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620 HARVARD BUSINESS REPORTS
confronted with serious problems of overseating. This problem was particularly acute in New York City. To accomplish the chief purposes of the association the organizers planned to unite a sufficient number of independent theaters to enable the association to withhold from the large producers a volume of business large enough to constitute a serious loss of revenue. It was realized that the contract between the association and its members authorizing the association to purchase pictures for its members would have to be absolutely binding and irrevocable if the association were to accomplish its aims.
The promoters were able to interest a large number of exhibitors but found that many of them hesitated to join any association the rules of which would be as binding upon its members as those of this association necessarily would be. Those who organized the association would have been pleased to receive all the 200 independent motion picture theaters in New York City into membership. The by-laws (Section I, Article II) provided that "any person, firm, corporation, joint stock association or partnership owning or leasing and operating any motion picture theater'' in New York City might be admitted to membership. The by-laws further provided, however, that the application of each exhibitor desiring to become a member must be approved by the executive committee, by two-thirds of the board of directors, and by the president. An effort was made to persuade all independent theaters to join.
Exhibitors operating 80 theaters actually joined. Thirty of these theaters had virtual control of the exhibition of motion pictures in their zones; that is, within a limited area they were the only theaters or had competition only from theaters of a lower class. Fifty were operating in zones also served by other theaters which were either independent or members of chains. Some of the 80 theaters were housed in modern buildings and catered to a high-class patronage and some had cheaper equipment, a lower class patronage, and lower admission prices. Many of the exhibitors joining the association were not in a sound financial condition. In most cases this position was due to overexpansion. The theaters which joined the association had been paying more than $2,000,000 annually for the motion pictures shown on their screens. It was estimated that all the theaters of Metropolitan New York paid $8,000,000 yearly for pictures.