WEBVTT - Movies, Theaters and Streaming 0:00:04.400 --> 0:00:07.800 Welcome to Tech Stuff, a production from I Heart Radio. 0:00:12.520 --> 0:00:15.640 Hey there, and welcome to tech Stuff. I'm your host, 0:00:15.800 --> 0:00:19.160 Jonathan Strickland. I'm an executive producer with I Heart Radio 0:00:19.200 --> 0:00:21.759 and I love all things tech. And a while back, 0:00:22.160 --> 0:00:24.920 I did some episodes in which I mentioned off hand 0:00:25.079 --> 0:00:28.880 a Supreme Court decision in the United States that laid 0:00:28.880 --> 0:00:31.360 down the law when it came to movie studios and 0:00:31.480 --> 0:00:34.640 theater chains. And lately I've been thinking about this again 0:00:34.800 --> 0:00:38.680 as we see movie studio has become part of much larger, 0:00:38.840 --> 0:00:43.800 multibillion dollar communications companies. And then when I decided to 0:00:43.800 --> 0:00:46.559 do this episode, I found to my surprise that the 0:00:46.560 --> 0:00:50.520 Supreme Court decision from decades ago, like eighty years ago, 0:00:51.040 --> 0:00:54.840 was dissolved earlier in and somehow I had never even 0:00:54.920 --> 0:00:57.480 heard about it. So today I want to talk about 0:00:57.520 --> 0:01:02.800 the production and distribution side of entertainment, specifically when it 0:01:02.840 --> 0:01:08.200 comes to motion pictures. This discussion involves technology, politics, and business, 0:01:08.200 --> 0:01:10.400 and it also ties into other stuff that we've talked 0:01:10.440 --> 0:01:14.080 about in recent episodes, like the problem with anti competitive 0:01:14.120 --> 0:01:18.640 practices and monopolies. So let's get started by going back 0:01:18.680 --> 0:01:22.720 to the early days of film and theaters. Films have 0:01:23.040 --> 0:01:28.960 always been a convergence of technology, business, and art. Sometimes 0:01:29.000 --> 0:01:32.320 one or two of those three points might be emphasized 0:01:32.360 --> 0:01:36.119 more than another. So for example, you might argue that 0:01:36.319 --> 0:01:40.080 a big budget action film could lean heavily on business 0:01:40.160 --> 0:01:43.399 and tech, but maybe go a little light on the 0:01:43.600 --> 0:01:46.160 art part of the triangle. Or you might have a 0:01:46.200 --> 0:01:49.440 really low budget arthouse film that's really heavy on the 0:01:49.560 --> 0:01:52.360 art and kind of light on the tech, and you 0:01:52.400 --> 0:01:54.880 wonder who the heck even agreed to fund the thing 0:01:54.920 --> 0:01:57.920 in the first place. But I think generally speaking, most 0:01:57.960 --> 0:02:01.720 movies have these three factors, and on measure, we're going 0:02:01.760 --> 0:02:05.160 to leave art out of this, as it is subjective 0:02:05.280 --> 0:02:08.280 and up to the interpretation of each person. There's probably 0:02:08.280 --> 0:02:12.160 someone out there who objects to me dismissing most big 0:02:12.200 --> 0:02:15.520 budget action films, for example. But the tech and business 0:02:15.520 --> 0:02:19.200 sides are woven together in a really snug way. For 0:02:19.280 --> 0:02:22.640 one thing, if you invent a technology, you have the 0:02:22.639 --> 0:02:27.400 opportunity to file for a patent describing how that technology works. 0:02:28.000 --> 0:02:31.839 Patents are useful because they provide you some protection for 0:02:31.880 --> 0:02:34.720 your idea. On the one hand, you have to spell 0:02:34.720 --> 0:02:38.560 out how your invention works, at least on a high level, 0:02:39.040 --> 0:02:41.320 and you do that in a document that the patent 0:02:41.360 --> 0:02:44.480 office makes available to anyone who wants to see how 0:02:44.480 --> 0:02:48.040 that technology works. But on the other hand, in return 0:02:48.240 --> 0:02:52.119 for agreeing to have your ideas publicly available, you get 0:02:52.160 --> 0:02:55.680 protection for those ideas. If someone else tries to make 0:02:55.760 --> 0:02:59.480 a you know, whatever it is you made without your permission, 0:02:59.840 --> 0:03:03.320 you can file a lawsuit for patent infringement, and if 0:03:03.360 --> 0:03:07.120 you can prove that they in fact violated your patent 0:03:07.560 --> 0:03:11.680 by creating a