1917–1919: Paramount, First National, and United Artists

The Paramount Pictures Corporation, the immediate beneficiary of Triangle’s collapse, had not fallen into this position by accident. In fact, the success of Paramount was in many ways an illustration of Adolph Zukor’s ability to refine and perfect schemes already introduced by men like Harry Aitken or William Fox (just as Aitken’s failure with the “Famous Players” idea illustrates his inability to handle a production policy once successfully introduced by Zukor).

W. W. Hodkinson, an independent West Coast exchange operator, first conceived the idea of Paramount after observing the success of the General Film Company’s national distribution system. The product of Zukor’s Famous Players Film Company, as well as that of the Jesse Lasky Feature Play Company, constituted the bulk of those features then available on the open market (VLSE, Fox, and some others were handling their own distribution). They were offered on a “states rights” basis, with local distributors or exchange operators contracting for territorial exhibition rights. Hodkinson joined with other local distributors from New York, Boston, Pittsburgh, and Philadelphia and incorporated the Paramount Pictures Corporation on 8 May 1914. One week later this corporation entered into a five-year distribution agreement with Zukor, Lasky, and Bosworth, Inc. (an alliance of actor-producer Hobart Bosworth and Broadway impresario Oliver Morosco, financed by Los Angeles capitalist Frank C. Carbutt). By combining nationally, advances could be guaranteed for future productions that would be much higher than what might have been raised in separate states rights contracts, thus encouraging the production of more ambitious films. In exchange for exclusive distribution rights and 35 percent of the rentals, Paramount agreed to advance $20–$25,000 for each five-reel film and pay for the cost of prints and trade advertising. In 1915 this contract was extended to twenty-five years. 12

Despite the great success of the organization for all involved, Zukor was uncomfortable about being, technically, a cog in the Paramount wheel. In addition, Hodkinson, remembering Aitken’s recent failure at merging production and distribution, resisted Zukor’s urgings to turn Paramount into a producing organization. Accordingly, Zukor and Lasky took control of Paramount by buying out the interests of several of the original incorporators on 21 May 1916 and forced Hodkinson to resign on 13 June. Zukor and Lasky then combined their production organizations as the Famous Players-Lasky Corporation on 29 July and acquired the stock of Bosworth and Morosco that November. What had begun as a move to consolidate power in the hands of the distributor had, under Zukor, become the world’s most impressive producing concern, as the Film Daily put it, “the United States Steel Corp. of the motion picture industry.” 13

Having eliminated Hodkinson, the aggressive Zukor went to work on his new partners. Samuel Goldfish, one of the founders of the Lasky Company, was to serve as chairman of the board of Famous Players-Lasky, with Zukor acting as president. Friction between the two was immediate, and Zukor demanded that Jesse Lasky choose between them. Despite the fact that Goldfish was his brother-in-law, Lasky lined up behind Zukor. Goldfish cashed in his interest for $900,000. 14

The combined star rosters of the Famous Players and Lasky operations were already considerable, but in 1917 Zukor was able to add the defecting talents once handled by Triangle. At a time when star prominence was the single most important factor determining a film’s box-office success, Zukor had cornered the market. In a 1918 popularity poll conducted by Motion Picture Magazine, the six top stars on the list—Mary Pickford, Marguerite Clark, Douglas Fairbanks, Harold Lockwood, William S. Hart, and Wallace Reid—were all under contract to Zukor. 15

Using this leverage, Paramount was able to insist that prospective exhibitors interested in, say, the Pickford films, acquire them in large blocks along with a quantity of less attractive titles. These block-booking arrangements typically included groups of from 13 to 52 or even 104 titles. Paramount salesmen offered a variety of different product lines, from the top-quality Artcraft releases of Pickford, Fairbanks, and Hart to the more modest Realart productions, in which stars such as Bebe Daniels were being developed. Because these films had not yet been produced, exhibitors were required to “buy blind” from a sketchy prospectus or campaign book. The system was similar to the program policy employed in nickelodeon days. But from the exhibitor’s point of view, it was ill suited to current conditions, because audiences had become far more selective in their filmgoing habits (if only to patronize the films of one star over another). As best they could, all of Zukor’s competitors soon adopted variants of this policy, with the notable later exception of the United Artists Corporation. 16

