Golden Age of Verticle Integration

When I hear the phrase "The Golden Age of Hollywood" memories of the glitz and glamour of stars like Katharine Hepburn, Greta Garbo, Clark Gable and Jean Harlow come to mind. I don't automatically think of greed, monopoly or vertical integration. In fact, until I started this class I never heard of the term.

The famed "Golden Age" essentially began with the introduction of sound in films around 1927 and lasted until 1948. "Talkies" gave the studios an opportunity to cash in on the new technology and monopolize the industry. Studios were able to buy small "mom and pop" theatres and squeeze them out or dictate what films they were allowed to show (such as "B" list films) in order to get the "A" list films in their theatre. These small independent theatres didn't have a choice or they could risk going bankrupt. This was a process called "block booking"

During this time there were a set of eight major studios. The large ones were known as "The Big Five" which included MGM, Warner Bros, Paramount, 20th Century Fox, and RKO.
The remaining "Little Three" were United Artists, Universal and Columbia.

studio logo photos courtesy of http://www.filmsite.org/20sintro.html

What effects did vertical integration have on films, theatres and actors? By controlling the production, distribution and exhibition of films, the studios were able to control the entire market. We already know that independent theatres didn't stand a chance. The studios also bought up large amounts of land in order to film on location and construct elaborate sets. read full article

This affected smaller independent studios from competing with the "Big Five". Although the "Little Three" had some success in producing successful films, each lacked one element of vertical integration. None of them owned their own theatres. Actors during that time would have been limited to the major studios. If they didn't want to sign a contract they might find their career in jeopardy since independent studios or theatres wouldn't be able to market their "image" successfully. The production of some films by independent studios would have been affected in the same way or not produced at all if funding wasn't possible.

The golden years lasted until 1948 when the case of US vs. Paramount (a.k.a. Paramount Decree) effectively ended the rein of the studios monopoly. The verdict forced the studios sell their theatre chains. The studios weren't the only ones to suffer the consequences of this verdict. Since they were forced to sell, they increased the rental rates to try to recoup their losses. This ruling along with the rise in television caused a drop in movie attendance and hurt the film industry until around 1972 with the release of The Godfather which is considered the first modern blockbuster. http://en.wikipedia.org/wiki/United_States_v._Paramount_Pictures,_Inc.

Is vertical integration a thing of the past? Not really. Modern day companies like Apple are condsidered a vertical integration company. Cable companies such as Comcast are as well. I have personal experience with this monopoly. I've lived in downtown Seattle for four years and everytime I moved into a new building, I was told that I didn't have a choice on which cable company I could sign up with. Apparently apartment builiding contract with either Comcast or Broadstripe. This infuriated me as I would like to be able to choose which company I get cable from. I think it is unfair that as a comsumer I don't have the option to choose my cable provider.

The Federal Communications Commission (FCC) put a ban on exclusive cable deals years ago. In October 2007 the FCC invoked section 628 of the Communications Act, which prohibits cable companies from pursuing deals that have "the purpose or effect of hindering significantly or preventing their competitors from providing satellite cable programming or satellite broadcast programming to subscribers or consumers." read full article

"Perhaps the greatest danger that a vertically integrated company poses to a non- integrated competitor is to deny the competitor access to must-have programming that it owns or controls. Lack of access could even foreclose competitors from the market. Inferior or more expensive access to that programming also could place non-integrated rivals at a competitive disadvantage." The Free State Foundation

Photo Sources:

www.stanford.edu/~brooksie/Stars/OtherStars;

http://goldenageofhollywood.co.uk/;

http://history.sandiego.edu/gen/filmnotes;