competing product based on your design, a 0:03:11.760 --> 0:03:15.240 court can make them stop and perhaps award you compensation, 0:03:15.720 --> 0:03:18.600 which would be paid by the accused, assuming that they 0:03:18.680 --> 0:03:21.840 can pay it now. One of the important things about 0:03:21.880 --> 0:03:26.520 patents is that they expire, and once they do, anyone 0:03:26.800 --> 0:03:30.560 can make a technology based off that patent without having 0:03:30.560 --> 0:03:33.280 to get the permission from the patent holder. Because the 0:03:33.280 --> 0:03:37.120 patent itself has expired, it's in the public domain. So 0:03:37.640 --> 0:03:40.280 a patent grants you a limited amount of time to 0:03:40.640 --> 0:03:44.680 profit from your ideas. At that time, you can do 0:03:44.760 --> 0:03:47.560 so without the fear of someone else swooping in and 0:03:47.680 --> 0:03:52.200 using your ideas without your permission, and you can grant permission. 0:03:52.320 --> 0:03:55.120 Typically we see that in the form of licensing agreements. 0:03:55.640 --> 0:03:59.119 So you come up with a really cool technology. Someone says, hey, 0:03:59.320 --> 0:04:02.320 I would love to use that how much And the 0:04:02.360 --> 0:04:04.320 two of you come to an agreement on how much 0:04:04.360 --> 0:04:06.720 money they pay you in return for being able to 0:04:06.840 --> 0:04:10.080 use your patented technology. At least that's how it's supposed 0:04:10.120 --> 0:04:14.720 to work. The alternative to patents is just keeping your 0:04:14.720 --> 0:04:18.480 technology as hidden and secret as possible. This would be 0:04:18.560 --> 0:04:22.120 the trade secret strategy. It's it's one you don't want 0:04:22.160 --> 0:04:25.280 to share because it would give up a competitive edge 0:04:25.560 --> 0:04:28.719 in whatever market you're working in. The danger with trade 0:04:28.760 --> 0:04:31.680 secrets is that if someone susses out how you made 0:04:31.720 --> 0:04:35.000 your technology, if they reverse engineer it, you don't really 0:04:35.000 --> 0:04:38.160 have any protection against them copying you. If I make 0:04:38.160 --> 0:04:40.760 I'll watch him a jig, and I don't patent any 0:04:40.800 --> 0:04:43.159 of my designs, and you figure out how it all works, 0:04:43.560 --> 0:04:45.360 you can make your own watch him a jig, and 0:04:45.480 --> 0:04:47.839 I'm out of luck. Really now. The reason I even 0:04:47.839 --> 0:04:51.240 bring this up is that, in the early early days 0:04:51.240 --> 0:04:54.240 of film, and we're talking like nineteen o eight, a 0:04:54.320 --> 0:04:58.800 group of motion picture companies, some of the most you know, 0:04:58.839 --> 0:05:01.360 some of the earliest ones in the assistance along with 0:05:01.680 --> 0:05:05.240 Eastman Kodak, which was the chief supplier of film stock 0:05:05.760 --> 0:05:08.279 because this was you know, when films were actually shot 0:05:08.320 --> 0:05:12.279 on film. And then a film distributor named George Klein 0:05:12.720 --> 0:05:16.120 all banded together to create an organization called the Motion 0:05:16.279 --> 0:05:21.159 Picture Parent Company or mp PC. This was out of 0:05:21.200 --> 0:05:24.919 necessity because one member of that company, that would be 0:05:24.920 --> 0:05:29.479 the Edison Manufacturing Company named after Yes, Thomas Edison, was 0:05:29.600 --> 0:05:33.200 making life really difficult for the other companies. See Thomas 0:05:33.320 --> 0:05:36.120 Edison was famous for a few different things. One was 0:05:36.279 --> 0:05:41.400 inventing stuff. Two was being a really shrewd businessman. Three 0:05:41.480 --> 0:05:43.880 was that he built up a company that he filled 0:05:43.920 --> 0:05:48.640 with engineers who invented stuff too, and when they patented 0:05:48.720 --> 0:05:51.360 those inventions, Thomas hays and always made sure his name 0:05:51.400 --> 0:05:54.000 was also on the patents, which is part of why 0:05:54.040 --> 0:05:56.839 he has so many hundreds and hundreds of patents to 0:05:56.960 --> 0:06:01.120 his name. And four he was fierce you protective of 0:06:01.200 --> 0:06:05.440 his patented technology. If he suspected that some other company 0:06:05.640 --> 0:06:09.080 was making use of his patented tech without a proper license, 0:06:09.480 --> 0:06:14.080 he would file lawsuits, lots of them. Well. The other 0:06:14.160 --> 0:06:18.000 members of what would become the Motion Picture Parent Company 0:06:18.080 --> 0:06:21.000 were film studios that Edison had kind of sued on 0:06:21.120 --> 0:06:24.520 multiple occasions and really The purpose of this new entity 0:06:24.640 --> 0:06:28.320 was to work out some licensing agreements to pool patents together, 0:06:29.000 --> 0:06:32.880 so that way, when it came to stuff like film cameras, projectors, 0:06:32.960 --> 0:06:36.760 and the various processes used in making movies on a 0:06:36.839 --> 0:06:41.599 technical level, there was this agreement. Now, there was also 0:06:41.680 --> 0:06:46.039 a holdout company called Biograph. That company had its own 0:06:46.160 --> 0:06:49.960 camera technology that didn't sit well with Edison because he 0:06:50.040 --> 0:06:53.720 wanted to have the corner on that market. So Edison 0:06:53.800 --> 0:06:56.640 was really hoping he could push them out of business. 0:06:57.160 --> 0:07:00.760 But Biograph wisely went and purchased the rights to another 0:07:01.040 --> 0:07:04.719 key patent in the film process, which gave the company 0:07:04.839 --> 0:07:08.320 enough leverage to force its way into mp PC as well. 0:07:08.880 --> 0:07:12.560 So there were a lot of strange bedfellows, I guess 0:07:12.560 --> 0:07:15.760 you could call them now. Before the mp PC, the 0:07:15.800 --> 0:07:18.920 standard procedure between studios and theaters went something like this. 0:07:19.360 --> 0:07:22.680 A theater owner would decide which films they wanted to 0:07:22.720 --> 0:07:26.360 play in their theater, and they would purchase a film print, 0:07:26.760 --> 0:07:29.560 So in other words, they would purchase a copy of 0:07:29.720 --> 0:07:34.080 a film from a studio uh and the studio would 0:07:34.120 --> 0:07:38.280 make copies from a master and then sell the copies 0:07:38.280 --> 0:07:40.920 to theaters, and then the theaters would just hold on 0:07:41.000 --> 0:07:43.720 to that copy because they had purchased it, or they 0:07:43.800 --> 0:07:46.520 might just you know, throw it away if they didn't 0:07:46.520 --> 0:07:49.160 hold onto it, but it was theirs. But the mp 0:07:49.320 --> 0:07:53.360 PC would change that. They switched it to a rental agreement. 0:07:53.440 --> 0:07:56.160 So now theaters would pay a certain amount of money 0:07:56.200 --> 0:07:58.600 to get a copy of a film for a set 0:07:58.640 --> 0:08:01.000 amount of time. After that set amount of time, they 0:08:01.000 --> 0:08:04.160 would have to return the copy or they would have 0:08:04.160 --> 0:08:06.920 to rent it again. And this gives studios a bit 0:08:07.000 --> 0:08:10.440 more quality control over film prints because they could dispose 0:08:10.560 --> 0:08:12.560 of any prints that had a lot of wear and 0:08:12.600 --> 0:08:15.280 tear on them. And you know, films, the physical medium, 0:08:15.280 --> 0:08:17.320 it does wear down over time, so that this was 0:08:17.360 --> 0:08:20.320 important and it was good business because it meant that, 0:08:20.440 --> 0:08:24.320 you know, audiences wouldn't associate a particular studio with poor 0:08:24.400 --> 0:08:27.280 quality film. If in fact that copy was starting to 0:08:27.320 --> 0:08:29.360 break down, they could swap it out for something new. 0:08:30.040 --> 0:08:33.520 The mp PC was also a trust or you know, 0:08:33.559 --> 0:08:37.720 a monopoly. Eastman Kodak held the rights to produce film stock, 0:08:38.200 --> 0:08:41.960 and other companies could license that technology from Kodak, or 0:08:42.360 --> 0:08:44.440 you could have someone try and come up with a 0:08:44.440 --> 0:08:47.920 total alternative to Kodak film and the typical film stock, 0:08:48.400 --> 0:08:50.160 but that would also mean you would have to have 0:08:50.200 --> 0:08:53.079 an alternative form of camera and a projector as well, 0:08:53.120 --> 0:08:55.839 so that was not, you know, a small task. So 0:08:56.040 --> 0:08:58.920 the mp PC set it up where Kodak would only 0:08:59.000 --> 0:09:02.679 sell film