If William Fox were alive today, rather than creating Theda Bera and Tom Mix and launching the career of Westerns director John Ford, Fox – who founded Fox Film Corporation in 1915 – might instead be managing their images, promoting their merchandise, or building theme park rides on their personas. Why? Because the big entertainment conglomerates in Hollywood that run today’s entertainment empires are no longer primarily the creators of content—they are the curators of content, the managers of intellectual property.
Those readers who have followed this series of articles on the history of Hollywood and IFE will remember William Fox as one of the founders of early Hollywood and one of the visionaries behind Hollywood’s so-called “studio system.” During Hollywood’s golden age, the studio bearing Fox’s name not only generated a steady flow of motion pictures, it also distributed these motion pictures to theaters in the US and operated its own chain of magnificent movie palaces.
As the Great Depression approached, the man who once envisioned owning the grandest movie theater in every key city in the US to exhibit the movies produced by his studio, William Fox was maneuvering to take over rival studio, MGM – the biggest of all the studios at that time – and was constructing opulent movie palaces like the magnificent Fox Theater in St. Louis. [For pictures of that marvelous edifice, see “Six Degrees of Spyros Skouras: Mutascopes and Zoetropes and Little Lambs Eat Ivy” in the February 2013 issue of Airline Passenger Experience magazine.]
When the Depression hit, however, Fox went bankrupt – and eventually to jail for attempting to bribe the bankruptcy court judge. But today, the media giant that survived William Fox’s misfortune and is now run by Rupert Murdoch, still bears his name – despite barely resembling the company Fox created.
In 1948 – the 20th anniversary of the Academy Awards – the seven major studios were Paramount, Universal, MGM, 20th Century Fox, Warner Bros, Columbia and RKO. Disney was not a major studio then and the movies created by Walt Disney were released by RKO. Not only did those seven companies own the production studios and control actors and talent under contract, they also owned the distribution companies and either owned or controlled most of the theaters.
As you will recall from previous articles in this series, the three principal functions of motion picture provisioning are production, distribution and exhibition, and until 1948, in the US, seven major studios had a near monopoly over them all.
Those creators – like Walt Disney – who produced movies independently were still forced to use the seven major companies for distribution and exhibition. Of all of its creators, the only pioneer from the studio system era who had the instincts of a curator was Walt Disney – who, as an independent, fought the studio system whose exclusive focus on theatrical exhibition was not consistent with Disney’s broader vision.
It was Walt who was the first movie creator to license merchandise in peripheral markets based on the interest generated by the movies themselves. The first merchandise license was for Mickey Mouse—beginning with the Mickey Mouse wristwatch, then clothing, then toys—in 1930! The first theme park was opened by Disney in the 1950s. Walt Disney was conceiving Disneyland as the major studios were still enjoying the fruits of the studio system, which was ready to crumble around them.
Walt Disney was the ultimate outsider in Hollywood. As an animator, most of his movies didn’t involve actors, and Disney was not friendly with studio heads – often referring to them using derisive ethnic terms, and them him as an oddball. By the mid-1930s, when the eccentric Howard Hughes took over RKO, Walt had decided that he had to take control of his own distribution since that control was essential to his vision to exploit multiple rights from his movies.
In 1940, Walt Disney joined with other independent producers, all of whom distributed their motion pictures through the major studios, to create a highly secretive society that would support the anti-trust action of the US Department of Justice intended to end the major studios’ monopolistic practices.
The studio system was responsible for the viewing habits of movie patrons. In 1948, people didn’t pick a movie to go see – they went out to the theater where they saw the motion picture programmes that were playing. These usually consisted of an “A” feature (bigger budget releases), a “B” feature (generally produced on a lower budget and genre-based such as a Western or film noir thriller), a cliffhanger serial, plus various cartoons and short subjects – something for everyone. The decision to go to the movies had little to do with which movie.
In that same year, network television came to the US, and families would soon behave the same way in their living rooms with the family gathering around the TV to watch whatever was broadcast. During the first three decades of the movies, going to the theater was a family experience.
In 1948, 95% of studios’ revenues were from US ticket sales – foreign revenue was minimal, TV was embryonic, and only Walt Disney sold images of his characters to adorn T-shirts and watches. In just a couple of years, Roy Rogers and Hopalong Cassidy would join Mickey Mouse on lunchboxes and milk cups and Saturday morning TV. In 1948, the studio system – and the primacy of the motion picture – was reaching its apex.
CHANGE, CHANGE, CHANGE
A number of important milestones would converge between 1947 and 1950 to change Hollywood in significant ways – and kill the studio system. They include:
- The Hollywood “blacklist”
- The 1949 Consent Decree
- James Stewart’s contract for Winchester 73
- The advent of network television
Twenty years later, another series of milestones – cable, satellite and Betamax – would further change the industry. But that’s for a later article!
The Hollywood “blacklist: In 1947—following accusations made the year before in a column by the then-publisher of The Hollywood Reporter — the US House of Representatives Un-American Activities Committee (HUAC) began to subpoena members of the Hollywood film industry as part of an investigation into whether Communists or Communist sympathizers were inserting propaganda in Hollywood films. Concerned that the industry was already being investigated by the U.S Justice Department, studio heads were anxious to make this go away and were more than willing to throw actors, directors and others – whom they believed had “leftist” tendencies anyway – under the bus.
Since actors, screenwriters and directors were under exclusive contracts with the studios, studio bosses could end their careers by simply not using them. Seeing this as nothing more than a political witch hunt, eleven of the forty-three industry members who were summoned by HUAC to testify in 1947 and 1948 refused. One gave in, and the others became known as the “Hollywood Ten.” Studio bosses blacklisted them, and about 300 others, helping to increase the resistance by actors, screenwriters and directors to the exclusive control that studios held over them.
