Independent Exhibitors Film Bulletin (1956)

DANGER IN LIQUIDATION "Slunrnttmsh ip. Sportsmanship. Salesmanship* (Continued from Page 5) nation during the weeks immediately before Easter, an important business period for the industry, sharply curtailed theatre attendance. The drop in attendance, however, is believed to have been temporary, and revenues will probably resume their uptrend as a larger number of better films become available. We therefore continue to look for the motion picture industry to enjoy a prosperous year in 1956. Long-Term Economic Climate Favorable Whether the expansion in revenues and earnings we foresee for the motion picture companies in 1956 is the beginning of a strong recovery trend, or whether it is but an evanescent boom remains to be seen. Basically, however, the motion picture industry should be benefiting from a favorable economic climate over the next few years. By the end of this decade, the average American will probably have a larger income than what he is earning now. He is likely to spend more for recreation and amusement. As the average number of hours worked decline and as the load of housework is further alleviated by various electrical convenience appliances, the average American will also have more time for amusement. In addition, Hollywood will be favored by a sharp growth in the population of its major customer group, the 15 to 24-year olds. According to U.S. Census projections, the number of persons in this age bracket will grow some 15% over the next four years. It is thus evident that if Hollywood can maintain its current share of the public's leisure time and recreational spending dollar, or even better, if it could gain a somewhat larger share that it now enjoys, the motion picture companies would then be able to take full advantage of the favorable economic environment and thereby increase their earnings. At this point, investors might well ask: How likely are those "ifs" to become realities? We believe them fully capable of realization — but again provided that (1) the companies are given a fair chance to fight for their survival and to demonstrate their abilities, and (2) given that chance, they will work together as a group to achieve that goal. Ominous Clouds Ahead Whether the motion picture companies will get many other opportunites to prove their mettle is a moot point, however. Recently, the large discounts at which the common stocks of several major film producers are selling below their respective asset values have come to the attention of financial groups, which are reportedly considering buying heavily into the shares of these companies and then liquidating a part, if not all of their assets. It is commonly known that the common stocks of Loew's, Paramount Pictures and Twentieth Century-Fox, the big three producers in Hollywood, are all selling well below book values that do not even reflect the multi-million dollar library of old films of these companies. It is also generally believed that the real estate of these studios in Hollywood, carried at nominal figures on the companies' books, has appreciated substantially in market value. Moreover, these companies have various other interests that are also not fully reflected in book values. Loew's, for instance, has sizable foreign investments, Twentieth Century-Fox has oil and gas under its studios, and Paramount has substantial interests in a number of electronic companies. There is no doubt, therefore, that if some financiers can buy enough common shares in the open market to take control of these companies, they can carry out a program of "spin-offs" that would yield substantial profits for them I selves as well as other shareholders. While such spin-offs, should they materialize, might I serve stockholder interests best in the short run, they would deal the entire motion picture industry a devastat I ing blow. If the vast assets of these three major studios should be liquidated and the proceeds distributed to their I respective stockholders, the shareholders would over a period to time, reap substantial windfalls. But the surviv I ing studios, stripped of their properties, financial resources, and Hollywood-minded managements as well, would be I hard-pressed to produce the elaborate films that have come to be associated with Hollywood. Since it has become evident that Hollywood's ability to compete successfully with television depends largely upon an abundance of such pictures, the lack of supply from these companies would discourage theatre attendance and gradually force many theatres to close. With fewer outlets available, smaller film producers would probably see their revenues contract, and I would therefore have to divert their efforts to the production of TV programs, or go out of business altogether. As a result, the motion picture industry, as such, could very easily become no more than a producing adjunct to the television industry. Such a development, however, is as yet only a threat to the industry. It may never, and for the sake of the motion picture industry, we hope it will never take place. Perhaps if the managements of these film producers can demonstrate their abilities to earn a reasonable return on their vast assets, investors as well as financiers might be more reluctant to liquidate these companies. After all, if these companies could show substantial gains in their earnings over a period of time, they would be able to pay out larger dividends, and the market price of their common stocks would, in turn appreciate significantly. Under such circumstances, shareholders would not be likely to demand liquidation of their companies. To increase their earning power, motion picture producers and exhibitors alike must work harder than ever before. In short, they will require (1) showmanship, (2) sportsmanship, and (3) salesmanship. Showmanship The large number of box office successes in 1955 clearly indicates that with quality pictures, Hollywood can not only halt the exodus of audiences from the theatres but can (Continued on Page 20) Page 18 Film BULLETIN May 14, 1 956