artist popular enough to command $3,000 per week. Eugene and Willie Howard followed with a comic sketch. And the headliner was Al Jolson, who did three songs, standing before a set of a southern plantation. Variety could only see a bright future for an invention that could place this much high-priced vaudeville talent on one stage at one time. Despite these early triumphs, Vitaphone experienced its share of disappointments during its first season. At Grauman’s Egyptian theater in Los Angeles, Don Juan with sound lasted only two weeks. (Later the silent version with Grauman’s own prologue ran for 11 weeks.) In St. Louis, Vitaphone withdrew Don Juan after seven losing weeks and put silent program releases in the Capital for the remainder of its lease. At the McVickers, Vitaphone experienced a 50 percent drop during the usually active Christmas season. Only at Broadway’s Colony and Warner theaters did Vitaphone shows generate extraordinary revenues. Overall there was no clear-cut trend. Thus, it surprised no one in the film industry when, in December 1926, Warner Bros. released Don Juan, and, a month later, The Better ‘Ole as individual silent films. Despite this lukewarm response, Catchings and Harry Warner remained optimistic. Harry continued to sign every available concert, musical, and vaudeville star. He consciously followed the model of the Victor Phonograph Company, wanting to make the Vitaphone trademark as famous in its field as Red Seal was in its own. By February 1927 Vitaphone had 50 vaudeville subjects on disc and was recording five new shorts per week. In April 1927 Vitaphone signed its last major vaudeville holdout, Weber and Fields. Still, tenor Giovanni Martinelli and Al Jolson made the most shorts, received the highest fees ($5,000 per recording), and received the most praise from the reviewers of the time. Vitaphone’s key problem became how to maintain a balance between opera stars, variety acts, and big-name bands. Like big-time vaudeville, Vitaphone found it should construct 30minute-long preludes, with its biggest stars coming last. Moreover, the shorts gradually became unlike “canned” vaudeville, as Sam Warner and his assistants eliminated mandatory bows (by May 1927) and extremely long takes, employing more traditional strategies of camera work and editing. Simultaneously, Vitaphone began to interest exhibitors in leasing and installing reproducing equipment. Between November 1926 and April 1927, 132 exhibitors signed installation contracts. Of the first 74 theaters wired, the majority of which were in the East. In the spring of 1927, Harry

The Warner Bros. Innovate Sound • 41

secured three very important accounts. The first was the Stanley Company of America, owners of more than 300 theaters in the mid-Atlantic states. (Warner Bros. would merge with the Stanley Company in 1928.) Stanley installed Vitaphone equipment in 13 of its theaters. In Minnesota the Finkelstein and Rubin circuit held dominion. It installed Vitaphone in the Capital theater in St. Paul and the State theater in Minneapolis. The final, key account consisted of only one theater: New York City’s Roxy. In March 1927 Samuel Rothafel opened America’s largest theater, the Roxy, and featured Vitaphone shorts. Recognition by such a noted theater entrepreneur produced extremely favorable publicity. Most theaters that used Vitaphone kept their regular prices despite the additional cost. Still no trends emerged. Vitaphone failed and succeeded; it had long runs in some theaters and closed within a week in others. Most exhibitors waited, hoping to learn more before deciding. Warner Bros. continued to improve financially despite the drain from Vitaphone. As of February 26, 1927, Warner Bros. had invested over $3 million in Vitaphone, yet its quarterly losses had declined to less than a third of the previous year’s loss. Foreign operations grew extremely profitable. Rentals in Great Britain alone rose by two million for the fiscal year ending August 31, 1927. Waddill Catchings was always able to generate the necessary financing for all of Warners’ new investments, including Vitaphone. To finance more costly products, he established a new revolving credit account of $4 million; to facilitate production, he secured a $1 million loan to construct a new Hollywood studio. He negotiated extensions on outstanding loans and refinanced others. But even such extraordinary financial support did not satisfy John Otterson. Still wanting to control all Vitaphone operations directly and then to grant direct licenses to Famous-Players, Otterson continued to harass Catchings’s and Harry Warner’s efforts at every turn. He set the cost of the reproduction equipment at $16,000 to $25,000, not at the promised $3,700 to $7,000. This price crippled Vitaphone’s ability to interest independent theater owners of limited means. Harry Warner countered by granting liberal time-payment plans: 25 percent down, the balance due over a period of 12 to 24 months. Otterson kept requesting that Vitaphone supply detailed, long-range plans; he pressured Harry Warner to move toward rapid expansion. By the end of 1926, Otterson had totally broken with Warner and Catchings. He detailed his thoughts in a memo: the present management of the Vitaphone Corporation is incompetent to properly exploit the Vitaphone, to conduct relationships with the motion picture industry and to execute the contract with the Western Electric Company.50 Otterson hoped Western Electric could purchase Vitaphone, and then let Warner Bros. make shorts and scores, while Western Electric directed all the

42 • The Coming of Sound

technical and licensing activities. He was convinced that only then would Western Electric be able to gain a monopoly position and, hence, not be outmaneuvered and distanced by competitors who have started later in the field. In December 1926, Otterson took the offensive. First, he organized ERPI, as a wholly owned subsidiary of Western Electric, solely to market sound equipment. From this new base, Otterson pressured Paramount, Loew’s/MGM, and Fox to take out direct licenses for sound, even though this activity was legally reserved for Vitaphone. The Fox Film Company did contract for such a license on December 31, 1926. Still, Otterson could not persuade the “Big Two”—Paramount and Loew’s/MGM. Otterson’s demands proved to be the largest impediment. Neither Adolph Zukor nor Nicholas Schenck would contract to pay the eight percent of gross royalties Otterson sought; it was too high a rate. Moreover, legally, Vitaphone would have to grant the license to Paramount or Loew’s/MGM, and neither giant wished to become the licensee of a subsidiary of a competitor. Thus, in February 1927, Zukor and Schenck postponed any decision concerning sound for one year. In reaction, Otterson campaigned more intensely to separate Warner Bros. from Vitaphone. He could then reopen negotiations with FamousPlayers and Loew’s. On March 14, 1927, he called on Catchings and demanded termination of the current Vitaphone-Western Electric agreement. The next day Catchings approached Edgar S. Bloom, Otterson’s immediate superior. Bloom supported Otterson and said that ERPI’s lawyers had prepared an opinion proving that Vitaphone was in default of its contract. Bloom threatened to release this information to the press. Catchings knew this would cripple his on-going strategic plans. Thus, he concluded that Warner Bros. must give in and negotiate a new contract. Signed on May 18, 1927, two documents formed the heart of the new Warner Bros.-Western Electric agreement. The first terminated the earlier contract as of April 2, 1927, and transferred to EPRI, another subsidiary of Western Electric, itself a subsidiary of AT&T—all of Vitaphone’s theater reproducing equipment, its contracts with 136 exhibitors, and its sublicense with Fox-Case. In return, ERPI paid Vitaphone $1,322,306 and agreed not to license any other motion picture producer at a rate less than that which Vitaphone paid. In the second contract, ERPI granted Vitaphone a nonexclusive license to employ Western Electric sound-recording equipment and patents at cost plus an 8 percent of gross revenues royalty fee—against an annual minimum of $100,000. In retrospect, this new agreement would deny millions in profits to Warners. Yet Warners’ secured over $1 million in cash, and retained its lead in the production and distribution of sound films.

The Warner Bros. Innovate Sound • 43

On the other hand, Otterson now had total control over all matters concerning future contracts and prices and, thus, could reopen negotiations with Zukor and Schenck and promise no strings attached. Yet it would be a year (minus a week) before Otterson could sign Famous-Players and Loew’s. After its settlement with ERPI, Warner Bros. was free to continue expansion. In May 1927 it announced new plans for the 1927—1928 season. It would release 26 features and 4 road-show specials—all with Vitaphone accompaniments. In addition, Harry Warner proclaimed that Vitaphone would add talking sequences to some of its feature films—the first of which would be The Jazz Singer. Still Harry Warner had more faith in the Vitaphone short as a testing innovative tool. By May 1927—when the contractual agreements had been worked out—the Vitaphone had become an accepted part of the motion picture industry’s presentations. Throughout the slack summer period, Vitaphone continued to produce shorts at the rate of five per week and release them to the growing number of theaters with installations. The Jazz Singer opened early in October 1927. Yet by then at least 150 Vitaphone shorts had been recorded and released. Two new shows opened: Old San Francisco on June 22, 1927, at the New York Warners’, and The First Auto Race at New York’s Colony Theatre on June 28, 1927. A show in this case was defined as a silent film accompanied by an orchestra on record and Vitaphone short as the substitute for the stage show. The three original shows were playing now at popular prices in New York, Chicago, Minneapolis, Dayton, Denver, Philadelphia, Detroit, Buffalo, and Portland, Oregon. Vitaphone opened on Labor Day in theaters in Newark and Milwaukee. And, of course, the Roxy continued to use Vitaphone shorts. To meet its new schedule of “talkers” and shorts, Warner Bros. instituted an intensive building program. As early as May 1927, it completed the first of four new Hollywood stages completely devoted to the production of Vitaphone shorts and features. In October, when all were finished, Warner Bros. could shift its production of shorts to Hollywood. The new stages were 90 by 150 feet; all walls were felt-lined and specially sealed. Fifteen feet above the floor was a glass-enclosed booth to monitor the recording. The camera was enclosed in a soundproof, movable booth. To maintain absolute quiet, Sam Warner installed incandescent lamps to replace the usual motor-driven arc lights and carbon lamps. Sam needed talented people to produce the new sound films. Gradually he built his staff: Herman Heller to head the music department, Nathan Levinson to head a sound department, and two full-time writers, Grant Clarke and Murray Roth. Bryan Foy, a former member of vaudeville’s Seven Little Foys and an experienced silent film director, became chief director

44 • The Coming of Sound

and production manager. With his connections in both vaudeville and motion pictures, Foy was a natural choice. Foy quickly established a rigid schedule for the production of shorts; Sam then moved to concentrate on features with Vitaphoned segments. The first was The Jazz Singer; finished in August 1927, it cost an estimated $500,000, making it the most expensive feature in the history of Warner Bros. Sam immediately began production of more feature films with Vitaphone sequences. In all, Warner Bros. looked forward to a prosperous 1927—1928 season. Despite gaining control over all contracts and prices for equipment, John Otterson continued to criticize Vitaphone’s efforts. He repeatedly favored ERPI’s only other licensee, Fox. For example, he promised Fox and Vitaphone one price for certain new equipment and then, at the last minute, doubled only Vitaphone’s rate. Harry Warner and Waddill Catchings still thought Vitaphone could work with ERPI; then Otterson’s agents began directly to obstruct exhibitors presenting Vitaphone products. Typical was the case of the Smith Amusement Company of Ohio. One of Vitaphone’s first accounts, Smith followed perfectly the marketing plan Harry Warner had proposed for Vitaphone’s films. Its presentation of Vitaphone shows in Warren and Alliance, Ohio, and Huntington, West Virginia, gradually created interest throughout the upper Ohio River Valley. Smith lost $25,000 during the 1926—1927 season and counted on The Jazz Singer to recoup its losses. However, on the day before the premiere, ERPI pulled its apparatus from all three theaters and took Smith to court. Vitaphone had lost an important account, and the word soon spread of the power of ERPI. A few exhibitors even began to return their equipment and went back to silent films. Catchings and Harry Warner tried to reason with Otterson, but without success. As an alternative, they approached C. M. Bracelen, vice-president and general counsel of AT&T, ERPI’s parent company. Would Bracelen serve as an informal arbitrator? Upon hearing of this suggestion, Otterson became enraged; he reasoned that the parent company had no authority in this matter. Otterson soon became even more uncooperative. Vitaphone’s contract with ERPI provided for formal arbitration (under New York law) for any unresolved disputes. Catchings knew formal arbitration might take years to settle, but it was the only way to impede further abuses by Otterson. So on January 30, 1928, Vitaphone formally notified ERPI of its contractual defaults. ERPI responded on February 8, denying all of Vitaphone’s contentions. Vitaphone issued further complaints on March 30; ERPI countercharged with 12 new violations on April 6. Formal hearings began in October. Meanwhile, Otterson reduced his direct harassment of Vitaphone and its exhibitor accounts, freeing Warner Bros. to concentrate on its innovative and expansionary activities.

The Warner Bros. Innovate Sound • 45

As the 1927—1928 season opened, Vitaphone began to add new forms of sound films to its program. Though The Jazz Singer premiered on October 6, 1927, to lukewarm reviews, its four Vitaphoned segments of Jolson’s songs proved a success. Vitaphone contracted with Jolson immediately to make three more films for $100,000. (The four Warner Bros. did not attend The Jazz Singer’s New York premiere because of Sam Warner’s death in Los Angeles on October 5. Jack Warner took over Sam’s position as head of Vitaphone production.) Bryan Foy pushed his unit to create four new shorts each week, becoming bolder in programming strategies. On December 4, 1928, Vitaphone released the short My Wife’s Gone Away, a 10minute, all-talking comedy based on a vaudeville playlet developed by William Demarest. Critics loved this short; so did audiences. Thus, Foy, under Jack Warner’s supervision, began to borrow even more from available vaudeville acts and playlets to create all-talking shorts. During Christmas week of 1927, Vitaphone released a 20-minute, alltalking drama, Solomon’s Children. Again revenues were high, and in January 1928, Foy moved to schedule production of two all-talking shorts per week. Warner Bros. had begun to experiment with alternative types of shorts as a cheap way to maintain the novelty value of Vitaphone entertainment. Moreover, with such shorts it could develop talent, innovate new equipment, and create an audience for feature-length, all-sound films. In the spring of 1928, with the increased popularity of these shorts, Warner Bros. began to change its feature film offerings. On March 14, 1928, it released Tenderloin—a routine mystery that contained five segments in which the actors spoke all their lines (for 12 of the film’s 85 minutes). More part-talkies followed that spring. Harry Warner and Waddill Catchings knew that the investment in sound was a success by April 1928. By then it had become clear that The Jazz Singer show was more than a mild success; it was the most popular entertainment offering of the 1927—1928 season. In cities that rarely showed films for more than one week, The Jazz Singer set records for length of run: five weeks each in Charlotte, North Carolina, Reading, Pennsylvania, Seattle, Washington, and Baltimore, Maryland. It also began to appear on return engagements. The Jazz Singer played the Fox Theater in Philadelphia for two return weeks in mid-February, holding its own at Philadelphia’s second largest theater. By mid-February, it was in its (record) eighth week in Columbus, Ohio, St. Louis, and Detroit, and its (record) seventh week in Seattle, Portland, Oregon, and Los Angeles. Samuel Rothafel even booked The Jazz Singer package for an unprecedented second run in April 1928, where it grossed in excess of $100,000 each week, among the Roxy’s best revenues that season. Perhaps more important, all these first-run showings did not demand the usual expenses for a stage show and orchestra.

46 • The Coming of Sound

As will be examined in more detail in Chapter 5, it took Warner Bros. only until the fall of 1928 to convert to the complete production of talkies— both features and shorts. The Singing Fool became the highest grossing film in studio history—and would retain that title until 1938. Waddill Catchings and Harry Warner had laid the foundation for this rapid growth and, hence, maximum profit with Vitaphone’s slow, steady expansion in production and distribution. In 1929 Warner Bros. had the largest profits of any motion picture company and had moved to third in the industry in total assets. Others quickly moved to imitate Warners’ behavior, and William Fox was the first.51

CHAPTER

4

William Fox Innovates Sound

Fox’s sound-on-film system became available because of the efforts of two recluse scientists working in a private laboratory—still very much in a nineteenth-century research and development tradition. In 1913 an independently wealthy, eccentric, Yale-trained physicist, Theodore Case, opened a private laboratory in his hometown of Auburn, New York, a small city near Syracuse. Spurred on by recent breakthroughs in the telephone and radio fields, Case and his assistant Earl Sponable, sought to improve the Audion tube, a device by which to amplify weak incoming radio waves. In 1917 Case and Sponable perfected the Thalofide Cell, a highly improved vacuum tube. The U.S. Navy Department immediately contracted with Case to adopt this invention to improve ship-to-shore communication. But America’s participation in World War I ended before the two scientists could complete their assigned task, and in 1919 the Navy ceased all funding.1 Case and Sponable returned to a prewar goal—to integrate the Thalofide Cell into a system for recording sounds. In 1922, as part of this work, Case met with the even more individualistic Lee de Forest, inventor of the Audion tube, and presently at work on his Phonofilm system for recording sounds on motion picture film. For personal reasons—envy perhaps—Case turned all his laboratory’s efforts to besting de Forest. Within 18 months Case Labs would produce a sound-on-film system, based on the Thalofide Cell. Naively, de Forest contracted to use the Thalofide Cell, while providing Case with all his knowledge of sound-on-film, free of charge. As de Forest unsuccessfully attempted to market his Phonofilm system to Paramount and Loew’s/MGM, Case and Sponable continued to work quietly in upstate New York. In 1923 the pair developed an improved microphone, 47

48 • The Coming of Sound

recorder, and amplifier. By August 1924 Case had constructed—with his own funds—a complete sound studio, and projection room adjacent to his laboratory.2 In 1925 Case determined he was ready to try to market his sound-onfilm system. Case’s skills as a businessman hardly matched his scientific acumen. First he attempted to form an alliance with de Forest, but that effort was doomed from the start. The temperamental de Forest partially blamed his own sales difficulties on Case, and the two broke all formal and informal communication in September of that year. Case then approached Edward Craft, vice-president for research at the AT&T-controlled Western Electric, Inc. In December 1925, Craft and two assistants visited the Case Laboratory, and saw and heard a demonstration film. Craft was impressed, but after some consideration, decided that Case’s patents added no substantial improvements to the Western Electric soundon-disc system—then under exclusive contract to Warner Bros. Pictures, Inc. Rebuffed, Case decided to imitate Western Electric’s limited achievements, and directly solicit a show business entrepreneur. He first approached John J. Murdock, the long time general manager of the Keith-Albee vaudeville circuit. Case argued his sound system could be used to record musical and comedy acts, and even the accompanying music of an orchestra, and present these sound motion pictures in Keith-Albee houses throughout the United States. Then the most popular performers could “appear” simultaneously all over the United States at greatly reduced costs. Earl Sponable attended those meetings with Case, Murdock, and other Keith-Albee executives, and later recounted the latter’s reaction: “They were very much disturbed to think that [anyone] would dare bring up the subject of talking pictures to them again. They admitted that they had been stung on the thing twice, once about fifteen years ago where they invested considerable money in the stock of a talking picture outfit, and later in certain connections with the de Forest Company. The Vice-President of the Keith Company [Murdock] stated positively that they were not interested in talking motion pictures.3 Adolph Zukor and Nicholas Schenck—heads of Famous-Players, and Loew’s/MGM echoed Murdock’s response.4 None expressed the slightest interest in this latest version of “talking motion pictures.”5 Case moved to the second tier of the U.S. film industry and found an interested party in William Fox. In 1926, Theodore Case cooperated with Fox because Courtland Smith, president of Fox Newsreels, reasoned that with sound newsreels he could push that branch of Fox Film to the forefront of

William Fox Innovates Sound • 49

the industry. In June of 1926, Smith arranged a demonstration for company owner, founder, and president, William Fox. The boss was pleased, and within a month, on July 23, 1926, helped create the Fox-Case Corporation to produce motion pictures using the Case sound-on-film technique. Case turned all patents over to the new corporation, retired to the security of his laboratory in upstate New York, and ordered Earl Sponable to supervise all engineering changes for Fox-Case. Courtland Smith assumed the presidency of the new enterprise.6 Initially, William Fox’s approval of experiments with the Case technology began as only a small unit of a total plan to vault Fox Film to preeminence in the motion picture industry. In 1925, William Fox and his advisors initiated an expansion campaign. By marketing $6 million of new common stock, they increased budgets for feature films, and enlarged the newsreel division. (Courtland Smith was hired at this point.) Simultaneously Fox began acquiring and building a chain of motion picture theaters. At that time, Fox Film controlled only 20 small, neighborhood houses in the New York City environs.7 In July 1925 a third interest in West Coast theaters was purchased, thus guaranteeing access to the best theaters in the state of California. By 1927 the Fox chain included houses in Philadelphia, Washington, D.C., Brooklyn, New York City, St. Louis, Detroit, Newark, Milwaukee, and a score of smaller cities west of the Rockies. The flagship became the Roxy— in the heart of Manhattan’s Times Square. To finance these sizable investments, William Fox first utilized the services of several Wall Street banking houses. Dissatisfied he ultimately developed close ties with Harold Stuart, president of Chicago’s Halsey Stuart, an investment banking house. In financial circles Stuart’s reputation as a renegade matched William Fox’s rapscallion image in the motion picture industry. Not surprisingly, these two kindred spirits worked closely to supervise the growth of Fox Film throughout the late 1920s.8 At Fox, Stuart, and their assistants strove to produce a motion picture colossus, Courtland Smith controlled a small, then quite insignificant subsidiary, the Fox-Case Corporation. In 1926 he initiated the innovation phase of the Case sound-on-film technology. At first, all he could oversee were defensive actions designed to protect Fox-Case’s patent position. On September 23, 1926, exactly two months after incorporation, Fox-Case was threatened by Lee de Forest who claimed that Case had illegally acquired basic de Forest patents. To defend Fox-Case, Courtland Smith acquired two options to purchase $2 million of Phonofilm stock. Before the second option expired, however, Smith learned de Forest did not possess complete ownership of his patents. Fox-Case withdrew its offer;

50 • The Coming of Sound

the matter was dropped. The other major threat came from abroad. The German Corporation, Tri-Ergon A.G., controlled important sound-onfilm patents developed by German scientists. Smith contacted Tri-Ergon executives and secured an option to purchase non-German (rest of the world) rights. For six months Smith and his staff explored the potential value of signing a long-term agreement. Finally, after much investigation, William Fox paid $50,000 for the rights if only to check the minute potential for a suit by Western Electric, de Forest, or some other yet unanticipated rival.9 Now Courtland Smith could move to supplement the Case technology by adding certain necessary amplification equipment. Smith first approached the chairman of the board of General Electric, Owen D. Young. GE had developed its own system of sound-on-film—variable area recording. Fox-Case employed the variable density method.10 Initially Young noted some virtues in an alliance, but ever cautious, he would formalize nothing without the approval of David Sarnoff, then president of GE’s commercial agent for broadcasting, RCA. Seizing the moment, Sarnoff persuaded his superior that General Electric should compete with the smaller Fox-Case and Warner Bros., and extend GE (and RCA’s) commercial arena to include motion pictures with sound.11 Rebuffed, Smith turned to Western Electric. Its legal staff referred him to Warner Bros. Because, at this point in time, that corporation held exclusive rights to all licenses of Western Electric patents. Warner Bros. willingly granted Fox-Case a sublicense on the last day of 1926. In return, Fox-Case agreed to pay Vitaphone, Warner’s subsidiary for sound film production, eight percent of all gross revenues against a minimum that would eventually rise to nearly $100,000 per year. In addition, Fox-Case cross-licensed all its patents with those of Vitaphone and Western Electric.12 At last Fox-Case could commence to assault the marketplace. Although Courtland Smith pushed for immediate experimentation with sound newsreels, William Fox, somewhat conservatively, ordered Fox-Case to imitate the innovation strategy of Warner Bros. —filming popular vaudeville performers. Warner’s had begun in June, 1926; four months later, in October, Fox-Case filmed a sound short starring the noted vaudevillian, Sir Harry Lauder. Production continued on a regular basis during that winter. On February 24, 1927 Fox executives felt confident enough to stage a widely-publicized demonstration for the press of the newly christened Movietone system. At 10:00 A.M. 50 reporters and photographers entered the Fox studio near Times Square, and were filmed using the miracle of Movietone. Four hours later these representatives of the U.S. and foreign press corps saw and heard themselves as part of a special private screening. In addition, Fox-Case presented several vaudeville sound shorts: a banjo

William Fox Innovates Sound • 51

and piano act, a comedy sketch, and three songs by the then popular cabaret performer, Raquel Mueller. The strategy worked. Favorable commentary was unanimous; the future looked bright. Consequently, William Fox ordered sound systems for 26 of Fox’s largest, first-run theaters, including the recently acquired Roxy.13 Yet overnight the fad for talkies seemed to die. Ill-prepared Fox-Case could offer no more demonstrations until August. Warner Bros. programs of synchronized, scored silent feature films, and vaudeville shorts with sound no longer attracted better than average crowds. Smith pressed William Fox to reconsider the original plan: newsreels with sound. Then, Smith argued, Fox Film could provide a unique, economically viable alternative to Warner Bros.’ presentations. In terms of the economic theory, Fox-Case would differentiate its product from that of Vitaphone, and move into an unoccupied portion of the market for motion picture entertainment. Furthermore, sound newsreels would provide a logical method by which Fox-Case could gradually perfect necessary new techniques of camera work and editing, and test the market, at minimal cost. William Fox and his top staff were convinced, and ordered 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 either William Fox, or Courtland Smith imagined at the time.14 Smith moved quickly.15 The premiere came on April 30, 1927, at the Roxy in the form of a sound newsreel of cadets marching at West Point. Lasting only 4 minutes, and despite the lack of any buildup matching the February press demonstration, this first Movietone newsreel drew an enthusiastic response from the trade press and New York based motion picture reviewers. Soon after Smith seized upon one of the most important symbolic news events of the 1920s. On May 20, 1927 Charles Lindbergh departed for Paris at 8:00 A.M. That evening Fox Movietone News presented footage of the takeoff—with sound—to a packed house (6,200 persons) at the Roxy theatre. The throng stood and cheered for nearly 10 minutes. The press saluted this new motion picture marvel and noted how it had brought alive the heroics of the “Lone Eagle.” In June of 1927—4 months before the premiere of The Jazz Singer—Lindbergh returned to a tumultuous welcome in New York City and Washington, D.C. Movietone News cameramen recorded portions of those celebrations on film, and Fox Films distributed a 10 minute Movietone news film to the few theaters equipped for sound.16 Again press response proved overwhelming. Both William and Courtland Smith were now satisfied that the Fox-Case system had been launched onto a propitious path.17 That summer Smith sent cameramen to all parts of the globe. They recorded the further heroics of aviators, harmonica contests, beauty pageants,

52 • The Coming of Sound

and sporting events, as well as the earliest sound film statements by public figures such as Benito Mussolini, Alfred Smith, and 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 constraint now became a paucity of exhibition outlets. During the fall of 1927, Fox Film did make Movietone newsreels the standard in all Fox-owned theaters, but that represented less than three percent of the potential market. To push toward more extensive profits, Fox Film moved to create a larger and larger chain of first-run theaters. In the meantime, Courtland Smith established a regular pattern for release of Movietone newsreels—one 10 minute reel per week. He also increased the permanent staff of cameramen and laboratory employees, and developed a world-wide reticulation of stringers.18 Smith and William Fox also decided to again try to produce vaudeville shorts, and feature films with synchronized musical accompaniment. Before 1928, Fox-Case had only released one scored feature, Sunrise. The two executives moved quickly and by January 1, 1928, Fox had signed up a dozen major vaudeville artists (including Eddie Cantor), filmed 10 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 percent of the upcoming production schedule would be “Movietoned.” By May of 1928, Fox was confident enough to raise that share to 100 percent. Simultaneously, Fox Film continued to wire, as quickly as possible, all the houses in its ever-expanding 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.19 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 to two issues per week. In June it had 27 Movietone units in the field; by October the number reached 40. In January 1928 there were 50, with 35 for U.S. news, and 15 for the rest of the world. During the fall of 1929, Fox reached its apex by releasing four separate newsreel editions each week, produced by 70 crews. The theatre division 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 all theaters sign exclusive agreements for five years of Fox newsreels at rates double those for silent newsreel competitors. The dominant U.S. theatre chains quickly acceded to these stiff terms. Only the giants, Paramount and Loew’s/MGM, possessed

William Fox Innovates Sound • 53

enough economic power to resist and wait until their own newsreel suppliers caught up with Movietone News.20 William Fox wisely pressed its advantage in newsreels, because for the other motion picture forms—narrative, all-talking features, and vaudeville shorts—Fox quickly lost any leverage it possessed. Warner Bros. switched completely to all-sound features by September 1928; Fox did not release its earliest all-talkie feature film until four months later. By then, even Paramount and MGM were producing all-talking features. The rest of the industry trailed Warners, Fox, Paramount, and MGM by six months. For vaudeville shorts, during the early months of the diffusion phase, Fox was the only firm with the facilities and technical staff to effectively compete with Warners. Yet Fox quickly learned that, in fact, this segment of the market for all-sound motion picture entertainment offered little profit potential. Warner Bros. simply had the most popular vaudeville and musical performers under exclusive long-term contracts. Consequently, Fox Film rapidly phased out the production of vaudeville shorts, releasing its last in May 1930. It had produced only seven between September 1929 and May 1930. Only giants, Paramount and Loew’s/MGM, again commanded the economic power necessary to challenge Warner Bros., and these three controlled the market for vaudeville shorts well into the 1930s when that form began to lose its special allure. Building on earlier expansionary investments, the popularity of sound films rapidly thrust Fox Film toward the acme of the U.S. motion picture industry. Aggressively, William Fox reinvested all profits, and borrowed the maximum available during the economic distention of the “Roaring Twenties.” On October 28, 1928, Fox opened Movietone City, an all-sound studio near Beverly Hills, California. This $10 million plant had taken only four months to construct, because 1,500 persons worked three shifts, 24 hours a day, seven days a week to build it. But the largest commitment of resources was allocated toward securing theaters. Fox took over theatre chains in New England, 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 quite closely during 1928 and 1929. At the pinnacle, in 1930, Fox Film enterprises controlled 532 theaters in the United States, and 450 overseas—second in size only to the ParamountPublix chain.21 The independent, egocentric, William Fox now neared the top of an industry he helped found. In fact, events would momentarily push his enterprise past even Paramount to become the world’s largest, and potentially

54 • The Coming of Sound

most profitable film company. In 1927, the founder of Loew’s, Marcus Loew, died. Soon thereafter the Loew family indicated its third interest of Loew’s, Inc., was for sale at the current stock market prices: $28 million. Intoxicated by recent successes, William Fox maneuvered 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, the daring entrepreneur turned to Western Electric and Halsey, Stuart. After weeks of round-the-clock meetings, the initial financing broke down as follows: Western Electric supplied $12 million; Halsey, Stuart added $10 million more; and because William sat on the board of directors of Banker’s Security Company of Philadelphia, he was able to secure a $10 million loan from that concern. The financial package now totaled $32 million dollars—$18 million short of William Fox’s goal. To underwrite the necessary capital, Fox and Harold Stuart transferred stock among Fox’s corporate subsidiaries, and further mortgaged the company’s (and William Fox’s personal) assets. On the verge of the biggest takeover in the history of the U.S. film industry, William Fox secretly cleared the merger with the United States Justice Department. Officials guaranteed that no antitrust action would result if the takeover was consummated. On March 3, 1929, William Fox held a press conference, and announced the Fox-Loew’s amalgamation. Fox Film controlled the largest motion picture production-distribution enterprise in the world, owned more than 1,000 theaters in the best locations, and foresaw nearly unlimited profit potential. In five years Fox had pioneered a sound-on-film process, and parleyed that into the creation of the world’s largest motion picture empire.22 Fox Film rested at the summit of the U.S. film industry for less than six months. Within days, the fragile mesh of Fox Film’s financial support had begun to come apart. Upton Sinclair and Glendon Allvine have vividly recounted the descent of the corporation and the man. He took a big risk— the largest in the history of the coming of sound—and uniquely failed. As did his underwriters. The Fox Film Company would survive, and in May of 1935 would be taken over by Twentieth-Century Pictures, owned by the orchestrator of the original sale from the Loew’s side, Nicholas Schenck. It was all a phantom in that Twentieth-Century Pictures was owned by Joseph Schenck, and the brothers had been always working together to undermine the overtly ambitious Fox. Yet William Fox must be given credit for innovating sound-on-film technology to the Hollywood film industry.23

CHAPTER

5

Warners’ Blockbuster The Singing Fool

If one were to poll film fans, film makers, critics, and other interested parties and ask them what was the most significant American film made before 1940, one would undoubtedly get dozens of answers. Surely some would nominate the brilliant comedies of Charlie Chaplin and Buster Keaton. The stunning mise-en-scéne of F. W. Murnau and Joseph von Sternberg would rank high. Other critics would push film makers who achieved a measure of social impact such as Frank Capra or D. W. Griffith. Simply put, each person would have certain criteria in mind for what makes for an influential film and then would search out and nominate the best within that category. And fans and historians alike would—because it was first—place Warners’ The Jazz Singer among the top films. After all, fans and scholars would say—no Jazz Singer, no talkies. Indeed that is the very premise of the valuable Wisconsin/Warner Bros. Screenplay series. Not The Singing Fool, but obviously, The Jazz Singer. Editor Robert Carringer never even states this assumption. The Jazz Singer was first, therefore it deserves a screenplay publication, while the far more successful sequel, The Singing Fool, has no published screenplay. Donald Crafton echoed Carringer’s thesis as The Jazz Singer stands as the centerpiece of his book. The myth is that The Jazz Singer made so much money, it convinced all that talkies were inevitable. We have a good idea of which films took in the most at the box office. Businesses, movie companies included, want to

55

56 • The Coming of Sound

make as much in the way of profits as they can. Yet, an examination of the Warner Bros. archive at U.S.C. confirms the champion at the box office from 1928 to 1938 was The Singing Fool. It was also the champ, for a decade, at profit-making. Warner Bros.’ The Singing Fool, starring Al Jolson, a musical released in September 1928 during the coming of sound to the movies, cost an estimated $200,000 but drew a fabulous $5 million. The difference set a record surpassed only by Gone With the Wind. The Singing Fool has been lost in the contours of film history. It stands at the core of the coming of sound. This important film should not be lost, but stand at the centerpiece of the coming of sound.1 Moreover, a myth has built up that the first Jolson feature-length talkie, The Jazz Singer, was the box office champion. Industry insiders of the day knew better, and reliable figures ranked The Singing Fool one-third to onehalf higher in box office take throughout the world. If The Singing Fool stood as the most profitable film of the late 1920s and through most of the 1930s, how do we account for its success? Generally, industry pundits look to four variables to explain the box office take of a film: its stars, its story, its director and creative personnel, and its special effects. To gain the highest possible profits Hollywood seeks to combine a unique mixture of top stars, a gripping story, and breathtaking special of effects, all put together by a first-rate production team. The Singing Fool certainly had all that. The Singing Fool featured noted ingenue Betty Bronson and new child discovery Davey Lee, but to moviegoers of the day and historians today the film really had only one draw above the title—Al Jolson. Jolson ranks as one of the great entertainers of the first half of the twentieth century. It is doubtful that any other performer introduced as many songs that have become true standards: “I’m Just Wild About Harry,” “There’s a Rainbow Round My Shoulder,” “When the Red, Red Robin,” and “April Showers.” Al Jolson was more than just a singer or an actor—he was a phenomenon, entertainment king of the Roaring Twenties. Jolson’s success on the Broadway stage began nearly 20 years before the premiere of The Singing Fool. Few fans of the day did not know that Jolson’s life story provided the model for the narratives of both The Jazz Singer and The Singing Fool. After The Singing Fool, Jolson went on to become a major radio star of the 1930s, entertained the troops during World War II, and made a comeback after World War II with Columbia Pictures’ hit film biographies The Jolson Story and its sequel, Jolson Sings Again. Larry Parks played Jolson in both films, but Jolson himself supplied the voice for the songs. The Jolson Story earned third place in 1947’s run for the top grossing movies, while its sequel topped the movie money making list for 1949.

Warners’ Blockbuster • 57

Warner Bros. knew the Jolson persona represented the principal attraction for any film with sound and thus overtly formulated The Singing Fool around the trials and tribulations of the Jolsonesque Al Stone, a singing waiter who becomes a best-selling song-writer. The Singing Fool may have offered a thin story, but it could tender the Jolson voice and mannerisms on film. The narrative provided Jolson endless opportunities to introduce new songs. In both The Jazz Singer and The Singing Fool, the bulk of the story came in the form of a traditional silent film. Consequently, Jolson’s songs (presented through the new Vitaphone recording process) titillated and thrilled the audience even more. But The Singing Fool had much more going for it than the story of the life of one popular star. The production team who put together The Fool was as professional as Hollywood could offer. Cinematographer Byron Haskin would go on to become a director in his own right. Editor Ralph Dawson would cut many a Warners’ classic in the 1930s, winning the Academy Award in 1935 for Anthony Adverse. Director Lloyd Bacon guided the creation of The Singing Fool. To film historians, Bacon is well known for his credits for the Warner musicals 42nd Street (1933) and Footlight Parade (1933). Yet he did much more. From the mid-1920s to the mid-1940s Hollywood insiders counted Bacon as one of the consummate professionals who could handle all genres. One cannot help but stand somewhat in awe of his directorial output during the 1930s when he cranked out a film every two months, year after year after year. Notoriously tight-fisted, Warners rewarded this profit maker by paying him $200,000 per year (equal to more than $1.5 million per annum in 2003-inflation-adjusted dollars). The apex of Lloyd Bacon’s contribution to film history came early in his career during the coming of sound. He directed such significant early talkies as The Lion and the Mouse (1928) and Moby Dick (1930). The Singing Fool vaulted Bacon to the pantheon of Hollywood money making craftsmen. Others may have produced serious films that conveyed the Hollywood studios’ higher status in the minds of critics, but the Lloyd Bacons provided the product that generated the much sought after profits. But in the end, it was the novelty of the then special effect of sound that surely accounted for the special drawing power of The Singing Fool. Silent movies had always had live sound accompaniment with music and sound of effects. Five-hundred-seat neighborhood theaters had to make do with a piano and violin. Four-thousand-seat picture palaces in urban centers such as New York and Chicago maintained resident orchestras of more than 70 members. What the silent cinema lacked was prerecorded synchronized sound. Vaudeville shows and the legitimate theater thrived as long as the movies

58 • The Coming of Sound

were silent. But within the space of five years during the 1920s, the American film industry introduced sound recorded first on synchronized records, and then on the film alongside the images. It became possible to offer the equivalent of legitimate dramas plus the renderings of the most popular musical performers. The coming of sound transformed film making in its day, as would the coming of color, wide-screen images, stereo sound, and other new technologies later in the history of film. To understand the drawing power of The Singing Fool, it is important to understand how the coming of sound transformed the Hollywood studio system. By the 1920s technological change in the motion picture industry functioned as part of a larger industrial process. The new ideas that led to the coming of sound did not emerge from the genius of one lone mind but rather were generated by corporate-sponsored research shops and then adopted by the major corporations of the film industry. When the giant motion picture industrial combines—the predecessors of today’s Paramount, Twentieth-Century Fox, Universal, and Columbia—took up synchronized sound, this brand of special effects became part of standard film industry practice. If these corporations had wavered, the coming of sound would have been delayed until the chieftains of Paramount and its corporate competitors had approved. What motivated these large corporations to take on sound? Money. They sought to use the new technology of sound to create higher profits. Corporate leaders reasoned that if Hollywood produced talkies, profits would rise. Technical change, in short, functioned as part of the matrix of economic decision making. The success of Warner Bros.’ The Singing Fool climaxed the pioneering innovation phase of the coming of sound and thus offers a case study of how to study the economics of technical change. During the fall of 1926 through the spring of 1927, the prime moviegoing season in those days before the air-conditioning of theaters, Warner’s developed several packages of a silent film with recorded orchestral music plus a half dozen shorts of noted musical talent. As this policy evolved, the shorts became more pop and less classical. Jolson, indeed, appeared before the Warner cameras and recorded two of his most famous hits. The trade paper Variety saw a bright future for the new technology, especially outside the larger urban environs in which Jolson regularly appeared on tour. Warner Bros. concentrated on these so-called vaudeville shorts. By April 1927 the company had recorded all the more popular stars of the day (who saw a Vitaphone recording as good publicity). Jolson and tenor Martinelli, the ranking pop and classical attractions of their day, drew the largest crowds and were paid the highest recording fees ($5,000 each or nearly

Warners’ Blockbuster • 59

$50,000 in 2003 inflation-adjusted dollars). Jolson was the star and The Singing Fool had greatest success. The first such Vitaphone feature was The Jazz Singer. It opened the 1927—1928 movie season, premiering early in the fall of 1927. But it was a part-talkie. Jolson had a few lines. Over the summer months Warner’s convinced enough theaters to install the required sound equipment to make the investment in the part-talkie feature film a financial success. During the down time of the summer of 1927, Warner salesmen performed a masterful job of selling skeptical exhibitors, and the Vitaphone projector equipment began to appear in picture palaces throughout the United States. The Jazz Singer did well at the box office but failed to better records set by such silent film blockbusters as Four Horsemen of the Apocalypse (1921), Ben Hur (1926), and The Big Parade (1925). Skeptics questioned the staying power of talkies. If sound were so great, why didn’t The Jazz Singer move to the top of the all-time box office list? The “boffo-socko” blockbuster (to use Variety’s current terminology) that convinced all doubters was The Singing Fool. From opening day (September 20, 1928) on, reviewers from the newspaper of record, The New York Times, to the cynics writing for Variety correctly predicted an all-time hit. The premiere was held in a rented Broadway theater, the Winter Garden, and $11 first-night tickets (the equivalent of more than $70 in 2003 inflation-adjusted dollars) were being sold at double the price by Broadway sharpies even before the doors of the Winter Garden opened. By Thanksgiving Day of 1928, Warners knew The Singing Fool was inexorably climbing toward becoming the new Hollywood box office champion. It had rung up some 70 box office records throughout the United States, and more premieres remained to be launched. In New York City The Singing Fool registered the heaviest business in Broadway history. The advance sales exceeded more than $100,000 (more than $1.5 million in 2003 currency) before the film had played three full weeks. The Singing Fool had reached such proportions that every big ticket agency in Manhattan departed from a strict policy of not handling movie shows to broker blocks of seats. Throughout the United States theaters owned by Warners’ rivals (such as Paramount and Loew’s) scrambled to book the film. They ignored the fact that they were making business for a rival producer. By the dozens theaters ordered sound equipment just to play The Singing Fool. Dozens more aped New York and added a midnight showing to handle interested crowds. From around the United States, records of unprecedented box office takes mounted. The manager of the Great Lakes Theatre in Buffalo, New York, reported nearly 170,000 saw The Singing Fool during the first two weeks it was booked. In Mansfield, Ohio, The Singing Fool played a solid

60 • The Coming of Sound

two weeks when four days had been the town’s previous record for a film. In Menominee, Wisconsin, the equivalent of one-and-one-half times the entire population of the town paid to see the attraction during its week run. In Albany, New York, The Singing Fool exceeded the record box office takes of The Big Parade and Ben Hur. The Singing Fool spilled over into other popular entertainment markets. It created the spin-offs we have come to expect in the contemporary film industry. Warner Bros., of course, created a sequel, Say It with Songs, which was released at the beginning of the 1929—1930 season. Like many a followup, Say It with Songs failed to match the box office take of its predecessor. Grossett and Dunlap issued a “novelized” version of the film complete with “illustrated scenes” (seven publicity production stills) from the “photo-play starring Al Jolson.” Two songs from the film, “Sonny Boy” and “There’s a Rainbow ‘Round My Shoulder,” went on to comprise the first million-selling phonograph record of the talkie era. Both also sold a million copies in sheet music. When “Sonny Boy” was revived for Jolson Sings Again, it sold yet another million phonograph records, bringing the aggregate to more than three million. And this occurred in an era when a “million seller” came along at most once a year. The Singing Fool helped transform the U.S. film industry in a way that can be claimed by few individual feature film titles. As a blockbuster—both as a film and a phonograph record—Jolson’s vehicle assured that silent films would never return. The industrial transformation begun by Warner Bros. only three years before now moved from the innovation stage into the diffusion phase. But the study of the economics of the film business can also tell us much about the textual features of individual films. During the late 1910s, Hollywood film companies innovated a certain style of film making we have come to call the classical Hollywood cinema. Such a style is centered around the use of popular stars in pleasurable stories that are made in the most efficient, cost-effective manner. The Singing Fool certainly illustrates how such a style was adapted to the use of sound. The star of this classic text was drawn from another field—vaudeville— and was the most popular singer of his day, which ensured access to a large audience. The story was indeed drawn from the myth of how Jolson himself had broken into show business and how he overcame all the obstacles to become a star. And Hollywood business and production apparatus had even, this early, begun to integrate the popular songs into the text. Warner’s was able to do this by learning from the experience it had accumulated in producing vaudeville shorts during the prior two years.

