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When did the Studio System collapse? Was it inevitable?


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last night, The Story of Film referenced "the collapse " of the Studio System. that collapse had its beginnings with the de Havilland Ruling by the California Supreme Court (now informally referred to as the De Havilland Law). by the time of the early 70's (the Story of Film subject on Monday) Studios had lost most of their ironfisted control of all things movie related.

 

so, what "thing" did them in? TV, bad judgment, bad movies, lousy investments, the Supreme Court of the US monopoly decision?

 

was the setup in 1943 (when de Havilland started her court case) just waiting to be toppled? and the system was so corrupted from the inside that the demise of the Studio System was inevitable?

 

was there anything the studios could have done to prevent what was the end of their reign?

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One of the best books ever written about the studio system (its rise and fall) is "The Genius of the System" by Thomas Schatz. I'm sure you can still find a copy somewhere. It is absolutely one of my favorite books

about the classic era of filmmaking, if not the favorite.

 

Lydecker

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The first serious crack in the studio system and a portent of things to come, was the formation of *United Artists* in 1919.

 

UA was formed to offer independent film production, where the movie star principals would arrange their own financing and have a share in the profits of distribution. This contrasted with actors as studio employees, who although very well paid, did not share in profits. Some of it's early principals were D.W. Griffith, Mary Pickford, Douglas Fairbanks, Charlie Chaplin, Gloria Swanson and Walt Disney.

 

Hollywood's top stars were paid such astronomical salaries, that many of them felt that they now had the resources to engage in independent production and distribution, thereby hoping to make still more money by a share in the profits.

 

What kept such an idea really taking off was the fact that the majors owned the theater chains, thus putting a stranglehold on exhibition venues for an independent. To show a UA film, an exhibition deal had to be cut with one of the majors.

 

The death blow was dealt with the Supreme Court case of *United States vs. Paramount (1948)* an anti-trust action taken by the government against the industry's vertical integration. The above mentioned practice of studios owning their own theater chains, "block booking" and restricting distribution by independents was held to be a violation of anti-trust law.

 

In the wake of the decision, the studios had to divest themselves of their exhibition venues. Affected by the decision were Paramount, RKO Radio Pictures, Inc., Loew's, 20th Century-Fox Film Corporation, Columbia Pictures Corporation, Universal-International and Warner Bros. This also came at the worst possible time for the majors, as it coincided with the advent of television.

 

All of this didn't kill the movies. What it killed was a system where films could be turned out assembly line like in a production factory; where everyone from the producer on down was a salaried employee.

 

The business changed to a per-deal model: the producer or production company would be responsible for arranging the financing, contract for actors and everyone else, pay a horde of people "points" (i.e. a share in the profits) and arrange for distribution. Upon completion, everyone (except maybe the production company principals) disbands and goes their merry way. Under this system, everyone including the stars, are but very highly paid "temps" or "contractors"! Gone are the days when somebody would offer a newcomer a 5 or 7 year contract! (Payable to the star whether they were in a picture or not!)

 

The new system had the effect of astronomically driving up film production costs. The cost of making a feature movie has skyrocketed over the decades, far outstripping the rate of inflation. (See my thread *Money In the Old Movies in the Your Favorites* forum, where I discuss this in greater detail:

http://forums.tcm.com/thread.jspathreadID=161743&tstart=45).

 

As a result movie theater ticket prices also took off, outpacing inflation adjustments.

 

Staggeringly high production costs, which continue to escalate into the stratosphere, led to an ever greater dependence on bankers, those widely reviled "East coast suits". The old studio bosses hated having to deal with them, and hated even more the influence they would wield over studio management and production.