The blacklist was not broken until 1960 when Kirk Douglas, acting as producer of his movie Spartacus, hired blacklisted screenwriter Dalton Trumbo to write the screenplay – in his own name. During the blacklist, many screenwriters like Trumbo used “fronts” to sell their scripts to the studios under pseudonyms. Even after 1960, many on the blacklist were discriminated against for years.
The 1949 Consent Decree: For decades the US Department of Justice (DOJ) had looked suspiciously on the studio system’s vertical integration and control over the production, distribution and exhibition of motion pictures, and the attendant practices known as “block-booking” and “blind-bidding.”
After the death of MGM head Marcus Loew in 1927, William Fox bought the Loew’s family holdings in MGM. But studio bosses Louis B. Mayer and Irving Thalberg tried to thwart Fox’s takeover. Mayer used his political connections to help persuade the DOJ to take action against Fox for violating anti-trust laws.
The DOJ pulled its punches during the Great Depression – but that event foiled Fox’s actions. The DOJ likewise put its anti-trust actions on hold during World War II, deferring to the Department of Defense’s interest in using movies for wartime propaganda.
But after WWII, the DOJ once again targeted Hollywood for anti-trust and this time it stuck. Though breaking up the studios’ control over production, distribution and exhibition took place over many years, the tipping point was US v Paramount – the 1948 US Supreme Court ruling against the studio that resulted in 1949 in a series of consent decrees between the DOJ and individual studios under which studios agreed to the divestiture of their theaters and an end to block-booking and blind-bidding.
The Society of Independent Motion Picture Producers (SIMPP) – whose members included Charles Chaplin, Samuel Goldwyn, Alexander Korda, Mary Pickford, David O. Selznick, Walter Wanger – and Walt Disney – originated in this antitrust action. Founding member Walt Disney contributed the first of the Society’s dues in November 1941.
James Stewart’s Contract for Winchester 73: Undermined by the divesture of their theaters, studios were now vulnerable to the increased demands of their talent. Under the now weakening studio system, studios didn’t share their boxoffice receipts with anyone. Actors, directors, screenwriters and even producers were salaried employees.
But in 1950, when Universal wanted James Stewart for the lead role in its Western Winchester 73, the studio couldn’t afford Stewart’s salary. So the actor’s agent at MCA, Lew Wasserman – who would later run Universal – agreed to waive Stewart’s salary and accept a percentage of the profits. Universal readily agreed, but after the picture’s boxoffice success Stewart’s take far exceeded the salary that he had waived. MCA – who in 1948 represented about half of Hollywood’s biggest stars – saw an opportunity to loosen the studios’ excessive control over actors whose boxoffice power could be used to give them free agency.
The advent of network television: 1948 was the year in which network television displaced the movies as the most pervasive form of entertainment in the United States. Families that once went out every week to the movie theater could now sit around a box in the living room to be entertained. That was also the year in which motion picture attendance peaked. In the period from 1945 to 1948, average annual motion picture attendance in the US was 4.68 billion people. In 1999, it was 1.47 billion.
In the four-year period from 1948 to 1951, there was a fifty percent decline in theatrical attendance in the US. Studios were relinquishing ownership of their theaters, and now faced the increased leverage of actors, directors, screenwriters and producers – who increasingly became independent contractors rather than employees – as the dust settled around the collapse of the studio system.
Another outcome of the demise of the studio system was the sale or absorption of the major studios to other business conglomerates.
After the Depression, when men like Spyros Skouras began replacing the earlier entrepreneurs, they helped studios survive the death of the studio system, using television production to replace “B” movie production, and things like 3-D and Cinemascope to lure viewers from their televisions. But, ever the outsider, Walt Disney’s vision – while including television – was much broader but yet quite simple. Walt Disney’s strategy was developing “powerful brand and character franchises” that could be licensed.
After Walt’s death from lung cancer in 1966, “his vision survived”, observed Edward Jay Epstein, author of “The Big Picture: Money and Power in Hollywood” [Copyright 2005, E.J.E. Publications Ltd.].
“His brother, Roy, who succeeded him, continued the ‘Disney way’ of using the theme parks, television programmes, children’s books and movies to enhance the value of Disney characters,” wrote Epstein. “‘Integration is the key word around here,’ he [Roy Disney]explained. ‘We don’t do anything in one line without giving a thought to its likely profitability in our other lines.’
“Even though Michael Eisner, who became Disney’s chairman in 1984, greatly expanded the company by buying the ABC network, the ESPN network, and other assets,” said Epstein, “he insisted that the company’s ‘key objective’ remains the same as Walt Disney’s: developing ‘powerful brand and character franchises.’”
And this objective was pursued even more vigorously when Robert Iger succeeded Michael Eisner as chairman in 2005. Iger purchased Pixar Animation Studios (bringing the characters of Sheriff Woody, Buzz Lightyear, etc. ) in 2006, Marvel Entertainment (Captain America, Spiderman, Fantastic Four, Thor, X-Men, Iron Man) in 2009, and Lucasfilm (Luke Skywalker, Darth Vader, Han Solo) in 2012. These three acquisitions added thousands of licensable characters to the Disney ranks.
Today’s six major entertainment giants—Time Warner, NBC Universal, Sony, Fox, Viacom and Disney—have evolved from seven major studios that once dominated US theatrical movie production, distribution and exhibition into global entertainment empires. And with their enormous holdings in television, media, and intellectual property, their movies are simply the tail that wags the dog.