The Film Daily (1928)

THE •ci^ak DAILV Sunday, Febmary ll Right to Select Customers Defendi SAY PRICE NOT ALWAYS DETERMINING FACTOR conducts its business almost entirely on orders for future delivery. Henry Ford is now and has been for years doing business on contracts for future deliveries. Such a prohibition would work an unreasonable hardship on the producer, distributor and exhibitor. Practically all producers, to some extent, finance their operations on the credit derived from future contracts and to many of the smaller ones this is the only means of obtaining credit available to them and it would be an unfair discrimination against them, unjustified by any precedent of either law or fact. As has been heretofore pointed out. pictures must move rapidly as the advertising campaigns have to start long before the completion of the pictures and reach their climax on the release dates. The effect of this section would be to slow down the whole course of the business and compel the producers and distributors to carry films, representing investments of millions of dollars (frozen capital), idle on their shelves for months. This would be ruinous to the smaller concerns as they have neither the capital nor credit to carry such a load. The effect upon the exhibitor would be equally as unfair, because he would have no means of contracting for his supply of pictures in advance. Exhibitors want to be assured long in advance of their supply, so they can arrange their programs and publicity matter accordingly. In the fall of 1923, Paramount tried to initiate such a sales system as is required by this section, but found the trade unwiling to accept it. The exhibitors wanted to book wholesale and in blocks. After a few weeks' trial, with a resulting loss of over a million dollars. Paramount was forced to abandon it and returned to the present system. The provisions of this section would absolutely abolish the news reels. They constitute a prompt news service, similar in function to the daily newspapers. From their very nature they cannot be exhibited in advance of their sale any more than could a newspaper be similarly previewed. News reels service is sold by the year 104 issues for release — two each week. The prices run from $2 to $10 per theater per issue. To attempt to sell each issue separately would be impossible. To prohibit the sale of this news service by the year would make it mechanically and physically impossible for any of the six news reels to exist. Section 6 — Page 9 — Line 19 Secti<nt 6. After six months from the date of this Act it shall be unlawful for any producer or distributor to allocate, lease, or rent copyrighted films to theaters which are affiliated directly or indirectly with such producer or distributor or with any other producer or distributor without affording all competing exhibitors an equal opportunity to bid for such films in free and open competition. This is the most extraordinary section of this extraordinary bill. It would make it unlawful for any producer and/or distributor to sell copyrighted film to theaters affiliated with any producer or distributor without affording ail competing exhibitors an equal opportunity to bid for such film. Such a law would deprive producers and distributors of their right to choose their own customers. Today there are affiliated theaters in all the key cities of the country and also in most of the other large cities and towns, and a producer desiring to sell to affiliated houses would have to put his pictures up at auction in the most important cities and stand by and see them knocked down to the highest bidder without regard to the character of the theater operated by him. The producer would hare no assurance of a first class, first-run showing of his pictures in the key cities, which is a matter of the utmost importance. The producer would lose all control of his product and would be deprived of the right to retail his own pictures. There is and can be no law making it illegal for a manufacturer to market his own product. The whole economic trend of the day is toward this sales system, as evidenced by the rapid grovrth of the chain store movement. If this proposed sales system was to be enforced in other industries it would, for example, compel the United Cigar Co. to offer its product at auction and would prevent it from operating its retail stores. A further effect on producers would be to require them to offer their own pictures to their competitors. No court would sustain such a law. First National Pictures, Inc., has something in the neighborhood of 1,000 contracts with exhibitors over the country which are of indefinite duration and by the terms of which the rentals are fixed and determined by the agreements and provisions of such contracts. These contracts constitute a valuable property right, both to the producer and the exhibitor. If enacted this section would abrogate these contracts and deprive these exhibitors of this valuable right. Other producers have also made long-term contracts with exhibitors which would be similarly effected. It is a common practice to rent motion pictures for exhibition on a percentage basis with the receipts of the theater divided between distributor and exhibitor on an agreed percentage basis. This is recognized as a fair and equitable sales system. The enactment of this bill