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Portrait ofa Vertically Integrated Company 13~RTUNE Loew's, Inc. Mr. Nicholas M. Schenck, for the last twelve years president of Loew's, Inc., is the author ofthat optimistic saying, "There is nothing wrong with this industry that good pictures cannot cure." It has been the easier for Mr. Schenck to say that about the movie business because Loew's picture-making unit, Metro-Goldwyn-Mayer, has for at least eight years made far and away the best pictures of any studio in Hollywood . Metro's gross revenue from film rentals has been consistently higher than that ofother studios, and as a result Loew's, Inc., has been and still is the most profitable movie company in the world. So vital are Metro pictures to Loew's earnings that whereas Mr. Schenck, the undisputed boss of the whole shebang, received some $220,000 from his profit-sharing contract last year (over and above a salary of$2,500 a week), Mr. Louis B. Mayer, the employee who runs Metro, received $763,000 on his profit-sharing contract, over and above a salary of $3,000 a week. That's what Mr. Schenck and his board of directors are willing to pay for "good pictures." When Fortune looked at Loew's in December 1932 [see ch. 12-Ed.], the whole story was devoted to Mr. Mayer's fabulous studio. Today, however, Mr. Schenck is faced with one or two problems, not then anticipated, which Mr. Mayer may not be able to solve for him singlehandedly . The chief one is the antitrust suit that the Department of Justice brought against Loew's and seven other major units of the movie industry in July 1938. Loew's, like its four biggest competitors, From vol. 20 (August 1939), pp. 25-30+. 334 13. Fortune: Loew's, Inc. 335 is engaged in selling and exhibiting, as well as in making pictures; and the government, on behalf of the small producers and independent theater owners who feel squeezed by this vertical trustification, seems resolved to break it into halves. The fight is proceeding to trial very, very slowly, but only the vagaries of the law, and not good pictures, will ultimately end it. Another thing in the back of Mr. Schenck's mind is the fact that Metro pictures, while still possibly the most successful in the world, have recently been failing to make their customary splash in the trade. The absence of splash was loudly heard last fall, when the expensive superspecials Marie Antoinette and The Great Waltz were presented to an American public that has not even yet shown any inclination to return to Metro their negative costs. Jeanette MacDonald's Broadway Serenade and Joan Crawford's Ice Follies of1939, coming along in the spring, helped to confirm the impression that Metro had struck a slump; so did the news that the touted I Take This Woman (Spencer Tracy and Hedy Lamarr) has been indefinitely postponed. In a company that had grown used to releasing a Grand Hotel, Mutiny on the Bounty, Thin Man, Test Pilot, Boys' Town, Captains Courageous, or their box office equivalents every month or so, the recent Metro crop ofturkeys has not been reassuring. Insofar as this constitutes a problem for Mr. Schenck, he can hardly tum solely to Mr. Mayer, for it might be Mr. Mayer's fault. It is certainly Mr. Mayer's responsibility. But it has not been costing Mr. Schenck any sleep. The fact is that Metro's gross picture rentals, which reflect the average popularity of the studio's entire product offifty or so pictures a year, are ahead ofthe 1938 gross to date by some $2,000,000. The number ofexhibitors who are buying the product has also been steadily climbing. Hence if Metro is indeed in a serious slump, the only measure thereofis the volatile thermometer ofHollywood gossip. To be sure, Hollywood gossip is itselfsometimes a hard business factor, in its effect on people in the industry. The antitrust problem, though more tangible than the studio problem , has not troubled any Schenck sleep yet either. He believes that Loew's cause is just, and that the government will either drop its suit (which Assistant Attorney General Thurman Arnold denies) or lose it. Some people say that even ifthe five big chains were to be divorced from the five big studios, the effect might be to stimulate Loew's profits rather than to stop them. It would be a different sort ofpicture business from...

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