2
A Game of Freeze-Out

There was a time—it was the golden age—when the merchant of films or apparatus did his business directly with the consumer; he knew him. The business took care of itself because the offering was equal to the demand. The dizzy growth of the industry in the course of these last years has changed this happy state of things. The customers have multiplied to such proportions that the manufacturer would need a magic power to know them all.

—Georges Dureau, Ciné-Journal, no. 1, 15 August 1908

In 1907 a nickelodeon manager got films wherever and however he could. The problem was to get enough of them. Nothing prevented an exhibitor from purchasing films directly from the producers, but this was not very practical for a program that changed twice a week or even daily. Why continue to buy films that would be shown only a limited number of times? It made more sense to rent them from distribution exchanges that purchased them from the producers. Some of the rental exchanges were organized by nickelodeon owners, or former owners, who had accumulated a collection of films. It was a logical step for a supplier of lantern slides and optical goods, such as George Kleine in Chicago, to add a stock of films for rent or sale. In other instances, the producers set up separate branches to handle rentals: this was the case with the Vitagraph Company and the Lubin Company, for example. Any exchange that could get hold of enough films to keep a number of exhibitors supplied week in and week out was making good money as well. William Swanson, one of the most successful of the exchange men to enter the business in 1907, said he soon achieved an income of $20,000 a week.¹

While exhibitors in 1907 might run films made at any date, showing them as many times as the public still wanted to see them, and indeed had to take any films they could get their hands on, the fact is that audiences were so motion-picture crazy that they were going repeatedly and wanted new subjects all the time. Films, like vegetables, were a perishable product. If an exhibitor only had old films, the customer might go down the street to see something new. Of course, this would not have been possible in the smallest towns with only one show, but the cities with their rows of nickelodeons were the largest consumers and represented the significant market for determining business practices.

The system by which the exchange would make up the program that the theater showed began in this chaotic period. The exhibitor who lived far from exchanges, as was often the case in the West, as William Swanson explained, had to take what was shipped, and there was not much opportunity to choose. Among those who lived near exchanges and collected and returned films "over the counter," there were those who did not care much anyway. They just sent over the projectionist with the previous day's reels with orders to get some more. Others, who did care enough to try to select, would get the best films only if they were good customers, or went into the back room to give a bribe to the booking man. Film quality was not always so much a matter of content or style as of condition: given the shortage of product that existed, a good film was the one that was not all scratched up ("rainy") and whose perforations and splices would still hold up in projection. Among the many conditions that the producers said they wanted to correct was the showing of seriously scratched, dirty, torn prints with images that danced drunkenly on the screen. Their concern was couched in terms of "the good of the industry," an expression that can usually be understood as "the good of ourselves." What worried producers the most, I suspect, was that some rental exchanges and exhibitors were making a higher degree of profit on their investment than those who actually manufactured the product.

The production of films in America in 1907 was still a handcrafted amusement industry, trying in vain to keep up with the rapidly expanding market. There were only about 1,200 films of one reel or less, mostly less, released in the entire United States in that year, and only about 400 of them were made in America. Most of the others were French, with the largest number coming from Pathé Frères. This was not much to feed thousands of hungry nickelodeons. Production had to be expanded to meet the demand if the new industry were to flourish and become stable. Some people still considered motion pictures a temporary craze, while others saw a vast future. But expansion was delayed by the fights for control of the industry. Edison's production even slipped back from its previous output during 1906 and early 1907. Nonetheless, in the United States, until the production-distribution-exhibition systems stabilized, there was some reluctance to invest greater capital.²

