Mr. HINSHAW. Is there any serious objection to submitting a book of synopses with the block of pictures that is submitted? Mr. PETTIJOHN. Yes, sir. Do you want to go into that? Mr. HINSHAW. I would like for you to explain that. Mr. PETTIJOHN. You want to go into that angle?

Mr. HINSHAW. Yes.

Mr. PETTIJOHN. I would like to bring before this committee-I anticipated that question from some of the other questions that have been asked. I would like to bring here what I think would be the only safe synopsis that could be given by any one motion picture distributor for say 50 pictures that he makes.

Now, maybe I have not had as much experience in writing motion picture film contracts as some others, but there is one branch of the law that I know something about, I hope.

I would not want to advise a single client of mine to take a chance of going to jail under the terms of this bill-it is a year and $5,000— unless he would submit with his contract and make a part of that contract, not the first, second, third, eighth, ninth, or tenth, but the final shooting script of each picture.

Mr. Hinshaw, under this bill as I read it, you could not complete a picture, show it to an exhibitor, let him look at it, and sell it to him without the synopsis being in the contract.

Mr. HINSHAW. How much of a synopsis?

Mr. PETTIJOHN. In order to do what this bill says, I would furnish him with a copy of the final shooting script of the picture, because only from that could he get the dialog, and only from that could he get the directions of the director, and only from that—and I hardly think from even that could he get the grimaces or looks, or the shrugging of the shoulders. They would have to get a copy of the final script, and I say to you, sir, under the terms of this bill, I would not advise any client to sell any motion picture without a copy of the final script of that picture being attached to the contract. It will take a truck to bring them in here to show you what 50 of those things amount to, to be attached to a contract which is already long enough. Mr. BULWINKLE. Mr. Chairman, that brings to my mind one point. I want to ask this question: Are you going to take up this bill section by section?

Mr. PETTIJOHN. Yes, sir; I hope to.

Mr. BULWINKLE. Let us get to that. There is another thing that I would like to ask. I would like to see a copy of that contract that you and the other lawyers drew that you are talking about.

Mr. PETTIJOHN. I did not draw it.

Mr. BULWINKLE. You did not draw it?

Mr. PETTIJOHN. No, sir; I deny the allegation.

Mr. BULWINKLE. Did you have a hand in it in any way?

Mr. PETTIJOHN. I think with 90 percent of the theater men, we could write a contract on the back of a postage stamp, and with the other 10 percent, I would not take a gamble except on the present forms in use.

Mr. BULWINKLE. Have you put that contract in the record? Have you put a typical copy in the record?

Mr. PETTIJOHN. I think a number of them have already been put into the record by the proponents.

Mr. MCGRANERY. They have been.

Mr. BULWINKLE. I would like for you to furnish us one of each, if you will.

Mr. HINSHAW. Mr. Chairman, I would like to have that clauseMr. PETTIJOHN. Yes, sir; I will be glad to put them in the record, or furnish you copies.

Mr. HINSHAW. I would like to have that clause in the several contracts relating to rejections on moral grounds or otherwise, placed in the record.

Mr. CHAIRMAN. If you have it, you may insert it in the record at this point.

Mr. PETTIJOHN. Yes, sir.

Mr. PEARSON. Mr. Chairman.

Mr. McGRANERY. Mr. Chairman.

The CHAIRMAN. Mr. Pearson.

Mr. PEARSON. May I ask a question?

Mr. BULWINKLE. I would like to see you analyze the bill, take it up section by section.

Mr. PETTIJOHN. I will be glad to.

Mr. BULWINKLE. This is fine, this conversation we are having with you, but I would like to have you discuss the bill.

Mr. PETTIJOHN. I am subject to the direction of you gentlemen. I am trying to do what you want me to.

Mr. BULWINKLE. This discussion is fine, but so far as I am concerned, I would rather get down to the bill, section by section. The CHAIRMAN. Mr. Youngdahl.

Mr. YOUNGDAHL. No questions, Mr. Chairman.

Mr. McGRANERY. Mr. Chairman.

The CHAIRMAN. Mr. McGranery.

Mr. McGRANERY. There is only one thing I want to ask in connection with the insertion of that provision for the rejection of pictures on moral grounds at this point, and that is, What is your answer to the question of who determines the moral of the picture for rejections? Mr. PETTIJOHN. I would think that the newspaper reviews would establish that.

Mr. McGRANERY. You would think that the reviews would establish it?

