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Vertical Integration and the Advent of the Studio System

Keeping control of that business was a high priority. The immigrant studio chiefs were quite aware that they had defeated the previous movie regime, and they didn’t want the same thing to happen to them. To protect and extend their companies7 power, they engaged in one or both of two key strategies: vertical integration and the studio system.

VERTICAL INTEGRATION Recall from Chapter 2 that, in the mass media industries, vertical integration is control of all steps in the process from creator to audiences—production, distribution, and exhibition. Vertical integration dictated that a major film company should possess moviemaking facilities (the studio), a division that distributed its films to theaters (its distribution arm), and many theaters in the key areas. If a firm had all these activities under its control, competitors could not stop its movies from being shown to the public.

THE STUDIO SYSTEM From the early 1920s to the 1950s, the studio system was the approach the movie companies used to turn out their products efficiently. One element of this process was the star system. This operation was designed to find and cultivate actors under long-term contracts, with the intention of developing those actors into famous “stars” who would enhance the profitability of the studio's films. Another element was the division of the studio into A and B movie units. A films were expensively made productions featuring glamorous, highly paid stars. B films were made more quickly, with much smaller budgets.

Sometimes the studios produced series pictures—movies that featured the same characters (and actors and sets) across a number of films, thus lowering the costs and increasing profits. The A films were the prestige films; they were designed to get audi­ences excited, and to think highly of the companies that made them. The movie companies also used A films to force independent theaters (those that the film companies didn't own) to carry their films. Distribution executives simply said that if theater owners didn't carry a certain number of B films they would not get the A pictures. They called this practice block booking.

Alone or together, vertical integration and the studio system kept the seven immigrant-built firms—sometimes known as the majors—at the top of the movie industry during the 1920s, 1930s, and 1940s. Small companies emerged to create niche pictures (children's films, comedy shorts, documentaries, and the occasional big drama), but the majors ran the industry.

This is not to say that times were always healthy for all of these companies. During the 1920s, and especially during the Great Depression years of the 1930s, many firms had a hard time staying afloat. In fact, it was during the late 1920s that a struggling Warner Brothers decided to gamble on a technique for adding talking and singing to movies. After experimenting with short talkies, or films that featured sound as well as images, the company released The fazz Singer in 1927 starring the vaudeville singing sensation A1 Jolson. The film was a hit, and it sparked a worldwide conversion of movie theaters to handle sound. A new era had begun. By the early 1930s, the majors were only turning out movies with sound.