Motion Picture News (Sep-Oct 1923)

13C0 M o t i o n Picture News For a Sound State Rights Market TO PUT the state rights market on a sound basis, I believe the following things are necessary: t. The elimination of the headlong practice of over-exploitation; that is, advertising that looks big but is wholly unpractical in its results; the establishment of a credit bureau; co-operation among state right distributors so as to eliminate the extension of credit to or even the doing of business with exchanges careless of their obligations; the reduction of salaries from the chief executive to the office boy to the point of national distributing organizations handling any other product. II. Encouragement to the v.ery last degree of those state rights exchanges who are honest in their dealings, honest in their intentions, and operating, too, upon a strict commercial basis; extending to them every assistance and consideration compatible with good business. Let me go back to the period when state rights was first inaugurated as a regulai method of distribution of independently produced motion pictures. This takes us back to the time before Adolph Zukor started in business and when the Box Office Attractions Company was the only activity of William Fox in addition to that of the few theatres he then owned. We knew little or nothing of the practice of sending salesmen on the road; buying by state right exchanges was done in New York, where all productions were made. The delivery of promissory notes or trade acceptances or percentage contracts were not even thought of. Advertising in other than strictly motion picture trade publications was unknown and undreamed of. C. 0. D. shipments were a rarity because payment was usually made in advance. False First Runs Exorbitant salaries to exploitation specialists ( ?) , advertising managers and false first runs — by that I mean a first run which a national distributor pays for — were not resorted to in an attempt to bolster up the sales value of the production. There was more system in advertising and a greater exertion to conserve money than now. Proceeding from the point of the ready acceptance by theatre owners of product made by independent producers and distributed through the channel commonly designated " state rights," the independent producer and national state right distributors must, of necessity, so regulate the cost of sales and national distribution as to reduce the royalty to be paid by the state right exchange, so that they (exchanges) may in turn be in a position to meet every form of competition in connection with the prices to be paid by the theatres, and to encourage the liberal use by theatre owners of advertising matter so that the greatest amount of publicity and advertising may attach itself to every production played out of a state right exchange. The sometimes terrific or exorbitant sales value placed upon an independent production is named by no means solely because of the theatrical or true worth of a production itself; but such price is augmented by numerous contingencies and the extravagance, that in some instances connects itself with the national state right distributing organization, plus the losses that such national distributor must face in connection with, first, unsold territory, and. second, the many breaches of contract that An Analysis By Jesse J. Goldburg Beautiful interior set built for the Universal Jewel production. " A Lady of Duality," starring Virginia Valli. are committed by local state right exchanges. To suggest a method of stabilization of national state right distribution and to point out a few of the many channels through which money is dissipated, necessitating the covering up of such losses by making " the other fellow " pay more than he would be otherwise justified in paying, is the province of this article. There is no necessity for the expenditure of moneys in sending salesmen to the various exchange centers. This involves a terrific expense, which, of necessity, must be added to the sales price of the picture, and if eliminated would give the exchange the benefit of such saving. There is no reason why a print of the production can not be forwarded to an exchange for screening at their office, where we are reasonably sure that such exchange is a reputable, responsible organization and not likely to take advantage of any such confidences. But the better method ofttimes advocated would be a clearing house or sales center in New York where" all independent productions might be cleared or offered for sale to state right buyers. To send salesmen on the road on any particular attraction, making a complete tour of the United states, involves an expense of railroad fare, sustenance and salary of approximately $2,200. Unbusinesslike Methods It is true that when one travels to a locality to dispose of a production, not receiving fair treatment from an exchange, a distributor repeats the visit time and again. We recognize, regardless of the merit of our proposition, the fact that we call upon a buyer in his own town places us, incidentally, at a disadvantage — at least a state right exchangeman operates on that theory. The loss that follows protested notes or acceptances and the time consumed in negotiating payment all adds to the overhead or sales expense and this would be eliminated if there was co-operation among state right producers and distributors to the extent that when an exchange failed to meet its obligation that, much like any other protective organization, Ihe members of such association would refuse to do business with such delinquent exchansre. To eliminate this loss would also materially reduce the sal«k expense. I am a firm briiever in advertising, but I fail 1o see where the terrific amount of money that is sometimes snent in advertising in national magazines, other than trade publications, serves any purpose that would lead direct to the box office. I am convinced that moving picture patrons are impressed only by billboard advertising and local newspaper publicity and advertising, and possibly by " fan " magazine advertising, but not by advertising in publications whose rate per page runs into the thousands of dollars. The state right distributor who expends money in -that direction, to my mind, is adding to the cost of the production that unjustly shifts the burden upon the local distributor. Such advertising reads well and looks well to the eye of the producer and national distributor, but its returns in dollars and cents to me is speculative. Where a producer incurs the obligation of having prints made and advertising matter manufactured and it is ordered specifically by an exchange, there is no reason why the national distributor should be compelled to meet refusals of exchanges to lift such shipments. The annual return charges and the loss occasioned by such refusals amounts to a substantial sum of money which the state right national distributor must reckon with in regulating the sales value of his production. If payment is made at the time of the placing cf the order, the exchange would receive the benefit of a slight reduction in cost, to say nothing of the saving of the charge made for C. 0. D. payments. Office Overhead But avoiding generalities and getting down to concrete individual instances of the insidious practices that have crept into the present method of state right sales and distribution, from which the state right exchangeman benefits, let me say that the matter of office overhead is of primary concern. We find with several national state right distributors the practice of employing a staff of high-salaried employes as advertising and publicity managers and various other so-called executives, including even the heads of the organizations themselves, who devote about one-fourth of their time toward the business in hand, which increases fourfold the sales expense. In the getting up of the various forms of advertising matter there is little or no attempt to utilize the things manufactured for any more than one purpose. By this I mean that there are so many individual items that could be utilized in the manufacture of various forms of advertising matter. The inability of state right distributors to finance the manufacture of advertising matter and the securing of tremendous terms of credit, of necessity, compels the manufacture of advertising matter to add to the cost, which, in turn, requires the exchange to pay more for such advertising matter than he would be otherwise required to pay if the national state right distributor was so financed as to be able to pay for what it has made up. If the state right exchange was required to pay cash flSjr lithographs, lobby displays, etc., there is no reason why the national state light distributor should not also pay for such material and secure the reduced price that would in turn permit the state right exchange to pay less for such material. Reckoning the terrific overhead of state right distributing organization plus the actual sales expense which involves trade paper advertising, traveling, projection, etc.. etc., and