Boom to Bust
Boom to Bust
81928-1929: Bullish in Hollywood
Boom to Bust
The End of the "New Era"
Sound Effects: Studio Strategies
Try Wall Street. That's headquarters for suckers.
Banker inOn with the Show, Released in June 1929
The transition to sound straddled a watershed in American economic history. The rush to expand business by heavy borrowing and investing created unprecedented growth. Boom times gave the film industry the money for expansion. The collapse of the banking system in 1929-1930 and the onset of the Depression years tested the mettle of the most sophisticated managers. Most industries were affected; many businesses failed. Motion pictures were no different. During the early 1930s all the studios went through varying degrees of reorganization and retrenchment, and several entered involuntary receivership. The coming of sound and the change in Hollywood's fortunes after the Crash of 1929 are inextricably linked. This chapter will give only brief before-and-after snapshots of Hollywood's transition within a growing, then shrinking, economy and discuss the part that sound played in those changes.
As Hollywood capitalized to install sound, build up-to-date stages, and expand its picture-palace outlets, its own way of doing business was influenced by external big business practices. Whether this trend affected the production of specific films is debatable; what is more likely is that it introduced the principles of accountability, efficiency, and "scientific management" that business leaders were espousing in the 1920s. An infusion of executives from power companies contributed to the vague notion that movies were a kind of public utility, like gas, water, and electricity. Like many good businessmen, movie leaders looked to Washington for aid in improving profits. But the national expansion needed to convert to sound, and the resulting restraint of trade also led the industry closer to infracting the antitrust laws. Though the industry tried to maintain the appearance of being depression-proof, in fact the stock market crash hit Hollywood hard, if somewhat later than it hit most other businesses. Retrenchment entailed closing unprofitable theaters, stripping away nonessential distribution services, and streamlining the Hollywood product by confining it to generic categories.
In 1930, the editor of Electronics magazine, Franklin S. Irby, attempted to express graphically the complexity of the motion-picture industry by means of a remarkable organizational chart (figure 8.1). It illustrates the new post-sound, post-Crash business environment. Octopus-like, the film industry had spread across nations and other businesses. This complex of interlocking corporate relations was the result of aggressive acquisition and defensive position-taking triggered by sound and unexpected shifts in the economic circumstances of movie consumers.
The furor over sound peaked in 1928. Maurice Kann observed that "all signs of reason seem to have been abandoned in the stampede toward sound which now prevails. Such rapidity of decision, marked as it is by a lack of complete analysis, is a sorry enough condition for the trade to face."1 In its synopsis of 1928, Film Daily Year Book reported difficulty that theaters experienced in keeping up with the change:
July was proving a heyday for the wired houses, and conversely, the unwired ones were fighting with their backs to the wall. With all attention being centered on sound films, unwired houses were hard hit. Silent films were not being given proper attention, from several standpoints, notably exploitation. Frenzied efforts were being made to provide a synchronizer within reach of the little fellow's pocketbook. Many exhibitors were installing non-synchronous equipment, figuring mechanical music and sound effects would put over their shows, but their patrons were demanding talkers. Uncertainty and confusion were the result. (Film Daily Year Book 1929, p. 499)
As business conservatives, the Big Five producers expected to track demand without overinvesting in hardware. Taking a lesson from factory management techniques, the studios aimed to rationalize production. Examples might be the stringent divisions of labor that managers instituted in the late 1920s, or the detailed budget analysis and accounting procedures used by all the producers. The models for these operations were borrowed from chain stores—whose outlets were thought to be analogous to movie theaters—and from electric utilities, perhaps because they too "distributed" an intangible product to the masses, and because their investments were also sensitive to interest rates. Balio and Gomery have shown, however, that rationalization was more of an ideal than a reality, and that good business practices in other industries did not always work in Hollywood.2 Changes in management, the effects of the Depression on the studios' gross revenues, exhibitor resistance, and especially the fickle taste of the audience—going wild for one cycle of films, then suddenly switching to another—all tended to make the movie business unpredictable. To cope with sound, the producers had to find ways to integrate it into the existing institutional framework, expanding just enough to hold the box-office line, but not too much.
The Washington Connection
Because film was an important growth industry, and because of its glamour and cultural cachet, the film moguls found friends in politics and the Republican White House. Calvin Coolidge was invited to appear in several talking newsreels, the most famous of which was Fox's Movietone record of Lindbergh's reception in Washington. After Herbert Hoover was elected in November 1928, things looked even rosier for the movie moguls. Hoover had been secretary of commerce since 1921, sitting on Harding's cabinet beside Will H. Hays, who had been postmaster general. Hoover had been keenly interested in radio and the movies and was receptive to the industry's needs. When Hays left the cabinet to head the Motion Picture Producers and Distributors Association (MPPDA), he worked with the Commerce Department to establish a special motion picture division.
Hoover was philosophically disposed toward cooperation among businesses and encouraged the associationist movement that typified American capitalism in the twenties.3 This idea encouraged businesses to band together to regulate competition and share the market in the name of efficiency and limiting "wasteful" competition. Associationism was part of a pervasive philosophy of business, exemplified by a shift away from agrarian values and individual enterprise and toward social association. The historians Thomas C. Cochran and William Miller note that "American business, under the leadership of international corporations, interstate trade associations, national chambers of commerce, and 'booster' organizations, had already become much more cooperative than competitive, much more social than individualistic." Hoover's FTC had become "a research organization to discover ways in which business managers could cooperate more successfully. The Federal Trade Commission had originally been formed to check violations of the Clayton Antitrust Act. Under business pressures it became an instrument for rationalizing such violations."4 The task of enforcing antitrust laws fell to the Justice Department, which administered them selectively, subject to all kinds of political influence.
The explosive expansion of the film industry in 1927-1929 was set against this background. Easy money flowed into the studios from consumers financing their leisure time on revolving credit plans and from brokers, banks, and big corporations eager to issue initial public offerings of movie company stock, float bonds, and give outright loans secured by the ever-growing chains of theaters and the rapidly appreciating land beneath them. The studios were awash with cash, credit, real estate, and stock equity. Studios were able to rebuild their physical plant for making films and to bid for movie chains in which to show them. The expense of sound conversion was immense, but so was the payoff. Will Hays reported to the U.S. Chamber of Commerce that it cost 22.5 percent more to run the film business in 1929 than it did in 1928. Even with this extra overhead, film company profits for the fiscal year ending 30 September surpassed those for 1928 by a wide margin; the Wall Street News attributed these returns to talking pictures.5 Kann compared the consolidations and huge gains for the big chain theaters to Woolworth's stores, which had a similar rise in profits of 25-125 percent over the same period in 1928.6 These profits funded the studios' ventures into experimental technologies, like color, widescreen, television, and, of course, sound.
Herbert Hoovers nomination, acceptance, and inauguration were media events. In Washington, in January 1929, broadcasters jostled with five sound newsreel trucks. President Hoover displayed a revitalized interest in motion pictures, and the film industry responded warmly, eager to reap federal favors. Hoover's friend Louis B. Mayer had introduced the president to William Randolph Hearst and the California clique after the 1924 election and chaired the Republican Party in California. Mayer exemplified the 1920s businessman-lobbyist.
William Miller, The Age of Enterprise: A Social History of Industrial America [New York: Macmillan, 1942; reprint, New York: Harper & Row, 1961], p. 324">
Since America's economy had become dependent to a large extent upon new consumers' goods industries and the success of these industries depended upon good public relations, it is not surprising that businessmen sought increasing social control. And since their "prosperity" won for them the confidence of a large part of the population, they became more than ever before the fountainheads of American ideas and the arbiters of American morality. (Thomas C. Cochran and William Miller, The Age of Enterprise: A Social History of Industrial America [New York: Macmillan, 1942; reprint, New York: Harper & Row, 1961], p. 324)
Mayer was among the first guests to stay in the White House and had the president's ear when Fox took over Loew's, Mayer's parent company. It has been assumed (though not proven) that the Justice Department suit against Fox was in recognition of Mayer's loyalty.
On 9 May 1929, the White House screening room was wired for sound. Hoover asked Hays to select and install the apparatus. (He chose Western Electric.) Film Daily reported (a bit coyly perhaps?) that "both the President and Mrs. Hoover are very fond of pictures, but have seen few other than newsreels, which are shown two nights a week." Fox's The Valiant (1928), starring Paul Muni, became in June the first talkie feature screened in the White House. Exhibitors also played the Washington game. Coolidge's FTC chair, Abram F. Myers, became the new head of the Allied States Association, a powerful exhibitors' organization. It represented the independents and rivaled the Motion Picture Theater Owners of America (MPTOA), which represented the affiliated chains.7 His connections in the Department of Justice transformed Allied States into a powerful check against the studio oligopoly.8
Producers and exhibitors had good reasons to cultivate federal commendation. The mergers and acquisitions of the late 1920s, made in part out of a desire to corner the sound market, had triggered investigations into Hollywood's monopolies and marketing schemes. Hoover's new attorney general, William DeWitt Mitchell, in an American Bar Association speech, vowed to enforce the antitrust laws. He singled out his predecessor's lackadaisical attitude toward Hollywood for attack. Specifically, he began investigating Fox and Warner Bros. for possible violations of the Clayton Antitrust Act. (Fox would pay the consequences in 1931, but the Warners suit was dismissed in 1934.)9 Mitchell's offensive coincided with the post-Crash downturn in the economy, so the era of merger mania dried up anyway for lack of capital.