would abolish the renting of pictures on such basis. The strongest' argument against the blind booking — auction block feature of the Brookhart bill is that although it is seriously embarrassing to the producer, distributor, exhibitor corporation, it works worse hardships on the very exhibitors supporting this bill. If the provision for sale to the highest bidder is efficacious, then the producer-distributor who has invested enormous suras in the highest class motion pictures has no assurance for the supply of his theater. If it is not efficacious (and it is difficult to see how it can be since the affiliated theater could bid exaggerated sums for pictures as long as it was paying them to its subsidiary or to the company which owns it), then the unaffiliated theater would be the one hit since it would have no assurance whatever of product. This feature would also destroy the present system under which a theater builds up its patronage in establishing good will in the minds of its customers between a certain line of pictures or certain stars. If Colleen Moore's, for instance, should be offered separately at auction, no theater would care to build up a Colleen Moore following. A boxoffice in a particular theater sometimes thrives in proportion to the fan following which has been built up for the stars exhibited in that theater. It would be difficult for a star to capitalize on his or her popularity, if the pictures featuring that star are to be shunted from one theater to another. The selling by a producer to chain theaters in preference to an unaffiliated theater, in many cases, is merely the reflection of the economical factor both as to safety and outlet, and the lesser cost of selling that goes with a chain sale. It is much cheaper to sell 100 houses of a circuit, or 50, than to negotiate for that number of separate contracts. Furthermore, each circuit, having a tremendous investment, has a greater appreciation of a tie-in with a quality producer than an individual that uses one brand of pictures this year and may go elsewhere next year. There is an imperative need for distribution costs in this industry to come down and as chain operation becomes more and more a vogue (as it has in every other line of business), reduction of .sales costs must go hand in hand with it. For producers to be deprived of the right to sell the chain and offer in each separate locality the pictures to the highest bidder, as against the chainowner, would mean that it would be impossible to sell to a chain of theaters with any degree of safety, and even the producer who desires to own his own theaters, would find himself in a position where he would not be sure of his own product for his own houses. The intent and purpose of this section is to prevent the producers and distributors from selling to chain theaters on better terms than they do to unaffiliated theaters. This question has also been litigated in the Federal Courts in other industries, and it has been definitely decided that a manufacturer may sell to chain stores on better terms than to independent stores and having the right to choose the customer, may refuse to sell independent stores who are competitors of the chain stores. These cases arose from attempts by the Federal Trade Commission to compel manufacturers to recognize the independent stores as against their customer, the chain stores; but the courts refuse to sustain the Commission's orders. One of the leading cases is National Biscuit Co. vs. Federal Trade Commission. Section 7 — Page 10 — Line 1 Section 7. Administration of this Act is vested in the Federal Trade Commission, which is hereby authorized ana empowered to make su-itable rules and regulations for giving effect to the provisions hereof,, including the power, after full hearing, to fix the differentials which may be observed between the price of a block or group of films and the price of a separate and several film or films less than such block or group as mentioned in section 4 of this Act. This section gives to the Federal Trade Commission the power to enforce the bill and to make rules and regulations for giving effect to its provisions including the power, after full hearing, to fix the price differentials. The most remarkable feature of this section is that it makes no provision for an appeal from any decision, rule, regulation or order entered by the Commission. The broad and unlimited powers granted by this proposed act would put the motion picture industry absolutely under the control of this (Commission with no right of appeal to a court for a review. This commission is not a judicial body, but an administrative body, and the enactment of this bill would deprive this industry of the right to have these important questions of law and equity determined by a court. The Federal Trade Commission Act has an express provision for an appeal as of right to the U. S. Circuit Court of Appeal from any order of the commission and similarly orders of the Interstate Commerce Commission may be reviewed by the Federal court. This legislation is the most drastic of any of the so-called commission laws yet proposed. As has been pointed out heretofore, the effect of this Bill would be to bring thousands of price disputes before this commission for determination. This would involve an enormous amount of litigation at a cost of