 

The current system is even more vulnerable to meddling by bankers. To get financing for a deal, you first have to make a big sales pitch to the bankers, convincing them that the project has all the elements needed to potentially cover the huge loans. Everything will be looked at, from the past track record of all the people involved in producing "hits", the draw potential of the proposed stars and the "marketability" of the story and script. Very high costs and huge loans put the pressure on to produce a home run, out of the ballpark hit for each approved project. It discourages any kind of risk taking with topics or presentation, except for those that reflect solid past success patterns at the box office and which pass a market feasibility study. Going out on a limb is for small independents!

 

The old "factory" model of film production contained costs much more efficiently, by keeping on continuous hire all the people necessary to make a film, spreading costs over an output of 50 or more features a year. The new system has to scramble for such people for each new project, having to offer "sweeteners" in the form of "points" to just about every contracting firm and significant participant. It may not be the best way to make movies, but it has proven to be the best way for the people involved to make a lot of money, hence this system is here to stay.

 

 

 

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Edited by: ThelmaTodd on Oct 31, 2013 11:50 AM

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> What kept such an idea really taking off was the fact that the majors owned the theater chains, thus putting a stranglehold on exhibition venues for an independent. To show a UA film, an exhibition deal had to be cut with one of the majors.

 

 

But didn't United Artist have a chain of theaters? There was a United Artist theater in Downtown Detroit for years( building still there. The DSO used to record there). And I heard of other cities having a United Artist theater in their limits.

 

The studio system collapse WAS inevitable. Making movies in a "factory" like system was too different than making cars or refridgerators. When you buy a car, you never see the people involved in it's assembly, or are provided with a list of names of the men and women involved in it's making.

 

Movies are different in that when you buy a ticket, you SEE who's involved in it's making, and in most cases it's THOSE people who are responsible in many cases for the product selling so well. If people liked the pairing of William Powell and Myrna Loy in the THIN MAN movie( and they DID), it wouldn't help get them back into the theater for a second one with an entirely different cast. Now, Bob might have installed the seats in your new car, but when you go to buy a new car a few years later, Bob could be replaced by Frank, and you'd never know the difference.

 

Now the stars in the studio's "stables" might have been aware of that power, but it took many years to be able to use that leverage is what made the studio system last as long as it did. Out of work actors( and there's always boatloads of THEM) happy just to find "steady" work, signed contracts with the studios which limited their ability to wield their star power once, or if, they accquired any. But once those contracts ran out, the star, if indeed still one, had more power in his/her grasp. After that, there was nothing the studios could do to plug the leak. The boat HAD to sink.

 

Sepiatone

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Hi Sepiatone,

 

For the United Artists' principals to invest in their own theater chain, was a way to "up the ante" in what was a very, very high stakes poker game! Sitting at the card table were the other majors who also owned their own (and larger) theater chains. The "prize" was getting your films shown to the public at high traffic locations.

 

For UA to own it's own theaters in those days did two things: increased distribution outlets for their films (at a greater profit than showings in a theater owned by a major), and second, increased their negotiating leverage with the majors when it came to distribution. The huge risk they were taking was the high cost of building and maintaining their own national string of theaters, which would then require a steady stream of UA produced hit films in order to be viable.

 

The "heat" was on; it was really, really on for these former silent movie stars turned studio magnates/producers. They found out, like Gloria Swanson did, that this is one hell of a risky business, especially when you are making one feature at a time and it's sink or swim, depending on how well it does! They found out that "playing" Louis B. Mayer or Adolph Zukor, was no bowl of cherries and could lead to grey hairs and many a sleepless night! When you add on the risk of acquiring, owning and making enough hits to sustain your own theater chain, besides wrangling with the majors over distribution, then the stress level had to go through the roof. Some of these stars must have yearned for the simpler days, when all they had to do was pick up a nice fat salary check every week, and leave the business worries to someone else.

 

About the "factory" system. The production of a film involves a lot of unseen hands. Having worked as an extra, I got to see this firsthand. There are often hundreds of people behind the camera in auxiliary roles. In the old days, sets had to be designed and constructed, writers, musicians, lighting technicians, carpenters, costume designers, hair do people, cameramen, grips ets. etc. The old studios would keep all of them on salary and spread the cost by producing many features a year. The current system requires a producer to find and contract for these people on a per film basis, and negotiate for their involvment. This has significantly affected the cost structure of making a picture. But it also allows for more sharing of the box office wealth.

