Harvard business reports (1930)

Record Details:

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RAINIER THEATER 607 Section 3 in the Franchise Agreement concerning price determination calls for definite consideration. Two particular points may be named. First, with regard to exhibitor representatives who advise the distributor on the exhibition value of each picture, the article states that "the distributor makes no representation that such representatives will be so appointed or will act hereunder. If said representatives are not so appointed or cannot or do not act hereunder, or if said representatives and the distributor fail to agree upon the exhibition value of any such motion pictures, the exhibition of all such motion pictures on which there has been no agreement shall, for the purposes of this franchise, be fixed at three times the negative cost thereof, as shown on the books of the producer ..." In other words, if the distributor should have good reason to believe that a given picture would not prove a success or that excessive and avoidable wastes had been incurred in producing such a picture, he could, by the simple expedient of refusing to appear or to agree, automatically insure to himself a valuation of three times his given book value of the negative. The opportunities thus bound up are obvious. Second, the motion picture industry has long assumed that no definite relation existed between negative cost and exhibition value. In the present case, it is assumed that a relationship does exist and that it may be expressed in a definite figure more or less applicable to all pictures produced. It is quite possible that a wholly satisfactory answer to such questions as these can only be found if and when the exhibitors themselves have some special voice in the determination of the production program. Finally, Section 21 relating to arbitration is of extremely limited application. Appeal may be had to the National Appeal Board " relative to an adjustment of schedule prices." Only by the widest of interpretation could this board arbitrate such questions as violation of protection, failure to deliver, failure to designate play dates, or questions involving the local rejection of pictures on racial or similar grounds. Such claims, however, probably represented well over one-half of all exhibition claims filed in 1928 before the Arbitration Boards. Various reasons may be advanced to explain the omission of any general arbitration provision in this franchise agreement, reasons which cannot be discussed here. The fact of the omission, however, is worthy of note. The case does not indicate that at the moment the Rainier Theater was in a desperate situation. It was advantageously located. Competition did not exist in the residential districts immediately surrounding the theater. Under existing circumstances, good first-run productions could be obtained from several independent producers. It is not probable that the pictures of the particular producer in this case would be barred from the Rainier Theater should the agreement