One way to cope with risk is to share it. The various self-protective associations worked well to defuse whatever threat sound may have represented. David Bordwell has shown how the producers banded together to exploit mutually their combined power to resist trade unionization, cosponsor research on incandescent lighting, and utilize the Producers-Technicians Committee of the Academy of Motion Picture Arts and Sciences (AMPAS) to carry out research and standardize practices. Discourses about "art" and "quality" (and events like awards ceremonies) enhanced the public's perception of the social and aesthetic value of Hollywood's products.10 One could add as associationist examples the Five-Cornered Agreement, the creation of the Central Casting Corporation, the studios' support of ERPF's music-licensing department, and reciprocal agreements by competing distributors to book each other's films into their chains. Such arrangements were not magnanimous expressions of brotherhood, of course. They were founded on hardheaded business practices intended to limit the access of independents to the benefits of oligopoly. The coming of sound was precisely the kind of rocking of the boat that strategic planning and cooperative action were designed to control. The industry in general used the "threat" of sound to centralize and solidify its academy, its associations, and its distribution practices.
The Academy grew more assertive. In 1930 AMPAS used funds donated by the MPPDA to pursue its technical research through activities such as "sound schools." The first one was attended by 550 film workers. Sharing production secrets disseminated knowledge, but it also forwarded the goals of the Academy by standardizing the product and softening any competitive edge that one company might gain in technology." Members of guild organizations—for example, the American Society of Cinematographers (incorporated in 1919)—as well as independent workers, writers, composers, and technicians migrated freely and shared knowledge among studios.
The Hays Office lobbied strongly and successfully on behalf of its members. The organization is best known for its Code of Ethics on Production and Advertising, which the industry adopted in December 1930. But the office was effective in many other ways. Will Hays, for instance, presided over the Paris conference on world sound patents. And he helped in little ways, as when he petitioned the Interstate Commerce Commission to lower express shipping rates on movie discs. In May 1930, the producers united behind the MPPDA to declare a moratorium on widescreen systems until a uniform standard could be adopted, replaying their approach to sound three years earlier.12 Hays maintained cordial relations with the Academy as well as the Association of Motion Picture Producers (AMPP) (founded in 1924). The latter group sought to improve public relations, but it also owned the important Central Casting Corporation, which placed extras in the films of all producers.13
The exhibition sector had its own associations and its share of collusive practices. Publix and Warner Bros., for example, declared that they would stop buying houses in each other's territory and would show and promote each other's product. Warners and First National films were booked reciprocally into the Fox and Loew's circuits. Universal, which had shed most of its theaters, booked its features into RKO's first-run houses and the Warner-Stanley chain. United Artists ran its films in all Warner Bros., Publix, and Loew's theaters. The Columbia lineup would play in Warner Bros. houses. Of course, cooperation had its limits. The compatibility issue was briefly resuscitated when Warners insisted that all films have disc recordings to play in its chains, even if that required making a new sound track.14 It quickly backed down. Another dissonant note sounded when Joseph Schenck discontinued showing United Artists pictures in Fox West Coast theaters because of a dispute over rental fees.15 The artists said they would rather show their films in tents and armories than in Wesco theaters. But aside from these exceptions, the noncompetitive exhibition arrangements are a good example of how the majors attempted to maximize profits for all through cooperation, while making it more difficult for independents to play on a level field.16
The Justice Department continued to target these and similar cooperative strategies. Slowly small cracks appeared in the motion picture industry's monopoly. For example, in November 1930, the Supreme Court upheld a judgment against the Hays Office, the Film Boards of Trade, and ten distributors, finding that part of the studios' standard exhibition contract violated the Sherman Antitrust Act.17
Wall Street, according to Variety's historic headline, laid an egg on 29 October. Until then, the year 1929 had been one long boom. In February a commentator noted that "interest in the stock market, which the public is going in for heavily these days is seen as a contributing factor in the strong box office draw being shown by The Wolf of Wall Street ."18 In "Vast Movie Crowds Key to Prosperity," the New York Times reported long lines at theaters in August, usually the dead month. The writer surmised that, in addition to the presentation acts, air cooling, and "audible film," it was "increased national prosperity" that undoubtedly attracted crowds.19 These articles reflect the prevailing sense of affluence. Although paychecks were low, Americans could collateralize to borrow cash, which could be used for such things as stock-picking on margin, taking the family to the movies, and generally making whoopee (having fun). John Kenneth Galbraith, however, in his classic study of the Crash, maintains that "the long accepted explanation that credit was easy and so people were impelled to borrow money to buy common stocks on margin is obviously nonsense." He attributes the sudden decline in value in part to psychological factors. "Far more important than rate of interest and the supply of credit is the mood. Speculation on a large scale requires a pervasive sense of confidence and optimism and conviction that ordinary people were meant to be rich."20 Recent analysts have attributed complex causes to the Crash. According to Ned Davis, the 1921-1929 mega-bull run happened when "basically, a revolution in industry caused dramatic productivity gains and therefore booming earnings, thus capturing the fancy of the public investor."21 Perhaps the mushrooming picture palaces—temples of opulence and conspicuous consumption—and the rapid diffusion of technologically sophisticated distractions, such as the talkies, contributed to the feeling that the New Era really was here to stay.
Margin calls and forced selling dissipated the dream and led to the market meltdowns of 24 and 29 October. The public's infatuation with stock speculation ended abruptly. Jack Alicoate wrote that three out of every five businessmen in the film industry had been hurt. But he also viewed the Crash as a temporary slowdown. Merger talks and financing might be delayed. He pointed out confidently that the movie industry had suffered fewer losses than most big industries, including transportation, oil, steel, chain stores, and utilities.22 This was optimistic. Although it has been reported that motion pictures were not immediately hurt in the downturn, a look at the ticker shows otherwise. After the Crash, the New York Times industrial index fell from a September high of 469.49 to 220.95 in the November trough, down about 53 percent. Film-related stocks seemed to have fared only scarcely better—and several did quite a bit worse.
|9 September 1929||13 November 1929||Percentage down|
|Amer. Tel. & Tel.||304.00||197.25||35.1|
Analysts urged calm, predicting the market would bounce back. The motion picture trade also looked for silver linings as film stocks tracked the broad market's descent. Alicoate declared immediately that the market was on an even keel. "Hard times and even panics do not affect desire of American public for clean amusement at cheap prices. This fact alone makes picture stocks of our big established companies as fine an investment as can be had." The next month he wrote, "One thing is certain, this so-called slowing up of business has not hurt this industry and is not likely to."23 Will Hays assured the U.S. Chamber of Commerce that employment and wages would be even higher than the banner year of 1929 and predicted "still further substantial increase in the attendance."24
Meanwhile, New York's mayor, James J. Walker, did his bit. The morning after Black Tuesday, his office telephoned the city's theater managers. Would they please show optimistic pictures as a "means to counteract the depression caused by the crash?"25 Soon "depression" would take on new meaning.
The Depression Bogey
The Standard Statistics Company confirmed that even with the fourth-quarter shock, 1929 had been one of the best years ever for motion pictures. Profits increased 160.6 percent over 1928. Standard also reported that the three groups with increased profits in the last quarter of 1929 were films, electrical equipment, and food products. The analysts continued, "The average depreciation in motion picture stocks was less than the decrease in such basic industries as foods, automobiles, motor equipment, rubber, leather, chain stores, mail order and others. The 1929 market crash undoubtedly killed what might have been a bull movement in film stocks as a result of the sensational success of talkers." The first quarter of 1930 showed an aggregate increase of 85.4 percent by the six top theater and film companies—compared to an 18.5 percent drop by the index of 306 industrial companies (the forerunner of the Standard & Poor's 500 index). Thus, the amusement business headed their list of "depression-proof" industries.26
The advisers of Engerleider & Company assured investors that the movie business was not likely to suffer from the general recession. They repeated a familiar palliative: "The motion-picture-going habit is so deeply rooted in the American public that even in times of business depression theater attendance is little affected." The stock analysts at Theodore Prince & Company also declared that the film industry was now a safe investment and rated motion picture stocks a buy. This optimism was buoyed by company profit reports for 1929. Paramount's were 78 percent higher than in 1928. RCA made $2 million instead of losing money.27
The Wall Street Journal was not too bothered by reports of an attendance decline, which was more than usual for the season but did not foretell a drastic decrease:
Movies are an American habit and now that more people than ever have been drawn to the picture houses by sound, any sharp falling off in attendance is unlikely. … Sound has enabled the film producers to offer better amusement in the form of Broadway talent heretofore unavailable to the great mass of the public.