Warners’ Blockbuster • 61

Song, the star, a gripping story, and the attraction of sound, all enveloped within a continuous narrative form so familiar to movie fans, made The Singing Fool the biggest box office attraction of its day. We should abandon the myth of The Jazz Singer, and replace it with the economic reality of The Singing Fool. This is what the industry saw from the fall of 1928 through the spring of 1929. The Singing Fool convinced all doubters that talkies were not just a fad. They represented—by the public embracement of this film by paying their dollars—the turning point into a new era.

CHAPTER

6

Paramount and Loew’s Wait, and Then Make Their Deal

The two dominant companies of the presound era were Adolph Zukor’s Paramount Famous Players-Lasky and Nicholas Schenck’s Loew’s/MGM. We read over and over again that Zukor and Schenck were stupid businessmen —not interested in change, only in preserving the status quo. But that is a myth. They wanted to preserve their monopoly status; but they chose to let Warners and Fox experiment, and then decide on an appropriate strategy. Doing nothing is misleading. Zukor and Schenck were watching and learning. In this chapter, I argue that these crafty long-time movie moguls were well prepared—as they studied the reactions to the Vitaphone shorts, Fox Movietone newsreels, and then the blockbuster success of The Singing Fool. Indeed, they had made their move while The Singing Fool was still in production. I argue that given their economic situation, Zukor and Schenck acted wisely and quite rationally by waiting and signing with Western Electric when they did. Although the switch to sound occurred very rapidly, Paramount and Loew’s/MGM encountered no substantial problems or a loss in profitability. Waiting, as others attempt innovation, is often the most rational policy. The advantages lie in the ability to acquire new information and to benefit from further improvements. A more cautious firm can gather valuable data concerning potential revenues by observing the actions of the innovator, and new information concerning costs from the inventory. However, there is risk. The innovator may gain significant advantages over reluctant firms 63

64 • The Coming of Sound

and place them in a less favorable competitive position. In most cases, it is very difficult to make up lost sales and recover one’s share of the market. This risk factor is smaller if the recalcitrant firm possesses a measure of market power. Such firms can (and Paramount and Loew’s/MGM did) use their power to maintain their economic advantage while gathering information. Paramount and Loew’s/MGM possessed a large amount of economic power in 1925, and thus could afford to wait and gather information, knowing there was no real threat to their position atop the film industry. When the dust cleared in 1930—as talkies had swept the nation—MGM/Loew’s led the industry, not Warners or Fox. And Paramount was equal to the profitability of all three.

Initial Probes In 1924 when Western Electric was assembling its systems of sound inventions for commercial exploitation, George Cullinan, Western Electric’s General Sales Manager, and Elbert Hawkins, his chief assistant, were convinced that the biggest firms in the motion picture industry would not be interested. All were too profitable and had added too much other new capital (principally new studios, new offices around the world to deal with distribution, and particularly more theaters) in recent years to attempt such a risky investment. However, Edgar S. Bloom, president of Western Electric, overruled Cullinan and Hawkins. The potential profit for AT&T’s Western Electric was far too great. Thus, in May of 1924, the two Western Electric salesmen approached Sidney Kent, general manager of the film industry’s largest firm, Paramount Famous Players-Lasky. Cullinan first contacted Kent during Paramount Famous Players’ annual sales convention in May of 1924. Kent’s younger brother, employed at Western Electric’s Lamp Division, formally introduced the two. Cullinan told Kent of the wonderful promise of talking pictures; Kent was not impressed. Like other film industry leaders, he knew of the long list of failures of talking picture experiments compiled during the past 20 years. In a second meeting later that same month, at Paramount Famous Players’ New York headquarters, Kent called in Zukor and they both remained opposed. But Cullinan and Hawkins did not give up. One by one they approached and tried to interest the other key leaders of the top companies in the film industry. In each case the reasons for rejection were the same. All reminded Cullinan of past attempts, most recently de Forest and earlier Edison, in particular.1 By the autumn of 1924, Cullinan had convinced his superiors that this direct method was not the most fruitful. He suggested Western Electric

Paramount and Loew’s Wait, and Then Make Their Deal • 65

pursue an alternative strategy by which it would work through an independent promoter from outside the motion picture industry. This type of speculative entrepreneur was common during the boom of the 1920s. The ideal candidate would have a large amount of available private capital and commit himself to the task for at least three years. In January of 1925, Cullinan selected Charles S. Post. During the first few months of 1925, Post produced several recordings of vaudeville musical artists. Next he showed these sound shorts to Zukor and then later to Nicholas Schenck. He too was rejected out of hand. Discouraged after four months of futile effort, and the loss of a large personal investment, Post quit. Cullinan sought a replacement.2 In May of 1925, he reached agreement with Walter J. Rich, then head of a successful corporation producing automobile speedometers. In June of 1925, Rich, using Post’s shorts as sales tools, duplicated Cullinan and Post’s pitches to Zukor and Schenck. He too could not persuade them. Only as a second best alternative, and with much reluctance on his part, did Rich meet and agree, in June, to link up with Warner Bros. to form the Vitaphone Corporation.3 For a year, the important film industry moguls continued to concentrate their efforts on immediate and long-term problems of growth and generally ignored Vitaphone’s efforts. This ambivalence disappeared in August of 1926, with the premiere of the Don Juan program. This package of sound shorts, and a feature film with mechanical musical sound accompaniment greatly impressed the leaders of the film industry—particularly Zukor and Schenck. Both expected Vitaphone to generate large revenues, especially in conjunction with recordings of vaudeville and presentation acts. In September, 1926, Waddill Catchings, Warner Bros.’ chief financial officer and investment counselor, with assistance from Harry Warner, easily opened exploratory negotiations toward merger with Adolph Zukor and Sidney Kent. Catchings saw a potential alliance with Paramount Famous Players as consistent with the best interest of Warner Bros. It would give strength and legitimacy to the Vitaphone experiments.4 At first, Catchings and Warner learned that Zukor and Kent would invest no money in Vitaphone unless Warner Bros. gave up its controlling interest. After long negotiations, Catchings eventually found an opening. He proposed that Vitaphone remain an independent corporation, one-half owned by Warner Bros., the other half by Paramount Famous Players. The new Vitaphone Corporation would then be at the disposal of both film producers. Silent film production would remain unchanged. Zukor and his associates foresaw that silent features would remain Paramount’s primary product, while sound films would provide only vaudeville presentation material. The new corporation’s board would contain three directors from Paramount

66 • The Coming of Sound

Famous Players, three from Warner Bros., and Catchings as the seventh member. Zukor would buy out Rich and invest an additional $2 mullion. After less than one month of negotiations, by the beginning of October (1926), all parties agreed orally and ordered a draft contract printed.5 Only one constraint remained. Warner Bros. had to notify Western Electric, as required by the original contract. In the first week of October, Catchings notified Western Electric’s Sales Manager, John E. Otterson, of the nature and substance of the agreement between Vitaphone and Famous Players. Otterson became outraged. Many times in the past his company had tried to interest Famous Players in the new inventions and failed. Now this small, unimportant company had succeeded. Otterson went directly to Zukor and offered him a lower royalty rate as a direct licensee. On November 24, 1926, Otterson arranged a meeting between Western Electric president Edgar S. Bloom and Zukor at the University Club in New York City. By then, Otterson’s persuasive tactics had succeeded. Zukor told Bloom he would not deal directly with Warner Bros. Furthermore, Paramount Famous Players would now negotiate in tandem with the other major powers in the industry, in particular his powerful rival, Nicholas Schenck’s Loew’s/MGM. Thinking it through, the duo—Zukor and Schenck—decided to play their economic power card, and not ally at this early stage with Warners.6 Instead Zukor and Schenck formed a committee representing Paramount, Loew’s/MGM, and Nicholas Schenck’s brother’s United Artists. Zukor and his distribution ace, Sidney Kent, represented Paramount Famous Players, Nicholas Schenck and company lawyer, David Bernstein, represented Loew’s, Robert Cochrane represented Universal, John J. Murdock represented Producers Distributing Corporation, and Clifford B. Hawley and Robert Lieber represented First National. United Artists’ delegate was Joseph Schenck; however, because he was living in California, he could attend only an occasional meeting. On all matters, Nicholas Schenck looked after his brother’s interests. Otterson and Rich represented AT&T’s Western Electric. Otterson, by this time, had completely convinced Rich to switch his allegiance from Warner Bros. to Western Electric. They ignored Warners—even though they could not effect an agreement without Warner Bros.’ approval. AT&T was so much larger than Warners, Otterson felt he could pressure a deal anytime he could get Zukor and Schenck to sign on the dotted line.7 At John Otterson’s suggestion, the producers committee—dominated by Zukor and Schenck—began to consider the type of proposal that Zukor had almost adopted when he broke off negotiations with Catchings and Harry Warner. All were reluctant to become direct licensees to Warners. Under Otterson’s plan the five largest—Loew’s/MGM, Paramount Famous

Paramount and Loew’s Wait, and Then Make Their Deal • 67

Players, United Artists, Universal, and First National—would dominate ownership of a new Vitaphone, with Warner Bros.’ share falling from 70 percent to 35 percent. The five new parties would collude and out vote Warners. For this, each would deposit $800,000, for total $4 million in new capital stock. The producers balked at this price, so Otterson reduced their subscription to $600,000 per share. Warner Bros. had already contributed over 90 percent of Vitaphone’s $2 million in assets.8 John Otterson advised Waddill Catchings and Harry Warner of the impending agreement. Moreover, he advised them that Warner Bros. must accept the plan, or Western Electric would announce publicly that Vitaphone had not paid its royalties and thus Western Electric must terminate the original license. Catchings knew such an announcement would severely harm Warner Bros.’ credit rating, with the only hope of recovery a prolonged lawsuit against a very influential and wealthy foe. With some reluctance, Catchings and Harry Warner advised Otterson that Warner Bros. would accept the plan, even though both thought their company was being denied a fair share, given the amount of capital it had invested. In other words, the majors and AT&T colluded to screw Warners as 1927 began.9 But Otterson had waited too long to put his new Vitaphone together. Zukor and Schenck in the spring of 1927 perceived a deterioration of interest in sound. Long-run profits would not be large enough to support an investment of even $600,000. They even knew of Warner’s plan for The Jazz Singer, but figured the first star chosen for the role, George Jessel would create not hit. Jolson would make the difference. Moreover, Zukor and Schenck figured Otterson’s proposition seemed too complicated. They did not mind colluding with smaller firms, but preferred direct licenses issued to them by AT&T. Zukor and Schenck insisted on developing their own individual sound recording operations. They did not want Warner Bros. to own even 35 percent of a corporation in which they would control. Zukor and Schenck knew if Harry Warner and Waddill Catchings could persuade one major participant in the offer to side with them, Paramount and Loew’s/MGM might lose the vote. And finally, seven months before The Jazz Singer, all wanted more time and proof to determine the success of Warner Bros.’ assault on the marketplace.10 Only the renegade William Fox—never a party to Adolph Zukor’s and Nicholas Schenck’s producers committee—remained speculative enough. In the process of developing his own sound-on-film system, Fox signed with Western Electric’s newly created subsidiary, ERPI, on December 31, 1926. Like Warner Bros., Fox had the necessary banking support to challenge the largest firms in the industry. Up to this time no manufacturer of sound equipment offered Western Electric any competition in terms of patents owned and controlled,

68 • The Coming of Sound

accumulated technical expertise, or significant financial backing. Numerous owners of small firms approached Zukor and the producers committee in December of 1926. In January of 1927, a major foe entered the arena, RCA’s vice-president, David Sarnoff. He not only represented his firm but also the electrical giant, General Electric. The jointly developed Photophone system was well advanced in a technical sense and included rights to not only its own but all of Western Electric patents, the latter through cross-licensing agreements signed in 1920 and 1926.11 David Sarnoff reminded Zukor and Schenck that whichever system they chose, it would become the standard for the industry. All equipment at the time was very different: RCA had developed only sound-on-film; Western Electric had not yet demonstrated sound-on-film, using instead sound-ondisc. Moreover, RCA’s sound-on-film employed a track significantly wider than Western Electric’s still experimental sound-on-film. RCA’s reproduction system picked up the sound before the film passed before the lens, while Western Electric’s picked it up afterwards. Furthermore, Western Electric’s disc required only 331/3 rpm; all others ran at the standard 78 rpm. With conversion costs estimated at $30 million, Sarnoff easily persuaded the producers committee to postpone a decision.12 On February 17, 1927, Loew’s and Famous Players-Lasky, plus Universal, First National, and United Artists signed an agreement to postpone any decision for one year. This memorandum was no document of war as some have characterized; instead it was a rational statement of the issues and a rational course of action for powerful film corporations. The memorandum opens with a clear statement of the problem. The producers who signed could most profitably present their products in theaters that employed one standardized sound system. They realized it was wasteful for them to let exhibitors install and use more than one system. Simple economies of scale determined it was in the producers’ best interest to collude and pressure exhibitors to adopt one system. The producers knew they could do this because of the immense amount of market power they possessed through their distribution networks and ownership of key first run theaters. After some self-serving arguments outlining how standardization was also in the public’s best interest, the producers agreed to one course of action. First, the signatories would adopt only one system. The producers established a screening committee of five members, one representing each studio. This subcommittee would accumulate the data needed to determine the best system. The cost of gathering such evidence would be split equally among the five parties. The signatories agreed to consider the subcommittee’s recommendation, and given the most reasonable terms, abide by a

Paramount and Loew’s Wait, and Then Make Their Deal • 69

majority vote of the full committee. Sidney Kent of Famous Players-Lasky became chairman of the subcommittee, and David Bernstein, Vice President and Treasurer of Loew’s, became its vice chairman. The agreement expired on February 17,1928, but could be continued, by majority approval, for up to three years.13

The Changing Background for Investment Decision Making The subcommittee then began serious investigations in March of 1927. Complete agreement would not come until May of 1928. During this 15month period, these large motion picture firms grew rapidly and further increased their economic power. Loew’s/MGM and Paramount continued a decade-long period of extreme expansion. During the prior three years, beginning in 1924, Paramount had doubled its asset base. By the spring of 1927, both began to reap the profits from their recent investments. However, that spring the United States’ economy experienced a decrease in national income of two percent, the first reduction since 1921. During the previous two years the national income of the USA had grown at a rate of 6.4 percent. Just as Paramount and Loew’s/MGM leaders began to contemplate the adoption of sound, they had to turn to far more serious economic issues which would delay their consideration.14 This small decline in national spending by consumers had severe repercussions in theatrical box office demand. Motion picture exhibition receipts fell drastically. The worst decline came for the road-show films, the expensive $2 specials like Ben Hur and The Big Parade. Revenue from lower priced fare also plunged for the first time since 1919. In the areas of the recession’s greatest impact, such as New England, receipts fell as much as 45 percent. The leaders of Paramount and Loew’s/MGM—Adolph Zukor and Nicholas Schenck—noticed the change. Despite their recent large investments, profits began to level off.15 Their reaction was predictable. Realizing their immense economic power, Paramount and Loew’s/MGM began to cut expenses wherever possible. The most important component of variable costs, meaning the most easily adjusted in the short run, was the wage bill for production, an area where most employees were not unionized. So Zukor and Schenck instituted wage cuts at the very time they were considering investing in talkies. The climate for new investment could not have been worse.16 Moreover, alternative employment, especially at high wages, existed only in declining industries—vaudeville and the legitimate theatre. Thus, Zukor and Schenck, and their cohorts heading smaller companies, concluded that they could lower wages for these employees and face little effective opposition. Thus, on June 21, 1927, Paramount’s vice president for production,

70 • The Coming of Sound

Jesse L. Lasky, announced a 10 percent across-the-board salary cut for all of Paramount’s production employees earning over $50 a week. The next day every other major producer-distributor, including Fox and Warner Bros., followed Paramount’s lead. Zukor estimated this action would save Paramount $1,040,000 per year, and increase profits by 15 percent.17 The New York based Actors’ Equity union did not remain passive. On June 28, 1927, the executive committee of its Los Angeles branch called the national president, Frank Gilmore, to Hollywood to organize the unhappy film actors. The producers had recently organized a company union, the Academy of Motion Picture Arts and Sciences, which passed a resolution in favor of Zukor’s move. During the first week of July of 1927, Gilmore conducted a series of conferences, climaxed by a mass meeting on July 6, 1927. Actor’s Equity called for a cessation of all pay cuts, and the adoption of a new basic agreement with minimum guarantees. Groups of writers and technicians held similar protest meetings, and demanded similar action. They did not want to negotiate through the Academy, but through established trade unions. The producers feared pressure for a closed shop and reacted quickly. On July 29, 1297, Lasky announced that Paramount would rescind all pay cuts—but only if all further labor negotiations would be held only through the Academy. Actors Equity, speaking for its members, the unorganized writers, and other labor agreed. The other producer-distributors followed; they did not want powerful unions to reduce their monopoly power in crucial labor markets. Expenses would have to be cut in other, less sensitive areas.18 But as this was going on, the economy was changing direction. National income turned up in the fall of 1927 and the “Big Three” experienced a dramatic resurgence in motion picture receipts and profits. Paramount’s third quarter earnings doubled vis-à-vis the same quarter of 1926. By the end of 1927, it had accumulated the greatest profits in its history. Loew’s/MGM, second in the industry, grew less rapidly. It did not acquire a large number of theaters in the mid-1920s. Indeed, even with it investments in talkies, Warner Bros. would secure only a small loss for the year 1927. It was the small independent producers who continued to experience extremely poor returns as the bigger companies began to squeeze them out—united in this effort so as to keep peace on the labor front.19 The Jazz Singer did well in the fall of 1927 and most historians see this as the starting point of change. But in fact, Paramount and Schenck turned to reconsider investing in talkies at that same time because their overall demand for silent films began to increase and they had collectively solved their labor problems. Thus the obvious spark of the talkie revolution—The Jazz Singer—benefitted from the very up tick in the economy that sparked

Paramount and Loew’s Wait, and Then Make Their Deal • 71

Zukor and Schenck into action. We must be careful not make the historian fallacy which David Hackett Fischer calls “the prodigious fallacy” where one mistakes sensation for significance.20

The Actual Negotiations In February of 1927, the producers subcommittee, headed by Sidney Kent (acting on behalf of Adolph Zukor), began to investigate available systems. To assist Kent, the producers hired a staff of engineers, lawyers, and technicians. Roy J. Pomeroy of Paramount’s special effects department and Louis Swarts of Paramount’s legal staff headed up units concerned with technological and legal questions.21 Pomeroy was one of the few industry engineers with experience using sound equipment. In the fall of 1926, he had developed a sound effects system to be used with the film Wings. Pomeroy’s method employed six revolving discs, and an automatic mechanism for raising and lowering the tone arm at the beginning and end of each record. However, this system lacked an adequate loud speaker for amplification. While the subcommittee considered different systems in 1927, Pomeroy continued to work on his device. Using RCA loud speakers, Wings would play during the fall of 1927 with mixed results. Eventually, the subcommittee would drop Pomeroy’s system as far too cumbersome.22 The subcommittee judged all systems by three important standards. First, the equipment had to be technically adequate. It was the Pomeroy unit’s job to determine this. Second, Swarts and his assistants had to judge if the systems’ owners controlled the necessary patents to prevent a surge of legal actions against potential users. Both RCA and Western Electric possessed distinct advantages in these areas, controlling hundreds of patents. Moreover under the cross-licensing agreements of 1920 and 1926, each firm had access to the others’ patents. Furthermore, both had the vast technological know-how to develop more patents and the legal staff to work out any potential, disruptive technological bottlenecks concerning patents. The final criterion was the most important. The chosen system had to have the financial backing of a large, important firm with substantial manufacturing resources, already existing technical personnel and facilities, and adequate strength in the financial markets. The committee knew the switch to sound would require the output of much technical equipment and the necessary personnel to install and service it. This would be a large undertaking; giants like Paramount did not want to risk their good will, capital stock, and strong profit potential by linking to a small, under-financed

72 • The Coming of Sound

firm. Sidney Kent put it succinctly—the producer-distributors wanted to buy financial “reputation.”23 Using these three necessary criteria, the subcommittee easily eliminated all but three firms. It initially considered seriously the Fox-Case system. However, Fox-Case General Manager, Courtland Smith, had to demand 10 percent of the gross receipts as a royalty; the Fox-Case system depended on a license from Western Electric, and for this Fox-Case paid eight percent of its gross revenues to Western Electric. Kent soon learned of this rate restriction and dropped the Fox-Case method from consideration, even though Pomeroy had praised its technical performance. After four months of investigation, the only two systems to meet all three criteria were RCA’s Photophone and Western Electric’s Vitaphone.24 In July of 1927, Pomeroy and his staff journeyed to Schenectady, New York, to make a complete study of the Photophone system. After about a month of study, Pomeroy returned an exceptionally favorable report. General Electric and its commercial agent, RCA, were strong by all criteria: technical, financial, and patent. Thus, Kent sat down with David Sarnoff, Owen D. Young, General Electric’s chairman of the board, Paul Cravath, RCA’s chief counsel, and their assistants to discuss terms. Chief negotiator David Sarnoff proposed an agreement calling for a holding company, one half owned by RCA and one half by the five motion picture producers. This agreement was modeled on the aborted Vitaphone proposal. All of General Electric’s sound film patents would be vested in this one company. Sarnoff and Young sought equality in royalties with Western Electric and demanded eight percent of the gross revenues. When Kent placed this offer before the full committee, the producers countered with demands for individual licenses and a royalty rate of $500 per reel. For an 8-reel film (90 minutes) with gross revenues of $50,000, the $500 per reel charge equaled eight percent. As gross revenues rose above $50,000, there would be significant savings. For example, if a film grossed $500,000, then the 8 percent royalty would be $40,000. The per-reel cost remained $4,000. Sarnoff and Young easily accepted the per reel method of calculation, but not the rate.25 For several months the two parties exchanged offers and counter offers concerning the royalty rate. The producers saw, as the principle advantage of linking with RCA and General Electric, the elimination of legal complications with competitors Warner Bros. and Fox. The six producers would have one system, Fox and Warner Bros. another. As these negotiations wore on, the producers decided not to participate in a joint holding company. They wanted no part of the machinery manufacturing. Each desired only a license to produce and distribute sound films. During September and October of 1927, the two parties stalemated over this issue.26

Paramount and Loew’s Wait, and Then Make Their Deal • 73

In November, Kent and Bernstein contacted John Otterson. While the producers committee was bargaining with RCA, Otterson had worked to strengthen his firm’s position. In June of 1927, he opened negotiations for a license with the president and general manager of the Music Publishers Protective Association (MPPA), Edwin Mills. On September 5, 1927, ERPI signed a five year contract with the MPPA giving any ERPI licensee use of MPPA’s music. The cost was a function of the number of seats in theaters showing the film. Another provision guaranteed MPPA $100,000 the first year, and $125,000 thereafter. Now Otterson could not only offer prospective licensees his system, he could also tender the rights to a necessary factor of production.27 Simultaneously, Otterson began conducting talks with the Victor Talking Machine Company to market a nonsynchronous sound system. Later—in January 1928—the two parties would sign an informal agreement granting Victor a nonexclusive license to produce discs for musical accompaniment to films. In turn, Victor would assign ERPI and any potential licensees the right to negotiate with artists under its exclusive contract. With the stress on recording musical artists at the time, Otterson was on the road to acquiring yet another valuable linkage.28 Upon opening negotiations with Otterson, the producers committee requested that Pomeroy inspect and report on the Western Electric system at its present stage of development. In January of 1928, Pomeroy spent two weeks in Western Electric’s laboratories and rendered a very favorable report regarding both the sound-on-disc and sound-on-film methods. Pomeroy praised the technical and manufacturing operations already present in Western Electric plants. This was necessary since at this point in time, General Electric possessed no manufacturing facilities for making talking picture apparatus.29 Yet the committee desired more data. Thus in February of 1928, Otterson shipped two complete recording systems to Pomeroy, then stationed at Paramount’s Hollywood studio. In the early part of March, just prior to their final decision, the committee members journeyed to Hollywood to see a complete demonstration. These two systems would remain at Paramount as part of the deal completed in May.30 All the relevant technical data for both systems was at hand when the producers’ agreement expired on February 17, 1928. The members of the producers committee anticipated making a favorable decision in some form in the next several months. The situation had changed little during the early part of January when General Electric purchased part interest in Film Booking Office (FBO) to guarantee studio facilities for its system. Late in February the committee began seriously to bargain with Otterson. Early in the negotiation process, Otterson learned the producers committee would only consent to one direct license per company. He quickly acceded

74 • The Coming of Sound

to this major demand. Although the producers’ committee was quite happy with Western Electric’s quality and scope of manufacturing operations, many specific contractual arrangements remained to be ironed out. The committee demanded assurance that an adequate amount of Western Electric’s manufacturing facilities would be devoted to the production of the needed recording and reproduction equipment. The producers knew they would commit large amounts of capital to this new investment; one estimate reached as high as $100 million. Otterson guaranteed Western Electric would make such a commitment.31 The producers were satisfied. They decided in early March of 1928 to prepare the final contracts to sign with Western Electric. The two parties, complete with numerous assistants and advisors, began to draw up contractual drafts. The film industry leaders knew they must make a final decision by May to have any effect on the 1928—1929 season. Thus a large group of lawyers, engineers, and executives began holding planning sessions. For four months they drafted long term schedules, and created numerous contingencies for all anticipated mistakes or problems. If and when the producers did sign, Zukor and Schenck wanted to be assured that their firms would be ready, and the transition would be effected smoothly.32 The major consideration remained price—the royalties the studios would pay. The producers announced they would not enter agreements in which the basis was a fixed percentage of gross receipts. Under no circumstances would they reveal their revenues to Warner Bros. The current Western Electric-Warner Bros. contract required that Vitaphone receive 37.5 percent of the royalties paid to ERPI. Moreover, ERPI’s experience with Vitaphone had proven that a percentage method only produced insoluble disputes. If a film was a part talkie, or only had a synchronized score, what part of the gross receipts would be due to sound? The producers would only accept the reel (of positive film ready for distribution) as the measure. The producers offered $250 per reel; Otterson demanded $1,000. Agreement came at $500.33 There remained one final hurdle. Under the current Western Electric agreements with Warner Bros. and Fox, ERPI agreed to charge no new customer a royalty rate lower than eight percent of gross revenue. The $500 per reel was substantially less. Thus, Western Electric would have to either reimburse its old customers and lower current rates, or break the contract. Otterson approached Catchings to see if Warner Bros. would negotiate. Catchings refused. Moreover, Vitaphone and ERPI were locked in a complicated arbitration dispute.34 William Fox, on the other hand, agreed to a royalty readjustment. By the beginning of April of 1928, Otterson was sure he could secure the

Paramount and Loew’s Wait, and Then Make Their Deal • 75

producers at $500 per reel. This amount would guarantee ERPI millions of dollars in royalties. On April 6, 1928, Western Electric terminated its contract with Vitaphone and served its former licensee with a counterclaim in the pending arbitration suit charging that Vitaphone had broken the current agreement.35 On March 17, 1928, George Pratt, ERPI’s chief counsel, Leopold Friedman, Loew’s chief counsel, and Louis Swarts began to meet daily to negotiate the final contracts necessary for licenses for Paramount, Loew’s/MGM, and United Artists. The other studios simply sat back and watched Zukor and Schenck decide. Then they would sign for identical terms.36 The writing of the contract took six weeks. David Bernstein (Nicholas Schenck’s lawyer) and John Otterson monitored the daily sessions, while other executives from Western Electric, other motion picture moguls, and their lawyers and technical advisors involved frequently attended. On April 19, 1928, word leaked that the parties were near agreement. The web of secrecy was broken and rumors of an impending, total switch to sound spread to all sections of the industry.37 However, the necessary contracts were not ready until April 28, 1928. After two weeks to secure final clearance, the official signings occurred on Friday, May 11, 1928. The public announcement came the following Wednesday morning, May 16, 1928. Paramount, United Artists, and Loew’s/MGM signed. Quickly, all other producers signed with Western Electric: for example, Hal Roach on May 18, 1928; Christie Film on June 20, 1928; Universal on July 18, 1928; Columbia on September 25, 1928; and in early in 1929, several other small independent firms. All waited until they had the cash on hand to actually commit to the transition.38 On May 10, 1928, Western Electric executed an agreement with FoxCase, retroactive to April 2, 1927, settling all pending royalty questions. Immediately thereafter, Otterson opened negotiations with Fox-Case for a license similar granted on May 11, 1928. Fox-Case delayed its decision, but signed on November 14, 1930, effective May 11, 1928. Their decision finally made, all the movies companies joined Warners and began to implement their recently constructed long-range plans.39 As profit-maximizing corporate powers, Paramount and Loew’s/MGM reacted to the innovation of sound wisely and sensibly. There was no chaos, panic, or confusion in the fall of 1927, or the spring and summer of 1928. Instead, after initial albeit quite rational reluctance, Paramount and Loew’s/MGM decided to try the new innovation on a trial basis. With the immense popularity of The Singing Fool, Zukor and Schenck converted their trials and experiments into a full-time commitment. The united

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studios learned from the innovator’s actions, using their 15 months of waiting wisely. They hired technical and legal consultants, bargained for the best terms, and planned for future contingencies. This would serve them well in 1928 and 1929. All could make the switch very rapidly and increase their profits and economic power. Shrewdly, Paramount and Loew’s/MGM’s negotiators played RCA off against Western Electric and secured much more favorable terms than either Fox or Warner Bros. had.

CHAPTER

7

The Rise of RKO The Failure of All Others

The Winner: RKO RCA had millions of dollars of resources to offer Zukor, Schenck, and the other others, but RCA paled in size compared to AT&T. Through the negotiations, RCA’s head, David Sarnoff, tried to convince Adolph Zukor and Nicholas Schenck to take on RCA’s sound-on-film system, and not adopt Western Electric’s disc system. He failed. RCA was simply no match for AT&T, then a telephone national monopoly at its peak. Thus, Sarnoff had no customers for his system. That he had the two dominant radio networks—NBC Red & NBC Blue—and was the leading seller of radio sets, proved no significant advantage in 1927—1928. He, like AT&T, maintained a laboratory for fundamental scientific research. Organized by part owner General Electric, it was not as large as Bell Laboratories. His Photophone system was superior in terms of technology —it was sound-on-film, requiring no adroit cuing as did AT&T’s sound on disc—as is often the case at the beginning the economics of the bargain saw all the advantages on the side of the inferior technology of AT&T.1 The necessary inventions for the RCA Photophone sound system originated from basic research done at General Electric’s laboratory. The work on sound recording began when, during World War, a United States Navy asked GE scientist, Charles A. Hoxie, to create a high-speed recorder of radio signals that also provided a visual document which could be

77

78 • The Coming of Sound

deciphered later. Hoxie perfected such a device in June of 1917. His machine employed a pen recorder tracing dots on a paper tape. After the war, Hoxie extended this work and created a machine to directly record the human voice. By December, 1920, having incorporated photographic film, a photoelectric cell, and a vibrating mirror into his previous system, he could record a variety of complex sounds including the human voice. A complete recorder was ready by March of 1921. He presented the further perfected “Palio-Photophone” to his superiors in December. To sell it they simply cut off the “Palio.”2 To test it, Willis R. Whitney, head of the GE Research Laboratory, had Hoxie record speeches by Vice President Calvin Coolidge and several Harding administration cabinet members, and then broadcast them over General Electric’s radio station WGY-AM in Schenectady, New York. At this point, Hoxie only conceived of his system as an improvement on the phonograph. In 1922 and 1923, he and his assistants continued to perfect the inventions. Hoxie discovered that the recording track need not be 35 mm wide. A track as narrow as 1.5 mm was sufficient, thus allowing the sound to accompany the motion picture image on the same strip of celluloid. Simultaneously, as part of other work, Hoxie’s assistants, Chester W. Rice and Edward W. Kellogg, developed a new type of loud-speaker to improve reception for the radio sets General Electric manufactured for RCA.3 At this point late in 1922, Whitney learned of Lee de Forest’s efforts to record sound on film. Not to have GE outdone, Whitney ordered Hoxie and his assistants to develop a sound reproducer that could be attached to a standard motion picture projector. Hoxie demonstrated such a system for GE’s top executives first in April of 1923 and then in a more perfect state in November. However by November, Whitney and his superiors determined that de Forest’s failure at innovation of sound motion pictures proved there existed no market for Hoxie’s invention at that time. Whitney promptly transferred his staff ’s effort to the development of a marketable invention, an all-electric phonograph. GE placed its new phonograph on the markets in the summer of 1925. This was RCA’s business strategy: pioneer sound recording for the phonograph industry.4 One year later, in 1926, Western Electric had linked to Warner Bros. in an effort to innovate sound motion pictures. Whitney, sensing a change in market conditions, reactivated the sound-on-film experiments. At this point, he shortened the invention’s name to Photophone. Whitney placed Lewis T. Robinson in charge of the engineering team whose chief task was to develop a practical system of motion picture sound. Robinson hired A. C. Hardy of MIT to perfect the final piece of the Photophone system. General Electric’s well-established publicity service, led by Charles E. Bathcholtz, GE’s publicity chief, created the shorts to demonstrate their

The Rise of RKO • 79

new method of creating talkies. By December General Electric had a marketable system, and handed it to RCA to sell to the film companies as the first months of 1927 passed and Zukor and Schenck had created the subcommittee analyzed in the preceding chapter.5 Like AT&T, they had no luck with the two leaders of the movie industry, but Warners was interested. Waddell Catchings approached Sarnoff at the Warners theater in New York City and demonstrated some of Vitaphone’s vaudeville shorts. All parties seemed to believe that this would be a good agreement as Warners was the leader. Catchings particularly embraced this deal as it would give Vitaphone an exclusive license with both AT&T and RCA—thus cornering the market. However, when AT&T’s leaders discovered what was happening, they nixed the deal because they wanted the opportunity to break Warners’ exclusivity, not see it monopolize the market.6 During September of 1926, William Fox approached Sarnoff so FoxCase could use General Electric’s amplification patents. Fox figured not on a monopoly, but an advantage to sell RCA’s superior loudspeaker system to theaters. Again a license was arranged, the papers prepared, and announcements readied. But David Sarnoff nixed it and, that fall, developed a strategy to go head to head with AT&T and sign Zukor and Schenck. He terminated the negotiations with Fox, and set off to try to convince the two leaders. As noted in the preceding chapter, he started his push in the beginning of 1927 and led Zukor and Schenck to form their collusive subcommittee to play RCA off against AT&T. Well before the premiere of The Jazz Singer, all parties involved—the leading film companies, RCA and AT&T, all saw that movies with sound had a profitable future. But they first had to make a deal—consummated May 11, 1928, with AT&T—before Paramount and Loew’s/MGM would start.7 Sarnoff convinced Zukor and Schenck to seriously consider RCA’s new system even though RCA had not even demonstrated Photophone publicly. That proved no sizable disadvantage. But Zukor and Schenck knew they were in the driver’s seat. They wisely stalled and drove down the demands of RCA and AT&T as analyzed in the preceding chapter.8 Sarnoff knew that whichever system Zukor and Schenck chose, it would become the standard for the industry. This was an important consideration because at the time all systems were different. RCA put forth sound on film. Western Electric relied exclusively on the more proven sound-on-disc. Leading minor company, Vocafilm, used a disc, but it ran at 78 rpm, while Western Electric had perfected a 331/3 rpm system so that the elapsed time of a sound record could equal one movie reel’s running time. If there was confusion, it was technological. Zukor and Schenck did not care; they simply wanted the best deal with a company—probably RCA or AT&T—bigger than the whole film industry at the time.9

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Yet Sarnoff did not ever concede to far bigger AT&T. On February 2, 1927, he demonstrated the Photophone system for the press and invited guests at the State Theatre in Schenectady, New York. Shorts featuring a 100-piece orchestra impressed a New York Times reporter, although a constant background noise proved irritating.10 Nine days later Sarnoff presented Photophone to a second group of reporters at the Rivoli Theatre in New York City. This demonstration opened with two reels of MGM’s The Flesh and the Devil—accompanied by a Photophone recording of the Capital Theater Orchestra. Then three shorts featuring the Van Curler Hotel Orchestra of Schenectady, an unnamed baritone, and a quartet of singers followed. A New York Times reporter judged the synchronization, volume, and tone excellent. Sarnoff praised Photophone’s ease of installation and simplicity of operation. He simply followed the strategic model Harry Warner and Waddill Catchings already had in place.11 In the summer of 1927, Sarnoff invited the subcommittee’s engineer advisor and Paramount employee, Roy Pomeroy, to come to Schenectady to make a complete study of Photophone. After about a month of study, Pomeroy returned an exceptionally favorable report. Swarts could discover no legal problems. RCA met all the technical, financial, and patent criteria necessary. Thus Kent sat down with David Sarnoff, Owen D. Young, Paul Cravath, RCA’s chief counsel, and their assistants to discuss terms. Sarnoff and Young proposed an agreement that called for a holding company, onehalf owned by RCA and one-half by the five motion picture producers. Most significantly Sarnoff simply asked for the exact same royalties deal as AT&T already had in place with Warners and Fox. In October of 1927 Kent took the offer to his boss. Zukor, with counsel from Nicholas Schenck (their offices were across Times Square from each other), countered with demands for individual licenses and royalties set at $500 per reel. For a typical eight-reel film (90 minutes) with gross revenues of $500,000, the eight percent royalty would be $40,000; at the new rate, the amount came to $4,000, a difference of $36,000.12 Sarnoff reluctantly acceded to the per-reel method of royalty calculation, but not $500 as the rate. And he would not agree to provide an individual license for each producer. At this point Zukor saw RCA’s biggest advantage as it was not AT&T. He and his fellow subcommittee members could link with RCA, and then isolate Warner Bros. and Fox with an incompatible system. Zukor and Schenck figured then Warners and Fox would have to come to them. But with Sarnoff unwilling to provide direct licenses to each studio, the two parties stalemated. Thus, late in November, Zukor sent Kent to find John Otterson of AT&T and see if he would meet what Zukor wanted.13

The Rise of RKO • 81

Otterson asked if Pomeroy could inspect and report on the advance of the improved AT&T system. In January of 1928, Pomeroy spent two weeks in Western Electric laboratories and rendered a very favorable report regarding both sound-on-disc and the experiments AT&T was making to perfect a sound-on-film method. Western Electric’s engineers had made great progress with the sound-on-film system, especially with information acquired from Fox. Pomeroy also praised the technical and manufacturing operations already present in Western Electric plants. At this time neither GE nor RCA possessed any manufacturing facilities for the necessary equipment.14 With all the relevant data at its disposal, the producers subcommittee met in January of 1928 to deal. He was willing. By March, Otterson had eliminated all of Zukor’s problems, and producer’s subcommittee legal experts sat down with AT&T and the deal was done on Zukor’s terms. Sarnoff simply would not match his wealthy rival’s terms. He gambled and lost.15 With no signee, RCA purchased 14,000 shares of stock of FBO from a syndicate headed by FBO president, Joseph P. Kennedy (better known to the public as the father of an assassinated president) for nearly $500,000. It was a good deal for Kennedy, as now he and Sarnoff could instantly create a major studio with RCA’s money and technology, and FBO’s production and distribution corporate apparatus. All they needed were theaters to wire.16 The next step would come from FBO’s Joseph Kennedy. In February of 1928—anticipating AT&T had already convinced Zukor and company—he struck a deal with John J. Murdock, head of the declining Keith-Albee vaudeville empire, who owned theaters across the USA, one in every major city. Murdock hoped Kennedy would not only develop ways to use movies to revive interest in vaudeville, but also to prevent the new talkies from hurting vaudeville business even more. Kennedy and Murdock moved quickly. That same month they took over the Orpheum vaudeville circuit and thus merged all the major American vaudeville interests under the Keith-Albee umbrella. The new Keith-Albee-Orpheum Corporation had a nation-wide chain of over 200 large, downtown theaters. By May Radio [from RCA] Keith Orpheum or RKO was in place when Zukor and Schenck were signing with AT&T.17 Still, what the new RKO lacked was any experience in the field. Warner Bros., Fox, and Western Electric had taken almost two years to eliminate all the problems of presenting clear sounds of sufficient volume in large movie palaces. As of this point, Photophone had yet to be tested in long-term commercial situations, and Sarnoff and his staff had precious little time to iron out all the numerous acoustical problems. Promised in April, then July, the equipment was not ready until October of 1928—when the first RCA

