to cure that. I have got one called the Audubon, on Washington Heights, that cost a million and a half dollars to build. For 20 years. it ran first-run pictures, and from the time that Harry Brandt took it over it has been running seventeenth run. The Neely bill does not cure that. We ran the same pictures that the Audubon has always run, but we run them 6 months later.

And, talking about admission prices, Mr. Lea, we charge 15 cents admission at that theater. If the contract did not have an admission price clause in it, I would like to charge a nickel.

Mr. YOUNGDAHL. Mr. Chairman.

The CHAIRMAN. Mr. Youngdahl.

Mr. YOUNGDAHL. I am a little confused at some of your testimony. Is your testimony to the effect that the problems which exist in your industry today which also affect the public can best be solved by your industry, with the aid of the public and not through legislation? Mr. BRANDT. It can be best solved by the industry itself.

Mr. YOUNGDAHL. With the aid of the public?

Mr. BRANDT. With the aid of the public.

Mr. YOUNGDAHL. That is all.

The CHAIRMAN. Mr. Brandt, in view of your questions to Mr. Boren, I would like to ask you some questions.

Mr. BRANDT. Yes, sir.

The CHAIRMAN. I take it to be the policy of the country to protect. people from the exhibition of pictures of a demoralizing type anywhere, regardless of the result at the box office. In other words, there is a common level of decency that must be maintained, whether the audience wants to see it or does not want to see it.

Mr. BRANDT. Definitely so.

The CHAIRMAN. Do you concur in that view?
Mr. BRANDT. Definitely so.

The CHAIRMAN. Nothing you have said then, I take it, in order to clarify your position; nothing that you have said was intended to indicate that you approve of pictures, regardless of the demoralizing character, provided the people wat to see them?

Mr. BRANDT. You are absolutely right.

The CHAIRMAN. Very well. We thank you.

Mr. SOUTH. Mr. Chairman.

The CHAIRMAN. Mr. South.

Mr. SOUTH. I understood you to say that since the Breen organization became effective, this particular theater went from first place down to seventeenth. Will you briefly explain that?

Mr. BRANDT. It was not through the Breen organization.

Mr. SOUTH. I understood you to say that.

Mr. BRANDT. I said that was a theater that was operated as a first-run theater.

Mr. SOUTH. I see.

Mr. BRANDT. By an affiliated circuit, from the time that it was built up until I got the theater; and from the time I got the theater, I could not buy first-run pictures.

Mr. SOUTH. I understood you to say something about the Breen connection.

Mr. BRANDT. Brandt.

Mr. SOUTH. Brandt?

Mr. BRANDT. Yes.

Mr. SOUTH. That is your name?

Mr. BRANDT. Yes; my name is Brandt.

Mr. SOUTH. I beg your pardon. That clears the matter up. Mr. BRANDT. From the time Brandt took it, I could not get the pictures.

Mr. SOUTH. Thank you.

Mr. BRANDT. That is right. And, I can afford to pay, in that theater, just as much if not more than any other theater in that section, for pictures, if I could get first-run pictures. My theater, by far, is as good if not better than the majority of the theaters that are showing first-run pictures up there now.

Mr. SOUTH. And is the fact that you are an independent operator the thing that causes you to be unable to get first-run pictures? Mr. BRANDT. There are affiliated theaters in that section.

Mr. SOUTH. How can that be overcome, if at all?

Mr. BRANDT. That can only be overcome by the industry sitting down among themselves and working out the problem.

Mr. SOUTH. That is one of the things that you have been talking about?

Mr. BRANDT. That is right.

The CHAIRMAN. We thank you.

Mr. BRANDT. Thank you.

STATEMENT OF HAMMOND WOOBER, GENERAL MANAGER, TWENTIETH CENTURY FOX

The CHAIRMAN. Mr. Woober.

Mr. WOOBER. Mr. Chairman, my name is Hammond Woober. I am general manager of the Twentieth Century Fox Film CorporaOur firm tries to make the best pictures in the industry and our firm is trying to sell the greatest number of accounts in the industry. I have been selling pictures under the present system for over 25 years, and if there is a better system evolved, we would like to know it, and we would like to adopt it, but we do not believe that the Neely bill offers any solution of the methods of selling.