Mr. PETTIJOHN. Yes; the way that it is received by the public; the reviews; the way that the picture is received by the public. Mr. MCGRANERY. So the exhibitor could not, of himself, cancel a picture regardless of the terms of the cancelation clause?

Mr. PETTIJOHN. I think that in most cases the exhibitor does do it himself.

Mr. MCGRANERY. You think that is true in most cases? Mr. PETTIJOHN. Yes, sir; those I am familiar with; yes. Mr. MCGRANERY. But, because of the clause in the contract it is not sufficient to permit him to determine that of himself?

Mr. PETTIJOHN. Mr. McGranery, I have never known of an instance where an exhibitor wanted to cancel a picture for moral grounds that it has not been granted. I have never known such a case, not only this year, but in any year. I have not known of it. I have yet to see a case where that has not been amicably and peaceably worked out.

Mr. MCGRANERY. Now, you say amicably and peaceably worked

out.

Mr. PETTIJOHN. Yes, sir.

Mr. McGRANERY. Some of these proponents of the bill here say that they could do it on payment of a certain sum of money, could work it out all right; but they do not have out-and-out right of cancelation.

Mr. PETTIJOHN. I may have a copy of that clause here. If so, I will read that clause. I think it is covered by that clause. I think we have one here. I will submit the clause, but that is my impression. I may be wrong. I do not want to say something here that I cannot substantiate or I do not want to be erroneous in any statement I make; but as I remember it there is no such qualification as that in that clause, if it is for moral or racial grounds. I think it can be canceled without paying anything additional, Mr. McGranery. That is my impression. I have a distinct recollection that that clause was put into the contracts.

Mr. PEARSON. Mr. Chairman.

The CHAIRMAN. Mr. Pearson.

Mr. PEARSON. Mr. Pettijohn, in connection with your statement a moment ago that according to your contention these contracts did not constitute block-booking, I do not want to appear to be unusual, but I have read one of the contracts from beginning to end due to litigation I had growing out of one of them, and I am of the opinion that there is very little question about these contracts absolutely requiring the individual exhibitor to either take or leave an entire group of pictures which are listed in his contract.

Now, you do not mean to leave the impression, I am sure, that the contract does not require the exhibitor to take the pictures that he has subscribed for and contracted for; and the entire group of pictures which are listed in the face of his contract. That is always done, is it not?

Mr. PETTIJOHN. Yes, sir.

Mr. PEARSON. And then, as you suggest, there is a clause which permits cancelation within a reasonable length of time on the part of an exhibitor under certain conditions. Is that not true?

Mr. PETTIJOHN. Yes, sir; under the provision I referred to.

Mr. PEARSON. Now, to the extent that the producer in going to an exhibitor to sell his product says to him, "This is what we are going to have next year; this is a list of pictures," with the different names, "with the right to change the names of those pictures that we expect you to contract for in next year's exhibitions"-is that always the case with those contracts?

Mr. PETTIJOHN. Well, not exactly the way you stated. He says, "Here is our product, our line-up, for next year, and you have been our customer for 5 or 6 years. This is what we want to sell you." And, let us assume

Mr. PEARSON. But when he sells him, he sells him that whole list in his contract.

Mr. PETTIJOHN. I think that merchant pays for the merchandise that he buys, except that he has a privilege which is not usually exercised in the merchandising of other goods. He can even reject, after he has purchased, a certain percentage, and he can reject any portion of that merchandise if it is immoral or it can be canceled on racial grounds, which is comparable with receiving something that is damaged.

235749-40-pt. 2- -4

Mr. PEARSON. I am not criticizing the contract or the method of selling the products, because I am not convinced that the very nature of the industry itself does not require selling the product that way; but I wanted to clear up what may be a misapprehension.

Mr. PETTIJOHN. I think, Mr. Pearson, the very nature of the business requires for the small accounts, for the small theaters, a method of purchasing wholesale.

I think that we would go broke selling 1 picture for $10 at a time. We could not exist. Nobody could. You cannot send a man 200 miles and pay his salary and feed him, and pay his carfare, or railroad fare, and sell pictures 1 at a time, for $10 each; but you can go and sell him 40 pictures for $400, and you can deliver to him the very best that that company makes.

Mr. PEARSON. Because you have some assurance in advance as to what the demand is going to be?

