Mr. PETTIJOHN. I think I see now what it is that you are asking. Let us take the RKO Theater right here in Washington. The Music Hall is not a producer-owned theater. I think the Rockefellers are the only ones who could afford to run that theater.

Let us take the Keith Theater, right here in Washington. I forget the name of the picture, but I know one ran for 3 weeks, one picture, back some time ago, and many times a picture runs 2 weeks.

Now, it must be apparent that that theater does not need over 40 pictures a year at most, and probably only 38.

The company which owns that theater--and the old Keith-Albee people owned it for many years, years and years back, before it merged is RKO. The company that owns that theater made, I think, last year approximately 50 pictures, but they made more than they could possibly use in their own theater here, if they ran only their own product.

Now, they do not run all of their own productions. Frankly, they do not. Universal comes along, and they have no theaters. Columbia comes along, and they have a lot of good pictures, and they run some Universals and Columbias there. In fact, I would not hazard a guess. I do not know. Mr. Meekin can come in and give you the exact figures, but I would say that they use less than 40 pictures a year. They do not need more than that, whereas a little exhibitor needs 2 or 3 times that number, and he can buy them.

But they stand here and call that selective buying. Gentlemen, if it were not for the Keith Theater and the Capitol Theater in Washington, and the Music Hall and the Capitol Theater and the Roxy Theater in New York-those big theaters in every city of the United States that pay real money for these pictures-we would all be out of business and there would not be any 300 pictures for the little fellow to buy for a $10-note apiece.

That is really one of the fine things about our business. The big fellow at the top is paying the production freight, and the little fellowand I have not heard of any of them being driven out of business-is getting the benefit of it. I have had, Mr. Chairman, called to my attention instances where I personally thought an exhibitor was being mistreated, and I have not had any difficulty straightening them out. A man may sit in New York and not know conditions in a territory like Joplin, Mo., or Boise, Idaho. We have between ten and twenty million contractual relations a year-not thousands, but between ten and twenty millions. We are bound to have some arguments. There is bound to be some unfairness, but I have never in the entire time that I have been engaged in my work had any trouble in straightening out a situation when it was a situation that should be straightened out. As busy as I have been down here, I stopped yesterday afternoon and straightened out one. I do not know whether the man is here in the room now or not, but the man we straightened it out with came here to Washington to see us, and he had no serious difficulty after he met Mr. Rodgers.

The CHAIRMAN. One more question. I take it, of course, that it is an advantage to the producer to sell on block-booking.

Mr. PETTIJOHN. Yes; on the wholesale plan.

The CHAIRMAN. Now, why could not the producer accomplish the same result by charging the higher price which would be justified for individual sales and eliminate the necessity of compulsory purchases?

Mr. PETTIJOHN. I am very glad to answer that question. In my opinion and I can only give my opinion based on what experience I have had in the business-I do not believe that the exhibitor can pay more than he is paying today for films. I do not believe there is a theater man in this room who will contradict me on that statement. If he pays more for his film, of course we will have happen what I said yesterday I thought was going to happen. Prices must go up to the public. A man cannot pay more for his merchandise unless he gets more for it, Mr. Chairman.

There are only a certain number of people in the United States who will go to the movies every week. The motion-picture dollar is what people have to pay for amusement, and we try to please all that we can; but I personally am willing to stand or fall on this statement; I personally shudder to see that admissions may have to go up to the public in this country. The greatest thing about our business, or one of the two greatest things, is that we are able now to sell the best that we can make every year in the small towns for the price of an ice-cream soda. It is a great thing to give people that kind of entertainment at that kind of a price.

It is a great thing to reach all these places, these tiny theaters, with the best we make.

Those are the things that I think personally, are more important to preserve than any element, and if we put the price of pictures up to the four or five thousand theaters in the country that cannot afford to pay, then, Mr. Chairman, those theaters will go out of business and we will all suffer in the long run, because the more customers we have, the more healthy our condition, and all theaters are our customers.

The CHAIRMAN. Suppose that you charged, as I have suggested, higher prices for individual sales, and maintained your best prices for wholesale sales, would not the problem then be passed on to the local exhibitor?

Mr. PETTIJOHN. I see the point.

The CHAIRMAN. He could buy block-booking if he wanted to: or independently, if he wants to, and pay more for pictures if he thought they were worth more that way.

