The American Film Industry

11. Economic Control of the Motion Picture Industry

Structure ofthe Industry IIMAE D. HUEruG Economic Control of the Motion Picture Industry Some Questions to Be Answered Despite the glamour of Hollywood, the crux of the motion picture industry is the theater. It is in the brick-and-mortar branch of the industry that most of the money is invested and made. Without understanding this fact, devotees of the film are likely to remain forever baffled by some characteristics ofan industry which is in turn exciting, perplexing, and irritating. Emphasis on the economic role ofthe theater is not meant to belittle the film itself. Obviously it is the film which draws people to the theater. Nevertheless, the structure of the motion picture industry (a large inverted pyramid, top-heavy with real estate and theaters, resting on a narrow base of the intangibles which constitute films) has had far-reaching effects on the film itself. This may seem farfetched. Most writers on the motion picture industry rather studiously avoid its duller aspects, i.e., those dealing with the trade practices, financial policies, intercorporate relationships, etc. But the facts indicate clearly that there is a connection between the form taken by the film and the mechanics of the business, even if the connection is somewhat obscure. It is true, as one student has pointed out, that "the issues involved are not peculiar to the motion picture Abridged by the editor from Economic Control ofthe Motion Picture Industry (Philadelphia : University of Pennsylvania Press, 1944), pp. 54-95. 285 286 Part III / A Mature Oligopoly, 1930-1948 industry.'" Despite this lack of uniqueness, the problems of organization , intercorporate relationships, and financial policy in the motion picture industry deserve more than passing mention. The attitude of the industry itself toward discussion of these problems has not been completely candid. A great reluctance to disclose factual information with respect to its operations has unfortunately characterized most of the leaders of the industry. Among the many questions which lack a reliable answer are: How many people attend movies? How often? How large is the industry in terms of invested capital and volume ofbusiness? What is the annual income ofall theaters? How many theaters are owned by what groups? What type of film is most uniformly successful? What is the relationship between the cost offilms and their drawing power? Little is known of the industry's place in the broader pattern of American industry, or its method of solving the specialized problems of commercial entertainment . There are few reliable statistics available (and of these none is compiled by the industry itself) with regard to these questions. What Is the Economic Importance of the Industry? There are various ways of measuring the role of an industry in our economy. The indices most commonly used are: (1) volume of business , (2) invested capital, and (3) number of employees. The value of such criteria is limited, since comparison between all types of industries produces results too general to be significant. However, in the case of the motion picture industry, these indices are valuable as a means ofdelimiting its economic importance and recording some basic information regarding its size. This question assumes importance partly because the industry itself seems to be under some misapprehension with respect to the answer. It may well be true, as Will Hays frequently says, that the motion picture is a great social necessity, an integral part ofhuman life in the whole civilized world, but this value is in no way minimized by an accurate statement as to the industry'S economic importance. "Standing well among the first ten (or the first four) industries in this country" [for a similar statement, see ch. 8, for example -Ed.] has so often prefaced the remarks ofindustry spokesmen as to indicate that the facts are not generally known. Here, then, let it be noted that insofar as size ofindustry is measured by dollar volume of business, the motion picture industry is not only 1. Howard T. Lewis, The Motion Picture Industry (New York: Van Nostrand, 1933), p. xiii. 11. Huettig: Economic Control of the Motion Picture Industry 287 Hell's Angels premiere at Grauman's Chinese Theater, Hollywood. Courtesy Bruce Torrence Historical Collection, c/o First Federal of Hollywood not among the first ten, it is not even among the first forty. It is surpassed by such industries, to name only a few, as laundries, hotels, restaurants, loan companies, investment trusts, liquor, tobacco, and musical instruments. Viewed thus...