The Slow Death of Movie Monopolies
Famously, millions of Americans evaded the Great Depression’s miseries by going to the movies -- the “talkies” that made stars of Myrna Loy, William Powell, Edward G. Robinson, Bette Davis and many others.
Infamously, the film industry’s studio owners and distributors spent much of the 1930s in federal courts, as they had in the 1920s and would again in the 1940s, charged with violating the Sherman Antitrust Act by constraining competition.
The battle between large studio companies and small, unaffiliated theaters came to a head in the April 6, 1932, case United States v. Balaban and Katz. Federal Judge Charles E. Woodward ruled that 21 companies, including Chicago Theater owner Balaban & Katz Corp., were guilty of giving preference for first-run shows to theaters they owned or controlled while denying timely access to independents.
"Decree Orders End of Movie 'Monopoly,'" read the New York Times headline the next day. The larger film distributors and exhibitors, the article said, had engaged in a "conspiracy" against unaffiliated theaters by dictating unfair terms that prevented smaller theaters from obtaining films. The larger companies would buy more films than they needed, give first choice to the theaters they owned and lease films to smaller companies only in “block bookings,” which included a fixed set of films, short films and newsreels.
The companies that were charged “consented to the final decree, which constituted an admission that the monopoly existed,” the Times reported.
So that was that, right?
Not really. For decades, movie moguls had fought court cases over their efforts to manage competition. They argued that films weren't ordinary products like can openers, furniture or furnaces. The upfront costs for feature movies were enormous -- almost $4 million for “Gone with the Wind,” in 1939 -- whereas most of their market value expired in a few weeks or months.
To counteract these high upfront costs, studios integrated forward, acquiring movie theaters, capturing the first wave of fans (and profits), and breaking even before sharing their wares with outsiders.
The movie companies lost case after case and consented to one decree after another while endlessly seeking ways to avoid sending their films to market like cabbages. Free marketeers and antitrust enforcers tried just as resolutely to bring to an end to collusion among producers to control distribution.
That battle wouldn't end until after World War II, but other antitrust controversies were a big item that spring.
In late March, International Business Machines Corp. and Remington-Rand Inc. -- companies then selling punch-card tabulating services -- were accused by the federal government, one of their largest customers, of creating a monopoly and charging uncompetitive prices on rentals of processing machines and the 2 billion punch-cards sold annually.
The government also brought a suit against General Electric Co., Westinghouse Electric International Corp., R.C.A. Communications Inc., and the National Broadcasting Company over monopolization of radio patents.
In 1932, big businesses’ troubles were hardly confined to profits and share prices. The business-friendly Hoover administration filed suit after suit to stop corporate collusion to control markets and keep prices from collapsing.
(Philip Scranton is a Board of Governors professor of the History of Industry and Technology at the University of Rutgers at Camden and the editor-in-chief of Enterprise and Society. He writes "This Week in the Great Depression" for the Echoes blog. The opinions expressed are his own.)
To read more from Echoes, Bloomberg View's economic history blog, click here.
To contact the writer of this blog post: Philip Scranton at firstname.lastname@example.org
To contact the editor responsible for this blog post: Kirsten Salyer at email@example.com