Mr. PETTIJOHN. There is an outside possibility there, Mr. Chairman, but let me show why it will not work. It would be great-I am glad that you asked me that question-it would be great if we could base the price we charge for pictures upon the cost of production. It would even be fine if we could base it on the exhibition value, but unfortunately, our business is different from any other business. Somebody has asked the question: "What is the difference? Why should you do different from other people who sell their merchandise?" A man can make cars, Ford cars as Mr. Ford does. He knows within $2 of what every one of those cars is going to cost to turn out. We never know when we start what a picture is going to cost to finish. I could stand here for an hour and give examples of it where the budget has been exceeded, and where the picture turned out good and where it turned out bad.

We cannot sell pictures based upon the cost of production, because the picture which costs $300,000 may be three times as good as a picture that costs $900,000.

We cannot base it upon exhibition value, because we do not know what that exhibition value is until the picture is at least half played

out and we have gotten back our first runs, at least 80 percent from the first and second runs, of the total revenue. It is impossible to base it upon exhibition value, because we do not know that until it is too late.

Mr. BOREN. Mr. Chairman.

The CHAIRMAN. Mr. Boren.

Mr. BOREN. I was so interested in what you were saying, that a part of my question escapes me. But there is one point in connection with what you mentioned about straightening out individual problems that I am interested in.

Suppose that a small-theater man, or an independently owned theater in turn is controlled by a chain, and he has a problem of being unable to get products, because the chain theater in his area has bought in block the production of all of the major companies.

Now, if I send that man to you, will you be able to get products for him, Mr. Pettijohn?

Mr. PETTIJOHN. Yes, sir; because, Mr. Boren, I do not know of any instance in the country where there is any theater that cannot get some kind of a run and some kind of product.

I agree with you absolutely, and there have been instances of just what you say. I want to be perfectly frank with you. I say to you that I do not believe that any theater in America should be unable to get pictures. I believe that any theater in the United States ought to have motion picture products, if he wants to keep his doors open, no matter what kind of a barn or shack he may have; but if there are two theaters in a town, one good theater, and one obsolete, the fellow who has the good theater is bound to have preference. Only about 25 years ago we had nickelodeons. Surely no one should be penalized because we have advanced in the building of theaters in this country, because we have the type of theaters we have today; but I agree with you in what you are driving at, and I say this, without any qualm or fears whatsoever: I believe that every little motion picture theater in America should have some kind of product to keep his doors open, if the fellow is honest, if he is legitimate, and if he is a citizen and wants to run a motion picture theater, and has any excuse whatsoever to run it. I say that anybody should be permitted to do that.

Mr. BOREN. Under the present circumstances, is there anything to prevent either the producer-owned, the integrated, or the independent chain of theaters in a given area from buying the blocks of all of the major producers, whether he shows them or not; buying them up and then refusing to exhibit them, thus preventing the individual who might have one theater in the area getting pictures? Mr. PETTIJOHN. If I understand you correctly, Mr. Boren, you are referring to what we call overbuying.

Mr. BOREN. Probably.

Mr. PETTIJOHN. Overbuying in order to keep pictures away from the other fellow?

Mr. BOREN. That is right.

Mr. PETTIJOHN. Mr. Boren, I think it is wrong for any man to buy more pictures than he wants to run in his theater in order to keep anybody else from getting them.

Mr. BOREN. Well, if your pictures were put up for sale at individual prices, or even on a competitive-bid basis, the independent could buy an occasional picture and could have competitive oppor

tunity as against the fellow who at the present time buys all of the product.

Mr. PETTIJOHN. He can get it now if he will pay more money for it. Mr. BOREN. Not unless he will buy the whole block.

Mr. PETTIJOHN. Yes, sir. I have tried to illustrate, Mr. Boren, and the purpose of this [exhibing tables] is to show you that the whole block cannot be sold to very many exhibitors in the United States, for here is one company, the Twentieth Century Fox, which had 1,145 at the bottom and 14,000 at the top. Certainly they did not sell the exhibitors all of their pictures.

Mr. BOREN. Well, I do know this to be a fact, that occasionally, even in my country, a constituent of mine makes a trip East, I presume, to get in touch with the theater organizations in New York, and he advises me that it is very difficult to get products at any price. How can his difficulty arise other than the fact that his competitors have bought all of the blocks of the major producers and have shut him out of the market?

