Release of address made by Hon. Ellis Arnall, President of the Society of Independent Motion Picture Producers at a meeting of the Motion Picture Industry Council

June 15, 1949

When the President of SIMPP, former Georgian governor Ellis Arnall, gave the following discourse, he presented a unique look not only at the status of the independent producer at the close of the studio era. But he also provided valuable information on several issues that plagued Hollywood (movie monopolization, foreign film restrictions, etc.). The complete text of the speech is given below.

SIMPP president Ellis G. Arnall. This memorial to the former Governor stands at the Georgia state capital.

Mr. Chairman, Mr. Co-Chairman, and Members of the Motion Picture Industry Council:

As President of the Society of Independent Motion Picture Producers it gives me much gratification in the knowledge that our Society has affiliated with the Motion Picture Industry Council and proposes to support the Council in its functions, efforts, and programs all of which undertakings, I am sure, will be most beneficial to the entire industry.

Tonight I wish to speak quite frankly to you members of the Council, expressing my views as to some of the problems and some of the possible solutions of the problems with which the motion picture production business is confronted.

In spite of the optimistic views expressed by some within our industry, the motion picture industry is today at the crossroads; and the events of the next few months may well determine whether or not conditions will grow worse within the industry, or whether the industry will surge forward and move on to greater success, prosperity and well-being.

In all candor, I full well recognize that there may be some disagreement with some of the views expressed here tonight. And yet, it is my thought that they should be expressed. They should be expressed so that you members of the Council who are so interested in the success of the motion picture industry may analyze all views to the end that the truth may be ascertained and a course of action adopted.

The future of Hollywood, the motion picture capital of the world, the future of the men and women engaged in the making of motion pictures, is absolutely dependent upon the success of the producer. The producer must have profits if he is to make meritorious quality pictures. The producer must have profits if he is to gainfully employ actors, directors, writers, artists, workers and technicians. The producer must not continually lose money if he is to stay in business. So the future of Hollywood is part and parcel of the future of the producer.

Today the motion picture producer finds his income restricted on the domestic and the foreign market.

Unfair and unreasonable quotas, restrictions and discriminations against foreign showings of American-produced motion pictures have mushroomed throughout the world until income from the foreign market has been curtailed and minimized. Even the earnings of American-produced motion pictures in foreign lands cannot be fully translated into dollars because of currency restrictions.

Illustrative of the strangulation of income to American producers by reason of restrictive measures promulgated by foreign governments, is the case of Great Britain.

Some within the American motion picture industry have, in the past, undertaken to deal with the British industry and the British government in an effort to work out some system of fair treatment for American-produced pictures. Of course, anyone should readily recognize that private American industry has no bargaining power when it is arrayed against a foreign government. Always in such instances the American film industry comes off the field a bad second best. Accordingly it has long been the position of the Society of Independent Motion Picture Producers that discussions and agreements having to do with quote, restrictions and discriminations against the American industry should be maintained at governmental levels and that it is the duty of the Government of the United States to represent and to speak for the American film industry in dealing with foreign governments as to quotas and restrictions. The Motion Picture Association of America and the Society of Independent Motion Picture Producers have agreed to approach this problem on a unified basis in an effort to bring about the active participation of the State Department of the United States in representing to the British government the unreasonable attitude of the British government toward the problems of distribution and exhibition of American pictures in Britain.

Some while ago, I visited the President of the United States and undertook to convey to him the idea that American motion pictures are the bast salesmen of American Democracy, the best ambassadors of good will, the best trade developers available to our government; that while the government is spending billions of dollars for ECA, millions of dollars for the Voice of America and programs designed to sell Democracy to the rest of the world, our government is leaving unused the most effective medium at its disposal — quality American pictures. This medium can be utilized by our government absolutely free of cost. The President readily agreed that our government has a responsibility to see to it that American-produced motion pictures be utilized to the fullest in carrying the message of Americanism and Democracy to the rest of the world. He expressed these views to the Secretary of State, Mr. Acheson, and requested Mr. Acheson to take such steps as feasible to the end that foreign countries would not discriminate against American-produced pictures and would maintain no unreasonable quotas or unfair restrictions against them. Great Britain is today the largest non-domestic market for our pictures and MPAA and the SIMPP are in agreement that vigorous and aggressive action by the State Department is imperative in the British situation. Our joint views were made known yesterday to the State Department and we hope for effective results.