In 1907 there was a serious economic recession. That did not stop people from going to the nickelodeons in ever-increasing numbers, but it did give pause to the production companies, with their investments in this new enterprise, and even some alarm to the Empire Trust Company, which was a major lender to the American Mutoscope and Biograph Company. During that summer, the bank sent Jeremiah J. Kennedy, a civil engineer from Brooklyn who seems to have specialized in administering all kinds of companies (perhaps his profession was really acting as a troubleshooter), to look into the affairs of Biograph. He stayed, and before long he became the leading force in organizing the entire motion-picture industry. During these years Kennedy never gave up his positions in various other businesses, and it is clear that he was a very energetic man. Said Richard Hollaman of the Eden Musee: "A more resourceful, aggressive, persevering and point-getting man I have never met. … He is certainly one century plant."³

The previous decade's legal contenders now settled into two hostile camps. The latest court decisions had in effect held all the motion-picture cameras in use to be infringing Edison's patents, with the notable exception of the Biograph Company's camera. The Edison Company instituted a new round of lawsuits or threatened suits for infringement against several of the production companies, and then moved ahead to negotiate a settlement by offering each major company a license to use Edison's patents. They began their negotiations with Pathé Frères of Paris. This was logical, as Pathé had been the dominant producer on the world market for a long time and still held what was by far the largest part of the American market in 1907. Once Pathé fell into line, Edison business manager William Gilmore and Edison lawyer Frank Dyer figured, the others would certainly agree to the same terms. Pathé Frères was the one company that would have had the resources to challenge the Edison claims, a challenge later made and won by others. But Pathé did not contest. In Europe, of course, Edison's patents had no effect, but that had not stopped Edison from seeking to hamper Pathé's American distribution. Until licensed by Edison in December 1907, Pathé imported only positive prints; after that, it brought in negatives and printed the positives in America. It seems on the face of it that Edison must have agreed to freeze out much of Pathé's foreign competition on the American market, as that is in fact what happened, giving Pathé a decided advantage in what was the world's biggest market. French producers reported in October 1909 that for 5 prints reserved for France and 40 for Europe, 150 would be ordered by the United States.⁴

It was Edison's actions that had resulted in giving over the American market to the foreign competition around the turn of the century. Now the Edison Company's new schemes would lead to the American film industry's gaining control over all foreign competition, including Pathé Frères. In 1907, 60 percent of the subjects released on the American market were of foreign origin, but by the last six months of 1909, foreign productions represented less than 50 percent of films released and the percentage was declining. The goal of overcoming foreign competition was never openly discussed, yet it was surely in the minds of Edison and his colleagues. Later, industry spokesmen made a virtue of the fact that the dominance of foreign films had ceased. European films, it was claimed, failed to express the moral values of the native product. But at the time the plot, if plot it was, began, the values expressed in films the world over were scarcely distinguishable. In the beginning the universality of the film medium was particularly evident: the same kinds of subjects and styles appeared the world over. It could be argued that some French films portrayed actual nudity, while American films showed pretended nudity (actresses wearing flesh-colored leotards), but the risqué spirit was the same.⁵

Patent litigation was a regular method of business for Edison, as it was for George Eastman and many others. It was common business practice, and it evidently seemed proper to Edison. There is a confident self-righteousness in his statements about his patents. He had a habit of patenting everything in sight, without having successfully invented all of the devices he claimed. Eventually he did lose suits based on some patents. But then, as now, the small businessman did not have the resources to fight endless legal battles even if he might win them in the long run. He had to go along with the greater power or face financial ruin. In any case, the latest court decisions made it appear that Edison held the strong suit, and most companies were not prepared to contest. Everyone was tired of the costly lawsuits.

Once Pathé fell in line, most of the producers followed. Vitagraph, Kalem, Lubin, Méliès, Selig, and Essanay joined Pathé to form the Edison Licensees. Biograph held out, as did George Kleine. Here is where the history begins to get a bit complicated.