Mr. PETTIJOHN. In a competitive situation, all types of customers have trouble in getting what they want, Mr. Boren; but I do not know of any situation where a man cannot buy some kind of pictures, no matter what kind of theater he has. He does not always get what he wants. Nobody gets all he wants in this business. That is a peculiar thing.

Mr. BOREN. Let me ask you another question along that line. Mr. PETTIJOHN. It is a give-and-take proposition.

Mr. BOREN. Suppose that an individual wants to go into the exhibition business. He goes out and chooses a town, and be has plenty of financial resources. He feels that he can take care of himself on his ability to compete from the standpoint of financial resources, good service, and so forth, that he can give the public.

Now, is it a fact that he faces an 85-percent preempted market in that the producers control 85 percent of it?

Mr. PETTIJOHN. The distributors?

Mr. BOREN. And the exhibitors, exhibition houses, too, in the sense of seats and location? I realize that a number of witnesses here have said that you owned a third of the theaters.

Mr. PETTIJOHN. Twenty-three hundred of them; that would not be quite one-seventh. There ard 16,500.

Mr. BOREN. Did you analyze that 2,300 in connection with the seating capacity of the various theaters?

Mr. PETTIJOHN. Yes, sir. There would be a larger percentage so figuring.

Mr. BOREN. Probably it would not be anything like 85 percent of the seating capacity?

Mr. PETTIJOHN. No, sir.

Mr. BOREN. But, I think you see the thing that I am driving at. How could I go into the motion-picture business in Philadelphia, pick out a particular spot, for instance?

Mr. PETTIJOHN. I do not think, if you were going to build a good theater, and you are going into a community that will support another theater, that you will have any more trouble than others who have built theaters and made good, except for one thing. Supposing in this same town that you are talking about, the same locality that I had located my theater in, and that I had been a customer of M. G.

M.'s for 10 years, and Mr. Rogers come along, and I have been a customer of his for 10 years. Our relations have always been happy and satisfactory. Now, maybe my theater is a little bit run down. Maybe I should improve it a little. You might have difficulty in prying away the product that I have been buying from those men for sometime. That happens.

Mr. BOREN. Well, now, to carry that a little bit further, suppose that you are a man who owns at least one or two theaters in every town in Pennsylvania. That is a little bigger than your areas are divided into; but that you would buy a block from all of the 5 or 8 major producers; you buy from every one of them for that entire area. Now, how can I buy in block, as an individual theater, in competition with you?

Mr. PETTIJOHN. The only way I can answer that, Mr. Boren, is to say that those theaters are all operating; they are all staying open, and they cannot stay open without films. They are getting them; they are getting the best producers' products every year.

You mentioned Pennsylvania. I believe that the largest circuit of theaters in Pennsylvania is one presided over by the gentleman I mentioned here yesterday, Mr. Frank Walker. They are independent. They have a large number of theaters in Pennsylvania and New York, and I think they have some-I am not positive of this in New Jersey, and they get along fine. He is a splendid man to do business with. He has buyers. They have their troubles in getting prices, and they have their troubles in getting runs. They have the same trouble as anybody else has.

Mr. BOREN. I want to approach one other angle of this question. You have presented your side in your answer, at least, as to the possibilities for an individual going into the exhibition business. Now, suppose that I want to produce a picture.

Mr. PETTIJOHN. Yes, sir.

Mr. BOREN. As an independent. I would like for you to give some analysis of the opportunity an independent has for going into the production business and producing a picture, and releasing it, say, as an individual picture.

Mr. PETTIJOHN. Yes, sir.

Mr. BOREN. Just give me a brief analysis of your viewpoint of that prospect.

Mr. PETTIJOHN. I am an independent producer, we will say, and let us assume that the parade has not gone by me and that I can turn out a pretty good picture, and I have-let us say I have $100,000 or $200,000 in my pocket and I want to make a picture that will probably cost me three or four hundred thousand dollars. The sensible thing for me to do, Mr. Boren, is to take my story and go over to one of the existing lots in Hollywood; get one of those people to help me finance it; to loan me the people I want to make my picture.

Now, if there is anybody in this room who has ever been on a motion picture studio lot, you will realize that that lot is not just a studio. It is a city. A man with $200,000 in his pocket, with picture production geared up where it is today, to the type of pictures we must have to please our public and to keep our theaters open, a man with $200,000 in his pocket must have a place to make that picture a site-and that runs into millions and millions of dollars. You will find on those lots, if you have ever been on one of them, most everything from a