The studio system was a means of film production and distribution dominant in Hollywood from the early 1920s through the early 1960s. The term studio system refers to the practice of large motion picture studios (a) producing movies primarily on their own filmmaking lots with creative personnel under often long-term contract and (b) pursuing vertical integration through ownership or effective control of distributors and movie theaters, guaranteeing additional sales of films through manipulative booking techniques. A 1948 Supreme Court ruling against those distribution and exhibition practices hastened the end of the studio system. In 1954, the last of the operational links between a major production studio and theater chain was broken and the era of the studio system was officially over. The period stretching from the introduction of sound to the court ruling and the beginning of the studio breakups, 1927/29 1948/49, is commonly known as the Golden Age of Hollywood.
During the Golden Age, eight companies constituted the so-called major studios that promulgated the Hollywood studio system. Of these eight, five were fully integrated conglomerates, combining ownership of a production studio, distribution division, and substantial theater chain, and contracting with performers and filmmaking personnel: Fox Film Corporation (later 20th Century-Fox), Loew s Incorporated (owner of America's largest theater circuit and parent company to Metro-Goldwyn-Mayer), Paramount Pictures, RKO Radio Pictures, and Warner Bros. Two majors Universal Pictures and Columbia Pictures were similarly organized, though they never owned more than small theater circuits. The eighth of the Golden Age majors, United Artists, owned a few theaters and had access to two production facilities owned by members of its controlling partnership group, but it functioned primarily as a backer-distributor, loaning money to independent producers and releasing their films.
Sound and the Big Five
The years 1927 and 1928 are generally seen as the beginning of Hollywood's Golden Age and the final major steps in establishing studio system control of the American film business. The success of 1927's The Jazz Singer, the first feature-length "talkie" (in fact, the majority of its scenes did not have live-recorded sound) gave a big boost to the then midsized Warner Bros. studio. The following year saw both the general introduction of sound throughout the industry and two more smashes for Warners: The Singing Fool, The Jazz Singers even more profitable follow-up, and Hollywood's first "all-talking" feature, Lights of New York. Just as significant were a number of offscreen developments. Warner Bros., now flush with income, acquired the extensive Stanley theater chain in September 1928. One month later, it purchased a controlling interest in the First National production company, more prominent than Warners itself not long before. With the First National acquisition came not only a studio and backlot but another large string of movie theaters. Warners had hit the big time. The last of the "Big Five" Hollywood conglomerates of the Golden Age emerged in 1928: RKO. The Radio Corporation of America (RCA), led by David Sarnoff, was looking for ways to exploit the cinema sound patents, newly trademarked RCA Photophone, owned by its parent company, General Electric. As the leading film production companies were all preparing to sign exclusive agreements with Western Electric for their technology, RCA got into the movie business itself. In January, General Electric acquired a sizable interest in Film Booking Offices of America (FBO), a distributor and small production company owned by Joseph P. Kennedy, father of the future president. In October, through a set of stock transfers, RCA gained control of both FBO and the Keith-Albee-Orpheum theater chain; merging them into a single venture, it created the Radio-Keith-Orpheum Corporation, Sarnoff chairing the board. With RKO and Warner Bros. (soon to become Warner Bros. First National) joining Fox, Paramount, and Loew's/MGM as major players, the Big Five that would rule Hollywood and thus much of world cinema for decades to follow were now complete.
Reign of the majors
The ranking of the Big Five in terms of profitability (closely related to market share) was largely consistent during the Golden Age: MGM was number one eleven years running, 1931 41. Paramount, the most profitable studio of the early sound era (1928 30), faded for the better part of the subsequent decade, and Fox was number two for most of MGM's reign. Paramount began a steady climb in 1940, finally edging past MGM two years later; from then until its reorganization in 1949 it was again the most financially successful of the Big Five. With the exception of 1932 when all the companies but MGM lost money, and RKO lost somewhat less than its competitors RKO was next to last or (usually) last every year of the Golden Age, with Warners generally hanging alongside at the back of the pack. Of the smaller majors, the Little Three, United Artists reliably held up the rear, with Columbia strongest in the 1930s and Universal ahead for most of the 1940s.