82 • The Coming of Sound

installations began. In the meantime, Sarnoff used a low installation price and grand prognostications of future greatness to persuade the shrinking number of independent theater owners to wait for Photophone equipment.18 Kennedy exited gracefully, a rich man. The new merger linked vaudeville (Keith-Albee-Orpheum), radio (NBC), personal appearances (National Broadcasting Concert Bureau), and motion pictures (FBO, subsequently renamed Radio Pictures in May, 1929). The possibilities for interchange of talent were now unlimited. RCA had now gained a secure place in the motion picture industry. RKO would release its first talkies in the spring of 1929. Photophone could now battle Western Electric and the numerous other small sound manufacturers for contracts with the remaining unwired theaters. Slowly, in the 1930s, Photophone would become as widely accepted as Western Electric’s system.19

The Losers The history of the American film industry belongs to the victors. This is surely the case for the industry’s switch to sound—as the powerful took their places after much negotiation. Yet the small rivals who tried to enter and offer cheaper alternative sound systems—with exotic titles such as Han-a-phone, Cortellaphone, and Bristolphone—all failed. The 1929 Film Daily Yearbook provides a list of 75 more: Bel-O-Tone, Biophone, Cinephone, Dramaphone, Filmtone, Melotone, Movie-Phone, Sonograph and Telefilm. At least half were simply devices that offered a set of phonograph players to offer nonsynchronous sound, or music, with silent films for small rural theaters. It should be recognized that while there seemed chaos and a battle among Paramount and AT&T and RCA, they did have a common interest—keep out new competitors.20 If there was a leader among those who challenged the mighty it was Vocafilm, with over a half million dollars in backing, a large manufacturing facility, and much publicity with a New York premiere. Its leaders followed the same strategies as Warners, Fox, AT&T, and RCA, but all simply went out of business. A close examination of Vocafilm’s innovative attempt will explain and suggest why other even smaller manufacturers had ever had a chance, and how the maintaining the status quo was far more important to industry leaders than having any sort of new competition, let alone chaos, confusion, or disarray. The fact that these small companies even existed has long been made invisible by previous historians. Vocafilm became a viable corporation in December of 1926. ExVitagraph salesman, David R. Hochreich, and Pittsburgh financier, W. Harry Williams, provided $600,000 in capital, Allen Stowers and Leo DeHymel provided the inventions. Modeled on Thomas Edison’s 1913

The Rise of RKO • 83

method of linking a phonograph to a motion picture projector, Vocafilm employed a standard 78 rpm system of newly perfected electric sound recording and reproduction. In this way, Vocafilm almost matched the early Western Electric sound-on-disc system. However, Vocafilm lacked Western Electric’s sophisticated loudspeakers. In January of 1927, Vocafilm opened its own studio at 122 Fifth Avenue, New York. It manufactured recording and reproduction equipment in Long Island City, New York. At first, Hochreich, like Western Electric’s managers, tried to interest the major studios in Vocafilm’s method to create sound films. In February he conducted Adolph Zukor and Sidney Kent of Paramount on a tour of Vocafilm’s studio and then ran several shorts he had produced. Zukor and Kent did not find the system a significant improvement over Edison’s method and ignored Hochreich’s offer of merger. Other motion picture executives reached the same conclusion after similar demonstrations that spring.21 Vocafilm was typical of its rival independents in its failure to interest the large motion picture producers. Because all lacked the sophisticated electrical apparatus for clear recording, especially new microphones, and the necessary amplifiers for reproduction, these small sound manufacturers could only appeal to small independent theaters already being squeezed by the major producers’ chains. Moreover, all these small sound manufacturers lacked the necessary financing to open a laboratory to develop a better apparatus. These small firms emphasized their system’s advantages: speed of installation and low cost. Concentrating typically on regional markets, by January of 1927 an average of one system per month surfaced in exhibitor trade papers. The rate of announcements followed a set pattern. The more successful Vitaphone and Movietone appeared to be, the greater the number of new firms. Thus by May 1928, when the majors signed with Western Electric, a new system came forth each week.22 To try to match the sales efforts of Warner Bros. and Fox, and to best his smaller rivals, in the spring of 1927 Hochreich planned an elaborate New York premiere. He wanted to sell Vocafilm on a national, not regional, level and knew the publicity of a successful New York premiere was a crucial input. In May he secured a summer lease on the vacant Longacre Theater in New York. The Longacre was not one of New York’s best theaters, but all the others were firmly controlled by the major motion picture firms or Broadway theatrical producers. The slow summer season was the only time he could obtain even an acceptable theater near Broadway. Next Hochreich tried to sign up famous vaudeville acts to record for Vocafilm’s shorts. Unfortunately, the richer Warner Bros. and Fox organizations had already signed up the most popular talent to exclusive long-term contracts. Again Hochreich had to settle for second, even third-rate alternatives.23

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On Monday, July 25, 1927, Vocafilm presented its first show at the Longacre Theater. It closed after one showing. Like Warner Bros.’ Don Juan premiere almost a year earlier, a bill of recorded vaudeville acts opened the program. The first, the “1812 Overture,” went fine. The others did not. The Moss and Frey comedy act could not be heard; the crowd began to whistle and shout. Val and Ernie Stanton’s singing also was inaudible. At this point the crowd began to walk out. Sime Silverman of Variety likened the rest of the program to a “very poor, small-time vaudeville bill.” After the intermission, few of the crowd remained, even though most had come for free. The feature, First National’s When Babe Comes Home, starring professional baseball slugger Babe Ruth, provided little attraction because it was in its second run in New York. The Vocafilm score did not seem to help. Even Babe Ruth’s personal appearance could not keep the crowd. Moreover, throughout the whole program, the sound system emitted a scraping and screeching sound. Vocafilm’s management quickly regrouped. It hired new technical staff and reopened the same show 20 days later on August 14th. There was no significant improvement. Vocafilm closed the day before Labor Day with heavy losses.24 Hochreich realized his attempted premiere had failed. He then returned to his earlier strategy and tried to interest established producers in Vocafilm. Twice he almost succeeded. In January of 1928, he negotiated an exclusive contract with Educational Pictures, a Hollywood based producer of short subjects. However, a month after he had signed, Earle Hammons, Education’s president, learned Paramount, First National, United Artists, Loew’s, and Universal soon planned to sign with Western Electric. Hammons quickly broke his contract with Vocafilm and also signed with Western Electric. Hammons did not wish to be stuck with a different system when everyone else used Western Electric equipment. In June, after the majors had signed with Western Electric, Hochreich worked out a deal with legitimate stage producers, A. H. Woods, J. J. and Lee Schubert, and William A. Brady. This group would put up $500,000 for the Vocafilm equipment, produce Scandals as its first feature, and thus prevent the major film producers from raiding stage talent. The four signed an agreement with Vocafilm on July 26, 1928. However, as soon as they began production, Western Electric moved to prevent the reproduction of films recorded on other systems on its equipment. Because all the key first-run theaters in the United States had installed Western Electric apparatus, this greatly restricted the stage producer’s potential market. In September, Woods and his associates backed out of their deal with Vocafilm.25 The situation had become hopeless. With all the unsuccessful deals and the earlier unfavorable publicity, Hochreich could find no new financing.

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Moreover, Vocafilm sold too little equipment to theaters to meet accumulating debts. In April of 1929, Vocafilm went out of business. Hochreich, Williams, and their backers had lost close to a million dollars. Technological inferiority had only played a small part in Vocafilm’s demise. Even with sizable backing, it could not secure the necessary talent and theater for a successful premiere. After abandoning that strategy, which had worked for Warner Bros., Vocafilm could never link to another firm that could provide the needed resources for motion picture production, distribution, and exhibition. The coming of sound was one where only Warners and Fox vaulted into new positions of power. No small producer of technology—and there were dozens just like Vocafilm—had a chance against the largest company in the United States, AT&T; or the fast-growing, wellbacked companies such as General Electric and RCA.26

CHAPTER

8

The Diffusion of Sound in the United States

The joint signing of identical contracts by Paramount, Loew’s/MGM, and UA (that is by Zukor and the Schenck brothers, Nicholas head of Loew’s and Joseph head of UA) on May 11, 1928, signaled the beginning of the spread of talkies across the United States. The record popularity of Warner’s The Singing Fool accelerated the process. There was no chaos or confusion, but a speed of transformation which set a record within the mass media of the day. Beginning in September of 1930 talkies had taken over the movie industry, with the silent film rendered instantly obsolete. In other words, once Adolph Zukor and Nicholas Schenck decided to follow Warner Bros. and Fox, the stage of wide spread use of the new sound technology began. This is called by economic historians, the diffusion phase. The switch over occurred quickly and systematically—yet still there were necessary adjustments in production, distribution, and exhibition. With the concentration of power in the industry, Paramount and Loew’s/MGM solved all such problems in less than two years. AT&T’s subsidiary ERPI, and RCA fully cooperated, save for minor disagreements. The most difficult problems concerned interchangeability of equipment and union demands. That is, within 24 months, the industry had to standardize its product, and beat back the demands of unions. The standardization they chose is still with us; the unionization of the industry would have to wait until the 1930s when the National Recovery Act of 1933, passed by President Franklin Roosevelt’s “New Deal,” required the Hollywood companies to accept unions. 87

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Talkies Take the United States by Storm The diffusion of sound began with feature films since they comprised the largest money making source for any one corporation. Newsreels and talking shorts usually followed. The only exceptions were the easy to produce vaudeville shorts. The rate of progression of the switch over was a direct function of the profitability of each of these different products. For all film types, the change was rapid and systematic. David Bordwell, Janet Staiger, and Kristin Thompson describe how the narrative form was adapted and there is no reason to repeat their argument—other than to say that as with the economic changes, the switch to narrative talkies was fast and really effortless despite the popular image to the contrary.1 The new talkies were immensely popular. This can be seen as the total released output of feature films declined from 1928 to 1930. Each new talkie was so popular its run was extended and the industry colluded to five big firms—the old time leaders Paramount and Loew’s/MGM, the new comers, Warners, Fox, and RKO—milked their increasing market power. As an oligarch increases its power, it should restrict its output to maximize profits. This is a basic tenet of economics of industries. The decreased share of product of the independent firms resulted from producers leaving the market. Overall the majors declined 11 percent, while the independents declined 50 percent—as calculated using the American Film Institute catalog for 1920s features.2 Warner Bros. was far ahead of its competitors in the beginning of 1928. It released its last silent feature in April of 1928, with only one exception late in 1930. In July of 1928 came the first complete “talker,” The Lights of New York. The Singing Fool in the fall proved a bonanza. Yet Warner Bros. was surprisingly cautious. It continued to release part-talkies until April of 1929. Moreover, Warner Bros. released a silent version of each of its sound films throughout the 1929—1930 season. Its conversion to all talkie production began in September of 1930. By April, 1929, Warners’ main competitor, Paramount, had caught up and maintained the same pace of change. Paramount released its first feature with a musical score in August of 1928, its first with talking sequences in September, and its first complete talker in January of 1929. The year 1929 signified the transformation to all-talkies. Thus, by September of 1930 (the beginning of the 1930—1931 movie season) Paramount too had dropped all silent versions. Fox, despite its long lead in sound newsreels, trailed in features. It did not release its first all-talking features until January, 1929, the same month as Paramount. By September of 1929, Fox released only all-talking films. The only exceptions were rereleased silent films. By the beginning of the

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1930—1931 season, Fox had completed its conversion exactly as Warners and Paramount had. The other major power before the diffusion of sound was Loew’s/MGM. And it, like Paramount, switched over quickly. During the 1929—1930 season, it released some part-talkies, but was all sound by September, 1930. Loew’s/MGM followed Paramount’s path of diffusion by precisely one month. The smaller companies followed Paramount, Loew’s/MGM, Warners, and Fox by three months at each stage of change: some talkies, mostly talkies with some scored silents, all talkies. Universal and UA led the pace of change; Columbia lagged by another three months. RKO lagged behind. RCA and FBO did not set up the talkie production unit, Radio Pictures, until the spring of 1929. Meanwhile, RKO added spoken and musical prologues and epilogues to its films, and advertised them as talkies. RKO’s conversion was then instantaneous, not gradual. During the summer of 1929, it released only one film, its second full talkie. Meanwhile it retooled. By the beginning of the 1929—1930 season, it caught up to Paramount and the others. It released two versions of all features that season, and only a sound version in the following season. The switch over for Paramount was fast and deliberate, but for RKO it was a quantum jump. RKO sacrificed their summer of 1929 revenues to catch up. In sum, by October of 1928, Warner Bros. was the first to drop silent film production. The other major firms waited. The evidence was not yet conclusive. Moreover, Warner Bros.’ competitors were still trying to catch up. By the end of the year, the evidence had become sufficiently one sided. The grosses of The Singing Fool and other talkies convinced all skeptics. On March 25, 1929, Fox announced it would produce only sound films. The new Fox Movietone studio was ready and the next season’s productions planned. The other majors were not as bold in their public announcements, but by June of 1929, Fox too had dropped all silent film production, except special versions of sound features. By the summer of 1929, the silent film accompanied by live music—either an orchestra, an organist, or simply a piano player—was part of the past. Speculation for the 1930—1931 season turned to newer innovations using the wide screen and color. The Great Depression then hit, and brought to a halt all technological change—but the timing with the innovation and diffusion of sound had been that all resources had been transformed and committed. The coming of films in wide screen would wait almost 25 years. The coming of color would be much more gradual—as Technicolor held its monopoly and restricted out until a federal government antitrust suit broke its exclusivity, and the burst of films in color came in the 1950s.3

90 • The Coming of Sound

Short Subjects and Newsreels As argued in Chapters 3 and 4, Warners and Fox led the way in innovation through their pioneering use of vaudeville shorts (sound recordings of acts), and newsreels with sound. This spilled over into the diffusion phase as well. For example, at first and throughout the period of diffusion, Warner Bros. dominated the vaudeville sound short portion of the market. Warners released the most shorts for every month, except two, from January 1928 to December 1930. Warner Bros. had pioneered talkies with vaudeville shorts and, the first feature length, all talkie, The Lights of New York, was a product of Bryan Foy’s vaudeville shorts production unit. He simply extended a scheduled short to five reels. Fox, during the summer of 1928, copied Warners’ vaudeville shorts production techniques. Indeed, unlike Paramount and Loew’s/MGM, Fox was the only other major company to produce a significant number of vaudeville shorts. But William Fox soon found that vaudeville shorts were not as lucrative as its extremely profitable newsreel operation. Thus, in May, 1929, Fox ceased production of vaudeville short subjects, and concentrated on its Fox Movietone newsreels.4 Loew’s/MGM was Warner Bros.’ first rival to release vaudeville shorts in any sizable amount. If Loew’s/MGM lagged behind Paramount in conversion to sound for feature films, it led Paramount in the switch over to vaudeville shorts. By October of 1928, MGM began regularly releasing these shorts, produced under Gus Edwards and Major Edward Bowes. This was an outgrowth of Nicholas Schenck’s origins working with Marcus Loew in small time vaudeville during the 1905—1920 period. Loew’s origins in vaudeville helped switch to production of vaudeville shorts with sound almost instantaneously after Schenck signed on May 11, 1928.5 In January of 1929, Zukor followed. He had connections through Sam Katz and the vast Public theater chain subsidiary that was creating dozens of live stage shows each week for Paramount’s more than 1,000 theaters. Zukor then contracted with the Christie and Sennett companies to produce talkie shorts to be released through Paramount. (Schenck matched Zukor by signing Hal Roach in the fall of 1929 to make vaudeville shorts to be released through Loew’s/MGM.) In the fall of 1929, RKO, Columbia, and Universal also placed talking shorts on the market. The product was equally balanced between vaudeville, novelty films, and comedy shorts. In a special case, an exception to all other changes, the Disney studio signed with Columbia to became the most important independent producer of sound cartoons.6 For a short time in 1930, Warner Bros. and Paramount even produced and released advertising shorts. Each would contain a tag to identify the

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sponsor. However, this experiment proved unpopular with exhibitors and was quickly dropped.7 If Warner Bros. had a large head start in vaudeville shorts, Fox possessed such a lead for newsreels with sound. As its competitors braved the switch over through the summer of 1928, in August William Fox increased his corporation’s weekly issues from one to two per week. As the 1928—1929 season started in September, Fox had 27 Movietone units covering the world. He was such a leader that he could request a five-year contract if an exhibitor desired Movietone News during this crucial time. Many chains signed up, but the theater units of Paramount and Loew’s resisted.8 By the end of 1928, William Fox nearly doubled his Movietone units to 50—with 35 in the United States and 15 covering the rest of the world. As the 1929—1930 movie season began, William Fox had again doubled releases per week to four and hired 20 more crews bringing the new level to 70 in number. Fox even opened the first all newsreel theater, the Embassy, in New York’s Times Square. Still, Fox continued to produce a separate silent edition until the end of the 1929—1930 season to supply theater clients who had not been wired yet.9 Zukor knew his advantage lay in producing feature length talkie narratives. So it was not until December of 1929 when Paramount’s newsreel even issued two talkie editions per week. What were small profits for a lagging Paramount, proved large enough for Universal. Carl Laemmle’s company was tiny compared with Paramount, and owned no theaters to Paramount’s more than 1,000. But Laemmle bet on newsreels and by the end of 1929, matched Paramount, issuing two editions per week. Warner Bros. considered creating a Vitaphone newsreel to its operations, but Harry Warner and Waddill Catchings figured there was more profit in vaudeville shorts and Warner would not issue a newsreel until the late 1940s.10

Wiring Theaters Across the United States During the diffusion process, AT&T’s ERPI rushed to fill orders for reproducing and recording equipment and expanded its manufacturing facilities and services in the most rational manner, all while keeping the competition at bay. ERPI’s rate of installations increased steadily from May of 1928 through January of 1930. In the latter half of 1929, ERPI averaged almost nine installations per day. It completed most installations from midnight until the next afternoon. In 1930, installations slowed considerably. Through the complete diffusion stage, ERPI’s competitors usually possessed more total installations. ERPI held a temporary lead in the early part of 1928, but lost it quickly.

92 • The Coming of Sound

Starting in August of 1929, when the first data were collected, ERPI held about a 40 percent share of the market. It would continue to hold this share of the market into the mid-1930s. ERPI’s advantage lay in its contractual agreements with the large vertically integrated companies. All the recording license agreements committed the major firms to install ERPI equipment in their theaters. Thus, the key first-run houses were the first wired. Of the 67 most important theaters annually surveyed by Variety, only two were not owned by the majors. Over 76 percent of these important theaters had been wired by the end of 1928, compared to only 5 percent of all theaters in the United States. ERPI’s dominance continued throughout the diffusion period. In July of 1930, the Motion Picture Almanac listed the 2,000 first-run theaters in America. Of this total, 1782 or 89 percent had been wired by ERPI. RCA trailed poorly with 7 percent, and the more than 70 smaller companies, like Vocaphone analyzed in the previous chapter, only 4 percent of theaters— principally those in small towns and rural United States and not owned by the major studios.11 Most of the money that came into the movie industry came through first-run theaters in larger cities. Their average share constituted about 75 percent of all revenues collected at the box offices, even though there were only about 3,000 (of 20,000) theaters that could be labeled first run. This is the market that AT&T went after. Early on, its ERPI unit had 89 percent of all installations in the first-run theaters, but only 30 percent in all other theaters. Clearly, AT&T’s ERPI had secured the best theaters, while rivals— even RCA—settled for smaller houses. Only the existence of RKO’s chain of former vaudeville theaters kept the company afloat. Yet all this renovation of theaters took time. Even as late as 1930, almost one-fourth of all theaters in the United States still could present only silent films. Since the studios were only producing talkies, this meant that these small houses could only show silent films. This constraint—as much as the onslaught of the Great Depression—drove most out of business. In tiny crossroads across the Midwest, Southwest, or Mountain states, small town theaters shuttered. Some hung on, helped by wealthy owners or community contributions. Still, as late as January 1933, some 2.6 percent of the open theaters continued to present only silent films. One year later, the total was only one-half of one percent. It took until 1935 to eliminate silent film theaters as they simply closed.12 At this point AT&T’s ERPI problems became purely economic. How could it produce and install equipment fast enough to keep up with the growing demand? From 1928—1930, ERPI was always behind the demand. By the end of 1928, it had 1832 orders, but had filled only 700 of them. The necessary expansion of Western Electric’s Hawthorne, Illinois, plant had

The Diffusion of Sound in the United States • 93

been completed and ERPI was ready to reduce this delay. By the end of 1929, a five-month lag had declined to two months and ERPI possessed only 400 unfilled orders. Moreover, the installation of recording equipment had been completed in all the major Hollywood and New York studios. AT&T’s ERPI set up schools to train projectionists in 17 cities. The sixweek courses trained 100 men per session. Finally, ERPI established 50 district offices to handle service and repair operations. Over 450 engineers traveled regional circuits inspecting, testing, and repairing theater equipment. An engineer visited each installation approximately three times per month. By 1930, ERPI’s major problem became decreasing demand. As more theaters were wired, only the smaller marginal theaters remained. The profits were smaller and risks were much greater for these exhibitors. ERPI tried to prompt switches to its system and as early as April 1929—anticipating the problem—launched a nation-wide advertising campaign to institutionally promote sound films, especially as shown on ERPI equipment. The $250,000 campaign employed only national magazines; newspaper advertising was left to the individual motion picture firms.13 Such advertising proved vital because ERPI’s strongest competitors, especially RCA, began to announce lower prices. After the majors signed their recording license agreements, ERPI first had fixed a price range of $9,000 to $24,000, depending upon the size of the theater. Immediately, RCA countered with a range of $4,000 to $15,000. ERPI lowered its prices to $5,000 to $15,000 one week later. During this price war, ERPI always possessed one key advantage. RCA would confidently announce its prices, but all knew it could not deliver any equipment for at least one year. In fact, Photophone installations did not begin until October of 1928. In January of 1929, ERPI announced another price cut. RCA promptly matched it and followed with a further 15 percent reduction. ERPI’s price for equipment for a small, a theater with 500 seats or less cost $7,000, while RCA charged only $5,950. For a large theater of 2,000 seats, ERPI came down to $12,500, while RCA averaged $10,750. It was only at the beginning of the 1929—1930 movie season that RCA became a serious competitor to ERPI. In September of 1929, Sarnoff placed Charles Ross, RCA’s comptroller, in complete charge of Photophone’s sales and manufacturing. Ross added new management, streamlined manufacturing and sales operations, and produced Phonophone’s first profitable month in December of 1929. Ross introduced five new price classifications for equipment, added a liberal three-year payment plan, and aggressively advertised. By the summer of 1930, RCA had caught up and virtually evened competition for smaller theaters with AT&T’s ERPI. Sarnoff announced a

94 • The Coming of Sound

further price reduction—to $2,995. He even willingly embraced the installment plan: $82 down and $80 per week for three years. ERPI cut its price by 57 percent to $3,000 in order to compete. RCA also sent salesmen (and they were all men) to colleges, hotels, clubs, and other institutions to pick up accounts to wire both 35 mm and 16 mm theaters. No account was too small by this point.14 RCA’s bold maneuvers hit ERPI hard. Without the power of the contractual links to the majors, ERPI had to compete in the market place on price. ERPI’s long-time chief John Otterson had been successful in signing Zukor and Schenck, but proved less skilled at selling when there was real competition in the market place for installations. In 1928 and 1929, he led ERPI to earn substantial profits on its regular operations, of which the motion picture sound equipment accounted for over 90 percent. In 1928, ERPI earned a profit rate over 119 percent, in 1929 over 50 percent, and in 1930 over 39 percent. However, in 1931, with no special profits from nonmotion picture activities to boost its income, ERPI lost money. This loss continued for the next year under the impact of the Great Depression, and operations’ readjustment. For the next three years, 1933 to 1935, ERPI leased little new equipment, and its service operations generated little revenue. ERPI’s profit rate fell to even less than a normal return. ERPI had lost its monopoly power, and now had to compete in the marketplace with aggressive competitors. In the end, when resigning became an issue, most theaters went to a sound-on-film method, and RCA became an equally profitable foe.15 The diffusion of sound accentuated the decline of the small independent theater, and the rise of chains as dominating forces. In 1929 as the majors consolidated their holdings of theaters and added standard presentations, the smaller unaffiliated theaters were even less able to effectively compete. The additional cost of wiring, the prospect of a long wait for the equipment, and the inability to secure the newest sound features posed major problems for the small, unaffiliated theaters. Thus in the fall of 1929, as the major theaters systematically abandoned stage shows in all except their largest houses, the smaller theaters began to add more vaudeville acts as a counter-programming strategy. This helped for a short time. However, the automobile caused the greatest difficulty for the small town theaters. Roads had improved greatly in the 1920s and people began to drive to the larger cities in preference to their own local theater. The Paris, Texas, Chamber of Commerce took one type of action. It lent money to the local theater, the Dent, to install a Movietone system because the decline of movie attendance hurt this small town’s economy.16 Even the Hay’s Office realized that a large part of the potential subsequent run market might disappear unless the majors granted some relief.

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Sidney Kent headed a Hay’s Office committee to arbitrate disputes and grant relief. In actuality, Kent’s committee served as a strong public relations unit so small exhibitors’ complaints would not adversely affect public and governmental opinion.17 The final adjustment for most theaters was the elimination of the disc system. By February of 1929, only Warner Bros. recorded its films on disc; all others recorded on film, and then rerecorded on disc for those disc-only theaters. The distribution and exhibition problems with discs caused most theaters to convert totally to sound-on-film by 1931. Discs were too easily lost, mixed up and much too expensive to ship, especially to cost-conscious small exhibitors. Furthermore, exhibitors were never able to eliminate serious synchronization problems due to projectionists’ errors or film breakage. Warner Bros. gave up discs in 1930, and by January 31, there existed only about 1,500 disc-only theaters in the United States. By 1933, the figure was less than 400. The disc era that began in 1925 was over in less than six years.18 Standardization became the final problem to be resolved. As soon as Paramount and Loew’s/MGM signed with AT&T’s ERPI on May 11, 1928, numerous other sound recording and reproducing devices appeared. The number of companies selling recording equipment remained small since the major producers were committed to ERPI or RCA. But the market for reproducing equipment was not nearly as limited. Thousands of independent exhibitors were not linked to the large vertically integrated companies. The problem was that an ERPI or RCA recorded film could not play on a sound system from another company. Most were only sold in regional markets: Qualitone in Southern California, Filmfone in Utah, Han-OPhone in upper state New York, Paratone in southern Illinois, Syncrotone in Louisiana, and Talkaphone in Iowa. Few could claim over 25 installations. This made distribution a confused mess.19 From the beginning of the diffusion period, Otterson sought to protect ERPI’ s monopoly position in the market for theater equipment. Otterson insisted that all agreements should prevent producers from renting any films recorded on ERPI equipment to an exhibitor using a non-EPRI reproduction system. This “interchangeability clause” permitted the distribution of sound only to exhibitors using systems which operated “properly, reliably, and efficiently” to produce sound with “adequate volume and of quality equal” to that obtained by use of ERPI’ s equipment. The ostensible reason given by Otterson in public statements was that his clause protected ERPI’ s prestige and business reputation. In addition, compliance would limit threats of patent infringement suits by third parties. All ERPI exhibitor contracts implemented after January of 1928 contained a clause whereby the exhibitor agreed to the “interchangeability clause.”20

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However, Otterson’s real reason for this restriction was to limit the efforts of competitors. Otterson had always demonstrated an interest in total control of the sound equipment industry. He recognized the advantages of monopoly power when he wrote to his superior at AT&T, Edgar S. Bloom, in 1927: “Competition between [ERPI and RCA] will doubtless ultimately result in a situation highly favorable to the motion picture interests and opposed to our own. This is an expensive and highly profitable field and it is quite worth our while to go a long way toward making it practically our exclusive field.”21 Soon after the execution of the producers’ recording license agreements in May of 1928, ERPI’ s licensees added riders to their exhibition contracts. In these riders exhibitors pledged to show the talkies only on equipment which “operated properly, reliably, and efficiently to reproduce with adequate volume and quality equal to that obtained by ERPI equipment.” This applied to all exhibitors renting films from ERPI’ s licensees. This restriction only caused problems in June and July of 1928 for RCA. Goldsmith’s technical staff had altered the Photophone system to make it totally compatible with the ERPI system. David Sarnoff pressed Otterson for a practical decision regarding the interchangeability clause; Otterson remained vague.22 John Otterson wished to lease the most equipment possible before committing himself. But exhibitors wanted to present films from any producer, not just those licensed by ERPI. All sound equipment firms were concerned, but RCA had the greatest power to press for a change. As early as May 24, 1928, General James F. Harbord, president of RCA, wrote to Edgar S. Bloom, President of ERPI, requesting details regarding enforcement of the clause. Bloom, like his general manager, Otterson, was noncommittal. He simply paraphrased the interchangeability clause and noted how this was in the best interest of all parties in the industry. The impression to all segments in the motion picture industry was clear: employ non-ERPI equipment only at the risk of a long legal battle.23 The first break in the stalemate came early in July of 1928. RCA had recorded a synchronized score for King of Kings, Cecil B. DeMille’s popular silent film first presented one year earlier. After significant adjustment of the Movietone equipment in New York’s Rivoli Theater, Sarnoff induced Bloom and Otterson to permit an RCA recorded film to be shown on this ERPI reproducing equipment. The showing was successful. The two systems were compatible in actual use. During these negotiations, Otterson proposed that RCA and ERPI combine forces, eliminate this problem, and gain more profit for both firms. However, Sarnoff and Otterson could not agree on how to split up the manufacturing responsibilities, or the profits. Sarnoff continued his pressure. He did persuade Otterson to allow

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RCA-produced sound films to run on ERPI equipment. This was a small concession for there were almost no RCA recorded films then in release. Nothing was decided as regards the more difficult issue of showing ERPI recorded films on RCA equipment. Otterson then left the United States for a European selling trip.24 In August of 1928, Sarnoff pressed Whitford Drake, Otterson’s chief assistant, to set up a public test to try ERPI recorded films on an RCA reproducing system. The test, at the Astor Theater in New York City on August 6, 1928, was a success. Drake wired Otterson for instructions and received the following reply: I am sorry that the matter progressed so rapidly and hope that “the effect of [RCA’ s] announcement can in some manner be discounted without statement on our part . . . Be sure that [ERPI] does not issue any statement confirming [RCA’s] announcement. Defer this by all means until my return.” On August 7, Sarnoff announced that the interchangeability issue was settled. In fact the real struggle had only begun.25 In September of 1928, Otterson returned from Europe and again took the offensive. On October 6, Harrison’s Reports published Otterson’s reply to a series of questions. When asked directly regarding the interchangeability issue, he denied a categorical answer was possible. He announced it was still too early to make any statement. However, the diffusion process was creating pressures that Otterson’s stalling tactics could not handle. On October 15, 1928, the Academy Theater in Hagerstown, Maryland presented the ERPI recorded, Lilac Time, on Bristolphone equipment. A. Julian Brylawski, the owner of the Academy, secretly secured the discs and ran them to stimulate business. Brylawski’s experiment was not a success. The synchronization was poor, and the volume uneven. After four days, he ceased the trial run. But news traveled quickly and other exhibitors with independent equipment followed Brylawski’s example. By the end of October, at least one exhibitor, James N. Robertson of Detroit, had sued Paramount to force it to fulfill its contract and not withdraw a film from exhibition because of the interchangeability clause.26 As the interchangability battle raged, so did pressure from music publics for a cut of the increasing revenues. As part of the September 5, 1927, MPPA-ERPI agreement, Edwin Mills of the music publishers only allowed the musical copyrights extended for films recorded on ERPI equipment and then shown on ERPI reproduction equipment. A similar clause was contained in RCA’s agreement with the Music Publishers Protective Association (MPPA). During October 1928, RCA’s lawyers pressed Mills to waive this clause. They told Mills the copyright music restrictions were being used as a weapon by ERPI to restrict competition, and hence reduce MPPA’s royalties.

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Mills notified ERPI and RCA that he would never invoke the restrictive clauses for the life of their respective agreements. Sarnoff was pleased. Otterson was not, and advised Mills on October 25 that any change in the agreement had to be legally amended and approved by both parties. Mills replied that new negotiations were not necessary. The matter remained unresolved, as Otterson battled on the “interchangeability” front.27 Late in October, ERPI’s producer-licensees, led again by Paramount, United Artists, and Loew’s/MGM, entered the picture. All were faced with irate exhibitors who had sales contracts terminated because of the interchangeability and music copy issues restrictions. For example, an exhibitor in Salt Lake City complained. He had scheduled The Battle of the Sexes, but United Artists’ sales staff at the last minute had withdrawn the film because he employed a RCA Photophone system. In his defense, the exhibitor, Fred Gage, cited the two most flagrant violations of the interchangeability clause he knew. Both concerned United Artists. In the first case, The Perfect Crime, recorded on Photophone equipment, had played at the United Artists’ theater in Los Angeles. Moreover, a United Artists’ film, The Tempest, had run at the Castle Theater in Chicago on Dramaphone equipment. Gage opened the floodgates for hundreds of complaints. As the number of complaints increased, the sales distribution staffs of Paramount and Loew’s/MGM demanded help. Elik Ludwigh, general counsel of Paramount, formed a lawyers committee to negotiate a solution with Otterson of ERPI and Bloom of AT&T. Ludwigh’s committee first met with George Pratt, ERPI’s general counsel, on October 26, 1928, in the director’s room at the Paramount Building on Times Square. It would continue to meet there, for all the counsels had offices within a 20-block radius of this location. The lawyers committee met at least once a week with Pratt into December. Early in the negotiations, Pratt, upon advice from Otterson and Bloom, realized he could not continue to press for a strict interpretation of the interchangeability and music copy clauses in existing contracts. Ludwigh—reflecting Zukor’s wishes—did not wish to alienate theater owners; ERPI did not want to drive them to break the contracts and sign with RCA.28 Ludwigh simply issued an ultimatum and by the beginning of November 1928, with the negotiations of their lawyers continuing, the salespeople of Paramount and Loew’s/MGM began to furnish films to exhibitors with non-ERPI reproducing equipment—if the salesmen were satisfied that the independent equipment would perform in a reasonable manner. In most cases, a member of one of the producer’s salespeople

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would inspect a newly installed system, approve it, and then the producerdistributor would treat the theater as if it had installed ERPI equipment. At the same time, the lawyers committee pressed for complete elimination of the clause. The negotiators reached agreement and on December 14, 1928, Otterson sent a letter to all of ERPI’s licensees officially dropping the interchangeability clause. Executives of the producer-licensees would make all decisions; they proceeded to authorize distribution to all theaters with systems good enough not to embarrass their corporate image. ERPI could still disagree and request formal arbitration. It never did. A February 1929 Department of Justice investigation looked into the issue for three months and found the clauses inoperative. The matter was disruptive, but hardly chaotic. It was simply a battle for who controlled the system. As the world became installed, AT&T’s EPRI lost power, and the studio which would make up the studio system of the 1930s and 1940s, operating in the collusive manner they had throughout all the negotiations, prevailed.29

Unions: Winners (Sound Technicians); Losers (Theater Musicians) The diffusion of sound significantly altered the employment situation in the motion picture industry. Since strong unions existed only for projectionists, the International Alliance of Theatrical and Stage Employes (IATSE) and musicians, the American Federation of Musicians (AFM), they were the ones that presented a united front. Yet many unorganized workers benefited directly through increased demand for labor. The Academy kept things as calm and orderly as possible in Hollywood. Some new technicians unions such as the International Photographers of Motion Pictures Industry Local 644 of IATSE, representing Hollywood’s cameramen, quietly prospered. Unemployment for this group disappeared in 1929. On January 30, 1929, IATSE, which through the 1920s operated a blanket basic agreement for many behind the camera laborers—as well as representing the projectionists—negotiated a new contract with a minimum scale and standard eight-hour work day. Yet IATSE’s main link to the motion picture industry was through its division for projectionists. This group also experienced increased prosperity with talking pictures. In 1927, the majority of theaters operated under an agreement by which an adult operator had one boy assistant. As early as May 1928, certain locals demanded and received an amendment by which two full-time adult males were in the booth at all times. By the end of the 1929—1930 season, this two-man operation was a permanent feature of all IATSE agreements. Thus, the required number of employed projectionists doubled in two years. In 1929 the largest local, No. 306 of New York,

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possessed no unemployed members, and saw average earnings increase by 15 percent in one year.30 These were the winners—more projectionists and added sound technicians. The musicians—all members of the AFM—who accompanied silent films, were not so fortunate. One of the advantages of installing a sound system for most exhibitors was the reduction of costs for musicians while the music provided increased in quality. Even before the major producers signed their contracts in May of 1928, isolated disputes appeared concerning theaters installing a Vitaphone or Movietone system. For example, in St. Louis the local of the AFM demanded the new Skouras theater, the Grand Central, employ an orchestra of 15 even though it would only present Vitaphone features and shorts. The union accepted a minimum of five.31 In late June 1928, the AFM held its annual convention in Louisville, Kentucky. The main item on the agenda was the threat of sound films. The 158,000-member union organized a “defense fund” of $1,500,000 and began an educational campaign. Joseph N. Weber, union president, issued a position paper: The union was not opposed to talking movies, it only feared the mechanization of what should be a “live” art. It would be a backward step for America’s musical culture if orchestras in movie theaters disappeared. However, Weber’s union was not strong. Variety estimated that in less than 25 percent of the key cities and towns in the United States did the union have power to command a threat to the local exhibitors’ trade organizations. During the summer of 1928, few union contracts expired, but in all cases, the union saw jobs eliminated. In St. Louis, Worchester, Massachusetts, and Milwaukee, the union experienced a decrease in salaries, minimum number of employed, and length of employment.32 The start of the 1928—1929 season brought increased union activity. The most important action took place in Chicago, the location o£ the union’s second largest membership. Conflict began in July when Balaban and Katz removed an orchestra of 12 from the McVicker’s theater for the run of Street Angel. James C. Petrillo, president of the Chicago local and Sam Katz, head of theaters for Paramount, conferred with no results. Katz refused to reinstate the musicians. By July 22, Petrillo had given up negotiations and journeyed to New York for a strategy session with Joseph Weber. Musicians’ contracts for 50 important Chicago neighborhood theaters expired on Labor Day, September 3, 1928. The exhibitors prepared for an anticipated strike by securing nonsynchronous sound equipment from Electraphone and Orchestraphone. “Cue boys” at $5 per week would replace five to twenty piece orchestras. The sound systems would cost only from $500 to $2,000 to install and 100 records came with the system.33 On August 28, 1928, Petrillo announced that there would be a strike unless all of the new contracts provided for at least six musicians for 44 weeks.

