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592 HARVARD BUSINESS REPORTS
sell to other theaters, and such information would be useful not only to all distributors but also to competitive exhibitors.
While a percentage arrangement enabled the manager to minimize the element of risk involved in exhibiting pictures of unestablished merit, he believed the gamble was not greatly reduced, as the guaranty required was commonly about as high as the flat rental terms on the same picture would ordinarily be. Percentage buying, moreover, would prevent the buyer from capitalizing on his ability to select and buy pictures successfully.
The manager preferred to purchase pictures at a flat rental. Competition among theaters in the vicinity required careful bargaining on his part in order to secure the best bargain from a number of alternative purchases. It was often profitable to purchase a group of pictures that had been shown previously in Brooklyn theaters and had thereby obtained exploitation. In other instances, first-run privileges outweighed the exploitation value and were worth a higher price.
Some distributors favored flat rentals on their program pictures for two reasons. It was possible to secure more favorable terms by bargaining on a specified amount, and it was diflicult and expensive to check the box oflice receipts on a percentage contract. For special pictures previously roadshown in the larger cities, such distributors usually required a guaranty and percentage arrangement.
The popularity of sound pictures led a number of distributors in the latter months of 1928 to sell such releases on a percentage arrangement. The manager of the Willard Theater was approached by a salesman of Perry Pictures, Incorporated,5 for a contract to exhibit one of the new sound picture releases. The salesman stated that it was the policy of his company to sell the picture only on a guaranty and percentage arrangement. Three arrangements were being offered to exhibitors in booking the picture.
The first plan called for a guaranty to the distributor equal to the theater's average film rental for the current year on all pictures and, in addition, two percentage divisions of the receipts over and above the average receipts of such pictures. The percentage divisions requested by the distributor were: 50% of the first
5 Fictitious name.