The Motion Picture Industry Council and labor groups here in Hollywood have been most cooperative and effective in carrying to our governmental officials and tho State Department the insistence that our government stand up and fight for fair treatment to American motion pictures at the hands of the British government. I congratulate the Council, its officers and members for its effective action.

The proper approach to the foreign problem is this:

(1) Get rid of the idea of private deals with foreign industries and foreign governments.

(2) Insist that our government has a primary responsibility in representing the entire American picture industry; that our government has a direct responsibility in seeing to it that unemployment does not run wild in the American motion picture production industry; that our government has a direct responsibility in seeing to it that American-produced films are not discriminated against and that unreasonable quotas and unfair restrictions against our industry be eliminated.

(3) Determine that no illegality will be countenanced on the part of any segment of the motion picture industry in attempting to arrange private deals and agreements with other governments and private business interests in other countries and that in all activities, compliance be made with the laws of the United States.

(4) The American motion picture industry must never agree to a direct subsidy levied against American producers for the benefit of foreign motion picture production. If American producers subscribe to and agree to a policy of subsidy, they will have bargained away righteousness and their long-term future for the expediencies of the moment and ultimately will destroy themselves by reason of their subsidation of foreign competition. It is difficult to understand how any segment of our industry can agree to a program, even under compulsion, that will ultimately destroy the entire industry — including the parties to the agreement.

Government in the United States is not immune to pressures — particularly when the cause is right and just and honorable. So it seems to me that the Motion Picture Industry Council and all groups within the Council should continue, increase and step up our representations and demands to the President, to Congress, to the State Department, the Commerce Department and other State and Federal officials to the end that our government will become actively and aggressively interested in righting the battles that lie ahead to sec to it that the American motion picture producers receive fair and just treatment in the foreign market. If such a compaign[sic] is unsuccessful and unless the industry stands together in righting for fair treatment in foreign markets for American pictures, increased restrictions, quotas and destructive devices will be employed against the American film industry by foreign governments.

Any system that requires American producers to make their pictures in foreign countries instead of utilizing American human and physical resources for that purpose, is a foolish and absurd policy that will ultimately spell ruin for those depending upon American production for a livelihood. The producers are not to be blamed for this condition. They are forced into foreign production in order to utilize frozen funds. This is the type of thing that our government should concern itself about to the end that conditions may be again made favorable for producing American pictures in America.

While we all recognize the importance of ECA, the Marshall Plan, and other programs designed to aid in the rehabilitation of war-devastated countries and in assisting them in rebuilding their economy, I tell you tonight that when our own economy is threatened with disaster, it is time to re-evalute[sic] the application of the program to American industry -- particularly is this true of the motion picture business. Let me say it this way, we all want to see healthy economies in other countries and we are all anxious to help, so long as in so doing we do not pull down our own roof on our own heads, so long as we do not destroy the American system of competitive free enterprise.

So our foreign problems can be properly solved, it seems to me, only by aggressive governmental action.

On the domestic front, most of the troubles, in my opinion, confronting the producer are brought about by the prevalence of monopoly on the domestic scene. If I transgress the proprieties of this meeting, I hope you will forgive me but in speaking candidly and frankly, I feel that I must say that the greatest threat to democracy today is the threat that comes from monopoly, combinations, illegal combines and conspiracies. If these are permitted to grow and spread, our entire economic system will be so weakened that the economic future of men and women in America will be so doubtful that Communism or some other such hateful ideology might be accepted as a substitute for Democracy. The best defense we have against Communism is to constantly strengthen our democratic system so that every man and every woman may have an opportunity under our system to make of themselves what they will.

So the subject of monopoly and its effect on the American way of life is vital in a discussion of the future of American motion picture production. As Governor of Georgia, I saw at first hand the withering effects of the economic strangulation of the South brought about by the high-handed rate policies of the railroad monopolies. I conceived it to be my duty to do battle to bring about a change. During the time that I have had the honor to serve as President of the Society of Independent Motion Picture Producers opportunity has been afforded me to see once more at first hand the deadly effect of monopoly in the motion picture field.

