Harrison's Reports (1946)

168 Notwithstanding the deference due to a pronouncement by an impartial and intelligent tribunal, such as the three judge Court, this portion of the opinion is not likely to be greeted with enthusiasm by exhibitors who are familiar with the conduct of theatres by the defendant exhibitors, particularly during the years of the depression, when a high grade of ability to operate theatres was a prerequisite to financial survival; who have observed the operation and ultimate closing or abandonment of theatres acquired by large circuits from independent exhibitors; who are aware of the absolute failure of Universal to operate theatres efficiently, so that within a period of about five years it was forced to sell or abandon them; and who have not forgotten the receivership or reorganization or bankruptcy proceedings of large affiliated theatre circuits, such as Publix Theatres Corporation, Fox West Coast Theatres, Fox Metropolitan Circuit, and Universal Chain Theatrical Enterprises, Inc., and of such great theatre-owning organizations as Paramount and RK.O. Many exhibitors undoubtedly hold the view that it would be difficult for a circuit to avoid operating successfully if it had the advantage of a discriminatory system and regular access to the best product in the market, and if it was, in addition, protected and aided by unlawful trade practices. And, in cities where independent competition still exists, it may be doubted whether an adequate showing could be made that, having regard to the quality of product used, the major companies were operating more efficiently than independent exhibitors. In negativing the existence of inonophstic control of exhibition, the Statutory Court placed some reliance upon the figures already mentioned, showing that the defendant exhibitors owned or operated only 17.35 per cent of the total number of theatres in the United States. Spokesmen for independent exhibitors, according to the "Analysis of the Court's Opinion" from a layman's point of view in Harrison's Reports of July 20, 1946, have criticised this reason for denying complete divestiture. They have pointed out that the Court gave weight to the fact that the defendants "did not enjoy a numerical monopoly" and that they seemingly "ignored the fact that the monopoly consists of the defendants' control of important key first-runs, which in turn regulate the flow of product to the subsequent-runs, thus having a restrictive effect on their operation." The Government has argued along the same lines. In its brief it called attention to statistics showing that in various cities the revenue derived by distributors from first-run exhibition of films in affiliated theatres was very large. It pointed out, for example, that in all but five of the fortynine cities from one hundred thousand to two hundred thousand population, the first-run rentals alone ranged as high as seventy to ninety-four per cent of the total rental of the city." It may also be suggested that, in their decision, the Court made no attempt to compare the seating capacities or locations of the theatres mentioned, their annual gross receipts and profits, or the film rental paid by them to distributors. In their computation a theatre such as the Rado City Music Hall or the Roxy or Paramount in New York City, with tremendous seating capacity, continuous daily performances, and extended runs, counts as one unit, the same as any little upstairs house in a rural community in Maine or Mississippi, running three or four shows a week. It might not be inappropriate, therefore, to ask how many hundreds of small independent theatres of this nature would be required to produce the revenue of one of the large metropolitan theatres. On the basis of statistics compiled and estimates made by competent authorities," it is conservative to compute that the leading one thousand theatres in the United States pay to each of the five chief distributors not less than sixty to seventy-five per cent of the total film rental derived from all its domestic customers. In an action of this nature it may be difficult to get exact figures to show the extent of the defendants' power and control in the field of exhibition. Logically, however, it would seem that an opinion based merely upon the numerical proportion of theatres controlled by the defendants to the total number of theatres in the United States cannot be in any sense conclusive. The task before the Government, therefore, is to satisfy the Supreme Court that, in some respects, the findings of the Expediting Court are "clearly erroneous," or that, in the denial of the relief of complete divestiture, there was an abuse of judicial discretion. The general opinion is that upon an appeal the Government will prevail. From his knowledge ot conditions in the industry the writer inclines to the same view. But he has only a sketchy knowledge of the evidence, and in the absence of complete information on complicated issues he considers it inadvisable to advance a definite opinion. ~This subject was discussed by the writer under the titles "Theatre Acquisition" and "Monopoly of Product" in Hakbison's Klfokis, May 16 to 2i, 1936. There it was pointed out that in an early case a tortner chairman ol the Finance Committee of 1'aramount bad tcstiiied to the ettect that the control of the majority of hrst-run theatres in an area would effectively handicap other distributors; that the policy of theatre operation was in itself a threat to the existence of a competing exhibitor; that in the Federal Trade Commission case which resulted in the decision on block booking, federal Trade Commission v. Paramount hamous-Lasky Corp., (CCA. 2), 57 F.2d. 152, an order bad been originally issued by the Commission requiring Paiamount to desist from acquiring theatres with the intent or ettect of coercing exhibitors into leasing and booking films distributed by it; and that in a Massachusetts suit an Auditor had found that in some instances there had been the expressed or implied suggestion that if the exhibitor refused to take the product of Paramount at the prices offered the defendant would acquire a competing theatre in the locality, where its pictures might be shown. A similar finding subsequently was made in Momand v. Griffith Amusement Co., et al, in the District Court for the Western District of Oklahoma, No. 6517. In the issue of May 23, 19.36, it was stated: "In considering the question of monopolizing, it is worth while to bear in mind the methods, purposes and results of theatre acquisition, and the means by which control of product has been secured. Producer-controlled theatres have been strung together across the continent in large chains, with enormous buying power. The visible means or instrumentalities by which they have secured product have been franchises, or long term contracts, with major distributors; annual master contracts covering a large number of houses throughout the entire country; selective contracts, so-called; and requests for reservation of product, usually made in advance of the selling season. Obviously these have given the producer-controlled theatres a tremendous competitive advantage over independent exhibitors." "See United States v. Aluminum Company (C.C.A.2) 148 F.(2d.) 416, 433, where the Court said that an appellate court would reverse the findings of a trial judge "most reluctantly and only when well persuaded." "Plaintiff's Brief, p. 38. "Sidney R. Kent, formerly general sales manager of Paramount and president of Fox, testified in 1932 that approximately sixtyfive per cent of the revenue of Paramount was derived from the first rive hundred houses in this country. His estimate was approved by Mr. Adolph Zukor. (Depositions of Kent, p. 211, and Zukor, p. 127, Dorchester Theatre Company v. Paramount Publir Corporation, D.C. Mass.) Subsequently George J. Schaefer, former general sales manager of Paramount and president of RKO, testified that sixty-five to seventy per cent of the Paramount domestic revenue came from the first-run theatres in the first four hundred cities in this country. (Deposition of Schaefer, p. 26, Aetna Amusement Enterprises, Inc. v. Maine and New Hampshire Theatres Co., et al., D.C. Mass.) C. C. Pettijohn, formerly general counsel of the Film Boards of Trade, as well as of the Motion Picture Producers and Distributors of America, Inc., wrote to the Secretaries of all Film Boards of Trade, July 18, 1930, that "Probably seventy-five per cent of the money derived by distributors from exhibitors comes from the first-run accounts." In other actions it appeared that the revenue derived by a distributor from four or five first-run theatres, two of which were in Boston, was greater than the revenue obtained from any other account in New England, including a large affiliated circuit which used the product in most of its theatres. ORDER YOUR MISSING COPIES Now and then your copy of Harrison's Reports is lost in the mails, but you don't know that it is missing until you look up for some information you want. In such a case you are greatly inconvenienced. Why not look over your files now to find out whether a copy of an issue or two issues is missing? 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