Year book of motion pictures (1925)

Motion Pictures and Finance In a series of five articles, written for the Wall Street T ournal, L. W.~ Boynton, formerly publisher of the Exhibitors Trade Review, has contributed what may be appraised as a comprehensive course on all financial aspects and ramifications of the motion picture industry. Mr. Boynton says: * * * The industry is fundamental because it meets a human need, and meets it at a price within the reach of all. The vast majority of picture theaters in America charge less than 50 cents for their best seats, the average being nearer 25 cents. The motion picture appeals to the masses. It commands numbers, and commands them in a greater degree than any other form of entertainment. The average weekly attendance at film houses in this country is 50.000,000. In addition there is the rest of the world to draw upon, and the American industry is drawing upon it with increasing strength. * * * * * * In Great Britain 80% of the films shown are American. The principal American distributors have branches in all the chief cities of the continent. * * * * * * A leading picture corporation now has a gross income of a million dollars a week. That is what it gets from renting its pictures to the theaters of the country, plus its forergn business, which is about 25% of the total. The best obtainable statistics show the following facts about the industry in the United States : The investment is $1,500,000,000. Total number persons permanently employed, in all its branches. 300,000. Average number of feature pictures produced yearly, 700. Average weekly attendance at picture theaters. 50.000.000. Admissions paid annually total about $500 000,000. Salaries and wages paid at the studios, $75,0C0.000 annually. The theaters running from six to seven days a week, 9,000. Theaters running four to five days a week. 1,500. Theaters running one to three days a week, 4,500. Producers and exhibitors spend $5,000,000 a year in newspaper and magazine advertising Producers spend $7,000,000 annually for photos, cuts, slides, and other accessories; lithographs, printing and engraving. The big growth in the foreign market is shown in the government export figures. In 1913, 32,000. 000 lineal feet of film were exported In 1923, 200,000,000 feet went into foreign trade. The percentage of American films used abroad is between eighty and ninety. On the other hand, only 425 foreign pictures were sent here for sale in 1922. Of these only six were sold and exhibited." Article 2, dealing with the adoption of the budget system and the elimination of waste by the cost estimate systems, disclose the following as the more or less salient points on this subject of the series : * * * "The picture is made in the studio at a cost of anywhere from $50,000 to over a million. The average is probably between $150,000 and $200,000. * * * * * An example of the new business spirit in the industry is shown by a bonus plan which is shortly to be put into effect by one of the largest producing companies. Under this system the director of a picture will be given a definite budget to work upon, and he will be given a percentage of the saving from the production estimate. In other words, he will be made an actual partner in the making of the film, and will be interested in eliminating avoidable wastage. The budget plan is being adopted by all the successful companies. They know in advance, with reasonable accuracy, what the cost will be, and they can therefore to a great degree control this very important factor in the picture's later career. * * * * * * Every picture is an individual creation, but production on the whole is subject to the law of averages. The large production-distributien companies — Associated, First National, Famous Players-Lasky, Fox, Metro-Goldwyn, Universal — do not put all their eggs in one basket. They produce and distribute a sufficient number of pictures a year, so that the lower values of the less successful are absorbed by those which hit the mark with the public. * * * Another well-known law which works out in the film industry is that of supply and demand in its application to the salaries of stars and directors. With the business methods that have been introduced in production, of which players' salaries are an important item, of course, in negative cost, has come the stabilizing of the money paid to the stars. They are "made" in the last analysis, by the public, not by the producer. If the public wants them, they are a tremendous asset commercially, and they are therefore entitled to receive, and do receive, large salaries. The salary of the star is distributed over the millions of theater patrons who want to see that actor or actress." Article 3 is devoted to distribution and a digest of the key city system. Here we have: * * * "For first exhibition and distribution of their pictures all of the leading companies have adopted what is known as the key center plan. In the United States there are 31 key centers, each a key to its own territory. They are : New York, Hoston, Philadelphia, Washington. Atlanta, New Orleans, Dallas, Oklahoma City, St. Louis, Kansas City, Chicago, Minneapolis, Omaha, Denver, Salt Take City, Seattle, Portland, San Francisco, Los Angeles, Indianapolis, Cleveland, Pittsburgh, Cincinnati, Louisville, Des Moines, Buffalo, Detroit, Milwaukee, Newark, New Haven and Charlotte. * * * * * * In each key city there are recognized first class, first run houses, and into these, according to well-defined practice, the picture goes for its initial showing. It is liberally exploited. Films like "The Birth of a Nation,'' "Robin Hood," "The Hunchback of Notre Dame," "The Four Horsemen of the Apocalypse" and "The Covered Wagon" are billed in circus fashion and draw patronage from the whole territory of the key city. The engagement may run months, if public response warrants. » * * * * * One hundred positives, on the average, are made for each picture for the whole country. Now a picture which has cost $100,000 often brings in twice as much as one costing $200,000. The sales departments make a careful study of the picture and then fix what is called its "exhibition value," that is, the amount it is expected to produce in rentals from the theaters. When the picture is released, the cost is depreciated monthly — 50% in ninety days, 88% in a year and 100% in two years. The ratio of depreciation corresponds to the expected returns from rentals, but it is made irrespective of these returns. * * * * * * In the vaults of every representative picture company are millions of dollars in residual value in negatives. The story rights alone represent an important asset. Many of the old pictures are being remade, greatly improved in technique and acting. The residual value in picture stories, as well as negatives, runs high. The distribution of all motion pictures in 1923 cost about $40,000,000, about 30% of the total revenue received by the distributors from rentals. The growth of elaborate picture theaters in all the important cities is emphatic testimony to the tremendous fund of public good-will upon which the industry draws. The Capitol Theater in New York, seating 5.300 and devoted entirely to the presentation of pictures, is said to be the largest entertainment palace of the world. A new 53