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18 HARVARD BUSINESS REPORTS
according to an agreed percentage, as, for example, 50% to the exchange and 50% to the exhibitor. Some sales included only one or a few pictures while others were for large groups of pictures. In many cases the sales were made on a block booking basis. Some of the exchanges which sold First National pictures also sold pictures of other companies.
Three of the exchanges issued sub-franchises, similar in nature to the franchises which they held from First National Exhibitors' Circuit, Incorporated, to certain of the exhibitors in their territories. These were the exchanges in Dallas, St. Louis, and Cleveland. The Cleveland exchange had 126 such sub-franchises ; the St. Louis exchange, 40; and the one in Dallas, 140. These sub-franchises entitled and bound the holders to the use of the pictures released by the company and furnished to the exchange under which they held their sub-franchises. Various means of reaching an agreement upon the prices to be paid for the different pictures were used. The agreement between the Cleveland exchange and its sub-franchise holders contained the following provisions about exhibition rights and pricing:
Each subscriber hereto shall have the sole and exclusive right to the first showing of each moving picture film, purchased by the company, in the theater set after subscriber's name as signed to this agreement, and in the city or town where such theater is located for a period of thirty (30) days. The subscriber shall also have the right to further exhibition of such picture, any time after sixty (60) days subsequent to the thirty day protection period, above outlined, subject to standard form of agreement to be issued by the company, and approved by the stockholders.
Each subscriber shall contribute his share of the release price of each moving picture film purchased by the company, by remitting the same to the Treasurer of the company, within fifteen (15) days after notice shall be given to such subscriber, by registered mail, of the acquisition by the company of each moving picture play.
The share to be paid by each subscriber shall be determined as follows :
The percentage of cost to the Ohio Company being six and one-fourth (6lQ per cent of the total cost of United States and Canadian Rights on each moving picture play purchased by the New York Company. The basis of cost to each subscriber is to be figured on the net cost to the Ohio Company as above determined. Each subscriber shall pay a sum equal to the per cent of the cost as the percentage set opposite his name and signed to this agreement.