In 1921 the Federal Trade Commission began an investigation of block-booking practices that continued intermittently until 1932. The ensuing case, Federal Trade Commission v. Famous Players—Lasky Corporation, et al., yielded seventeen thousand pages of testimony covering all sides of this issue. The major producer-distributors defended themselves by arguing that the policy was simple wholesaling, that the sale of individual films was uneconomical, and that exhibitors still had the right to buy specific titles. Supporting the claims of independent producers and theater owners, the government charged coercion, denied the majors’ economic arguments, and insisted that the situation was a straightforward example of unfair trade practices. A cease and desist order was issued in 1927, which the majors chose to disregard while the matter worked its way through the U. S. Circuit Court of Appeals.

Before waiting for the government to come to their rescue, many of the nation’s most powerful theater owners had already banded together to form the First National Exhibitors Circuit. The rapid increase in picture-palace construction that followed the opening of the Strand in 1914 soon created a class of “first-run” theaters that proved crucial to the successful exploitation of new feature products. After the publicity of a run in one of these two hundred or so key theaters, a film would eagerly be sought by exhibitors outside the downtown areas. But if a film had no first-run record, it was almost impossible to sell it to the outlying houses.

Nonetheless, the owners of these key theaters (who often controlled chains of local theaters as well) felt themselves threatened by Zukor and Paramount, who compelled them to accept product on increasingly costly terms. As scattered retailers, they had little bargaining power, and only the Stanley Company in Philadelphia was able to deal with Paramount on its own terms, owing to the almost monopolistic control it exercised over local theater programming. Squeezing these exhibitors from the other side was the knowledge that many prime locations were already over-seated, with so much local competition that even a popular (and expensive) feature might play to half-empty houses. 17

A plan to organize these exhibitors was hatched by Thomas Tally, a pioneer Los Angeles showman, who together with J. D. Williams promoted the First National concept in 1916—1917. This was essentially a national organization of states rights franchisees. Films would be acquired by First National, with costs apportioned among the various franchise holders according to the value of their territories (table 3.1). 18

The formation of the new organization was announced in New York in April 1917. Its two dozen original stockholders controlled about one hundred theaters, but sub-franchises were offered to outlying exhibitors.

By April 1919 First National controlled 190 first-run theaters and approximately 40 subsequent-run houses, not counting some 366 theaters which were controlled under subfranchise agreements. In January 1920 the total number of theaters controlled by First National had increased to 639; of these 224 were first-run houses, 49 were subsequent-run houses, and 366 were outlets operated by subfranchise holders (Howard Lewis, The Motion Picture Industry [New York: Van Nostrand, 1933] p. 17).

Benjamin Hampton claims that the number of screens eventually aligned with First National was as high as five or six thousand, a figure that would have given them control of nearly half the nation’s theaters. Whatever the figure, most of these exhibitors had once carried the Paramount program, and when these theaters began to supply their own product, Zukor was faced with an effective boycott. 19

But it was not simply aggravation with the Paramount sales policy that drew so many theater owners to First National. In July 1917 it was announced that Charlie Chaplin had signed with the new company. Although his first release, A DOG’S LIFE , was not available until April 1918, the mere news of this acquisition was enough to Similar states rights percentage allocations were adopted by other distributors, but the percentages were constantly changing. First National’s own allocations changed from time to time, and while this 1925 table is not atypical, it has some idiosyncrasies of its own. SOURCE: Film Daily Yearbook of Motion Pictures (1925), p. 698. start a rush. First National had been able to lure Chaplin from Mutual not simply by offering him more money but by setting him up as his own producer, with his own Hollywood studio on the corner of Sunset and La Brea. They would advance $125,000 for the production of each of eight two-reelers, with an additional $15,000 per reel if Chaplin chose to produce a longer picture. First National paid for prints and advertising, took 30 percent of the gross to pay for distribution expenses, and split the remaining profits equally with Chaplin. Now that they had changed hats and become (essentially) producers, the First National franchise-holders stopped complaining about high star salaries and became the first to offer a million-dollar contract. They became the second as well, when they lured Mary Pickford away from Zukor himself. 20