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The expiring contracts called for only four musicians. Jack S. Miller of the Motion Picture Exhibitors Association of Chicago, representing the 50 theaters, said that requirements would mean bankruptcy for most of the theaters. The six musicians would cost as much as rental for a Movietone system and not provide for the showing of the new popular talkies. In addition, the union demanded guaranteed employment for one organist per house. The contracts expired with no signed agreement. On September 1, 1928, Miller went to U.S. District Court and secured four temporary injunctions restraining the union leaders from calling a strike. Petrillo immediately engaged Clarence Darrow, Donald Richberg, and David Lilienthal as counsel. Petrillo sought further help from William Green, president of the American Federation of Labor. Joseph Weber immediately left New York for Chicago. On September 4, Petrillo defied the injunction and called a strike. By the next day, 85 percent of Chicago’s theaters had no music; 700 musicians had walked off their jobs.34 With this action, Petrillo and Miller began serious negotiations. Petrillo had rallied his forces and threatened total shutdown of all Chicago’s theaters. All stage hands and projectionists were prepared to honor the picket lines. Still, Petrillo wanted jobs for his people, not a prolonged strike. He dropped his demand from six musicians to four. Miller conferred with Barney Balaban and Sam Katz and after an all-night conference, the exhibitors agreed to a new contract on September 8, 1928. Although both sides claimed victory, the union’s power had decreased significantly. Four musicians would be used, but the new contract would run for only one year, not the usual three years. The required number of weeks per year fell from 44 to 36, and wage rates fell slightly. This strike signaled the beginning of the end for the musicians. Only the power of a sympathy strike by stage hands and projectionists kept the exhibitors from releasing almost all the musicians.35 As the 1928—1929 season progressed, the least powerful locals began to suffer major setbacks. In November, Loew’s in New York City and Brooklyn eliminated all orchestras and organists from 20 of its theaters. At least 10 men lost their jobs in each theater. By the end of the 1928—1929 season, only one film house in Minneapolis-St. Paul had an orchestra. Average savings were $3,000 per week. Nationally, an estimated 2,600 musicians lost their jobs. However, the union members did not suffer as much as one would suspect. Alternative employment was available in two new areas. Radio stations began to expand their orchestras. In Chicago in May of 1929, 600 musicians gained employment in radio work. Unemployment remained low in most radio centers. The other new center for employment was Hollywood. The Los Angeles local grew to be the third largest in the country, closely following New York and Chicago.36

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By the end of the 1930—1931 season, the musician’s situation had reached an equilibrium. Using Washington, D.C., as a case study, it can be seen that musicians had been eliminated at a staggering rate in three years. Only the large deluxe theaters in Washington, D.C., retained employment of a substantial number of musicians. For the local union, even with the new alternatives in radio, it meant a 50 percent unemployment rate. On a national level, the rate was the same. In New York City, it was 53 percent, even with vast opportunities in radio. The Great Depression would increase this figure dramatically, and almost totally eliminate the use of orchestras in movie houses.37

The Talkies Transform the Production and Distribution Practices With such a rapid switch over to sound, there were bound to be difficult adjustments in film production. However, the problems were not as severe as one might have expected because the Academy coordinated and pooled information. On May 2, 1928, when it became known that the majors would sign the recording license agreements, the Academy held its first educational seminar. Roy Pomeroy of Paramount spoke to a group of writers. On May 15, four days after the contracts were signed, Pomeroy spoke to the Academy’s technician’s branch, and William DeMille addressed the directors. The Academy held a general meeting on June 5, 1928, to set up formal mechanisms to handle the adjustment problems. After this, the Academy’s 20 committees began to pool information, and distribute it to member studios. It even hired physicist Vern O. Knudsen of UCLA, and speech expert, Ray K. Immel of USC, to study the situation, conduct tests, and hold seminars.38 In 1929, the Academy initiated its two important projects. In September it opened a school to train studio personnel on the fundamentals and latest advances in sound motion picture production. One thousand employees requested places. Only 565 could be enrolled. Supervised by Irving Thalberg, the school pooled the knowledge from experts from all the major studios.39 The Academy’s second major project concerned finding the most efficient solution to the five most difficult purely technical problems the majors faced: (1) silencing arc lights, (2) silencing cameras, (3) finding the best material for sets and props, (4) improving release print quality, and (5) improving release print standardization. In June of 1929, Thalberg initiated a survey and determined that these were problems no individual studio could solve. Over the next 12 months, the Academy’s technical bureau gathered information and expert advice concerning these problems. It published the most significant findings and best solutions in the Academy

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Technical Digest. In 1930 all the reports were collected and released as a book, Recording Sound for Motion Pictures. With this kind of cooperation, the majors kept the problems of transition in the production sector to a minimum.40 The Academy also handled minor labor problems. It warned against phony voice schools, and pressed member producers to do their own vocal training. It assisted Central Casting in handling the overflow of extras. (The major studios used fewer extras during the transition so as not to generate unneeded noise. Crowd scenes remained difficult until microphone systems improved.) Finally, the Academy assisted in the unionization of the new soundmen. The IATSE and the International Brotherhood of Electric Workers both claimed the new employees. The Academy arbitrated the dispute and prevented any labor unrest over this issue.41 The actual building of the new studios commenced as soon as the majors signed their recording license agreements. Building plans had been formulated during the negotiations so MGM, Paramount, and Fox led the building race, but soon RKO, Columbia, Christie, United Artists, and Universal caught up. Even Warner Bros. added a fourth and fifth sound stage to its lot.42 On October 28, 1928, Fox opened its Movietone City, the first all new sound studio complex to follow Warner Bros. The new $10 million operation had taken four months to build, using 1,500 workmen, 24 hours per day, seven days per week. Movietone City contained an all-new ventilation and temperature system, a large administration building, separate dressing rooms, and its own electrical plant, carpenter shop, and film storage area. The new plant did not begin full operation until the first of the year.43 The other majors opened their new facilities during the winter of 1928— 1929. The only setback occurred on January 16, 1929. Just as Paramount’ s new stages reached completion, one burned to the ground. It took 19 engine companies to prevent the destruction of all the new buildings. However, Paramount did not delay rebuilding operations. The next day at noon crews began to clean up and with three shifts working 24 hours per day, seven days per week, a replacement was ready by March. One benefit accrued because of the fire. Much of Paramount’s sound film production was switched to the evening to avoid competition from construction noise. Soon, night shooting became the standard practice while any construction proceeded.44 By March of 1929, all the major studios had completed their new buildings. At the end of 1928, there had been only 16 recording facilities in Hollywood. By the end of April of 1929, there existed over 50, and by the end of 1929, the lumber had reached 116. Giant stages arose, typically built in groups of four surrounding a recording building that contained the

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necessary equipment. Piles extending 23 feet into the earth prevented any excess vibration. Double walls, two feet apart, held out all other extraneous noises. The cost of the construction was enormous. Conservative estimates placed the year-long investment at $23 million; others saw the total running closer to $50 million. All this came when the original studios, built over a 15-year period, were valued at only $65 million. Studio plant and equipment had almost doubled in one short year.45 The Hollywood studios were not the only centers of activity for talkie production. To cut expenses in using Broadway, radio, and vaudeville talent, Paramount reopened its Long Island studio in July of 1928. During the summer of 1928, MGM, First National, Warner Bros., Universal, RKO, and Pathe all activated studios in the New York City area. In May of 1929, Fox followed the others to the East Coast. New York City production continued throughout 1929 into 1930. In a typical week, at least 10 features, and as many shorts would be in production in Eastern studios. Paramount always led in activity. In 1929 it produced over 30 percent of its output in the East. The industry as a whole produced about 10 to 15 percent of its product in the New York City area. Gradually as the majors gained complete control of the necessary talent, Eastern production declined. The Great Depression caused all Eastern activity to cease by 1933.46 The distribution branch of the motion picture industry was the least affected by the coming of sound. The majors continued their dominance over national and international distribution. States-rights distributors decreased in number as their operations became less profitable. The exchanges themselves became more careful in handling prints as any dirt, oil, or grease could severely distort the sound.47 Two changes did come in selling practices and censorship. Prior to sound, most films rented for a flat fee. However, the new sound product was difficult to price since past performances did not serve as an accurate guide. Thus, more and more distributors began to employ a percentage system. With a percentage of receipts supported by a minimum guarantee, the producer-distributor could share in the profits if the film did well, but be protected if it did poorly. Exhibitor organizations vigorously protested against percentage sales. Exhibitors did not wish to expose their accounts to the producer-distributors, but the exhibitors did not want to lose the highly profitable sound films. Producer-distributors then hired checkers to monitor screenings. State and local censorship did not change. The new talkies were subject to the same state and local regulation as were their silent predecessors. On February 5, 1929, in a test case, the Pennsylvania Supreme Court ruled the new sound films should not be treated differently and distributors had to submit both the film and the discs for inspection.48

CHAPTER

9

Diffusion of Sound Throughout the World

The coming of sound to world cinema has precipitated many important studies of its aesthetic, social, and cultural effects. Surprisingly, there exists very little systematic analysis of the consequences of this technological change for the international trade of motion pictures. In short, the studios which survived to become producers and distributors of talkies, despite the opening which seemed to come because of language barriers, grew even more powerful as distributors around the world. They did this because they colluded in the manner learned as Zukor and Schenck worked together to obtain the best possible deal from AT&T’s ERPI. The United States had been, since the end of the First World War, the global movie power. The coming of sound solidified a hegemony that lasts to this day. Film distribution presents few problems within a single nation; international commerce is not nearly so simple. Examining prior work for trade among the United States, United Kingdom, France, and Germany, one finds three types of analysis. First, textbooks tell of obvious creation of world domination (and exploitation) by Hollywood, the success of film production in Britain in 1933, the disastrous effect of the world depression in France, and the rise of Hitler (and Goebbels) in Germany. No connections are made; the coming of sound simply happens. But without the coming of sound, the domination would have never been possible. This chapter concentrates on Europe, as these were the largest markets for the new Hollywood talkies. Consequently, this chapter illustrates the situation for the major economic national powers in the world as of 1930. Yet, 105

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in smaller countries—in terms of economic power—the same sort of transformation occurred. I do not pretend to have surveyed all the literature in all the nations of the world. But for an idea of what I have in mind for smaller economic nation-states (in terms of national income) see Brian M. Yecies, “Wiring Up the ‘Talkie War:’ The Coming of Sound to the Australian Cinema, 1924—1932,” a Ph.D. dissertation for Latrobe University, February, 2001. His conclusions echo mine. In 1930 Australia was under the economic thumb of the geographically smaller, but economically larger, head of the United Kingdom Commonwealth—England. London—not Sydney—was the center for foreign film trade. A second example for a tiny country—the Netherlands—comes with Karel Dibbets’s Spreckende films: De komst van de geluidsfilm in Nederland, 1928—1933 (Amsterdam: Otto Cramwinckel Uitgever, 1993), a 338 page study of the coming of sound to the tiny nation. I know from speaking to Karl many times of the quality of this study, but sadly, I do not read Dutch, and so up front I confess I have not read his work—save an English language summary. Indeed, to properly survey the studies of the coming of sound to the world, one must be able to read dozens of languages, so this chapter is limited by scope—but not by market size. I consider the following nations the largest economic powers of their day. For the coming of sound to Europe, analysis focuses on the question of the nature of economic relations among advanced capitalist countries. One concept emerges as central: cartelization. During this period, a small group of large powerful corporations in the United States, United Kingdom, France, and Germany sought dominance and consequently formed alliances to control competition on an international scale. Numerous pools, cartels, and trusts were formed. Such relationships were rarely static; each corporate giant sought to gain power from its rivals. Agreements would only last until one signatory felt strong enough to extract more surplus value. Cycles of truce . . . battle . . . truce . . . battle were common. Frequently the nation-state would assist resident corporations, using tariffs or quotas to gain temporary advantage. Pivotal in this new imperialism was the multinational corporation. After World War I, a monopolist corporation rarely operated in a single nationstate. During the 1920s, for example, United States corporations began large-scale expansion into European markets, especially into those countries most damaged by war. The so-called “new technology” industries— usually associated with mass consumable products like automobiles or motion pictures—grew most rapidly. European corporations, the former imperialist powers, had to retreat and develop methods by which to respond to aggressive U.S. competitors.1

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Hollywood’s multinational corporations (Warners, RKO, Fox, Paramount, Loew’s/MGM, Columbia, United Artists, and Universal) began to export sound movies late in 1928. At that time, there were few theaters outside the United States wired for sound; conversion of cinemas in Europe lagged far behind the U.S. By the end of 1929, only 18 percent of European theaters could present talkies, while nearly half the cinemas in the United States could. But the succession of wiring followed the U.S. model. In all cases the most deluxe picture palaces (super-cinemas) in the biggest cities were wired first. Then cinemas with less revenue-generating potential converted. Very small houses (100 to 200 seats) came last, some as late as 1935. United Kingdom exhibitors wired most quickly (22 percent in 1929; 63 percent by the close of 1930). German theater owners moved more slowly; the penetration rate did not top 60 percent until 1932. French exhibitors proved even more recalcitrant. Consequently, the United Kingdom became Hollywood’s first important foreign market. Later, Hollywood utilized experience gained in Great Britain to establish precedents that it would try to follow on the continent. First, in conjunction with Western Electric and RCA, the dominant U.S. suppliers of sound apparatus, the Hollywood monopolists—working tightly together through their trade association with the Motion Picture Producers and Distributors Association, more noted as the Hays Office—gave preferential treatment to the owners of the deluxe cinemas. Western Electric and RCA wired these theaters first; Hollywood provided the most popular talkies for exclusive first-runs. All technical problems of compatibility were easily eliminated. Native producers, importers, and owners of smaller cinemas simply had no choice but to acquiesce or lose the chance to capture a share of the surplus profits.2 However, RCA and Western Electric could not utilize similar marketing strategies for the continent because of language conversion difficulties. Initially, dubbing, subtitles, and native language narrators were tried—with little success. The most promising, dubbing, was fraught with technological limitations, and caused adverse audience reaction. Consequently, the Hollywood monopolists began to produce foreign language versions of feature films and short subjects. In November 1929, Loew’s/MGM took the lead by embarking on a $2 million program to replicate, in at least three versions, nearly all of its feature films. With fully amortized sets, costumes and scripts, additional versions rarely cost more than 30 percent of the original. MGM also filmed a few original foreign language films, usually based on previously successful silents. Early in 1930 Paramount established a huge studio at Joinville, six miles from Paris, to create foreign versions in five languages. By March of 1930, this studio was in full operation, the equivalent of any lot in California. The

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other Hollywood monopolists joined Paramount and, by the summer of 1930, Joinville functioned on a 24-hour-a-day schedule, creating films in 12 languages. The Hollywood studios also continued to make foreign versions in California. On a much smaller scale, the British, French, and German film industries also produced their own foreign versions for export. But their markets tended to be the countries of their present and former colonies— where their language was the same as the dominant nation.3 Yet within one year, Hollywood would realize it had grossly miscalculated. Foreign versions could not generate a profit. Even sharing expenses at Joinville did not keep costs below the break-even point. Dubbing had greatly improved and become far less expensive. Late in 1931, the Hollywood monopolists, in order to minimize losses, turned completely to that alternative. The large revenues for MGM’s dubbed versions of Min and Bill (in Italian) and Trader Horn (in French) convinced all concerned. MGM ceased production of separate versions early in 1932; the other Hollywood monopolists soon followed. Paramount converted Joinville into Hollywood’s dubbing center for Europe. Special language versions had a short life (1930—1931), and served only as the transition to the dubbing process, still in use today.4 As Hollywood worked to resolve its language conversion problem, a German cartel appeared to challenge the U.S. film industry’s domination of European markets. Three German inventors had developed an alternative sound-on-film method that became known as Tri-Ergon. They unsuccessfully tried to innovate their system into the German film industry between 1922 and 1926. However in 1928, after realizing the threat of U.S. domination of world sound technology, the German government encouraged the formation of an alternative. The Tonbild Syndicate A.G. (Tobis), organized with German, Dutch, and Swiss money, acquired the Tri-Ergon patents and began to install sound equipment in German theaters. Simultaneously, the two most important German electrical manufacturers, Siemens and Halske, and Allgemeine Elektrizitdts Gesellschaft (AEG) announced their own, jointly developed sound system. Quickly they formed Klangfilm. After some initial struggle, Tobis and Klangfilm agreed to unite against the anticipated U.S. “talkie-invasion.”5 Tobis-Klangfilm set up formal operations during the spring of 1929. In May 1929, Warner Bros. brought The Singing Fool to Berlin; TobisKlangfilm sued and stopped the premiere. In July an appeals court upheld Tobis-Klangfilm’s sole right to sound film patents within Germany; no U.S. films could be exhibited while the case continued to a higher court. Simultaneously Tobis-Klangfilm pressed for similar exclusivity in the United Kingdom and Switzerland. In reaction, the Hollywood monopolists

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(represented by Will Hays) and Western Electric worked for an out-ofcourt settlement. The German company would not back down and late in 1929, Hollywood began to boycott the German market. Hays reasoned that German theater owners would not be anxious to forfeit the short-run profits they could expect from the new Hollywood talkies and would pressure Tobis-Klangfilm to agree to present films recorded on U.S. systems. In 1929 the Hollywood monopolists had used such a boycott quite successfully to force the French government to dilute a stiff quota law.6 Hays underestimated Tobis-Klangfilm’s power. Within six months, with the support of the German government, Tobis-Klangfilm broke the Hollywood-Western Electric boycott. In fact, Tobis-Klangfilm successfully secured (final) injunctions against Western Electric in Germany, Holland, Czechoslovakia, Hungary, Switzerland, and Austria. Equally as important, early in 1930, Warner Bros. and RKO broke with their fellow monopolists, and began to rent films to exhibitors in the disputed markets. Warners had little incentive to cooperate with Western Electric; the two were in the middle of a six-year arbitration struggle concerning Warners’ original contract. RCA had created RKO to provide a market for its sound equipment. Seizing on Western Electric’s foreign problems, RCA’s parent corporation, General Electric, acquired part interest in AEG and thus became part owner of Tobis-Klangfilm. Soon after, RCA, RKO, and Tobis-Klangfilm initialed a cooperative agreement.7 The other Hollywood monopolists soon acquiesced. In mid-June of 1930, representatives from Tobis-Klangfilm, Western Electric, RCA, and the U.S. film industry began to confer in Paris. An international cartel was the stated goal; the surplus profits were estimated to be a quarter of a billion dollars. Quickly all parties agreed to split up the world for patent rights and then charge film companies royalties for distribution within each territory. The negotiations lasted one month. On July 22, 1930, Western Electric, RCA, and Tobis-Klangfilm formed a loose cartel that divided the world into four territories. Tobis-Klangfilm secured exclusive rights for Europe and Scandinavia, while Western Electric and RCA obtained the U.S., Canada, Australia, New Zealand, India, and the Soviet Union. For the valuable British Market, royalties were split one-fourth for Tobis-Klangfilm, three-fourths for Western Electric and RCA. The rest of the world became open territory; no company held exclusive rights. All parties exchanged and pooled technical information. The royalty fees ranged from $500 to $5,000 per film, depending on how many countries were involved. The diffusion of sound seemed to be complete, the economic struggle over.8 In fact, the Hollywood monopolists never formally ratified the “Paris Agreement.” Shortly after the conference, Germany instituted stiffer quota

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regulations. In protest, Hollywood leaders refused to sign the pact, but continued to make all necessary royalty payments. Western Electric, RCA, Tobis-Klangfilm, and the Hollywood monopolists began meeting informally to negotiate a final settlement. Finally, in February 1932, they held a another Paris conference. French representatives also attended and bitterly complained because under the 1930 accord they had to pay Western Electric one fee to rent equipment and Tobis-Klangfilm a second fee for the right to distribute the same film in their own country. Other disputes surfaced and the cartel fractured. It endured a mere 18 months.9 Consequently, patent disputes erupted in Europe and throughout the rest of the world. A typical challenge came in Denmark. In 1929 the dominant Danish producer, Nordisk, had acquired the rights to the PetersonPoulson sound system. Eventually these patents became part of the German group. With the world sound cartel in disarray, Nordisk began to reassert its exclusive rights for Denmark. First Nordisk petitioned a Danish court for the right to collect royalties for all foreign films presented in Denmark that were not recorded using the Peterson-Poulson system. In October 1933, the Danish Court ruled for Nordisk and issued an injunction preventing the exhibition of any film in Denmark unless it had been recorded (or re-recorded) on the Peterson-Poulson system. Quickly Nordisk instituted similar suits in Norway, Sweden, and Finland. Immediately tripartite negotiations opened among Western Electric, the Hollywood monopolists, and Nordisk. Tobis-Klangfilm ceded all rights. In November of 1934, the Hollywood monopolists signed an agreement with Nordisk for Denmark. Because of court rulings, Hollywood had to agree to yet another pact for Sweden. Nordisk lost its suits in Norway and Finland.10 As Hollywood negotiated more and more individual compacts, TobisKlangfilm, Western Electric, and RCA lost a larger and larger percentage of the royalties guaranteed under the 1930 Paris Agreement. Consequently, Tobis-Klangfilm pressured for a modified cartel. During 1935, in Europe and the United States, representatives from Western Electric, RCA, TobisKlangfilm, the Hollywood monopolists, and several European film industries met and negotiated a second “Paris Agreement.” The producers settled all past royalty claims, and secured lower rates for the future. The agreement was signed on March 18, 1936, and would last longer than its predecessor, nearly three years. The outbreak of World War II made any cartel impossible.11 In sum, the second Paris Agreement and the complete conversion of cinemas signaled the end of the diffusion of sound for Europe. Evaluating its impact for the United States, French, German, and British relations proves quite difficult. Language conversion problems did provide foreign countries a temporary advantage. When dubbing became universal, the

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advantage swung back to Hollywood. Patent warfare helped the United States and Germany. Throughout the ebb and flow of this economic struggle, U.S. and German firms dictated the terms of exchange; the British and French were simply exploited. Thus, it is not surprising that by 1936, the Germans had recaptured a major share of their own market from Hollywood. But so did the French and British! The Germans reduced Hollywood’s share (compared to 1929, preDepression levels) by 36 percent, the French by 24 percent, and the British by 20 percent. One is tempted to side with Sklar and find that the coming of sound caused the Germans, principally because of patent hegemony, to be able to ward off Hollywood’s domination of German screen time. But this explanation cannot account for the success of the French and British. For too long the coming of sound to Europe has been treated as a single, isolated variable. I argue we must turn to other factors to help explain the reduction of Hollywood’s power. Without a complete understanding of variations in economic exchange throughout the period of the coming of sound, we can never fully understand its impact.12 To keep this present analysis within manageable bounds, consider just two additional factors that we should include in any new analysis: the effect of the state and the relative impact of the world depression. By 1928, Britain, France, and Germany all had state restrictions regarding the exhibition of foreign films within their respective countries. In France, The Quota Commission required that for every French film produced, seven U.S. films could come into France. German and British laws were stronger. The Germans required import permits and with year-to-year modification, kept their numbers at levels lower than what Hollywood desired. The British law required that United Kingdom exhibitors and distributors reserve a certain portion of their business for British pictures. The Cinematographic Film Act of 1927 established initial minimums of 7.5 percent for distributors and 5 percent for exhibitors. These lower bounds increased annually until both reached 20 percent for 1936. There was limited cooperative action. In 1930 the French and German film interests and governments agreed to drop quota restrictions for exchange between those two countries.13 This is how government control stood as Hollywood began to export its sound films. As with the late 1920s, the French government continued its passive stance during the early 1930s. Its quota law expired in October 1931 and, under much pressure from the U.S. film industry, the French government did not renew the law. U.S. talkies flowed into France with no impediments. After one year, a revised law was passed (August 1933) which controlled the number of dubbed films that could be exhibited. Modeled on the successful German law, the French initially set the number (140) much lower than what Hollywood desired (about 200).

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The blockage effect was lost, however, because the government permitted so many loopholes. French cinema owners, assisted by the Hays Office and the U.S. State Department, successfully lobbied for loose enforcement. By 1936, when the market consisted entirely of sound films, the U.S. film industry was able to export to France about 85 percent of what they would have desired had there been no quota. Thus, all other things being equal, the law helped abate U.S. domination by about 15 percent. The British quota law also had a marginal effect. Like France, the internal struggle lay between British exhibitors who wanted more of the popular U.S. films and native producers who pushed for tighter control. Neither side gained; the law would not be rewritten until the original act expired in 1938. Gradually, however, throughout the 1930s the British did recapture 20 percent of the screen time lost to Hollywood during the prior decade.14 Germany proved to be the most successful against Hollywood. Each year Germany instituted a new quota, each equal to or stiffer than its predecessor. Early in 1933, Adolph Hitler took power and pushed for strong involvement in cinema but did not nationalize the film industry until 1942. In fact, just prior to the Nazi seizure of power, it seemed likely that U.S. film interests had succeeded in pressuring for a weaker quota law for 1933. The Nazis reaffirmed the strong traditional quotas and even added special provisions: all dubbing had to be done in Germany and the Minister of Propaganda, Joseph Goebbels, could refuse the showing of any foreign films with anti-Nazi themes. Even stricter censorship came in 1934. With the complete diffusion of sound in 1936, the Nazi government was gradually reducing the presentation of non-German motion pictures to zero. Franco-German “free-trade” lapsed in 1936.15 State action enabled Germany and France, and Britain to a lesser degree, to combat U.S. movie imperialism. So did the world-wide depression. The twentieth century’s most severe economic crisis provided France, Germany, and Britain a distinct comparative advantage—in both the short and longrun. As the depression spread throughout the world, exchange rates of foreign countries began to fluctuate significantly, usually against the U.S. corporations and in favor of their European counterparts. European governments either froze the currency holdings of foreign traders, or used (deflated) currency exchange rates to assist native industries at the expense of foreign corporations. Thus, in real (inflation adjusted) dollars, Hollywood extracted from its overseas operations smaller and smaller revenues, despite the popularity of the early talkies. The U.S. government finally adjusted exchange rates in 1934, but not before U.S. multinational corporations suffered large losses abroad.16 Equally as important—in the longer run—was the relative effect of the Great Depression in the four countries of concern here. Germany and the

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United States experienced severe decline. Between 1929 and 1932, U.S. national income fell 38 percent, industrial production, nearly 50 percent. Comparisons between nations are difficult but by economists’ best estimates, Germany’s slide matched that of the United States while the United Kingdom declined only half as much, and France three-quarters as much. I assume these gross declines matched those for relative consumer purchasing power, and thus, potential cinema revenues. In fact, the available (albeit crude) cinema attendance data indicates such logic is acceptable; for example, U.S. attendance declined 35 percent. There also existed a significant difference in terms of recovery: strongest in Britain (24 percent above 1929 levels by 1937), next in Germany (17 percent above), and the U.S. (3 percent above). In contrast, in 1937 France remained 18 percent below 1929 levels. The French economy did not decline as severely as that of the U.S. or Germany, but it never did regain previous levels of economic activity during the coming of sound. Germany and the United Kingdom surged back strongly. The U.S. economy simply returned to pre-Depression levels.17 For cinema exhibition there were three very different reactions for the Germans, French, and the British. Specifically, in Germany the downturn for cinema attendance came in 1930. Numerous cinemas closed. In response, the Nazi government banned double features, in order to place the most popular films in the maximum number of theaters, and initiated an embargo on construction of new theaters. Attendance began to creep up in 1934 and rose dramatically in 1936. In France, cinema attendance remained strong until 1933, declined severely for two years, and then stagnated at that lower level. During the Depression the United Kingdom experienced an increase in movie going. New cinemas opened; in 1932, at the nadir of the economic crisis, 150 new theaters were built, including several picture palaces. With rapid and strong recovery of the national economy, the British film industry grew stronger while Hollywood was at its weakest. The French made small gains until 1933; the Germans closed to world trade as Hitler isolated and armed for coming invasions. Across the sea, U.S. movie admissions plunged; three of the Hollywood monopolists went bankrupt and had to be reorganized by the federal government: Paramount, Fox, and RKO. But the setback to the studio system proved temporary. In 1936, Hollywood did regain its power and the potential strength to surge forward in foreign markets. Throughout the early 1930s, despite its patent position, Hollywood saw exports decline. In 1936 foreign revenues began to increase again, but not in the stronger European countries, only in weaker markets such as France and Latin America.18 In short, to whichever markets one looks at in the developed world in 1930, one found the Hollywood cinema dominating the marketplace. The

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language barrier never mattered in the long run. The collusion by the Hollywood companies grew tighter, and they spoke with one voice—often Will Hays’s. Nation states tried to prop up their national cinema production, but never succeeded long term. This trend of the globalization by Hollywood continued to the end of the century and beyond—setting the model for multinational globalization of the early twenty-first century. Again, there was no chaos, but a consolidation of economic power, the collection of more revenues, and a global colossus known to the world as simply Hollywood.

CHAPTER

10

The Formation of the Studio System

Merger Mania

Past studies have focused on the micro aspects of the coming of sound in film production and film reception. Taking a macro approach, the greatest consequence of the coming of sound was that it narrowed the field of Hollywood studios to eight, and divided them into five that owned theater chains (the “Big Five”), and three (the “Little Three”) that cooperated with the “Big Five.” This established the vertically integrated companies and the “Little Three” which remain in play today—save billionaire Howard Hughes taking RKO out of business in the 1950s. In other words, the greatest outcome of the coming of sound was the establishment of the studio classic system that dominated through the 1930s and 1940s, languished but remained viable in the 1950s, and was reinvented with the same companies shifting their place in the pecking order. The sole change was the rise of Disney into a major by the 1960s. Disney had survived the coming of sound by attaching itself to one of the major eight companies—first Columbia, then United Artists, and finally RKO—until 1953 when Walt Disney created his own international distribution system, and became a creator of feature films instead of only animated shorts, with an occasional feature.

Merger Mania Harry Warner and Waddill Catchings leveraged the cash pouring in from The Singing Fool and other early hits and in October of 1928, Warners acquired First National, a company that played a minor role in the transition to sound because it was cooperatively owned by regional theater chains. First National offered Warners two major assets: a vast lot for production 115

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in Burbank, California, a suburb of Los Angeles, and a chain of theaters, principally the Stanley chain based in Philadelphia, by then dominant in the mid-Atlantic states from New Jersey to Pennsylvania to Maryland to the District of Columbia to Virginia. By January of 1929, First National existed in name only—a brand of Warners’ films—hoping that would fake the Department of Justice that First National was not really run by Harry Warner. Everyone in the film industry understood this public relations move. This merger was the first of many, and it was not simple to pull off. Again, Catchings was at the center of the Warners-First National merger. He began in May of 1928, knowing that if he could truly vertically integrate Warners, his plan, set in motion four years earlier, would reach its goal of making Warners a major and the equal (or nearly the equal) of Paramount. It would climax his long-term strategy to boost the one-time independent producer into the ranks of the largest of the industry. In May of 1928, Lessing Rosenwald, Chairman of the Board of SearsRoebuck and member of the board of the Stanley Company of America, asked fellow Sears board member, Catchings, to join Stanley’s board. Jules Mastbaum had created this regional theatrical powerhouse, but died a year before. His widow inherited ownership and lured Rosenwald onto Stanley’s board to advise her. Rosenwald knew of Catchings’ success at Warner Bros. On a train trip from a Sears-Roebuck board meeting, Rosenwald asked Catchings to be Finance Committee Chairman for Stanley. Catchings secured Harry Warner’s approval and was elected a member of the Stanley’s board and Chairman of its Finance Committee on May 23, 1928. All parties were aware that this was simply a precursor to merger talks.1 But, while securing this, Catchings also began negotiating a merger with Joseph Kennedy and John J. Murdock between Keith-Albee-Orpheum, FBO, and Warner Bros. With his new connection on the Stanley board, this would make Warners the largest company in the movie field. But Joseph Kennedy and David Sarnoff—having lost RCA’s bid to sign Paramount and Loew’s/MGM—decided to pass. They would form their own company from these parts and it would become—as analyzed in Chapter 7—RKO. Catching’s knew of Warner’s conflicting ties to AT&T’s ERPI and knew Otterson would do anything to prevent Warners from tying up with RCA. In essence, Catchings bluffed, and was able to get the Stanley chain of theaters and its controlling interest in First National for a lot less that than if he and Harry Warner had pursued Stanley and its First National facilities straight on.2 By August 29,1928, Catchings and Harry Warner were sure of their strategy. Warner Bros. would merge with Stanley. The huge potential profitability of The Lights of New York left Warner Bros. the problem of control of

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major chain of theaters. Catchings and Warner knew they had to have this so Paramount and Loew’s/MGM dared not shut Warners’ films out of their theaters. If Zukor and Schenck did, the new vertically integrated power of Warners could deny Paramount or Loew’s/MGM access to the best theaters in Philadelphia, Pittsburgh, Baltimore, and Washington, D.C. The Stanley Company’s theaters gave Warners needed strength in the exhibition market in the United States, as the Big Five was forming by divvying up the United States into exclusive territories of domination.3 This territorial exclusivity became a major piece of the studio system monopoly power. Here is how it worked. The major producers would have to recognize Warner Bros. The Stanley Company owned all the key theaters in Philadelphia, southeastern Pennsylvania and southern New Jersey. To enter this valuable territory, the majors would have to effect a trade agreement and guarantee Warner Bros. access to the best theaters throughout the rest of the country. The merger would be highly advantageous for the Stanley Company. It would relieve financial pressure due to indebtedness, eliminate the confusion in management, guarantee Stanley’s theaters a supply of talking pictures, and give it even greater monopoly power. It was a win-win solution to merge. Mastbaum’s widow could become a major stockholder in one of the dominant companies, and Warners got territorial exclusivity. The negotiations were simple. Since Catchings was simultaneously the key finance director for Warner Bros. and Stanley, and the representative of Goldman, Sachs, which could provide the backing for the deal, he, in effect, negotiated with himself. By September 13, 1928, the terms of merger were completely set; only the details remained to be worked out.4 At the last minute, Adolph Zukor and William Fox, realizing what was happening, tried to capture Stanley. Neither Zukor nor Fox wanted Warner Bros. to grow too strong. Catchings held his ground. For this and past work, he would be rewarded with 50,000 shares of Warner Bros. stock worth over $100 per share; total = $5 million. Catchings and Harry Warner spent a month countering Zukor and the Fox’s counter offers. They succeeded. On October 9, 1928, the contracts were signed so Warners became a vertically integrated movie power the equal of any. The deal was complicated by the fact that Catchings and Harry Warners got a chance to get control of First National as part of the deal. Stanley owned one-third; Warner and Catchings negotiated with other stockholders of First National (Barney Balaban, head of Balaban & Katz of Chicago, A. S. Blank of Des Moines, Iowa, and John Korsky of Detroit) who were all allied with Paramount for their corporations, but were owners of the First National shares on their own. Catchings out maneuvered Zukor—but it cost Warners nearly $4,400,000. With this purchase, Stanley and Warner Bros. owned a controlling interest in First National. Many label October 1927 as the key date in

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the history of Warners, as during the first week The Jazz Singer premiered. But it was a year later, almost to the day, that Warners came of age as a true member of the Hollywood studio system, a true corporate powerhouse, almost the equal of Paramount and Loew’s/MGM. Adolph Zukor had paid Waddill Catchings and Harry Warner the highest compliment as he tried to stop this merger from ever happening, and failed.5 Now, the new Warner Bros. Pictures included two production and distribution firms and one of the most powerful theater chains in America. Stanley owned 250 theaters at the time of the stock exchange. The new board of directors consisted of Harry, Abe, and Jack Warner, former Stanley owners, Irving D. Rossheim, Simon Fabian, Moe Mark, Morris Wolf, and, naturally, Waddill Catchings. The new Warner Bros. immediately announced that all forthcoming films would be talkies. The merger gave the company the financial muscle to make the final step in committing to the coming of sound. And it proved timely as demonstrated in Chapter 5 as The Singing Fool was released as one of the first post-merge features. The new Warners gave the company the tools to fully exploit the popularity of the sequel to The Jazz Singer and set the Hollywood box office revenue record that would last a decade. This would have been impossible without the merger.6 But Waddill Catchings wanted even more security. He knew Warners lacked a top managerial team to run the new theater chain. On November 10, 1928, he negotiated his final deal. Warner Bros. purchased from the Skouras brothers—Spyros, Charles, and George—Skouras Bros. Enterprises, owners of the best theaters in St. Louis, for $3,640,000. This gave Warner Bros. control of some additional important first-run theaters, but more importantly Harry Warner immediately appointed Spyros Skouras—at $150,000 per year —to run Warners’ its new expanded theater chain. It had been a long year for Catchings and Harry Warner. There had been so many deals, proposed negotiations, and mergers, that Harry later remembered he could not offer an accurate tally. But the goal was achieved; Warner Bros. had risen into the major studios.7 Soon after this merger, the newly formed RKO and its parent company, RCA, began to expand to also join the ranks of the major studios. David Sarnoff determined that RCA needed a manufacturing facility to more efficiently compete in its market for radio sales. With a domination in set sales and radio networks with NBC, these tie-ins (now called synergies) could give more power to the new RKO. Sarnoff even took over Victor Company, the leading manufacturer of phonographs and records to be played upon these sets. The new RCA-Victor marketed the radio-phonograph combinations, promoted NBC and 78 rpm records—all with ties to its Hollywood stars within the RKO stable. None of this maneuvering was

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cheap. RCA was making lots of money, and its stock was hot so Sarnoff was able to evoke his horizontal integration—control across all entertainment choices—for an estimated $27 million.8 On the surface, Victor could provide a worldwide distribution network, an established trademark, and an important list of musical stars. RCA could use these stars on its radio network, NBC, and in the films RKO would produce. But the key for Sarnoff was Victor’s Camden, New Jersey plant. This facility could manufacture radio and phonograph equipment— and talking picture apparatus, for both its new studio for RKO and its chain of theaters.9 Victor even began to record synchronized scores for the major motion picture companies during the interim period before the sound stages were readied in Hollywood. Demand for this service was overwhelming. Victor purchased the Trinity Baptist Church in Camden and converted it into a recording studio. Victor recorded scores 24 hours per day throughout the summer of 1928. In July it began building its own recording studio in Hollywood. This plant opened for half-day operations in late October, fullday operations by the beginning of 1929. The average cost to synchronize a feature was $20,000, while shorts cost $7,500. The average time to record for a feature was one day. Musicians worked six hours per shift at $100 per day.10 In December of 1928, Sarnoff formally took control of Victor and became the corporate symbol known for three generations as RCA-Victor. The merger was officially approved on January 4, 1929. An exchange of stock was set for March 4. This was the true date for the beginning of RKO. The plans described in Chapter 7 could be executed from the integrated base that Sarnoff provided. That this plan would not work as well as had Sarnoff purchased more theaters is important, but beside the point. RKO had been established as a major movie company.11 It was only then Sarnoff could move quickly to expand RCA’s motion picture branch. He placed Hiram S. Brown, a Wall Street executive, in charge of the total RKO operation. First Sarnoff and Brown established the production branch, RKO Radio Pictures. RKO added a few more theaters to its chain in 1929: the six Pantages theaters on the West Coast, and the 14 F. F. Proctor theaters, chiefly in New York. Sarnoff also sought to secure RKO’s market position by negotiating a deal with a group of independent exhibitors, headed by former Federal Trade Commission Chief, Abram Myers. In conjunction with Tiffany-Stahl, a Photophone licensee, RCA tried to sell the independent exhibitors, all members of the Allied States organization, five-year franchises. RCA would guarantee 52 films per year, 26 from Tiffany-Stahl, and 26 from Radio Pictures. Zukor again recognized a threat and ordered Will Hays—on his behalf—to openly attacked RKO and

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Sarnoff. Again, as in the case of Warners, RCA supplied the corporate muscle to continue to press for the acquisition of franchises. By the end of October of 1929, 1,000 independent exhibitors had signed up, and RCA suddenly could seriously challenge ERPI in the open market. Zukor and the Schenck brothers paid attention; Harry Warner hated AT&T for its strongarm tactics. In the end this bold move by Sarnoff would set in motion sound on film as the standard, as RCA could supply it instantly—forcing AT&T’s Western Electric engineers to design their own variation which was compatible.12 The third new member of the major vertically integrated studios was Fox. So it seemed proper that during the spring of 1929, William Fox would provided the next spectacular merger—to match what Warners and RKO had done, and what Paramount and Loew’s/MGM already had. Fox Film had grown phenomenally in 1928. Its Movietone newsreels, analyzed in Chapter 4, were the station of the film industry. But William Fox had not rested and used the new profits to vertically integrate as Warners had. During 1927 and 1928, William Fox negotiated and purchased more than 300 theaters, including buying the Poli chain of theaters in New England, and West Coast Theaters, based in San Francisco. This vaulted Fox Theaters into third position of ownership, behind Paramount’s Publix’s division (approximately 1,000 but changing daily) and Warners (about 500 but changing daily). But unlike the other two, William Fox went beyond funding from current profits, and (it would turn out mistakenly) began to borrow heavily. In fact, he used the backing of AT&T and John Otterson to back his loans. In turn, William Fox then promised and did install ERPI equipment in all of his acquired theaters—even tearing out other sound apparatus in several cases. In short, in four years, Fox grew from a medium-sized motion picture firm to one of the four most important, alongside Warners, Loew’s, and Paramount—with the case still out on the success of RKO. Still not satisfied, William Fox sought more.13 The ultimate (and over-reaching) merger move for William Fox had its genesis with the September 1927 the death of Marcus Loew. His widow and sons inherited almost one-third of the stock of Loew’s/MGM. While she and her sons decided a course of action, Nicholas Schenck assumed the control that he “temporarily” had been assigned since Marcus Loew took sick in 1924. Schenck was the most conservative during the coming of sound. Loew’s continued to expand, although very modestly. In September of 1928, Schenck purchased 51 percent of Robbins Music and secured a source for the necessary musical material for its films. He also signed exclusive distribution for Hearst sound newsreels and Hal Roach shorts. He reduced costs by abandoning what had made the company in the first place—vaudeville.

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By the spring of 1929, Loew’s had reduced its vaudeville activities to selected presentations in only a handful of its largest theaters. By 1930, it would drop vaudeville altogether. Despite Schenck’s conservative attitude towards expansion, Loew’s remained the second most important corporation in the film industry— holding a place it secured in 1924 with its takeover of MGM. Furthermore it had a 10-year franchise agreement with Paramount and United Artists theaters which insured the most favorable theater bookings for the films coming from the MGM factory headed by Louis B. Mayer, but run by Irving Thalberg.14 Early in 1928, Marcus Loew’s widow indicated that her share of the Loew’s/MGM corporate empire was for sale. There were really only four parties—Warners, RCA/RKO, Paramount, and Fox—who could afford to pay the current market price the stock worth $28 million. RCA was not interested, as Sarnoff was too busy trying to restructure RCA-Victor’s vast holdings; he wanted to expand horizontally, not purchase another company which did what RKO was planning to do. Zukor already had close relations with the Loew family, and did not want to purchase the company, as he felt he had enough theaters and production facilities and had expanded enough as of early 1928. That left Fox and Warner Bros. Catchings approached the Loew family and opened negotiations. However, the widow and he could not agree on price because Fox always kept bidding more. Catchings stopped at $100 per share. Fox bid more even though the current market price was only $80 per share. Furthermore, Catchings insisted that Nicholas Schenck agree to remain with Loew’s for at least two years after the merger. The three Warner Bros. had signed for a five-year minimum as part of the Stanley deal. Schenck had now come to the center of any merger. He had organized a pool of himself, David Warfield, and David Bernstein to add their stock to Loew family holdings to represent majority interest in the company. Immediately, William Fox entered secret negotiations with Schenck. If investors found out, the market price of the shares would increase and the widow Loew and her partner Nicholas Schenck would ask for even more. Fox stopped at $125 per share. She became an instant millionaire, and so did Nicholas Schenck who pocketed $9 million extra for brokering the deal —part of which was that he continue managing the company.15 William Fox now had to secure the necessary $50 million to finance this incredible takeover. He turned to John Otterson and requested a $12 million loan from ERPI. Otterson recorded his thoughts on this matter: In considering whether or not such a loan should be made several different factors entered into the picture. The Fox Corporation

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owed ERPI a rather substantial amount of money and it was felt advisable to take what steps we could to protect our own situation from the point of view of a creditor. A more dominating factor, however, was our desire to keep the Fox interests as a real competitor of the other big producer companies. Not only was it important to us to have a large theater chain to which our apparatus could be sold but we also had in mind the long-term contract with the Fox interests that called for substantial royalties over a period of approximately 15 years. Our relations with Warner Bros. were somewhat strained while the relations with the Fox Companies might be said to be quite amicable.16 Otterson convinced his superiors to grant the loan. On February 26, 1929, ERPI granted $15 million from AT&T, and Fox easily raised the rest with AT&T as a cosigner. On February 28,1928, William Fox purchased the 400,000 shares from the Schenck’s pool, this gaining majority control of Loew’s/MGM. On March 3, 1929, William Fox announced the purchase to a stunned industry and to an even more skeptical Wall Street. The FoxLoew’s combination was now the largest in the motion picture industry, surpassing even Paramount. The new combine had assets over $200 million and an annual earnings potential of $20 million. It controlled theaters in the best locations from cost to coast. This merger easily surpassed the formation of RKO and the Warner Bros.-Stanley combination. William Fox had rolled the dice, partnered with AT&T, the world’s largest corporation, and created the largest entertainment complex in the United States. Now the skeptics asked, could it work? More of a threat, the Department of Justice took this as the final move in a wave of mergers which it began to investigate, so the actual final agreements were held up until the Department of Justice approved.17 This spurred Harry Warner and in January 1929, he purchased the music publishing company, M. Witmark and Sons. This paralleled earlier actions by RCA and Loew’s. This merger proved expensive, for Witmark was the oldest and most important firm in Tin Pan Alley. Its catalog included works by Victor Herbert, Sigmund Romberg, and George M. Cohan. The price was $1 million paid to the Witmark family as sole owners. Warner Bros. then hired the Witmark family to run its new music division operation. In May of 1929, Warner opened negotiations and added more corporate musical muscle with the acquisition of Harms Music Publishing Company, Remick Music Corporation, and a minority interest in DeSylva, Brown and Henderson, the most important new publisher of the late 1920s. This latter firm had written most of Jolson’s songs for Warner Bros.’ The Singing Fool for which Warner Bros. had paid dearly. With this new merger, Warner Bros. would be able to commission its own music.18

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Adolph Zukor also began to expand and diversify. As early as June of 1928, Paramount installed a radio station in its Hollywood studio. The station linked to the Los Angeles Evening Express, began operations on August 1, 1928. In July of 1928, Zukor set up a music division of Paramount under Nathaniel W. Finston. Finding the cost of the merger too high, he sought out independent songwriters, and commissioned them to produce songs upon request. The most famous of these 22 composers was Irving Berlin. Paramount also expanded its theater operations. By September of 1929, Paramount controlled 700 theaters, by May 1930 it owned over 1,400. No one knew the exact total on any one day for Sam Katz was always trading and contracting. In June, Zukor made his strongest move. Paramount acquired 50 percent of the newly formed Columbia Broadcasting System (CBS). No cash exchanged hands. Paramount simply traded 58,823 shares of Paramount common stock, then worth over $3,800,000, for the 50 percent interest of CBS common. The radio network would use Paramount film personalities as NBC used RKO’s stars. In exchange, CBS acquired a Hollywood connection to more effectively compete against RCA’s NBC. The new Paramount was as strong as RCA, and more diversified than Fox or Warner Bros.19 Yet Zukor wanted more. Late in the summer of 1928, he began to seek merger with one of his main competitors, either Warner Bros., RKO, Fox, or Loew’s. At first Zukor bid against Fox for Warner Bros. Harry Warner and Waddill Catchings entertained offers as high as $15 milion, but declined to sell. In November, Zukor considered actively bidding for Loew’s. The proposed merger would include United Artists. Instead, he began speculative talks with Sarnoff towards a Paramount-RCA link-up. Warner Bros. re-entered the picture in April of 1929. Throughout the summer, on-again, off-again Zukor held merger talks with these two parties. By August, Sarnoff had dropped out. He had enough problems trying to control his own expanding empire. On September 1, 1929, Zukor achieved success. He, Catchings, and Harry Warner had come to an agreement. Paramount would merge with Warner Bros. to form a new firm to be called “Paramount-Vitaphone.” The merger called for a stock exchange of one share of Paramount for 1.5 shares of Warner Bros. stock. Paramount-Vitaphone would be the industry’s largest entertainment combination, exceeding even the asset base and earning power of Fox-Loew’s or RCA. It would own over 1,400 theaters, including complete control of the Detroit, Baltimore, St. Louis, Philadelphia, and Chicago markets. The Paramount-Vitaphone empire would include six studios, a system of vaudeville presentation units, the Columbia Broadcasting System, the Columbia Phonograph Company, and Warner Bros.’ vast music holdings.