much time and money. Each case would have to be investigated, a complaint prepared and a copy served upon the respondent who, under the present rules of the commission, would have thirty days to answer. The issues being thus joined, the matter would be referred to a trial examiner before whom the testimony would be taken. This would necessitate much travelling over the country and the subpoenaing of many witnesses from dis tant localities. At the conclusion of the evidence the examiner would have thirty days in which to prepare and file his report, after which counsel for the commission and the respondent, would file their exceptions to the same and their briefs and then the matter would come on for argument before the commission and final determination. The length of time taken by the commission in determining the cases before it, is notorious. The important cases take years and even the smallest cases take months. An examination of the records would show that in the last five years seldom, if ever, has a contested case been finally disposed of in less than a year from the time it was first brought to the attention of the commission. Such a procedure would be fatal to both exhibitors and producers. In order to speed up the procedure, it would be necessary for the Congress to make a very substantial increase in the commission's annual appropriation as the personnel of the commission and staff would have to be greatly increased. In order to handle the large volume of new cases which would accrue from the passage of this bill, the number of commissioners would have to be increased, also more investigators, trial examiners and trial counsellors, would have to be employed and provision made for increased expenses, such as travel, mileage and fees for witnesses, stenographic expenses, etc. That this increased personnel would be necessary, is readily seen from an examination of the Commission's Annual Report for the Fiscal Year ended June 30, 1927, which was filed with the Congress last December. On page 104 of this report are found tables summarizing the work of the commission. Taljle 3 shows that during the last five years the commission, after investigations, docketed a total of 568 complaints or contested cases. This is an average of 113 a year. During the same period 686 cases were finally determined FUTURE DELIVERY SYSl IN OTHER LINES and disposed of, being an averag a year. It will thus be seen that aj of only several thousand cases a overwhelm the organization as noi tuted. There are arbitrated or con4 the motion picture business approxin 000 disputes each year between b| sellers of film and between 4,000 of these disputes are actually heari termined each year by the 32 arbitratf in the United States. There can tion but that this bill would resul| sands of new cases every year, bed utterly impossible to fix any stal "differentials" that will apply fairlj picture and every theater throughoul try. There is probably no qHest|l industry upon which there is suflf difference of opinion as that of fifl On questions of price all authoritiq and each case would be different require a full hearing on the merits! lays and red tape incident to this I would afford no relief to the ind| on the contrary would impose un burden and expense. By the titnej tion of price was litigated, the pic^ be so old as to have no exhibition Section 8 — Page 10 — Liij Section 8. Any person wl kiiozvingly and willfully violt provision of this Act or any ordt or regulation made by the Trade Commission, shall, upon tion in any district court of tht States, be sentenced to a fint more than $10,000 and not lit $1,000, or to imprisonment fai'i than one year or to both sui^ and imprisonment, in the di of the court. This is the penal clause pro^ and/or imprisonment for any the act or any order, rule or rej the Federal Trade Commission, crime and branding producers, and exhibitors who violate it as criil II lirf ifri 'h Wt' w( ki |« Crt fh lieili; tktt dSrii Bjp ■ tern lEal ip i] am. tiijB nil ! 1 fjfptl ml Hearst Papers LJ Up Against Broof (.Continued from Page '. "Blind booking," buying pictij and unmade, is nothing but sellinj future delivery, a practice uni; every leading business in the ci abolish forward contract would pendent producers" more than affiliated interests. Such contracts are the basis ifl loans with which the independent!) payrolls. There are plenty of pendent producers, just as ther sands of independent exhibitors. The most unfair part of the bj tempt to deny producers the rig] their exhibitors. For example, t] theaters they own. It is an back the clock of economic pro fusing to this one group of manu| right to sell directly to the pub The Brookhart Bill would i pense and confusion into film di forbidding the long-term cent business is done. It would r| tion more uncertain and costly would be produced, if none Ci until completed — that is, if then "blind booking." . Finally, government disappr lift film industry would give for ments a fine new excuse to hat I ^ can films by discriminatory leg i *« The Brookhart Bill should i ' "'i is an ill-considered proposal, b< d I'll ranee of the motion picture busi II ** harm instead of help the int( «( '> tends to protect. It is an un n '' terference with a great Amer Ul ' 11-Eil which has done nothing to stigma and this handicap at theUif government. n ^1