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UNIVERSAL PICTURES CORPORATION 475
Although the company's attention originally had been attracted to the field of theater operation by its need for controlled outlets, its executives considered that its primary interest in the operation of theaters was centered in the profits to be derived from that operation. An additional incentive for acquiring controlled outlets was the expectation that the theaters so acquired would constitute points of contact with the public which would enable the company to judge public taste more accurately.
Having decided to acquire a chain of theaters, the company was forced to decide what type of theaters to acquire and in what locations. Other producer-distributors were acquiring theaters in large metropolitan centers, and in some places had gained virtual control of most of the theaters. If the company were to begin building up a chain of theaters in similar locations, it would find itself buying theaters in competition with these producerdistributors, and, as a result, probably would find itself forced to pay exorbitant prices.
Many large cities and towns already were thought to be overseated. Certain operators of motion picture theaters held the belief that the average American city would support profitably one motion picture theater seat to every 10 persons. In some cities where competition among producers trying to build up chains and other theater builders had been particularly keen, there was in operation one theater seat for fewer than 10 persons.
In view of the financial strength of the organizations operating in large cities, it was probable that if the Universal Pictures Corporation entered into competition, its operations would be carried on at a loss at least for a time. Should the company acquire theaters in the centers in which other producers had done so, it also would find it difficult to secure for its theaters the outside feature pictures which would be required to complete its programs. Other producers having theaters serving the same localities would see to it that most of their pictures, and certainly their best pictures, were shown by their own theaters, which would be given exclusive first-run rights and protection of several weeks against other exhibitors. Distributors usually protected a theater exhibiting their pictures for the first time in a community by agreeing not to sell such pictures for further exhibition in the same community until after the expiration of a certain period of time. The length of this period varied from two weeks to as long as two