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No branch of the entertainment industry would be untouched. Paramount Vitaphone could easily challenge RCA’s power in radio broadcasting, and Fox-Loew’s power in film production, distribution, and exhibition. Now three giants, RCA, Fox-Loew’s, and Paramount-Vitaphone would control the five important entertainment industries: motion pictures, vaudeville, music publishing, radio, and phonograph. This Labor Day announcement stunned even those who had thought they had seen the last when William Fox figured he bought controlling interest in Loew’s/MGM. But again the antitrust division of the U.S. Department of Justice would have to approve the new combination. Like, the hold it put on the Fox deal, the Justice Department put a hold on Zukor’s proposed amalgamation.20 The timing could not have been worse. A new U.S. Attorney General, William D. Mitchell, had been appointed by the new president of the United States, Herbert Hoover. Mitchell put a hold on new deals so he and his attorneys could study their implications. On their plate quickly came the Fox-Loew’s combination. Zukor’s proposed deal taking over Warners brought the matter to the turning point. Behind the scenes, progressive Senators Walsh, Brookhart, and King threatened to investigate the Justice Department’s lax attitude in motion picture merger cases. By late October of 1929, the new administration’s position crystallized. It did not approve of the Fox-Loew’s, or the proposed Paramount-Warner Bros.’ mergers. If all were accomplished, only six firms would control the studio system. Zukor understood the situation. The film industry was still too controversial, too easily a target for public outrage. He had seen Paramount through seven years of Federal Trade Commission suits and investigations between 1921 and 1928. So, playing it conservatively, with all the contracts ready, the books audited, and even new offices and headquarters assigned, Zukor called off the motion picture industry’s largest merger to date. There would be no Paramount-Vitaphone. There would only be two massive companies: Paramount and Warners. Zukor set sail for a European vacation on October 25, 1929—the studio system was set once he abandoned his proposal.21 Zukor knew what was what. On November 27, 1929, the new Hoover Justice Department filed suits in district court in New York against Fox. Under section seven of the Clayton Act, the government’s petition called for the dissolution of the mergers to prevent the formation of a trust in the film industry. Hoover and Mitchell were using the film industry, because of its prominent public image, as an example. Louis Mayer always claimed he had an inside connection to the Republican White House, but could do nothing. Again it was another Mayer myth. Zukor knew his industry was highly concentrated, and would have had to halt further consolidation. He

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fully cooperated with the new attorney general and no new mergers took place thereafter. As expected, the suit against William Fox took a couple years to settle. On April 15, 1931, Fox Film and Fox Theaters and the government signed a consent decree. The Fox companies agreed to divest all Loew’s stock. Legally now the eight-member motion picture oligopoly had been formed—despite the fact that all knew Fox would lose his case. In reality, the studio system was set once Zukor called off his merger and set sail for Europe.22 The Zukor set of strategies were in place; the coming of sound during the late 1920s only solidified the studio system. Thereafter, through the 1930s and 1940s, there were eight companies—Paramount, Loew’s/MGM, Warners, Fox, and RKO were theater owners, Universal and Columbia were not, and United Artists was temporarily a theater owner as long as Joseph Schenck was its boss. That lasted until 1935 when Schenck formed Twentieth-Century Pictures (formed in 1933 as part of United Artists), merged with Fox and became Twentieth-Century Fox. Only Disney hung on at the margins, quitting United Artists when Schenck did, and distributing through RKO. These companies dominated the making of classically narrative films, their distribution around the world, and their exhibition in theaters throughout the United States. Five had studios, offices throughout the world, and a chain of theaters: Paramount, Loew’s (parent company for the more famous MGM), Fox Film (later Twentieth Century-Fox), Warner Bros., and RKO. Three minor companies, Universal, Columbia, and United Artists owned no theaters but fully cooperated with the oligopolistic aspirations of the Big Five, keeping out all pretenders to the Hollywood studio system. The only things that disrupted this studio system were outside forces—the Great Depression and the Second World War—the first negatively, the latter positively. By owning and operating picture palaces in all of the downtowns across the United States, the Big Five took in three-quarters of the average box-office take in the United States. Only after they granted their own theaters first and exclusive runs, and soaked up as much of the initial wave of boxoffice grosses as possible, did the Big Five then permit smaller, independently owned theaters to scramble for the remaining bookings, sometimes months, or even years, after a film’s premiere. No corporation could match the economic muscle of the Big Five because they did not own the top (exclusively first-run) theaters. Universal, Columbia, and United Artists simply cooperated with the Big Five to even participate in the domination of the studio system. We know that the Great Depression caused many Hollywood practices to change. During those lean times, borrowing techniques from the dime stores across the United States, marginal neighborhood movie houses

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began to regularly offer two films for the price of one—the double feature. The coming of the Second World War enabled Hollywood to prosper as never before; movie going increased, reaching its highest rate in the history of the United States. By the time of the creation of the studio system, most U.S. movie patrons lived in big cities, and all cities of size had their major theaters owned by local chains centered in the biggest city in the region. That is, by the time the studio-distributors were looking for a way to monopolize the industry —and would through the studio system—they simply needed to purchase one or more of these regional chains and gain significant power. The beginnings of the studio system also came on strong as theaters that supplied roughly 87 percent of all admissions, were owned by one of the five major studios. Paramount led the way by simply buying theater chains, principally in the Midwest and South. Loew’s had its chain in and around New York City, and then formed MGM to supply its theaters. Fox, Warners, and RKO pioneered the coming of sound, and used the vast profits made from this innovation to buy theaters across the United States. As the Golden Era started in 1930, all the highest grossing theaters in the United States were owned by one of the Big Five companies. The biggest and grandest theaters were downtown and were ornate in foreign styles. They held thousands of fans, and because of their affiliation with one of the major Hollywood companies, were booked with Hollywood’s finest films upon their national premiere. They also always charged the highest prices. Then, in an application of admission price discrimination, the major studios developed a series of runs, with a month in between runs, all within a defined geographical space. The message to the fans was clear. Pay the most and see your favorite stars downtown in a picture palace, or wait until second run, and pay a little less. Wait even longer, and pay even less. Chicago, for example, had 12 runs. The Hollywood studio bosses borrowed this idea from the travel industry, that for the same train or ship ride, one got a rise, but at vastly different conditions, at vastly different comfort levels.23 The Big Five, by controlling picture palaces in all of America’s downtowns, took in the bulk of dollars at the box-office. Only after they granted their own theaters first-run and soaked up as much of the grosses as possible, did they then permit smaller, independently owned theaters to scramble for bookings. Second, and as important, they controlled international distribution and guaranteed the companies the maximum advantages for selling their films. They alone could guarantee top films, shorts, and newsreels to theaters around the world. To set up a rival network was cost prohibitive for a newcomer. Even film companies in other nations did not have

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the resources to compete in the international marketplace with Hollywood. Indeed, most film companies in most countries outside the United States conceded part of their own native market to Hollywood, so powerful was the American film industry’s advantage in distribution. The final—not the first—component of the studio system was its factory system of production. The classic Hollywood narrative film became the standard and Hollywood organized the studios to make these features on a regular basis. The process was organized with the regular production of scripts, then shooting, then editing, and corporate approval before release. To keep product flowing, stars were developed, personnel trained, sets built and maintained, all supervised by the head of studio production. Yet, for all these changes at the theater, distribution, like much of the wholesaling trade, was invisible. Exhibition had a greater presence, but in most minds never matched the importance of the well-guarded, enormous California production plants. Yet in terms of invested dollars, production accounted for only five percent of total assets. Speaking correctly, distribution, despite its enormous leverage, totaled even less than about one percent. Throughout the 1930s and 1940s, by and large most investment took place on the exhibition side—some 94 percent. The amount of capital required for production paled when compared with the cost of financing a chain of several hundred theaters. Thus, although we know a great deal about the glories of MGM, that company was simply one subsidiary of a much larger theater corporation, Loew’s Inc. All the high-paid executives of the period knew where corporate revenues originated. Nearly all had started their careers in the theater end. For a clear picture of the studio era, one has to characterize the Big Five as diversified theater chains, producing features, shorts, cartoons, and newsreels to fill their houses. The term “studio” is a misnomer that has stuck. This book will use the term motion picture corporation. “Studio” era will be used to represent the 1930—1949 era, the latter date being when the Big Five began to split off from ownership of theaters. Far less glamorous than production, but far more important for profits, was distribution. Agents—in 32 major cities spread throughout the United States and in all countries of the world (except the USSR)—negotiated licenses and delivered films to theaters. Only the Big Five and Little Three maintained complete national and international distribution networks. The most powerful marginal producers, Monogram and Republic, had to make do with limited access to markets outside the United States. All the important producers, to ensure reasonable costs, had to work with a member of the Big Five or Little Three. If an independent producer could not negotiate such a contract, he or she stood little chance of making a profit however promising the film might be. United Artists was set up so

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independent producers had at least one such outlet, and because RKO did so poorly with its own products, by the beginning of the Second World War it also regularly picked up independently-made works. In particular, Disney and MGM distributed through RKO throughout the 1940s. After the Second World War, the situation began to change; the remainder of the Big Five and Little Three began to handle independent deals. Universal and Columbia in particular were able to make great strides by becoming havens for independent producers. 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 United States, they could spread these costs over numerous features, shorts, and newsreels, reaping low per unit costs. No outsider could afford to start an international organization 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 theaters gave the Big Five the power effectively to exclude other distributors from a large share of the potential market. Theaters owned by the Big Five rarely accepted non-United Artists, nonRKO independent products, and in as many cases as possible, independent theater-owners also gave preference to films from the major studios because they contained the most popular stars and promised to make the most money. Distribution hegemony forced all mainstream producers to go through the Big Five and Little Three. States-rights distributors, each operating in one or two regions of the United States, handled cheap westerns, quickies, and exploitation films. Thus, during the 1943—1944 movie season, for example, the Big Five collected just about 75 percent of all film rentals paid in the United States. The Little Three took in 20 percent. That left only five percent of the pie for everyone else. Within the Big Five, relative shares did change as one year Paramount would do better, another year Loew’s, but the total share taken in by the Big Five and Little Three remained remarkably consistent. The total for the Big Five and Little Three added up, year after year, to about 95% of the U.S. box office takings. The distribution power of the Big Five and Little Three extended to other countries. After the First World War, these eight corporations completed their distribution networks throughout the world. By 1925 (and throughout the 1930s and 1940s) overseas rentals accounted for approximately one half an average feature film’s takings. Hollywood dominated Britain, as well as France, Italy, and even Japan. The coming of sound did not hinder control. Foreign taxes, tariffs, and quotas did—to a degree. The U.S. Department of State helped to neutralize the effects of foreign governments by working with the Hays Office to mute as much as possible foreign

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constraints. Problems arose during the Second World War because of the loss of markets in Axis countries. After the war, the industry set up a formal equivalent of the Hays Office—the Motion Picture Export Association—to handle foreign matters. There were constant battles and disagreements, but the Big Five and Little Three never lost their significant comparative advantage. During the studio era, the Big Five created the bulk of the high budget, so-called “A films”. Universal, Columbia, and United Artists added their share of features to bring the total of the eight oligopolists to about threequarters of all features made. Films by marginal, small producers (Monogram or Republic, for example) consisted almost entirely of low budget “B” features, cheap westerns and serials. Such low-cost fare played in small neighborhood theaters and houses in rural America, rarely in the first-run urban operations of the Big Five. Consequently, the oligopolists’ features helped generate some 90 percent of the box-office revenues, while marginal producers had to scramble for the rest, faced with the high selling costs associated with dealing with thousands of 200-seat theaters. In addition, the Big Five controlled vital inputs into the process of production, including film processing, music publishing, sponsorship of Broadway plays (to be turned into films), and forays into television. In general, the Big Five rarely took on investments not related to film production, distribution, or exhibition. The Little Three stuck to film production and distribution, making few moves into ancillary fields. Workers wanted their share. The studios had, in fact, developed their own company union in the form of the Academy of Motion Picture Arts and Sciences. Effective union representation came about during the 1930s, especially under the aegis of the federal government through the National Recovery and the Wagner Acts. By the outbreak of the Second World War, most Hollywood studio labor, even the high-paid actors and actresses, was unionized. Entrenchment took place during the Second World War; strikes after the war solidified that power. By the close of the studio era, motion picture production in Hollywood was a completely unionized operation. With unions to support them, creative personnel of all kinds began to freelance during the 1940s. In 1945, there were 952 active members of the Screen Writers Guild, but only 174 were under long-term contract to one of the Big Five or Little Three. Of the 222 feature motion picture directors in their particular Guild, only 75 were under long-term contract. Since the majors provided employment for all the noted writers, directors, and stars, a number sought the security of a guaranteed income through a studio contract. Still, by the end of the Second World War, more and more creative personnel chose to venture into independent work, seeking the best possible offer. Consequently, the major film companies were able to extract less

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and less profit from control over stars, directors, producers, and other vital creative personnel. In turn, after the Second World War, the Big Five focused an increasing amount of corporate attention on boosting their power in distribution (especially overseas). Yet within all these changes, the Big Five and Little Three openly colluded to protect their joint interests. Through their trade association, the Motion Picture Producers and Distributors of America Inc. (the Hays Office), they organized self-censorship. Originally, the Hays Office was set in motion in 1922 to fight off a rising tide of state and municipal censorship restrictions. In 1934, after 12 years of informal controls, the HAYS OFFICE set up formal enforcement machinery, complete 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 theaters in which all films sought to play, nonapproved films were denied access to significant sources of revenue. Indeed, Hays Office disapproval guaranteed —in all but a few cases—box office failure. Effectively, in this manner, the Big Five and Little Three exercised prior restraint over the entire industry. Controversial films (in terms of sex, violence, religion, and politics) simply were never made, stymied early on at the script stage. The Hays Office code would gradually break down during the 1950s as the Big Five corporations spun off their theaters and relinquished a certain amount of their power in the mass entertainment business. There were fewer problems at the exhibition end. It was through the theatrical end of the industry, constituting some 90 percent of all their assets, that the Big Five operated as a collusive unit, protecting each other, shutting out all potential competitors, and guaranteeing profits for even the worst performer, usually RKO. The relationship of the Big Five throughout the studio era was like a chronically quarrelsome but closely knit family. Theatrical interdependencies guaranteed that if anyone produced a popular film, all members of the Big Five benefited. Distribution economies of scale brought forth significant cost savings. Production units corralled valuable stars, producers, directors, and other creative personnel and put together variations of certain narrative forms. The Big Five and Little Three cooperated to regularize the movie business, and take out as much risk as possible. To make the most from their productions and to maximize profits from their theaters, 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 cooperating sellers) to generate larger revenues. However, it is difficult and costly to segment consumers to charge

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them different prices. The studio system accomplished the task in a cost-effective, straightforward fashion through the use of runs, zones, and clearances (a temporal and spatial separation of markets). The distribution exchanges of the Big Five cooperated to establish runs, zones, and clearances for all cities and towns in the United States. All firstruns 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 and a final run at a neighborhood theater. Different admission prices were charged for each run, the highest in first-run and so on down the line. Keen movie fans paid up to a dollar to see their favorites. Casual movie patrons waited, and paid as little as 10 cents. Wide-scale advertising tried to line up potential patrons to attend a first-run showing rather than some later one. Distribution executives could juggle 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 of experimentation, runs, zones, and clearances were established during the 1920s, and fixed in place for the next 20 years. With few shifts in population during the 1930s and 1940s, the run–zone–clearance system served to maximize the revenues of the Big Five, regardless of differences in the qualities of the films produced. Actual bargaining between distributors and exhibitors was not a complicated affair. Each theater had a fixed run–zone–clearance status. Contracts stipulated admission prices. A rivalry did exist among the Big Five to sell their films to the best of the nonaffiliated theaters. With block booking and blind buying, the Big Five attempted to force independent theaters 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, distributors shifted a part of their risk to powerless exhibitors, guaranteeing that even films accepted poorly in first-run houses would receive a sub-run play-off. Block booking and blind buying helped Columbia and Universal most, enabling them to secure better rates of financing for production, and assuring a cost-effective utilization of their plant and equipment, but even at their peak use in the 1930s, these two tactics affected only a small portion of total revenues of the industry. The admission price discrimination and run–zone–clearance system had far reaching implications for the motion picture industry. First, this system minimized the number of theaters the Big Five needed to own to

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affect a measure of control. In actual practice, with approximately 15 percent of all U.S. theaters (but the majority of first-run), the Big Five could easily gather in 50 to 75 percent of the box office revenues. Second, it kept Big Five theaters fully utilized. Year after year, despite depressions, wars, poor films, aging stars, and changes in public taste, the Big Five could count on a steady flow of revenues at its box offices. 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 required prints never mounted up. If all theaters 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 theaters in each run, only 400 prints were needed. If prints wore out prematurely, later runs were simply canceled since striking a new print and shipping it cost more than expected revenues. The actual practice of running large theater chains was modeled on retailing techniques developed by chain operations like Woolworth’s and Sears. In the 1920s, Paramount’s theater division, Publix Theaters, led the way. Others—Loew’s, Fox, Warners, and RKO—quickly imitated. Publix regularized costs, booked from a central office and made a science of national advertising. Publix carefully controlled all expenditures at its theaters. Each theater had a weekly budget detailing all costs. All of the figures were carefully scrutinized by accountants in the home office and any excess had to be explained in a written report. In addition, local managers also recorded all nonfinancial aspects of their operations and forwarded such information to the New York office where experts constructed elaborate charts to serve as guides for future decision making. For example, all assistant managers of Publix houses recorded the temperature and humidity from the orchestra floor, balcony, lobby, and outside, every hour on the hour, for the complete operating day. Publix experts then used this data to issue orders concerning use of the heating and air conditioning. Other specialists calculated traffic patterns, population densities, income distributions, and recreation habits before a theater was built or purchased. All booking was done from New York. Since Paramount did not make enough films to fill Publix screen time, Publix bargained with and obtained favorable terms from the other major producer-distributors. Publix’s central buyer relied on data from previous years, which had been compiled in massive detail, and suggestions from managers at all levels. The actual scheduling began six to eight weeks in advance. Regional managers prepared master booking sheets and then sent them down the line to be commented upon at each level. The divisional, district, and local managers

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added the local touch by eliminating regionally offensive films and returning the sheets to New York for final approval. Executive managers, recruited from the areas they supervised, visited their territories several times a year. Publix promoted experienced local managers since they had first-hand knowledge of the needs of communities where Publix houses were located.

Outside Shocks The studio system was so successful, so powerful, and so stable that only forces outside its control could significantly disrupt it. There were three such outside shocks in the studio era. The first was the decrease in demand caused by the decline in incomes during the Great Depression. Although accurate statistics are hard to come by, box office revenues seem to have declined by 25 percent. Consumers turned to cheaper substitutes (radio) or simply cut the number of screenings attended each month. The Big Five cut wages, sought new revenues in refreshments, and finessed bulging mortgages as best they could. All survived intact. The federal government, through the National Recovery Act (NRA) of 1933, helped by openly sanctioning the monopolistic behavior of the Big Five. Instead of the informal cooperation that had existed throughout the 1920s, open and explicit collusion and exploitation took place, free from any threat of antitrust action. The Big Five immediately codified the run–zone–clearance system, and boosted revenues. The NRA outlawed all giveaways by exhibitors. Such a sanction helped the Big Five at the expensive of independent exhibitors. The second outside shock came in 1938 when the administration of President Franklin Roosevelt shifted gears and filed an antitrust suit against the Big Five and Little Three. The defendants were charged with conspiring to fix distribution contract terms of runs, clearances, and admission prices. In 1940, all parties signed a consent decree that set up a broad system of rules for bargaining and settling disputes similar to the Big Five self-government which had operated under the NRA. Little changed. In August 1944, the government reactivated the case, and pressed for divorcement of theaters of the Big Five. This solution was agreed to by the U.S. Supreme Court on July 25, 1949, signaling the end of the 20-year period of the studio era. Although the full force of this decision would not come about until the early 1950s, continuous pressure did exist beginning in 1938. 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 third and final external shock felt prior to 1949 also involved the federal government—the Second World War. As hostilities spread in Europe and the Orient during the late 1930s, the Big Five and Little Three saw

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revenues from overseas decline. Gradually, they lost markets in Europe and the Far East, which together had accounted for 33—50 percent of traditional revenues from abroad. When Britain declared war in September of 1939 and the Germans began to bomb, some theaters closed, but once the British adjusted, revenues from the United Kingdom soared to twice prewar levels. Britain clamped on currency restrictions. The Big Five and Little Three had great difficulty taking out all they earned, and so secured a number of investments in British studios and theater chains. Elsewhere, the Second World War did what all the earlier quotas, taxes, and tariffs could not do—partially shut down the overseas distribution of Hollywood movies. To offset the loss of European and Far Eastern markets, the Big Five and Little Three turned to South and Central America. The Department of State, through the Office of the Coordinator of Inter-American Affairs, assisted their efforts. Motion pictures were a good way to promote the Good Neighbor Policy. The State Department shipped hundreds of U.S. newsreels south, but demand for other products never followed. Hollywood had fully exploited Latin American markets prior to the war; there was little else to extract. The market for motion pictures in the United States during the Second World War offered a very different prospect. Domestically, the war period provided the best five years in movie history, and these increases more than compensated for any losses from overseas markets. As incomes rose, few durables were available for purchase. Business, especially in large cities with war-related industries, prospered as never before. Revenues in real dollars peaked in 1946; so did movie attendance. With restrictions on production, the number of features fell. No matter, revenues per film rose faster than costs. Even independent producers, usually working through RKO and United Artists, prospered. (Favorable tax benefits also helped.) The year 1946 saw the highest profits during Hollywood’s studio era: Paramount— $39 million; Fox—$25 million; Warners—$22 million; Loew’s—$18 million; even “poor cousin” RKO—$12 million. In real dollar terms, all these were corporate records, not approached again until the 1970s. The U.S. motion picture industry would have loved the Second World War to go on, at least on the home front, forever.

The Coming of Sound, No Chaos, but Consolidation of Economic Power In summary, the studio era—brought about by the coming of sound—represented a stable 20-year epoch in the history of American film. Eight major corporations—Paramount, Loew’s, Twentieth-Century Fox, Warner Bros., RKO, Universal, Columbia, and United Artists—dominated all phases of industry operation. In their quest for profits, these eight regularized film production with standardized products including features, animation and live

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short subjects, serials, and newsreels. All embraced now well-known narrative structures and then actively sought to convince potential movie patrons of the differences in their products. Through widespread advertising, all the majors heralded new stars, interesting stories, and stunning special effects. In so doing, these eight corporations worked to define how Americans understood what was an acceptable (natural) use of motion picture technology. During the 1930s, the studios that unit production provided a means of ensuring quality and consistency in high-end production while controlling not only costs but temperamental high-end talent. These units invariably formed around top stars and the other high-salaried, creative personnel— notably directors, writers, cinematographers, and composers—were keyed to specific star-genre formulas. Some of these units were informal and fluid, changing somewhat from one star-genre formulation to the next, except for a few key personnel, as with the writer, Casey Robinson, and the composer, Max Steiner, on the Bette Davis melodramas at Warners. Other units were remarkably consistent, like the Seitz unit at MGM, which cranked out Hardy Family pictures every four to six months, each of which depended on the collaborative efforts of the regular cast (Mickey Rooney, Lewis Stone, and other regular cast members), the director George B. Seitz, the associate producer Lou Ostrow, the writer Kay Van Riper, the script supervisor Carey Wilson, the cinematographer Lew White, the editor Ben Lewis, and dozens of others under studio contract, with some protections afforded by their guild or union membership. The producer was, in many ways, the key figure in these units, and the unit’s relative autonomy in terms of studio management was a function of both the producer’s track record and the leverage (contractual or otherwise) of the top talent involved. At the A-class feature level, where product differentiation was essential, the creativity of the collaborators was a veritable requirement; indeed, unit production at that level was a means of managing (and limiting) innovation. At the low-budget feature level, conversely, where the regulated difference of products was the prime concern, the studios maintained a mass-production, assembly-line mentality. In fact, by 1940 the most obvious remnant of the studio system’s central-producer system was in the B-picture arena. Each studio assigned a foreman of sorts—J. J. Cohn at MGM, Bryan Foy at Warners, Sol Wurtzel at Fox, Harold Hurley at Paramount, and Lee Marcus at RKO—to oversee production operations. But the 1940s also brought more genuinely independent producers owing to several related factors including the increasing leverage of top filmmaking talent, the growing demand for A-class product which accompanied the improving market, and the 1940 consent decree with its blocksof-five and trade-show provisions, which forced the studios to have A-class

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product on hand well in advance of release. This shift was widely anticipated in the industry, and in fact The New York Times ran an in-depth story on the coming trend in February 1940, noting, “The long-predicted bloodless revolution in picture-making appears imminent.”24 Warners, RKO, Universal, and Columbia led the way. UA was already supposed to be operating that way, but the company was barely making it, and the acceptance of independents and two majors and two minors hurt UA considerably. In April of 1940, Variety ran a lead story under the banner headline “Film Unit Production Grows,” reporting that the trend to studio-based independent filmmaking was accelerating, spurred by rising production and studio overhead costs and by the fact that some independents had their own outside funding. By 1940, top talent had already began to desert the safety and restrictions of a studio contact for freelance status—with the help of pioneering agents. Many of them actually created their own companies—a tactic that would accelerate rapidly as the war-related income tax codes took effect. While UA was an obvious option for independents and freelance talent, other studios began modifying the UA model and were beating the company at its own game. While UA offered greater autonomy, perhaps a studio could provide an in-house independent with financing, distribution, superior resources (production facilities, talent pool, and a full studio of facilities), and, in the case of the integrated majors, direct access to the first-run market through ownership of theaters. The studios were willing to consider deals with outside producers and other top talent, often on unprecedented terms, simply to secure proven film makers who could reliably deliver A-class features. This new leverage for independents affected studio-based contract talent as well in that, the studios were forced to grant more creative and administrative authority, to above-the-line personnel—stars, top directors, and writers, as well as, staff producers—in order to keep them under contract. The most famous, if not most financially successful, film makers were producer-directors like Frank Capra, John Ford, and Cecil B. DeMille. In fact, the number of these socalled hyphenates increased substantially in the 1940s, led by DeMille who adapted from a pioneer in movies per se, to a pioneer in how best to work in the new studio system—in his case at Paramount. These five majors not only ruled Hollywood during the 1930s and 1940s, but operated around the world as powerful fully integrated business enterprises. Only they could distribute films to their own theaters, located in the largest cities in the United States, as well as, a number of important foreign urban centers. The Big Five majors owned, the most important movie theaters in the biggest cities. By controlling picture palaces in all of the sizable downtowns, the Big Five major studios directly took in three-quarters of

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the average box office take. Only after they granted their own theaters exclusive first-run status and soaked up as much of the box office grosses as possible, did the Big Five major studios then permit smaller, independently owned theaters to scramble for the remaining bookings. As such, independent theaters never played an important role in film exhibition in the United States during the 1930s and 1940s. The Big Five studios secured their enormous power through film distribution. Only they could guarantee a film would be distributed throughout the world. As such, the cost of distribution into any single country was small, indeed less than what a native film company might need to spend. The major Hollywood studios already had prints, publicity material, and a track record theater owners admired. In turn, the major Hollywood studios had the funds to spend hundreds of thousands of dollars on their top films. Foreign competitors (indeed fellow Hollywood rivals) around the world never could match on a consistent basis this type of film financing. Thus, these five majors represented, in the 1930s and 1940s, far more than a handful of companies. The Big Five majors stood for the dominant film companies in the United States and around the world. They set the standard for filmmaking, film distribution, and film exhibition, and reaped the power and monetary rewards that went with their exalted status.25 In 1946, when the industry produced a little over 0.5 percent of the U.S. national income, and the same percentage of total wages, it was able to generate nearly 1.5 percent of all corporate profits. That is, the industry generated three times the expected share of profit. It is with this measure that the industry may have moved into the top ten U.S. industries, especially during its most prosperous years, 1941—1946, the so-called Second World War boom. Still, others did far better. For example, before the Second World War restrictions, the automobile and cigarette industries generated profits at twice the rate (and many times the absolute amount) of the motion picture industry. Thus, despite all the glamour and hype, the movie industry could never be considered more than a moderately successful industry, one affected by the usual booms and busts of twentieth-century capitalism. By the time of the creation of the studio system, most of U.S. movie patrons lived in big cities, and all cities of size had their major theaters owned by local chains centered in the biggest city in the region. By the time the studio-distributors were looking for a way to monopolize the industry—and would through the studio system—they simply needed to purchase one or more of these regional chains and gain significant power. The beginnings of the studio system also came on main street as theater which supplied seven-eights of all admissions were owned by one of five major studios: Paramount, Loew’s/MGM, Fox, Warners, and RKO. Paramount led the way by simply buying theater chains, principally in the Middle West and South.

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Loew’s had its chain in and around new York City, and then formed MGM to supply its theaters. Fox, Warners, and RKO pioneered the coming of sound, and used the vast profits made from this innovation to buy theater across the United States. As the Golden Era started in 1930, all the highest grossing theaters in the United States were owned by one of five companies. The biggest and grandest theaters were downtown, and were ornate in foreign styles, held thousands of fans, and because of their affiliation with one of the major Hollywood companies, were booked with Hollywood’s finest films upon their national premiere. They also always charged the highest prices. Then in an application of admission price discrimination, the major studios then developed a series of runs, with a month in between runs, all within a defined geographical space. The message to the fans was clear. Pay the most, and see your favorite stars downtown in a picture palace at top prices. Or wait until second run, and pay a little less. Chicago, for example, had 12 runs. The Hollywood studio bosses conceived of this idea from the travel industry which for the same train or ship ride, one got a ride, but at vastly different conditions, at vastly different comfort levels. The Big Five, by controlling picture palaces in all of America’s downtowns, took in the bulk of dollars at the box-office. Only after they granted their own theaters first-run and soaked up as much of the grosses as possible, did they then permit smaller, independently owned theaters to scramble for bookings. Second, and as important, they controlled international distribution guaranteed the companies the maximum advantages for selling their films. They alone could guarantee top films, shorts, and newsreels to theaters around the world. To set up a rival network was cost prohibitive for a newcomer. Even film companies in other nations did not have the resources to compete in the international marketplace with Hollywood. Indeed most film companies in most countries outside the United States conceded part of their own native market to Hollywood, so powerful was the American film industry’s advantage in distribution. The coming of sound ought not be remembered for a film (The Jazz Singer), production difficulties (as parodied in Singin’ in the Rain), or its speed (by the early 1930s fans were looking back at the apex of the silent film as art). It ought to be remembered for the consolidation of economic power we now call the studio system. This economic consolidation lasts to the present day—consider that only RKO is not still making and distributing movies.

CHAPTER

11

Mopping up the Loose Ends

Despite all the arguments of change in the films themselves, all the coming of sound caused was the solidification of the classic Hollywood narrative film style as 1930 commenced. This would remain the standard and Hollywood organized the studios to make these films in a regular, efficient manner. The process was organized with the regular production of scripts, shooting, editing, and corporate approval before release. To keep product flowing, stars were developed, personnel trained, sets built and maintained, all supervised by the head of studio production. This has been well argued by David Bordwell and Kristin Thompson—with its standardization through to the present day. But its base was the economics of the studio system—as fashioned by the coming of sound, as innovated by Adolph Zukor, and as reformulated by Lew Wasserman—creator of the modern media conglomerate, Universal Studios. There would be little in the way of technological change until the 1950s. The Great Depression and the Second World War cut off the desire for change. The exception was Technicolor, which must be saved for another book. The change that came in the organization of the industry and small problems that arose until sound was such a part of the Hollywood studio system that it seemed like it always had been there.

The Studios Stand Down AT&T The royalty provision of ERPI’s standard recording license agreement, signed May 11, 1928, by Paramount, Loew’s/MGM, and United Artists—an later all others save RKO—commanded licensees pay a fee for all sound

139

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films they distributed regardless of the origin of the recording. ERPI’s lawyers inserted this clause to retard the activity of RCA and its licensees when ERPI had reached the zenith of its power in 1928. Zukor’s committee did not much worry about some other system because they and their boss reasoned that AT&T would become the industry standard. The parties seemed at a stalemate about money, and Paramount and the others operated as they wished.1 As the balance of power changed through 1928—1930, AT&T and RCA began to clash about paying this fee. The initial clash involved trailers (filmed previews of upcoming attractions shown as part of the movie show). In September 1929, AT&T’s ERPI claimed that the production and distribution of trailers necessitated an extra royalty charge. Zukor’s lawyers committee disagreed. They asserted that the standard recording license agreement was vague on this matter. Many producers made trailers with footage reproduced directly from the feature film. Therefore, paying extra for trailers would be paying twice. Paramount and all other licensees refused to pay this extra charge.2 ERPI exhibited a double standard on royalty matters. At the same time it pressed for extra royalties, it granted certain licensees special favors. Paramount produced foreign versions of its talkies in its Joinville studio. For these, ERPI charged less than the usual $500 per negative reel. United Artists wished to release 12 special short subjects. If it did so, it would automatically raise its annual minimum royalty from $50,000 to $100,000.3 United Artists sales manager, Harry Buckley, took up the problem directly with ERPI’s manager, John Otterson. He claimed United Artists had planned these shorts well before considerations of sound had arisen. United Artists wished to more economically use its studio for the production of feature films. The experiment proved unsuccessful, and United Artists had no plans for continuing production once it had completed the original 12. Otterson waived the increase in royalties.4 In December of 1929, Otterson did not prove to be so kind. Sensing a rapidly declining power position, ERPI’s Otterson initiated claims against the licensees for separate royalty payments of $500 per negative for each language version of a feature film, regardless of where it was distributed. The licensees would also have to pay a foreign distribution royalty fee for each country for each separate language version. The lawyers committee began to study the legality of this request. On January 21, 1930, ERPI reasserted its claims, and added a new charge. If a licensee released a silent version of a sound film, that too would cost $500 per negative reel plus the appropriate foreign distribution charges.5 If that was not enough, ERPI claimed from United Artists, its major licensee distributing films of independent producers, an additional

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distribution fee of $500 per negative reel for She Goes to War. An independent producer, Inspiration Pictures, had recorded this film on RCA equipment at the Mack Sennett Studio. This double-royalty charge was the logical extension of ERPI’s month long pressure. The licensees did not want to pay these extra charges; United Artists’ management knew it would have a difficult time even collecting such fees.6 These claims remained unpaid for several months as the lawyers committee planned a counter maneuver. Louis Swarts, Paramount’s chief counsel, thought the committee should negotiate the matter directly with ERPI. Meanwhile, RCA notified the producers of She Goes to War that it would reimburse them for all extra ERPI charges.7 The lawyers knew RCA would be glad to have any extra business, so when it did open negotiations in June 1930 with ERPI concerning all these extra charges, it included RCA in the talks. The issues ranged the entire spectrum of royalty disputes. For example, United Artists was currently distributing 14 RKO produced films in Continental Europe. RKO, of course, recorded all its films on RCA equipment. Many licensees including Paramount, MGM, and United Artists distributed shorts for smaller companies, often recorded on RCA equipment. Many had multiple language and silent versions. All these operations would be in jeopardy if ERPI could enforce its extra charges.8 Through the rest of 1930 and into 1931, all the AT&T licensees paid only domestic royalties. AT&T’s ERPI countered by increasing its demands. Early in 1931 it claimed that if a foreign country censored a film and deleted part of the sound track, this constituted a new version. For this, its licensees had to pay an additional $500 per negative reel.9 But by June 1931, the decrease in demand for film viewings dictated a decrease in the price the licensees should pay. Standing as one, they triumphed and resolved all the disputes in their favor. There would be only one royalty fee of $500 per negative reel, regardless of the number of foreign versions produced. ERPI would charge only once for each foreign country for an unlimited number of versions distributed. There would be no extra fee for silent versions, cut-in-title versions, or subtitled versions. And finally, United Artists would not have to pay a double royalty. Between June and December, ERPI’s comptroller and the licensees’ accountants cleared up the remaining details. For example, ERPI would not charge extra for any films made specifically to avoid quota problems in England or France. For ERPI’s licensees, all royalty problems were completely solved by December, 1931.10 In two other matters the lawyers committee further reduced ERPI’s monopoly power over the licensees. ERPI held contracts for leased reproduction equipment in the theatre chains of all of the majors. In these contracts,

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signed in 1928 and 1929, ERPI placed two restrictive provisions in order to guarantee a greater than normal profits. The first concerned the servicing of the reproduction apparatus. In all ERPI’s leases it was mandatory that a theater secure a weekly service and inspection visit from an ERPI engineer.11 This proved invaluable in the hectic transitional period of the 1928— 1929 season. However, by 1930, most managers of major studio owned chains had trained their own service personnel. This was much cheaper. Nicholas Schenck repeatedly pressured Otterson to drop the required service. Otterson refused.12 Independent exhibitors complained with the same negative result. The major licensees placed the matter in the hands of Zukor’s lawyers’ committee. By the spring of 1933, the committee’s pressure led ERPI to mitigate its demand. On February 8, 1933, ERPI issued a new contract to exhibitors that granted, after two years and full payment of all past debts, rental of the equipment for one dollar per year with an option for service. Thus, in 1935 most theater chains ceased using ERPI’s service. As a consequence ERPI recorded its first loss in this branch of its operations.13 ERPI required not only service but also the use of only its replacement parts. In 1928 and 1929, this too proved to be a vital and important function for there existed no alternative source for many of these parts. The first ERPI exhibitor contracts provided that all additional or replacement parts had to be obtained from ERPI.14 Moreover, the exhibitor had to pay the list prices set by ERPI. The motive for these restrictions was clear. Robert E. Anderson, treasurer of ERPI, put it most succinctly when he spoke before a group of service engineers in 1929: “Our [standard exhibitor] contract provides that you can force these parts on the theaters. It proves that the theater must buy any such parts we insist on putting in. That is what the contract says and that is what we can do.”15 Exhibitors complained bitterly. By 1930 most parts could be secured less expensively from alternative sources. Independent theaters, as well as chains, pressed ERPI to reduce prices. The pressure by the theater divisions of the majors, with assistance of the Zukor’s lawyers’ committee, began to show results as early as January 1931. In that month, ERPI reduced some of its pressure for total acceptance of ERPI parts. In May 1932, Otterson ordered the significant changes. No new exhibitor contracts would contain the clause requiring the purchase of ERPI parts. Most exhibitors abandoned ERPI since open market prices still remained lower. As a consequence of these disputes, by 1933 ERPI kept only about 2,511 customers from its estimated 8,000 installations. The division of AT&T was now proving a drag on the company, and it went out of the talking movie business.

