Studio system
The
studio system was a means of film production and distribution dominant in
Hollywood from the early 1920s through the early
1950s. The term
studio system refers to the practice of large motion picture
studios (a) producing movies primarily on their own
filmmaking lots with creative personnel under often long-term contract and (b) pursuing
vertical integration through ownership or effective control of
distributors and
movie theaters, guaranteeing additional sales of films through manipulative booking techniques. A
1948 Supreme Court ruling against those distribution and exhibition practices hastened the end of the studio system. In 1954, the last of the operational links between a major production studio and theater chain was broken and the era of the studio system was officially dead. The period stretching from the introduction of
sound to the court ruling and the beginning of the studio breakups, 1927/28â€"1948/49, is commonly known as the
Golden Age of Hollywood.
During the Golden Age, eight companies comprised the so-called major studios responsible for the studio system. Of these eight, five were fully integrated conglomerates, combining ownership of a production studio, distribution division, and substantial theater chain, and contracting with performers and filmmaking personnel:
Fox (later 20th Century-Fox),
Loew's Incorporated (owner of America's largest theater circuit and parent company to
Metro-Goldwyn-Mayer),
Paramount Pictures,
RKO (Radio-Keith-Orpheum), and
Warner Bros. Two majorsâ€"
Universal Pictures and
Columbia Picturesâ€"were similarly organized, though they never owned more than small theater circuits. The eighth of the Golden Age majors,
United Artists, owned a few theaters and had access to two production facilities owned by members of its controlling partnership group, but it functioned primarily as a backer-distributor, loaning money to independent producers and releasing their films.
The years 1927 and 1928 are generally seen as the beginning of Hollywood's Golden Age and the final major steps in the establishment of studio system control of the American film business. The success of 1927's
The Jazz Singer, the first major "talkie" (in fact, the majority of its scenes did not have
synchronized sound) gave a big boost to the then small Warner Bros. studio. The following year saw both the general introduction of sound throughout the industry and two more smashes for Warners:
The Singing Fool,
The Jazz Singer's even more profitable follow-up, and Hollywood's first "all-talker" feature,
The Lights of New York. Just as significant were a number of offscreen developments. Warner Bros., with money to spend, did so wisely, acquiring the extensive Stanley theater chain in September 1928. One month later, it purchased a controlling interest in the
First National production company (more prominent than Warners itself not long before), which had not only a 135-acre studio and back lot but its own large string of movie theaters. Warners had hit the big-time.
Nineteen twenty-eight also saw the emergence of the fifth of what would come to be known as the "Big Five" Hollywood conglomerates of the Golden Age. The Radio Corporation of America (
RCA), led by
David Sarnoff, was looking for ways to exploit the cinema sound patents, newly trademarked
RCA Photophone, owned by its parent company,
General Electric. As the leading film production companies had all signed exclusive agreements with
Western Electric for their technology, RCA got into the movie business itself. In January, General Electric acquired a sizable interest in
Film Booking Offices of America (FBO), a distributor and small production company owned by
Joseph P. Kennedy, father of the future president. In October, through a set of
stock transfers, RCA gained full control of both FBO and the
Keith-Albee-Orpheum theater chain; merging them with the recently created RCA Photophone company into a single venture, it created the Radio-Keith-Orpheum Corporation, Sarnoff chairing the board. With RKO and Warner Bros. (soon to become Warner Bros.â€"First National) joining Fox, Paramount, and Loew's/MGM as major players, the Big Five that would rule Hollywoodâ€"and thus much of world cinemaâ€"for decades to follow were now complete.
The ranking of the Big Five in terms of profitability (closely related to market share) was largely consistent during the the Golden Age: MGM was number one eleven years running, 1931â€"41. With the exception of 1932â€"when all the companies but MGM lost money, and RKO lost somewhat less than its competitorsâ€"RKO was next to last or (usually) last every year of the Golden Age, with Warners generally hanging alongside at the back of the pack. Paramount, the most profitable studio of the early sound era (1928â€"30), faded for the better part of the subsequent decade, and Fox was number two for most of MGM's reign. Paramount began a steady climb in 1940, finally edging past MGM two years later; from then till its reorganization in 1949 it was again the most financially sucesssful of the Big Five. Of the remaining three nominal majors, United Artists reliably held up the rear, with Columbia strongest in the 1930s and Universal in the lead for most of the 1940s.
