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Background of the Industry ^> <^> <^ ^> 5
already been indicated, was that the film must be new. Then, as since, the first showing of a picture had the greatest entertainment value; it often commanded 10 to 20 times the rental that it could command later. In fact, "after a month the price became almost nominal". This led to reckless price cutting, violation of release dates,3 and many other forms of unfair practice on the part of competing exchanges in order to swell their volume of business.
Another factor complicated the situation. The manufacturers of cameras and projectors had founded their business upon patent rights. As usually happens, no one man or company either invented or had exclusive control of all the various technical improvements. Yet each was concerned with selling as great a number of installations as possible. To attain some measure of control it was common for a seller to insert in his contract of sale a clause requiring that an exhibitor use with his machine only those films produced by the seller. But since each exchange strove constantly to augment, by fair means or foul, the volume of its sales and profits and since there was a steadily increasing number of small independent exhibitors, the difficulty of enforcing such a clause became ever more apparent.
The first outstanding step toward stabilizing the situation came in 1908. In that year the Motion Picture Patents Company was organized, consisting of, in addition to seven producers of equipment and pictures which had been licensed under the fundamental Edison patents, the American Biograph Company; George Kleine, a Chicago film distributor; and the Edison Company. Under the terms of the agreement entered into by these interests, all patent rights and claims were surrendered by the several companies and pooled with the newly organized Motion Picture Patents Company. Each individual producer, however, retained the right to make any picture he saw fit and to distribute it through any channel he chose. Only licensed exchanges were
3 See Chapter IX.