Now, under the present method of selling, great fortunes have been built up by exhibitors, and if the present financial standings could be traced to their origin, you would find, in most cases, a very humble beginning.

I know of no business in which the retailer has been so uniformly successful as the retailer of the motion pictures, and I know you have had a lot of people testifying here already, and anticipate a lot more, and I will take as little of your time as possible, knowing that Mr. Rodgers and Mr. Pettijohn have already told you of most of our problems.

Now, so far as our company is concerned, I believe that we sell more accounts than any company in this business. We are supplying over 11,500 accounts, not including about 500 charitable and semicharitable accounts that we supply without cost, and that does not include our supplying the Army and Navy business, that all companies supply at but a small fraction of its cost.

We make an average of 52 pictures yearly, and naturally we try to sell our entire output to every account. We actually sell our output to less than 20 percent of our accounts, and a great many of our

accounts buy as few as 13 pictures; many buy but 26, and the balance 26 to 48, and where we do sell our output, we give elimination privileges up to 20 percent, and in addition we eliminate any picture that might be objectionable from a moral, racial, or religious standpoint, and I am happy to say that in our company, that I have no recollection of any eliminations having taken place on any of the three grounds mentioned in the past 5 years.

Now, in our output of 52 pictures we have as many as 15,500 bookings on a single picture and as low as 1,000 on other pictures, and the reason being that practically all exhibitors eliminate pictures with small earning capacity and all use and are ready to use pictures with big earning possibilities.

You know, there is a common belief that we sell pictures prior to their making and, in theory, that is correct. There is a belief that we sell, as it is commonly expressed, a pig in a poke. In reality that is not the way pictures are sold. We sell pictures the same as other articles of merchandise are sold.

If you are the owner of a Buick car and you paid a certain price for it, and the time comes to repurchase a car, you either place your confidence in the machine you own or you change the type of machine that you are going to buy, and that is the way motion pictures are negotiated for.

Practically all of the exhibitors that we sell, buy our pictures on an average price and, as an illustration, if an exhibitor pays an average of $50 per picture, and he made a reasonable or extravagant profit at that price, he negotiates accordingly for his next year's pictures. If he sustained a loss he negotiates at a lower price, and invariably those lower prices are finally accepted by all distributors.

Now, I am no lawyer, but I have read the provisions of the Neely bill and I frankly cannot see how this industry could survive under its provisions.

First each producing company would have to increase its inventory 50 to 100 percent in order to meet the requirements of the bill and that would require at least $100,000,000 to $200,000,000 of new capital, money that would be impossible to raise at this time.

The distribution costs of our company would increase at least 25 percent, and both of these costs would of necessity have to be handed to the exhibitors and in turn passed on to the consumer.

And, frankly, the passing of this bill would bring such chaos and confusion to this industry that I do not believe the industry could survive, and personally I would resign my position if it passed. The necessity of submitting a synopsis with the requirements as set forth in the bill, with its penalty possibilities, for any inaccuracies, would make the job too hazardous to be worth having; and, you know, ours is a peculiar business, and unlike any other business, we bet our all on each individual negative, and until the present time we have been recapturing that negative cost throughout the world markets. We have been getting from 60 to 65 percent of our returns on the domestic market and the balance abroad, and we are now faced with complete loss of that foreign business due to war conditions.

There is no American industry that has so completely dominated the foreign markets as has American films. In every foreign country we have been accused of using films as silent salesmen for American products, and while this industry has never received a nickel from the

manufacturers of any American product, we have unquestionably stimulated the sales of automobiles, radios, kitchen utensils, bathing suits, and numerous other articles. American trade has certainly followed American films.

In addition, the American film has done a great deal in advancing the English language. And, I know, in small countries like Rumania, Bulgaria, where our pictures are still shown in the English language, many of the peoples of those small countries now are able to understand and speak English.

Now we have dominated the world market because of our ability to make better motion pictures than those made in any other foreign country, and if this law goes into effect, you would throttle and you would handicap it to an extent that foreign business will be lost and, in addition, our own domestic business will be ruined.