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The vertically integrated movie studios again—by acting as one—had best the largest corporation in the world.16

William Fox Seeks His Revenge By 1931, those who made William Fox his loans to acquire Loew’s had called in their debts and ousted Fox from his own company. He left with a $1 million settlement and loads of resentment. He also left with some disputed sound patents he owned in his own name. William Fox’s American Tri-Ergon Company claimed to own some of the patents covered in the Paris agreement that had settled the diffusion of talkies around the world (see Chapter 9).17 In 1927, William Fox secured the rights for himself, not the Fox Film Company. AT&T’s ERPI head, John Otterson, did not see this as a problem. He and Fox were extremely friendly at the time, and he was sure the rights were safe with Fox. Technically though, Fox’s patent rights were never cross-licensed with those of ERPI.18 Fox did not exhibit a friendly attitude once his ouster came in May 1930. By then, Otterson had helped wrest him from control of the company he had founded. Fox hired a team of attorneys to examine the strength of his Tri-Ergon rights. Approximately one year later, on September 29, 1931, the U.S. Patents Office granted William Fox’s American Tri-Ergon the U.S. rights to two of the patents at the heart of the Paris Agreement. Fox now had the official sanction to press AT&T and its licensees for his revenge as a man mistreated.19 In November 1931, William Fox filed two actions. The first was against Paramount for violation of Fox’s patents. William Fox knew that with Paramount’s patent indemnity clause in its recording license agreement with AT&T, this was in fact an action against AT&T’s ERPI. On November 4, by letter, and on December 1, 1931, in public notice, American Tri-Ergon warned all producers that this was a test case. If Paramount lost, American Tri-Ergon would sue all other film producers. The letters and advertisements urged the firms sign up with American Tri-Ergon immediately. None did.20 At this point, ERPI’s lawyers took up the defense. They first delayed any court action for two years. Then on August 14, 1933, a New York district court ruled William Fox’s patent invalid.21 William Fox appealed. In June 1934, AT&T saw the U.S. Court of Appeals reverse the lower court’s decision. AT&T’s ERPI appealed the decision to the United States Supreme Court. By then, Zukor’s lawyers’ committee took direct action. In order to guarantee that the Supreme Court would grant the necessary writ of certiorari, the committee hired former

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U.S. Attorney General, William D. Mitchell, ironically the former attorney general who had halted the mergers in late 1929, to file an amicus curiae [friend of the court appeal] on their behalf. Mitchell’s fee was $25,000.22 While the licensees awaited the Supreme Court’s decision, their lawyers, executives, and technicians held numerous conferences to form alternative strategies in case of defeat. Warners brought out its dusty disc equipment, while the other majors decided to directly record on to a disc, add the music and sound effects to the same disc, and then transfer these sounds to the film’s positive track. All agreed that this was the cheapest method to avoid having to pay a bitter William Fox huge license fees. Yet all the preparation was for nothing. On October 8, 1934, the Supreme Court refused to review the case on appeal. Hiring Mitchell seemed to have worked. William Fox was ostracized from the film industry for the rest of his life. He died with few headlines in 1952. No one challenged the studio system and came out unwounded. The studio public relations departments blackballed William Fox, and made him invisible in film history. Such was their collective power as a result of the collusion—behavior that worked against AT&T, the world’s largest company. William Fox never had a chance.23

Warners Versus AT&T In April 1928, flush with cash, and feeling atop the world, Warners filed a set of complaints against ERPI, not over patents, but over royalties due. Arbitration led nowhere as the disputed stakes grew in dollar figures. Under their original agreement, ERPI was to share some of the royalties paid by the nonpioneers to Warners. AT&T of course refused. As the royalties paid grew with the popularity of talkies, by mid-1929, Harry Warner calculated ERPI owed Warners over $6 million. ERPI had paid only $700,000. But with AT&T corporate power the dispute hung on. By 1930—with talkies being well diffused—Warners demanded $30 million. ERPI offered $5 million.24 AT&T continued to stall. It figured the film company, facing declining revenues in the face of the Great Depression, would simply give up. Instead, Warners simply asked for more. Harry Warner had had it with this process of formal arbitration. On December 13, 1932, Warners, incorporated in Delaware as AT&T and its subsidiary EPRI, filed suit in the Chancey Court of that state. On April 21, 1933, the Delaware court upheld Warners right to sue.25 Before the trail would have started, on June 6, 1934, almost six and onehalf years after Warners had filed its first arbitration charges, the parties settled out of court for $5 million. Given the uneasy legal situation and the losses Warners had sustained for four straight years, this must be taken as a rational move. Moreover, Warners agreed to waive any demands for future royalties and to remain an ERPI licensee. The lawyers benefited the most

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from the dozens of arbitration hearings. Samuel Untermeyer alone drew over $500,000 in fees, matching his fee for handling William Fox’s problems. But again the studios proved no weak sisters under the control of anyone. Warners alone had battled AT&T and come away with more money than anyone expected. AT&T knew Warners was backed by the other members of the studio system, and only agreed to pay anything to a company 1/100th its size because it faced collusive reprisals. Again the studio system proved a mighty outcome of the coming of sound.26

Finally, a Real Paris Agreement The major film companies never formally ratified the Paris Agreement as analyzed in Chapter 9. Shortly after the Paris conference, Germany passed a stiff new contingent law. The Hays Office became very upset and pressed its members not to sign. Paramount’s Louis Swarts of the lawyers’ committee went to Berlin to press for changes. Meanwhile, the U.S. firms paid the required royalty fees.27 In February 1932, a second Paris conference was held. Many foreign film companies resented paying two fees, one to ERPI to actually record the sound, and one to Tobis-Klangfilm required under the 1930 Paris Agreement. The French became especially discontented. At this second Paris conference nothing was resolved, and informal talks continued throughout 1932. On January 1, 1933, the Hollywood film companies began withholding payments because the Germans had demanded too much. They not only wanted the normal fees, but also extra royalties they labeled import charges. Back payments accumulated for two years as informal negotiations continued in Europe.28 It was not until March of 1935 that all the parties finally reached a settlement. The Hollywood companies paid all past debts through September 30, 1934. Formal negotiations then began for a new Paris Agreement. Another stalemate developed. Then the new head of Tobis-Klangfilm, Dr. Hans Henkel, journeyed to New York for personal negotiations in March of 1936 with Schenck and Zukor. A new agreement was effected in two weeks. All parties signed a new Paris Agreement on March 18, 1936.29 The Hollywood major studio and vertically integrated licensees were quite successful in negotiating a favorable agreement. All royalties fell 25 percent on the average. Moreover, payments could now be made in the currency of the country in which the motion picture was presented. This was a crucial concession. Frozen currency had tied up much of the Hollywood film companies’ revenues. The reduction had little effect in Germany since most American companies had withdrawn from that market by 1936, or operated through a German agent. The majors did save

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large amounts in the other countries in the German exclusive territory as a result of this provision. The new Paris Agreement was a success until 1939. In that year, ERPI’s licensees notified Tobis-Klangfilm that because of the European war, they would not honor the agreement. The war ended the collusion. It destroyed the German film and electronics industries and there was no needed for an agreement thereafter. Indeed, after World War II, Hollywood marched triumphantly into Germany and helped rebuild its rival. The studio bosses approved of this because they knew there would never be a threat against them by German corporations in any substantial way. The outcome of the collusive studio system yet again proved its might in the long run.30

New License Agreements By far the longest set of negotiations during the 1930s concerned John Otterson seeking to increase ERPI’s revenues in several ways. The first was to provide studio services, using ERPI recording equipment, to independent producers. In October 1929, ERPI licensed Audio-Cinema, Inc. to record industrial and business sound films. In 1930, ERPI also granted Audio-Cinema a license to record theatrical feature films. As such, AudioCinema was the only ERPI licensee in New York City whose facilities were available to independent filmmakers. Rival RCA was very active in the New York area. Thus, Otterson pressed Audio-Cinema to expand its operations, but was so unsuccessful in 1931 it petitioned for bankruptcy. ERPI was its principle creditor, claiming over 68 percent of its debts. Accordingly, to guarantee permanent operations in New York for independent producers, ERPI formed Eastern Service Studios as a subsidiary of the reorganized Audio-Cinema. Through stock ownership, ERPI controlled Eastern Service Studios and thus guaranteed studio facilities in the East.31 Eastern Services Studio opened in May of 1932. However, independent producers did not use the studio. RCA had similar facilities in the New York City area and its price was much lower. ERPI did not want to lower its terms because it would then have to grant the same reductions to its major Hollywood licensees. As an alternative, ERPI established a $500,000 revolving fund through its subsidiary, Exhibitors Reliance Corporation, to help finance independent productions. Independent producers who distributed through Fox, United Artists, Universal, and Columbia utilized this plan. In all, ERPI helped finance 33 features, 207 shorts, and 77 educational films in the next three years.32 In 1933, Otterson decided ERPI needed a similar operation in Hollywood. ERPI secured the studio property from the Christie Film Company and Educational Pictures in lieu of long standing debts. In June 1935, ERPI

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acquired complete control of General Studios. It now had studio services on both coasts. It did not provide financial assistance to West Coast independent producers. However this operation, in the face of the collusion by the majors, proved a money loser. By 1936, both the New York and Hollywood studios had shuttered and ERPI lost $300,000. AT&T again proved no match for the collusive studios.33 In the meantime, ERPI’s original licensees pressured for lower royalties. They complained about excessive minimum annual payments, additional royalties for English quota films presented in the United States, and the lack of credit towards the annual minimum for foreign royalties. In every dispute, the studio licensees would withhold payment until the matter was settled by negotiation. The lawyers’ committee would press for, and in all cases receive, reductions. The Hollywood colossus was besting AT&T at its own game.34 The resignation of John Otterson as ERPI’s chief officer in June 1935, proved the turning point. AT&T officials just could not understand or appreciate Otterson’s rigidness. The dominant advocate for monopoly in the face of RCA was gone. Moreover, RCA began to become more aggressive in its own right. As early as 1933, Sarnoff began to offer significant discounts to independent producers. In 1934, Universal added RCA to its production in 1934, but still principally used ERPI sound. In 1935, RCA opened negotiations with Twentieth-Century Fox, Columbia, and Warners. By June of 1936, all were RCA licensees. They continued to employ ERPI’s system, but now had a cheaper option. All chose to concentrate most of their activity with RCA. Of the eight majors, this left only Paramount, Loew’s/MGM, and United Artists—the orginal May 11, 1928 signees—exclusively with ERPI.35 As it became clear that Fox, Columbia, and Warners would switch to RCA, Paramount, Loew’s/MGM, and United Artists pressed for a new agreement. Formal negotiations opened in September of 1935. At that time, the new Ottersonless ERPI made its first major concession. All licensees could credit foreign royalties toward their annual minimum payments. After six months of meetings, the negotiators drafted a new recording license agreement, covering both domestic and foreign operations. It was dated June 1, 1936. All parties approved the contract, but it took five years before all problems were finally ironed out. In the meantime, all licensees operated under its major provisions. The disputes disappeared only with the coming of the Second World war.36 The negotiations that led to the final adoption of the new license were detailed and complex. Whenever any small problem was brought up, it was added to a long list to be resolved. At one point in 1938, ERPI began to investigate in detail all its patents. One took eleven months. The whole of the negotiations lasted until the months before the Pearl Harbor attack. The

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1941 Recording License Agreement was much more detailed in its provisions than its predecessor. Twenty-three separate terms were defined in the new contract; the 1928 agreement defined only nine. Licensees now could record not only in the United States, but also on location in Canada and Mexico. They could distribute all over the world. The only exception was German exclusive territories. Royalty fees drastically declined. The fee for a feature film was set at $54 per minute of running time. Thus, a 100-minute feature cost only $600 per negative reel. The previous rate for world distribution had been $1,000. Short subjects cost one-half the rate of features; dubbed versions were $4.50 per minute extra. Trailers were free. The annual minimum for both domestic and foreign distribution declined from $100,000 to $70,000. Again the Hollywood studio system had held AT&T at bay. No one controlled the industry from the outside; no bankers associated with AT&T ever had the power. The collusion was just too powerful.37 The real period of diffusion did not end until 1941 and the beginning of the war. By then ERPI was no longer a monopoly, and technological change had turned to color—specifically Technicolor—with the enormous success of Gone with the Wind. Hollywood had done well against the world’s largest company. In all cases its united corporate muscle proved better than AT&T with RCA nipping at its heels. This final adjustment phase—unknown to the public—was simply a battle of corporate titans. And, in a happy ending for Hollywood, the motion pictures won and could finally turn to war, which at first seemed like it would be a distribution disaster, but proved the Golden Age of profitability and power for the Hollywood studios.

One Final Technical Change I end with a note of irony. The greatest technological change in the movie industry in the United States during the 1930s came with the installation of air conditioning into theaters. With Willis Carrier’s development of a compact, relatively inexpensive apparatus, many more exhibitors installed a system for cooling air and humidity control. Extensive use of Carrier’s new inventions at the Chicago World’s Fair during the summers of 1933 and 1934 generated familiarity and favorable publicity. The Big Five movie houses were rich enough to install this creature comfort and functioned as the sole institution offering such service at prices affordable to middle- and lower-income U.S. citizens. Generally throughout the studio era of the 1930s, Big Five theaters offered complete air conditioning, air-cooling plus dehumidification. Independent theaters more often than not only cooled the air, often with indifferent results.38 The innovation of air conditioning made going to the movies into a year-round industry. Indoor entertainment could provide welcome relief

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from the heat and humidity, whether either of the feature films was entertaining or not. This turned the summertime into the prime movie-going season and drew children out of school in greater numbers to the movies. With more children and fewer ushers, rowdyism again became a problem in the movie house, to a degree unreported since the nickelodeon day some 25 years earlier. The coming of sound—and the coming of air conditioning —made going to the movies such an attraction that it boosted the film industry to the top of the entertainment industries in the United States.39

CHAPTER

12

The Coming of Sound

A Reinterpretation

The coming of sound to the American cinema was not a revolution, but a systematic, gradual industrial evolution. The change is best explained by the interaction of many complex economic forces and the decisions of many profit-maximizing businessmen. The idea of adding sound to then silent motion pictures was not new to any of the entrepreneurs who headed the major motion picture firms in the 1920s. The history of attempted innovation began as early as 1892. By 1905, systems appeared on the average of one per year. All failed. In 1913, even Thomas A. Edison turned his firm’s talents to the problem. He induced vaudeville magnates John J. Murdock and Martin Beck to install his system into their New York theaters. Despite this backing, the apparatus proved unsuccessful. This signaled the end to any consideration of a sound system by a major entertainment firm until AT&T appeared in 1924 with its system, backed by its technical expertise and substantial financial resources. This book has argued that once Warners and AT&T initiated films with sound—through recorded orchestra accompaniment and vaudeville shorts—that only three entries benefited: Warners, fellow pioneer Fox, and RCA created, RKO. These—along with Paramount, Loew’s/MGM, plus Columbia, Universal, and United Artists, seized the innovation and diffusion of sound to create the studio system, which is still with us today. They also proved the power of the industry as it operated collectively. Collusion became so obvious that by the summer of 1938 the United States

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government sued the majors for antitrust violation. Here was real economic power that was so powerful, many others complained and the political system reacted in rare fashion. But in the end the coming of sound was so well managed that its studio system should be remembered not for formation, but pushing the film business to the top of the entertainment industries, as surveyed in Chapter 2. Its other three rivals—the radio industry, the music industry, and the vaudeville industry—paled in comparison. Had it not been for the coming of talkies, the Hollywood studio system would not have come to be, and the full extent of its world domination of style and social mores would have been far different. This was an economic revolution, not a technological one. To fully appreciate this change and setting in motion of domination, consider the three rivals surveyed in Chapter 2. The radio industry had come a long way since 1926. Over 50 percent of all families in the most populous states owned radio sets. Radio broadcasting was an accepted advertising medium, and a very profitable business. The small, educational, or church related station was now in the distinct minority. The key change was in programming. Chain (network) broadcasting had become the most important aspect of the industry. Small affiliate stations could provide the best talent (usually ex-vaudevillians) at a very low cost and then sell their advertising time at higher rates. Two major broadcasting corporations, NBC and CBS, each with more than 70 affiliates, dominated the network segment of the industry. Each had links to the most powerful stations in each section of the country, and together, covered over one-eighth of the country’s stations. Both networks were controlled or linked to motion picture firms in the fall of 1929; RCA owned NBC and RKO, and Paramount owned 50 percent of CBS. That Paramount would sell CBS now seems short sighted, but many made mistakes in the face of the Great Depression.1 The music industry also had changed significantly since 1926. With the popularity of Warner Bros.’ The Singing Fool and MGM’s Broadway Melody, the theme song fad hit Tin Pan Alley. That is, in 1926, it took scores of song pluggers, vaudeville artists, and hundreds of theater and hotel orchestras to bring a popular song before the public. Now one sound feature film playing five or six times per day all over the country could expose a song to millions in less than a week. Similar exposures could be provided by a network radio show. Thus, in the fall of 1928, to be guaranteed a source for popular music and to profit by its exposure in their theaters, motion picture firms began to purchase the major music publishers of Tin Pan Alley. By the fall of 1929, all the major music publishers were in Hollywood, and Tin Pan Alley ceased to be a New York City phenomenon. Only a few of the small independent publishers remained in New York City, with only a limited sheet music market remaining for their products. Over 90 percent of the

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popular music in America was being generated by music publishers owned by Warners, Paramount, RCA, or Loew’s.2 The live vaudeville industry died because of the coming of sound. During the fall of 1928, as more and more major theaters became wired for sound, vaudeville, already in trouble from the competition of silent movies, began an even more rapid decline. Keith-Albee eliminated all long-term contracts with artists. Business seemed to settle down during the 1928— 1929 season as many small movie theaters used vaudeville acts to compete, until they could be wired. Once wired, however, Keith-Albee-Orpheum, Loew’s, Fox, and Publix circuits dropped vaudeville acts and added solely talkies. By May of 1929, the trend was clear. Only the largest cities could support even one vaudeville show. The old vaudeville artists were available through movie shorts, or free on the radio. In medium-sized cities like Syracuse or Pittsburgh, there was no vaudeville in any form. Chicago could support only one straight vaudeville theater. Only a few deluxe motion picture theaters in the largest cities continued to use live acts. By the beginning of the 1929—1930 movie season, vaudeville came the end. Only 300 theaters played live vaudeville acts. These were the major several thousand seat showcase movie palaces in the largest cities in North America.3 This history reframes many of the following myths that have come to define the coming of sound. 1. Warners was the lone pioneer. I have argued that the Warner brothers. were surely pioneers—but so was William Fox. Both tested the market place—Warners with Vitaphone shorts, Fox with newsreels with sound. The Jazz Singer was hardly the turning point. It was a silent feature that contained three Vitaphone shorts. Warners’ The Singing Fool—as much as one film could—was the film that changed the film industry as it proved economically innovation was to turn to diffusion, and Adolph Zukor and Nicholas Schenck knew and acted upon this data. 2. The industry was in a panic during 1928, 1929, and 1930. The coming of sound was a classic—if rapid—gradual evolution, not chaos. The majors did not rush into the production of talkies. They preplanned each step. None became frantic with the mad race to catch up with Warner Bros. The changeover subject to economic analysis was accomplished with little turmoil and saw all the majors increase, not lose, profits and power. Labor was powerless to change anything until 1933 when the National Recovery Act freed the studios to be fully unionized. 3. Banks are often argued to have dictated what would happen. I have argued that in case after case, through the innovation, diffusion, and

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adjustments in the 1930s, this is a tale of corporate collusive power. By now, few argue that Warner Bros. was anywhere near bankruptcy. Harry Warner and Waddill Catchings formulated a plan to catch Paramount-Famous Players. So did William Fox. Meanwhile, Zukor and company waited to see if these tests worked. When they did work, Zukor was ready and caught up to Warners and Fox before the 1920s ended. Zukor united the industry to play AT&T off RCA, and gain good terms so they would, by 1929, be setting record profits. During the 1930s, film industry collusion continued and AT&T never was able to crack the Hollywood colossus, and so, with RCA always ready to offer a counter deal, AT&T was the victim, not the film industry. In short, the coming of sound is best understood as an example of growing corporate power during the late 1920s and into the 1930s. 4. Adolph Zukor was no recalcitrant, unthinking businessman. He was not unprepared. Paramount and Loew’s engineers and lawyers were quite ready to quickly switch over to talkies. Here is where the speed comes in. Had they not been ready, they could not have made the transition in one and a half movie seasons. Zukor was simply not going to roll over and play dead. By banding together, he, Schenck, and the other leaders, skillfully played AT&T, then the world’s largest company, against RCA, and signed contracts favorable to them. Again, the speed of the switch over proves this. There were no contractual roadblocks to prevent a transformation measured in months, not years. With this solid economic analysis of the transformation of the industrial base, we can see the coming of sound was the gestation of what we call the Hollywood studio system. It is now possible to build upon this economic study and consider alternative studies. For example, Donald Crafton could redo his reception analysis—not for The Jazz Singer—but for The Singing Fool. A study of the Vitaphone shorts can be done—along with the Fox newsreels—as the testing of the audience, and what the nature of the audience demand was—in profit making practice. And we can see this transformation as what it really was: an orderly technological change which led the innovators into the exclusive club known as the Hollywood studio system. This was the legacy of the coming of sound.

Endnotes Preface 1. This is a standard assumption of economists. For the economics of industry analysis, see any edition of Frederick M. Scherer, Industrial Market Structure and Economic Performance (Chicago: Rand McNally & Co., 1st edition 1970, 3rd edition 1990). 2. Until its break-up in the early 1980s, AT&T was a vertically integrated company—from Western Electric making the equipment, to the monopoly provision of long distance, to ownership of the local companies. It was one of the largest and most powerful corporations in the United States for 65 years. 3. See also M. Carol Hammond’s unpublished Ph.D. dissertation, “The Adoption of Sound: Changes in Narrative and Narration in American Films, 1924—1934,” University of Wisconsin, Madison. Again she focuses on the outcome of economic change, not how the economic change transpired. 4. The other myth needed to be dispensed with depended is that Marcus Loew was running his Loew’s/MGM empire until his death in September 1924. Marcus Loew and Nich Schenck put MGM together, and the ever growing sicker Loew elevated himself to figurehead CEO while Schenck made all the key decisions after 1924. Zukor surely was the point person for the biggest companies, but Schenck as he always was—until the end of his career in the middle 1950s—played best from behind the scenes. 5. Amongst his Film Daily citations, are ones to my dissertation, hardly a primary source. Why not simply copy my citations and claim them for his own? He ignored my articles, but was energetic enough to walk from his Vilas Hall office to the University of Wisconsin library to find a dissertation written by J. Douglas Gomery, not the John Douglas Gomery he continually cites. (Possibly he found my birth certificate?) Yet he never did borrow my citations— or verify them—as for example, he cites my dissertation that the majors signed identical contracts. These I found in the State Historical Society—across the library mall—in the UA papers. He seems willing to take the analysis of a graduate student—and not seek out the articles where I refined my analysis. 6. This is best illustrated in an essay by the long time curator of the AT&T archive, Sheldon Hochheiser, “AT&T and the Development of Sound Motion-Picture Technology,” in Mary Lea Bandy, ed. The Dawn of Sound (New York: The Museum of Modern Art, 1989, 23—27), wherein he follows the model I developed and then uses many of the same documents I found in court records but contained in his archive. He even, while having complete access to AT&T’s papers, uses my dissertation and later work in his notes! So does Donald Crafton by using this article frequently in his notes rather than look at the records directly. 7. For the best overview of this theory, see Scherer, Industrial Market Structure, 1970, Ch. 15. 8. Edwin Mansfield, The Economics of Technological Change (New York: W. W. Norton, 1968), 50. 9. For a similar discussion for another industry see W. Rupert MacLaurin, Invention and Innovation in the Radio Industry (New York: Macmillan Co., 1949), or Nathan Rosenberg,

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156 • The Coming of Sound “Technological Change in the Machine-Tool Industry: 1840—1910,” Journal of Economic History, vol. 23, (December 1963), 414—447. 10. For a more complete explanation of this theory see William J. Baumol, Economic Theory and Operations Analysis, 2nd edition, (Englewood Cliffs, NJ: Prentice Hall, 1965), and Mansfield, The Economics of Technological Change, Ch. 4. 11. For similar work see Nobel Prize winner Zvi Griliches, “Hybrid Corn: An Exploration in the Economics of Technological Change,” Econometrica, 25 (October, 1957), 501—522.

Chapter 1 1. Maurice D. Kann (editor), The Film Daily Yearbook—1929 (New York: Film Daily, 1930), 889; Variety, 25 July 1928, 34; Variety, 3 October 1928, Variety, 28 November 1928, 22; Variety, 5 December 1928, 7; Variety, 6 February 1929, 39; Variety, 20 March 1929, 7; Variety, 15 May 1929, 28; Variety, 16 April 1930, 35, 51. 2. Academy of Motion Picture Arts and Sciences, Annual Report for 1929 (Hollywood, 1929); Irving Thalberg, “Technical Activities of the Academy of Motion Picture Arts and Sciences,” Journal of the Society of Motion Picture Engineers, volume 15 (July, 1930), 3—16; Variety, 16 May 1928, 9, 16, and 42: Variety, 26 June 1929, 5; Variety, 30 October 1929, 26; Variety, 19 February 1930, 10. 3. Variety, 30 May 1928, 10; Variety, 6 June 1928, 7; Variety, 27 June 1928, 3; Variety, 11 July 1928, 10; Variety, 8 August 1928, 10; Variety, 28 November 1928, 5; Variety, 23 January 1929, 50; Variety, 16 March 1929, 1, 60; Variety, 3 April 1929, 6; “Talkies Require Concrete Construction,” Concrete, 135 (August, 1929), 56; Howard T. Lewis, (editor), Cases on the Motion Picture Industry (New York: McGraw-Hill, 1930), 19. 4. Variety, 24 April 1929, 17; Lewis, Cases on the Motion Picture Industry, 590—594; Trevor Faulkner, “The Maintenance of Sound Film in Exchange Operation and the Degree that Sound Reproduction Is Affected by the Continued Use of the Sound Track,” Journal of the Society of Motion Picture Engineers, volume 14 (October, 1930), 501—508. 5. Variety, 18 July 1928, 20, 23; Variety, 29 May 1929, 30; Variety, 17 July 1929, 5; Variety, 8 May 1929, 29; Variety, 7 August 1929, 185; “Economic Relief for Small Town Exhibitors,” The Motion Picture, September, 1929, 3. 6. Variety, 13 June 1928, 5; Variety, 18 July 1928, 49; Variety, 25 July 1928, 49; Variety, 8 August 1928, 44; Variety, 19 September 1928, 5; Variety, 10 October 1928, 1; New York Times, 5 June 1929, 1; Equity, July, 1928, 7—8; Equity, June, 1929, pages 7—14; Alfred Harding, Revolt of the Actors (New York: William Morrow and Company, 1929), 532—542. 7. New York Times, 6 June 1929, 19. I note that often the use of The New York Times is the case of being lazy as this has long been one of the wholly indexed U.S. newspapers. But for film industry studies of the pre-1960 era, The New York Times serves as a near trade paper and complete financial newspaper—as all the headquarters of the major companies were in New York City, most on Times Square. 8. New York Times, 7 June 1929, 28; Variety, 12 June 1929, 5; New York Times, 10 June 1929, 3; Variety, 26 June 1929, 6—7; New York Times, 28 June 1929, 5; Equity, July, 1929, 8; Variety, 3 July 1929, 6; Variety, 24 July 1929, 7, 42; New York Times, 21 July 1929, section VIII, 4; Variety, 7 August 1929, 191; Variety, 14 August 1929, 1, 6, 7, and 14; Equity, October, 1929, 51. 9. Variety, 2 January 1929, 17; Martin Quigley (editor), Motion Picture Almanac, 1934 (New York: Quigley Publications, 1935), 15; New York Times, 22 August 1928, 15. For the history of RCA and RKO see Gleason L. Archer, Big Business and Radio (New York: American Historical Company, 1939), 322—351 and Carl Dreher, Sarnoff (New York: Quadrangle, 1977), 103—133.

Chapter 2 1. Maurice D. Kann, editor, The Film Daily Yearbook 1927 (New York: Film Daily, 1928), 401— 409; Variety, 15 July 1925, 25. 2. Maurice D. Kann, editor, The Film Daily Yearbook 1926 (New York: Film Daily, 1927), 657. United Artists’ average was $273,000, Famous-Players, $213,000, and MGM, $286,000. 3. Kann, Yearbook—1926, 449—456; Kann, Yearbook—1927, 459. 4. Wall Street Journal, 27 May 1927, 1.

Endnotes • 157 5. Variety, 15 August 1925, 25; Variety, 16 June 1925, 8. 6. Kann, Yearbook—1926, 361; Variety, 2 September 1925, 25. 7. Variety, 21 April 1926, 20; Variety, 28 April 1926, passim (for Fox); Variety, 1 April 1925, 27; Variety, 23 December 1925, 35; Howard T. Lewis, “Motion Pictures,” Encyclopedia of the Social Sciences (New York: MacMillan, 1937), 61; Wall Street Journal, 27 May 1927, 7. 8. Kann, Yearbook—1926, 361. 9. Kann, Yearbook—1927, 777—781; Variety, 2 September 1925, 25. 10. Variety, 3 March 1926, 27; C. J. North, “Our Foreign Trade in Motion Pictures,” The Annals of the American Academy, volume 128 (November, 1926), 101. 11. North, “Foreign Trade,” 101—102. 12. North, “Foreign Trade,” pages 107—108. 13. Kann, Yearbook—1927, 3; North, “Foreign Trade,” 100; Benjamin Hampton, A History of the Motion Picture Industry, 368—374; Jesse L. Lasky, “Hearing Things in the Dark,” Collier’s, 25 May 1929, 48. 14. William A. Johnson, “The Structure of the Motion Picture Industry,” Society of Motion Picture Engineers Transactions, volume XI (1927), 675; William A. Johnson, “The Motion Picture Industry,” The Annals of the American Academy, volume 127 (September, 1926), 100. 15. Johnson, “The Structure of the Motion Picture Industry,” Society of Motion Picture Engineers Transactions, 1927, 667. 16. Kann, Yearbook—1927, 649—671, 905—910; Variety, 12 May 1926, 5. 17. Howard T. Lewis, The Motion Picture Industry (New York: D. Van Norstrand, 1933), 22; Lewis, “Motion Pictures,” Encyclopedia of Social Sciences, 59; Variety, 8 July 1925, 26. 18. Variety, 15 April 1925, 26, 30; Variety, 6 July 1925, 23; Wall Street Journal, 11 June 1927; 4. 19. Variety, 9 December 1925, 34; Variety, 3 June 1925, 5; Wall Street Journal, 23 June 1927, 4; The Wall Street Journal, 3 June 1927, 3. 20. Eric T. Clarke,“An Exhibitor’s Problems in 1925,” Transactions of the Society of Motion Picture Engineers, January, 1926, 49; Variety, 1 April 1926, 36; Eric T. Clarke, “An Exhibitor’s Problems in 1927,” Society of Motion Picture Engineers Transactions, volume IX (1927), 453. 21. Lewis W. Townsend and William W. Hennessy, “Some Novel Projected-Motion Picture Presentations, “ Society of Motion Picture Engineers Transactions, volume XII (1928), 349; Kann, Yearbook—1927, 509. 22. Variety, 10 March 1926, 35. 23. Variety, 16 December 1925, 29; Variety, 27 January 1926, 5; Variety, 14 April 1926; 23; Variety, 7 April 1926, 7; Variety, 17 March 1926, 27. 24. Roland Gelatt, The Fabulous Phonograph (Philadelphia: Lippincott, 1955), 217—218. 25. These conclusions are based on 1930 data from Malcolm A. Willey and Stuart A. Rice, Communication Agencies and Social Life (New York: McGraw-Hill, 1933), 187—193. 26. Leslie Page, “The Nature of the Broadcasting Receiver and Its Market in the United States from 1922 to 1927,” Journal of Broadcasting, volume 4 (Spring, 1960), 178; E. Haase, “What’s Happening in the Radio Industry?” Printer’s Ink, 15 October 1925, 6—9, 172—183. 27. E. C. Reeves, “Growing Pains in an Infant Industry,” Nation’s Business, September, 1929, 50. 28. John W. Spalding, “1928: Radio Becomes a Mass Advertising Medium,” Journal of Broadcasting, volume 8 (Winter, 1963—64), 39; James B. Walker, The Epic of American Industry (New York: Harper Bros., 1949), 351; Willey and Rice, Communication Agencies, 198. 29. Walker, Epic, 352—355. 30. Reeves, “Growing Pains,” 54; William Peck Banning, Commercial Broadcasting Pioneer the WEAF Experiment 1922—26 (Cambridge: Harvard University Press, 1946), 116; Variety, 19 April 1923, 3. 31. Variety, 21 December 1924, 26; Variety, 7 January 1925, 39; Spalding, “Radio Becomes,” 40. 32. Variety, 26 August 1925, 1; Variety, 10 February 1926, 42. 33. Variety, 9 December 1925, 1, 43; Variety, 5 May 1926, l; George A. Lundberg, “The Content of Radio Programs,” Social Forces, volume 7 (September, 1928), 59. Using Lundberg and Variety’s weekly radio reviews, I extrapolated backwards. 34. Banning, Pioneer, 39; Variety, 5 April 1923, 26; Variety, 19 November 1924, 21. 35. Variety, 1 April 1925, 1; Variety, 27 January 1926, 29; Variety, 21 January 1925, 26; Variety, 6 December 1923, 22; Variety, 28 January 1925, 25; Moving Picture World, 25 April 1925, 756; Moving Picture World, 23 January 1926, 306; Moving Picture World, 13 February 1926, 621.

158 • The Coming of Sound 36. Moving Picture World, 15 May 1926, 223; Moving Picture World, 7 August 1926, 322. 37. Variety, 15 August 1925, 24; Coleman Galloway, “Radio and the Movies Are Linked,” Radio News, November, 1925, 586—587. 38. David Ewen, The Life and Death of Tin Pan Alley (New York: Funk and Wagnalls Co., 1964), 258—264. 39. Ewen, Life and Death, 266—300; Ian Whitcomb, After the Ball (London: Penguin Press, 1972), 90—94; Lawrence Dale, “Piano and the New Competition,” Commerce and Finance, 1 January 1930, 14; James Parakilas, Piano Roles: A New History of the Piano (New Haven, CT: Yale University Press, 2002). 40. Ewen, Life and Death, 294—303; Whitcomb, After the Ball, 96—107. 41. Ewen, Life and Death, 303—306; Whitcomb, After the Ball, 108—116. 42. George D. Pasquella, “An Investigation in the Use of Sound in American Motion Picture Exhibition, 1908—1919,” (Masters Thesis, University of Iowa, 1968), 66—67; Reginald Foort, The Cinema Organ, 2nd ed. (Vestal, New York: Vestal Press, 1970), 34—49. 43. Pasquella, “An Investigation,” 66—73; Charles Hoffmann, Sounds for Silents (New York: Dramatic Bookstore Publications Drama Book Specialists, 1970), 2; John W. Landon, “Long Live the Mighty Wurlitzers,” Journal of Popular Film, volume II (Winter, 1973), 3. 44. Pasquella, “An Investigation,” 35; Paul S. Carpenter, Music: An Art and a Business (Norman: University of Oklahoma Press, 1950), 279. 45. Pasquella, “An Investigation,” 33—46; Landon, “Long Live,” 4—5. 46. Herbert v. Shanley, 242 U.S. 591 (1917); Leonard Allen, “The Battle of Tin Pan Alley,” Harpers, October, 1940, 516; St. Nicholas Amusement Co. v. Maxwell, 196 N.Y. Supp. 395 (1918); Harry Page Warner, Radio and Television Rights (New York: Matthew Bender, 1953), 344—345 [no relationship to Harry M. Warner, long time president of Warner Bros.]. 47. Warner, Rights, 341—343. 48. Eric T. Clarke, “An Exhibitor’s Problems in 1927,” Society of Motion Picture Engineers Transactions, volume XI (1927), 453. 49. Eric T. Clarke,“An Exhibitor’s Problems in 1925,” Transactions of the Society of Motion Picture Engineers, January, 1926, 49; Hoffmann, Sounds, 26. 50. Hoffmann, Sounds, 39; Erno Rapee, Encyclopedia of Music for Pictures (New York: Belwin, 1925), 23—24; Pasquella, “An Investigation,” page 49; Foort, Cinema Organ, 87. 51. Roger Manvell and John Huntley, The Technique of Film Music (London: Focal Press, 1957), 212; Hoffmann, Sounds, 9; Hugo Risenfeld, “Music and Motion Pictures,” volume 128 The Annals of the American Academy, November, 1926, 60—61; Kurt London, Film Music: A Summary of the Characteristic Features of Its History, Esthetics Techniques, and Its Possible Developments, Translated by Eric S. Bensinger, (London: Farker, 1936), 66, 68—69. 52. Donald Mac Gregor, “Serious Business in the Laugh Industry,” Nation’s Business, March, 1926, 48; Julius Weinberger, “Economic Aspects of Recreation,” Harvard Business Review, volume XV (Summer, 1937), 451—455, 458. 53. John Sherman Porter, Moody’s Manual of Industrials (New York: Moodys, 1928), 2457—2458; Marian Spitzer, “The People of Vaudeville,” Saturday Evening Post, 12 July 1924, 62—66; Marian Spitzer, “The Business of Vaudeville,” Saturday Evening Post, 24 May 1924, 130; Frederick E. Snyder, “American Vaudeville—Theatre in a Package: The Origins of Mass Culture,” (Ph.D. dissertation, Yale University, 1970), 31—32; John E. DiMeglio, Vaudeville USA (Bowling Green, Ohio: Bowling Green Press, 1973), 33—35; Allen Churchill, The Great White Way (New York: E. Page Dutton, 1962), 206—212. 54. Spitzer, “The Business,” 18; Churchill, White Way, 202—203. 55. Abel Green and Joe Laurie, Jr., Show Biz: From Vaude to Video (New York: Henry Holt and Co., 1951), 271—72; Variety, 12 May 1926, 14. 56. Snyder, “American Vaudeville,” 134; Spitzer, “The People,” 66; Variety, 12 May 1926, 1, 4. 57. Robert G. McLaughlin, “Broadway and Hollywood: A History of Economic Intervention,” (Ph.D. dissertation, University of Wisconsin, 1970), 44—93, 272, 275, 282. 58. Green and Laurie, Show Biz, 275; Variety, 29 March 1923, 3; Variety, 26 March 1924, 5. 59. Variety, 16 April 1924, 4; Variety, 21 May 1924, 1, 4. 60. Variety, 4 March 1925, 4; Variety, 11 March 1925, 5; Variety, 27 May 1925, 43; Variety, 20 January 1926, 7; Variety, 5 May 1926, 25. 61. Variety, 18 March 1925, 5; Variety, 21 October 1925, 3; Variety, 27 January 1926, 8. 62. McLaughlin, “Broadway,” 78—88.

Endnotes • 159

Chapter 3 1. This is based upon the first article I ever published “Writing the History of the American Film Industry: Warner Bros. and Sound,” Screen, volume 17, number 1 (Spring, 1976), 40— 53. In an introductory history to Screen’s publication of film history, editors Annette Kuhn and Jackie Stacey argue this was the first of the new film history published by that influential journal: “Gomery’s essay not only presents fresh historical information, but also, perhaps more importantly, constituted a manifesto for a bold new approach to the historiography of cinema.” See Screen Histories: A Screen Reader (Oxford, UK: Clarendon Press, 1998), 3 for the quotation; the article is reprinted on pages 139—148. I was not issuing a manifesto per se, but was seeking publication of work I thought was original and brought a new perspective to film history. In the end, I failed as few historians came later, and the myth remains widely accepted to this day. 2. James Limbacher, Four Aspects of the Film (New York: D. Van Norstrand, 1933), 197; Arthur E. Krows, The Talkies (New York: Henry Holt & Co., 1930), 100. 3. The myth is repeated in the standard literature. For example, Matthew Josephson, Edison (New York: McGraw-Hill, 1959), 337—338. It has been successfully challenged by Gordon Hendricks, The Kinetoscope: America’s First Commercially Successful Motion Picture Exhibitor (New York: The Beginnings of American Film, 1966), 90—92, 119—125. 4. Hendricks, The Kinetoscope, 119, 123; Rosiland L. Rogoff, “Sound and Film—The Long Engagement,” (masters thesis, University of California at Los Angeles, 1973), 11—12. 5. Dennis Sharp, The Picture Palace and Other Buildings for the Movies (London: Hugh Evelyn, 1969), 100; Moving Picture World, 30 November 1908, 342; Moving Picture World, 1 May 1909, 558. 6. Moving Picture World, 27 March 1909, 362, 369. 7. Moving Picture World, 25 April 1908, 369; Abel Green and Joe Laurie, Jr., Show Biz: From Vaude to Video (New York: Henry Holt and Co., 1951), 52. 8. Moving Picture World, 25 April 1908, 369—70; Moving Picture World, 20 March 1909, 328. 9. Moving Picture World, 20 March 1909, 328. 10. Moving Picture World, 7 May 1910, 727; Moving Picture World, 18 November 1911, 553. 11. Moving Picture World, 6 March 1909, 272; Moving Picture World, 4 June 1910, 945. 12. Moving Picture World, 20 August 1910, 415; Moving Picture World, 13 March 1909, 299. 13. Moving Picture World, 28 June 1913, 1347—1348; Leslie Wood, The Miracle of the Movies (London: William Heinemann, Ltd., 1937), 159. 14. Robert Grau, “The ‘Talking’ Picture and the Drama,” Scientific American, 12 August 1911, 155—156. 15. New York Times, 4 January 1913, 7. 16. Edward W. Kellogg, “History of Sound Motion Pictures,” in Raymond Fielding, editor, A Technological History of Motion Pictures and Television (Berkeley: University of California Press, 1967), 174. 17. Moving Picture World, 28 June 1913, 1347. 18. Will H. Hays, See and Hear (Hollywood: Motion Picture Producers and Distributors Association, 1929), 41—42. 19. New York Times, 9 March 1930, section IX, 6. 20. Green and Laurie, Show Biz, 55. 21. New York Times, 18 April 1913, 1; New York Times, 6 May 1913, 20; New York Times, 21 January 1914, 1; New York Times, 5 January 1913, 7; Grau, “The Talking Picture,” 155—56; Moving Picture World, 22 February 1913, 758. 22. Moving Picture World, 19 March 1913, 1318; New York Times, 18 February 1913, 3; Variety, 21 March 1913, 1. Rogoff, “The Long Engagement,” 23, presents an advertisement from a Hong Kong newspaper for a 1913 presentation. 23. “Dehumanizing the Stage,” Current Opinion, April, 1913, 297; Josephson, Edison, 429—431; Limbacher, Four Aspects, 199; Rogoff, “The Long Engagement,” 22—27. 24. New York Times, 3 May 1921, 20; New York Times, May 1921, section VII, 2; Iris Barry, W. Griffith (New York: Doubleday and Co., 1965), 6; Moving Picture World, 1 November 1913, 483. 25. Lee De Forest, Father of Radio: The Autobiography of Lee De Forest (Chicago: Wilcox and Follett, 1950), 358—359; New York Times, 17 August 1922, 6; New York Times, 29 August 1922, 1.