Edison, Vitagraph, Selig, Lubin, Biograph, and the two French firms, Pathé Frères and Georges Méliès, were all film-production companies founded in the first few years of the industry. Now they were the old-timers, the establishment. Pathé, as we have noted, was the giant producer, not only in America but all over the world. In terms of the number of film subjects released (which is not an indication of the copies sold, as Charles Musser has demonstrated in his study of Edison records), Vitagraph was by far the largest of the American producers in 1907, Lubin and Selig

the next largest, with Biograph and Edison the last. It is amusing to note that from the viewpoint of 1913, Frank Dyer of Edison remembered Biograph in 1907 as being the largest domestic producer and Edison's active competitor. I suppose he was actually thinking of other aspects of their rivalry, or of an earlier time.⁶

At the end of 1907, both Kalem and Essanay were still small and unimportant production companies. The Kalem Film Company was founded early in 1907 by two men who had been with Biograph from its early years: Samuel Long, who had been in charge of the laboratory, and Frank Marion, responsible for scenarios and production. Twenty percent of the capital came from George Kleine, the Chicago exchangeman who started out as a dealer in lantern slides and optical goods. Kleine was named president of Kalem, although he was based in Chicago and Kalem was in the New York area. Two Biograph actors were soon persuaded to join Kalem, Sidney Olcott as director and Gene Gauntier as leading woman and, after a short time, the company's scriptwriter. The first Kalem production was The Runaway Sleighbelle, released in the spring of 1907. According to the memoirs of Gene Gauntier, Kalem's owners felt a sense of achievement in being accepted as an Edison licensee. Charles Musser says that the inclusion of Kalem among the licensees was designed to appease Kleine, because the Edison Company wanted to exclude mere importers of film, such as the Kleine Optical Company, from the group. When Biograph and George Kleine decided to fight Edison's group, it became necessary for the Kalem owners to buy out Kleine in April 1908 in order to avoid conflict of interest.⁷

The Essanay Film Manufacturing Company, a Chicago firm, also claimed existence from the beginning of 1907, but the first Essanay release, called An Awful Skate, did not appear until 31 July of that year. Essanay was founded by George K. Spoor, who was a thirty-three-year-old former theatrical road-show manager turned movie exhibitor, and Gilbert M. "Broncho Billy" Anderson, formerly of Edison and Selig, who was to be director, scriptwriter, and leading actor. The name was formed from the initials of the two men, "S" and "A," just as Kalem's name came from the initials of its three founders, Kleine, Long, and Marion. According to the Edison plans,

Essanay, as the newest and least important company, was to be given a license only if Biograph failed to join, in which case the licensees would need to be strengthened.⁸

Georges Méliès of Paris was a prestigious producer, but the amount of film he turned out in his handcrafted production system, while amazing in its way, was negligible when compared to that of a big production factory like Pathé Frères. The Méliès imports would not provide any serious competition for them. The Edison license was granted to the Méliès Company through its U.S. representative, Georges's brother, Gaston.

As for George Kleine, he not only was an importer of foreign-made films but also had served as the Chicago agent for major American companies such as Vitagraph and Edison. According to the testimony of J. Stuart Blackton and others, he was one of the leaders of the scheme to organize the industry under the Edison patents, going back and forth between the Chicago producers, the Edison Company, Pathé, and Eastman Kodak and organizing the meeting of manufacturers in November 1907 at the Hotel Astor. When the Edison interests decided that Kleine Optical could be licensed but sought to limit its imports to only two brands of foreign films, Kleine joined forces with the other side, becoming a Biograph licensee. It was said that Kleine performed a diplomatic role, trying to bring the sides together. But Kleine, as one of Biograph's licensees, was in a weak position as far as Kleine Optical Company was concerned. He had already lost the Chicago agency he once held for the leading American producers. A memorandum of a proposed agreement of 29 July 1908, from Dyer of the Edison Company to Marvin of the Biograph Company, had

its terms been accepted, would have given Kleine the right to import 5,000 feet of film a week, while the other Biograph Licensees would be allowed to import only 2,000 feet a week. Kleine ended up with less in the final settlement of the disputes.⁹