 

It also reintroduces the per-picture all or nothing sink or swim gamble that the early UA principals struggled with. The "factories" could spread the cost and losses of an occasional "flop" over a large number of moneymaking features produced in a year. Those days are gone!

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One of the big consequences of the Paramount ruling was the studios no longer had guaranteed bookings for their films. No longer could they afford to make as many films as they had. Prior to the Paramount ruling, studios were churning out films almost on weekly basis and because they owned the theaters, they had outlets for those films. Some films performed badly at the box office but those losses could be off-set by other films doing very well or better than expected at the box office.

 

Once they no longer had the guaranteed bookings and the lucrative contracts that came with those bookings, they had to change the way they released films and that caused a change in the way the produced films and the number of films per year that they could afford to release.

 

That, of course, occurred at the time that television was beginning to take hold as well as a number of cities seeing a migration to the suburbs which reduced the regular audiences from the downtown movie theaters.

 

As with many social changes and large corporations, the movie studios didn't grasp the changes as quickly as they should have and when they did, they went with ideas based on consumer habits from the 1930s and the war years when people were regularly going to the movies and not fully understanding the shifts that were taking place with the audiences they were trying to reach.

'

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I'm surprised that none of the major studios got more involved into television production when tv was still in its early stages. My question; were there any legal roadblocks that kept the movie industry from being more directly involved in television production, or what prevented a major studio (Paramount, for example) from actually starting their own tv network?

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The Paramount decision had precluded the studios from continuing to own movie theatres, and thereby discouraged vertical integration. Studio ownership of TV networks would have been horizontal integration, which seems to be a different animal. But maybe the implication of the Paramount decision was that any integration would be frowned upon.

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Hi mrroberts,

 

I'm not sure there were legal impediments to the studios getting into TV. Like with the theater business, the key was either own your own string of TV stations throughout the country, or go into syndication. The radio networks like CBS, NBC and ABC were better positioned to acquire stations throughout the country, often upgrading their existing radio station facilities to TV stations. Also, the movie studio majors may not have had the excess capital to acquire TV outlets in the early boom days of television. That plus their recently court ordered divestiture of their theater chains might have given them cold feet about acquiring a string of TV stations, the fear that they might be forced to sell those in an anti-trust suit must have loomed on their minds.

 

Still, many movie industry players did go into syndication. A great many 1950's TV shows were created and produced by motion picture subsidiaries. One notable example was the case of Desiderio (Desi) Arnaz and Lucille Ball, who purchased RKO studios. The *I Love Lucy* show was produced by their Desilu subsidiary and shot on the old RKO facilities, using 35mm film cameras. The product was sold for syndication to a network. It was definitely the way to go. To this day, Hollywood film production companies show little interest in acquiring TV stations.

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>To this day, Hollywood film production companies show little interest in acquiring TV stations.

 

Movie studios, however, have acquired them in the last twenty years:

 

Walt Disney Studios own ABC as well as a number of cable networks.

 

Time-Warner owns HBO and the Turner channels, TBS, TNT and TCM.

 

Paramount via Viacom owns CBS and Showtime

 

20th Century Fox owns Fox Broadcasting and the various cable networks associated with Fox including Fox Movie Channel, FX and FXX.

 

Universal is owned by NBC-Comcast which controls Universal, NBC and their various cable networks.

 

To a lesser degree, Sony appears to own the SonyHD channel and MGM appears to own the MGMHD channel.

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That's the conglomerate approach, of a holding company buying whatever subsidiary it wants. The motion picture producing arms are themselves but subsidiaries of a larger holding company. That acquisition business model came later, but in the early 50's- the studios avoided direct acquisition. Even today, those conglomerates preserve the old radio network derived subsidiary owner, buying the network itself instead of directly starting their own local stations.

