The Decline of the Hollywood Studio System

mr. blandings builds his dream
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The year is 1948. The American economy is booming. The farmers are prospering. Abundance overall is greater than at anytime in the nation’s history. The net working capital of American corporations is at a new high of nearly $64 billion. For the steel, oil, and automobile industries, 1948 is a banner year. Unemployment is below 4 percent. Nearly everyone who wants a job has one, and though inflation continues, people are earning more actual buying power than ever before, and all of this following the record year of 1947, which, Fortune magazine reported had been the greatest productive record in the peacetime history of this or any other nation”. In the summer of 1948 London played host to the first Olympic Games since those held in Brelin in 1936. American athletes, Bob Mathais, Harrison Dillard, Melvin Patton-swept the track and field events, winning thirty-eight medals. American prosperity, it seemed was endless.

It was a time of extraordinary technical and scientific achievement. A 200-inch telescope, the world’s largest, was unveiled at Mount Palomar, California. Test pilot Chuck Yeager, flying a revolutionary rocket-plane, the Bell X-1, broke the sound barrier. In 1948 the transistor was developed. A new antibiotic, Aureomycin and Cortisone to treat rheumatoid arthritis, were developed. A new kind of fuel, liquid hydrogen, promised, its inventor claimed, to “send men to the moon.”

thelonious monk

For evening entertainment, the country was tuning in to such radio favorites as “Duffy’s Tavern” and “The Jack Benny Program”. Though Radio still dominated for news and entertainment, approximately one family out of every eight now owned a television. 1948 would be remembered as the premier year for the “Camel Newsreel Theater” with John Cameron Swayze, the first nightly news program. And for the first time ever, there would be television broadcasts of the political conventions both held in Philadelphia to make the television coverage easier.

The music being sung and danced to in 1948 included such hit songs as “Enjoy Yourself It’s Later Than You Think”, and “It’s a Most Unusual Day”. A new Jazz style “Be-Bop” was flourishing in such quaint spots as Minton’s Playhouse on West 118th Street in New York, where such luminaries as Thelonious Monk, Dizzy Gillespie, Charlie Paker, and others were creating an altogether new kind of music. Cole Porter’s “Kiss Me Kate” was the latest hit on Broadway, and some of the motion pictures released that year would be the best ever.

What Happened

Suddenly and without warning millions of people stopped going to the movies. Attendance sank from 80 million per week in 1946 to 60 million per week in 1948, and no studio fared worse than the grandest of the all, M-G-M. Long the biggest and richest studio in Hollywood, suffered grievously from these financial blows. The studio had a gross income of $18 million the first twelve months after the war, but that declined to $4 million during the physical year of September 1947 to September 1948, and led to a net defect of some $6 million.

The most important event in Hollywood in 1948 attracted remarkably little attention. Nor did it take place in Hollywood. Nor was it actually an event but rather a month-long series in events. The essential fact was that the Justice Department persuaded the Supreme Court that the whole Hollywood system, all those rich and powerful studios and all those highly paid executives who talked of their talents for showmanship-all this was actually a criminal conspiracy.

Enter the FTC

The controversy dated back almost to the beginning of the movie business. As early as 1921, the Federal Trade Commission was investigating such Hollywood practices as block-booking and blind-selling. The producers, many of whom had started out as half-hearted opponents of the patent holders, now insisted on their own right to protect their interests.

justice william o. douglas

In February of 1948, Attorney General Thomas Clark appeared before the Supreme Court to argue once again that the studios must divest themselves of their theater chains. There was no other way, he claimed, ¹ “to effectively pry open to competition the channels of trade in the industry”. The Justice Department had already submitted a petition to the Court arguing that its plea was not just a matter of free trade in the movie business but of free trade in ideas. “The content of films, regardless of who produces them or exhibits them, must necessarily be conditioned to some extent by the prejudices and moral attitudes of those who control the channels of distribution.“The Justice Department brief said. “Only by assurance that the distribution field is open to all may the fullest diversity of film content be had”.

“The major studios were not willing or not able to permit such a diversity”, the Justice Department said. “On the contrary, their past efforts had consisted of Creating and maintaining a control of the film market expressly designed to prevent any views other than their own. Such a past, gives little hope that they will in the future encourage production of the wide verity of films needed to satisfy the wide variety of tastes possessed by the potential American film audiences, rather than a standardized mass product adapted to profitable exhibition in a controlled market”.

In the midst of this rather confused situation, The Supreme Court spent three months reflecting on the Justice department’s demand for “the fullest diversity of film content.” Then it declared on May of 1948 that the Hollywood system was indeed a conspiracy, and that it would finally order the breakup that Thurma Arnold, chief of the FBI’s anti-trust division, had requested before the war. “It is clear , so far as the five major studios are concerned, that the aim of the conspiracy was exclusionary, i.e., that it was designed to strengthen their hold on the exhibition field,” said the seven to one opinion written by Justice William O. Douglas, In other words, the conspiracy had monopoly in exhibition as one of its goals.

Break ’Em Up

In October, the Justice Department announced once again that it wanted the five major studios to give up their interests in some fourteen hundred movie theaters. It served notice on Paramount, Loew’s, RKO, Warners, and Fox that this would be its position when the New York District Court took up the case. Among the alleged conspirators, the one who cracked was, of all people, Howard Huges. RKO told the federal authorities at the end of October that it would give up the battle and sell off its interest in 241 theater within a year. Ten days later, Loew’s also surrendered, and the others followed suit. A consent decree was approved by the Justice Department, the studios, and the court. Though it would take another year for the theaters to be sold, and still longer for the studios to realize the devastating implications of what had happened to them. The golden age that Hollywood had founded on a so-called ’conspiracy“ was coming to an end.

the godfather

The Result

Some great films have been made since the 1948 Supreme Court decision. But have motion pictures really gotten better? With the American Film Institute’s recent announcement of their top 100 films, one need only a passing glance to see that the bulk of them were produced by the major studios, during Hollywood’s golden age.

It is doubtful that the studios could have survived even had they been able to hold on to their theaters. As audiences dwindled, the studios had little choice but to liquidate their holdings. The dreaded seven year contracts that the studio's imposed on their actors and artistic people were being challenged. One by one the great movie studios began to fragment. M-G-M was bought by Kirk Kerkorian, a hotel magnate. Warner Brothers was eaten up my Seven Arts, and finally by the Kinney Corporation. Paramount was acquired by the Gulf+Western Company. MCA took over Universal. Harry Cohn's Columbia was acquired by Coca Cola.

The great empires have crumbled. The pinnacles of power have diminished. What remains is an idea, a truth that in our minds, at least those of us who cherish the great classic period, will never vanish. And what we take away is a constellation of values, images, and attitudes, a history and a mythology that is part of our culture and consciousness.

¹ Otto Friedrich, “City of Nets: A Portrait of Hollywood in the 1940's” 349

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Michael Mills