VI
THE BUSINESS SIDE
The business organization of the motion-picture field can find no counterpart in any other line of commercial activity. In some of its aspects it is akin to the theatrical world, in others it resembles publishing, but there are many points distinctly unique. The commercial organization is an evolution peculiarly adapted to picture conditions, and it is still in a state of transition, continuous and even more radical than that evident in the producing methods.
In its most interesting feature the system used in the United States resembles the newspaper syndicate, through which an article is published simultaneously all over the country in dozens of newspapers. In this case the article is supplied to the different newspapers in advance, with the statement that it is “released” on a certain date;that is, the newspaper may publish it on and after that particular date, but not before. This explains the surprise of the young man who travels away from home for the first time when he finds that the newspapers of the city he is visiting carry many of the special features he reads in the papers at his home city, and that they publish the articles simultaneously. In a similar manner motion pictures are shipped far in advance to the exchanges, the local distributing agents. A certain “release” date has been chosen, and on that day the picture is shown for the first time in theaters throughout the country. New York, in the heart of the film world, thus boasts of no advantage over the city a thousand miles away. The use of the word “release” in this connection is similar to that in the newspaper syndicate field, which explains a point that invariably proves confusing to the layman seeking information in filmland.
We are told in the chapter dealing with the history of the motion picture of the formation of the first large distributing organization. The system followed by this combination will give an idea of the method employed by the older organizations in handling the short pictures that make up the bulk of thefilm output. In forming the combination a group of pioneer picture manufacturers bound themselves together to release their product to the theater-owners through the one channel. Exchanges are located in the principal cities of the country and the distributing organization purchases from the manufacturer the number of positive prints of each picture needed to supply these exchanges. A manufacturer’s popularity with the exhibitors and the public is shown, of course, by the number of positive prints that the distributor must purchase from him to meet the demand. These manufacturers profited both by the sale of their prints and, through their direct interest in the distributor, from the earnings of the latter. There are two other large distributing agents organized along the lines of the pioneer to handle the output of other manufacturers. In the one the union between producer and distributor is not as close as that of the pioneer, while in the other producer and distributor are practically identical.
From these distributing agents the theater-owner secures his program, the usual practice being to pay a stated weekly rental price, dependent on the number of reels he secures and their freshness. The exhibitor whoshows the pictures on the day they are released naturally pays a proportionately larger rental for this “first-run” privilege than the theater-owner who is satisfied with pictures that may be days or weeks old. The latter runs the risk of showing pictures that his patrons have already seen in other theaters, and, naturally, he must expect film that has received the wear and tear of many performances since the day it was released.
This method sufficed for the short picture, but the coming of the feature, a production of three or more reels, changed matters considerably. It brought a score of independent producers into the field, and these men set about seeking their own methods of marketing. The first step was the development of “state rights” buyers, usually independent exchange owners who bid for the exclusive rights to handle the feature productions in their territories. The producer sold the rights and the necessary positive prints for the different territories to the highest bidders, and after that he washed his hands of the production, though, of course, he still had the negative, should additional positive prints be needed. The purchaser of the “state rights” was now in absolute control of the picture in his territory.His income was secured by renting the picture to the theater-owners.
“State rights” are at present heard of only seldom; they have been succeeded by the “feature program,” a combination of manufacturers of long pictures similar in many ways to the older combinations of the producers of short pictures. The chief advantage of the feature program lies in its certainty. To the theater-owner it offers an assurance of a steady supply of pictures of a certain quality, and in addition he knows the pictures that he will show far enough in advance to properly advertise them. To the picture producer the feature program offers a steady market, with an income that he can estimate, and thus he is enabled to make greater expenditures on each picture and to plan more extensively for the future than would be the case were each production to be sold separately.