For almost a year First National had negotiated with Pickford, whose Paramount contract approached expiration in 1918. Zukor, already feeling the effects of this exhibitors’ revolt, calculated that he could not raise Pickford rentals high enough to match First National’s offer. According to Benjamin Hampton, Zukor offered Pickford $250,000 simply to retire from the screen for five years (an incident that does not appear in Zukor’s autobiography), but Pickford is said to have declined. 21

In addition to Chaplin and Pickford, First National eventually signed D. W. Griffith, Louis B. Mayer, B. P. Schulberg, and Joseph Schenck, who brought with them such stars as Lillian Gish, Constance and Norma Talmadge, Anita Stewart, and Katherine MacDonald. Starting from an exhibition base, First National had successfully grown to include distribution and production as well. Adolph Zukor made the obvious countermove in 1919: from production and distribution he would move into exhibition. 22

On the advice of Walter Irwin, who had successfully been merchandising the weak Vitagraph-Lubin-Selig-Essanay (VLSE) product and now had accepted a Paramount vice-presidency, Zukor decided to attack First National’s franchise-holders on their   own ground. As Irwin later testified before the Federal Trade Commission (FTC), Paramount could destroy First National if it would go into each one of the First National cities and build, or threaten to build, the finest and largest theater in the city. Many of these exhibitors, weakened by the strain of carrying the large Chaplin and Pickford contracts and suffering cash shortages on account of theater closings imposed during the influenza epidemic, were in no mood to battle Paramount over the issue. 23

On 18 April 1919 Famous Players-Lasky acquired a half-interest in Grauman’s Million Dollar Theatre in Los Angeles; on 7 May they obtained a controlling interest in New York’s Rialto and Rivoli Theaters. This gave Paramount its own showcase in the most prominent East and West Coast exhibition sites. S. A. Lynch, a Paramount partner, sent his so-called “dynamite gang” through the South, intimidating exhibitors into selling out to Southern Enterprises, Inc., a Paramount subsidiary operated for this purpose. 24

The general manager of the Saenger Amusement Company, a major Louisiana chain, complained bitterly in a full-page trade advertisement:

The methods they are using are as near Bolshevism as anything I know of. They hope to gain a hold for each tentacle of their octopus by threats and brute financial force, and the independent exhibitor who has worked years to get his theaters in paying class and has striven night and day to make motion picture fans of his town’s population is a mere pawn in the operation of this huge octopus and classed by it as worthy of no consideration (quoted in Gertrude Jobes, Motion Picture Empire [Hamden, Conn.: Archon, 1966], p. 220).

Zukor bought into Saenger on 22 June 1920. He had already taken over the Black New England Theatres on 27 January and had bought out the Stanley Company of America the previous 1 August. With these interests, he not only acquired some of the nation’s most important theater chains but gained control over three of the key First National franchise-holders. The rumor that he had silently acquired E. H. Hulsey’s interests in Texas and Oklahoma (he had) demoralized the rest of the First National board, who were no longer sure which of their number was now in the enemy camp. This move so distressed Thomas Tally that he sold out all his theater interests, save his one Los Angeles flagship. 25

Much of this expansion had been financed by a $10 million stock issue underwritten by Kuhn, Loeb in 1919. The rumor that Zukor intended to buy up every major theater in the country, combined with the knowledge that Wall Street millions were behind him, did a great deal to soften up the opposition. By 1921 Zukor had acquired 303 theaters, only a fraction of the 14,000 then operating, but significant because most of Zukor’s houses were first-class, first-run theaters. Since only some two hundred key theaters existed, Zukor had gained an effective monopoly, according to the complaint of the Federal Trade Commission. The way these theaters were acquired, and their function in denying screen time to independent producers, became the second part of a lengthy FTC investigation that would continue throughout the decade. 26