Following the decisions of the courts that the Biograph camera was the only one not to infringe Edison's patents, the Biograph Company was unwilling to join as anything less than equal partner with Edison, sharing fifty-fifty in the royalties. Biograph strengthened its position by buying the rights to the Latham patent in early 1908. This was the patent covering the so-called Latham loop, which prevented the film from breaking in the projector (this loop still exists in all projection systems), and it was said to apply to cameras as well until later lawsuits denied the claim. The loop was not essential in the days when films were less than 100 feet because there was not enough tension built up in that short a length to break the film. But much longer films, several hundred feet or even a thousand, were already in use by this time. Jacques J. Berst, Pathé's American manager, admitted that he published articles in the trade papers during that year of open warfare saying that "the Latham patent was of no value … but, in fact, I knew very well it was not true." On 21 March 1908 Biograph also signed an agreement with Armat Moving Picture Company, complicating the question of the Armat-Jenkins patents. Biograph could sue Edison and Edison could sue Biograph, and nobody would win, especially not the exhibitors or the exchanges. Frank Dyer had run up against a man with a bigger bluff than himself: Jeremiah J. Kennedy.¹⁰

A committee composed of potential Edison-licensed manufacturers (including for the moment Biograph, Kleine, and the other importers who would later join the Biograph licensees) called the exchange owners together at a conference in Pittsburgh on 16 November 1907, where they formed the United Film Services Protective Association, with William Swanson as president. Their program consisted of the following points:

1. Renters will purchase film only from the licensed producers and importers;
2. Films will not be duped (i.e., copied);
3. Films will not be sub-rented (i.e., rented to another exchange);
4. Films will not be sold secondhand (i.e., not to another exchange);
5. Used film will be returned to the producer.¹¹

The stated purpose of the policy was to get rid of the old, worn prints that the producers felt were giving the industry a bad name. A more important reason was not articulated, however: to ensure that more profits came back to the producers and less to the distributors and exhibitors. This program, proposed by the producers and accepted by the distributors, was ratified at a meeting held in Chicago on 14 December 1907, but here the attempt to organize the whole industry collapsed because Biograph held out.

Biograph's output alone was not yet sufficient to fill a program for the exchanges. To give Biograph more strength on the market, they issued their own licenses to importers of foreign films: Kleine Optical Company; Williams, Brown, and Earle; the Charles E. Dressier Company (the film interests were identified with Isaac W. Ullmann); and the Great Northern Company, representing Nordisk Films of Denmark.¹²

On 8 February 1908, at a meeting in Buffalo, the Edison forces managed to get most of the exchanges to go along with them and sign allegiance to the producers under the Edison patents. At this meeting the organization of distributors shortened its name to the Film Service Association, frequently further shortened to the acronym FSA. There is conflicting testimony on qualifications for membership in this ostensible federation of exchanges that was actually controlled by the Edison forces. It seems that the producers could join but could not become officers. In any case, some producers—Vitagraph, Lubin and Essanay—maintained separate exchange arms, and these were entitled to membership.¹³

In a trade advertisement of 14 March 1908, H. N. Marvin and J. J. Kennedy of Biograph announced, "We were urged to join the Edison-Pathé combination but we refused…. We will protect our customers." War was now declared. All the efforts to organize and stabilize the industry were as yet without much result. Biograph and the group of importers licensed by that company still sold prints outright, to exhibitors or exchanges. This made it possible for them to continue to do business even though Edison had most of the exchanges locked up. Under the Edison license agreements and the rules of the Film Service Association, film was supposed to be returned to the manufacturer, but in fact this was not enforced. The return was postponed because production was not yet high enough to allow the exchanges to get by on the new films alone. During this time, however, the Edison licensees paid their royalties for the use of the patents. Still the largest producer, Pathé Frères paid between $17,000 and $18,000 to Edison during 1908.¹⁴

At the 11 July 1908 meeting of the FSA, a price system was established according to the day of release, which infected the whole distribution-exhibition complex with the disease of release date for the next several years. Only films shown on the first day at the first hour of release were truly "fresh" and valuable, like so many eggs fresh from the hens. After that, the price and therefore the value, went down. After thirty days, films were practically useless and became known as "commercial."