We have so educated the American audiences to such high standards of motion pictures through great negative investments, that anything that will interfere with the reduction or with the permanency of that high standard is bound to cause great losses in this country.

Now, gentlemen, as I said, I do not want to take up much of your time, because I know you have a great many speakers. I am grateful for the opportunity of having been permitted to present our story here. Thank you.

The CHAIRMAN. Thank you, Mr. Woober. Do you understand that the Neely bill would apply to foreign sales of American films, or only to domestic sales?

Mr. WOOBER. No; my understanding is that the interference of the Neely bill would prohibit us, would so interfere with our domestic business, that it would be impossible to maintain the high standard of quality that we are now maintaining and through which we are able to dominate world markets.

Motion pictures are made in practically every country in the world, and the only reason for American domination is because American pictures are superior; and they are superior because we are enabled to make a greater individual negative investment than any other country.

The CHAIRMAN. What I had in mind was subdivision (6), on page 3, defining the term "commerce" which would seem to apply to foreign as well as to domestic commerce in the films.. Were you speaking on the theory that it does or does not?

Mr. WOOBER. I was speaking on the theory that the application of the Neely bill here would be so injurious to the quality of our pictures that of necessity we would not be able to successfully compete in foreign markets.

The CHAIRMAN. You are not speaking with reference to that provision of the bill?

Mr. WOOBER. No; I was not.
Mr. HINSHAW. Mr. Chairman.
The CHAIRMAN. Mr. Hinshaw.

Mr. HINSHAW. In making your contracts with exhibitors, if those contracts are made for less than your entire output, do you give in such contract the right of cancelation?

Mr. WOOBER. That right is self-assertive insofar as if the man buys 13 out of 52, he makes the selection of 13 out of 52.

Mr. HINSHAW. He selects 13?

Mr. WOOBER. He selects 13 out of 52.

Mr. HINSHAW. What time during the period of the contract does he make those selections?

Mr. WOOBER. About in the order of their release. We would expect naturally, if he bought 13, that he would utilize about 1 picture per month.

Mr. HINSHAW. And you give him the right to select those pictures after the date of release?

Mr. WOOBER. That is right.

Mr. HINSHAW. For a given time?

Mr. WOOBER. That is right.

Mr. HINSHAW. I noticed in some contracts that the period of time is 14 days after release.

Mr. WOOBER. Well, I have no particular idea what particular contract you are referring to. Exhibitors have an opportunity of seeing pictures before they are released; they have an opportunity of seeing them and watching the success of the pictures after their release, and it is then that they determine whether they want to exercise their rights of elimination or not.

Mr. HINSHAW. In other words, if an exhibitor takes less than the entire output, then he relinquishes any right for the elimination of a picture?

Mr. WOOBER. If in the beginning he exercises the right to eliminate 75 percent of our pictures, by selecting only 15, we take that as a definite indication that he will take 13 pictures.

Mr. HINSHAW. Suppose that he bought 40 of your pictures?

Mr. WOOBER. Then he also waives his right of elimination; because he has already eliminated more than 20 percent under our trade practice.

Mr. HINSHAW. Does he then have the right to selection, if he purchases 40 pictures?

Mr. WOOBER. He has the right of selection of 40 out of 52.

Mr. HINSHAW. He has the right of selection of 40 out of 52, but he must take the 40?

Mr. WOOBER. That is correct.

Mr. HINSHAW. In other words, he must have sufficient confidence in your organization to put out 40 pictures of the type that he would enjoy?

Mr. WOOBER. That is correct.

Mr. HINSHAW. Do you offer him in that selection all of the pictures you make, or do you reserve certain pictures which do not come under that selective privilege?

Mr. WOOBER. No; we give him all that are released.

Mr. HINSHAW. All that are to be released?

Mr. WOOBER. Yes.

Mr. BOREN. Mr. Chairman

Mr. HINSHAW. Do you agree with this moral clause that has been agreed to by the industry, and I understand is being made a part of the contract?

Mr. WOOBER. That has always been a part of our contract.

Mr. HINSHAW. You say that has always been a part of your contract?

Mr. WOOBER. The moral, racial, and religious

Mr. HINSHAW. That has been in the contract?

Mr. WOOBER. It has been in our contract, for years.