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Background of the Industry <^ ^> <^ <^> 19
result that by the spring of 1923 the number of subfranchise holders had diminished to 2,700, a decline which marked the beginning of a general breakdown of the franchise arrangement. This decline in holdings was doubtless caused by a number of considerations, some of which were peculiar to the individual company as was the case in First National, and some of which were more general. Thus, the Famous Players-Lasky Corporation found that in acquiring theaters in the South it had obtained a considerable number of smalltown theaters which were relatively less profitable than those situated in other places. After the first skirmish with First National had subsided, therefore, a considerable number of these were sold. On a smaller scale, the same thing happened with the New England houses acquired by this same company. It may be true that the complaint issued by the Federal Trade Commission on August 31, 1931, against the Famous Players-Lasky Corporation and affiliated companies, particularly with reference to block booking, stimulated a reversal of policy.
By 1925, there were also some other embryo chains in existence. Fox had acquired 27 theaters situated chiefly in New York. Universal also had a few theaters which had been secured over a period of about two years. With the exception of First National and Loew's, theater holdings of these distributors were localized to a considerable degree. Even the Famous Players-Lasky Corporation controlled but few theaters outside the southern New England district.
Up to 1925, the acquisition of theaters, therefore, had not become very widespread. As has already been indicated, there were two general reasons for the acquisition movement. The first was the desire on the part of the distributor to secure a guaranteed outlet for the company's product. While it can hardly be said that this was the stated purpose of the First National efforts, the acquisition of theaters by this company did provide outlets for the product of the distributors which the company represented, and it was to