The Exhibitor (Nov 1938-May 1939)

36 SPECIAL FEATURES THE TRADE PRACTICE DRAFT AS SUGGESTED BY ABRAM F. MYERS, General Counsel for Allied States Association PREAMBLE The signatories hereto, being distributors of motion pictures, in order to promote a more harmonious relationship and to improve competitive conditions in the motion picture industry, and after consultation with representatives of the several organized groups of motion picture exhibitors, hereby severally bind themselves to the observance of the principles, policies and practices set forth herein in the licensing and distribution of motion pictures in continental U. S. I. CANCELLATION PRIVILEGE ( 1 ) Cancellation as a matter of right. Whenever an exhibitor contracts for all of the feature motion pictures offered by a distributor at any one time, the exhibitor shall have the right to exclude therefrom, without payment of the film rentals therefor, not to exceed 20 per cent of the total number if the film rentals for all average not more than $100 per picture, 15 per cent if the film rentals average in excess of $100 and not in excess of $2 5 0 per picture, and 10 per cent if the film rentals average in excess of $2 50 per picture. In determining the number of pictures that may be excluded under the foregoing percentages, fractions of one-half or more shall be counted as one and fractions of less than one-half shall not be counted. Westerns produced in groups or series and connected by a common star or continued story, re-issues, and foreigns (except those produced abroad in the English language by an American producer or distributor, or a subsidiary thereof) shall not be counted in determining the number of features offered or licensed or the number which may be excluded. For the purpose of this paragraph, westerns produced as aforesaid, reissues, and foreigns (except as aforesaid) shall be deemed to be separate groups, and if licensed on the same agreement as other features, shall be separately listed. Each such group shall be subject to exclusion by the exhibitor on the same basis and subject to the same terms and conditions as herein set forth. In computing the average film rental per picture for the purpose of determining the extent of the exhibitor’s cancellation right, the film rentals of pictures to be played in whole or in part on a percentage of the gross receipts of exhibition shall be determined as provided in the margin.1 1. As to each picture which the exhibitor may choose to exclude, he shall give the distributor written notice of such exclusion within 10 days after the mailing by the distributor of the first notice of the availability of that picture. 2. The exhibitor shall not at the time of giving such written notice be in material default under the license agreement. 3. The exclusions shall be exercised proportionately among the several price brackets provided for in the license agreement as outlined in the margin;' but any number of exclusions, up to the total allowed, may be made out of the lowest price bracket. 3 (a) Average the film rentals of all the distributor’s feature motion pictures of the preceding motion picture season exhibited for the same run in such situation upon a percentage basis at the exhibitor’s theatre(s). (b) If none of the distributor’s feature motion pictures were exhibited for the same run in such situation upon a percentage basis at such theatre (s) during said period, then the average film rental shall be determined by agreement at the time of the making of the license agreement. 4. If any exhibitor having the right to do so fails to eliminate one or more pictures from the upper brackets, he shall, for each such picture, have the right to eliminate one picture from the lowest bracket; except that if at the time he chooses to make such elimination there are no unplayed available pictures in the lowest price bracket, he may exercise such right in the next lowest bracket. 5. Upon the exclusion of any feature motion picture under this provision the license therefor and all rights thereunder shall terminate and revert to the distributor and shall be charged against the number of exclusions to which the exhibitor may be entitled whether or not a new license agreement for the exhibition thereof is subsequently entered into by the exhibitor. 6. All disputes growing out of the exercise or attempted exercise by exhibitors of the privilege herein granted shall be submitted to arbitration. (2) Cancellation for cause. An exhibitor shall have the right, in addition to the exclusion privilege provided for above, to exclude from any license agreement any picture which may be locally offensive on moral, religious, or racial grounds, provided he gives the distributor written notice, within 14 days after the conclusion of its first exhibition in the exchange territory out of which the exhibitor is served, of his desire to exclude such picture, specifying the reasons therefor. In the event of a dispute as to whether or not a picture is in fact locally offensive, it shall be submitted to arbitration. II. TRADE ANNOUNCEMENT (No change-elimination recommended.) III. EXHIBITOR’S LIMITED PLAYING TIME Whenever an exhibitor is unable to contract for the total number of pictures offered by a distributor because his playing time is so preempted by prior commitments that he can not, without altering the operating policy of his theatre, reasonably use that many additional