On 27 August, 1908 Kleine received a telegram from J. J. Kennedy of Biograph: "Edison Company reports that aggressive price cutting of your Philadelphia representative is likely to embarrass final negotiations with Edison Licensees. We recommend moderation in this respect; negotiations proceeding satisfactorily." Kleine obeyed promptly by getting rid of the Philadelphia exchange altogether, a branch that had opened just a few days earlier. By 23 September 1908, Kleine had signed a new contract with Gaumont for 2,000 feet a week, and with the signing of the Patents Company agreement, he was limited to this amount plus 1,000 feet from Urban-Eclipse each week.¹⁵

There were meetings of the producers all during that summer and fall of 1908 to try to reconcile the differences and bring the Edison and Biograph groups together. The meetings extended to Europe: George Eastman was in negotiation with the European producers, who were trying to organize along the lines of the Edison licensees. They were encouraged by Eastman because he presumed there could be a recognition of Edison's patents, which were unprotected in Europe, but Pathé would not cooperate with that scheme. It was in Eastman Kodak's interest to be involved in whatever organizing was done in Europe since at this point its biggest market was there.¹⁶

In November, Blackton of Vitagraph was in Paris meeting with Pathé Frères and Nordisk (Great Northern), the Danish firm, working on an alliance of French producers. This also came to nothing, but it makes one wonder if a defection from the

Edison combine was being considered by Pathé and Vitagraph. There is some support for this theory in the office that Pathé had opened in New York, rumored to be a rental exchange that would provide films to the independents. It was announced in September that Pathé decided against doing this. Perhaps research among the Pathé papers in France will one day clear up these mysteries, but in any case, the U.S. producers finally came together. Everyone could see that the industry could only be organized if Edison and Biograph agreed.¹⁷

At last, Frank Dyer gave in and granted parity to Biograph. The Motion Picture Patents Company was formed and its rules took effect on the first of January 1909. The Patents Company was a holding company for the patents belonging to all the producers. There were sixteen patents involved, coming from Edison, Biograph, the Armat Company, and Vitagraph and covering the issues of the film stock, the cameras, and the projectors. The Patents Company issued licenses, on the payment of royalties, to producers, distributors and exhibitors. Stock shares in the Patents Company were held equally by Edison and Biograph, except for those few needed to qualify the directors, and were kept by the Empire Trust in order that neither could sell without the other's knowledge. The scheme was a clever attempt to avoid the antitrust laws. The licensed producers who did not share in the profits as directly as Edison and Biograph must have resented their domination, and indeed, there were signs of rebellion at one time or another. But outwardly all was peaceful. No one actually bolted ranks until the Patents Company was ordered disbanded by the federal courts. The Patents Company licensed the same production companies from the beginning to the end of its existence, with the exception of the belated addition of Kinemacolor in 1913 (see chapter 13), and Méliès' American production company.¹⁸

At the time of the founding of the Patents Company in December 1908, the name of Georges Méliès appeared in the trade papers among the new licensees, but shortly thereafter, it disappeared from the list. It seems that Gaston Méliès, who was something of a rascal, had recently ceased sending back both money and reports to his brother in Paris and, trading on the Edison license granted in both their names to obtain financial backing, had set up his own production company in the United States. How much Georges knew and when he knew it are still in dispute, as is the date when Gaston stopped sending any money. Nevertheless, in the fall of 1908, Gaston persuaded the Edison Company to reissue the Méliès license in the name of this "Georges Méliès Company" and to acknowledge his partners James Lodge and Lincoln J. Carter. The company never produced films but did have a couple of Georges Méliès' French productions to distribute. Lodge and Carter, meanwhile, had secretly sold controlling stock in the company to one Max Lewis, who owned a chain of independent exchanges. This sale went against the terms of the agreement with Edison and certainly would not have been permitted to any licensed manufacturer of the Patents Company.