One of the techniques used to support the studio system was
block booking, a system of selling multiple films to a theater as a unit. Such a unit, frequently twenty films, typically included no more than a few quality movies, the rest perceived as low-grade filler to bolster the studio's finances. On May 4, 1948, in a
federal antitrust suit known as the Paramount case but brought against the entire Big Five, the U.S. Supreme Court specifically outlawed block booking. Holding that the conglomerates were indeed in violation of antitrust, the justices refrained from making a final decision as to how that fault should be remedied, but the case was sent back to the lower court from which it had come with language that suggested divorcementâ€"the complete separation of exhibition interests from producer-distributor operationsâ€"was the answer. The Big Five, though, seemed united in their determination to fight on and drag out legal proceedings for years as they had already proven adept atâ€"after all, the
Paramount suit had originally been filed on July 20, 1938.
However, behind the scenes at RKO, long the financially shakiest of the conglomerates, the court ruling was being looked at as something that could be turned to the studio's advantage. The same month that the decision was handed down, movie-crazy multimillionaire
Howard Hughes had acquired a controlling interest in the company. As RKO controlled the fewest theaters of any of the Big Five, Hughes decided that starting a divorcement domino effect could actually help put his studio on a more equal footing with his competitors. Hughes signaled his willingness to the federal government to enter into a consent degree obliging the breakup of his movie business. Under the agreement, Hughes would split his studio into two entities, RKO Pictures Corporation and RKO Theatres Corporation, and commit to selling off his stake in one or the other by a certain date. Hughes's decision to concede to divorcement terminally undermined the argument by lawyers for the rest of the Big Five that such breakups were unfeasible. While many today point to the May court ruling, it is actually Hughes's agreement with the federal governmentâ€"signed November 8, 1948â€"that was truly the death knell for the Golden Age of Hollywood. Paramount soon capitulated, entering into a similar consent decree the following February. The studio, which had fought against divorcement for so long, became the first of the majors to break up, ahead of schedule, finalizing divestiture on December 31, 1949. The Golden Age was over. Through Hughes's deal with the feds, and those by the other studios that soon followed, the studio system lingered on for another half-decade. The major studio that adapted to the new circumstances with the most immediate success was the smallest, United Artists; under a new management team that took over in 1951, overhead was cut by terminating its lease arrangement with the Pickford-Fairbanks production facility and new relationships with independent producers, now often involving direct investment, were forgedâ€"a business model that Hollywood would increasingly emulate in coming years. The studio system around which the industry had been organized for three decades finally expired in 1954, when Loew's, the last holdout, severed all operational ties with MGM.
Hughes's gambit helped break the studio system, but it did little for RKO. His disruptive leadershipâ€"coupled with the draining away of audiences to
television that was affecting the entire industryâ€"took a toll on the studio that was evident to Hollywood observers. When Hughes sought to bail out of his RKO interest in 1952, he had to turn to a Chicago-based syndicate led by shady dealers without motion picture experience. The deal fell through, so Hughes was back in charge when the RKO theater chain was finally sold off as mandated in 1953. That year,
General Tire and Rubber Company, which was breaking into broadcasting, approached Hughes concerning the availability of RKO's film library for programming. Hughes acquired complete ownership of RKO Pictures in December 1954 and consummated a sale with General Tire for the entire studio the following summer. The new owners quickly made some of their money back by selling off the TV rights for the library they treasured to
C&C Television Corp., a beverage company subsidiary. (RKO retained the rights for the few TV stations General Tire had brought along.) Under the deal, the films were stripped of their RKO identity before being sent by C&C to local stations; the famous opening logo, with its globe and radio tower, was removed, as were the studio's other trademarks. Back in Hollywood, RKO's new owners were encountering little success in the moviemaking business and by 1957 the gig was up. The tiremen shut down production and unloaded the main RKO facilities, which were purchased by
Lucille Ball and
Desi Arnaz's company,
Desilu. Just like United Artists, the studio now no longer had a studio; unlike UA, it barely owned its old movies and saw no profit in the making of new ones. In 1960 it abandoned the movie business entirely.