Mr. PETTIJOHN. Yes, sir; we have some assurance in advance and it was stated here by one of the witnesses that the exhibitor took all of the risk; but that is not so, Mr. Pearson. No exhibitor in the country has a nickel's worth of merchandise on his shelf. He gets his merchandise only as he wants it, and on the day he wants it, or the day he agrees with the booker, and plays it; and he pays for it only when he gets it. He does not carry a nickel's worth of merchandise on his shelf.

Suppose that at the end of the year he had five pictures that he did not want to play. That would not be unusual in any line of business. Mr. PEARSON. That is all.

Mr. YOUNGDAHL. Mr. Chairman.

The CHAIRMAN. Mr. Youngdahl.

Mr. YOUNGDAHL. Do I understand, Mr. Pettijohn, your testimony to be that if a picture is canceled on moral or racial grounds, that it is not deducted against his cancelation privilege?

Mr. PETTIJOHN. That is right. It is not even included in his percentage.

Mr. KENNEDY. Mr. Chairman.

The CHAIRMAN. Mr. Kennedy.

Mr. KENNEDY. Mr. Pettijohn, this controversy seems to be centering around the booking of a certain number of pictures or cancelation of a certain percentage of them. If this is so, there must have been a series of negotiations between the exhibitors and producers throughout the years, has there not?

Mr. PETTIJOHN. Yes, sir.

Mr. KENNEDY. Have these groups ever sat down around the table to work out a formula to correct the alleged abuses?

Mr. PETTIJOHN. Yes; we have had many sessions around the table, and then first one side and then the other blew up.

Now Mr. Arnold, of the Department of Justice, says that we cannot even sit down around the table any more.

Mr. KENNEDY. Well, it seems to me

Mr. PETTIJOHN. Mr. Kennedy, may I answer in this way. I remember in the motion-picture business when Carl Laemmle had his exchange in Chicago, and the old Mutual Co. was in Chicago. That is going back to 1915 and 1916.

My first film experience was with the Mutual Co., which did not have enough production to maintain a distributing organization. As

I remember, it cost us about $29,000 a week to pay off our employees, the rent, heat, light, and so forth, in the 32 distributing centers. To do that we had to have merchandise to sell the exhibitors, and we did not have enough pictures. I was given the job of winding up that company. We paid every creditor in full, incidentally, because we found we owned 12 two-reel Charlie Chaplin pictures which came out in the beginning with typewritten titles. We dressed them up with artistic titles and put them out again as what we call "reissues."

The result was that they brought in more money the second time than they did the first time. That enabled us to pay our creditors, wind up the affairs of the company, and we sold the exchanges to Robinson-Cole, who in turn sold them to F. B. O., who in turn sold them to RKO.

Now, we sold those pictures wholesale. They were two-reelers. We sold them for two, three, four, five, or six dollars, depending upon the classification of the theaters. We sold them 12 at a time.

I think possibly that is called block booking, wholesaling. We did not sell them for $2 apiece, or $3, or $4, or $5. That would have been economically unsound. But, we did pay off the creditors of that company 100 cents on the dollar and Pettijohn got a nice fee, because they liked the idea.

Mr. KENNEDY. My point is this: In an industry of this type, with millions of dollars involved as well as thousands of theaters, it is not clear to me why there should be so much apparent unhappiness and differences that cannot be adjusted.

Mr. PETTIJOHN. I think they can be, with the responsible factors in the business, and I think they will be.

I recollect the days when an exhibitor paid an advance deposit. In other words, that was the system up until about 1920. I was Mr. Selznick's attorney, and we had twelve Norma Talmadge pictures to sell a year. We gave a bonus to our salesmen, because we needed the money to make those pictures, to get as much money in advance on the signing of the contract as they could possibly get in advance deposits on pictures not yet made. In other words, the exhibitors were financing the film companies in the old days, until it became a business. You remember in Potash and Perlmutter, where one said. that he was going into the motion-picture business and the other said that is was not a business, it is a dissipation; but it became a real business along about 1920. By that, I mean they were able to finance their products without asking their customers to advance the money to make the pictures with, as under the old system. Now, as you say, in the natural evolution of the business we iron out these wrinkles. It became a business. Our distribution became more efficient. We have more happy, satisfied customers today than we had last year and the year before, and our pictures are better each

year.

This wholesale buying and buying in advance are not the two big problems of our industry, as I tried to explain yesterday when some of you gentlemen were not here. The big problem in our business today is the loss of our foreign markets, amounting to 30 or 35 percent of our gross revenue, and you must understand what that means to any business. How is it going to make that up, and maintain the