160 • The Coming of Sound 26. New York Times, 24 September 1922, section II, 1; New York Times, 5 April 1923, 12; New York Times, 13 March 1923, 12. 27. New York Times, 16 April 1923, 20. 28. New York Times, 18 June 1924, 2. 29. New York Times, 1 September 1924, 3; New York Times, 12 August 1924, 38; New York Times, 19 September 1924, 3. 30. Variety, 9 July 1930, 15; Lee de Forest, “Pioneering in Talking Pictures,” Journal of the Society of Motion Picture Engineers, April, 1925, 48. 31. Variety, 4 November 1925, 6; Variety, 6 December 1925, 27; General Talking Pictures Corporation v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), Louis B. Hoffmann deposition, 3—4. 32. General Talking Pictures Corporation v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), M. A. Schlesinger deposition, 1; General Talking Pictures Corporation v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), “Findings of Facts,” 1. 33. Frank H. Lovette and Stanley Watkins, “Twenty Years of Talking Movies,” Bell Telephone Magazine, Summer, 1946, 84—89; General Talking Pictures Corporation et al. v. American Telephone and Telegraph Company et al., 18 F. Supp. 650 (1937), Record, 2488—2489. 34. General Talking Pictures, 18 F. Supp. 650, Record, 2505—2506. 35. Lovette, “Twenty Years,” 90—91; “Samuel L. Warner, Honor Roll Award,” Journal of the Society of Motion Picture Engineers 48 (May, 1947), 443; General Talking Pictures, 18 Supp. 650, Record, 2491. 36. Lovette, “Twenty Years,” 92; General Talking Pictures, 18 F. Supp 650, Record, 2490—2495. 37. E. C. Wente, “Contributions of Telephone Research to Sound Pictures,” Journal of the Society of Motion Picture Engineers, volume 27 (August, 1936), 190—191. 38. New York Times, 7 August 1926, 6. 39. Lovette, “Twenty Years,” 84—93; P. M. Rainey, “Some Technical Aspects of the Vitaphone,” Transactions of the Society of Motion Picture Engineers, August 1927, 298; General Talking Pictures, 18 F. Supp. 650, Record, 2501. 40. General Talking Pictures, 18 F. Supp. 650, Record, 2502—2503. 41. Lovette, “Twenty Years,” 93—94. 42. General Talking Pictures, 18 F. Supp. 650, Record, 2504—2508. 43. N. R. Danielian, AT&T.: The Story of Industrial Conquest (New York: The Vanguard Press, 1939), 1—50. 44. U.S. Federal Communications Commission. Report on Electrical Research Products Inc., Volume I, Report A (Pursuant to Public Resolution No. 8, 74th Congress, 1937), 13—24. 45. U.S. Federal Communications Commission, Staff Report on ERPI Volume I, 53—54; U.S. Federal Communications Commission. Report on the Investigation of the Telephone Industry in the United States (House Document 340, 76th Congress, 1st Session, 1939), 225—230. 46. New York Times, 22 April 1942, 24; General Talking Pictures, 18 F. Supp. 650, Record, 2619— 2633, Electrical Research Products, Inc. v. Vitaphone Corporation, 171 A. 738 (1934), Plea, 288—392, 376—378. 47. General Talking Pictures, 18 F. Supp. 650, Exhibit 4, letter Western Electric to Walker J. Rich, 27 May 1925. 48. General Talking Pictures Corporation et al. v. American Telephone and Telegraph Company et al., 18 F. Supp. 650, Record, 1108. 49. Koplar (Scharaf et al., Intervenors) v. Warner Bros. Pictures, Inc. et al., 19 F. Supp. 173, (1937), Record, 368. 50. United States Federal Communications Commission, Staff Report on Electrical Research Products, Inc., Volume 11, Report A (pursuant to Public Resolution No. 8, 74th Congress, 1937), 169. 51. Many documents support this chapter. The most important government documents employed in the author’s research were the Hearings on H.R. 4523: Pooling of Patents (74th Congress, 1st Session, 1935. (b) 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: Electrical Research Products, Inc., v. Vitaphone Corporation, 171 a. 738 (1934); General Talking Pictures

Endnotes • 161 Corporation et al. v. American Telephone and Telegraph Company et al., 18 F. Supp. 650 (1937) and Koplar (Scharaf et al., Interveners) v. Warner Bros. Pictures, Inc., et al., 19 F. Supp. 173 (1937).

Chapter 4 1. “Theodore W. Case, Honor Roll Award,” Journal of the Society of Motion Picture Engineers, volume 48 (May, 1947), 437—438; T.W. Case, “Thalofide Cell: A New Photo-Electric Substance,” The Physical Review, volume XV, Series II (April, 1920), no. 4, 289—292; T.W. Case,“Infra Red Telegraphy and Telephony,” Journal of the Optical Society of America, volume VI, number 4 (June, 1922), 398—406. 2. Lee de Forest, “Journal Notebook,” Volume 21, 13 May 1923 and Volume 22, 10 February, 11 May, 29 June and 15 August 1924, Lee de Forest Collection, Library of Congress Manuscript Collection, Washington, D.C.; Earl I. Sponable, “Historical Development of Sound Films,” Journal of the Society of Motion Picture Engineers, 48 (April, 1948), 286—290; Lee de Forest, Father of Radio (Chicago: Wilcox and Follett, 1950), 368—370. 3. Sponable, “Historical Development,” 297. 4. The Loew’s Corporation functioned as the parent company for its more famous subsidiary, MGM, a production unit. 5. Sponable,“Historical Development,” 290—299; Lee de Forest,“Journal Notebook, volume 22, 7 December 1924, and volume 23, 7 September 1925, 19 December 1925,” Lee de Forest Collection; de Forest, Father of Radio, 394—395; Altoona Publix Theaters, Inc. et al. v. American Tri-Ergon Corporation et al., 294 U.S. 477 (1935), Record, 251—252. 6. Paramount Publix Corporation v. American Tri-Ergon Corporation, 294 U.S. 464 (1935), Record, 410—412; In the Matter of William Fox, Bankrupt, no. 24431 (New Jersey, 1936), Testimony of William Fox, 117—146; Altoona Publix Theaters, 294 U.S. 477, Record, 223, 240; Film Daily, 3 January 1926, 1, 11; Variety, 22 September 1926, 5. 7. Overlooked has been William Fox’s penchant for becoming personally involved in lengthy court fights. During the Great Depression, this movie mogul first sought to claim all rights to two basic patents for sound-on-film recording. He failed, and thus had to file for personal bankruptcy in 1936. Within these cases are reams of documents containing testimony, correspondence, contracts, and financial records concerning the Fox Film Corporation’s activities during the coming of sound. Moreover, Fox Film secured much financial support for its innovation of sound through a Chicago investment-banking house, Halsey, Stuart. An examination of files in Halsey, Stuart’s headquarters has revealed additional, detailed records of Fox’s financial activities. Supplementing the primary evidence are data from investigations of Fox’s activities by agencies of the United States government, and the fine coverage of its business affairs in trade papers such as Variety, Moving Picture World, Motion Picture News, and Film Daily. This mass of information furnishes the historian with more than enough evidence to construct a thorough re-evaluation of Fox’s contributions regarding the introduction of sound-on-film technology. Fox took on the studios in the 1930s and failed as analyzed in Chapter 11. 8. W.R.K. Taylor, “Summary of a Detailed Study of Fox Film Corporation, September, 1927,” 6—14, Fox Folder 6; “Statement and Affidavit of Winfield R. Sheehan, 24 March 1930,” 26— 27, Fox Folder 17; William Fox, “Answer of William Fox to `Open Letter’ of Halsey, Stuart & Co. of 24 March 1930,” 5—14, Fox Folder 17; “Fox West Coast Properties, Supplementary Memorandum, 11 April 1927,” Fox Folder 18; Prospects for Fox St. Louis Theatre and Fox Detroit Theatre, 1927, Fox Folders 2 and 15, Bache Halsey-Stuart Library, Chicago; John Sherman Porter (editor), Moody’s Manual of Industrials—1931 (New York: Moody’s Investor Service, 1931), 410; United States v. Fox Theaters Corporation et al., Eq. 51—122 (S.D.N.Y., 1929), Answer for Fox Film Corporation, 27—28. 9. In the Matter of William Fox, Testimony of William Fox, 155—176; Lee de Forest, “Journal Notebook, Volume 23, 7 October 1927,” Lee de Forest Collection, Library of Congress; United Artists Collection, O’Brien File, Manuscript Collection (Wisconsin Center for Film and Theatre Research, Madison), Box 84—86, Letter, F.T. Woodward to Vita-phone Corporation, 3 December 1931; U.S. Federal Communications Commission, Telephone

162 • The Coming of Sound

10. 11.

12.

13. 14. 15.

16. 17. 18.

19. 20.

21.

22.

23.

Investigation Exhibits (Pursuant to Public Resolution No. 8, 74th Congress), 1936—1937, Exhibits 1794—1797; Variety, 13 October 1926, 5; Altoona Publix Theaters, 294 U.S. 477, Record, 116—123; “Fox Loses,” Business Week, 9 March 1935, 18. For an excellent discussion of the differences between the two sound-on-film systems see Raymond Spottiswoode, Film and Its Techniques (Berkeley: University of California Press, 1969) 279—322. In the Matter of William Fox, Testimony of William Fox, 129—131; Altoona Public Theaters, 294 U.S. 477, Record, 621; Paramount Publix Corporation, 294 U.S. 464, Record, 415; New York Times, 23 October 1926, 35; New York Times, 27 October 1926, 19; New York Times, 28 October 1926, 25; Variety, 27 October 1926, 55, 62; Eugene Lyons, David Sarnoff (New York: Harper and Row, 1966), 141—142; John A. Miller, Workshop of Engineers (Schenectady, NY: Maqua, 1953), 21. 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, 1245, 1315—1349; General Talking Pictures Corporation et al. v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), Record, 2732—2734; Moving Picture World, 8 January 1927, 1; Moving Picture World, 15 January 1928, 2; Exhibitor’s Daily Review, 6 January 1927, 1—2. U.S. Congress, Pooling of Patents, 1670—1672; Moving Picture World, 19 February 1927, 1; Moving Picture World, 26 February 1927, 622, 677; Variety, 10 November 1926, 9; Variety, 23 February 1927, 7; Variety, 2 March 1927, 10. Moving Picture World, 5 March 1927, 20; Variety, 6 April 1927, 54; Variety, 13 April 1927, 9; Variety, 20 April 1927, 1; Variety, 4 May 1927, 4. In addition, Courtland Smith also helped Fox Film plan new theaters, open additional distribution outlets, and increase the production of “quality” films. For an analysis of how Fox Film achieved the latter goal, see Robert C. Allen, “William Fox Presents Sunrise,” Quarterly Review of Film Studies, volume II, No. 3 (August, 1977), 327—338. I use cameraman because Fox Film did not hire women to operate newsreel cameras. Variety, 4 May 1927, 27; Variety, 11 May 1927, 80; Variety, 25 May 1927, 9, 18; Variety, 1 June 1927, 25; Variety, 15 June 1927, 28; Moving Picture World, 7 May 1927, 28; Moving Picture World, 28 May 1927, 248; New York Times, 29 May 1927, section VII, 5. Altoona Publix Theaters, 294 U.S. 477, page 243; Variety, 7 June 1927, 26; Variety, 29 June 1927, 11; Variety, 17 August 1927, 12: Variety, 7 September 1927, 8; Variety, 21 September 1927, 1, 20, 23; Variety, 2 November 1927, 21: Variety, 30 November 1927, 18—19; Moving Picture World, 11 June 1927, 433; Moving Picture World, 23 July 1927, 1; Moving Picture World, 1 October 1927, 299; Moving Picture World, 5 November 1927, 10; Moving Picture World, 3 December 1927, 12—13. Variety, 30 November 1927, 1—5; Variety, 28 December 1927, 5; Variety, 15 February 1928, 14; Variety, 22 February 1928, 9. Electrical Research Products Inc. v. Vitaphone Corporation, 171 A. 738 (1934), Affidavit of John E. Otterson, 192—197; Variety, 16 May 1928, passim; Variety, 1 August 1928, 16, 22; Variety, 22 August 1928, 28; Variety, 12 September 1928, 10; Variety, 26 September 1928, 17; Variety, 3 October 1928, 12; Variety, 28 November 1928, 22; Variety, 5 December 1928, 7; Variety, 20 March 1929, 7. U.S. Federal Communications Commission, Staff Report on the Investigation of the Telephone Industry in the United States, (House Document 340, 76th Congress, 1st session, 1934), II, 474—79; “An Analysis of Fox Theaters Corporation, 2 August 1929,” 1—2, Fox Folder 19, Bache-Halsey Stuart Library, Chicago; Variety, 1 February 1928, 5, 25; Variety, 10 October 1928, 5; Variety, 27 June 1928, 51; Variety, 7 November 1928, 5; Variety, 28 November 1928, 19; Barrons, 30 August 1928, 20; Barrons, 28 September 1928, 8. U.S. v. Fox Theaters, Eq. 51—122, Answer for Fox Film Corporation, 25—26; Variety, 6 March 1929, 5, 10; Motion Picture News, 12 January 1929, 82; Film Daily, 1 March 1929, 1; Barrons, 11 March 1929, 11; FCC, Staff Report, Volume 11, 475—478; William Fox, “Answer,” 18—19, Fox Folder 17, Bache-Halsey Stuart Library; Motion Picture News, 2 March 1929, 611. Upton Sinclair, Upton Sinclair Presents William Fox (Los Angeles: Privately Printed, 1933); Glendon Allvine, The Greatest Fox of Them All (New York: Lyle Stuart, 1969).

Endnotes • 163

Chapter 5 1. Primary data on the production and distribution of The Singing Fool rests in the Warner Bros. corporate materials on file at the University of Southern California, Princeton University, and the University of Wisconsin. Information on the exhibition of the film can be found in the trade press: Motion Picture News, Motion Picture Herald, and Variety. Previously cited court records and governmental studies were used extensively. Rankings of grosses come from Motion Picture Almanacs, which have been issued yearly by the Quigley Corporation since 1929. Indeed, consider that the 1934—35 edition of the Motion Picture Almanac noted that although The Jazz Singer was the first all-talking feature film to be released and although it was a financial success—chalking up about $3,500,000 in world rentals—its successor, The Singing Fool, accrued not only one-third more in U.S. rentals alone but received even greater net profits throughout the world. The novelization of the film can be found as Herbert Dahl, The Singing Fool (New York: Grossett & Dunlap, 1929). Information on the sales of the songs introduced in the movie is summarized in Joseph Murrells, compiler, The Book of Gold Discs (London: Barrie and Jenkins, 1978). Biographies of Al Jolson include Michael Freedland, Jolson (New York: Stein and Day, 1972), and Robert Oberfirst, Al Jolson: You Ain’t Heard Nothing Yet (San Diego: A. S. Barnes, 1980).

Chapter 6 1. General Talking Pictures Corporation et al. v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), Record, 2627—2630, 2828—2830. 2. 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, 1924, 1343; U.S. Federal Communications Commission, Staff Report on Electrical Research Products, Inc., Volume II, Report B (Pursuant to Public Resolution No. 8, 74th Congress), 1937, 161; General Talking Pictures, 18 F. Supp. 650, Record, 2630— 2631. 3. General Talking Pictures, 18 F. Supp. 650, Record, 2633—2636; Electrical Research Products, Inc. v. Vitaphone Corporation 171 A. 738 (1934), Affidavit of Waddill Catchings, 3; Koplar (Scharaf et al., Interveners) v. Warner Bros. Pictures, Inc., et al., 19 F. Supp. 173 (1937), Record, 367. 4. General Talking Pictures, 18 F. Supp. 650, Record, 2672, 2831—2832. 5. New York Times, October 1, 1926, 8; Koplar, 19 F. Supp. 173, Record, 480—484; New York Times, 1 October 1926, 8; General Talking Pictures, 18 F. Supp. 650, Exhibit C, letter, John E. Otterson to Harry Warner, 28 September 1926, Exhibit D, letter, Harry Warner to John E. Otterson, October 2, 1926. 6. Variety, 20 October 1926, 51; Electrical Research Products, 171 A. 738, Answer, 23—24; Koplar, 19 F. Supp. 173, Record, 484—85. 7. General Talking Pictures, 18 F. Supp. 650, Record, 2671—2677. 8. General Talking Pictures, 18 F. Supp. 650, Record, 2678. 9. U.S. Congress, Pooling of Patents, 1349; Koplar, 19 F. Supp. 173, Record, 491—92; U.S. Federal Communication Commission, Telephone Investigation Exhibits (Pursuant to Public Resolution No. 8, 74th Congress), 1936—37, Exhibit 1606, 20—22 and Exhibit 1605, 55. 10. General Talking Pictures, 18 F. Supp. 650, Record, 2680—2683, 2834; United States Federal Communications Commission, Telephone Exhibits, Exhibit 1605, 55. 11. Koplar, 19 F. Supp. 173, Record, 489. 12. Kann, editor, The Film Daily Yearbook—1929,489. 13. General Talking Pictures, 18 F. Supp. 650, Exhibit 105. 14. Charles H. Hession and Hyman Sardy, Ascent to Affluence (Boston: Allyn and Bacon, 1969), 611—618. 15. Variety, 18 May 1927, 5, 26; Wall Street Journal, 11 June 1927, 1, 4; Wall Street Journal, 23 June 1927, 1, 4. 16. Murray Ross, Stars and Strikes (New York: Columbia University Press, 1941), 27. 17. Ross, Stars, 27—28; Commercial and Financial Chronicle, 25 June 1927, 3700; Barrons, 27 June 1927, 4. 18. Equity, July 1927, 7—9; Equity, December 1927, 7—16; Barrons, 29 August 1927, 1.

164 • The Coming of Sound 19. Maurice D. Kann, The Film Daily Yearbook—1940 (New York: Film Daily, 1941), 48; Barrons, 19 September 1927, 19; Barrons, 28 May 1928, 2; Howard T. Lewis, editor, Cases on the Motion Picture Industry (New York: McGraw-Hill, 1930), 320. 20. David Hackett Fischer, Historian’s Fallacies: Toward a Logic of Historical Thought (New York: Harper & Row, 1970), 70—74. 21. General Talking Pictures, 18 F. Supp. 650, Record, 2838—2839. 22. Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 1—4; New York Times, 30 August 1927, 10; Variety, 21 December 1927, 115; Variety, 30 November 1927, 11; Earl I. Sponable, “Historical Development of Sound Films,” Journal of the Society of Motion Picture Engineers, volume XLVIII (May, 1947), 420. 23. General Talking Pictures, 18 F. Supp. 650, Record, 2838—2842. 24. General Talking Pictures, 18 F. Supp. 650, Record, 2841; Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 5—7. 25. General Talking Pictures, 18 F. Supp. 650, Record, 2846—2848; Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 4—5. 26. General Talking Pictures, 18 F. Supp. 650, Record, 2716, 2847. 27. General Talking Pictures, 18 F. Supp. 650, Deposition of Edwin C. Mills, 1—12; Variety, 28 December 1927, 1, 26; New York Times, 21 December 1927, 29; Moving Picture World, 24 December 1927, 1; Federal Communications Commission, Telephone Exhibits, Exhibit 1609, 19—23; United Artists Collection, O’Brien File, Manuscript Collection (Wisconsin Center for Film and Theatre Research, Madison, Wisconsin), Box 86-5. 28. Electrical Research Products, 171 A. 738, Plea, 224—227; General Talking Pictures, 18 F. Supp. 650, Exhibit 15. 29. Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 8—9, and Exhibit 1623. 30. Electrical Research Products, 171 A. 738, Affidavit of John E. Otterson, 182; Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 8—12. 31. U.S. Congress, Pooling of Patents, 518; General Talking Pictures, 18 F. Supp. 650, 2715—2716; Electrical Research Products, 171 A. 738, Affidavit of John E. Otterson, 84; Federal Communications Commission, Telephone Exhibits, Exhibit 1621. 32. General Talking Pictures, 18 F. Supp. 650, Record, 2713—2731, 2844—2846. 33. Electrical Research Products, 171 A. 738, Affidavit of John E. Otterson, 152—163; General Talking Pictures, 18 F. Supp. 650, Record, 2846—2848. 34. Koplar, 19 F. Supp. 173, Record, 556—558; Electrical Research Products, 171 A. 738, Affidavit of Waddill Catchings, 23—24, and Affidavit of John E. Otterson, 185—86. 35. Electrical Research Products, 171 A. 738, Affidavit of Waddill Catchings, 25—26, Affidavit of John E. Otterson, 186—191. 36. Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 9. 37. New York Times, 19 April 1928, 23; Variety, 2 May 1928, 12; General Talking Pictures, 18 F. Supp. 650, Record, 2946—2947; United Artists Collection, Box 84-4. 38. General Talking Pictures, 18 F. Supp. 650, Opinion, 15. 39. New York Times, 16 May 1928, 18; Variety, 16 May 1928, passim; Electrical Research Products, 171 A. 738, Affidavit of John E. Otterson, 192—197.

Chapter 7 1. C. E. Kenneth Mees and John A. Leermakers, Organization of Industrial Scientific Research (New York: McGraw-Hill, 1950), 133—34; John A. Miller, Workshop of Engineers (Schenectady, New York: Maqua, 1953), l—30. 2. David Sarnoff Library, Princeton, New Jersey, Elmer E. Bucher, “Radio and David Sarnoff,” New York, 1966 (Typewritten), 652—655; American Tri-Ergon, 294 U.S. 477 (1935), Record, 536, 539, 600—606. 3. Edward W. Kellogg, “History of Sound Motion Pictures,” 64 Journal of the Society of Motion Picture Engineers (June, 1955) in Raymond Fielding, A Technological History of Motion Pictures and Television (Berkeley: University of California Press, 1967), 182—83; Bucher, “Radio,” 654—655; “Mister Hoxie’s Talking Film,” Literary Digest, 9 December 1922, 26—27; W. E. Theisen, “Pioneering In Talking Pictures,” Journal of the Society of Motion Picture Engineers, 36 (April, 1941), 438; New York Times, 22 October 1922, section II, 14.

Endnotes • 165 4. New York Times, 22 October 1922, section II, 14; Bucher, “Radio,” 654; Archer, Big Business, 324—325. 5. Kellogg in Fielding, “A Technological History,” 183; Miller, Workshop, 58—59; Laurence A. Hawkins, Adventure into the Unknown (New York: William Morrow, 1950), 75. 6. Koplar (Scharaf et al., Interveners) v. Warner Bros. Pictures, Inc. et. al., 19 F. Supp. 173 (1937), Record, 467—470; Archer, Big Business, 132—278. 7. Lyons, David Sarnoff, 141—142; New York Times, 26 October 1926, 35; New York Times, 27 October 1926, 19; New York Times, 28 October 1926, 25; Kann, Yearbook—1929, 487. 8. Koplar, 19 F. Supp. 173, Record, 489; Bucher, “Radio,” 662—664. 9. Kann, Yearbook—1929, page 489; Bucher, “Radio,” 655. 10. New York Times, 30 January 1927, l; New York Times, 3 February 1927, 18; Moving Picture World, 5 February 1927, 2. 11. New York Times, 12 February 1927, 7; Variety, 16 February 1927, 4,20; New York Times, 16 February 1927, 3; Kann, Yearbook—1929, 487; Bucher, “Radio,” 658—659. 12. General Talking Pictures, 18 F. Supp. 650, Record, 2846—2848; Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 4—5; Bucher, “Radio,” 664. 13. General Talking Pictures, 18 F. Supp. 650, Record, 2716, 2847 14. Federal Communications Commission, Telephone Exhibits, Exhibit 1622, 8—9, Exhibit 1623. 15. Federal Communications Commission, Telephone Exhibits, Exhibit 1621; U.S. Congress, House Committee on Patents, Pooling of Patents, Hearings before the Committee on Patents, House of Representatives, on H.R. 4523, 74th Congress, 1st Session, 1935, 518; General Talking Pictures, 18 F. Supp. 650, 2715—2716; Electrical Research Products, Inc. v. Vitaphone Corporation, 171 A. 738 (1934), Affidavit of John E. Otterson, 84. 16. Maurice D. Kann, editor, The Film Daily Yearbook—1928 (New York: Film Daily, 1929), 888; Kann, Yearbook—1929, 495; Variety, 11 January 1928, 5; David Sarnoff Library, Princeton, New Jersey, David Sarnoff, “Reminiscences on Joseph Page Kennedy,” New York, 30 October 1964 (Typewritten). 17. Koplar, 19 F. Supp. 173, Record, 568—571; John Sherman Porter, editor, Moody’s Manual of Industrials—1929 (New York: Moody’s Investor Service, 1930), 794; Marian Spitzer, The Palace (New York: Atheneum, 1969), 148. 18. Variety, 25 April 1928, 19; Variety, 16 May 1928, 14—15; Variety, 5 September 1928, 7; New York Times, 16 April 1928, 4; Variety, 18 April 1928, l, 41; Variety, 2 May 1928, 10; General Talking Pictures, 18 F. Supp. 650, Deposition of Elmer Bucher, 2; Bucher, “Radio,” 680. 19. Bucher, “Radio,” 686—89;, David Sarnoff Library, Princeton, New Jersey, Plan for the Formation of Radio-Keith-Orpheum Corporation, Deposit Agreement. 22 October 1928, l— 10; Variety, 24 October 1928, 9; Variety, 7 November 1928, 30; Variety, 24 October 1928, 29. 20. Maurice D. Kann, editor, The Film Daily Yearbook—1929 (New York: Film Daily, 1930), 505—509. 21. Variety, 6 April 1927, 31; Variety, 25 May 1927, 4; Moving Picture World, 4 June 1927, 326; Variety, 13 July 1927, 30; General Talking Pictures Corporation et al. v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), Deposition of David R. Hochreich, 319. 22. Variety, 26 January 1927, 14; Variety, 21 September 1927, 10; Variety, 21 December 1927, 12; Variety, 4 April 1928, 5. 23. Variety, 27 July 1927, 23; New York Times, 26 July 1927, 17; New York Times, 27 July 1927, 27; Moving Picture World, 13 August 1927, 445. 24. Variety, 24 August 1927, 29; Moving Picture World, 17 December 1927, 10; Variety, 15 February 1928, 16; Variety, 25 January 1928, 4; Variety, 2 May 1928, 31; General Talking Pictures, 18 F. Supp. 650, Record, 320—323. 25. New York Times, 2 August 1928, 5; Variety, 30 May 1928, l; New York Times, 17 August 1928, 22; General Talking Pictures, 18 F. Supp. 650, Record, 323—326. 26. General Talking Pictures, 18 F. Supp. 650, Record, 321—327.

Chapter 8 1. David Bordwell, Janet Staiger, and Kristin Thompson, The Classic Hollywood Cinema (New York: Columbia University Press, 1985), 298—308. That Bordwell, who wrote the section, needed only 10 pages to cover the change, indicates how little was required.

166 • The Coming of Sound 2. The calculation of the diffusion rates for feature films was done using the American Film Institute catalog for the 1920s cross referenced with trade papers. This is not a pure rate of diffusion as it traces the elimination of feature films without mechanical sound. Thus, if just a musical track was added, then I calculated that as a change. So, through all additions of sound to full talkies, I calculated the change with any mechanical sound added as a change. Once I plotted the changes, I could then see the patterns of the various studios as in the following outline. 3. Variety, 3 October 1928, 20; Variety, 8 August 1928, 5; Variety, 29 August 1928, 27; Variety, 12 September 1928, 7; Variety 2 January 1929, 6—7; Variety, 2 January 1929, 17; New York Times, 25 March 1929, 1; New York Times, 26 March 1929, 15; Variety, 17 April 1929, 36; Variety, 2 April 1930, 13; Variety, 8 January 1930, 87. 4. Variety, 11 July 1928, 27; Maurice D. Kann, editor, The Film Daily Yearbook—1929 (New York: Film Daily, 1930), 889; Variety, 15 May 1929, 28; Koplar (Scharaf et al., Interveners) v. Warner Bros. Pictures, Inc. et al., 19 F. Supp. 173, (1937), Record, 1130. 5. Variety, 25 July 1928, 34. 6. Variety, 6 February 1929, 39; New York Times, 10 February 1929, section IX, 5; Variety, 16 April 1930, 51; Variety, 16 April 1930, 35. 7. “Talkies Adopt Radio Methods in New Sponsored Programs,” Business Week, 30 July 1930, 8; Variety, 8 May 1929, 5. 8. Kann, Film Daily Yearbook—1929, 501; Variety, 1 August 1928, 16; Variety, 1 August 1928, 21; Variety, 22 August 1928, 28; Variety, 12 September 1928, 10; Variety, 26 September 1928, 17. 9. Variety, 3 October 1928, 12; Variety, 28 November 1928, 22; Variety, 20 March 1929, 7; Variety, 28 November 1928, 22; Variety, 5 December 1928, 7; Variety 20 March 1929, 7; Raymond Fielding, The American Newsreel, 1911—1967. (Norman: The University of Oklahoma Press, 1972), 185, 200—201. 10. Variety, 18 December 1929, 23; Variety, 28 August 1929, 25; Variety, 27 June 1928, 4. 11. E. S. Gregg, The Shadow of Sound (New York: Vantage Press, 1968), 42—43; Howard B. Santee, “Installation and Adjustment of Western Electric Sound Projector Systems,” Bell Laboratories Record, volume 7 (November, 1929), 112—116; Kann, Yearbook—1929, 865—887; Martin Quigley, editor, Motion Picture Almanac—1931 (New York: Quigley Publications, 1932), 358—363. 12. Martin Quigley, editor, Almanac—1931, 12; Martin Quigley, editor, Almanac—1934, 904. 13. Variety, 27 June 1928, 16; Variety, 11 July 1928, 11; General Talking Pictures Corporation, et al. v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650(1937), Record, 2744—2746; Frederic M. Thrasher, editor, Okay for Sound (New York: Duell, Sloan and Pearce, 1945), 78; U. S. Federal Communications Commission, Telephone Investigation Exhibits, (Pursuant to Public Resolution No. 8, 74th Congress), 1936—37, Exhibit 1609; 42; Variety, 6 March 1929, 6; T. F. Walsh, “Western Electric Advertises to Popularize Sound Pictures,” Printer’s Ink, 11 April 1929, 112—117; Variety, 17 April 1929, 39. 14. Variety, 23 May 1928,9; Variety, 6 June 1928, 5; Variety, 15 September 1928, 8; Variety, 16 January 1929, 7; Variety, 30 January 1929, 17; Variety, 1 May 1929, 21; Variety, 15 May 1929, 32; Variety 10 April 1929, 7; Variety, 18 September 1929, 4; Variety, 16 April 1930, 4; Variety, 19 March 1930, 12; Variety, 27 November 1929, 26—27; Variety, 14 May 1930, 30; Variety, 21 May 1930, 16; Variety, 28 May 1930, 4. 15. U. S. Federal Communications Commission, Staff Report Volume III, Report C, (Pursuant to Public Resolution 8, 74th Congress), 1937, 651, 656. 16. Variety, 8 February 1928, 4; Variety, 18 July 1928, 23; Variety, 18 July 1928, 20; Variety, 29 May 1929, 30; Variety, 17 July 1929, 5; Variety, 8 May 1929, 29; Variety, 7 August 1929, 185; “Texas Chamber of Commerce Out for Talkies,” The Motion Picture, September, 1928, 4. 17. “Economic Relief for Small Town Exhibitors,” The Motion Picture, September, 1929, 3. 18. Variety, 18 July 1928, 24; Variety, 17 October 1928, 20; Variety, 14 May 1930, 4; Variety, 6 February 1929, 5; Variety, 9 April 1930, 2; Porter H. Evans, “A Comparative Study of Sound on Disk and Film,” Journal of the Society of Motion Picture Engineers, volume 15 (August, 1930), 185—192; Martin Quigley, Almanac—1931, 294; Variety, 25 June 1930, 14. 19. Variety, 30 January 1929, 7; Variety, 17 April 1929, 31; Variety, 19 December 1928, 15; Variety, 20 February 1928, 11; Variety, 21 August 1929, 21; Variety, 5 December 1928, 16; Variety, 23 January 1929,. 23; Variety, 27 February 1929, 68; Variety, 13 February 1929, 7;

Endnotes • 167

20. 21. 22. 23. 24. 25. 26.

27. 28.

29.

30.

31. 32. 33. 34.

35. 36. 37. 38. 39.

Variety, 24 April 1929, 5; Kann, Yearbook—1929, 511; Kann, Film Daily Yearbook—1930, 631; Earl I. Sponable, “Historical Development of Sound Films,” Journal of the Society of Motion Picture Engineers, volume 48 (May, 1947), 422. U. S. Federal Communications Commission, Staff Report on Electrical Research Products, Inc.,Volume II, Report B (Pursuant to Public Resolution No. 8, 74th Congress), 1937, 258—262. Federal Communications Commission, Staff Report, Volume II, 260. Kann, Film Daily Yearbook—1929, 495, 888—889; Variety, 23 May 1928, 9; Federal Communications Commission, Staff Report, Volume II, 263—264. Federal Communications Commission, Staff Report, Volume II, 265—267. Variety, 18 July 1925, 5; Variety, 11 July 1928, 7; Federal Communications Commission, Staff Report, Volume II, 268—272. Federal Communications Commission, Staff Report, Volume II, 272—274; Kann, Film Daily Yearbook—1929, 501; Variety, 22 August 1928, 7. Variety, 24 October 1928, 7; Variety, 31 October 1928, 7, 20; Variety, 31 October 1928, 20; United Artists Collection, O’Brien File, Manuscript Collection (Wisconsin Center for Theater Research, Madison, Wisconsin), Box 84-4, letter, Dennis O’Brien to George Pratt, 27 October 1928. General Talking Pictures, 18 F. Supp. 650, Record, 23—24; General Talking Pictures, 18 F. Supp. 650, Deposition of Edwin Mills, 1—12. United Artists Collection. Box 84—4, letter, Fred Gage to United Artists, 24 October 1928, and letter, Al Lichtman to Dennis O’Brien, 29 October 1928; FCC, Staff Report, Volume II, 76; General Talking Pictures, 18 F. Supp. 650, Record, 2937—2939; United Artists Collection. Box 84—4, letter, George Pratt to Dennis O’Brien, 9 November 1928; Kann, Yearbook—1929, 501; Variety, 21 November 1928, 24; Variety, 12 December 1928, 7; General Talking Pictures, 18 F. Supp. 650, Deposition of George Pratt, 1—8. United Artists Collection. Box 84—4, letter, Dennis O’Brien to George Pratt, 31 October 1928, and letters, Dennis O’Brien to Al Lichtman, 9 and 10 November 1928; Kann, Film Daily Yearbook—1929, 889; Variety, 7 November 1928, 16; Variety, 15 May 1929, 2; Variety, 20 February 1929, 5; United Artists Collection. Box 84—4, letter John Otterson to United Artists, 14 December 1928; Federal Communications Commission, Staff Report, Volume II, 278—284. Francis E. Ziesse, “America’s Highest Paid Labor,” American Federationist, 37 (May, 1930), 570—575; Variety, 16 May 1928, 16; Variety, 23 May 1928, 5; Variety, 30 May 1928, 21; Variety, 25 July 1928, 4, 87; “Effects of Technological Changes Upon Employment in Motion Picture Theaters of Washington, D.C.,” Monthly Labor Review, volume 33 (November, 1931), 1007; “Effects Technological Changes Upon Employment in the Amusement Industry,” Monthly Labor Review, volume 33 (August, 1931), 263. Variety, 7 March 1928, 12; Variety, 22 August 1928, 24. New York Times, 30 June 1928, 10; Variety, 13 June 1928, 20; New York Times, 20 July 1928, 21; Variety, 22 August 1928, 24; Variety, 22 August 1928, 37; Variety, 25 July 1928, 22; Variety, 4 July 1928, 24. Variety, 11 July 1928, 17; Variety, 18 July 1928, 19; Variety, 1 August 1928, 14. New York Times, 30 August 1928, 13; Variety, 29 August 1928, 16; New York Times, 29 August 1928, 19; New York Times, 2 September 1928, section II, 9; New York Times, 3 September 1928, 14; New York Times, 3 September 1928, 14; New York Times, 4 September 1928, 25; New York Times, 5 September 1928, 25. New York Times, 6 September 1928, 23; New York Times, 7 September 1928, 16; New York Times, 8 September 1928, 19; Variety, 12 September 1928, 11. Variety, 21 November 1928, 57; Variety, 22 May 1929, 6; Variety, 18 September 1929; 70; New York Times, 21 March 1929, 28; New York Times, 7 April 1929, section II, 3; Variety, 9 January 1929, 27; Variety, 12 September 1928, 17; Variety, 15 May 1929, 64; Variety, 8 May 1929, 71. “Effects,” Monthly Labor Review, November, 1931, 8—9; “Effects,” Monthly Labor Review, August, 1931, 2—3. Variety, 9 May 1928, 9; Variety, 16 May 1928, 9, 19, 42; Variety, 9 May 1928, 5; Frank Woods, “The Sound Motion Picture Situation in Hollywood,” Society of Motion Picture Engineers Transactions, volume XII (1928), 625—630. Academy of Motion Picture Arts and Sciences, Annual Report for 1929. (Hollywood, 1929), 13; Variety, 4 September 1929, 5.

168 • The Coming of Sound 40. Variety, 26 June 1929, 5; Lester Cowan, editor, Recording Sound for Motion Pictures (New York: McGraw-Hill, 1931); Irving Thalberg, “Technical Activities of the Academy of Motion Picture Arts and Sciences,” Journal of the Society of Motion Pictures Engineers, 15 (July, 1930), 3—16; Martin Quigley, Almanac—1931, 101—104; Variety, 30 October 1929, 26; Variety, 19 February 1930, 10. 41. Variety, 10 July 1929, 4; Variety, 27 June 1929, l; Murray Ross, Stars and Strikes (New York: Columbia University Press, 1941), 85—86, 142; Variety, 6 June 1928, 5; Variety, 13 February 1929, 51; Hugh Lovell and Tasile Carter, Collective Bargaining in the Motion Picture Industry (Berkeley, California: Institute for Industrial Relations, 1955), 17. 42. Variety, 4 July 1928, 7; Variety, 13 June 1928, 4; Variety, 20 June 1928, 49; Variety, 4 July 1928, 19; Variety, 18 July 1928, 6; Variety, 18 July 1928, 7; Variety, 22 August 1928, 26. 43. New York Times, 28 October 1928, 7; Variety, 7 November 1928, 5; Variety, 28 November 1928, 19. 44. New York Times, 17 January 1929, 28; Variety, 23 January 1929, 50; Variety, 3 April 1929, 6. 45. Wilton R. Holm, “Technology in Motion Pictures,” Official Bulletin of the International Alliance of Theatrical and Stage Employees [sic], Summer, 1969, 27; Frank S. Crowhurst, “Acoustic Linings for Soundproof Motion Picture Stages and Sets,” Society of Motion Picture Engineers Transactions, XII (1928), 828—835; A. S. Ringel, “Sound-Proofing and Acoustic Treatment of RKO Stages,” Journal of the Society of Motion Picture Engineers, 15 (September, 1930), 352—369; Variety, 16 March 1929, 1, 60; New York Times, 28 July 1929, section XIII, 4; “Talkies Require Concrete Construction,” Concrete, 35 (August, 1929), 56. 46. Variety, 30 May 1928, 10; Variety, 6 June 1928, 7; Variety, 27 June 1928, 3; Variety, 23 May 1928, 6; Variety, 11 July 1928, 10; Variety, 8 August 1928, 10; Variety, 28 November 1928, 5; Variety, 8 May 1929, 4; Howard T. Lewis, Cases, 30; Variety, 12 June 1929, 13; Variety, 11 December 1929, 9; Variety, 25 December 1929, 19. 47. Trevor Faulkner, “The Maintenance of Sound Film in Exchange Operation and the Degree that a Sound Reproduction is Affected by the Continued Use of the Sound Track,” Journal of the Society of Motion Picture Engineers, volume 14 (October, 1930), 501—508. 48. Howard T. Lewis, Cases, 590—94; Variety, 24 April 1929, 17; Howard T. Lewis, “Motion Pictures,” Encyclopedia of the Social Sciences. (New York: D. Van Norstrand, 1933), 62; Variety, 6 February 1929, 4; Richard S. Randall, Censorship of the Movies (Madison: University of Wisconsin Press, 1968), 22—23; In re Vitagraph, In re Fox Film Corporation, 145 A. 518 (1929)

Chapter 9 1. Paul Sweezy, The Theory of Capitalist Development (New York: Monthly Review Press, 1970), 254—265; 301—309; Louis Turner, Invisible Empires (London: Hamish Hamilton, 1970), 1—10; Mira Wilkins, The Maturing of Multinational Enterprise, Volume 11 (Cambridge: Harvard University Press, 1974), 101—192. 2. C. J. North and N. D. Golden, “Meeting Sound Film Competition Abroad,” Journal of the Society of Motion Picture Engineers 15 (Dec., 1930), 751; Variety, 3 October 1929, 6; Franklin S. Irby, “Recent and Future Economic Changes in the Motion Picture Field,” Journal of the Society (editor), The Motion Picture Almanac—1931 (New York: Quigley Publications, 1932), 302—309; Variety, 13 February 1929, 14; Variety, 21 August 1929, 6; Variety, 11 December 1929, 12; Variety, 18 December 1929, 5—6; United Artists Collection. O’Brien File. Manuscript Collection. (Wisconsin Center for Film and Theater Research, Madison, Wisconsin), Box 84-4, letters, 1929. 3. Variety, 30 April 1929, 6; Variety, 7 August 1929, 189; 2 October 1929, 5; Variety 16 October 1929, 16; Variety, 6 November 1929, 4; Business Week, 9 February, 1930, 40; George Lewin, “Dubbing and Its Relation to Sound Motion Picture Production,” Journal of the Society of Motion Picture Engineers, 16 (January, 1931), 38—48; Variety, 26 March 1929, 10; Variety, 17 April 1930, 9; Variety, 30 April 1930, 7; Variety, 2 July 1930, 7, 26; Variety, 10 September 1930, 6; 17 September 1930, 2; Variety, 22 October 1930, 7, 64; M. S. Phillips, “The Nazi Control of the German Film Industry,” Journal of European Studies Volume I, Number 1 (1971), 42.