The end of the system and the death of RKO
One of the techniques used to support the studio system was block booking, a system of selling multiple films to a theater as a unit. Such a unit five films was the standard practice for most of the 1940s typically included only one particularly attractive film, the rest a mix of A-budget pictures of dubious quality and B movies. On May 4, 1948, in a federal antitrust suit known as the Paramount case brought against the entire Big Five, the U.S. Supreme Court specifically outlawed block booking. Holding that the conglomerates were indeed in violation of antitrust, the justices refrained from making a final decision as to how that fault should be remedied, but the case was sent back to the lower court from which it had come with language that suggested divorcement the complete separation of exhibition interests from producer-distributor operations was the answer. The Big Five, though, seemed united in their determination to fight on and drag out legal proceedings for years as they had already proven adept at after all, the Paramount suit had originally been filed on July 20, 1938.
However, behind the scenes at RKO, long the financially shakiest of the conglomerates, the court ruling was being looked at as something that could be turned to the studio's advantage. The same month that the decision was handed down, movie-crazy multimillionaire Howard Hughes had acquired a controlling interest in the company. As RKO controlled the fewest theaters of any of the Big Five, Hughes decided that starting a divorcement domino effect could actually help put his studio on a more equal footing with his competitors. Hughes signaled his willingness to the federal government to enter into a consent decree obliging the breakup of his movie business. Under the agreement, Hughes would split his studio into two entities, RKO Pictures Corporation and RKO Theatres Corporation, and commit to selling off his stake in one or the other by a certain date. Hughes's decision to concede to divorcement terminally undermined the argument by lawyers for the rest of the Big Five that such breakups were unfeasible. While many today point to the May court ruling, it is actually Hughes's agreement with the federal government—signed November 8, 1948—that was truly the death knell for the Golden Age of Hollywood. Paramount soon capitulated, entering into a similar consent decree the following February. The studio, which had fought against divorcement for so long, became the first of the majors to break up, ahead of schedule, finalizing divestiture on December 31, 1949. The Golden Age was over. Through Hughes's deal with the federal authorities, and those by the other studios that soon followed, the studio system lingered on for another half-decade. The major studio that adapted to the new circumstances with the most immediate success was the smallest, United Artists; under a new management team that took over in 1951, overhead was cut by terminating its lease arrangement with the Pickford-Fairbanks production facility and new relationships with independent producers, now often involving direct investment, were forged a business model that Hollywood would increasingly emulate in coming years. The studio system around which the industry had been organized for three decades finally expired in 1954, when Loew's, the last holdout, severed all operational ties with MGM.
Hughes's gambit helped break the studio system, but it did little for RKO. His disruptive leadership coupled with the draining away of audiences to television that was affecting the entire industry took a toll on the studio that was evident to Hollywood observers. When Hughes sought to bail out of his RKO interest in 1952, he had to turn to a Chicago-based syndicate led by shady dealers without motion picture experience. The deal fell through, so Hughes was back in charge when the RKO theater chain was finally sold off as mandated in 1953. That year, General Tire and Rubber Company, which was expanding its small, decade-old broadcasting division, approached Hughes concerning the availability of RKO's film library for programming. Hughes acquired near-complete ownership of RKO Pictures in December 1954 and consummated a sale with General Tire for the entire studio the following summer. The new owners quickly made some of their money back by selling the TV rights for the library they treasured to C&C Television Corp., a beverage company subsidiary. (RKO retained the rights for the few TV stations General Tire had brought along.) Under the deal, the films were stripped of their RKO identity before being sent by C&C to local stations; the famous opening logo, with its globe and radio tower, was removed, as were the studio's other trademarks. Back in Hollywood, RKO's new owners were encountering little success in the moviemaking business and by 1957 the gig was up. The tiremen shut down production and unloaded the main RKO facilities, which were purchased by Lucille Ball and Desi Arnaz's company, Desilu. Just like United Artists, the studio now no longer had a studio; unlike UA, it barely owned its old movies and saw no profit in the making of new ones. In 1959 it abandoned the movie business entirely.
The studio system in Europe and Asia
While the studio system is largely identified as an American phenomenon, film production companies in other countries did at times achieve and maintain full integration in a manner similar to Hollywood's Big Five. As historian James Chapman describes,
In Britain, only two companies ever achieved full vertical integration (the Rank Organization and the Associated British Picture Corporation). Other countries where some level of vertical integration occurred were Germany during the 1920s (Universum Film Aktiengesellschaft, or Ufa), France during the 1930s (Gaumont-Franco-Film-Aubert and Path -Natan) and Japan (Nikkatsu, Shochiku and Toho). In Hong Kong, Shaw Brothers adopted the studio system for its wuxia films throughout the 1950s-'60s. India, which represents perhaps the only serious rival to the U.S. film industry due to its dominance of both its own and the Asian diasporic markets, has, in contrast, never achieved any degree of vertical integration.