Claiming ignorance of these dealings, Gaston sided with the Patents Company when they refused to deliver the license that had actually been signed with all the others on 18 December. By sticking with the Patents Company members in the lawsuit that followed, Gaston got his reward in the form of a license to produce (still in the name of Georges Méliès) in the United States, about six months after the founding of the Patents Company. The other "Georges Méliès Company" eventually lost its suit against the Patents Company. It was many years before Georges Méliès was to find out what had happened with his brother and his money, and for many years the two branches of the family did not speak. Gaston Méliès set up his studio in south Brooklyn under the direction of Wallace McCutcheon, who had been chief director of Biograph when David Wark Griffith arrived there late in 1907. The first production of the American Méliès company was The Stolen Wireless, released on 13 October 1909. Later the company became known as "G. Méliès," to distinguish it from Méliès Star Film, the French firm.¹⁹

The further maneuvers of the Patents Company scheme to control the motion-picture industry are well illustrated by the involvement of Eastman Kodak, the leading supplier of raw stock for the industry and a key player in this game of freeze-out. The same day that the Motion Picture Patents Company came into being, an agreement was signed between the Patents Company, Edison, and Eastman Kodak, under which Eastman Kodak became the exclusive supplier of raw stock to licensed producers in exchange for ceasing to sell to anyone else. There was a minor exception or two, permitting the sale of raw stock for scientific use, for example, but nothing of economic importance. The agreement also provided that Eastman Kodak would collect royalties from the producers on behalf of the Patents Company for the use of the film patents. This last provision was considered of major importance by the Edison people because it protected the Patents Company from the antitrust laws. It was possible for Eastman to call a halt to the exclusivity clauses of the contract with sufficient notice, but they would still have to continue collecting the royalties for the Patents Company.²⁰

That Eastman's involvement, together with that of Pathé, was crucial to the settlement is shown by a letter of 23 November 1908, from Marvin of Biograph to Kleine in Chicago, informing him that settlement was near but that the negotiations were delayed pending the return of George Eastman to the United States. Eastman would certainly have been better off with an open market for its product: the major producers had to have the raw stock, and Eastman was, for practical purposes, the only manufacturer in the country and by far the most important one in the world. However, the Patents Company agreement gave the company a guaranteed market, and Eastman Kodak would have faced a lawsuit based on "contributory infringement" if it sold to nonlicensed producers. Judging by the methods being used to organize the industry, it seems very probable that the Patents Company promised to try to freeze out the stock manufactured by Lumière in France and Ansco in Germany. Marvin's letter to Kleine in November 1908 provides some evidence for this: "I believe your best possible interests will very soon lie in the direction of the highest possible tariff on imported goods." Indeed, it is difficult to see how it would not have been against Kleine's interest as an independent importer. As a Patents Company licensee, however, Kleine would soon be able to import negatives and make his own prints in the United States with Eastman Kodak stock purchased locally, as Pathé Frères did. This meant less footage on which to pay duty.²¹

It was inevitable that the Patents Company would use all its power to prevent independents from obtaining a regular supply of raw stock, and for a period of time they were partly successful. Eastman Kodak was not willing to lose any established customers and had insisted on supplying Biograph as well as the Edison group the previous year. In the course of the negotiations Eastman worked toward the goal of making sure that every producer of any importance was a member of the Patents Company. There would be a number of attempts to produce and market raw stock in the United States during the years of the independents' struggle against the Trust, but no serious and lasting rival to Eastman Kodak emerged.