… While the advent of sound pictures entailed large initial capital expense for soundstages and equipment of theaters, the actual cost of making sound films is no larger than that of silent films and is probably less in many cases. A picture with dialogue must be more carefully planned and there is no filming of expensive scenes to be eliminated later. Also much more work is done in the studios where organization is better instead of on location where daily expenses for maintaining a large company is [sic] enormous. (Film Daily, 9 June 1930, p. 6)
But even as this was being written, owners were reporting big drops in theater patronage. Nevertheless, Jack Alicoate philosophized:
The lowest ebb is the turn of the tide. Sane economists and close business observers agree that we are at or about the little junction called the "Turning Point" and from now on the business road should be smoother. Soon business will be booming again and the cares of today will be forgotten in the progress of tomorrow. Clean wholesome amusement is as necessary to the world as food and clothing. (Film Daily, 15 July 1930, p. 1)
One symbolic event stoked Alicoate's optimism. Warner Bros.' greater expansion expenses and falling revenue had raised doubts about whether it would suspend its quarterly dividend. When it was paid, there was a sigh of relief. "With attendance upward bound, good profits are just ahead for well-governed film companies. This little business may have its recessions and its occasional difficulties, like any other industry, but it is quick to rebound."28
Film executives unanimously agreed, at least in the presence of reporters. The slump was over, and it had been mild. Many promulgated a Darwinist view that strong films would drive the weaker ones from the theaters. Al Lichtman, vice president and general manager of United Artists, said,
Economics can't be blamed for inferior pictures, and the only pessimists are those with duds on their hands. … All this talk of depression really means nothing in the face of genuinely entertaining attractions. It seems to me that weak stories, lacking in punch and originality, have been at the bottom of our depression, that not enough care has been taken in preparing the picture before the cameras start turning. (Film Daily, 3 September 1930, p. 11; 28 August 1930, p. 1)
Cecil B. DeMille, filmmaker turned dilettante economist, also spoke out:
Let me say a word about "depressions." From Squaw Man  to [The] Squaw Man  I have seen about four of the gloomy periods we are now undergoing. Out of them all I have gained just one central thought and that is "depressions" are bad on bad pictures; but they never really affect good entertainment. In bad times people seek relaxation more energetically than in days of prosperity, but they shop more for their shows. You can't satisfy them with bunk. You must deliver the goods in entertainment, and if you do, good pictures have always broken records in even the worst of "panics." (Cecil B. DeMille, "Squawman," Hollywood Reporter, December 1930, quoted in Tichi Wilkerson and Marcia Borie, The Hollywood Reporter: The Golden Years [New York: Arlington House, 1984], pp. 28-29)
The people at Fox subscribed to the view that the Depression was caused by consumers not spending enough. Movietone released a short to stimulate recovery. Its little parable showed a Mr. Courage telling Mr. Fear to spend an extra dollar a week. A narrator "urges the public to shake off the fear and overcaution that is mostly to blame for the depression."29
Sam Katz tried a psychological tactic and issued orders to his Publix personnel to join in a war against the "depression bogey." He declared, "Theaters are directed to see that a note of joy, happiness and optimism is injected into all parts of every program and advertising." Alicoate applauded: '"Bad times' often are nothing more than bad mental conditions, gloomy exaggerations of natural cycles in affairs. Putting the public mind in a healthy state by filling it with cheer and assurance is one of the surest methods of promoting 'good times.'"30
Despite these salutary words, the reality of economics crept in. One indicator was the increasing number of thieves who went after movie box offices. A particularly bold bandit took $11,000 from the till of the Broadway Paramount. But 250 other New York vicinity theaters had nothing to steal. Even as rampant closures swept the East, distributors were optimistic that "aggregate patronage" would not be affected. By late May, 700 houses had gone out of business in the metropolitan area. The theater owners' association put the best face on it. It was just as well that these "junk" theaters had been weeded out.31
Nine Chicago silent houses closed owing to competition with sound theaters. "Chief among the houses that have gone dark," Film Daily reported, "are the Monogram, Indiana and Vendome, in the Negro district, where serious unemployment has been a contributing factor." By June 1930, thirty-one more Chicago houses had closed.
Audiences would not or could not pay two dollars a ticket for "road shows" anymore, and everyday "popular prices" were lowered, at first to a maximum of fifty cents. Alicoate doubted that this was a healthy trend and pointed to radio set manufacturing as a cautionary example for exhibitors:
"Should prices be reduced?" Here is a mooted question that seems to be raging in many sections of the country…. Last year the radio folks were forced to slash prices right and left as the result of overproduction. The result was that they could hardly give sets away. Keep your attractions up to a standard and your admission price will take care of itself. (Film Daily, 15 July 1930, p. 1)
By December the price-cutting was being described as an epidemic. Thirty-five-cent admissions were not uncommon. Lower ticket prices led to even more austere retrenchment. Katz ordered "rock bottom" cost-cutting for the Publix chain. Following suit, Fox West Coast banned all billboard advertising and slashed the remaining advertising budget by 10 percent.32
One economizing measure was to drop male ushers for female usherettes because the girls worked cheaper. "The current crop of prospective usherettes is exceptionally large, owing to depression in nearly all fields of commercial activity, and the girls are willing to work for from 20 to 30 percent less than boys," laconically reported Film Daily.33
Producers embarked on retrenchment by closing the few remaining New York studios. Pathé, for example, abandoned East Coast production after completing the January 1930 schedule. Only the Metropolitan Sound Studios in Fort Lee (which serviced independents), Paramount in Astoria, and Warners' Vitaphone studio in Flatbush remained committed to New York shooting. The studios' need for Broadway-based musicals and short playlets justified the policy.34
On the West Coast, Fox consolidated by closing its old studio at Sunset Boulevard and Western Avenue and moved to its new Movietone City lot. Warners also relocated most of its Sunset Boulevard operations to Burbank, leasing out its former space to independents. (One tenant was Leon Schlesinger, whose cartoon series Warners distributed. The animators nicknamed the premises at 1123 North Bronson Avenue "Termite Terrace.") In October the ever-optimistic Film Daily saw these moves as another turning point: "Film industry companies have completed their retrenchment movements, with shakeups and cutting of forces and salaries at an end…. The industry will no doubt be enabled to make rapid and broad strides toward that talked-about era of new prosperity."35
One strategy to aid producers and exhibitors was surreptitious, anticipating what is now called product placement. In RKO's Danger Lights (1930), a new-model RCA-Victor phonograph was displayed prominently in close-up for thirty seconds in the party scene. As a cross tie-in, Victor gave a free phonograph and ten records to each RKO house that played the film, while RCA dealers plugged the show with displays in their stores. Though no money changed hands, the practice skirted the MPPDA policy that discouraged direct advertising in films. Citing verbal allusions to cigarette brands and highly visible billboards placed in movie backgrounds, in November the producers ordered a ban on all name-brand product references. They claimed that the practice amounted to free advertising and competed with their own efforts to initiate paid advertising in the guise of industrial shorts. They had another reason, however, for discouraging advertising—audience intolerance. Trailers for products were frequently greeted with catcalls by viewers. It was reported that a "commercial film" shown at the Strand prompted at least thirty people to walk out. "Many others were heard suppressing something in the nature of a groan. New Yorkers, at least, don't seem to care for commercial advertising as part of their screen bill-of-fare." In November the Fox circuit banned all advertising within its theaters. Since 1928 (the inception of the CBS network), radio had
been rapidly transformed into a sponsor-subsidized form; providing ostensibly advertising-free entertainment was part of the film industry's attempt to differentiate itself from radio by cultivating an aura of quality and public service.36
The following account shows how the major studios dealt with the need to adapt hastily to sound production, then to cope with the changing external demands of the Depression. The trends before the Crash were: changes in the infrastructure, acquisition of music rights, technological competition, and building up production in New York and Hollywood. After 1930 the studios cut back budgets, downsized, and focused on turning out product that would add to the bottom line.
Warner Bros./First National
Warner Bros. matched its technological innovation with a voracious appetite for theaters. Based on the cash flow from Vitaphone, the financial guru Waddill Catchings encountered little difficulty raising money on the promise of even greater future earnings. In September 1928, he put together a deal to acquire the 270-theater Stanley chain. In another lightning move, Warners acquired the St. Louis Skouras chain and appointed Spyros Skouras head of the suddenly huge Warner theater empire.37 Warners also gained Stanley's controlling interest in First National.
First National was the earliest of the major filmmakers to commit publicly to a sound system. President Clifford Hawley announced in April 1928 that the company would adopt a system called Firnatone. Having no sound facilities or expertise of its own, First National had hired the Victor Talking Machine Company, which had cross-licensed its music rights in exchange for ERPI's recording license agreement, thus permitting Victor to enter the movie sound-track business as a freelance provider. Licensed from Western Electric and installed by ERPI, Firnatone was a disc recording system identical in every respect except its name to Vitaphone. ERPI and Victor technicians traveled to the Burbank studios to decide which First National properties would be most amenable to the Firnatone treatment.38 They determined that La Tosca was the most promising project and started planning a talking version with Billie Dove. But executives felt otherwise. Hawley wanted Colleen Moore's next production, Lilac Time, to premiere with dialogue, but Moore, on the advice of her husband, manager, and First National producer John McCormick, vetoed the idea. Nathaniel Shilkret recorded the music in June at the Victor studios in Camden, New Jersey, while a crew visited the Philadelphia Navy Yard to record the sounds of planes and machine guns.39 But Joseph Kennedy took over First National, Hawley was out, and so was his sound system. When the film premiered at the Carthay Circle in Los Angeles with a Photophone track, it was not successful. The effects were judged by the Herald to be "not entirely in hand." The Los Angeles Times agreed: "Photophone, with which Lilac Time is synchronized, was not effective at all times last night. Certain sequences produced an almost deafening roar, even taking it for granted that seven aeroplanes combined can stir up quite a lot of racket."40 For its general release, this and all other First National films were distributed with discs.
Kennedy had not been able to pull the organization together, and his ruthless costcutting had devastated morale. Two weeks after he quit as First National's financial consultant, Warners paid $3.8 million for a controlling interest in the franchise.41 The deal gave Warner Bros. a place at the table with the other big producers, distributors, and exhibitors. It also gained the extensive First National production facility in Burbank, California, which was built beginning in 1922.42 Although still legally autonomous, Warners and First National studios thenceforth functioned as one, with Jack Warner in charge.