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ThelmaTodd:

 

I agree with your well laid out explanations for the demise of the studio system, except for one minor point......which is your first point of your first post here. While I would agree that the creation of UA was a portent of things to come, I would not say that it was the first serious crack in the studio system, insofar as said system was barely in it's formative phase itself. It would not be fully developed until the late 20s and the 30s. Rather, I'd characterize the UA model as a.competing paradigm, which developed side by side with the emerging studio system, but whose influence would not come into it's own until the late 40a and especially the 1950a and beyond, until the unraveling of the studio system, of which it had a hand.

 

PS.....the tipping point in the rise of the artists, vis a vis the studio system at mid century, was the rise of MCA and the like, brokering deals on behalf of James Stewart,.etc. with Percentage participation deals that made beaucoup bucks for the artists, and further weakened the weakening studio system.

 

Edited by: Arturo on Oct 31, 2013 5:45 PM

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>>In the wake of the decision, the studios had to divest themselves of their exhibition venues. Affected by the decision were Paramount, RKO Radio Pictures, Inc., Loew's, 20th Century-Fox Film Corporation, Columbia Pictures Corporation, Universal-International and Warner Bros.

 

While they were affected, it should be noted that neither Columbia nor Universal owned a theater chain. In this way, the change for them was beneficial as it was a more equal playing field when it came to bookings.

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Hi James,

 

I think a big part of the answer to your question can be seen when the interminable ending screen credits roll in a contemporary film. You will notice that they are a combination of individual names (people) along with a lot of companies that provide the many services that a film company uses.

 

When an individual name with no company affiliation is mentioned, chances are that they negotiated a personal deal for their involvement, most likely through an agent. (This may not be true for all of them though) How much such a person gets paid depends of course on where they stand in the totem pole of usefulness to the overall effort. Stars of course are on top and it goes down the line from there. Whether the person gets 1099'd or not is probably taken up by their agent in negotiations with the producer. Some individuals have formed their own corporations, into which their earnings get funneled.

 

The uncredited no-name participants are probably employees of a firm contracted to work for the film. One example is the ancient *Biograph Studios*, which once employed Chaplin. It's still around and kicking in the business, providing grip services and other set support. You see many of their people on a film shoot, wearing black company t-shirts with the classic "Biograph" logo. Some employees of these contracting firms may get screen credit. You do see "key grip" and "assistant grip" get credits for example.

 

One service provider whose contribution is valued or damned by the production company are the food service vendor and chefs! Production people work very long hours, sometimes 14-16 hrs a day, and they want and expect good chow! (Most people don't realise just what a physically grueling business it is; not just the long, long hours, but lengthy exposure to all kinds of weather for outdoor shoots.) Gotta keep up your strength and morale! As an extra, I was very, very well fed! (Extra special gourmet fare is available to the director, stars, and other high ups) The food vendor company gets credit for sure, and often the head chef gets individual mention too.

 

Extras, at least for location shoots outside of Hollywood, are non-union and are employed (w-2'd) by an extra casting agency that contracts with the film production company.

 

Two things people in the business are hungry for: "points" and screen credit. All of these are matters of delicate negotiation. Points are the real bonanza and can provide the recipient with years of income stream after the production is over, as the film goes to foreign market, video and cable syndication. Points are the real dividing line in the business between those who seriously matter vs. those who are easily replaceable employees or contractors. If you qualify for points, you already have an agent, accountant and an attorney. Whether you are going to be 1099'd or not is not going to be your main concern! You let other people worry about that stuff!

 

Edited by: ThelmaTodd on Oct 31, 2013 7:39 PM

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>Today, are the 'worker bees' responsible for making a movie self-employed contractors (e.g. they get a 1099 per movie) or are they employees of a company (or various companies)?

