Motion Picture Daily (Jan-Mar 1935)

Monday, February 25, 1935 MOTION PICTURE DAILY Cancellation Shift Is Up to Campi Convention's Action Needs Gov't Stamp New Orleans, Feb. 24.— Recommendations for doubling the present 10 per cent cancellation provision in the code, slated for the M.P.T.O.A. convention, will have to be made to Campi. If it approves, any amendment will have to go to Washington for Compliance Director Sol A. Rosenblatt's sanction. Efforts by exhibitors for 15, 20 and 25 per cent elimination privileges in contracts date back to the early stages of the formation of the code when coordinating committees were named to pacify opposing elements. On Aug. 2, 1933, after members of the industry had worked on a tentative draft of the code for months, the first sign of concellations came to light. Exhibitors wanted a straight 15 per cent elimination. Distributors wanted to adhere to the uniform contract provision and sought to maintain that clause in the code. It provides for the first five per cent with full payment, the second five at half price and the third five without payment. With exhibitors holding out for a flat 15 per cent and distributor group tenaciously insisting on the contract clause, the issue ultimately was left to Rosenblatt for decision. In the master exhibitor draft sent to Washington, the 5-5-5 arrangement, arrived at after 20 or more months of active and desultory conferring by committees representing M.P.T.O.A., Allied and distributors, was included, but in the list of 28 exceptions submitted with the draft by Charles L. O'Reilly, exhibitor coordinator, the elimination provision was included. Has Ancient History On Sept. 21, 1933, Motion Picture Daily stated that Allied was seeking a 20 per cent cancellation. S. R. Kent, distributor coordinator, in commenting on the subject, said at the time: "If the exhibitor is given the right to cancel out pictures as he may elect how can the studios tell what pictures to make or not to make? Our negative costs, as a consequence, will maintain their present high level ; we will be compelled to make all of the pictures we set out to make at the start of the season and stagger along on the chance some of them will be canceled, and by not being canceled, return what we have spent." On Oct. 4, 1933, the first revised draft of the exhibitor code by Rosenblatt included the 15 per cent elimination without payment. Five days later this clause was changed by reducing the percentage by five. The reduction followed conferences between Rosenblatt, then administrator, and distributor heads. The third revision of the exhibitor draft followed on Oct. 19 when the clause was changed to read that cancellations can only be made on groups of 10, or, in other words, one of every 10 pictures bought may be canceled without payment. On Oct. 28, United Artists had not yet signed the code and, while it was stated at the time that its reason was because it opposed the anti-raiding clause in the production code draft, it was believed that the cancellation privilege also was an annoyance because of the company individual selling policy. Two days later, distributors went on record as willing to abide by contracts already signed providing for 15 per cent cancellation. This again was under the original 5-5-5 arrangement, but on Dec. 4, Motion Picture Daily learned that the 10 per cent provision would be granted exhibitors who signed on the old cancellation basis. Allied directors, meeting secretly in New York on Jan. 24, 1934, discussed cancellations but would not comment on their stand. It is believed that they still maintained their 20 per cent demand made on Sept. 21, the year before. Around Feb. 10, Campi members had an inning on the retroactive phases of cancellation. Rosenblatt held it was effective as of Dec. 7, when the code went into operation. Code Authority members thought differently and asked NRA legal department to decide the issue. On Feb. 16, John C. Flinn released the legal department order upholding the administrator. Not satisfied with the ruling by the NRA, M-G-M, Paramount, RKO, Fox and Warners on March 1 were reported ready to test the retroactive date in court. On March 10, the five companies changed their attitude and acquiesced. March 30 found Campi sending out letters to all local boards advising secretaries to list for hearings complaints on cancellations. Apparently still dissatisfied with the number of requests for eliminations, distributors were holding out at the end of March when Rosenblatt, at a Campi session, insisted on a showdown. By a vote of eight to two, Warners and Paramount dissenting, the members accepted the cancellation privilege. To top this, the NRA on March 31 ruled that even non-assentors could benefit by the 10 per Cancellation Clause Facing Fire on Convention Floor New Orleans, Feb. 24. — The cancellation clause against which the M.P.T.O.A. will lay down a heavy barrage appears in the code under Article V (Unfair Practices), Subdivision F, Part 6. This is the text on which the exhibitor convention will seek amendment to increase the 10 per cent bracket to 20 per cent: Part 6. If in any license agreement for the exhibition of feature motion pictures the Exhibitor has contracted to exhibit all of the motion pictures offered at one time by the Distributor to the Exhibitor and the license fees of all thereof average not more than $250.00, the Exhibitor shall have the privilege to exclude from such license agreement not to exceed ten percent (10%) of the total number of the motion pictures so licensed; provided the Exhibitor (1) is not in default under such license agreement, and (2) shall have complied with all of the provisions thereof, if any. for the exhibition of such motion pictures at specified intervals. (b) Such privilege of exclusion may be exercised only upon the following terms and conditions : (1) The Exhibitor shall give to the Distributor written notice of each motion picture to be excluded within fourteen (14) days after the general release date thereof in the exchange territory out of which the Exhibitor is served. (2) The Exhibitor may exclude without payment therefor one (1) motion picture out of each group of ten (10) of the number of feature motion pictures specified in the license agreement provided he has