Motion Picture Daily (Apr-Jun 1953)

6 Motion Picture Daily Thursday, April 30, 1953 Says SBC Group Head Arbitrate! (Continued from page 1) that the sub-committee's final report will play up arbitration as a leading solution to the problem before the sub-committee. . Schoeppel made his statements on arbitration today during testimony by William Zimmerman, assistant to the domestic sales manager of RKO Radio Pictures. Zimmerman, today's only witness before the sub-committee, was the third distributor spokesman to testify. Yesterday the sub-committee heard from Loew's general sales manager Charles M. Reagan and Universal Pictures' vice-president and general sales manager Charles J. Feldman. Zimmerman told Schoeppel that he "wholeheartedly" shared the Senator's belief that any arbitrable situation should be arbitrated. He said RKO favored arbitration and was willing to accept the final draft of the industry arbitration system presented to exhibitors and distributors last fall. RKO is willing to arbitrate matters of clearance, he said, but is flatly opposed to arbitrate film rentals. "This is a one way street," he declared. "There would be arbitration only as to whether bids were too high; not whether they were too low." The fourth and final distributor spokesman, Paramount Pictures' vicepresident and general counsel Austin C. Keough, will testify before the subcommittee tomorrow. He is expected to give detailed information about the negotiations conducted for an industry arbitration system last spring and summer, and explain the final draft agreed to by exhibitors and distributors. Recess After Keough The hearings will recess after Keough's testimony, to resume at a later date with spokesmen from the anti-trust division of the Department of Justice and the Federal Trade Commission. Both were originally scheduled to appear Friday of this week, but Attorney General Brownell was granted a postponement so that he and newly appointed anti-trust chief Stanley Barnes could look over the record of the hearing. Since the committee wants to hear both the FTC and Justice on the same day, the FTC's appearance has been postponed, too, a committee official said today. In a 14-page prepared statement, Zimmerman said that his company had suffered "no less severely than the exhibitors" since 1948. "Our company has found the competition with the other motion picture companies for the patronage of the exhibitor to be most severe," he said, "and has suffered substantial losses during 10 of the last 15 years." Zimmerman called "ridiculous on its face" the exhibitor charge that RKO Pictures and other producer-distributors are trying to drive independent exhibitors out of business. "In other words," he declared sharply, "our company is intent upon committing economic suicide." He pointed out that half of RKO Pictures' national revenue is derived from smaller independent exhibitors. "Using Mr. Myers' figures of more than 10,000 theatres which may be driven out of business," he continued, "our potential market would be reduced from about 19,000 to 9,000 theatres." In many localities, Zimmerman said, there would be no substitute for the closed theatre, so that "the patronage from that area would be irretrievably lost." Zimmerman's statement outlined the position of the distributor faced with the "bargaining power" of the exhibitor. "Much has been said to this committee concerning the alleged weakness of the independent exhibitor in his dealings with the motion picture companies for product," he said. "The facts are to the contrary." As factors facing the distributor, he pointed to the number of companies competing with each other for exhibitor business ; the localities where one exhibitor owns the only theatre or theatres in the community ; arrangements made among exhibitors "not to compete with each other for the licensing of product, but to divide such product" ; buying and booking combines which possess concentrated strength "and are successful in obtaining films from RKO Pictures upon very favorable terms." Permitted Two A Year Zimmerman described the prerelease practice as being "one of long standing." It is used, he explained, when a producer makes "an all out effort in time and money to produce an exceptionally outstanding picture." He told the committee that the final arbitration draft of last year contained a clause permitting each company to pre-release two pictures a year. A policy on the part of exhibitors of adhering to a rigid admission price "arbitrarily precludes such pictures as 'Hans Christian Andersen' and 'Peter Pan' from an opportunity to obtain the revenue which they are capable of producing and need," Zimmerman maintained. This reminded him of the use of a "loss leader," he said, with the exhibitor using "the excellent Disney or Goldwyn attraction to create good will among his customers so that they will be more inclined to attend his theatre when a less attractive, or indeed a markedly inferior, picture is being shown." The exhibitor thus insists, Zimmerman claimed, "that Disney or Goldwvn take the loss so that the exhibitor may obtain a better patronage with respect to other less attractive pictures." Zimmerman's concluding remarks dealt with competitive bidding. "Nothing could be farther from the truth," he said, than that RKO Pictures has operated competitive bidding in an unfair manner. The company institutes bidding only at the request of an exhibitor, he said, with the exception of the Chicago area. There, because of a decree in a private suit, RKO Pictures adopted the advice of counsel that "the only assurance against a claimed violation of that decree was to adopt competitive bidding for the subsequent run situations in Chicago." RKO Pictures thought competitive bidding was a "fair method of resolvign