Despite the fact that Zukor had acquired several seats on the First National board, he had not been able to put First National out of business. While the FTC investigation developed, Zukor’s hands were effectively tied, and First National continued acquiring strong program material. It merged in 1921 with Associated Producers, a distributing combine handling the work of Thomas H. Ince, Allan Dwan, George Loane Tucker, Mack Sennett, Marshall Neilan, Maurice Tourneur, J. Parker Read, and King Vidor under the new name Associated First National. In 1923 it constructed its first studio complex, an elaborate facility in Burbank financed by several million dollars’ worth of stock issued by Hayden, Stone, and Company. Sam Katz of the powerful Balaban and Katz chain in Chicago tried to organize support among the members to merge all the company’s scattered interests into one tightly knit organization. But the unwieldy First National Board hesitated. By 1926 Zukor had managed to buy out Balaban and Katz, crippling First National for good, and had merged many of the components (including the Balaban and Katz chain itself) into his new Publix Theatres Corporation. 27

“Now that the inventors, cameramen, exchangemen and exhibitors had taken their fling at motion picture control,” wrote Terry Ramsaye, “it was the actors’ turn.” At the January 1919 convention of the First National Exhibitors Circuit, a wild rumor circulated concerning Adolph Zukor’s latest attempt to eliminate his rival: a direct merger of First National and Paramount. Mary Pickford and Charles Chaplin were then both releasing through First National and would have fallen under the control of Zukor if the deal had gone through. Chaplin appeared before the executive committee to ask for an increase in his budget allotment, because, with A DOG’S LIFE and especially with SHOULDER ARMS (1918), he was spending far more on production than he had originally estimated. The committee refused. “I believe it has something to do with this motion picture convention,” advised his brother, Sydney, who served as his financial manager. For Pickford, it was enough that “the trade papers reported that the men ruling the industry were planning to clamp the lid down on the salaries of actors.” Realizing that, whatever the results of the merger discussions, events were reducing them to pawns in a far larger power struggle, Chaplin, Pickford, and Douglas Fairbanks (whose Paramount contract was nearing an end) decided on an immediate preemptive move. They quickly involved D. W. Griffith and William S. Hart (both then releasing through Paramount) and ostentatiously announced to the press an ambitious scheme to set up their own producing and distributing organization. According to Chaplin’s later testimony, the announcement was a simple ruse: “It was not our intention to go through with the project, however. Our objective was only to stop exhibitors from signing a five-year contract with this proposed merger, for without the stars it would be worthless.” 28

But the response was so dramatic that the scheme quickly took on a life of its own. Pickford, Fairbanks, Griffith, and Chaplin signed the United Artists incorporation papers on 17 April 1919. Hart, who had already talked of retirement, did allow himself to sign again with Zukor, taking full advantage of the situation to raise his fee to $200,000 per picture. Because Hart was releasing six films a year by this time, he immediately moved into the million-dollar class, in addition to avoiding the corporate squabbles and financial problems that plagued the United Artists members for years to come.

Unfortunately, Pickford and Chaplin still owed films on their existing First National contracts before they could begin releasing through United Artists. Griffith, in order to raise his share of the initial United Artists financing, actually signed a three-picture contract with First National, thus keeping himself tied up until 1920. Only Fairbanks was immediately free, and the first United Artists release, HIS MAJESTY, THE AMERICAN , was a Fairbanks picture, just as the first Triangle release had been four years earlier. 29

