Film year book (1948)

tract, if circuit theater remains closed for more than eight weeks, and reinstating it without liability upon re-opening; allowing large privileges in the selection and elimination of films; allowing deductions in film rentals if double bills are played; granting moveovers and extended runs; granting roadshow privileges; allowing overage and underage; granting unlimited playing time; excluding foreign pictures and those of independent producers; granting rights to question the classification of features for rental purposes. These provisions are found most frequently ni franchises and master agreements, which are made with the larger circuits of alTiliated and unaffiliated theaters. Small independents are usually licensed, however, upon the standard forms of contract, which do not include them. The competitive advantages of these provisions are so great that their inclusion in contracts with the larger circuits constitutes an unreasonable discrimination against small competitors. 111. The discriminations referred to in Finding 110 would appear to be impossible under a system where the exhibitors competing for a license to exhibit a given feature on a given run do so on a parity since the same offer must be made to all prospective exhibitors in each competitive area. Competition Removed 112. Agreements were made by the exhibitordefendants with each other and their affiliates by which given theaters of two or more exhibitors, normally in competition with each other, were operated as a unit, or most of their business policies collectively determined by a joint committee or by one of the exhibitors, and by which profits of the "pooled" theaters were divided among the exhibitors in or owners of such theaters according to preagreed percentages or otherwise. Some of the agreements provide that the parties thereto may not acquire other theaters in the competitive vicinity without first offering them for inclusion in the "pool." The result is to eliminate competition pro tanto both in exhibition and in distribution of features which would flow almost automatically to the theaters in the earnings of which they have a joint interest. 113. Other forms of operating agreements are between major defendants and independent exhibitors rather than between major defendants. The effect is to ally two or more theaters of different ownership into a coalition for the nullification of competition between them and for their more effective competition against theaters not members of the "pool." 114. In certain other cases the operating agreements are accomplished by leases of theaters, the rentals being determined by a stipulated percentage of profits earned by the "pooled" theaters. This is but another means of carrying out the restraints found above. Theaters Held Jointly 115. Many theaters, or the corporations owning them, are held jointly by one or more of the exhibitor-defendants, together with another exhibitor-defendant, in some cases in conjunction with independents. These joint interests enable the major defendants to operate theaters collectively, rather than competitively. When a defendant or an independent owns an interest of five per cent or less, such an interest is de minimis and only to be treated as an inconsequential investment in exhibition. 11G. When theaters are jointly owned by a major defendant and another party, it is evident that both joint owners wish to participate and indeed are directly or Indirectly participating in the business of exhibiting motion pictures. The major defendant thereby eliminates putative competition between Itself and the other joint owner, who otherwise would be in a position to operate theaters independently. 117. Such joint interests as those described above in findings 112 through 116 exist in a great number of theaters, a summary of which is set forth in the following tabulation taken from RKO's Exhibit 11: Theaters jointly owned with independents: Paramount 993 Warner 20 Fox ee RKO 187 Loew's 21 Theaters jointly owned by two defendants: Paramount-Fox 6 Paramount-Loew's 14 Paramount-Warner 25 Paramount-RKO 150 Loew's RKO 3 Loew's Warner 6 Fox-RKO 1 Warner-RKO 10 Total Theaters 1.501 Of the above theaters jointly owned with independents, the following number will not be affected by the decree, since the defendant or coowning independent owns less than a 5 per cent interest: Paramount 177 RKO 32 Total Theaters 209 Total affected by the decree according to RKO's Exhibit 11 1.292 118. In the year 1945 there were about 18.076 motion picture theaters in the United States, of which the five major defendants had interests in .3.137. or 17.35 per cent. Of the latter. Paramount or its subsidiaries owned independently of the other defendants 1.395 — a little less than half, or about 7.72 per cent; Warner 501. or about 2.77 per cent: Loew's 135, or about .74 per cent: Fox 636. or about 3.52 per cent: and RKO 109. or about .60 per cent. There were 361 theaters, or about 2.00 per cent, in which two or more of these defendants had joint interests, whether held directly or indirectly through stock ownership in the same corporation or through a lease or operating agreement. This tabulation excludes theaters connected with one or more of the defendants through film-buying or management contracts or throusrh corporations in which a defendant owned an indirect minority stock interest. It includes all theaters in which each defendant otherwise owned a direct or indirect interest of any amount. IVo Theater Monopoly 119. The present theater holdings of the five defendant-exhibitors Paramount, Loew's, Fox, RKO and Warner, aggregate little more than one-sixth of all the theaters in the United States, and by such theater holdincs alone the defendants do not and cannot collectively or individually, have a monopoly of exhibition. 120. On Jan. 1. 1935. Loew's operated in the United States. 126 theaters. The first-run theaters, which are engaged to a large extent In exhibiting Loew's own product. Metro pictures, serve as "show-cases" for those pictures in the areas where the theaters are located. 121. The formation of RKO resulted in the conversion of vaudeville theaters acquired by It into motion picture theaters and thereby introduced new and substantial competition into the exhibition field in the cities in which each of these theaters was located. 122. Ownership and operation by RKO of theaters in certain principal cities of the United States enables RKO through the utilization of the facilities of such theaters to plan and direct the first exploitation of the features which it distributes in such areas in a more effective man 982