exhibitors' conflicting demands," he said, and was honestly administering it. "It seems to us," he went on, "that most of the objections to com petitive bidding you have heard are the result of the fact that the exhibitor involved is unable to meet competition." Zimmerman explained that RKO Pictures employs competitive bidding in 800 situations and averages three theatres per bid. Exhibitors do not see the bids, he said, but if there are exhibitor complaints over the distribution of bids the company sometimes permits a lawyer to look at them. About half of Zimmerman's statement was devoted to the method of selling "Peter Pan" and "Hans Christian Andersen." Respective producers Walt Disney and Samuel Goldwyn, he said, had told RKO Pictures that it would be impossible for them to "recoup their costs, let alone make profits," if the pictures were distributed on a regular release basis only. It was evident to RKO and to the exhibitors who viewed the pictures with RKO, Zimmerman said, "that they were of such outstanding quality as to warrant the deluxe marketing of a pre-release." Subject to the requirements of the law, Zimmerman said, RKO's contracts give Goldwyn and Disney the right to determine the sales policy in the marketing of their pictures. "This carries with it," he added, "the right to approve and reject any proposed license agreement." He emphasized, however, that it has been RKO Pictures' policy not to make any agreements, expressed or implied, with respect to admissions prices. "Under our instructions," he explained, "our sales personnel are required to use the utmost care in obtaining the exhibitor's intended admission price, so that there could be no criticism that RKO's salesmen or sales executives had attempted, directly or indirectly, to obtain an admission price agreement. Indeed, our sales personnel are instructed to tell the exhibitor when requesting such information that the exhibitor is free to charge any admission price he chooses." Describes Shor Episode Zimmerman described in detail his company's recent experience with Cincinnati exhibitor Ruben Shor, in the marketing of "Peter Pan." Zimmerman said Shor had told the RKO salesmen the prices at which he intended to offer "Peter Pan," and that subsequently Shor advertised the picture at a lower price for adults and free of charge for children. "It is perfectly understandable in the light of the importance of the popcorn, candy and other concession business in theatres why Mr. Shor has a policy of admitting children free to his drive-in theatres," Zimmerman declared. "It is obvious that if he attracted an increasing number of children, his concession business, both with respect to the children and with respect to the parents who accompanied them, would be correspondingly increased. The beauty of this arrangement as far as Mr. Shor was concerned is that since his film deal was a straight percentage of the box office gross receipts, he was required to make no payment to Disney nor the children's patronage, which inured completely to Shore's benefit in terms of concession sales." The Disney picture has a Adjustments May Be Arbitrable: Feldman Washington, April 29. — Requests for film rental adjustments on which the exhibitor and distributor are not in agreement might properly be a matter of arbitration, Charles Feldman, Universal general sales manager, told the Senate Small Business sub-committee yesterday. Feldman was asked by Sen. Smathers (D., Fla.) whether rental adjustments shouldn't be arbitrated. Feldman replied that he thought they should be. "In a broad sense," he explained, "after a picture has played, adjustments should be a matter for arbitration." "If an exhibitor says he lost money on a picture because it didn't come up to expectations, would you arbitrate?" Smathers continued. "Yes," Feldman replied, "within certain bounds." "I commend you on your willingness to arbitrate so that everybody can stay alive," Smathers said. "We try to operate so that the local man can handle everything, Feldman explained. "We can't operate our business from New York." Feldman previously had told the sub-committee that Universal, like other major companies, was unwilling to submit film prices to arbitration. The most difficult problem of all, he continued, is film rentals. "As previously stated," he declared, "a poor picture brings nothing, and the price of a good picture must be arrived at through negotiations only. We know of no way by which any outside party to the transaction can place a price tag on anything like a motion picture that has a different value in every single theatre and village and city in which it plays." special attraction for children, Zimmerman explained, and must receive substantial revenue from that source. Shor used it "as a lure," he said, without compensation to Disney of any kind, "so that he could make a killing in candy, popcorn and other concession sales." Zimmerman told the committee that the total national concession sales was equal to about 39^2 per cent of the total national theatre admissions and that the percentage was greater for drive-ins. "When the picture, such as a Disney feature, has a special appeal for children," he said, "the profits from concession sales spiral upward." Thomas Stowell Retiring Albany, N. Y., April 29.— Thomas Stowell, veteran of 30 years of publicity work in the state service and well-known legislative correspondent, will retire Friday from his post as director of the motion picture unit of the State Commerce Department here. Vt. Sunday Bill Killed Montpelier, April 29. — A bill which would have allowed Sunday shows in Vermont to start at 2 :00 P.M. was killed by the State Senate after having been passed by the House. Shows now are permitted only on Sunday evenings in Vermont.