 

A bit of both. Today, depending on the production company and the money, some production staff is carried on the payrolls and they go from project to project with the production company.

 

Once a production company works out a deal and a budget, then they are able to hire the rest of the crew and any cast that hasn't previously committed to the film to get the deal done.

 

Still, many are self-employed contractors who go from job to job billing on a bi-weekly basis, getting paid and then receive 1099s (for tax purposes) at the end of January for the various films they worked on throughout the year.

 

And others are union members such as cinematographers and editors who are usually on the film longer than most of the actual production crew. They are usually requested by the producer or director and are usually paid by the production company as a regular employee.

 

Television production is a bit different because series are usually in production for about ten months (July to April, usually) if they get an order for a full series and many of them are paid by the studio or production company on a bi-weekly basis for the length of the series with time off in May and June when production is on hiatus.

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>To this day, Hollywood film production companies show little interest in acquiring TV stations.

>Movie studios, however, have acquired them in the last twenty years: ...Paramount via Viacom owns CBS and Showtime...

 

This is a fascinating overall topic.

 

Just to fill in a little more of the history, the reason that film studios have recently acquired TV networks, etc., is that the Federal Communications Commission eliminated its financial interest and syndication ("fin-syn") rules in 1995. These rules, originally adopted in 1970, prohibited TV networks from owning an interest in the programs that they aired (see http://en.wikipedia.org/wiki/Financial_Interest_and_Syndication_Rules).

 

The saga of CBS, Desilu, and Paramount provides an example of what happened in Hollywood because of the fin-syn rules. Prior to the fin-syn rules, networks could produce and/or own TV shows. The CBS network, for example, bought "I Love Lucy" and other Desilu shows from Desilu in the early 60s, and CBS Films then syndicated them for a number of years. When the fin-syn rules were adopted, however, CBS could no longer own syndicated TV shows and had to spin off CBS Films, creating Viacom as a separate company. (Baby boomers will remember the Viacom logo that ended many TV reruns in the 70s and 80s.)

 

Meanwhile, Lucille Ball, the primary owner of the Desilu studio after her divorce from Desi Arnaz, sold Desilu (including the old RKO lot, which Desilu then owned) to Gulf & Western, which owned the Paramount Studio. In the early 90s, Viacom (owner of the Desilu film/TV library) bought Paramount (owner of the Desilu production company, which had become Paramount Television), thereby reuniting the pieces of the old Desilu.

 

In 1995, the FCC repealed the fin-syn restrictions on networks owning TV programs, so networks were free to get into TV production and could again own programs and syndicate or air them. This change brought things full circle with Viacom and CBS, because Viacom/Paramount then merged with its original corporate parent, CBS, in the late 90s. Several years later, however, Viacom split into two companies, separating many of the original CBS assets from the Paramount studio, thereby reversing much of the Viacom/CBS merger. (Thanks to Wikipedia for much of this information -- I think I've gotten everything straight.)

 

So, it was a change in federal regulations that led to the recent combining of Hollywood studios with TV networks.

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That whole CBS/Viacom/Paramount/Desilu story is incredible, isn't it? It's also a valid indication of just how much has changed through the years as media companies have become smaller in number but greater in potential influence.

 

Group W Productions and King World figure into that melange of mergers also, I sure wish that I had kept that King World stock that I bought as an IPO. Not that I didn't make a few dollars on it, but that was my entry into the stock market. My wife at the time was calling me every time the stock dropped 1/8 of a point, so we sold it, split the profit and from then on no longer invested together.

 

Another interesting media story, but less complicated is that of Disney and ABC. When the three networks were all trying to interest Walt Disney in the early 50s, it was the lowly ranked ABC that managed to secure the deal. The tie-breaker was that ABC fronted Walt the money so that he could realize his dream of an amusement park in Annaheim, CA.

 

It was the park and the ones that followed in its success that kept the company afloat in the lean years after Walt's passing and eventually, Disney bought ABC from Cap Cities.

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