Investigation of concentration of economic power; monograph no. 1[-43] (1940)

CONCENTRATION OF ECONOMIC POWER 25 system where each picture would have to stand on its individual merits, there would be greater price competition in film rentals. The preemption of industry playing time by large block purchases to a large extent hmits the market for new independent producers. However, it must be pointed out that the control of the more im- portant exhibition outlets by the producer-distributors is probably a more important factor in limiting the entrance of new producers of quality pictures into the market than is block booking. If the producer contention that block booking is an economical method of distribution which reduces distribution costs is.valid, this is to the advantage of the consumer. Jt is unquestionably true that sale of pictures in smaller groups than the total offered by a distrib- utor during a single season would entail greater sales expense. How- ever, distribution costs in to to are relatively small, and sales expense is but a fraction of distribution cost.^ The savings in sales expense achieved by block booking may thus represent a doubtful economy for the consumer if the system entails even minor disadvantages of other types. Likewise, it is advantageous to the consumer, if, as producers con- tend, assured income permits the production of better pictures. It might be argued that conspicuous success in this direction has not yet been achieved, although block booking has been in effect for more than 20 years. Moreover, the large box-office returns from some pictures produced on small budgets, compared with occasional expensive box-office failures, indicates that success in satisfying the consumer is not wholly to be measured in terms of income available for production.* To the contrary, there is strong reason to believe that a more competitive system of sales would tend to discourage the production of poor pictures, in contrast to the present system which insures a return on even the least satisfactory films of the major producers. A weighing of these pros and cons leads to the conclusion that block booking as practiced today is, on the whole, disadvantageous to the consumer. It is necessary, however, to examine the alternatives. The most frequent proposal has been that contpulsory block booking be completely eliminated. In practically every Congress in the last 15 years bills to that effect have been introduced,* but none has passed both Houses. The latest of these was. the Neely bill, which states in section 3: It shall be unlawful for any distributor of motion-picture films in commerce to lease or offer to lease for public exhibition filiijs in a; block oT group of two or more films at a designated lump-sum price for; th« entire block or group only and to require the exhibitor to lease all such films ol- permit him to lease none; or to lease or offer to lease for public exhibition films in a block or group of two or more at a designated lump-sum price for the entire block or group and at separate and several prices for separate and severgil films, or for a number or numbers thereof less than the total number, which total or lump-sum price and separate and several prices shall bear to each such relation (a) as to operate as an unreasonable 3 According to the industry, distribution costs amou nt to 10 percent of the motion-picture dollar. ("Film Facts," published by the Motion Picture Producers and Distributors of America, Inc., New York, 1940.) Recent data are not avaUable, but in 1929 motion picture distributors alBliated with producers reported total expenses of $31,700,000. Of this amount $9,^)0,000 was accounted for by salaries and exper>ses of salesmen. (U. S. Dept. of Commerce, Census of Distribution ,1929.) In this year, then, direct sales ex- pense amounted to less than ons-third of total distribution expenses. There is no repson to assume that the proportion has materially artered since that time. * For example, "The Great McGinty" and "It Happened One Night," produced on relatively small budgets, were financial successes, while "Marco Polo," produced on a lavish scale, was a failure. » Among them are: 3.1667,70th Cong., 1st sess.; S. 3012, H. R. 4757, H. R. 8877, and H. R.6472, 74th Cong., 2d sess.; S. 280, 76th Coijg., 3d sess.