Investigation of concentration of economic power; monograph no. 1[-43] (1940)
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CONCENTRATION OF ECONOMIC POWER 41 facilities, and the admission prices which it can charge. First-run showings are usually booked into the theaters having the largest potential box-office receipts, since such theaters can pay the highest film rentals. Such theaters are, of course, the largest houses centrally located in cities so as to draw audiences from an entire metropolitan area. The objective of the operator of a first-run theater is to bargain for as much protection over subsequent showings as possible since in this way he tends to increase his total revenues. The length of the clear- ance period must, however, be balanced against the higher film rentals which will be charged by the distributor for extended protection. The operator of a subsequent-run theater may have to consider not only the protection over still later showings, but also his position with respect to prior exhibition. The admission price charged by a theater is always an important element in setting clearance periods. It is the universal practice for the distributor to stipulate in each exhibition contract the minimum admission price at which films may be shown. This is not done simply to protect the distributor's interest in pictures which may be licensed on percentage terms. Customarily, each subsequent showing of a film in a competitive area is made at a lower admission price. The subsequent sale value of a film may-, therefore, in large part be deter- mined by the admission prices which have been charged in the prior- run theaters. The relation between clearance and admission is quite flexible. In general, the higher the admission price charged by any particular exhibitor, the longer the clearance period which will be granted by the distributor. Conversely, admission prices can generally be reduced only at the expense of less satisfactory protection terms. Clearance and admission prices can thus not be considered separately. It may well be that the location of a theater will determine the admission prices which it can charge, and this in turn will fix the theater's clearance period. The complex bargaining involved makes the establishment of clear- ance schedules difficult indeed, but these difficulties rise almost wholly in urban areas. Clearance presents few problems in small towns or isolated areas where not more than two or three theaters are in direct competition. Such theaters may play behind the prior-run houses in the large cities, but this is not likely materially to afi^ect their revenues. Moreover, even in the large cities, it is the establish- ment of equitable clearance periods between the first-run and subse- quent-run theaters which is most difficult. The longest clearance period is usually set between the first showing of a film in the large downtown theaters and any subsequent showing. Clearance between subsequent runs is frequently quite brief. The relation between run, clearance and zoning, admission price, seating capacity, and rental fees is indeed a complex one. The range covered by these factors is indicated by this fact: a license fee amount- ing to many thousands of dollars may be paid for the first showing of a film in a large metropolitan theater, and within a year the same film may be exhibited in some small theater in the same city for a fee of less than $20. A further indication is given by the experience of the feature "Gorie With the Wind." This picture was released early in 1940 for showing at substantially advanced admission prices. At this time it