The two companies' foreign offices were merged in January 1929. The stages on the Burbank lot were completely refurbished, giving First National all-dialogue production capacity by March. Previously, sound films made at Burbank were recorded by sending the signal over telephone lines to Vitaphone equipment at the Sunset Boulevard lot. After the October stock market crash put William Fox, a minority partner in First National, in desperate straits, Warners bought out his 36 percent. According to the terms of purchase, the First National brand had to continue to be used. It was a good deal for Warners. The worldwide First National exchange allowed Warners to compete with the big distributors. And the studio acquired significant performer contracts, for example, those of Richard Barthelmess, Douglas Fairbanks, Jr., Loretta Young, Billie Dove, and Constance Bennett.
The studio's strong balance sheet led to more bold expansion moves. In January, Warners bought M. Witmark and Sons, a major music publisher. That summer it picked up Dreyfus, Harms, and five others to form the Music Publishers Holding Company. This move was a carefully strategized plan to control all of its own film music, and perhaps that of other producers as well. It was also a salvo aimed at ERPI. The agreement with the Music Publishers Protective Association (MPPA) that enabled ERPI to sublicense compositions was about to expire. Instead of having to pay royalties through ERPI, Warners could now simply buy the publishers. The music historians Russell Sanjek and David Sanjek conclude that "Warner Brothers' purchase of the Witmark business and the impending deal to buy all of the Dreyfus music holdings clearly indicated that they intended to pull the MPPA down." When the ERPI contract expired, instead of dealing with a cartel of publishers, film companies would have to deal with a Warner subsidiary.43 In 1930, Warners bought Brunswick-Balke-Collender, a diversified music, phonograph, and entertainment company, for $11 million. The package included radio and phonograph patents as well as record-manufacturing plants and recording studios around the world. The plan enabled Warner Bros. to press its own records, effecting savings for both its Vitaphone operation and its consumer music libraries. The deal did not include the Brunswick bowling and billiard equipment business. Although Harry Warner later said this omission was a mistake, it made sense at the time, indicating the company's desire to restrict its diversification to the field of "electrical" entertainment.44
Controlling music was essential in 1928—1929 because musicals and talkies were almost synonymous. The studio clearly believed that monopolizing access to music was a way to dominate film sound. In Burbank the composers physically displaced the writers—a move that clearly indicated music was in the air:
In a big office building on the First National/Vitaphone lot the song-writers under contract to that company have taken up their abode. Formerly the building housed only scenarists and "gag men." Now it is filled with the sound of pianos, saxophones, voices raised in song and the tap-tapping of clog dancers. It is musical headquarters. From morning to night songs are written and tried out and the dialogue scenes for "talkies" are rehearsed within these walls. (Smiling Irish Eyes souvenir program, 1929, Yranski Collection)
A look at the 1 February 1929 contract that Jack Warner signed with the composer Gus Edwards (who was working for MGM) reveals how important owning one's own music was. "If I Came Back to You and Said I'm Sorry" was written exclusively for The Gamblers (1929). Warner Bros. reserved all motion picture rights, and the studio was careful to limit further film use of its new song:
It is definitely understood, however, that no royalty whatsoever shall be payable to you upon any other form of reproduction of such song, either words or music, except upon such sheet music, and in particular, no royalties whatsoever shall be payable upon any reproduction thereof by records, sound or discs used in connection with the Vitaphone or other instrument for the synchronization of sound with pictures which may be provided with such method of reproduction. We shall in all cases be entitled to the free and exclusive use without payment of any royalty whatsoever for Vitaphone or other synchronized method of projection or other motion picture purposes, including the use of title, words, music or any portion or portions thereof. (Agreements file 1080a, Warner Bros. Collection, University of Southern California)
But Edwards's terms were potentially very lucrative for him. He received a $1,500 advance, one cent per copy from all sheet music sales (which could be substantial), and 22 percent of Warners' share of radio broadcast or phonograph record income.
The Warners' spending spree continued through the first quarter of 1929 when the brothers tried to merge with United Artists in a deal masterminded by UA's head, Joseph Schenck. Chaplin was the first of the "Artists" to balk, saying that he would rather bid out his films than relinquish control. The proposal died in May when Pickford, Fairbanks, and finally the Warner brothers themselves could not stand to give up autonomy.45
Warners rehabbed the Hollywood Vitagraph studio and added a new soundstage in Flatbush, Brooklyn. Here production of Vitaphone shorts under Bryan Foy's supervision continued at a brisk clip—more than one hundred in the first quarter of 1929.46
Mastering other technologies, analogous to controlling music publishing, was another competitive strategy. The management of Warner Bros. thought that color held the same promise as sound. The search was on throughout 1929 for a pleasing yet practical system. In February, Jack Warner announced that six color features would employ a process developed by Lee Fargue, a French inventor. This arrangement evidently did not work out, for shortly thereafter Warners signed a contract with Technicolor for fiftysix color and sound pictures (on the Warner Bros. and First National labels) to be made over the next two years. On with the Show (1929) would be first, then Sally (1929).47
Technicolor had established a lead in the color business. Like sound, color was considered a special "treatment" to be reserved for scenes of spectacle and pageantry, or used expressively, as in Paramount's Redskin (1928). Here black-and-white footage and color alternated for dramatic effect, distinguishing the monochrome East from the colorful West. A newly developed process had reduced the cost of color prints (though they were still four times higher than black-and-white) and improved their durability. Although this option did not apply to disc users, the new prints were now capable of carrying a silver optical sound track. Technicolor's two-color process reproduced only in shades of blue-green and orange-red. In August 1929, a new Hollywood plant doubled the company's capacity. Warners clearly wished that its expensive alliance with Technicolor would give it another competitive edge on the industry, as sound had done.
Chafing at its perceived abuse by ERPI—suits and countersuits were still wending through the courts—Warner Bros. bought the Nakken Patents Corporation to acquire that company's basic patents in sound-on-film, television, and a process for the "transmission of pictures and facsimile messages by wire and radio."48 Warner Bros. also openly backed an alternative sound reproduction system developed by Louis Gerard Pacent, a radio engineer. Although it too used discs, in many ways the Pacent system was superior to Vitaphone. For instance, it used no batteries, a relief from the troublesome wet cells that powered the Western Electric horns. Pacent said that its dynamic speakers with tuned baffles gave better distribution of sound. The amplifier used two channels (monaural) for superior reproduction, and one could serve as a backup if the other failed. Finally, the $2,500-3,500 price, based on a house's size, handily beat ERPI. Warner sales agents were reported to be actively pushing the system. Vitaphone issued a carefully worded statement on compatibility:
[Vitaphone] will require reproduction of its product by means of equipment which operates properly, reliably and efficiently to reproduce the same with adequate volume and quality equal to that obtained by the use of equipment supplied by Electrical Research Products, Inc. Where such satisfactory equipment is installed, The Vitaphone Corporation will, subject to its regular sales policies and then existing commitments, enter into negotiations with the exhibitor for its product. (Film Daily, 8 February 1929, p. 9)
This assured theaters that they could play Vitaphone discs on other systems—such as Pacent's—if Vitaphone approved. The orders came in, and Pacent started manufacturing 250 machines per month.
Not unexpectedly, AT&T, Western Electric, and ERPI sued Pacent for infringing on eight patents granted between 1915 and 1924. Separately, Western Electric sued the Stanley Company (as part of Warners) for installing encroaching Pacent systems. Ordinarily, just the threat of an ERPI lawsuit was sufficient to make alleged infringers capitulate, but Louis Pacent was in the extraordinary position of having Warners' backing. His lawyers won a dismissal on a technicality, but John Otterson doggedly refiled. The suit was dismissed again and appealed again until, in 1932, ERPI won.49
Despite gobbling up theaters and music publishers, investing in speculative technologies, and indirectly challenging the supremacy of AT&T and RCA in theater sound, Warners was still flush. At the end of its 1929 fiscal year, net profits for all operations were up a breathtaking 744 percent over 1928. The rental data summarized by H. Mark Glancy (see appendix 1) reveal what an extraordinary year the 1928-1929 season was for the studio: "In this early sound period Warner Bros. had broken away from its 'poverty row' image and emerged as an industry leader. One measure of its success can be seen in the fact that the average earnings figure for 1928-1929 ($973,000 [per feature]) was well above that of MGM ($808,000)."50
The year 1930 was, economically, a peak for Warner Bros. With assets of more than $230 million, it now ranked as one of the Big Five. Yet the Depression took a quick and heavy toll, and the studio would not be financially secure again for nearly twenty years.51
Warners began the year on a roll, with many ambitious plans. By February all Warner-Stanley houses were showing only sound films. Warners again affirmed its commitment to color production and announced it would begin shooting widescreen Vitascope films on 65-mm stock. Jack Warner had started an extensive renovation of the Sunset lot, the forty-acre Warner Ranch backlot, and a tripling of the Burbank studio plant to an aggregate floor space of one and a half million square feet. An upgraded Vitaphone studio in Brooklyn, under the supervision of Murray Roth, was capable of finishing six shorts a week. (Bryan Foy was transferred to Burbank in January to make features, replaced in Brooklyn by Herman Raymaker.)52
While the serious decline in revenue that began in the summer of 1930 hit Warners hard, the seeds of the studio's unmaking had been planted in its highly leveraged acquisitions and internal expansion. The debt had stretched the balance sheet thin. Furthermore, Warner Bros. had invested heavily in the musical and operetta genres. The audience spurned these films in 1930, but the notes, interest payments on bonds, and mortgage payments kept coming. Earnings for the first quarter of 1930 were $1.67 million, down 55 percent from the first quarter of 1929. In August, Harry Warner initiated extensive retrenchment and refinanced short-term debt by floating new stock. After he resisted a shareholder group which charged mismanagement and sued to put the company in receivership, the stock issue raised $17 million in capital, enabling Warner Bros. to show a net 1930 profit of $7 million.53
Instead of cutting back on quantity and increasing production value, the studio seemed to do just the opposite. Production was stepped up, and Jack Warner moved his executive offices to Burbank. Both East and West Coast studios continued to work at full speed all spring with eight productions per week. The Brooklyn Vitaphone facility was operating at full capacity: it set a new record by filming twenty shorts at a time in November 1930.54 The following year the Brooklyn studio was expanded. Space for six writers was added, and Warners acquired land next to the studio for future development.55
Warners made two important changes. The original sixteen-inch discs were replaced by lighter twelve-inch recordings, made possible by narrower grooves. And the company conceded the increasing use of optical sound. The six First National and three Warner Bros. films currently in release and all of the fall 1930-1931 season would be available with sound either on film or on disc. The Dawn Patrol (1930) and Sally (1930) were among the First National films to be distributed in both sound formats.56
Retrenchment made greater production efficiency mandatory. Before sound, the Warner and First National units normally had a fall layoff so that workers would not have to be paid. When Darryl Zanuck became general manager in 1931, the studio switched to a twelve-month schedule, eliminating the usual hiatus.57 This change was also supposed to improve quality. Under the new system, directors were to spend twelve to fourteen weeks on each script. A maximum of four films would be in production at once. The most significant change at Warners, though, was the elimination of the banks of multipie cameras shooting scenes simultaneously. Jack Warner emphasized that more preparation, with less shooting, was replacing what he called "the old mass method."58
Warners suffered huge losses throughout the 1930s but refused to go into receivership. Instead, theaters and nonproduction assets were shed, budgets and salaries were cut, and loans were refinanced. Meanwhile, the studio produced some of the most popular films of the decade.
