The Business of Movies
From the very beginning, the movie industry was controlled by patents and lawsuits. Thomas Edison, an inventor of early cameras and projectors, and a savvy business man, was quick to patent his inventions. By 1897 he found himself defending his work against his chief rival, the American Mutoscope and Biograph Company, whose products were engineered differently than Edison's and merited their own patents. Edison continued to sue competitors without success.
Competition between the companies grew so fierce that it was draining the major players' resources and distracting them from their businesses. Edison, Biograph, Vitagraph and several other companies finally decided to join efforts, and in 1908 the Motion Picture Patents Company was formed. This new company, known as "The Trust," quickly became a monopoly, issuing licenses for patented equipment to a small group of just ten producers.
Eastman Kodak supplied most of the industry's film stock at the time. The company made a deal with the Trust to supply film only to Trust members. Such exclusive agreements existed in every aspect of the industry, and meant that companies outside the Trust had extremely limited access to resources. Independent producers ambitious enough to compete with the Trust headed away from New York, to places like Cuba, Florida, and Los Angeles. Southern California, with its warm climate and cheap labor, proved to be an ideal setting for filmmaking, and it was not long before Hollywood was established.
200 Reels a Week
At the time, business was booming. Motion picture profits soared as audiences grew larger and larger. The simple, silent films had grown into an art form. Directors devised new techniques that were impossible to replicate on stage. Sets became more and more elaborate, and scripts were adapted to better suit film acting. By 1913, Hollywood film crews were working non-stop to crank out 200 reels a week.
Director D.W. Griffith was a leader in artistic innovation and technique, advancing the industry with his work. For much of his career he worked at Biograph, which gave him all the benefits intrinsic to the trust. But he was so much of a star himself that he had a certain independence, and he would later break away from Biograph to join with three prominent actors to form United Artists, an unprecedented creative alliance that shifted the rules of the movie business.
Film Distribution Methods
During the period the Trust was active, from 1908 to 1915, there were two methods of distributing films. The most common system for the nationwide release of short films was "States Rights." Film producers sold a print of the film to a local salesperson for regional distribution to theatres until the film literally fell apart. For feature length films, the "Road Show" release was the most lucrative. Formal agreements were made between producers and theatre owners for features to be shown at glamorous theaters with high ticket prices. But this often meant the audiences were smaller and there were fewer screenings. Many filmmakers chose to use a combination of the two methods to maximize profits. D. W. Griffith's Birth of a Nation was first a Road Show release, but was circulated through States Rights. The dual method approach could keep a film at the top of the box office charts for several years.
A New System
The Trust dissolved in 1915, ruled a monopoly in violation of trade policies by the U.S. government. Its dissolution set the wheels in motion for a completely new method of distributing feature length films. Businessman William Hodkinson came up with the idea of arranging for the distributor to cover production costs in exchange for exclusive rights to a completed film. The distributor would claim 35 percent of the film's gross, and the producers the remaining 65 percent. The system was beneficial to both parties, with better quality films for distributors s and higher profits for producers. Hodkinson's system was so effective that its founding principles serve as the basis for Hollywood's current method of distribution.
With audiences demanding more movies and filmmakers busy producing them, businesspeople recognized the income potential in film exhibition. Entrepreneurs opened small theaters everywhere. Some of the exhibition halls were makeshift, with chairs set up in an empty room and the film projected onto a sheet. When film marketers began targeting the middle and upper classes, they erected much more inviting "Picture Palaces."
As distribution companies increased their influence by merging, theater owners realized that they too, could benefit from consolidation. What began as scattered, impromptu businesses, soon transformed into an organized chain of exhibition halls. Loew's is one of the first established theater chains still in existence.
There was clearly money to be made in the new industry, and a few prominent stars had the clout to take full advantage of their celebrity. As one of the top Hollywood stars and one of the industry's toughest negotiators. Mary Pickford was in a position to make a lot of money. Audiences filled theaters to see her and sent letters to film companies wanting to know more about "the girl with the golden curls." Pickford, with her mother's help, took full advantage of her popularity.
Climbing the Ladder
With a beginning salary of $50 ($929 in 2003 dollars) a week at Biograph, Mary soon demanded $100 a week because of her growing popularity. In 1910 and 1911, Mary moved from Biograph to IMP to Majestic where she commanded an impressive $225 a week (over $4,100 in 2003 dollars). She continued to move from company to company, incrementally increasing her salary. In 1916, Mary went to work for Adolph Zukor's Famous Players. When she first signed with Zukor, Mary earned $25,000 ($422,025 in 2003 dollars) a year. Just three years later, she got $500,000 ($5,318,000 in 2003 dollars) and her own production unit where she shared creative control with Zukor.
The Founding of United Artists
Pickford's ambition, both artistic and financial, led her to the formation of United Artists. In 1919, Pickford, Douglas Fairbanks, Charlie chaplin. and D.W. Griffith launched their own company. The partners would have full control over their films, financing, producing, and distributing them themselves. At first the business world reacted with disdain; "the lunatics have taken charge of the asylum," said Richard Rowland, the president of Metro Pictures. The first few years were tough, as Pickford and Fairbanks struggled to bring in new films and make enough of their own films to carry the company. However, they persevered and the famous company logo continues to light up movie screens.
As of 2002, movie box office receipts totaled $9.3 billion, putting the film industry among the top in the world. While some early innovators did not recognize its potential, film has unlocked a wealth of possibility and unlimited business opportunity.