For instance, in 1929 nearly 75 percent of Japanese movie theaters were connected with either Nikkatsu or Shochiku, the two biggest studios at the time.
After the system
At the beginning of the 1960s the major studios began to reissue older films for syndication and transformed in to mainly producing telefilms and b-movies to supply TV's demand for programming. Between 1969 to 1971 the industry underwent a severe recession and suffered a loss of confidence felt industry wide, due in part to youth-marketed art cinema and big-budget flops. The onset of Steven Spielberg's Jaws and especially George Lucas's Star Wars became the prototype for the modern blockbuster. Hollywood's recovery began in the 1980s with mega-hits such as the sequels to Lucas's Star Wars, The Empire Strikes Back and Return of the Jedi, Spielberg's back-to-back successes with Raiders of the Lost Ark and E.T. The Extra Terrestrial, and the development of home-video and cable television. From 1990 to 1995, New Hollywood turned into more of a conglomerate Hollywood and quickly dominating the global entertainment industry. As of 2007, five of the Golden Age majors continue to exist as major Hollywood studio entities, each as part of a larger media conglomerate: Columbia (owned by Sony), 20th Century Fox (owned by News Corporation), Warner Bros. (owned by Time Warner), Paramount (owned by Viacom), and Universal (owned by Comcast/NBC Universal). In addition, The Walt Disney Company's Buena Vista Motion Pictures Group has emerged as a major, resulting in a "Big Six." With the exception of Disney, all of these so-called major studios are essentially based on the model not of the classic Big Five, but of the old United Artists: that is, they are primarily backer-distributors (and physical studio leasers) rather than actual production companies.
Sony, in addition to ownership of Columbia, also has effective control of the relatively small latter-day incarnation of MGM and its subsidiary UA; under the Sony umbrella, MGM/UA operates as a "mini-major," nominally independent of but closely associated with Columbia. In 1996, Time Warner acquired the once-independent New Line Cinema via its purchase of Turner Broadcasting System. In 2008, New Line was merged into Warner Bros., where it continues to exist as a subsidiary. Each of today's Big Six controls quasi-independent "arthouse" divisions, such as Paramount Vantage and Disney's Miramax Films (which originally was an independent studio). Most also have divisions that focus on genre movies, B movies either literally by virtue of their low budgets, or spiritually for instance, Sony's Screen Gems and Buena Vista's Hollywood Pictures brand. One so-called indie division, Universal's Focus Features, releases arthouse films under that primary brand. Both Focus and Fox's arthouse division, Fox Searchlight, are large enough to qualify as mini-majors. Two large independent firms also qualify as mini-majors, Lionsgate and The Weinstein Company. They stand somewhere between latter-day versions of the old "major-minor" like Columbia and Universal in the 1930s and 1940s, except Lionsgate and The W.C. have about half their market share and leading Golden Age independent production outfits like Samuel Goldwyn Inc. and the companies of David O. Selznick.
- Bergan, Ronald (1986). The United Artists Story (New York: Crown). ISBN 0-517-56100-X
- Chapman, James (2003). Cinemas of the World: Film and Society from 1895 to the Present (London: Reaktion Books). ISBN 1-86189-162-8
- Finler, Joel W. (1988). The Hollywood Story (New York: Crown). ISBN 0-517-56576-5
- Goodwin, Doris Kearns (1987). The Fitzgeralds and the Kennedys (New York: Simon and Schuster). ISBN 0-671-23108-1
- Hirschhorn, Clive (1979). The Warner Bros. Story (New York: Crown). ISBN 0-517-53834-2
- Jewell, Richard B., with Vernon Harbin (1982). The RKO Story (New York: Arlington House/Crown). ISBN 0-517-54656-6
- Orbach, Barak Y. (2004). "Antitrust and Pricing in the Motion Picture Industry," Yale Journal on Regulation vol. 21, no. 2, summer (available online).
- Schatz, Thomas (1998 ). The Genius of the System: Hollywood Filmmaking in the Studio Era (London: Faber and Faber). ISBN 0-571-19596-2
- Schatz, Thomas (1999 ). Boom and Bust: American Cinema in the 1940s (Berkeley, Los Angeles, and London: University of California Press). ISBN 0-520-22130-3
- Utterson, Andrew (2005). Technology and Culture The Film Reader (Oxford and New York: Routledge/Taylor & Francis). ISBN 0-415-31984-6
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