William Fox engineered the most astonishing merger of the period. Propelled by gross annual receipts of $135 million, he edged out Warners to buy Loew's theater chain and its MGM studio subsidiary in February 1929. Corporate assets swelled to eight hundred theaters, worth around $225 million. (In addition to the Roxy in New York, the company also owned Grauman's Chinese on Hollywood Boulevard.) Fox confidently boasted that by the end of 1929 he would have one million movie seats. This was an empire built on talking; on 24 March 1929, the studio announced that it had made its last silent film.59 Fox ceased making vaudeville shorts and discontinued all New York production except for the newsreel. Though a hit with theaters and audiences, the enormous setup charge for Fox Movietone News generated a $3 million loss between 1926 and 1931.60 Work on features and shorts was concentrated at Movietone City in Westwood (in what now includes Century City). The complex grew at a tremendous rate. During the summer of 1929, thirteen new buildings costing $2 million sprawled across forty acres of the hundred-acre Fox Hills lot between Pico and Santa Monica Boulevard. Two 325-by 200-foot stages connected by sound cables were built in October 1929.
Fox was also a player in the musical craze and, to achieve its competitive edge, bought a substantial interest in the De Sylva, Brown, and Henderson firm, composers of numerous popular songs and Broadway show tunes.61 Four of their revues were running simultaneously on Broadway in 1929, and they had written the mega-hit "Sonny Boy" for Warners' Singing Fool. The three Tin Pan Alley songsmiths packed up for Hollywood to write musical comedies, the first of which was Sunny Side Up (1929).62 Fox also acquired an interest in the American Broadcasting System. In addition to music revenue, radio broadcasting would exploit Fox movies and plug Fox theaters. The models were RKO's synergistic relationship to NBC and Paramount's to CBS.63 Not content with his thousand domestic theaters, Fox added another three hundred when he bought the Gaumont British chain.
William Fox's plans for acquiring one million movie seats and conquering Hollywood unraveled precipitously on 17 July 1929. While driving in Old Westbury, Long Island, he was seriously injured and the chauffeur was killed when his Rolls Royce overturned avoiding a collision. Though the doctors promised a complete recovery, it proved to be slow. Insiders felt that some of the mogul's zeal and shrewd judgment dissipated after the accident.64
When the stock market crashed, so did William Fox's empire. He had put the MGM deal together on a $15 million loan from AT&T that would be due in the spring. He owed $6 million in notes for Gaumont. Then in November 1929, the Justice Department sued Fox for creating an illegal monopoly. The financial paroxysms continued through the first quarter of 1930. Wall Street watched as Fox lined up new debt to underwrite the old with "hourly rumors, mostly unfounded, drifting up and down the big street."65 The extent of Fox's wheeling and dealing is suggested by the length of the list of motion picture transactions he submitted to the U.S. district court—forty pages. Though complex, the crux of the problem was that $45 million in loans was due within sixty days. "The present heavy debt was incurred primarily in the acquisition of the English Gaumont circuit of theaters and in assisting Fox Theaters Corp. to acquire a substantial block of common stock of Loew's, Inc., both of which acquisitions the board of directors believes will prove to be profitable," wrote Fox's board to their shareholders. "Failure to effect such refunding before the decline in market values of securities last autumn is the immediate cause of the corporation's financial embarrassment."66
The fight for these assets pitted two powerful banking alliances against each other. Fox's coalition consisted of Bank of America/Blair & Company, Lehman Brothers, and Dillon, Read & Company. The Fox plan secured refinancing and stipulated that William Fox would resign from all his companies. Opposing the reorganization plan were the former Fox allies John Otterson (representing Western Electric/ERPI) and Harold Stuart (of Halsey, Stuart & Company). The stockholders at the annual meeting voted in favor of the Fox (Bank of America) plan. William Fox responded, "The winning of the present fight again prevents the entrance into the field of a monopoly which the telephone company was trying to establish in talking pictures as a result of certain patents they own." His optimism was misplaced. The bankruptcy court subsequently gave control to Otterson and Stuart. On 31 March, proceedings on the Fox matters were taking place in a U.S. circuit court of appeals, U.S. district court, New York state court, and the New York State Supreme Court, and pending in Brooklyn Supreme Court. Twenty-two attorneys were counted at one hearing.67
Fox settled in April 1930 by selling all his stock to a syndicate headed by General Theaters Equipment Company. Harley L. Clarke became the studio's new president. Educated at the University of Michigan and a young electric utilities capitalist, Clarke was a far cry from the founder. The deal was financed through a consortium—AT&T, Bank of America, Halsey, Stuart & Company, Lehman Brothers, and Dillon, Read & Company—with the provision that Fox and his board resign. Winfield Sheehan had spoken out against William Fox and his proposition, favoring Western Electric. As a result, he continued as vice president and general manager of the studio. Sheehan told the press, "The war is over and we're back in the amusement business." By the end of the year, facing losses and veering toward receivership, Fox sold back ten New York houses to independent exhibitors.68
Business did go on at Fox throughout the turmoil. Early in 1930 the studio was confident that the musical would continue forever and hired twenty-four songwriters and composers. Countering Warners' move to color, Sheehan laid plans for building a $1 million Fox color plant in Hollywood. In February the studio expected to make three negatives for each film in the 1930-1931 season: Grandeur widescreen, standard Movietone, and standard silent. The studio budgeted $20 million for feature production. Work was scheduled to begin on eight new soundstages at Movietone City. Among the big names contracted were the composers George and Ira Gershwin, the cartoonist Rube Goldberg, and Joseph Urban, a designer and architect.69 In retrospect, this expenditure looks extravagant for the times. But in early 1930 revenue was still pouring in from the vast theater chain. As the Depression deepened, Clarke's Fox Film Corporation would sink.
The suits against Fox Film Corporation, Fox Theaters, and William Fox charging violation of the Clayton Antitrust Act ended in 1931 when the U.S. district court ruled that the takeover of Loew's had been illegal. The court ordered Fox Film to divest all of its remaining interest in Loew's and MGM. Fox Film Corporation lost $4.2 million in 1931, in contrast to its $10 million profit in 1930. Though William Fox was no longer associated with his companies, he was personally sued by the managers of Fox Film and Fox Theaters for manipulating stock and would eventually serve time in prison for bribing a jury.70
Adolph Zukor brought Paramount's sound whiz Roy Pomeroy east in 1928 to reopen the dormant studio in Astoria, Long Island. Throughout the summer and fall he worked with Western Electric engineers to retrofit the big stage for sound production. Zukor made it clear that Astoria would be used for "certain types of stories that can best be made here in the East on account of the availability of a particular type of talent," in other words, Broadway performers. The "regular" schedule, as opposed to the eastern "stage unit" productions, would remain in Hollywood for both sound and silent production. The first Long Island sound "channel" (the term designating the recording unit) was put into operation on 16 July 1928. Production started one month later on an Eddie Cantor short. In October the first talking feature started up—The Letter, with Jeanne Eagels (released 1929).