Since the disintegration of the studio system, the eight major film studios of the Golden Age have gone through the following ownership changes ("purchased" meaning acquired anything from majority to total ownership):
*independent, through 1982
*
Coca-Cola, 1982-1987 (purchased by Coca-Cola;
Tri-Star Pictures, a joint venture with
HBO and
CBS initiated in 1982â€"CBS drops out in 1984)
*independent as Columbia/Tri-Star, 1987-1989 (divested by Coca-Cola; also in 1987, HBO drops out of Tri-Star, which merges with Columbia)
*
Sony, 1989-present (purchased by Sony)
*independent, through 1985 (purchased by
Marc Rich and
Marvin Davis in 1978; Rich sells his shares to
Rupert Murdoch's
News Corporation in 1981)
*
News Corporation, 1985-present (Murdoch's company purchases Davis's shares and assumes control)
*independent, through 1967
*
Warner Bros.-Seven Arts, 1967-1969 (purchased by and merged with
Seven Arts Productions)
*
Kinney National Company, 1969-1975 (Kinney purchased Warner Bros.-Seven Arts)
*
Warner Communications, 1975-1989 (Kinney changed name)
*
Time Warner, 1989-present (Warner merged with
Time Inc.; from 2000 to 2003, the parent company was known as
AOL Time Warner, following merger with
AOL)
*independent, through 1966
*
Gulf and Western Industries, 1966-1984 (purchased by Gulf+Western)
*
Paramount Communications, 1984-1993 (Gulf+Western changed name)
*
Viacom, 1993-2005 (Viacom purchased Paramount)
*
Viacom, 2005-present (Viacom split into two companies: "new" Viacomâ€"with Paramount Pictures,
MTV,
BET, and other cable channelsâ€"and
CBS Corporationâ€"which includes
CBS Paramount Television)
*independent, through 1946
*independent as Universal-International, 1946-1952 (merged with International Pictures)
*
Decca, 1952-1962 (purchased by Decca)
*
MCA, 1962-1990 (MCA purchased Decca)
*
Matsushita Electric, 1990-1995 (Matsushita purchased MCA)
*
Seagram, 1995-2000 (purchased by Seagram from Matsushita)
*
Vivendi, 2000-2004 (Vivendi purchased Seagram)
*
General Electric, 2004-present (purchased by GE from Vivendi)
*
Loew's Incorporated, through 1959 (Loew's ceded operational control to studio management in 1954)
*independent, 1959-1981 (fully divested by Loew's; purchased by
Edgar Bronfman Sr. in 1967; purchased by
Kirk Kerkorian in 1969)
*independent as MGM/UA, 1981-1992 (Kerkorian purchased United Artists and merged it into MGM; purchased by
Ted Turner in 1985; repurchased by Kerkorian seventy-four days later; purchased by
Giancarlo Parretti in 1990)
*
Crédit Lyonnais, 1992-1997 (Parretti in default, his bank foreclosed on MGM/UA)
*independent as MGM/UA, 1997-2005 (repurchased by Kerkorian)
*Sony/
Comcast/4 private equity firms, 2005-present (purchased by Sony, backed by cable company Comcast and private investment firmsâ€"
Providence Equity Partners, in fact, currently owns the greatest number of shares; having joined Sony's Columbia TriStar film stable, many insiders speculate that the brand will soon be known as
Sony Pictures, however, under the Sony/Comcast joint venture agreement, a number of films must be made each year under the MGM banner)
*independent, through 1967 (operational control by Arthur Krim and Robert Benjamin from 1951; fully purchased by Krim and Benjamin in 1956)
*
Transamerica, 1967-1981 (purchased by Transamerica)
*MGM/UA, 1981-present (purchased by Kirk Kerkorian from Transamerica and merged into MGM; see above for further detail)
RKO Pictures (defunct 1960-80, dormant 1993-97)
*independent, through 1955 (controlling interest by
Howard Hughes from 1948; Hughes interest purchased by Stolkin-Koolish-Ryan-Burke-Corwin syndicate in 1952; interest repurchased by Hughes in 1953; fully purchased by Hughes in 1954)
*
General Tire and Rubber, 1955-1984 (purchased by General Tire and Rubberâ€"renamed RKO Teleradio; production ceased in January 1957â€"renamed RKO General; all film-related operations ceased in 1960; low level of production resumed in 1981)
*
GenCorp, 1984-1987 (reorganization creates holding company with RKO General and General Tire as subsidiaries)
*Wesray Capital, 1987-1989 (renamed RKO Pictures and purchased by Wesray)
*independent, 1989-present (purchased by
William E. Simon and Ray Chambers from Wesray; purchased by
Dina Merrill and Ted Hartley in 1991 and merged with their Pavilion Communications; no films produced or distributed from 1993 through 1997)
*
Filmmaking*
Major movie studioPublished
*Bergan, Ronald,
The United Artists Story (New York: Crown, 1986)
*Finler, Joel W.,
The Hollywood Story (New York: Crown, 1988)
*Goodwin, Doris Kearns,
The Fitzgeralds and the Kennedys (New York: Simon and Schuster, 1987)
*Hirschhorn, Clive,
The Warner Bros. Story (New York: Crown, 1979)
*Jewell, Richard B.,
The RKO Story (New York: Arlington House/Crown, 1982)
*Schatz, Thomas,
The Genius of the System: Hollywood Filmmaking in the Studio Era (London: Faber and Faber, 1998)
*Utterson, Andrew,
Technology and Cultureâ€"The Film Reader (Oxford and New York: Routledge/Taylor & Francis, 2005)
Online
*
The Hollywood Antitrust Case, aka The Paramount Antitrust Case extensive, detailed history from the Society Of Independent Motion Picture Producers research archive
*
Howard Hughes Revisited essay by film scholar Paul Brand; part of
Bright Lights Film Journal