By 14 February 1911, the independent market had become a significant one, and the power of the Patents Company was beginning to weaken. On that date, the original agreement was amended to permit Eastman to sell to the independents, with only a small financial advantage for the licensed producers. In 1913, by the time the Patents Company was under legal attack from the United States government, Eastman Kodak was having its own legal problems. The case of the Rev. Hannibal Goodwin's prior claim to the process of manufacturing film stock was finally settled out of court, at a cost of $5 million. In the long run, however, Eastman Kodak survived its troubles and the Patents Company did not.²²

When the second annual meeting of the Film Service Association was held in January 1909 at the Imperial Hotel in New York, some sixty to seventy-five members found themselves presented with a new license agreement that had provisions quite similar to the old one, although it was not an agreement with Edison. Rather, it was with the Motion Picture Patents Company, and this time it had teeth in it. In effect, the FSA was out of business, although it continued an ineffectual existence for another year, primarily as a fraternal business association, for sociability and exchange of information. In any event, there was no longer anything for it to negotiate: its members accepted the terms offered by the Motion Picture Patents Company or they were finished. This included the president, William Swanson, who almost lost his film-exchange business, but, survivor that he was, he left the FSA and started up again, becoming one of the leaders of the independents.

One hundred and fifty exchanges signed up with the licensed group, but by July of 1909 there were only about one hundred licensed exchanges in the United States. About six thousand theaters paid two dollars a week each to the Patents Company for a license, while two thousand or more remained independent. As was to be frequently pointed out by the independents over the next few years, many of these exhibitors had purchased projection machines with no strings attached. They owned them. Now, the Patents Company said that in order to use the machines they would be obliged to pay two dollars each and every week that they remained in business. Otherwise, they would be sued under the patents held by the Patents Company. In practice, the collection of the two-dollar fee proved onerous, and the Patents Company assigned this task to the licensed exchanges that dealt with the exhibitor. In time, the exchanges simply added it on to the price of the contract, and in the

competition for customers, it mostly "disappeared" as far as the exhibitors were concerned.²³

Even as the exchanges and exhibitors were signing up, there were the rumblings of an independent movement of protest, which will be detailed in a later chapter. For the year 1909, though, the basis of an organized industry existed, and now the producers could confidently go forward to invest in expansion, with new and enlarged studios and laboratories, with increased production staffs, and with new assembly-line production methods. Now there could be a standardized product, easily marketed and consumed. Now they could turn out the sausages with enough regularity to satisfy the omnivorous nickelodeon customers.

Each producer had a set releasing day or days every week and a set number of reels to release. For the most part the exchanges contracted by standing order for their output and established a contract to supply a regular service to their customers. Exhibitors could get a variety of service contracts. First-run houses signed up for the first day of release of each film from the licensed producers. They knew from the trade periodicals which films they would get on any date. Most nickelodeons settled for a smorgasbord, getting one film absolutely fresh, one a day old, one a week old, one over thirty days, and so forth. Poor nickelodeons, or ones that had no nearby competition, could do just as well with a program composed entirely of "stale" films. The exchanges negotiated the price for the service separately with each exhibitor, and struggled, often in vain, to keep their customers from competing with each other by showing the same films at the same time. The exhibitor's service price was about the only part of the system that was not standardized. The exchanges paid a fixed price per foot for the films they purchased from the licensed producers. They would buy one print or more, depending on the popularity of the brand. At first they were compelled to buy at least one of everything because of the product shortage.

Asked why there should be a fixed price for films that had variable production costs, J. J. Kennedy explained in 1914 that "it would prevent a regular supply being issued" if there were negotiations and separate orders for each subject. Instead, the price represented an average of such production costs. Asked if the standing order system took away the incentive to improve film quality, he maintained that if a producer increased "average quality" there would be an increase in the average number of copies sold for each picture.²⁴

The system fell apart to some extent as intense competition led to unethical practices. The exchanges had the power of life and death over exhibitors, because without the regular supply of films delivered promptly and reliably, the nickelodeon could not survive. Exchanges could force exhibitors to pay kickbacks, they could threaten to put an exhibitor out of business if he or she did not take their service, they could set up their own theater to which they would give preferential treatment. In some areas, exchanges combined interests and would not allow an exhibitor to change from one to another without paying a penalty price increase. At least these were the reasons Kennedy gave for proposing, at the end of 1909, that the licensed producers should establish their own exchange system.