In December the Astoria plant was enlarged.71 Pomeroy was named head of sound production, and the trades reported feelers about Paramount's starting a joint talking-picture department with MGM and United Artists.72 Paramount, despite having ERPI facilities to do all its own synchronization, farmed out Erich von Stroheim's The Wedding March (1928) to Pat Powers, who recorded its musical track on his Cinephone system. This is not surprising, since Powers had financed the film as an independent producer.73
The year 1929 got off to a disastrous start when Paramount's newest Hollywood soundstage burned to the ground on 16 January. It had been Western Electrics most ambitious production installation, with four stages under one roof and eight separate recording systems. Jesse Lasky downplayed the setback. All production, he said, would be transferred to the other Gower Street stages and to Long Island. The need to keep the recording laboratory separate from the shooting stage had saved it. Cables were trenched from it to the undamaged stages, and ERPI dispatched four Kearny sound trucks from Philadelphia to provide emergency recording service.74
While other studios were beating a strategic retreat from New York, Paramount continued to shoot feature-length talkies there, sometimes up to three simultaneously. Second and third sound channels were added in January and February 1929. By September, Paramount's Long Island studio had expanded 25 percent.75
Paramount was no slouch in the music division either; indeed, it claimed to have the largest music department. For a while it boasted of the services of the nation's most popular composer, Irving Berlin, who wrote music for The Cocoanuts. The studio's coup was hiring the Broadway director Rouben Mamoulian, who had staged Porgy and Wings over Europe for the Theater Guild. In June he started Applause, starring Helen Morgan, at Astoria.76
Paramount continued to be the studio most actively exploiting radio as a publicity medium for its talkies. In February 1929, there was a "Big National Tie-up" between the studio and Philco, the radio manufacturer. Paramount hired billboards, distributed autographed star photos, took out magazine ads, sponsored rotogravure newspaper sections, and made available ad mats for local papers. In June 1929, the studio executed a stock tender exchange for a 50 percent interest in the Columbia Broadcasting System so that similar radio tie-ups could be expanded and regularized.77
Challenged, perhaps, by the Fox-Loew's combination, Paramount attempted a friendly merger with Warner Bros. in September 1929; it would have created the largest entertainment conglomerate ever. Attorney General Mitchell's threat to sue put an end to the proposed "Paramount-Vitaphone Corporation."78
Having the largest and farthest-flung theater chain, Paramount needed a steady stream of quality film. The company's seriousness in maintaining production at Astoria was confirmed when its prize director, Ernst Lubitsch, was appointed to the position of supervising director of the eastern Paramount studios.79 Dorothy Arzner, basking in the success of her Ruth Chatterton melodramas, was transferred east to direct Claudette Colbert and Fredric March in Honor Among Lovers (1930).80
On the West Coast, Paramount was evaluating its programming strategies. Like the other majors, the studio signed with Technicolor for shorts and some features. It sponsored a 56-mm widescreen process called Magnafilm.81 Analogous to Zanuck's decision to focus on topicals, B. P. Schulberg and his new general manager of West Coast production, David O. Selznick, were reported to be "going after the kiddie market." TOM Sawyer (1930), With Jackie Coogan and Mitzi Green, was the first of a proposed series of juvenile releases. "Paramount's mighty magnet to bring back the kids!" it was hoped.82
The magnet lost its charge quickly, drained by the Publix theaters' drop in attendance. A finance committee headed by the Lehman Brothers executive John Hertz (who later founded the car rental agency) was formed in November 1931 to steer the company back to solvency—without success.
In June 1928 (the day after Warners' announcement that all its films would have talking sequences and well after Paramount had started shooting all-talking features), Nicholas Schenck conceded that MGM would also incorporate Movietone effects into "many" of its pictures. As he wrote, a 7,000-square-foot enclosure was being built on vibrationless pilings with soundproofed walls. The Culver City installation was supervised by Western Electric, Victor Talking Machine engineers, and Professor Verne Knudsen of the University of Southern California, one of five academic sound consultants hired by MGM. Sound would also be used for the independent films distributed by MGM: its own Movietone Newsreel (produced by Hearst) and the Hal Roach comedies (including Our Gang and Laurel and Hardy). The studio also leased the Cosmopolitan Studios in New York (127th Street at 2nd Avenue). Eddie Albert and other entertainers signed contracts to make Vitaphone-like musical shorts there.83
Schenck criticized the industry for its hasty conversion. Perhaps thinking of his own studio's questionable success in its first goat gland attempt, White Shadows in the South Seas, he said,
The novelty of sound has upset all reason. Sound has been applied indiscriminately whether it belonged or not. Everywhere the cry is for "talkies" regardless of subject matter. Certain properties lend themselves to dialogue, but they are not many and there you have the root of the trouble. Hysteria on the part of exhibitors who envision fortunes accruing through sound has reached the studios via sales departments and the pressure from the field. (Film Daily, 20 December 1928, p. 1)
He vowed to continue proceeding slowly. Schenck's statement acknowledges that the demand for sound, and for dialogue in particular, was coming from "hysterical" consumers (voiced through exhibitors) and was not being pushed on a passive public by the major producers. Moving at a stately pace, MGM's last silent film was The Kiss, directed by Jacques Feyder and starring Garbo, released with disc-synchronized music in December 1929.
Despite the resistance of Schenck and Irving Thalberg, the grosses from MGM's sound films could not be ignored. Glancy (appendix 1) notes that White Shadows in the South Seas and Alias Jimmy valentine, despite their weak star value, earned excellent returns in the 1928-1929 season. The draw of sound was confirmed with the tremendous success of The Broadway Melody, MGM's first all-talker, which opened in February 1929.
When it did convert, MGM did so in a big way. The facilities, state-of-the-art Western Electric, were installed under the supervision of Douglas Shearer, working under a new screen credit, "recording engineer." By the end of 1929 the Culver City facility had a preview theater seating 1,500 and the industry's largest soundstage, capable of shooting twelve scenes simultaneously. Amid the new quarters was a music building dedicated "for the sole use of composers and music writers, and here the largest musical library on the coast is now established. Under the leadership of such men as Arthur Lange, famous composer, and Dr. William Axt, former musical director of the Capitol Theatre, New York, each new story is studied with a view to preparing the proper musical setting."84 The arrangers could avail themselves of MGM's new acquisition, the Robbins Music Company, which the studio bought in October 1930. Though its changeover to sound production was slow, from the point of view of the consumer, the company was advanced. In fact, Loews chain of theaters was among the first to be fully wired.85
After Fox's sudden hostile takeover of the studio's parent company, there was a brief period of uncertainty. Nicholas Schenck had not informed Louis B. Mayer or Irving Thalberg about the pending Loew's sale, so there was a lingering rift in the company management. But William Fox was not only preoccupied with theater acquisition, not filmmaking, but recuperating from his auto accident after July 1929, so with Mayer and Thalberg still in charge, the schedule proceeded as planned.
MGM continued its cautious transition to sound, producing a smaller percentage of box-office hits than it was accustomed to but nevertheless doing good business. The studio's investments in sound were more modest than those of the other big producers. It spent about $1 million expanding its two new soundstages. It also dabbled in color production and in the widescreen process called Realife, which was photographed with Mitchell Grandeur cameras borrowed from parent company Fox. A comparison of the profits noted in the Mannix ledger to Loew's balance sheet reveals the extent to which theater revenues contributed to the overall operation of this Big Five company. For 1930, MGM's film rentals produced a profit of $5.94 million; Loew's total profit was $14.6 million. If these figures are reliable, they show that MGM film rentals made up only about 40 percent of the company's revenue.86
Loew's scaled back to cope with the post-Crash economy but was able to reorganize effectively in order to avoid receivership. Gomery points out that MGM never failed to make a profit even in the leanest years.87 Strong returns on its sound films, which capitalized on the stellar Garbo, Chaney, and, surprisingly, Marie Dressier, kept the company going.
RKO's big hits of 1929-1930 brought in cash. Unlike ERPI, which did not produce or distribute films, RCA Photophone could promise independent owners access to RKO product at favorable terms in exchange for installing its system. The number of theaters owned outright by RKO increased to 180.
Despite the market crash the previous October, the year 1930 began auspiciously with the opening of another soundstage—500 by 150 feet and seven stories high—on the Hollywood lot. William LeBaron announced yet another $2 million addition in March. RKO purchased a 500-acre ranch for shooting exteriors. In New York the Radio-Victor Gramercy Studios were refurbished.88
RKO's scramble for market share continued. In January 1930, the company installed Spoor-Berggren widescreen equipment in RKO theaters. "Stereoscopic" versions of Dixiana (1930), a big-budget musical with Wheeler and Woolsey to be filmed completely in Technicolor, and Ddanger Lights (1930), a railroad melodrama, were announced in February. The RCA sound engineers would use their new dish-shaped concentrator microphone.89 It seems that management was still cultivating the aura of technological progress.
In July 1930, Paramount stopped playing its films in RKO's houses. This caused a shortage of product, which had to be replenished because of contractual obligations to theater owners. RKO was forced to look for another production branch. The obvious choice was Pathé, over which Sarnoff and Joseph P. Kennedy had haggled for two years. In addition to interlocking directorates, Pathé and RKO were the only producers using RCA Photophone. Now Pathé was in financial trouble, but it held several resources. In addition to its distribution exchanges and its program of features, shorts, and Aesop's Fables cartoons, Pathé could also bring its profitable newsreel to RKO.90
Kennedy had been elected Pathé's chairman of the board in May 1929.91 In light of his early interest in sound, it is not surprising that Pathé, in spite of its size and Poverty Row status, paced the other studios in converting to all-talking production. The release schedule was slow, with only two Pathé talkies completed by April. The studio announced that Pathéchrome, a French process, was to be introduced in its films—and perhaps it was, but it could not compete with Technicolor.92
Pathé's chronic lack of stardom continued to be a problem. William Boyd was a rugged leading man, inherited from DeMille's silents. His all-talking debut, The Flying Fool (1929), was a low-budget programmer. Film Daily recognized the actors fine comedy sense, saying it was Boyd's best work to date.93 He would find fame after 1935 when he became the quintessential matinee cowboy, Hopalong Cassidy.