Each of the feature programs has its own type of organization. Some are practically closed corporations handling only the productions of a certain group of manufacturers. Others are comparatively elastic in their organization, and, while releasing all the productions of certain manufacturers, will also contract to handle the pictures madeby independent workers. The manufacturer usually receives his income from the feature program through a percentage of the rental earnings of his pictures. In the case of distributors who sign monthly or yearly contracts with exhibitors to supply them with a stated number of pictures each week it can be seen that the manufacturer’s return will be almost a constant figure, affected only slightly by the merits of the individual picture. This is, in fact, one of the most important defects of the closely bound program, it tends to place all the pictures on a common level. While this may work to the producer’s advantage in the case of a poor picture, he also finds it irksome when he attempts to secure the proper return from a picture that cost him an unusually large amount to produce. The feature program that secures its income from the per diem rentals of each picture, with no long-term contracts to fall back upon, is a trifle more elastic.
We now come to the latest step in the evolution of the business side of the motion picture. This is, in many ways, a return to the methods of the theatrical producer. The manufacturers found that they could not expect to secure a reasonable profit frompictures that cost extra-large sums of money and many months of preparation if they were marketed through the ordinary channels. So they resolved to take a leaf from the stage producer’s book and turn exhibitors themselves. With such productions as “The Birth of a Nation” the manufacturer handles the presentation himself in the large cities, and the picture, like the spoken play, is presented as long as it attracts patrons. If the picture succeeds, an engagement to packed houses of many weeks, or even months, is assured, so that it can be seen that the manufacturer’s profits are tremendous. Different methods are used following the metropolitan engagements. Sometimes the manufacturer will sell the rights to the territory he has not touched, just as in the old days he sold “state rights.” Or perhaps he will send out many different prints of the picture to tour the country under his own management in the same manner that the theatrical manager sends out a number of companies to present the piece that has succeeded in New York. The original company will be seen only in New York, and possibly Chicago and a few other large cities, while the other companies will tour the “one-night stands,” up and down the map. Just as theprestige of success in New York aids a play, so it also proves valuable to a picture.
The earnings of a motion-picture production are as fluctuating as the rise and fall of stock prices in Wall Street. The cost of a thousand-foot picture is usually placed at the average of a thousand dollars, and the manufacturer selling his positive prints at ten cents a foot and releasing through established channels markets twenty-five prints, though the number may run many more or less, according to the efficiency of the selling organization and the popularity of the particular type of picture. He may thus be seen to have more than doubled his investment. His foreign sales may double this figure again. But this instance treats of the manufacturer who has been years in business, and who is releasing through one of the combinations strong enough to practically guarantee a market. Even in these cases inferior-quality pictures or a change in the tastes of the public may quickly force a drop in the number of prints sold. Likewise it does not require a very great increase in the cost of production to eat up the profit.
The manufacturer of long pictures faces even greater uncertainty. His investment in each picture will average between ten andtwenty-five thousand dollars, and it does not require many high-salaried stars or spectacular scenes to reach the higher figure. Nor have we considered the overhead expense of maintaining a studio and offices and the heavy outlay to market the picture. A poor picture can lose all of the original investment and even more, the latter if a strenuous effort is made by means of advertising and so on to sell it. A good picture can double the investment, and the outlook for a picture of unusual strength is rosy indeed. Many very costly productions have been forgotten a month after they were released; many very good pictures are still earning money for their producers two and three years after they first came on the market. The life of the negative is without limit, and after the original investment has been recovered, the cost of supplying new positive prints for those that have worn out is a small item.
Theater-owners who show the long-feature productions pay an average of fifty dollars per day for the rental. If competition is strong between the producers the price may go lower, and long-term contracts to use the output of certain organizations may also make the cost of his pictures less to thetheater-owner. But frequently he will pay more than this sum for the picture that has proven its popularity. The theater using short pictures—showing three or more subjects at a performance—contracts for its service at a stated weekly rental price, ranging from fifty dollars to two hundred and fifty dollars or more. For the top-notch price he will receive “first-run” pictures, that is, pictures he is allowed to show on the day of release. For the intermediate price his program will be varied; it is apt to include one “first-run” picture, one week-old subject, and others that have been released a greater length of time.