The early attempts to organize the industry were made by people who conceived of it purely as a business with a product to sell. They emphasized its uniformity and standardization and freshness. They wanted to popularize brand names, not individual items. The very names they used indicated the state of mind they brought to the

business. They were manufacturers, and the product they manufactured was made in a factory. Most of the companies had the word "manufacturing" in their official name: the Edison Film Manufacturing Company, the Vitagraph Film Manufacturing Company, the Lubin Manufacturing Company. The American Mutoscope and Biograph Company was nearly the only one not to include it, probably because they considered their name to be too long already. They dropped the "American Mutoscope" part of it in the spring of 1909, as they had ceased to produce Mutoscopes for the most part, and they then became the Biograph Company. In any case, most of the companies eliminated "manufacturing" from their names within a few years, reflecting a change in attitude toward the moving picture. The same shift in attitude explains the gradual change from "manufacturer" to "producer."

The major producers in 1907 were for the most part respectable businessmen. Not all had impeccable backgrounds: for example, some years earlier the partners in Vitagraph had been part of the cheap vaudeville circuit, or appeared in carnival shows. However, that unfortunate fact could be overlooked now that Blackton, Smith, and Rock were well-established citizens, heads of a successful business. And if a part of the wealth of the respectable producers came from a disreputable source—the dirty, dark, and smelly nickelodeons showing risqué entertainment—in a hypocritical Victorian society, that fact too could ordinarily be ignored. But the growing numbers of nickelodeons began to make it difficult to ignore. The entertainment business was on its way to becoming a major industry. By 1915 it would be claimed (with considerable exaggeration, we now think) to be the fourth-largest industry of the entire United States.

These same producers were good Progressives, committed to the imperialists' responsibility toward the underprivileged classes. They believed that the unfortunates must be educated and learn to share the same value system as the middle classes. In the Philippines, where America was engaged in its virgin experience with colonial responsibility, Progressives urged that motion pictures should be selected with the aim of educating the savages and lifting them upward toward civilization, through "this universal language." What actually happened at the far end of the distribution line was that the Philippine "savages" usually had to make do with the worn and scratched prints of the less uplifted period before 1908. The same imperialist ideals informed the movement to uplift the poor and foreign-born working classes living in the inner-city ghettos.²⁵

These attitudes were less true of the exhibitors and exchange men. In the group that succeeded at the highest level, buying more theaters, establishing theater chains, or groups of exchanges, were those who came from the poor, little-educated, and foreign-born working class, rising on the euphoric tide of a new country full of opportunity if one were only willing to work hard. The records do not tell us much about those who failed at this get-rich-quick scheme of the nickelodeons and what might have happened to them. Those who found success and became tycoons were highly competitive and less interested in organizing than the producers.

Allowing for the differences in the cultures from which they came, the two groups nonetheless shared some of the same value systems with regard to progress in America and success in business. The fundamental difference was that the producers were able to agree to cut down competition among themselves in order to organize their group into a productive system, and that gave them the ability to lead the industry in the directions they thought best, for the industry and the audience and for themselves. Perhaps it was only their organizing of the chaotic nickelodeon business that made the movie "craze" last long enough to become a major industry—at least that is what they believed. Perhaps the medium was so powerful in its potential that it would have survived anyway, in some other form. But the big problem in 1907 from a business point of view had been the lack of stability, the uncertainty of a source of supply for films, which made it a risk to invest a lot of money in the business. By 1909 that problem was nearly resolved, but in the meantime the fledgling industry faced another danger: reform movements.