Pathé also suffered a fire, this time with tragic consequences. On 10 December 1929, eleven workers were killed and twenty were injured in the soundstage leased from the Manhattan Studios. A spark from an arc light ignited the soundproofing that lined the walls. Indirectly, this incident contributed to moving sound production out of New York. The New York City fire chief gave sound studios three days to remove all the cotton batting used to dampen echoes in the recording areas. The edict also affected the many theaters that were using this material to improve the acoustics in their auditoriums. Some small houses claimed they would have to close because they could not afford to remodel.94
Kennedy and Sarnoff were working on a Pathé-RKO merger at the time of the fire. The talks had fallen through, but Kennedy left the door open by saying that the failure "does not mean that [Pathé] may always steer away from affiliations." In March 1930, he resigned from the RKO board of directors and retired from actively managing both Pathé and Gloria Pictures. He announced that he would resume his former association with the investment banker Elisha Walker. United Artists quickly reminded him that he was under contract to produce two more Swanson pictures in addition to What a Widow! (1930), her second talkie, then being completed. Despite his professed indifference, Pathé stockholders reelected Kennedy chairman of the board of Pathé at the June 1930 meeting.95
RKO, unlike Pathé, ended the fiscal year 1930 in good shape, with a profit of $3.4 million and assets of $117.8 million.96 Such a balance sheet enabled Sarnoff and Kennedy to settle on a price. Pathé stockholders met to vote in January 1931 either to accept a payment of $5 million cash and notes from RKO or to place the company in receivership. The payment was accepted, but a group of seventy-five angry stockholders accused Kennedy of selling them out for his personal enrichment. They felt the company was worth at least $1 million more. At the next Pathé shareholders meeting—"the main session was generally hectic and frequently out of control"—Kennedy defended himself against charges that the sale to RKO had been put through quietly. He disclosed that Pathé had been offered to Howard Hughes, United Artists, and Paramount but that no one was interested. Kennedy denied that he had made $18 million on the FBO-RKO deal and that he would make a similar amount on the RKO-Pathé deal, although he held about 70 percent of Pathé's preferred stock. When the brouhaha subsided, RKO took control of Pathé's assets on 31 January 1931. Hiram Brown, the RKO head, said the companies would remain separate.97
The downturn in theater-going affected RKO during the late spring of 1930, just as the studio was gearing up for its fall production season. Revenue fell, and paying for the overpriced theater chains drained RKO's reserves. The big scale-back began. First, LeBaron announced that for the 1930-1931 season the company was canceling its plans for all-color films. Also, no more silent prints would be made. The elaborate special cinematography plans for Dixiana were abandoned, and color was downscaled to two reels in the "Mardi Gras" finale. Instead of maintaining the Gramercy studio, RKO bought a stake in the Van Beuren Corporation, the producer of Paul Terry's cartoons and a specialist in short subjects. Amédée J. Van Beuren retained control of his own company and took over RKO's East Coast production in October.98
Of RKO's thirty-four films released in the 1930-1931 season, nineteen lost money. The biggest loser in 1930 was Dixiana, which went into the red $300,000." Bebe Daniels did not recapture her RIO RITA (1929) charm and was further hindered by a lugubrious leading man, Everett Marshall. Danger Lights, RKO'S once-promising and technically innovative feature, received a blasé reception. "With the clang of bells and the din of locomotive whistles, this feature starts out at express speed only to slow down to a local after its first few minutes. It's the old stuff with hardly a modern touch."100
Sarnoff hired David O. Selznick after he quit Paramount in the summer of 1931. Selznick's job was to "take over both [RKO and Pathé] studios and to merge them."101 With profits disappearing, Sarnoff replaced Hiram Brown with NBC's president, Merlin Hall Aylesworth, who, like Brown, was a former utilities executive. In November 1931, RCA Photophone forced a reorganization of RKO. When it was over, RCA's stock interest in RKO had increased from 22 to 60 percent. The deal triggered a Senate investigation in December.102
RKO entered receivership in January 1933 and did not emerge for seven years, though it continued to release films. Throughout the thirties, RKO lost money on its big-budget features. But, as Sedgwick concludes, RKO's average- and low-budget pictures tended to be more profitable than its "A" product, thus seeming to "support the contemporary perception of RKO as a 'programmer's studio.'"103
The unique structure of United Artists probably retarded its entry into sound. Founded in 1919 as a partnership to release the films of its independent producer-filmmakers, notably D. W. Griffith, Douglas Fairbanks, Mary Pickford, and Charles Chaplin, UA was not a studio per se.104 When Joseph Schenck, as chair of the board of directors, signed with ERPI in May 1928, he bound UA's producers to using the Western Electric system, if and when they chose to make sound films. Being wealthy and popular stars, the "Artists" could afford to move slowly, and they did. Al Lichtman, the executive in charge of distribution, said in July that the company would make silent and synchronized musical versions of its films, but that there were no plans to record the voices of Chaplin, Pickford, Norma Talmadge, Dolores Del Rio, or Douglas Fairbanks.105
Lichtman was echoing the views of the original partners, as well as Joseph Schenck, whose aversion to the talkies rivaled that of his brother Nicholas at MGM. Even during the sound stampede in the summer of 1928, Joe Schenck was predicting that the fad would last only four or five months. "We are not going to make talking pictures. We have not shown any talking pictures, and I am not going to show any until I am convinced that the public want them." He liked the Movietone "topicals," but as for features, "the danger is that the public may be poisoned by the 'talkies.'" He declared, "Dialogue in films destroys their sincerity, and the unreality of mechanical voices will mean early death for the talkers."106 Schenck's views were shared by Charles Chaplin, then in the throes of beginning City Lights.
Schenck's and Chaplin's antagonistic views concerning sound were not held by all. Samuel Goldwyn, another partner releasing through UA, announced several sound films as soon as the ERPI license had been signed. The first of these was supposed to have been The Awakening (1928), starring Vilma Banky. Goldwyn convinced Schenck to build what was claimed to be Hollywood's largest soundstage on the UA lot at 1041 North Formosa at Santa Monica Boulevard. (Later it was called the Samuel Goldwyn Studios). It was 225 by 132 feet by 73 feet high, "large enough to accommodate outdoor sets." Anticipating simultaneous multi-camera shooting, there was space for ten camera booths and scores of mikes. But what was the motivation for including in the design "a permanent theater with a pipe organ to be used for opera atmosphere?" Evidently the executives thought there would be a future need for silent accompaniment. Goldwyn commissioned Hugo Riesenfeld to write the score, while the director Victor Fleming and the scenarist Carey Wilson set about creating "speaking effects." The Awakening was slow to arise, snoozed until November, then was tucked in again until 28 December. These postponements became a pattern at UA. Banky and Ronald Colman in Two lovers and Colman's The Rescue were also announced in May. The former, which turned out to be the first United Artists sound film (with synchronized music), was released 12 August 1928. Colman's solo film, planned with dialogue but released only synchronized, was not ready until January 1929.
While ranting against talking, Schenck, who as head of Art Cinema was also a producer, was entering the sound field himself by releasing Tempest (a John Barrymore film that had run silent on Broadway) for national distribution with a music track. The synchronized version premiered at the Paramount on 18 August 1928.107
Douglas Fairbanks announced in June 1928 his intention to Movietone his next film. He cautiously told a reporter, "Perhaps dialogue in films has come to stay, and perhaps it hasn't. But there's a hundred thousand dollars of my money going into that soundproof stage out there."108 His ambivalence is emblematic of Hollywood's hedging strategy. Mary Pickford settled on Coquette (1929), a 1927 Broadway hit, for her talking debut.
Just as it previously had owned no major production facility, UA also owned no extensive theater chains. But this fact is misleading. The brothers Joseph and Nicholas Schenck arranged deals with the Big Five that ensured outlets for UA films in return for not competing in national exhibition.109 In 1930 there were nine United Artists releases, a record. But after expenses, the bottom line barely showed a profit ($400,000).111
Balio has shown that during the 1928-1932 period at United Artists, it was Samuel Goldwyn and Schenck, as head of Art Cinema, and not the original founding partners, who were the most prolific producers.111 Since the partners acted as individual business entities, the effects of the Depression affected each differently. But United Artists never regained the economic clout it had enjoyed before sound came.
The brothers Jack and Harry Cohn and their partner Joseph Brandt had been gradually consolidating their reserves since incorporating as Columbia Pictures in 1924. In March 1929, the company went public to finance its sound conversion and to acquire capital to buy up some small short-subject production companies, augmenting an area in which it already specialized. Going public also enabled the fledgling company to upgrade the lot at 1438 Gower Street at Sunset, in the area that was deprecated as "Gower Gulch" and "Poverty Row."112 The "Columbia lady" logo was associated as much with shorts as it was with Capra's features. Distributing Disney's enormously popular Mickey Mouse and "Silly Symphonies" provided a windfall to the Cohns.
The studio was elected to membership in the Motion Picture Producers and Distributors of America in 1929, an event that symbolized its new privileged status. On its 1930 balance sheet Columbia had only $5.8 million in assets, yet it eked out a $1 million profit. Since the Crash had caught Columbia with little debt and it owned no theaters, it was affected minimally by the first years of the Depression.113
While the majors signed with ERPI in May 1928, Universal held out, claiming that it was still experimenting with its own sound device, to be called Uniphone. This may have been a mere bargaining chip, for Universal continued to dicker with ERPI.
