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190 -^ <^ ^> The Motion Picture Industry
of percentage pricing. This limited use of percentage pricing disclosed the principle weaknesses in the system: for instance, the difficulty in effecting the proper percentage division of receipts, inadequate exploitation, and the difficulties involved in checking receipts. The barriers established by these weaknesses were considered by many, both distributors and exhibitors, as insuperable.
The advent of sound pictures, however, brought about a complete change of opinion. Sound pictures were of unknown worth at the box office, though it was obvious from the time of their introduction that they possessed great novelty value. The producers and distributors, on the one hand, wished to profit from the increased attendance; since they were unable to measure the potentialities of the sound film, however, they could not determine rental increases fairly and accurately. As an attempt to solve this problem, some distributors decided to experiment with a system of percentage rentals under which the exhibitor would guarantee a given amount, usually less than the flat rental paid for silent pictures, and split all receipts over and above a given amount according to a percentage derived by mutual consent.
Many exhibitors, on the other hand, wishing not to be burdened with higher flat rentals for pictures of unknown drawing power, acceded to the percentage system. Others acceded because distributors refused to lease sound pictures under any other plan; in the case of many exhibitors, especially those equipped for sound reproduction, sound pictures were indispensable. A large number of exhibitors, although accepting percentage pricing, voiced their objections strenuously. They disliked, for example, granting distributors access to their books, for the reason that the distributors could use the information thus derived to the disadvantage of the exhibitors. The latter believed that percentage rentals would limit their profits and, since no provisions were made for the sharing of losses, would be beneficial primarily to the distributor.
Despite this difference of opinion, in general, both exhib