Motion Picture Herald (May-Jun 1946)

MAJORS REMAKE POLICY IN LIGHT OF TRUST VERDICT Seek Distribution Method to Conform to Decision; Little Three'' Anxious by WILLIAM G. FORMBY Only a week old and legally yet to be empowered by decree, the decision of the U. S. District Court in the anti-trust case, U. S. vs. Paramount, et al, against the majors began this week to remake the sales practices and policies of distribution. Regardless of the nature of the restrictions which must one day be finally approved by the U. S. Supreme Court, it was clear the industry would continue under Government regulation. Hence, legal and sales departments began to plan a fighting conformity. Licensing of 1946-47 Product Halted; Formula Sought Licensing of 1946-47 product by those companies, which were that far advanced, had been halted. Sales executives and attorneys were casting about for a formula that would meet the major points of the decision. Sales of current product in deals pending when the ruling came down were consummated in the usual manner. Distributors offered their current blocks on the old basis. Beyond activity in connection with immediate supply, however, sales heads were not prepared to chart a course. The consensus held that they probably would institute single-picture deals, with more attention likely to competitive bidding for exhibition rights. Counsel for the distributors went into session Wednesday to work out the details of suggestions to the court for findings of fact and for incorporation in the court order. They also were drafting a report to the Motion Picture Association of America on points of law in the decision. ^'Little Three" Disturbed By Theatre Provisions Executives of the "Little Three," Columbia, United Artists and Universal, were disturbed over the provision that permitted the "Big Five" to retain their theatres and prohibited the theatreless defendants from acquiring or building exhibition units without court approval. The Department of Justice worked on its decree suggestions and prepared to ask the court for a judgment enforcing portions of its decision by injunction pending appeal by the Government. Although sales executives and other officials of the major distributors presented a "business-as -usual" front to the trade, they privately discussed their predicament. It SAYS MANY PARAMOUNT HOUSES NOT AFFECTED Many of the most important Paramount theatres are owned outright by the company and the court ruling in the anti-trust case does not affect these interests, Barney Balaban, president, told the annual stockholders meeting Tuesday in New York. Mr. Balaban cited theatres in New York, Brooklyn, Boston, Chicago and Salt Lake City, as well as all units in the wholly owned Minnesota Amusement Company and the Intermountain Theatres circuit. He said that considerable cash would be required to effect the changes suggested in the decision if they prevailed in any final decree; that possibly Paramount may have to borrow money to bring them about. The meeting is reported on page 18 of this issue. was pointed out that although the decision was a long way from finality, it had the effect of being in effect the moment it was handed down. The stakes are too high and the chances for mistakes too great, it was admitted, to ignore the implications of the decision and conduct business as usual. Economically, therefore, the distributors feel required to recognize the constraints potentially as law and arrange their business policies accordingly. That is why liberalization of long-disputed trade practices is an early probability ; why pictures probably soon will be sold singly on a more competitive basis by the "Big Five," and singly in groups with an undetermined cancellation privilege by the "Little Three." Threat of Other Litigation Hangs Over Industry The threat of other litigation, too, hangs heavy over the scene. Exhibitors who insist upon licensing in conformity with the decision can cause trouble later if the distributors should persist against concessions. Although the court has issued no formal order to desist, it has termed certain practices illegal. Attorneys point to the advantage an exhibitor would have in court proceedings that might ensue from arguments. They believe the current is running too strong for an upstream fight. No immediate change, however, was anticipated in theatre holdings. Both the distributors and their partners are expected to await final action by the Supreme Court on the matter of divorcement. The Government will insist on full divestiture, upon distributors distributing and exhibitors exhibiting. The defense will fight to retain at least the partial victory the District Court decision gave them. See Need for Approval of Court as Handicap Here is where the case of nerves attacks the "Little Three." They feel the decision has handed the "Big Five" a long lever for bargaining. The interpretation is that although the present distributor-exhibitors are permitted to retain their theatre holdings, Columbia, United Artists and Universal may not acquire theatres if they are needed to protect film revenue. The provision in the decision for court approval is considered an impractical solution in the rugged business of getting the motion picture to the public at a profit. By the time court approval could be obtained of each deal in the shifting fortunes of exhibition the opportunity would have vanished, the reasoning goes. The decision had slight effect on stock quotations of the defendant companies. June 10, the day preceding the court's action, 23,100 shares changed hands at an average quotation of $51 per share. The following day, late selling after the decision became known about an hour before the market closed pushed the volume to 55,200 shares with average quotation steady at $51. A day later, the average dropped to $50 when 41,100 shares were moved. Tuesday, a week after the decision, the volume was 50,700 shares at an average of $50. The trend in film stocks, therefore, was steady, the average drop running about one-fourth of a point. The decision, meanwhile, was being used as precedent in Chicago. There, Thomas C. McConnell, counsel for the Jackson Park theatre, filed copies with Judge Michael F. Igoe of the U. S. District Court. The court is considering application by the theatre for an injunction against operation of the clearance and zoning system, as well as a couple of actions for damages. Decision Reserved But S chine Judge Annoyed Decision was reserved in Federal Court in Buffalo on two motions by the Schine circuit. One was to stay dissolution proceedings pending the result of an appeal to the Supreme Court. The other was for appointment of a special master to take additional testimony. Judge John Knight was irritated. "The Schine case has been pending for seven years and it is time it was settled," he said. MOTION PICTURE HERALD, JUNE 22, 1946 13