stock to the companies that were inside the 0:09:02.800 --> 0:09:07.240 mp PC. The trust also held the camera and projector rights, 0:09:07.360 --> 0:09:09.320 and so all of this meant that anyone who wanted 0:09:09.320 --> 0:09:12.560 to get into the filmmaking side of business had to 0:09:12.559 --> 0:09:15.720 be a part of the mp PC, or they would 0:09:15.760 --> 0:09:18.920 have no legal means to get hold of the equipment 0:09:18.960 --> 0:09:21.640 and film that they needed to make movies. But as 0:09:21.640 --> 0:09:25.880 I mentioned earlier, patents expire, and by nineteen thirteen, the 0:09:26.040 --> 0:09:30.319 mp PC no longer had the cudgel of patent infringement 0:09:30.400 --> 0:09:35.280 lawsuits to knockdown competitors. In addition, the mp PC was 0:09:35.440 --> 0:09:38.280 located on the east coast of the United States in 0:09:38.360 --> 0:09:43.480 New Jersey, that's Thomas Edison's stomping Grounds, and several upstart 0:09:43.559 --> 0:09:47.240 motion picture companies would set up operations way out west 0:09:47.280 --> 0:09:51.240 in the world of Hollywood Land, which made it mighty 0:09:51.320 --> 0:09:55.360 inconvenient to investigate the possibility of patent infringement and hanky panky. 0:09:55.640 --> 0:09:57.480 So that's on the on the other side of the nation. 0:09:57.559 --> 0:10:00.520 And and then the death blow came. The United States 0:10:00.559 --> 0:10:05.040 government brought an antitrust lawsuit against the mp PC in 0:10:05.160 --> 0:10:08.960 nineteen fifteen. The government claimed that the actions that the 0:10:09.000 --> 0:10:12.920 company had taken were anti competitive and it wasn't just 0:10:13.080 --> 0:10:15.240 the actions of a company trying to protect its own 0:10:15.280 --> 0:10:19.040 intellectual property, and as a result, the mp PC would 0:10:19.080 --> 0:10:21.679 dissolve just a couple of years later. So that's our 0:10:21.679 --> 0:10:25.640 first example of a monopolistic strategy in the film distribution world, 0:10:25.760 --> 0:10:28.360 and it won't buy any stretch be the last one. 0:10:28.760 --> 0:10:31.760 The law of the U. S Government enforced against the 0:10:31.920 --> 0:10:35.600 mp PC is called the Sherman Act. It's one of 0:10:35.640 --> 0:10:39.400 the foundational antitrust laws in the United States, and in fact, 0:10:39.400 --> 0:10:41.560 it was passed all the way back in eighteen ninety 0:10:41.640 --> 0:10:43.800 is part of an effort to deal with issues stemming 0:10:43.800 --> 0:10:48.200 from powerful monopolies and cartel's, largely in industries like steel 0:10:48.400 --> 0:10:52.760 and railroad, among a few others. The government found that 0:10:53.080 --> 0:10:55.840 mp PC was in violation of Section one of the 0:10:55.840 --> 0:11:00.120 Sherman Act, and that section states that quote, every contract 0:11:00.280 --> 0:11:03.840 combination in the form of trust or otherwise, or conspiracy 0:11:03.920 --> 0:11:07.400 in restraint of trade or commerce among the several states 0:11:07.520 --> 0:11:11.680 or with foreign nations is declared to be illegal. End quote. 0:11:12.280 --> 0:11:14.040 Section two of the Sherman Act is the part that 0:11:14.080 --> 0:11:18.040 really prohibits the monopolization of interstate trade or commerce and 0:11:18.640 --> 0:11:21.800 makes it a felony to to do so. While mp 0:11:21.800 --> 0:11:26.120 PC was crumbling, a new movie studio Powerhouse was taking shape. 0:11:26.559 --> 0:11:28.640 And someday I'm going to have to do a full 0:11:28.840 --> 0:11:32.559 episode on this company because it has a fascinating and 0:11:33.040 --> 0:11:36.160 important history. But it all started off with the merger 0:11:36.240 --> 0:11:40.680 of two other companies. First was the Famous Players Film Company, 0:11:40.920 --> 0:11:44.800 which in itself was originally called Famous Players in Famous 0:11:44.840 --> 0:11:47.679 Plays the early days of films sometimes referred to movies 0:11:47.720 --> 0:11:51.560 as plays. And second was the Feature Play Company, which 0:11:51.600 --> 0:11:54.840 was founded by a guy named Jesse L. Laski, and 0:11:54.880 --> 0:11:59.320 the merged company would become Famous Players Last Key Company. UH. 0:11:59.400 --> 0:12:02.559 It would later on merge with a film distribution company 0:12:02.720 --> 0:12:07.200 with the more familiar name of Paramount Pictures Corporation. Along 0:12:07.240 --> 0:12:10.920 the way, the organization acquired several more independent film companies, 0:12:10.960 --> 0:12:12.920 and it would lead to an approach and filmmaking and 0:12:12.920 --> 0:12:16.320 distribution that would become a big headache for the industry 0:12:16.400 --> 0:12:19.280 and the United States government down the line, and the 0:12:19.320 --> 0:12:22.960 actual merger process was actually a really sneaky one. So 0:12:23.040 --> 0:12:27.000 you got Adolph Zukor, he's the founder of Famous Players 0:12:27.160 --> 0:12:30.679 Film Company, and then Jesse Laski, and they both entered 0:12:30.679 --> 0:12:34.840 into distribution deals with Paramount Pictures Corporations. So originally this 0:12:34.960 --> 0:12:38.760 wasn't you know, a merger, that was just a business deal. 0:12:39.520 --> 0:12:43.240 And the guy who founded the Paramount Pictures Corporation was 0:12:43.320 --> 0:12:47.679 William Wadsworth Hodkinson, and he was serving the president as 0:12:47.679 --> 0:12:51.320 president of the company. But then Laski and Zuker thought, hey, 0:12:51.360 --> 0:12:54.439 you know, if we were able to distribute our own movies, 0:12:55.160 --> 0:12:57.959 we wouldn't have to share revenues with a distributor. It 0:12:58.000 --> 0:13:01.120 would all be our own revenue. So instead of paying 0:13:01.200 --> 0:13:05.000 this this guy to distribute our films, wouldn't it be 0:13:05.000 --> 0:13:07.640 better if we just got hold of those assets and 0:13:07.679 --> 0:13:10.160 we did it ourselves and thus got to keep all 0:13:10.200 --> 0:13:12.920 the money. So they set about doing a hostile takeover. 0:13:13.080 --> 0:13:15.240 This is what we would call it in the hades. 0:13:15.679 --> 0:13:19.160 And sometimes I see Hodgkinson listed as a founder of 0:13:19.200 --> 0:13:22.640 the movie studio Paramount Pictures Corporation, and it is true. 0:13:22.679 --> 0:13:26.079 He founded the distribution side of the company, but he 0:13:26.240 --> 0:13:29.240 was not involved with it as a movie studio. Because 0:13:29.400 --> 0:13:33.520 Laski and Zooker bought enough shares to influence the board 0:13:33.559 --> 0:13:38.040 of directors of Paramount Pictures to have Hodginson ousted as president, 0:13:38.720 --> 0:13:42.000 then they were able to buy the company because they 0:13:42.080 --> 0:13:44.880 essentially had the board of directors in their pocket. So 0:13:44.920 --> 0:13:47.680 they said, hey, board of directors, wouldn't it be cool 0:13:47.720 --> 0:13:50.040 if we bought your company? And they said, yes, because 0:13:50.200 --> 0:13:53.880 you own us. And so they brought Paramount Pictures under 0:13:53.880 --> 0:13:56.960 the fold and they made this a true force and 0:13:57.000 --> 0:13:58.840 film and like I said, I have to do a 0:13:58.840 --> 0:14:02.680 full episode or maybe two, maybe three about Paramounts history 0:14:02.679 --> 0:14:04.680 and movies because it really did shape the way the 0:14:04.720 --> 0:14:09.160 film industry works today. Around this time, the various film studios, 0:14:09.160 --> 0:14:12.600 including the future Paramount Pictures, began to create what we 0:14:12.679 --> 0:14:17.400 call the studio system. This system would lockdown film production 0:14:17.520 --> 0:14:21.440 in various ways. For example, studios would engage directors and 0:14:21.520 --> 0:14:26.800 performers and others into long term contracts, so the filmmakers 0:14:26.800 --> 0:14:29.520 and stars wouldn't be full time employees of the studio 0:14:29.560 --> 0:14:33.000 per se, but they would be locked down to exclusive agreements, 0:14:33.040 --> 0:14:35.160 and so certain actors would only be found in a 0:14:35.200 --> 0:14:40.080 particular movie studios films Rudolph Valentino and Gloria Swanson were 0:14:40.120 --> 0:14:45.200 two actors exclusive to famous players Laski. For example, Sometimes 0:14:45.520 --> 0:14:48.760 a studio would negotiate with another studio and they would 0:14:48.760 --> 0:14:51.680 allow one of their stars or directors