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.

The Rise of RKO • 85

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

88 • The Coming of Sound

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

The Diffusion of Sound in the United States • 89

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

The Diffusion of Sound in the United States • 91

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