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72 MONEY BEHIND THE SCREEN
struggles, as we shall presently see — of a new patents monopoly very nearly as complete in fact, if not in form, as the old patents trust of the pre-war years. At the same time the financial results of the crisis led to a transformation in the sphere of direct stock and banking control that in its general effect reinforced the hold over the industry of the powers behind the new patents groups.
The problem of the " men behind the movies " to-day therefore resolves itself into a dual enquiry : first an enquiry into the powers exerting an indirect control over the industry through their monopoly of essential equipment ; and secondly an enquiry into the present situation with, regard to the direct financial control, through majority holdings of voting stock or the monopoly of executive key positions, of the eight major companies.
The former analysis is presented graphically in chart 1*, and the relations of the companies there indicated to the dominant Morgan and Rockefeller interests on the one hand and to the film companies on the other are specified in the explanatory notes attached to that chart. The key to the situation is provided by the co-operation resulting in joint control of the most important American patents in the sound equipment field, between the Western Electric Co. (a subsidiary of the American Telephone and Telegraph Co.) and R. C. A. Photophone (a subsidiary of the Radio Corporation of America). The former group of concerns is almost wholly Morgan controlled, while in the latter the Rockefeller interests appear at the present time to be as strong, if not more so than those of the Morgan group. Until recently all the major companies, except R.K.O., had contracted for Western Electric sound equipment, but in the past few months R.C.A. succeeded in adding Warner Bros., 20th Century-Fox, Columbia and at least one of the United Artists producers to R.K.O. as their licensees.
Since 1930 this American monopoly has been extended into a world monopoly by an agreement between the American groups and the most important German patentees A. E.G., SiemensHalske and Klangfilm. Under this arrangement licenses are issued to film producers in all countries for the use of both the German and the American patents, while for the manufacture and sale of equipment certain countries are regarded as the exclusive territory of either the American or the German interests, the remainder being open to the products of either group on the basis of free competition.
The cash value of this monopoly is measured by the Ucense fee of $500 per reel charged until recently by Electrical Research Products Incorporated (the sound equipment subsidiary of Western Electric known in the trade as " Erpi ") for all films produced on
♦This chart illustrates the indirect control over the film industry exercised by the leading financial groups through their sound patents monopoly.