As a result of the government's anti-trust action against the major producing companies to bring about divorcement of their theatre holdings, the American public has gained some knowledge of this particular phase of monopoly. However, I do not want to dwell tonight upon what I consider to be the evils of the production-exhibition combinations. I do want to discuss, however, the situation brought about by the growth of the restrictive circuit monopolies and buying combines which have sprung up and spread allover the country.

These represent a form of monopoly that has now reached such proportions that the whole economic structure of our industry here in Hollywood is threatened. These monopolies exist on a local scale, on state levels and in great regional areas. Within their own spheres of operation they have virtually eliminated the independent exhibitor as an economic factor in the industry. These monopolies are in a position to dictate terms to producers on a "take it or leave it" basis which has already forced many producers to stop making pictures and which will spell ruin to our entire industry if the condition remains unchecked. Soma while ago, the HOLLYWOOD REPORTER in speaking out against the dangerous, ruinous aggregations of concentrated, illegal monopolistic buying combines said: "One of the most devastating activities in the sale of our pictures to theatres and the proper money-returns to our producers for their product is the buying combines that have now infiltrated into every exhibition zone in the country --- The combine, once set up, immediately takes millions a year out of the returns our producers should justly receive --- resulting in our producers and their distributors taking an awful beating --- Our production business is losing millions a year through dealing with scavengers". Those are strong words but they point up the real dangers which face us by talking gently about the business practices of those outside of Hollywood which are bringing ruin to those inside of Hollywood.

Governmental agencies and the courts are aware of illegal actions like these taking place allover the country, but nothing seems to be done beyond a few powder-puff law suits. To be sure, a few cases have reached the United States Supreme Court like those involving the Schine Circuit and the Griffith Circuit which the Court passed on last year. The facts in those cases illustrate what I mean.

According to the court records, the Schine Circuit has 148 theatres in 76 towns in 6 Eastern States. Of these 76 towns, 60 are absolutely closed towns where Schine has either the only theatre or all the theatres in town, while in the other 16 towns there are other theatres, although Schine dominates the market. The Griffith Circuit in the Southwest operates in 85 towns, out of which 53 are completely closed with not even the semblance of competition.

The Supreme Court of the United States has labeled these operations as "the unmistakeable[sic] earmarks of the use of monopoly power with intent to expand an empire and to restrain competition". The Court pointed out very clearly that "A man with a monopoly of theatres in anyone town commands the entrance for all films in that area -- his monopoly power may be used with crushing effect on competitors. When the buying power of the entire circuit is used to negotiate films for his competitors as well as his closed towns, he is using monopoly power to expand his empire." And at whose expense have these circuits been expanding their empires? Not only at the cost of destruction of competitors in exhibition, but at the expense of the producers and, what is so important and so little understood, at your expense. When exhibition chains and buying pools use their monopoly power to squeeze the film rentals, they are depriving your own people of an opportunity of earning a living and are bringing ruin on the whole structure upon which full employment in Hollywood depends. This does not affect the independent producers alone, it affects the majors and every single member of the crafts and guilds represented here tonight. There is not a single person in our industry who can escape feeling the direct ruinous effects of the deadening hand of monopoly on our business. This kind of economic strangulation strikes straight at the vitals of Hollywood.

It is a simple law of economics that motion picture producers cannot payout more than they take in. If the unfair, grasping, avaricious practices of the exhibition monopolies are permitted to continue unchecked, the jobs of your people will disappear. AND DO NOT for a moment think that it is only the independent producer and those of your crafts or guilds who are employed by the independents who are suffering as a result of the grasping tactics of the exhibition combines.

Even the major companies have begun to feel the pinch which has been caused by the circuits' squeeze for profits. I certainly do not propose to speak for them, but the facts are obvious. You are all aware of the campaign launched within the last two months by 20th Century-Fox to impress upon theatres the country over the necessity for fair rentals for its pictures. I am sure you are all aware, too, of the shocking fact that motion picture exhibitors, as a whole, in 1948 made not profits, after taxes, of $200,000,000, while motion picture producers, as a whole, lost money on their operations. It is time that Hollywood becomes really awakened to what this state of affairs means.

