Chapter 3 POL128.docx

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Ryerson University
Politics and Public Administration
POL 128
Joseph Zboralski

Chapter 3 POL128 - The main point to understand was that during the studio era, there were 8 corporations that dominated the distribution, production and exhibiton of the films - - Oligopoly is where a few corporations dominated an industry - The American film industry had a system in place that made sure that its major participants made large pofits, while maintaining high barriers to entry to keep away potential competitors - The major participants are Paramount pictures, Loew’s Inc, 20 Century Fox, Warner Bros and Radio Keith Orpheum, Universal and Columbia, - It was not Hollywood production that gave them their power, but it was thei worldwide distribution networks that gave them a large cost advantage, - The rise of the studio system - - - oligopoly control through ownership of production, distribution and exhibition represented the full grown hollywood studio system - - The first dozen of years were the years that were easy to go into and out of this industry - - Neither patent problems nor cost created long run barriers to entry in any sector - - 10 leading equipment manufacturers grouped together to form the MPPC, they tried to use their monopoly power over equipment to charge fees to producers and exhibitors - - The MPPC made its own distribution arm known as the General Film Company to earn more revenues. - - The purpose of the MPPC was to purchase or drive out of busies all possible competitors - - after the fall of the MPPC, Famous players became huge where it performed well through its three part strategy - - Famous players was successful for being able to differentiate its products, dominating exhibition through ownership of a small number of first run theatres. distributing national, then international level - - Famous players was able to differentiate its films from others through hiring stars - - Each motion picture became a unique good as a result of using stars in their films - - Early producers, such as the MPPC did not exploit their actor's and actresses images while Famous Players heralded certain played who seemed to be able to help the film earn high box office revenue - - Studios would make stars sign long term, exclusive contracts so that they cannot seek a higher salary from another studio - - the second aspect of their strategy was to focus first on national, than international distribution - - In movie distribution, there were cost savings that were a result of division and specialization in advertising, sales promotion, and service - - only the eight oligopolies were able to construct effective world distribution networks - - another part of famous player's strategy was to own a few first and some second run picture palaces to earn revenue - - Warner Bros and Fox invented sound media - - Members of the big I've were Paramount, Warner Bros, RKO and Fox-Loew's, Universal and columbia - - The introduction of sound in film created one new corporation: The Radio Keith Orpheum. This was a result of the Radio Corporation of America's interest in talkies - - RCA, meaning Radio Corporation of America was created by General electric and westinghouse electric to monopolize in radio broadcasting in america - - in 1929, the American film industry was dominated by 5 firms; Paramount, Loew's, Warner Bros, Fox and RKO - - The big five each owned substantial production facilities, a worldwide distribution network and a sizeable theatre chain - - The little three ( Universal, Columbia and United Artists) maintained only production and distribution units The structure of the studio system - During the 1930s-1940s, the big five were Loew’s Inc, paramount, RKO, 20 century Fox and Warner bros - - each of the big five mirrored the entire indstury, with most of their invested capital in theatres, not production. - Most corporate assets and revenues came from the theatre division - Universal, Columbia and United artists added their share of features to bring the total of the eight oligopolists to about ¾ of all features made - Films by smaller producers were mainly made up of low budget features, cheap westerns and serials. They were rarely in the first run urban operations of the big five - The oligopolist features took up 90% of the revenues of the box office while the margin producers made up the other 10% - The big five controlled vital intputs into theprocess of production, such as film processing, music publicshing, sponsorship of broadway plays and forays into television - There was no way to exclude independent producers at the time, as United Artists serviced independents - A second force for creative independence in film production came with the rise of powerful Hollywood unions - Effective union representation began in the 1930s, under the support of the federal government through the national recovery and wagner acts, at the end of the second world war, most Hollywood studio labor was unionized - - by the end of the studio era, the motion picture production was a completely unionized operation - With the existence of unions, creative personal began to freelance where they didn’t stay with one company for too long, thus hurting profits - The big five and little three colluded to protect their common interests, thus creating Motion Picture Producers and Distributors of America Inc, they organized self censorship - The original purpose of the MPPDA was to fight against state and municipal censorship restrictions. 12 years later they made enforcement machinery, member producers had to submit scripts and films for approval , if they were rejected, then it would become a box office failure. - The MPPDA never approved films regarding sex, violence, religion and politics - The most important factor for profitmaking was distribution - The important producers, to ensure reasonable costs, had to work with one of the members of the big five or little 3, if an independent producer could not negotiate a contract, they could not make a profit regardless of how promising the film may be - The purpose of United Artists was to allow independent producers to have a partner to distribute their film at a low cost. - After the second world war, the major businesses began accepting films from independent producers - Advantages of a national/international distribution network i) Low unit costs ii)Control over the key theatres gave the big five the power to exclude other distributors from a large share of the potential market; markets owned by the big five rarely accepted non-UA, non RKO independent products. Independent theatre owners preferred films from the major studies because it contained popular stars which guaranteed higher revenues - The introduction of sound did not affect their control, foreign taxes, tariffs and quotas did - - the effects of foreign governments were neutralized by the government working with the MPPDA - The motion picture export association was created to handle foreign matters, although there were battles and disagreements, the big five and little 3 always had their away - Big five owned mainly the large theatres, which were found in downtown or in regional outlying shopping areas - Paramount dominated the south, Nw England and the upper Mi
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