The Exhibitor (Nov 1938-May 1939)

25c CODE OF FAIR PRACTICES FOR THE MOTION PICTURE INDUSTRY What folloivs is the revised draft of the trade memorandum as of March 3 0, 1939, as sent to exhibitor leaders throughout the country and the Department of Justice. The revision follotvs conferences betiveen exhibitor and distributor groups during the past feiv months. PREAMBLE The signatories hereto, being distributors, exhibitors and organized groups of exhibitors of motion pictures, hereby severally adopt the following as a code of fair practice, hereby severally binding themselves to the observance of principles, policies and practices set forth herein in the licensing, distribution and exhibition of motion pictures in continental United States. 1. Exclusion Privilege (1) Exclusion as a matter of right. Whenever an exhibitor shall have entered into a license agreement for all of the feature motion pictures ("features’) offered1 * at any one time by a distributor for a run in any situation", such exhibitor shall have the right to exclude therefrom, without payment of the license fee therefor, not to exceed twenty per cent of the total number of features contracted for, if the average of the license fees for all features contracted for shall not exceed $100 per picture; fifteen per cent, if such average is in excess of $100 and not in excess of $2 5 0; and ten per cent, if such average is in excess of $2 5 0. In determining the number of features that may be excluded, fractions of one-half or more shall be counted as one and fractions of less than one-half shall not be counted. In computing the average of the license fees for all features contracted for the license fees of features based in whole or in part on a percentage of the gross receipts of exhibition shall be included at the average of the license fees of all the distributor’s features of the preceding motion picture season which were exhibited upon a percentage basis for the same run in such situation. If none of the distributor’s features was so exhibited during the preceding season, then such average of license fees shall be agreed upon by the distributor and the exhibitor and included in the license agreement. For the purpose of determining the rights of exclusion of an exhibitor hereunder, so-called "Westerns” (as such term is understood in the motion picture industry3 *), reissues and foreigns (except such as may have been produced outside of the Un.ted States in the English language by an American producer or distributor or subsidiary thereof) shall not be included in the number of features offered or contracted for as above provided, but shall be deemed to have been offered in separate groups and, if contracted for, the features in each group shall be subject to exclusion on the basis set forth above and, if included with other features in the same license agreement, shall be separately listed. The right of an exhibitor to exercise his exclusion privilege herein provided for shall be subject to the following terms and conditions: ‘An exhibitor contracting for a portion of distributor’s features shall be deemed to have contracted for "all of the feature motion pictures offered” if the distributor shall have offered only such portion to exhibitor. 'An exhibitor shall be deemed to have contracted "for a run in any situation” if he contracts for the right to exhibit each feature for a particular run either at a specified theatre or upon an or basis, i.e., at one of two or more specified theatres. 3Only "Westerns” which are not of the usual character and type of, and are inexpensively produced as compared with, the distributor’s general line of features for the particular season in question. (a) a first-run exhibitor shall give the distributor written notice with respect to each feature he elects to exclude within 14 days after the mailing by distributor of the first notice of availability thereof; any other exhibitor shall give such notice within 14 days after the close of the first exhibition of such feature in the city or town in which his theater is located or the mailing of the notice of availability thereof, whichever is later, provided that if such feature is not exhibited on a prior run in such city or town and notice of availability shall have been previously mailed to such exhibitor, the distributor shall mail to such exhibitor a new notice of availability thereof and notice of exhibitor’s election to exclude such feature shall be given within 14 days after the mailing of such new notice; (b) the exhibitor shall not, at the time of giving such written notice, be in material default under the license agreement1; (c) exclusions shall be made proportionately among the several price brackets provided for in the license agreement5; but any number of exclusions to which an exhibitor is entitled may be made from the lowest price bracket; (d) if any exhibitor, having the right to do so, fails to exclude one or more features from higher brackets, he shall, for each such feature, have the right to exclude one feature from the lowest bracket; provided, however, that if at the time there are no unplayed availabe features in the lowest bracket, he may exclude a feature from the next lowest bracket. Upon the exclusion of any feature under this Section (1), the license therefor shall terminate and all rights thereto shall revert to the distributor and such exclusions 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 of such feature is subsequently entered into by such exhibitor. All disputes growing out of the exercise or attempted exercise by an exhibitor of the exclusion privilege provided for in this Section (1) shall be subject to arbitration. (2) Exclusion for cause. An exhibitor shall have the right, in addition to the exclusion privilege provided for in Section ( 1 ) above, to exclude from any license agreement any feature which may be locally offensive on moral, religious or racial grounds, provided he shall give the ‘Without limiting the generality of the term "material default,” an exhibitor shall in any event be deemed so to be in material default if, at the time of giving notice of exclusion, he has failed to pay the license fee due for any feature there tofore exhibited by him or if, at such time, he has failed reasonably to perform the license agree ment with respect to the playing of features theretofore made available to him thereunder. 5 Example : If the agreement licenses 48 features, of which eight are in the highest bracket, 12 are in the next to highest bracket, 16 in the next to lowest bracket, and the remaining 12 in the lowest bracket, and, if the exhibitor has the right to exclude 10 per cent (five features), then not more than one feature may be eliminated from the highest bracket, not more than one from the next to highest bracket, not more than two from the next to lowest bracket, and the remaining one feature from the lowest bracket; or all five or any lesser number may be eliminated from the lowest bracket. distributor written notice, not later than 14 days after the conclusion of its first exhibition in the exchange territory in which the exhibitor is served, of his desire to exclude such feature, specifying the reasons therefor. Upon the exclusion of any feature under this provision, the license therefor shall terminate and all rights thereto shall revert to the distributor. Any dispute as to whether or not a feature is in fact so locally offensive shall be subject to arbitration. The arbitrators shall not, in deciding such question, take into consideration the decision of any arbitrators with respect to the same feature except only that they do so if such decision concerns the same feature in the same local area in which exhibitor’s theatre is located. II. Trade Announcement Each distributor shall make a general trade announcement at or prior to the beginning of each of its seasons, containing such information as it may be practicable to give of all features completed or actually in production then intended for release during such season, it being understood that the completion of such features actually in production and the making of such other features which it is intended to produce are subject to the hazards and uncertainties of the business and they may not be completed or produced, as planned. III. Public Demand for Exceptional Feature If in any town or in any city, or section of a metropolitan city, an exhibitor shall request of a distributor the license for a run in any situation0 of a feature, having such an exceptional and outstanding appeal as to create a natural and spontaneous national public demand and for which there is a spontaneous and natural public demand in the town, city or section of the metropolitan city in which his theatre (s) is located, and which would not be shown in such town, city or section unless licensed for exhibition to exhibitor, and the distributor offers to exhibitor a greater number of features than exhibitor because his playing time will be so absorbed by previous commitments for features can without altering his operating policy reasonably exhibit in such situation, the distributor will then offer to such exhibitor such lesser number of features, including such requested feature, as may be agreed upon or, lacking such agreement, such number as may be determined by arbitration to be the maximum number of features which can reasonably be exhibited by exhibitor in such situation; provided that the distributor shall have the right at any time before the arbitrators shall have made their award to offer or license all or any of its features to any other exhibitor. An exhibitor who has been a customer of a distributor and who has refused to contract for such distributor’s features for the situation involved shall have no right to attempt to use this Article to compel such distributor to license to him from time to time its outstanding features. Any dispute as to whether such requested feature is an "Exceptional Feature” as above described or as to the number of features which can reasonably be exhibited by exhibitor in such situation or as to whether exhibitor is so at °"For a run in any situation” as defined in Section (1) of Article 1, footnote 2. April 5, 7 959