Hiram Abrams, an experienced marketing executive who had served as president of Paramount after Hodkinson’s dismissal, was appointed general manager of the new firm. Some historians, especially Benjamin Hampton, have claimed that the essential concept of United Artists was actually brought to Abrams by a young associate of his at Paramount, B. P. Schulberg, to whom he agreed to give half of his share if he could convince the top stars to sign. But by the time the final papers were drawn, Schulberg was out, only to bring suit on this issue in 1920. In his history of United Artists, Tino Balio notes that Abrams denied all Schulberg’s claims, which were said to be based on an oral agreement between them. The case was settled out of court for an undisclosed sum. In any event, the existence of the Schulberg-Abrams argument implies that the impetus for an organization of film artists came not from the artists themselves but from one or another distribution executive. 30

The early history of United Artists was extremely troublesome. Without automatic access to any theaters of its own, the firm needed to break the stranglehold of Paramount and First National (it was not entirely a coincidence that Paramount began its theater-buying spree the day after the incorporation of United Artists). The United Artists members also needed to raise production money in advance, and they attempted, with little initial success, to get it from the theater owners themselves. Fearing a possible takeover attempt, the four partners refused to go public with their stock, but given the investment community’s opinion of “independent” producers (those with no firm access to theaters), even this group would have had trouble raising money on Wall Street. 31 Said Mary Pickford in 1923:

I have to worry so much about distribution now that my ability as an actress is impaired. Producers have so bottled up the best theaters that it is often impossible to get a showing of my pictures in them. I will retire from the business if the conditions become worse…. Key cities mean two-fifths of the returns. If the market is closed by block booking the producers owning theaters will eliminate the people who are seeking to make big pictures and conditions will lapse into the state of three years ago (quoted in William Seabury, The Public and the Motion Picture Industry [New York: Macmillan, 1926] p. 60).

While United Artists was originally to release twelve films per year, only seven were issued in 1920, their first full year of operation. To help fuel the distribution machinery, pickups from other producers needed to be acquired. A subsidiary named Allied Producers was established to handle work by such lesser lights as Charles Ray and Max Linder, but it proved unattractive. The partners quarreled among themselves over their own distribution practices, Griffith preferring to handle road-show engagements of his films personally, then turning them over to United Artists after he had already skimmed the better part of their potential earnings. Chaplin released nothing through United Artists until the end of 1923, and then only the commercially unsuccessful A WOMAN OF PARIS . A few big hits—WAY DOWN EAST (1920), ROBIN HOOD (1922), and THE GOLD RUSH (1925)—were outweighed by many unprofitable releases. Between 1919 and 1927 the United Artists Corporation claimed a loss in all but two years, and even those “profits” amounted to less cash than Adolph Zukor would have paid Mary Pickford in a month. United Artists’ inability to distribute films efficiently on an individual basis must have seemed an object lesson to Zukor and the other block-booking proponents then under investigation by the FTC. 32

At the end of 1924 Joseph Schenck was hired to reorganize the company, made an equal producing partner, and elected Chairman of the Board. He brought with him the contract of his wife, Norma Talmadge, who was by this time selling more tickets than Pickford. Moving immediately to increase the flow of product, Schenck signed Rudolph Valentino, Buster Keaton, Gloria Swanson, and producer Samuel Goldwyn. Such acquisitions had more publicity value than practical success. Keaton’s films failed at the box office, Swanson became bogged down in the QUEEN KELLY fiasco, and Valentino died just before the release of SON OF THE SHEIK (1926). Goldwyn proved irascible and difficult, but his films were successful enough that he was elected a producing partner in 1927. By then Griffith was already gone, his own financial problems driving him back into a contract with Zukor. 33

Schenck had begun to act on his own merger plans as well and attempted to join with Metro-Goldwyn-Mayer in 1925, but Chaplin, fearing the size of the prospective combine, rejected the idea. In creative terms, Chaplin may have been right, but the U.A. partners lost millions by failing to acquire a piece of MGM at the start of the Page 80  Mayer and Thalberg years. By the end of the silent period, Schenck had to content himself with a tentative expansion into exhibition by acquiring first-run houses for United Artists in a handful of key cities and reconstructing their distribution apparatus via the United Artists Theatre Circuit.