The American Film Industry

8. The Motion Picture Industry as a Basis for Bond Financing

The Movies as Big Business 8HALSEY, STUART & co. The Motion Picture Industry as a Basis for Bond Financing Motion pictures, meeting at popular prices the universal demand for recreation and amusement, have quickly become an essential part ofmodern living. People everywhere look to them for their relaxation, their entertainment, and increasingly for their general information and education. Without doubt the "Movies" are today one of the best known of all things American, both in this country and abroad. And yet the great Motion Picture Industry back ofthe movies-now a major ranking industry in the United States-has until very recently been comparatively unknown in its investment aspects. It is time that the American people, who know and appreciate their "Movies" so well, should, as investors, become better acquainted with the Motion Picture Industry, its tremendous proportions, its financial structure, its prospects. And as the investor goes backstage, literally "behind the screens," to examine this vibrant new industry which makes possible his favorite form of recreation and education, he will not only find an industry of much larger dimensions than he anticipated , but one which is much more efficient, much better integrated, and more thoroughly seasoned than he could have imagined. The motion picture industry has grown to its present rank among the great industries of the United States in a brief period of thirty years. But more surprising than even that rapid growth is the fact that Prospectus, May 27, 1927. 195 196 Part II / Struggles for Control, 1908-1930 in little more than one generation it has developed into a well-knit, efficiently organized industry. Any critical appraisal ofthe motion picture business today will bring out the fact that it is an industry already quite thoroughly "in line" with the best methods ofindustrial organization and technique. While it is a relatively new industry, it is nevertheless a mature industry. And while it is still growing tremendously, its present development is being achieved along lines closely paralleling the expansion ofour great veteran industries. The integration of manufacturing, wholesaling, and retailing is already well advanced. This condition is not confined, as in some industries , to just one all-dominating corporation, but at least a halfdozen of the leaders in the motion picture field are now established as complete units of operation. Very effective trade associations have been organized in this industry . It occupies an advanced position regarding public relations. It ranks high in its success in the arbitration of disputes. The motion picture industry has stablizied itself and won much prestige in recent years through its progressive theater-building program . The big companies have always been strong in earnings, and now their asset situation has been much strengthened. Real estate, in the form of substantial theaters and office properties, bulks large in the typical balance sheet. In fact the motion picture concerns bid fair to become among the most extensive chain owners of business locations in the whole country. In the production phase ofthis industry, standardized methods have been established; modern systems of cost control are the rule; conservative policies regarding depreciation are in vogue; film inventory values, based on the cost ofproducing pictures, are written offrapidly after each release date. And backing up all this is the present program of high-grade research into the economic as well as the mechanical problems of future development. A Growth Chart ofthe Industry If a comprehensive chart could be made to depict the growth of the motion picture industry, all of its graphic lines would start near the zero point about 1896, and rise to points of impressive magnitude by 1926. The line representing motion picture theaters, for instance, would show approximately 20,000 of these buildings in the country at the 8. Halsey, Stuart & Co.: Bond Financing 197 present time, while in 1900 there were practically none devoted to pictures exclusively. Employment figures for this young industry would show that in 1926 more than 350,000 persons found work in its various branches, whereas in 1900 only a few venturesome spirits had dared to think of motion pictures as a sole source of income. Our chart would show, as well as possible, that the manufacture of motion picture films, which was close to the zero point in 1900, now exceeds 1,250,000,000 feet per year; consumes, incidentally, more silver in their manufacture than is used by the United States Mint; and dominates the film markets of the world. The...