It is here that all the creative effort of your people and of ours is devoted to the task of making pictures of which we can all be proud. It is here that all the "blood, sweat and tears" that go into every picture are expended. It is here that every bit of risk and gamble is taken by those who make pictures. It is here that people stake everything they have today on their hopes of reaping their reward tomorrow. And after all that is done, after all that effort, hope, creative ability, talent and money is put into a picture, the monopoly exhibitor who has contributed nothing to the creative process, who takes no risk since he will not buy a picture till he has seen it and satisfied himself that it is right for him, who has waxed rich on the product of this industry, simply sits back and dictates what we may receive, by his grace, for our efforts. And we find that the production end of the business is today receiving nothing for its contribution — not a penny of profit last year, while exhibition garnered in a clear profit of close to a quarter of a billion dollars. The continuance of such a condition can mean only destruction of production.

Some of the independent producers have for a long time warned Hollywood that this situation was bound to come about. Just five years ago, when everything was rosy and there seemed no possible let-down from the lush period in which Hollywood then found itself, Samuel Goldwyn, in a warning which the HOLLYWOOD REPORTER featured across half its front page, pointed out that "The repercussions of vicious film buying practices by some of the major theatre circuits and many of the independently owned circuits -- some of the actually illegal monopolies in their respective territories, and so charged by the Department of Justice (and I might add, parenthetically, so proven in the Courts since that time) -- already are exploding in the Hollywood creative center . . . The very existence of thousands of workers in the Hollywood creative ranks is concerned with these conditions. Prevailing pernicious and unfair practises[sic] by which many large and small independent exhibitor units deprive the producer of their rightful share of the box-office dollars are bringing insurmountable financial obstacles in the path of production progress."

"If present policies of unfair division of box-office receipts are permitted to continue," Mr. Goldwyn said, "the producer of pictures cannot cope with the problem of diminishing dollars against the increasing costs of production plus the impending world competition. . . . after the war’s conclusion*** To capitulate to the prevailing unfair practises[sic] is certain artistic and financial disaster. A vast number of circuits exercise monopoly of exhibition in their theatres, selfishly refusing fair terms. However profitable their business seems to be for the moment of lush wartime spending, they will kill the source of their future existence."

None of us takes any satisfaction in the fact that this warning has come true. The important thing is that action must be taken today — and not five years from now — which will help to make sure that real doom and disaster does not come upon us. As long as these circuits and combines continue in existence, arrogantly dictating what they will and will not pay, using and abusing the po\ver of their monopoly positions, refusing to permit the forces of competition to function, you can rest assured that all Hollywood will suffer. I want no special privileges for those whom I represent — and I am sure that the same is true of each of you. But I do want — and I insist on it as a basic right under our American system — all of us to be free and unfettered in the pursuit of our livelihoods.

It is of vital importance to the health of our industry that these exhibition monopolies and buying combines which exist around the country be broken up. Concretely, this means legal action of two kinds. The first is the bringing of suits such as the Society of Independent Motion Picture Producers and many of its individual members have brought in Detroit, where a complete monopoly of the exhibition field has dried up film rentals to almost a vanishing point. It is our aim to have these vicious practises[sic] stopped by court order. The second is determined action by the Anti-trust Division of the Department of Justice to break up these monopolies all over the country.

It is tremendously important that" all Hollywood groups directly affected by motion picture production urge the Department of Justice, Senators, and Congressmen to take all necessary steps to accomplish this result.

At the same time, I think it equally important for the Motion Picture Industry Council to embark on a course of enlightening the public to the facts on which our lives out here are dependent. I believe this Council has a responsibility to those whom it represents and to our entire industry to take it upon itself to see to it that our side of the case is laid before the public. Let the public know how the creative well of Hollywood is being dried up by these forces of economic strangulation.

Our entire economic system is built on the premise that fair and open competition in a free market is the only way to have a healthy economy. Under that kind of a system we can all take care of ourselves. Where that freedom and health is destroyed, our existence is endangered. We must all fight shoulder to shoulder to protect the very life of the business which those whom you and I represent have devoted their lives to building.