Endnotes • 169 4. Variety, 19 March 1930, 30; 6 August 1930, 4; 30 September 1930, 6; 29 Variety, 29 October 1030, 6; Variety, 24 December 1930, 6; 15 September 1931, 17; Variety, 15 September 1931, 17; 3 November 1931, 15; 12 April 1932, 11; 16 August 1932, 11, 39; 20 June 1933, 19; Alfonso Pinto,“Hollywood’s Spanish Language Films,” Films in Review, 24 (October, 1972), 474—483. 5. Franklin S. Irby, “International Relations in the Sound Motion Picture Field,” Journal of the Society of Motion Picture Engineers, 15 (December, 1930), 744—746; Douglas Miller, “Talking Syndicate Organizing in Germany,” Commerce Reports, 20 August, 1928, 496; Rudolph K. Michels, Cartels, Combines and Trusts in Post-War Germany (New York: Columbia University Press, 1928), 128—139; Frank A. Southard, American Industry in Europe (Boston: Houghton & Mifflin, 1931), 17—37, 100—101; Douglas Miller, “Competing Talking Film Companies Organized in Germany,” Commerce Reports, 1 October 1928, 53; Variety, 9 January 1929, 6; Variety, 13 February 1929, 3; Variety, 13 March 1929, 13. 6. Variety, 17 April 1929, 2; Variety, 12 June 1929, 2; Variety, 5 June 1929, 2; Variety, 19 June 1929, 2; Variety, 24 July 1929, 5; Variety, 28 August 1929, 2; Variety, 25 September 1929, 4; U.S. Federal Communications Commission, Telephone Investigation Exhibits (Pursuant to Public Resolution No. 8, 74th Congress, 1936—37), Exhibits 1813—1814. 7. Variety, 6 November 1929, 5; Variety, 13 November 1929, 4; Variety, 4 December 1929, 4; Variety, 11 December 1929, 4; Variety, 8 January 1930, 76; Variety, 12 March 1930, 8; Variety, 9 April 1930, 6, 68; Variety, 25 June 1929, 22; Douglas Miller, “Difficulties of the Spitzen Organization in Germany,” Commerce Reports, 18 November 1929, 430. 8. New York Times, 17 May 1930, 20; Variety, 21 May 1930, 7, 47; E. S. Gregg, The Shadow of Sound (New York: Vantage Press, 1968), 61—62; New York Times, 18 June 1939, 9; Variety, 25 June 1930, 105; Variety, 2 July 1930, 3, 31; Variety, 16 July 1930, 7, 57; Ervin Hexner, International Cartels (London: Isaac Putnam and Sons, 1946), 374—375; United Artists Collection, Box 86-2, Agreement, American-German Film Conference, 22 July 1930. 9. Variety, 23 July 1930, 4; Variety, 27 August 1930, 5; Variety, 10 September 1930, 6; Variety, 2 February 1932, 11; Variety, 29 March 1932, 5; Variety, 9 September 1932, 16; Variety, 11 August 1933; 6; United Artists Collection, Box 86-2, Memos, 1935. 10. Variety, 15 November 1932, 15; Variety, 12 February 1935, 15; United Artists Collection, Boxes 84-7, 85-1, 86-2 and 87-7, letters, 1933—1935; New York Times, 11 November 1932, 17; New York Times, 13 October 1934, 10. 11. Variety, 9 October 1935, 15; E. S. Gregg, The Shadow of Sound (New York: Vantage Press, 1968), 181; United Artists Collection. Boxes 85-3 and 86-2, contracts and letters, 1936—1939. 12. Jeremy Tunstall, The Media Are American (New York: Columbia University Press, 1977), 284; Film Daily Yearbook—1931 (New York: Film Daily, 1931), 1001, 1017, 1025—26, 1050; Film Daily Yearbook—1936, 1124—1130. 13. U. S. Bureau of Foreign and Domestic Commerce, Trade Information Bulletin No.694, May, 1930, 6—7, 14; Howard T. Lewis (editor), Harvard Business Reports, No. 8 (New York: McGraw-Hill, 1930), 452—472; Carlton J. H. Hayes, France: A Nation of Patriots (New York: Columbia University Press, 1930), 190—195; Film Yearbook–1926, 858—859; U.S. Bureau of Foreign and Domestic Commerce, Trade Information Bulletin No. 542, 4; Howard T. Lewis, The Motion Picture Industry (New York: D. Van Nostrand, 1933), 399—404, 421—423; Political and Economic Planning, The British Film Industry (London: PEP, 1952), 41—44; Variety, October 1928, 11; Variety, 28 September 1928, 12. 14. George Sadoul, French Film (London: Falcon Press, 1953), 158; Lewis, Motion Picture Industry, 417—419; Film Daily Yearbook—1931, 1017; 1933, 970—975, 986—987; 1934, 998— 999, 1023—24; 1935, 1017—1022, 1049—1051; 1936, 1124—1127, 1169, 1171; 1937, 1163—1167, 1215—1216; R. K. Neilson Baxter, “The Structure of the British Film Industry,” Penguin Film Review, No. 8 (Sept., 1948), 86—87; George Perry, The Great British Picture Show (New York: Hill and Wang, 1974), 78—79; Michael Balcon, Ernest Lindgren, Forsyth Hardy and Roger Manvell, Twenty Years of British Film 1925—1945 (London: Falcon Press, 1947), 18—22. 15. Lewis, Motion Picture Industry, 403—404; Roger Manvell and Heinrich Fraenkel, The German Cinema (New York: Praeger, 1971), 69—70; H. H. Wollenberg, Fifty Years of German Film (London: Falcon Press, 1948), 35—37; M. S. Phillips,“Nazi Control,” 37, 53—54; David Stewart Hull, Films In the Third Reich (Berkeley: University of California Press, 1969), 109—112; Film Daily Yearbook—1932, 1031; 1933, 972—973, 992—993; 1934, 1000—1001, 1030; 1935, 1019— 1020, 1055; 1936, 1127—1129, 1177, 1179; 1937, 1168—1169, 1219—1220.

170 • The Coming of Sound 16. Lester V. Chandler, America’s Greatest Depression, 1929—1941 (New York: Harper & Row, 1970), 101—109, 161—169; Charles Page Kindleberger, The World Depression, 1929—1939 (Berkeley: University of California Press, 1973), 177—198; William I. Greenwald, “The Motion Picture Industry: An Economic Study of the History and Practices of a Business,” Unpublished Ph.D., New York University, 1950, 185—186; Film Daily Yearbook—1932, 1004; 1933, 963. 17. Christopher H. Sterling and Timothy R. Haight (editors.), The Mass Media (New York: Praeger, 1978), 187; W. Arthur Lewis, Economic Survey, 1919—1939 (New York: Harper, 1949), 52—69. 18. Georges Sadoul, Le Cinéma Français (Paris: Flammarion, 1962), 141, 145; Balcon et al., Twenty Years, 18; Perry, The Great British Picture Show, 73; Phillips,“Nazi Control,” 53; Ernest Batts, The Film Business (London: George Allen & Unwin, 1973), 75—106; Political and Economic Planning, 55—78; Film Daily Yearbook—1931, 1017, 1025—1026, 1050—51; 1932, 1002—04, 1023, 1030—31, 1050—51; 1933, 962—963, 970—75, 986—993, 1014; 1934, 998—1001, 1023—24, 1030—31; 1935, 1013—22, 1049—50, 1055—56, 1079—80; 1936, 1121—29, 1124—25, 1169, 1171, 1179, 1207; 1937, 116—69, 1215—21, 1253.

Chapter 10 1. Koplar, 19 F. Supp. 173, Record, 575—576. 2. Richard J. Whalen, The Founding Father (New York: New American Library, 1964), 97—98; David E. Koskoff, Joseph P. Kennedy (Englewood Cliffs, N.J.: Prentice-Hall, 1974), 32; Koplar, 19 F. Supp. 173, Record, 576—577. 3. Barrons, 13 August 1928, 18; Variety, 19 September 1928, 5; Variety, 29 August 1928, 5; Variety, 29 August 1928, 11; Koplar, 19 F. Supp. 173, Record, 578—579, 584—585. 4. Koplar, 19 F. Supp. 173, 585—586, 1133; Maurice Kann, Film Daily Yearbook—1929, 889. 5. Koplar; 19 F. Supp. 173, Record, 587—608, Exhibits: Minutes of Board Meeting, Warner Bros., 12 September 1928, 4 and Purchase Agreement, Exchange Agreement, and Deposit Agreement, 2 October 1928. 6. Variety, 17 October 1928, 19; Variety, 26 December 1928, 17; Variety, 24 October 1928, 11; Variety, 24 October 1928, 16. 7. Maurice Kann, Film Daily Yearbook—1929, 889; Koplar, 19 F. Supp. 173, Plaintiff ’s Proofs, 196—197; Variety, 26 December 1928, 5. 8. Eugene Lyons, David Sarnoff (New York: Harper and Row, 1966), 145; “Blue Chip,” Fortune, September, 1932, 104; Roland Gelatt, The Fabulous Phonograph (Philadelphia: Lippincott, 1955), 245—46. 9. Variety, 11 April 1928, 16; Variety, 9 May 1928, 16; Variety, 21 November 1928, 23. 10. Variety, 11 July 1928, 11; Barrons, 20 August 1928, 8; Variety, 26 September 1928, 48; Variety, 10 October 1928, 12; Variety, 3 October 1928, 7; “Solving Some Problems of the Talkies,” Literary Digest, 19 January 1929, 43. 11. Maurice Kann, Film Daily Yearbook—1930, 551; Radio Corporation of America, Annual Report for 1929 (New York, 1930), 3—4; Archer, Big Business, 342—345; Lyons, Sarnoff, 155—57. 12. Variety, 16 November 1929, 18; Variety, 6 February 1929, 11—14; Barrons, 17 March 1930, 20; Variety, 14 August 1929, 5; Variety, 21 August 1929, 21; Variety, 28 August 1929, 12; Variety, 11 September 1929, 26; Variety, 25 September 1929, 25, 29; Variety, 2 October 1929, 28, 38; Variety, 16 October 1929, 20; Variety, 30 October 1929, 20. 13. Barrons, 30 August 1928, 20; Variety, 10 October 1928, 5; “The Case of William Fox,” Fortune, May 1930, 27. 14. Barrons, 30 August 1928, 29; Variety, 27 June 1928, 51; Barrons, 25 September 1928, 8; Upton Sinclair, Upton Sinclair Presents William Fox. (Los Angeles: Published by the author, 1933) 69—70; Federal Communications Commission, Staff Report, Volume II, 474; Variety, 26 December 1928, 51; Variety, 9 January 1929, 65; Variety, 26 September 1928, 55; Variety, 17 July 1929, 55; Abel Green and Joe Laurie, Jr. Show Biz: From Vaude to Video (New York: Henry Holt and Co., 1951), 372; Variety, 6 March 1929, 5, 10. 15. Variety, 6 March 1929, 5, 10; Barrons, 11 March 1929, 11. 16. Federal Communications Commission, Staff Report, Volume II, 475.

Endnotes • 171 17. Variety, 8 May 1929, 29; Barrons, 11 March 1929, 11; Variety, 6 March 1929, 5, 10; Barrons, 11 March 1929, 11; Variety, 7 August 1929, 185—234; Federal Communications Commission, Staff Report, Volume II, 477—478. 18. Variety, 6 November 1929, 65; New York Times, 14 April 1935, section IX, 4; U. S. Congress, Senate, Temporary National Economic Committee, The Motion Picture Industry—A Pattern of Control, Monograph 43. 76th Congress, 3rd Session, 1941, 62; Variety, 26 December 1928, 51; Variety, 21 August 1929, 51; Isidore Whitmark and Isaac Goldberg, From Ragtime to Swingtime (New York: Lee Furman, Inc., 1939), 427—429; Variety, 16 January 1929, 57; Variety, 1 May 1929, 63. 19. Variety, 12 September 1928, 57; Variety, 11 July 1928, 4; Barrons, 21 October 1929, 15; Barrons, 26 May 1930, 9; Arthur Mayer, Merely Colossal (New York: Simon and Schuster, 1953), 96—97; Archer, Big Business, 389; Variety, 19 June 1929,65; Barrons, 21 October 1929, 15; Variety, 28 August 1928, 27; William S. Paley,“Radio and the Movies Join Hands,” Nations Business, October, 1929, 238; Variety, 11 September 1929, 5. 20. Variety, 18 August 1929, 5; Variety, 24 October 1928, 4; Variety, 21 November 1928, 3; Variety, 16 January 1929, 5; Barrons, 21 January 1929, 19; Barrons, 11 March 1929, 11; Variety, 17 April 1929, 5; New York Times, 22 September 1929, section II, 14; Barrons, 26 August 1929, 29; Variety, 2 October 1929, 1, 4; Variety, 16 October 1929, 35. 21. Variety, 9 October 1929, 6; Variety, 30 October 1929, 9; Variety, 6 November 1929, 7; Barrons, 7 October 1929, 20. 22. A. D. Neale, The Antitrust Laws of the United States of America (Cambridge, U.K.: Cambridge University Press, 1970), 180—181; Variety, 4 December 1929, 11, 19; Variety, 11 December 1929, 7; “Consent Decrees Entered in Federal Anti-Trust Cases: The Moving Picture Industry,” Harvard Law Review, 46 (April, 1933), 931. 23. 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 maximal monies through systematic presentation. 24. New York Times, 21 February 1940, section X, 5. 25. I traced this for a Warner Bros. film, High Sierra (1941) in an essay that introduced the screenplay in the series for University of Wisconsin Press: High Sierra: Screenplay and Analysis (Madison: University of Wisconsin Press, 1979), 9—16. With all the various runs of the film, in a city such as Chicago, High Sierra was running, off and on, for more than a year and a half.

Chapter 11 1. United Artists Collection, Box 86-6, Memo, Mr. Brenailer to Dennis F. O’Brien, 18 February 1929; U. S. Congress, House, Committee on Patents, Pooling of Patents, Hearings before the Committee on Patents, House of Representatives, on H.R. 4523, 74th Congress, 1st Session, 1935, 1441—1458. 2. United Artists Collection, Box 84-4, letter, Dennis F. O’Brien to Harry Buckley, 27 September 1929, and letter, Harry Buckley to Dennis F. O’Brien, 9 September 1929. 3. United Artists Collection. Box 84-5, letter, Dennis F. O’Brien to Arthur Kelly, 23 July 1930 and Box 84-4, letter, Dennis F. O’Brien to Harry Buckley, 27 September 1928. 4. United Artists Collection. Box 84-5, letter, Harry Buckley to Dennis F. O’Brien, 31 October 1929 and letter, John E. Otterson to Harry Buckley, 29 October 1929. 5. United Artists Collection. Box 84-5, letter, R. E. Anderson to Arthur Kelly, 31 January 1930, and Box 84-4, letter, Arthur Kelly to Dennis F. O’Brien, 3 December 1929, and letter, Arthur Kelly to R. E. Anderson, 27 December 1929. 6. United Artists Collection. Box 84-5, letter, R. E. Anderson to Arthur Kelly, 31 January 1930 and letter, Arthur Kelly to Dennis F. O’Brien, 1 February 1930; U. S. Federal Communications Commission, Staff Report on Electrical Research Products, Inc., Volume II, Report B (Pursuant to Public Resolution No. 8, 74th Congress, 1937, 288—89; FCC, Telephone Exhibits, Exhibit XI-73. 7. United Artists Collection. Box 84-5, letter, Dennis F. O’Brien to Arthur Kelly, 20 February 1930, and letter, Arthur Kelly to Dennis F. O’Brien, 24 February 1930. 8. United Artists Collection. Box 86-6, letter, Arthur Kelly to Dennis F. O’Brien, 28 May 1930.

172 • The Coming of Sound 9. United Artists Collection. Box 86-6, Report to Dennis F. O’Brien, 12 March 1931, and Box 84-5, letter, Dennis F. O’Brien to Arthur Kelly, 23 July 1930, letter, Dennis F. O’Brien to Arthur Kelly, 7 July 1930, and letter, Harry Buckley to Dennis F. O’Brien, 2 September 1930. 10. United Artists Collection. Box 84-5, letter, Dennis F. O’Brien to Arthur Kelly, 23 July 1930, and Box 84-6, letter, Leopold Friedman to Arthur Kelly, 17 November 1931, and letter, Louis Swarts to Edward Raftery, 13 January 1932, and Memo, Arthur Kelly to Edward Raftery et al., 16 November 1931. 11. Federal Communications Commission, Telephone Exhibits, Exhibit IX-108. 12. Variety, 16 August 1932, 2; Variety, 8 April 1931, 26; Federal Communications Commission, Telephone Exhibits, Exhibit IX-112, IX-113, IX-115, IX-116. 13. Federal Communications Commission, Staff Report, Volume II, 319—327. 14. Federal Communications Commission, Telephone Exhibits, Exhibit IX-107 and IX-108. 15. Federal Communications Commission, Telephone Exhibits, Exhibit IX-135A, IX-135 16. Federal Communications Commission, Staff Report, Volume II, 334—335, 356—373; Federal Communications Commission, Telephone Exhibits, IX-164; Federal Communications Commission, Telephone Exhibit IX-175. 17. The patent under dispute was United States Patent No. 1,713,726. See also United Artists Collection. Box 84-6, Letter, F.T. Woodward to Vitaphone Corporation, 3 December 1931; FCC, Telephone Exhibits, Exhibit 1795; “Fox Loses,” Business Week, 9 March 1935, 18; FCC, Telephone Exhibits, Exhibits 1794, 1796, 1797. 18. Federal Communications Commission, Telephone Exhibits, Exhibit 1798, 1799, 1800, 1801. 19. Variety, 22 October 1930, 7; American Tri-Ergon Corporation v. Paramount Publix Corporation, 4 F. Supp. (1933); Variety, 20 October 1931, 7. 20. Variety, 9 February 1932, 5; Variety, 1 December 1931, 25; United Artists Collection, Box 874, letter, F. T. Woodward to Dennis F. O’Brien, 3 December, 1931; letter, Dennis F. O’Brien to Clarence Erikson, 3 December 1931; letter, Ward, Crosby and Neal to United Artists Corporation, 4 November 1931. 21. American Tri-Ergon Corporation v. Paramount Publix Corporation, 4 F. Supp. 462 (1933); New York Times, 15 August 1933, 20. 22. American Tri-Ergon Corporation v. Paramount Publix Corporation, 71 F. 2d 153 (1934); United Artists Collection: Box 87-5, letter, William Mallard to Edward Raftery, 17 July 1934, letter, Austin Keough to Edward Raftery, 7 July 1934, letter, Lawyers Committee to William D. Mitchell, 13 July 1934, letter, William Mallard to Henry R. Ashton, 20 July 1934. 23. “Movie Climax: Validity of William Fox’s Patents Upheld by U.S. Supreme Court,” Business Week, 20 October 1934, 18; Variety, 9 October 1934, 5; United Artists Collection, Box 85-1, letter, Dennis F. O’Brien to Lloyd Wright, 16 October 1934, and Box 85-7, letter, William Phillips to Edward Raftery, 12 October 1934; Variety, 23 October 1934, 5, 29; New York Times, 19 October 1934, 19; New York Times, 3 November 1934, 20; Variety, 6 November 1934, 5, 27; New York Times, 6 November 1934, 47; Paramount Publix Corporation v. American Tri-Ergon Corporation, 294 U.S. 454 (1935); Variety, 5 February 1935, 23; Variety, 6 March 1935, 5, 21; Upton Sinclair, Upton Sinclair Presents William Fox (Los Angeles: Upton Sinclair Publishing Co., 1933), 374; Glendon Allvine, The Greatest Fox of Them All (New York: Lyle, Stuart, Inc., 1969), 23—26. 24. Variety, 15 May 1929, 5; New York Times, 19 May 1929, section II, 18; Variety, 22 May 1929, 5; Variety, 1 October 1930, 5; Variety, 25 June 1930, 116; Variety, 29 October 1930, 4. 25. Variety, 13 October 1931, ; Variety, 20 December 1932, 6; Vitaphone Corporation v. Electrical Research Products, Inc., 166 A. 255 (1933). 26. Vitaphone Corporation v. Electrical Research Products, Inc., 167 A. 845 (1933); New York Times, 7 February 1934, 11; Variety, 13 February 1934, 7; Electrical Research Products, Inc. v. Vitaphone Corporation, 171 A. 739 (1934); New York Times, 28 March 1934, 40; Variety, 10 April 1934, 5; Variety, 14 June 1934, 4; New York Times, 22 June 1934, 24; Variety, 26 June 1934, 4, 35. 27. Variety, 23 July 1930, 3, 37; Variety, 27 August 1930, 7, 67; Variety, 10 September 1930, 5. 28. Variety, 2 February 1932, 11; Variety, 29 March 1932, 21; Variety, 9 August 1932, 15; Variety, 11 July 1933, 21; United Artists Collection. Box 86-2, Memo, F. S. Irby to Paul O’Brien, 8 May 1935, Memo, Paul O’Brien to Arthur Kelly, 29 May 1935.

Endnotes • 173 29. Variety, 9 October 1935, 13; United Artists Collection. Box 85-3, letter, Milton Diamond to United Artists Corporation, 25 February 1936, Box 85-3 Contract, Columbia Pictures Corporation et al. and Tobis, 18 March 1936. 30. Gregg, Shadow, page 181; United Artists Collection. Box 85-3, Interoffice Memo, United Artists Corporation, 9 December 1936, and Box 86-2, Contract, Columbia Pictures, 18 March 1936, letter, Paul O’Brien to Milton Diamond, 20 November 1939. 31. United Artists Collection. Box 84-4, letter, Louis Swarts to Dennis F. O’Brien, 21 November 1928; United Artists Collection, Box 86-7, letter, John E. Otterson to United Artists Corporation, 22 May 1930, and Contract, ERPI and United Artists Corporation, Distribution of Sound Records Outside the Territory in Which Produced, 22 May 1930; General Talking Pictures Corporation et al. v. American Telephone and Telegraph Co. et al., 18 F. Supp. 650 (1937), Exhibit 101; Federal Communications Commission, Telephone Exhibits, Exhibit 1871, Exhibit X-43A, X-43B, and X-43C & X-43D. 32. Variety, 3 May 1932, 7; Variety, 10 May 1932, 4; Variety, 24 May 1932, 6; New York Times, 12 June 1929, 27; Federal Communications Commission, Staff Report, Volume II, 436—437; FCC, Telephone Exhibits, Exhibit X-43C; U.S. Federal Communications Commission, Proposed Report: Telephone Investigation (Pursuant to Public Resolution No. 8, 74th Congress), 1938, 481; Federal Communications Commission, Staff Report, Volume II, 430—435. 33. Federal Communications Commission, Staff Report, Volume II, 399—418; Federal Communications Commission, Proposed Report, 483. 34. United Artists Collection. Box 85-1, letter, Benjamin Glazer to Harry Buckley, 6 December 1933; Federal Communications Commission, Telephone Exhibits, Exhibits 1871 and 1872. 35. Variety, 27 March 1935, 4; United States Congress, Pooling of Patents, 1562—1565, 1567— 1575; Variety, 27 March 1935, 4; Electrical Research Products, Inc. v. Vitaphone Corporation, 171 A. 738 (1934), Plea, 276—287; New York Times, 12 June 1935, 31; Motion Picture Herald, 5 June 1935, 8; Variety, 5 February 1936, 29; Variety, 3 January 1933, 5; Variety, 29 May 1934, 44; New York Times, 30 June 1938, 37; Variety, 10 June 1936, 27; Variety, 17 June 1936, 34. 36. United Artists Collection. Box 85-2, letter, Whitford Drake to United Artists Corporation, 19 December 1935, and Box 86-7, letter, Leopold Friedman to Paul O’Brien, 27 March 1936; United Artists Collection. Box 85-3, letter, Arthur Kelly to Paul O’Brien, 6 May 1936, letter, Arthur Kelly to Edward Raftery, 19 May 1936. 37. United Artists Collection. Box 85-4, Memo, M.A. Ezzell to Harry Buckley, 6 December 1938; Variety, 22 May 1941, 10; New York Times, 29 August 1941, 30; United Artists Collection, Box 85-6, Contract, ERPI to United Artists Corporation, Recording and Distribution License Agreement, effective, 1 July 1936, Supplemental Letter Agreement, Letter of Guaranty, 30 October 1941. 38. Carl F. Boester, “ New Things in Air Conditioning That Are Bringing Lower Costs,” Motion Picture Herald, “Better Theaters,” 18 March 1939, 6—7; Margaret Ingels, Willis Haviland Carrier: Father of Air Conditioning (New York: Doubleday and Company, 1952), passim; Motion Picture Herald, “Better Theaters,” 15 October 1938, 9—11. 39. Domestic Engineering 165 (March, 1945), 113—114; Business Week (27 June 1953), 43—44, 46; Motion Picture Herald, “Better Theaters,” 18 March 1939, 6—7; Business Week, 27 June 1953, 43—46.

Chapter 12 1. Malcom M. Willey and Stuart A. Rice, Communication Agencies and Social Life (New York: McGraw-Hill, 1933), 186—96; Jesse F. Steiner, Americans at Play: Recent Trends in Recreation and Leisure Time Activities (New York: McGraw-Hill, 1933), 118—121; Martin Codel, editor, Radio and Its Future (New York: Harper Bros., 1930), 206—207, 210—11. 2. David Ewen, The Life and Death of Tin Pan Alley (New York: Funk and Wagnalls, 1964), 311— 320; Paul S. Carpenter, Music, an Art and a Business (Norman: University of Oklahoma Press, 1950), 279—291; Isaac Goldberg, Tin Pan Alley (New York: Day, 1930), 312—319; New York Times, 9 June 1929, section VII, 6; Hazel Meyer, The Gold in Tin Pan Alley (Philadelphia: Lippincott, 1958), 73—75; “Tin Pan Alley Changes Tempo,” Business Week, 16 April 1930, 34. 3. Variety, 29 August 1928, 34; Variety, 7 November 1929, 31; Variety, 5 June 1929, 28; Variety, 2 January 1929, 15; Variety, 2 October 1929, 51; Green, Show Biz, 272—273, 372—374, 495; New York Times, 26 August 1929, 17; Gregg, Shadow, 36.

Index (film titles are in bold)

Balaban and Katz 11–12, 100–101, 117 Barrons xv Barrymore, Ethel 5 Barrymore, John 37 Barrymore, Lionel 5 Bathcholtz, Charles E. 78 Baumol, William J. 156 Beck, Martin 28, 29 Bel-O-Tone 82 Ben Hur 59, 69 Berlin, Irving 18, 39, 123 Bernstein, David 69, 121 Better ‘Ole, The 39 Bergstrom, Janet xxi Big Five studios 115–138 Big Parade, The 59, 69 Biophone 82 Birth of a Nation, The 19 Blank, A. S. 117 Bloom, Edgar S. 42, 66–67 Bordwell, David xiii, xvii, 139 Bowes, Major Edward 17 Brady, William A. 84 Bristolphone 97

A Abel, Richard xiii Academy of Motion Picture Arts and Sciences (the Academy) 2–3, 102–103 Actors Equity (Equity) 4–5, 70 Air conditioning 148–149 Allgemeine Elektrizidtz Gesellschaft (AEG) 108–112 Altman, Rick xiii American Federation of Musicians (AFM) 99–104 American Society of Composers, Authors, and Publishers (ASCAP) 13, 19 American Telephone and Telegraph (AT&T) xii, xiv, xvi, xx, 1, 15, 31–34, 79–80, 122, 140–143, 144–145 Association of Motion Picture Producers 4–5 B Bacon, Lloyd 57 Balaban, Barney 117

175

176 • Index

Bronson, Betty 56 Brown, Hiram S. 119 Brylawski, A. Julian 97 Business Week xv Byrd, Richard 52

C Cameraphone 25 Cantor, Eddie 18, 52 Capra, Frank 136 Carnegie, Andrew 28 Carroll, Noel xvii Case, Theodore 47–50, 161 Catchings, Waddill 35–38, 41, 44, 65–66, 79, 115–116 Censorship 104 Chain retailing techniques 132–133 Chronophone 25 Cinephone 26–27, 82 Cochran, Robert 66 Cohan, George M. 122 Cohn, J. J. 135 Columbia Broadcasting System (CBS) 123–124 Consent decree 135–136 Coolidge, Calvin 15, 30, 78 Craft, Edward B. 31–32, 48 Crafton, Donald xiv, xviii Crawford, Jesse 16 Cullinan, George E. 34, 64–65 D Darrow, Clarence 101 Davis, Bette 134 Davis, John W. 30 De Forest, Lee 29–30 Demarest, William 45 DeMille, Cecil B. 4, 96 Dibbets, Karel 106 Dickson, William K. L. 24 Distribution 9–10, 127–129, 137

Don Juan 39–40 Dramaphone 82 Dressler, Marie 5 Dubbing 108

E Eastern Services Studio 146 Economics of price discrimination 130–131 Edison, Thomas A. 13, 24–25, 27–28 Educational Pictures Corporation 84 Electrical Research Products Incorporated (ERPI) xvi, 1, 42–43, 74–75, 91–98, 120–123, 139–143, 146–148 Exhibition 10–12, 19–20, 127 Wiring theaters 91–99 Eyman, Scott xiii, xviii F F. F. Proctor theater chain 119 Fabian, Simon 118 Film Booking Office 8, 73–74 Film Daily xiv, 155–173 Film Daily Yearbook, The xv, 10, 155–173 Filmfone 95 Filmtone 82 Finston, Nathaniel W. 123 First National Corporation 8, 66–67, 115–116 Fischer, David Hackett 71 Flesh and the Devil, The 80 Ford, John 136 Foreign versions 107–108 Fortune xv Four Horsemen of the Apocalypse 59 Fox, William xvi, xxi, 14, 24, 47–61, 91, 120–125, 143–144

Index • 177

Fox-Case Corporation 49–52 Fox Film Corporation xix, 1–2, 5, 47–61 Fox Theaters 120 Foy, Bryan 43–44, 135 France, Joinville 107–108 Friedman, Leopold 75

G Garden, Mary 15 Gaumont 25 Geduld, Harry M. xii General Electric 33, 50, 77–80 Germany 108–113 Gilbert, John 5 Gillmore, Frank 4–5 Goebbels, Joseph 112 Gone with the Wind 56, 148 Good Neighbor Policy 134 Grauman, Sidney 12 Gray, Gilda 12 Great Britain 107 Great Depression 133 Griffith, D. W. 28 Griliches, Zvi 156 H Hammons, Earle 84 Han-O-Phone 95 Harding, Warren G. 31 Hardy, A. C. 78 Harms Music Publishing Company 122 Harrison, H. C. 32 Hawley, Clifford B. 66 Hays, Will 109–114, 159 Hays Office (see Motion Picture Producers and Distributors Association Hepworth, Cecil 27 Herbert, Victor 19 Hitler, Adolph 112

Hochheiser, Sheldon 155 Hochreich, David R. 82–84 Hoover, Herbert 124 Hoxie, Charles A. 77–78 Hurley, Harold 135

I Immel, Ray K. 102 Independent film production 136 Industrial organization economics xvii Interchangeability 95–98 International Alliance of Theatrical and Stage Employes (IATSE) 99–100 International Brotherhood of Electrical Workers 103 J Janis, Elsie 39–40 Jazz Singer, The xiv, xv, 43, 45 Jessel, George 39 Jewett, Frank B. 31 Jolson, Al 18, 20, 56–57 K Kennedy, Joseph P. 81–82 Kent, Sidney 64–65, 69, 71–73, 80 Kern, Jerome 18 Kinetophone 28–29 King of Kings 96 Klangfilm 108–113 Knudsen, Vern O. 102 Kraft, Joseph xxi L Laemmle, Carl (see Universal Corporation) 7, 27 LaFollette, Robert 30 Lasky, Jesse L. 70 Lastra, James xiii

178 • Index

Lauder, Sir Harry 25 Lee, Davey 56 Levinson, Nathan 36 Lewis, Ben 135 Lewis, Howard T. 157, 169 Lieber, Robert 66 Lights of New York, The 116 Lilac Time 97 Lindberg, Charles 51–52 Little Three studios 115–138 Loew, Marcus xiv, 7, 12, 13, 17, 54, 120–121 Loew’s/MGM xiv, xx, 1–2, 5, 8–9, 17, 21, 63–76, 107, 122 Lopez, Vincent 12, 17, Loud speaker 31–32 Ludwigh, Elik 98 Lubitsch, Ernst 37

M M. Witmark and Sons 122 MacNamee, Graham 16 Mansfield, Edwin xviii Marcus, Lee 135 Mark, Moe 118 Martinelli, Giovanni 38 Mastbaum, Jules 116 Mayer, Louis B. 121 McCormack, John 16 Melotone 82 Mergers 115–138 Miller, Jack S. 101 Mills, Edwin 73, 97–98 Min and Bill 108 Mitchell, William D. 124, 144 Moody’s Manual of Industrials xv, 158–163 Motion Picture Almanac, The xv Motion Picture News 10 Motion Picture Producers and Distributors Association (Hays Office) 4–5, 130

Movie-Phone 82 Movietone 50–61 Movietone City 53, 103 Movietone News 53, 88–89, 91 Moving Picture World xv, 158–160 Mueller, Raquel 51 Murdock, John J. 28, 29, 48 Murnau, F. W. xxi Music Publishers Protective Association 73 Mussolini, Benito 52 My Wife’s Gone Away 45 Myers, Abram 119

N National Broadcasting Company (NBC) 18 National Recovery Act 87, 129 New York City xvii, 3, 104, 132–133 New York Symphony Orchestra 15 New York Times, The xv Newsreels 90–91 Nordisk 110 O O’Brien, Dennis xv–xvi Office of the Coordinator of InterAmerican Affairs 134 Ostrow, Lou 135 Otterson, John xiv, 37–38, 42–44, 66–67, 80–81, 120–124 P Palo-Photophone 78 Paramount Corporation xx, 1–2, 5, 8–9, 63–76, 107 Paramount-Vitaphone 123–124 Paratone 95 Paris, Texas 94–95 Paris Agreement 110–112, 145–146 Perfect Crime, The 98

Index • 179

Petrillo, James C. 100–104 Phonofilm 30 Photophone 77–80 Picture palace 126–127, 136–137 Poli theater chain 120 Pomeroy, Roy J. 71–72 Porter, Cole 18 Pratt, George 75 Profits xii, xvii Projectionists 99–100

Q Qualitone 95 R Radio Corporation of America (RCA) xii, xvi, xx, 5, 15–16, 18, 33–34, 71–72, 92–94, 109–112, 118–119, 140–142 Radio industry 15–17, Radio-Keith Orpheum (RKO) 1–2, 5, 77–82, 89, 115, 116 Remick Music Corporation 122 Rich, Walter J. 34, Riesenfeld, Hugo 19, 30 Roach, Hal 90 Robbins Music, Inc. 120 Robinson, Casey 135 Rogers, Richard 18 Rogers, Will 15 Romberg, Sigmund 18, 122 Rooney, Mickey 135 Roosevelt, Franklin D. 87, 133 Rosenberg, Nathan 155 Rosenwald, Lessing 116 Ross, Charles 93 Rosshein, Irving D. 118 Roxy (Samuel Rothefel) 12, 16, 19, 21, 32, 43 Ruth, Babe 84

S Sarnoff, David 50, 68–69, 72, 77–82, 96–97, 119 Scandals 84 Schenck, Joseph 54, 66, 87 Schenck, Nicholas (Nick) xiv, xx, 12, 14, 17, 42–43, 54, 63–75, 79, 87, 117, 120–121 Scherer, Frederick M. 155 Schubert, J. J. 84 Schubert, Lee 84 Screen Writers Guild 129–130 Second World War 133–134 Seitz, George B. 135 Short subjects 90–91 Siemens and Halske 108–111 Singin’ in the Rain xv Singing Fool, The xv, xix, 5, 55–61, 108–109 Skouras, Charles 118 Skouras, George 118 Skouras, Spyros 118 Skouras Bros. Enterprises 118 Smeck, Roy 38 Smith, Al 30, 52 Smith, Albert E. 36 Smith, Courtland 48–52 Solomon’s Children 45 Sonograph 82 Sponable, Earl 47–48 Staiger, Janet xiii Stanley Company of America 116 States’ rights distribution 3, 8–9, 128 Steiner, Max 135 Stone, Lewis 135 Stowers, Allen 82 Street Angel 100 Studio system, Hollywood 115–139 Sunrise 52 Synchroscope 27 Synchrotone 95

180 • Index

T Talmadge, Norma 5 Talkaphone 95 Telefilm 82 Tempest, The 98 Tenderloin 45 Thalberg, Irving 2–3, 102–103 Thalofide Cell 47 Theory of technological innovation xviii–xix, 23–24, Diffusion in the United States 87–104 Diffusion throughout the world 105–115 Thompson, Kristin xiii, 139 Tiffany–Stahl studio 119–120 Tin Pan Alley 17–19 Tonbild Syndicate A. G. (Tobis) 108–111 Trader Horn 108 Tri-Ergon A. G. 50, 108–112 Tucker, Sophie 20 Twentieth Century-Fox xiv U Unions 99–104 United Artists Corporation (UA) xv, 2, 8, 98, 140–141 United Booking Office 28–29 United States Federal Communications Commission (FCC) xvi, 160–173 United States Federal Trade Commission 124 United States House of Representatives 160–173 United States Justice Department 54, 124 United States State Department 112–113 Universal Corporation (see Carl Laemmle) 2, 8

University of California at Los Angeles 2 University of Southern California 2

V Variety xv, 155–173 Vaudeville industry 20–22, 25–26, 39–40, 58–59, 81–82, 90–91 Victor Talking Machine Company 16–17, 26–27, Vitagraph Corporation 24, 35–36 Vitaphone 37–46, 67–68 Vivaphone 27 Vocafilm 79, 82–85 W WGY-AM 78 Wagner Act 129 Wall Street Journal, The xv, 156–173 Walt Disney Company, The 8 Warfield, David 121 Warner, Abe 23, 118 Warner, Harry 14, 23, 35–41, 43–44, 115–116, 118 Warner, Jack xiv, 23, 118 Warner, Sam 23, 36, 40, 43–44 Warner Bros. Pictures, Inc. xvi, xix, 1–2, 5, 23–46, 55–61, 88, 89, 115–118, 144–145 Wasserman, Lew 139 Weber, Joseph N. 100 Wente, E. C. 32–33 West Coast Theaters 120 Western Electric xiv, 1, 31–32, 41–42, 54, 64–65 Westinghouse 33 When Babe Comes Home 84 White, Lew 135 Whiteman, Paul 12, 16, 17, 18, 20 Whitney, Willis R. 78 Williams, W. Harry 82

Index • 181

Wilson, Carey 135 Wolf, Morris 118 Wurtzel, Sol 135

Y Yecies, Brian M. 106 Young, Owen D. 50, 72

Z Ziegfeld Follies 21 Zukor, Adolph xiv, xx, 7–8, 12, 13, 14, 30, 42–43, 48, 63–75, 79, 83, 87, 90, 91, 105, 117–118, 123–125, 142–143, 145

Plate 1. The four Warner brothers who pioneered movies with sound. Left to right: Harry, the eldest and final decision maker; Jack, (the youngest) who ran the studio; Sam, who pushed for talkies, but died in 1927; and Abe, the brother in charge of distribution. Courtesy of Quigley Collection, Georgetown University.

Plate 2. Adolph Zukor, head of Paramount, who made the final decision as to which sound system to adopt. Courtesy of Quigley Collection, Georgetown University.

Plate 3. David Sarnoff (left), shown here with G. M. Marconi. Zukor decided not to adopt the model of Sarnoff ’s RCA, instead creating RKO. Courtesy of Library of American Broadcasting.

Plate 4. Loew’s head Nicholas Schenck surrounded by his employees and next to his wife. Left to right: Buster Keaton, Harry Rapf, Irving Thalberg, Schenck, Pansy Schenck, L. B. Mayer, Eddie Mannix, and Albert Lewin. Courtesy of Quigley Collection, Georgetown University.

Plate 5. UA head Joseph Schenck, Nick’s brother and partner in Hollywood. Left to right: L. B. Mayer, Sam Goldwyn, Joseph Schenck, and unknown. Courtesy of Quigley Collection, Georgetown University.

Plate 6. The brothers Cohn, heads of Columbia Pictures, who had to accept what Zukor and the Schencks decided. Left to right: Jack Cohn, based in New York, who handled distribution; Harry Cohn, the most notorious movie mogul, whose actual power paled when compared to Zukor and the Schencks; and one of their accountants. Courtesy of Quigley Collection, Georgetown University.

Plate 7. Will Hays, industry representative and broker of the Paris Agreement for world sound distribution. Author’s collection.

Plate 8. MGM backlot, 1930, with enclosed sound proof stages to keep noise out and recorded sound on film. Author’s collection.

Plate 9. The Paradise picture palace (4,000 seats) on the West Side of Chicago, Fall 1928: owned by Paramount, playing Warner’s State Street Sadie (a part talkie) together with a Fox Movietone newsreel. Author’s collection.

Plate 10. The acme of talkies, Saturday 17 August 1929 in New York’s Times Square. Advertising MGM’s The Hollywood Revue of 1929, with all MGM’s stars, save Greta Garbo, a smash hit, lauded by the New York press and loved by thousands in the crowd. Author’s collection.