to work for 0:14:51.760 --> 0:14:54.400 another studio in exchange for a trade of you know, 0:14:54.440 --> 0:14:58.200 perceived equivalent value. But for the most part, people were 0:14:58.200 --> 0:15:02.040 stuck working for a single student video until their contract expired, 0:15:02.520 --> 0:15:05.040 and that would end up being a big part of 0:15:05.040 --> 0:15:07.760 the problem as it would give the creators in Hollywood 0:15:07.800 --> 0:15:10.680 a lot less opportunity to pursue their best deals while 0:15:10.760 --> 0:15:13.880 under contract. So there might be a part that an 0:15:13.920 --> 0:15:16.600 actor would have been perfect for, they just never would 0:15:16.600 --> 0:15:18.840 have had the opportunity to do it because they would 0:15:18.840 --> 0:15:21.840 have been locked in with a competing studio. Now, the 0:15:21.880 --> 0:15:24.680 second big part of the studio system was the vertical 0:15:24.760 --> 0:15:28.640 integration approach. So we can think of there being three 0:15:28.680 --> 0:15:32.080 major components in the film industry. There are producers. There's 0:15:32.160 --> 0:15:36.160 the studios that actually you know, make films. There are distributors. 0:15:36.320 --> 0:15:38.440 These are the companies that arranged for prints of a 0:15:38.440 --> 0:15:41.280 film to go to theaters. And then there are the 0:15:41.320 --> 0:15:45.000 exhibitors or the theaters themselves. And then you've also got 0:15:45.040 --> 0:15:48.440 you know, other parties involved, like film stock companies like Kodak, 0:15:48.840 --> 0:15:52.080 which play a part two. But the producers, distributors and 0:15:52.280 --> 0:15:55.400 exhibitors are what we're really focusing on. In the eyes 0:15:55.440 --> 0:15:58.040 of the government. These three groups were meant to be 0:15:58.560 --> 0:16:02.440 separate from one another, but Famous Players Last Sky changed 0:16:02.440 --> 0:16:06.240 this by going with a vertical integration approach. With the 0:16:06.320 --> 0:16:10.080 sniping of Paramount Pictures Corporation, Zukor and Laski checked off 0:16:10.120 --> 0:16:13.280 the distribution box, and they also began to buy up 0:16:13.400 --> 0:16:17.640 theaters in various markets. This activity attracted the attention of 0:16:17.680 --> 0:16:21.520 the US Federal Trade Commission, or FTC in the early 0:16:21.640 --> 0:16:27.800 nineteen twenties. In the FTC charged the company with conspiracy 0:16:27.880 --> 0:16:32.200 and restraint of trade, essentially arguing that the company was 0:16:32.320 --> 0:16:35.120 violating the Sherman Act. When we come back from break, 0:16:35.280 --> 0:16:38.480 we'll talk about how that unfolded, how the Great Depression 0:16:38.640 --> 0:16:42.520 complicated matters, how a movie trade organization would become part 0:16:42.560 --> 0:16:45.240 of this mess, and how things would get a whole 0:16:45.280 --> 0:16:56.600 lot worse. But first, let's take a quick break among 0:16:56.640 --> 0:17:00.240 the problems that the FTC found with Famous Players Last Ski, 0:17:00.480 --> 0:17:03.520 and I should point out that other studios were doing 0:17:03.560 --> 0:17:08.320 the same thing. Were some industry strategies that were particularly unfair. 0:17:08.960 --> 0:17:12.240 One was called block booking, and here's how it would work. 0:17:12.800 --> 0:17:17.760 Studios were locking down stars in these long term contracts. 0:17:17.800 --> 0:17:20.000 So audiences would begin to fall in love with some 0:17:20.080 --> 0:17:23.639 of these stars, and they wanted to see the pictures 0:17:23.680 --> 0:17:26.760 the movies that these stars were in. Theater owners would 0:17:26.760 --> 0:17:29.280 want to run films with those stars in them in 0:17:29.400 --> 0:17:32.639 order to attract crowds and sell tickets. And so the 0:17:32.720 --> 0:17:36.440 movie studios who controlled the stars would say to the 0:17:36.440 --> 0:17:40.760 theater owners, Okay, I'll lease to you a print of 0:17:40.800 --> 0:17:43.320 this film with the stars that you want in it, 0:17:43.720 --> 0:17:47.600 but in return, you also have to promise to rent 0:17:47.640 --> 0:17:51.000 and exhibit these dozen other movies starring folks that nobody 0:17:51.040 --> 0:17:53.800 really cares about. Otherwise you don't get the good stuff. 