The largest of the "Little Three" (with Columbia and United Artists), Universal's financial position was too precarious to participate fully in the sound upgrade. While Carl Laemmle made a grand show of siding with the little exhibitor, his company's lack of major theater chains and its specialization in "oaters" (Westerns) prevented it from tapping the urban first-run market. He had to be content with small-town venues, where the theaters were called "shooting galleries" by the trades.
To raise cash, Universal sold off the relatively few theaters it owned. Carl Laemmle, Jr.'s promotion to studio head in 1929 (supposedly as a twenty-first-birthday present) coincided with the studio's tardy embrace of sound and a new high-quality production policy. Laemmle produced at least one enduring work, All Quiet on the Western Front (1930). Variety's Sime wrote
U[niversal] has turned out a talker picture that may live forever as a picture of the four-year war, and did so commercially, but to whom is due the rose for daring to make such a picture as this, with that commercialism in mind? If that person were young Carl Laemmle, who produced this film, then the kid is there with nerve, for he has done on that nerve perhaps something no other producer in the film industry would have cared or dared to chance. (Variety, 7 May 1930)
The bloated budgets quickly drove the studio into the red. Universal lost $2,048,000 in 1930, compared to a $491,000 profit in 1929.114 The surprise 1931 hits DRACULA and FRANKENSTEIN began a horror cycle that helped pull Universal through.
Before sound, numerous independent producers existed on the margins of the film industry. Tiffany Pictures (begun in 1921), Mascot (started by Nat Levine in 1927), and Monogram (founded by W. Ray Johnston in 1929) were perhaps the best-known companies. The coming of sound did not at first severely limit these independents, as is usually thought. Paul Seale's research shows that a combination of factors actually lifted Poverty Row production in 1928-1929. Indeed, Variety reported an eight-year production high (342 features for 1928-1929). A complex symbiotic relationship developed wherein the "indies" provided product to fill out theatrical programs (as a weekday show or as half a double bill) and the major producers and exhibitors gave exposure and sometimes distribution to some independents in an effort to control competition. The large distributor tolerated certain small producers while others were shut out. From the exhibitors' view, the increased need for cheap double features played a role. From the producers' perspective, the excess capacity of Hollywood soundstages available for leasing, the availability of good actors willing to work for modest pay, and the generally low overhead in this kind of production encouraged these upstart companies.
This was the cut-rate sound domain prowled by De Forest Phonofilm, Bristolphone, and dozens of other providers of generic sound-recording systems. The equipment was cheap, but the expertise to operate it was frequently nonexistent. For those who could afford to, signing with RCA Photophone or Powers Cinephone or renting ERPI-licensed studios on a daily or weekly basis were options. There were many such studios to choose from: Metropolitan (operated by Pathé after 1928), FBO (then RKO), United Artists, Universal, and even MGM were happy to let out their stages during downtime. Some took advantage of a "bootleg sound price war in Hollywood with rates dropping to as low as $150 per day." Several independents followed the majors to New York, shooting their films there in one often independently operated sound studios."115 These companies tried to carve out a niche, often in Westerns, drawing-room plays, mystery thrillers, or serials.
For the suppliers of quality product who were unaffiliated with a big studio, the coming of sound required that they shoot outdoors and rent studio space for interiors from one of the sound "horse barns" set up expressly for the purpose. Some of these soundstages, like Tec-Art (5360 Melrose Avenue), rivaled the larger facilities. Mimicking the majors, several indies set up cooperative distribution schemes. Their financing came not from banks but from credit advanced by processing labs grateful for the extra business. For talent, there were always actors looking for work in Hollywood, and because talkies tended to have smaller casts, better-quality performers were available for the independents.
Raytone (Rayait before sound came) switched to the talkies by renting space at Studio City in Los Angeles, Mack Sennett's independent operation. It was also based in Fort Lee, New Jersey, and entered the backstage musical derby in September 1929 with Howdy Broadway! A diversified company, it also controlled Continental Pictures and Syndicate Pictures in Los Angeles, both of which made silent Westerns.116
One of the most ambitious independents was Sono Art Productions (shooting at Metropolitan Sound Studios). The company got off to a good start with a series of low-budget Westerns and all-talking musicals starring (and sometimes cowritten by) the radio personality Eddie Dowling. His The Rainbow Man (1929) did so well in New York that Paramount took over its distribution. Dowling's film Blaze O'Glory (1929) was not as successful. After a disastrous preview, it was withdrawn and recut. Sono Art was also a states-rights distributor and made a deal with James Cruze to sell The Great Gabbo (1929). Though heavily promoted, the story of Erich von Stroheim as a mad ventriloquist, a horror film married to a backstage musical, was not successful. The film is usually regarded as the nadir of Cruze's and Stroheim's careers. In 1930 Sono Art distributed Reno, with Ruth Roland, who was a star of serials. Through its affiliate Sono Art-Worldwide, the distributor had a deal with British International Pictures that let it introduce Hitchcock's Blackmail to American audiences in October 1929.117
The Poverty Row studios continued to supply product to diversify urban programs and to substitute their product for expensive films from the majors in economically marginal areas. Mascot's 1930 lineup suggests the range of material: a new Rin Tin Tin serial; "The Lone Defender" (a Tom Tyler Western serial); and "King of the Wild" (a wild animal serial). Tiffany-Stahl booked its features in nearly 2,500 theaters but was hurt by the lack of a profitable distribution network. Seale concludes, "Though certainly a few companies folded, most notably Tiffany-Stahl, the costly innovation of sound was hardly the only determinant of their failures."
The macramé of connections and kickbacks diagrammed in Electronics (figure 8.1) illustrates how sound transformed Hollywood into a multinational entertainment network. These are not branches growing according to a systematic master plan, but intertwined tendrils of several fast-growing vines spreading according to opportunity and means. The chart is an image of the robust gains made by these companies during the twenties by their simultaneously competitive and collusive strategies. It also represents the tenuousness of the connections, many of which would soon be realigned in the early Depression years.
Equity analysts, motion picture analysts, and people chatting at drugstore soda fountains just after the Crash agreed that the movies would be scarcely affected by the reversal of the economy. About six months later they had quickly lost their conviction that the film business was Depression-proof. During 1931 amusement stocks declined 75 percent. Among the hardest hit was General Theaters Equipment, the controller of Fox. Its convertible preferred stock dropped 98 percent, and the common lost 87 percent of its value. Fox itself was down 90 percent. Warner Bros. was down 87 percent, Paramount 83 percent, and Loew's 58 percent. The only gainer was a slight bump in Universal's preferred issue.118 Executives' heads rolled, and the industry was in turmoil. Hollywood changed its ways of doing business. Producers had to return to budgets that were scaled to rental income, not to the availability of credit. Hoover-era laissez-faire approaches, including turning a blind eye to monopolies, could no longer be counted on. Feature production for the majors in 1930-1931 dropped to a fifteen-year low.119 Industry insiders said that business was 40 percent below normal.120 Still, the bottom was not plumbed. The drop in business did not reverse until 1932 or 1933.
How did the Depression affect sound? The primary installations of recording and projection facilities had been completed before the profits started running out, so the hardware was in place before hard times set in. Dropping attendance foretold lost income, so Hollywood began cutting back whenever possible (sometimes involuntarily, at the hands of hired managers, or by stockholders armed with court orders). The typical studio response included backing a few big prestige pictures or blockbusters while reducing the number of films released and slashing budgets. The studios curtailed investment in novelties such as widescreen and color and streamlined production practices. By late 1930 the techniques of dialogue production had been assimilated into standard practices. Wasteful practices like multi-camera shooting were abandoned. The Academy and the SMPE quickly adopted standards to eliminate incompatibility. Earlier schemes calling for dual versions of silent films were abandoned. The studios could not afford a shotgun approach to distribution (for example, sending comedies and Westerns to small towns, opera and "class" theatrical adaptations to the cities). Hollywood wanted to make only one kind of film—the profitable kind.
The Depression changed exhibition. When the distributors did not make profits on silent versions, the studios stopped making silent prints. When a theater could not play silents, the owner had to go into debt to convert to sound. If the theater could not make its payments, ERPI or RCA would place a lien on it and, usually, it would go out of business. The result was fewer theaters, concentrated in centers of capital, that is, affluent urban neighborhoods.
Perfectly consonant with the call for an integrated style in which neither speech nor music stood out as a special effect, the films of the early thirties subsumed sound in a "natural" way which supported action. Genres, or cycles, as they were then called, also helped Hollywood cope. Shooting films that resembled their successful predecessors cut costs by applying tried-and-true practices to similar material. Once the techniques were learned that enabled one to, let us say, light a set or adjust the sound for one kind of film, generalizing this knowledge to the next was easy—and saved money. Audiences, too, relied on generic descriptions of films in advertising and conversation.
The social effects of the Depression exerted an intangible influence on the stars and stories. The popular ingenue, sheik, and flapper images of the late twenties fell out of favor. Masculine men and worldly women became the movie fashion. Often their toughness and glamour were expressed as much through their vocal stylings as through their appearance or acting gestures. Though escapist stories never faded out completely, many more films of the early Depression years were topical. Hollywood movies were seldom overtly political—and the industry's executives had little to gain and everything to lose by a serious critique of government policy. But their audiences' economic plight was reflected in stories of individuals forced into desperate acts, whether men flirting with gangsterdom or women making moral compromises in order to get ahead. Not that many moviegoers were actually in these situations. But the knowledge that hard times could cause even the mighty and the pure to fall was part of the allure of the cinema of hard times.