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476 HARVARD BUSINESS REPORTS
months. In like manner the theaters of the Universal Pictures Corporation would demand exclusive and protected rights for the first showing of Universal pictures. Where such theaters were in the same locations as the theaters of the company's competitors, this condition would prevent the sale of the Universal Pictures Corporation's films to its competitors' theaters. Even though the films were traded in some way by two of the competing theaters in the same city, no additional outlets would be secured since both theaters would be serving the same community.
If the company acquired only theaters in the metropolitan cities with large seating capacity and high admission charges, it would secure a higher gross income for the display of its pictures than if it bought smaller theaters in smaller centers. The operation of theaters in the metropolitan cities also would be of greater advertising value than the operation of smaller theaters with fewer customers and less prominence. This advertising might be exploited to create a general demand among the smaller theaters for pictures which had been especially popular in the metropolitan theaters.
If the company, on the other hand, were to adopt a program of acquiring most of the theaters for its chain in the smaller cities or towns, it would meet little competition from other producers who were building up chains of theaters and who had their interests centered for the most part on the larger theaters in the metropolitan cities. Thus the company might expect to acquire its theaters at more reasonable prices. It was believed that overseating was not so prevalent in the small urban centers as it was in some of the metropolitan cities and, since the company expected to buy more theaters than it would build, and anticipated making very thorough surveys before going into any building project, there was little likelihood of the development of an overseating problem of any importance. By buying theaters in communities that were not overseated, the company would enhance its prospects of profitable theater operation. Judging from the results secured by other theater operators in such places, it seemed reasonable to anticipate a satisfactory profit in the operation of the company's theaters thus situated. With theaters situated in small urban centers where most of the competing theaters were independently owned and only a few were members of chains owned by large producer-distributors, the company