0:17:54.160 --> 0:17:57.200 And when I say dozen, that's not an exaggeration. In fact, 0:17:57.400 --> 0:17:59.760 some block booking would be up to a hundred and 0:18:00.000 --> 0:18:03.560 four films, which was a year's worth of movies in 0:18:03.640 --> 0:18:07.200 one go. And this practice is called block booking. Theater 0:18:07.240 --> 0:18:10.679 owners were being pushed to rent out entire blocks of 0:18:10.760 --> 0:18:14.240 films if they wanted to exhibit an anticipated film in 0:18:14.320 --> 0:18:17.600 their theaters, so it was saying, if you want this one, 0:18:17.640 --> 0:18:21.200 you also have to take all these other ones. In addition, 0:18:21.359 --> 0:18:24.200 block booking would affect the variety of movies that theater 0:18:24.280 --> 0:18:26.840 owners could show. If you're running a theater that has 0:18:26.840 --> 0:18:29.879 a single screen, as many theaters had back in the 0:18:29.920 --> 0:18:33.000 early days, there are really only so many different movies 0:18:33.040 --> 0:18:36.320 you can exhibit in a week, and if your agreement 0:18:36.359 --> 0:18:39.240 with Studio A means you have to take you know, 0:18:39.359 --> 0:18:42.320 a dozen or more of their films, that might be 0:18:42.440 --> 0:18:46.480 all you can show. You could presumably pay the studios 0:18:46.520 --> 0:18:50.080 for all these movies but not actually show them, and 0:18:50.160 --> 0:18:53.840 opt instead to also deal with Studio B. But then 0:18:53.880 --> 0:18:56.560 you're wasting money, right because you're spending money to rent 0:18:56.560 --> 0:19:00.880 out blocks of films that you never show, you only 0:19:00.880 --> 0:19:03.680 show a couple of them. That makes it much harder 0:19:03.720 --> 0:19:06.159 to make your money back as an exhibitor, and the 0:19:06.200 --> 0:19:09.320 exhibitors were over a barrel on this one, as were 0:19:09.359 --> 0:19:11.879 the directors and stars. In fact, you could argue that 0:19:11.920 --> 0:19:14.800 the only party to really benefit from this arrangement would 0:19:14.840 --> 0:19:18.960 be the studios. Another practice the FDC found questionable was 0:19:19.000 --> 0:19:23.280 called blind booking or sometimes called pre selling. So with 0:19:23.359 --> 0:19:26.439 this approach, theaters would agree to pay studios up front 0:19:26.840 --> 0:19:29.960 to rent film prints of movies that hadn't even been 0:19:30.000 --> 0:19:33.840 made yet, and these could often be lumped in with 0:19:33.880 --> 0:19:37.200 the block booking. So you might get a deal where 0:19:37.240 --> 0:19:40.359 you're dealing with Paramount, for example, and Baramount tells you, 0:19:40.359 --> 0:19:42.639 all right, we'll give you will We'll let you rent 0:19:42.680 --> 0:19:44.960 this one film, but you have to agree to rent 0:19:45.000 --> 0:19:47.919 these one and three other movies, and a lot of 0:19:47.920 --> 0:19:51.280 them haven't even been shot yet. If you have watched 0:19:51.320 --> 0:19:53.639 a movie about the Golden Age of Hollywood, you may 0:19:53.640 --> 0:19:56.399 have seen some sort of parody of this, where you know, 0:19:56.440 --> 0:19:59.320 a film has its director and its cast, and maybe 0:19:59.320 --> 0:20:02.520 even has a ooster for the movie, but the film 0:20:02.560 --> 0:20:05.280 doesn't have a script and no one has shot a 0:20:05.359 --> 0:20:09.639 foot of film yet. Barton Fink has a scene that 0:20:09.800 --> 0:20:12.639 specifically sends this up. Well, that kind of stuff was 0:20:12.680 --> 0:20:16.400 actually happening, and again exhibitors were being pressured to play 0:20:16.440 --> 0:20:18.880 ball and pay up without a chance to even see 0:20:18.920 --> 0:20:21.199 the film first, often because there was no film to 0:20:21.400 --> 0:20:24.240 see if they hope to get the movies that their 0:20:24.240 --> 0:20:26.879 customers were willing to pay for. And as I mentioned, 0:20:26.880 --> 0:20:31.520 earlier studios were also buying up theaters or building theaters 0:20:31.560 --> 0:20:35.320 of their own. The FTC alleged that famous players last 0:20:35.359 --> 0:20:37.960 Kie had even gone so far