Year book of motion pictures (1951)

ject any such proposed contract the Producer or its representative shall have fourteen (14) days from the date of rejection in which to obtain a more favorable contract. Should the Producer or its representative fail so to do the origrinal contract shall ipso facto be deemed approved tniless the Producer or its representative shall have designated its orig'inal rejection as final. No proposed contract on which the rejection has been designated as final shall be entered into by United. Should the Producer or its representative at any time a?ree in advance with United upon the rental terms or license fees for the distribution, exhibition, or marketing of any motion picture in any specified theatre or situation. United shall not be obligated to submit the contract containinsr the terms so agreed upon to the Producer or its representative for appioval. Discriminations 110. Various contract provisions b,v which disci-iminations against small independent exhibitors and in favor of the largre affiliated and unaffiliated circuits were accomplished are: suspending' the terms of a given contract, if a circuit theatre remains closed for more than eieht weeks, and reinstating: it without liability upon reopening: allowing: large privileges in the selection and elimination of films: allowing deductions in film rentals if double bills are played: granting move overs and extended runs: granting road-show 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 frequentl.v in franchises and master agreements, which are made with the larger circuits of affiliated and unaffiliated theatres. 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 contract with the larger <-ircuits constitutes an unreasonable discrimination against small competitors. 111. The discriminations referred to in Finding 110 can be enjoined but there is no effective way of preventing similar results from the use of other discriminatory devices in the absence of divorcement relief. 112. Agreements were made by the exhibitordefendants with each other and their affiliates by which g-iven theatres 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" theatres were divided among the exhibitors in or owners of such theatres accordingto pre-agreed percentages or otherwise. Some of the agreements provide that the parties thereto may not acquire other theatres 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 theatres in the earning:s of which they have a joint interest. 11.3. 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 theatres of different ownership into a coalition for the nullification of competition between them and for their more effective oompetion against theatres not mem,bers of the "pool." 114. In certain other cases the operating^ agreements are accomplished by leases of theatres, the rentals being determined by a stipulated percentage of profits earned b.v the "pooled" theatres. This is but another means of carrying out the restraints found above. Joint Ownership 115. Man.v theatres, or the corporations owning them, have been held jointly by one or more of the exhibitor-defendants together with another exhibitor-defendant. These joint interests have en abled the major defendants to operate theatres collectively rather than competitively. When one of the major defendants has owned an interest of five per cent or less, such an interest was «le minimis and was only to be treated as an inconsequential investment in exhibition. A summary of theatres jointly owned by two defendants is set forth in the following tabulation taken from RKO's Exhibit 11: Paramount-Fox 6 Paramount-Ivoew's 14 Paramount-Warner 25 Paramount-RKO 150 Loew's-RKO 3 Loew's-Warner 5 Fox-RKO 1 Warner-RKO 10 Total 214 Theatres The major defendants have, since the remand of this case, entered into orders and stipulations providing for the dissolution of all such joint interests still held by them, except those which were de minimis. 116. The interest of Newman in Evergreen State Amusement Corporation was that of an investor. 117. Many theatres, or the corporations owning them, have been held jointly by one or more of the exhibitor-defendants with independents. A summary of such theatres is set forth in the following tabulation taken from RKO's Exhibit 11: Paramount 993 Warner 20 Fox 66 RKO 187 Loew's 21 Total 1.287 Some involved no more than innocent investments by those who were not actual or potential theatre operators. Others involved an alliance with one who was or would have been an operator but for the joint ownership, thereby eliminating putative competition. When a defendant or an independent has owned an interest of five per cent or less, such an interest was tie minimis and was only to be treated as an inconsequential investment in exhibition. Of the theatres listed above, 177 theatres in which Paramount had an interest and 32 in which RKO had one were <le minimis. The dissolution of all joint interests with a present or potential operator has been provided for in orders and stipulations entered into by the major defendants since the remand of this case. 118. In the year 1945 there were about 18,076 motion picture theatres 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 independentl.v 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 theatres, or about 2.00 per cent, in which two or more of these defendants had joint interests, whether held directly or indirecly through stock ownership in the same corporation or through a lease or operating agreement. This tabulation excludes theatres connected with one or more of the defendants through film-buying or management contracts or through corporations in which a defendant owned an indirect minority stock interest. It includes all theatres in which each defendant otherwise owned a direct or indirect interest of any amount, 119. Former Finding 119 has been vacated. 120. On January 1. 1935. Loew's operated in the United States 136 theatres. The first-run theatres, 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 theatres are located. 121. The formation of RKO resulted in the conversion of vaudeville theatres acquired by it into motion picture theatres and thereby introduced new and substantial competition into the exhibition field in the cities in which each of these theatres was located, except insofar as such competition was affected by the practices of the defendants. 914