paid for the other nine (9) of such group. (3) If such privilege of exclusion is not exercised as provided in paragraph (b) (2) above, the Exhibitor may nevertheless exercise such privilege by paying the license fee of each motion picture excluded with the notice of its exclusion. In such case, such payment shall be credited against such tenth or succeeding tenth motion picture, as the case may be. which the Exhibitor would otherwise be privileged to exclude as provided in paragraph (b) (2) above. If the only or last group licensed is less than ten (10) and more than five (5) motion pictures, the privilege to exclude shall apply provided the Exhibitor has paid for all motion pictures but one in such group. (c) Upon the failure or refusal of the Exhibitor to comply with any term or condition of such license agreement, or to comply with any arbitration award in respect thereto, the privilege of exclusion forthwith shall be revoked and the Exhibitor shall be liable for and pay to _ the Distributor the license fees of all motion pictures theretofore excluded. (d) If the license fee of any feature mo tion picture specified in the license agreement is to be computed in whole or in part upon a percentage of the receipts of the Exhibitor's theatre, such license fee (for the purpose of computing the average license fee of all the motion pictures licensed) shall be determined as follows: (1) Average the license fees of all of the Distributor's feature motion pictures exhibited upon a percentage basis at the Exhibitor's theatre during the period of one year prior to the term of such license agreement. (2) If none of the Distributor's feature motion pictures were exhibited upon a percentage basis at such theatre during said period, average the license fees of all feature motion pictures exhibited upon a percentage basis at such theatre during the said period. (e) If the rental of any motion picture excluded is to be computed in whole or in part upon a percentage of the receipts of the Exhibitor's theatre, the sum to be paid by the Exhibitor as provided in paragraph (b) (3) hereof shall be determined as follows: (1) Average the gross receipts of all the Distributor's feature motion pictures exhibited at the Exhibitor's theatre during the ninety (90) day period preceding the Exhibitor's notice of exclusion, and apply to such average the percentage terms_specified in the license agreement for the picture excluded. (2) If no feature motion pictures of the Distributor were exhibited at the Exhibitor's theatre during said ninety (90) day period, average the daily gross receipts of the Exhibitor's theatre for the period of thirty (30) operating days preceding the Exhibitor's notice of exclusion and apply to such average the percentage terms specified in the license agreement for the picture excluded. (f) In computing the number of feature motion pictures which may be excluded hereunder, fractions of more than one half (Vi) shall be regarded as one (1). (gl Upon the exclusion of each feature motion picture, the license therefor and all rights thereunder shall terminate and shall revert to the Distributor. (h) The Optional Standard License Agreement referred to in Part 1 hereof shall be deemed amended by substituting in place of Article Fifteenth of such contract the provisions of this Part. cent provision. On April 12, ' Code Authority instructed all branch managers to immediately abide by the elimination clause in the code. At the M.P.T.O.A. convention last year, a move was made for hiking the elimination figure to 15 per cent. That was on April 14 in Los Angeles. When Campi was queried on April 17 on the M.P.T.O.A. resolution, no ofircial request was on record other than that which was reported in trade papers. On May 10, the M.P.T.O. of Nebraska went on record for 15 per cent cancellations, but no further action was taken. On May 28, Campi reported 215 non-assentors had taken advantage of the power to cancel without payment. The first sign of difficulties with U. A. over the 10 per cent provision came to the attention of code members when, on May 29, William E. Troug, branch head for the company in Kansas City, notified Grace Gannon, local code secretary, that the company was not subject to the clause. Supporting this statement was Al Lichtman, who in Chicago on June 4 on a two-day company convention, stated "it was part of our understanding when we signed the code and also our agreement with Sol A. Rosenblatt we were not subject to the clause." U. A. Was Storm Center Fred Meyn of the Pershing, Kansas City, said he would file a test case against United Artists. This was the first of three against the company. The Egyptian, De Kalb, 111., was the second. This theatre filed a complaint on June 11, a week after Meyn. The third instance developed without special significance when, on Aug. 9 last year. H. R. Evans of the Albion, Albion, Ind., was given a Campi verdict against U. A. Evans declared he had bought 26 pictures, or all offered by the company, and was turned down on a one-picture cancellation. Code authority held that the exhibitor was within his rights, having bought all the product offered. U. A. contended the contracts were on an individual basis and that Campi could not eliminate 10 per cent of one picture. During the month of August, U. A., through its attorneys, O'Brien, Driscoll & Raftery. threatened legal action. On Sept. 7, this plan was dropped, the company stating that it would abide by its provisions. On Oct. 23 the question of substituting pictures for cancellations came up, .distributors contending they had the right to take a picture from the lower bracket in any contract and charge an exhibitor the amount of the film canceled in the higher bracket. On Dec. 26, Ed Kuykendall, in a bulletin to M.P.T.O.A. members recommending an overhauling of the code, stated the code cancellation privilege was inadequate. He also said that the topic would be one for convention discussion in New Orleans. No further complaints against U. A.'s refusal to grant eliminations have been registered with either local boards or Campi. Apparently disappointed in its efforts to get increased cancellations. Allied at its board of directors meeting in Washington recently did not dip into the subject, but slammed the code at large.