pictures, the distributor will then offer to the exhibitor such lesser number as may be agreed upon, or, lacking such agreement, such number as may be determined by arbitration to be the maximum number of pictures that can reasonably be used by the exhibitor; provided, that the distributor shall have the right at any time before an agreement with such exhibitor has been approved to solicit a contract from or to license all or any of its pictures to any other exhibitor. IV. PREFERRED PLAYING TIME (1) Flat rentals and guarantees. A distributor will not exercise the right which it may have under a license agreement to designate feature pictures for preferred playing time in respect of any picture for which the film rental is either a fixed sum or is to be computed in whole or in part upon a percentage of the gross receipts of exhibition with a fixed minimum sum guaranteed. (2) Unsuitable pictures. If a distributor shall exercise the right which it may have under a 2 Example : If the agreement licenses 4 8 pictures and the highest price bracket includes eight pictures, the next highest bracket includes 12 pictures, the next highest bracket includes 16 pictures and the lowest bracket contains the remaining 12 pictures, and if the exhibitor has the right to exclude a total of 10 per cent (five pictures), then not more than one picture may be eliminated from the highest bracket, not more than one from the next highest bracket, not more than two from the next highest bracket and the remaining one picture from the lowest price bracket, or all or any part may be eliminated from the lowest price bracket. license agreement to designate straight percentage pictures for preferred playing time in respect of any picture deemed by the exhibitor to be unsuitable for such playing time, and the exhibitor shall give the distributor written notice of his objections thereto and the reasons therefor within seven days after the mailing of notice of such designation, the question of suitability shall be determined by agreement between the distributor and exhibitor, or, lacking such agreement, by arbitration. If the picture is determined to be unsuitable for preferred time, the distributor may, at its option, either (a) designate the picture to be played upon the same rental terms on other days of the week or (b) then or thereafter substitute another picture to be played on preferred time on the terms designated for the picture objected to, and in the latter case the film rental for the picture originally designated shall be such as may be designated by the distributor within its right under the license agreement. Nothing in this provision shall decrease or increase the number of pictures to be exhibited in each bracket as provided in the agreement. V. RUNS AND EXISTING CUSTOMERS (1) Run guaranteed. To relieve against socalled “exclusive selling” an exhibitor will be able to obtain from a distributor a run of its pictures in any situation, the run to be designated by the distributor, provided (a) that the distributor and exhibitor can mutually agree upon terms (the terms asked not to be substantially disproportionate to those asked in comparable situations), (b) that the exhibitor’s theatre is not of an obsolete character, (c) is in good condition and (d) operates under a policy that is not destructive or (e) which will not substantially affect the distributor’s revenue from other runs in the situation, and further provided (f) that the exhibitor is of good reputation as a theatre operator and (g) is financially responsible. Any dispute arising out of an application by an exhibitor for a run of pictures under this provision shall be submitted to arbitration. (2) Protecting existing customer. To relieve against so-called "selling away to a chain” a distributor will not license its product away from an existing customer to a new or another exhibitor for the sole reason that the new or other exhibitor is a customer or prospective customer of the distributor at other theatres in the same or other situations (that is, that the new or other exhibitor is a circuit, a buying combine, a booking combine or a co-operative), provided (a) that the existing customer has substantially performed his previous license agreements with the distributor, (b) that he maintains and operates his theatre in a modern manner, and (c) is financially responsible. Any dispute arising out of the licensing away or threatened licensing away of product contrary to this provision shall be submitted to arbitration. VI. SHORT SUBJECTS, NEWSREELS, ETC. No exhibitor shall be required as a condition of licensing feature motion pictures to license short subjects, newsreels, trailers, serials, re-issues, westerns and foreigns (the westerns and foreigns being as defined in Proposal I, section (1) ). VII. SCORE CHARGES In respect of license agreements commencing with the current (1 93 8-1 93 9) season, score charges, if any, for flat rental pictures will be added to and consolidated with the film rental. Commencing with the 1939-1940 season there will be no separate score charge in respect of pictures on either a flat rental or percentage basis. VIII. ALLOCATION OF PICTURES Under license agreements authorizing a distributor to allocate pictures to particular price brackets, the distributor, on giving notice of the availability of each such picture, and in no case later than 14 days after its national release, shall February 22, 19)9