Harrison's Reports (1955)

200 HARRISON'S REPORTS December 10, 1955 3. You claim for Paramount what seems to be an unlimited right to choose its customers and you attribute to me an expression to the effect that "the decision in United States v. Paramount did not deprive the distributor of the right to choose its own customer." Now in order to understand my position clearly you did not need to go beyond your own company's files, for it is set forth in a letter I wrote Barney Balaban dated January 5, 19? 1 and in a speech transmitted with that letter. There is, of course, no doubt about the inherent right of a trader to select his own customers in bona fide transactions and not in restraint of trade. 1 offered that in connection with a plea to the film companies to stop forcing bidding among independent ex' hibitors. But the film companies said that the provision requiring them to offer and license pictures "theatre by theatre without discrimination in favor of affiliated theatres, circuit theatres, or others," prevented the free exercise of that right. I, therefore, proposed to the film companies that all parties join in seeking to amend the provision by eliminating the words "or others." Now let me quote from my letter to Mr. Balaban: ". . . The purpose of the litigation as shown by the pleadings, findings and opinions was to open up the 'sys-. tem of fixed runs and clearances' enjoyed by the affiliated theatres and circuit theatres. That being so, competitive bidding is justified, if at all, only when invoked by an independent exhibitor in order to secure pictures on a run formerly monopolized by an affiliated theatre or a circuit theatre, and we feel that this should be spelled out in the decree." An identical letter was sent the heads of all the other companies bound by the decree. Some (including Mr. Balaban) acknowledged the letter and a few ignored it. Not a single one approved the suggestion or volunteered to cooperate in an effort to secure freedom of choice in selecting their customers except where an independent sought access to a run monopolised by a circuit theatre. Are we to assume from Paramount's unyielding attitude on that occasion, and its present determination to select its customers for merchandising runs, that the "theatre by theatre" clause exists, in your estimation, merely as a cloak for enforcing competitive bidding upon independent exhibitors? 4. To illustrate the exclusory nature of merchandising engagements I said in my letter to Weltner that restricting such engagements on "Desperate Hours" to 128 theatres "deprives 17,872 from any opportunity to play the picture on this preferred run." This evidently impressed you as an excellent opening for the reductio ad absurdum, for in answer you say: "This statement implies that all 18,000 theatres should play this picture day and date, which is patently absurd . . . "The only other meaning I can abscnbe to your statement is that Paramount has no right whatever to determine its method of release and must, perforce, let every exhibitor who wants it, play 'Desperate Hours' on our merchandising engagements regardless of its location, size, competitiveness with other theatres or its grossing potentialities." On a former point I said it was hard to believe you were serious in what you said. With respect to the foregoing statement you are either joking or your memory will not serve you from one paragraph of your own letter to another. For on page 5 you take me to task for protesting against the total destruction of "the system of releasing pictures to the established runs in their respective order" and then, only one page and four paragraphs later you accuse me of wanting all theatres to play day and date. 5. Generally with respect to merchandising engagements you state that Paramount seeks to determine when the greatest sales penetration, through advertising and exploitation, have been achieved and then puts the picture into broadest possible release. You say clearance is not involved because the picture is withheld from general release "only for a brief period." In your letter to the House Small Business Committee in this regard you do not give the date of the initial showing of "Strategic Air Command" in seven cities but you state that thereafter the merchandising engagements in 601 "carefully selected" theatres occurred between April 21 through June, say 71 days, during which the picture was withheld from general release. I do not believe you will deny that the great national exploitation which Paramount gave the picture was carried on during those initial and merchandising engagements. According to your letter "Strategic Air Command" "was made available for sale on a widespread basis . . . commencing July 1st." Whether by this you mean is was generally released, is not clear. You state that in the four weeks following that the picture was exhibited in 1,967 theatres. This makes a total of 2,575 theatres during the four months of April, May, June and July. This can hardly be called a fast play off. As pictures go, "Strategic Air Command" was pretty old when it was made available to the subsequent run and small town exhibitors. You state that my letter to Weltner had nothing to do with Paramount's sudden decision to call off the merchandising engagements of "Desperate Hours." That is a matter of no consequence to me since I am interested in results more than the causes thereof. In my Chicago speech I went no further than to voice a "suspicion" that my letter to Weltner was on the table and in the minds of the sales and legal departments when they decided to abandon the merchandising engagements. In extenuation let me say that the coincidences in point of time between my letter and Paramount's decision, and my Winchendon speech and the hurried instructions to the sales force to call up the regular accounts and tell them the picture is now available, constituted probable cause for my "suspicion." Of course, there is another possible explanation of Paramount's about-face which I hesitate to mention because it may be less pleasing to you than the one rejected by you. Isn't it possible that "Desperate Hours" did not measure up to the high rating that you gave it and that, in the parlance of the trade, it fell flat on its face? 6. It is not news to me that production costs are higher than they were in the pre-war era, and I remind you the theatre operating costs have advanced also. But I cannot see the bearing of this factor as a justification for Paramount's prereleasing practices. I seriously doubt whether Paramount is investing any more in its pictures in the aggregate than it did in the past. You say your "average" negative cost is $3,000,000 whereas formerly your negative cost exceeded $1,000,000 in only a few of its pictures released in a year. You might have added that during the years Paramount has greatly reduced its annual output of pictures. As a rough illustration of what I am driving at, 20 pictures at $3,000,000 apiece would cost no more than 60 at $1,000,000 each. What Paramount is doing is to curtail its output and con-, centrate on extended runs at high admission prices in the big city first run theatres. This has been very profitable to Paramount. I watch carefully its quarterly statements of net earnings and note that they jumped from $5,780,000 in 1953 to $9,003,000 in 1954, and total $7,680,000 for the first three quarters of the current year. I know of no subsequent run or small town exhibitor whose net has increased substantially since 1953. On the face of this, there must be an uneven division of the box-office dollar as between your company and some of its customers. "You say that "The clamor of all exhibitors is for more great pictures" and you apparently ascribe Paramount's prosperity wholly to the excellence of its product. Certainly there is a crying need for more pictures, especially good pictures. The present starved condition of the film market, more than any other factor, contributes to the present depressed state of all but the big first run theatres. You state that "Paramount is exceedingly proud of the success which its pictures have attained in the past several years." It is my impression that there is justification for such pride. But is Paramount proud, and are you proud, that in almost all surveys among independent exhibitors as to which is the fairest company and which is the hardest to get along with, Paramount has received the dubious distinction of being least popular? 7. Your observation on Government regulation of film rentals and the bill which I drafted by direction of Allied's board of directors comes in from deep left field. There is nothing in my letter to Weltner to provoke a controversy on this subject. However, since you have paid me the compliment by sounding off against me publicly for the first time, I will follow you all over the water front, if necessary, in order that you may be fully answered. In the first place Nate Yamins asked me that question in Winchendon not because he was concerned about it, but in order that I might answer a point that is featured in the propaganda against the bill. And incidentally, I did not reply hotly, but smilingly, because I knew why he asked the question and I was glad of the opportunity to answer it. (continued on inside page)