To prohibit and to prevent the trade practices known as "compulsory block-booking" and "blind selling" of motion-picture films in interstate and foreign commerce .. (1939)

TRADE PRACTICES IN MOTION-PICTURE INDUSTRY 9 Since prices for motion-picture films vary with each picture and with each theater in each locality, so much so that one theater may be paying $20,000 for the exhibition rights of a motion picture, while another theater giving a simultaneous exhibition of such motion picture in another area may be paying only $15, it can be readily appreciated that section 3 places its burden on the pricing policy of distributors in negotiating contracts with exhibitors. An important factor is the fact that if a distributor fails to liceixse a motion picture in a given area, he can receive no revenues for that motion picture in that area. Whether a motion picture meets its production costs depends upon the total revenues paid for it by all the exhibitors who contract to exhibit it. The provisions operative in price negotiations are claimed by the sponsors of the bill to be inserted for the purpose of preventing a distributor from attaining by indirection the result sought to be outlawed; namely, that of refusal to deal with an exhibitor unless he contracts for all offered, but a careful reading of the language must make it plain that the section does more than that. It operates to fix prices at which motion pictures in groups may be oft'ered for contract. The section is complained of as being vague and indefinite and as failing to provide a standard to which the distributors' sales representatives may conform in its application to their negotiations with exhibitors on pain of criminal punishment. It is singular that although 12 j^ears have elapsed since the language embodied in section 3 was first promulgated by the Federal Trade Commission, despite the attack thereon ever since, no measure has been drafted except in terms identical with that voided by the court. It needs to be appreciated, as the court which reversed the order stated, that its provisions operate in a field of "ordinary incidents of bargaining and negotiating between seller and buyer out of which a contract may or may not result." The testimony of witnesses before the subcommittee reveals that negotiations between a distributor and an exhibitor leading to contracts for motion-picture films are rare in which the distributor does not seek for at least a portion of the motion-picture films to be licensed at fees or "rentals" which are a specified percentage of the revenues derived at the exhibitor's box office upon the exhibition of such motion-picture films. Obviously a contract for a group of motion pictures in which some of the motion pictures are licensed on a percentage basis cannot be a contract at a "designated lump-sum price for the entire group." But tliis is not the only reason why motion pictures cannot be said to be either offered for contracts or contracted for at a designated lump-sum price for an entire group. The main reason is that it is the practice of distributors to solicit ofi^ers and it is the practice of exhibitors to make offers and conclude contracts for a stated license fee for each motion picture covered by the contract. In rare cases the individual license fee for each picture is the same for each of the pictures covered by the contract. In a great many cases and perhaps the great majority of instances they are not. The most typical solicitation by a distributor relating to a group of motion pictures and the most typical contract mutually agreed upon between a distributor and an exhibitor will have several price classifications for different numbers of motion pictures and normally at least one of the price classifications is one in which a certain number of pictures in the group are licensed on a percentage basis. S. Kept. 5.32, 76-1, pt. 2 2