as to lean heavily 0:20:38.119 --> 0:20:41.560 on a theater owner to sell their movies to or 0:20:41.600 --> 0:20:44.320 to rent their movies too, and if they encountered resistance, 0:20:44.359 --> 0:20:46.920 they would threaten to open up a competing movie house 0:20:47.200 --> 0:20:51.000 in a nearby location, like literally across the street. And 0:20:51.040 --> 0:20:54.040 then after opening up the competition, the studio would undercut 0:20:54.080 --> 0:20:57.679 the prices of the competing theater and would sell tickets 0:20:57.680 --> 0:21:01.040 at a huge loss just to attract customers away from 0:21:01.119 --> 0:21:04.760 the theater owner that had shown resistance and hopefully forced 0:21:04.800 --> 0:21:06.720 them to go out of business as a result. So 0:21:06.760 --> 0:21:10.040 it's a very cutthroat way of doing business. Lumping the 0:21:09.920 --> 0:21:13.480 theaters under studio ownership gave studios even more control of 0:21:13.480 --> 0:21:17.520 which films would play in various regions. Studios could block 0:21:17.560 --> 0:21:20.600 a theater from exhibiting a film from a rival studio. 0:21:21.000 --> 0:21:23.879 The vertical integration was creating a real stranglehold on the 0:21:24.040 --> 0:21:27.640 entire process, and the average American customer had fewer options 0:21:27.680 --> 0:21:29.679 to buy a ticket to the films they really wanted 0:21:29.720 --> 0:21:33.520 to see, so then the FTC comes in and says, hey, 0:21:33.240 --> 0:21:36.760 this doesn't seem fair. It appears that Famous Players Last 0:21:36.840 --> 0:21:39.560 Key is engaged with some anti competitive practices meant to 0:21:39.600 --> 0:21:43.440 restrict other companies from doing business in the film industry. 0:21:43.480 --> 0:21:46.240 But the FTC's pursuit of a judgment against the company 0:21:46.320 --> 0:21:49.960 would take, let's call it, a leisurely path. It wasn't 0:21:50.040 --> 0:21:53.240 until the summer of nineteen twenty seven. Keep in mind, 0:21:53.480 --> 0:21:59.359 this investigation began in the one. It wasn't until that 0:21:59.400 --> 0:22:01.920 the courts a warded the FTCs call for a cease 0:22:01.920 --> 0:22:06.000 and desist order against Famous Players Last Key for practices 0:22:06.080 --> 0:22:08.600 like block booking, and a call for the company to 0:22:08.600 --> 0:22:12.280 stop purchasing theaters. The court ordered Famous Players Last Key 0:22:12.359 --> 0:22:16.000 to comply within sixty days of the judgment or otherwise 0:22:16.040 --> 0:22:18.840 produce a darn good excuse as to why it had 0:22:18.920 --> 0:22:22.320 not yet done so, and the company played for time 0:22:22.400 --> 0:22:26.840 they asked for, and they received extensions on this judgment twice. 0:22:27.520 --> 0:22:31.600 Then in nine, when the stalled tactics were at an end, 0:22:31.920 --> 0:22:34.600 the company claimed it wasn't really guilty of the charges 0:22:34.720 --> 0:22:36.840 after all, at least not the way they had been 0:22:36.960 --> 0:22:40.040 framed in the court case. That did not sit well 0:22:40.080 --> 0:22:42.879 with the f TC, and in the meantime, the Commission 0:22:42.960 --> 0:22:46.600 was expanding its investigations into the movie industry at large, 0:22:46.920 --> 0:22:49.600 with the Famous Players Last Key case at the heart 0:22:49.640 --> 0:22:53.000 of it. The FTC began to escalate its charges against 0:22:53.040 --> 0:22:56.560 movie studios and going for a more direct antitrust case. 0:22:57.280 --> 0:23:00.760 This would ultimately rise to the Supreme Court. The Supreme 0:23:00.760 --> 0:23:04.120 Court would ultimately decide that the practice of block booking 0:23:04.280 --> 0:23:08.400 was inherently anti competitive and thus would be illegal under 0:23:08.400 --> 0:23:11.720 the Sherman Act, and that studios that practice block booking 0:23:11.720 --> 0:23:16.080 would be subject to criminal proceedings and fines. However, at 0:23:16.119 --> 0:23:18.520 the same time, the United States was dealing with the 0:23:18.600 --> 0:23:22.320 Great Depression, which began in October of nineteen twenty nine 0:23:22.760 --> 0:23:25.760 with the stock market crash, and then it got worse 0:23:25.840 --> 0:23:30.159