Mr. BOREN. Mr. Chairman, I submit for the record a letter from L. C. Griffith, of Oklahoma City. (The letter referred to is as follows:) GRIFFITH AMUSEMENT Co., Mr. ED KUYKENDALL, New York, N. Y. DEAR ED: I am, indeed, sorry that personal matters of extreme importance make it impossible for me to be with you in Washington on May 13 when the hearings start on the Neely bill. You know that I would be there if it were at all possible, in view of the dangers which this bill holds for our industry. I hope that you and the others who appear before the committee are able to make the members of the committee see and understand the truth concerning this bill. It is my sincere hope that they will, after having heard all sides of the question, understand the complex workings of our industry, at least enough so that they can see that the bill will not accomplish the purposes which its sponsors have led others to believe that it would, namely, the cleaning-up of the motion picture screen. After having read the proposed law repeatedly I fail to see that it would accomplish this purpose at all. We, in our theaters, are as anxious for clean pictures as anyone can possibly be; because we have learned that over the long pull the better box-office results do come from this type of picture. However, the Neely bill will not help us get cleaner pictures; but I am afraid it will have exactly the opposite effect. Furthermore, from several readings of the bill I am convinced that in operation it will add tremendously to our cost of doing business: First, because we will not be able to plan ahead on our product for any season, but will have to buy pictures individually as made; and, second, because the producers will make exhibitors buy "through the nose" in a big way any time that they have any picture with better-than-average box-office possibilities, or one that the public demands to see. Gone With the Wind, which almost every exhibitor had to buy, in answer to public demand, as you know "nicked" the exhibitor for 70 percent, leaving no profit to the theater operator. Gone With the Wind, of course, was not sold under the block-booking plan, but was sold individually, and therefore, the distributors were in a position to demand that exorbitant percentage arrangement. Not only would we be blackjacked into paying more for every worthwhile picture, but we would not be helped by single buying; because we would still have to buy the mediocre pictures in order to keep our theaters opening and the public in the habit of theater attendance. I know you are familiar with all these facts, but wanted to state our case again. Kindest personal regards and best wishes for your success in Washington. Yours very truly, LCG:mb. L. C. GRIFFITH. The CHAIRMAN. The committee will stand adjourned until 10 a. m. Monday morning. (Thereupon, at 3 p. m., an adjournment was taken until 10 a. m., Monday, June 3, 1940.) MOTION-PICTURE FILMS MONDAY, JUNE 3, 1940 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The committee met at 10 a. m., pursuant to adjournment, Hon. Clarence F. Lea (chairman) presiding. The CHAIRMAN. The committee will come to order. STATEMENT OF C. C. PETTIJOHN-Resumed Mr. PETTIJOHN. Mr. Chairman, in an effort to comply with the suggestions of the chairman and other members of the committee, we have devoted the time over the week end to getting statements in writing which can be filed. In a few instances, the ladies who are here with their own statements, will merely identify themselves and introduce their statements in the record. Others will not be here and will submit statements in writing. Also Mr. George Schaefer, president of RKO Pictures, has dictated his statement so that it may be submitted into the record, and that statement is now being typed, and as soon as it is completed by the stenographer I will give it to the clerk for insertion into the record. Also may I state that Mr. Austin Keough and I have agreed that in order that there may not be unnecessary duplication, that he and I am sure he will do it much better than I would-will discuss the bill, paragraph by paragraph, in my place, as has been previously requested by two or three members of the committee. I believe that fairly states the situation, and may I add that I am hopeful that we may complete our presentation today. I believe that to be possible. Thank you. (The statement of Mr. George Schaefer follows:) STATEMENT OF GEORGE J. SCHAEFER, PRESIDENT, RKO RADIO PICTURES, INC., NEW YORK CITY Mr. SCHAEFER. The opposition which I voice against the measure now before your committee, which would remake the trade practices of the motion picture industry is, first, that it is untimely; second, that it is unnecessary; third, that it is unworkable; and fourth, that it is un-American, in that it works directly toward the censorship of the screen. It is untimely because it would add vastly to the burdens of an industry gravely affected by the war and reeling from terrific blows received in the loss of important foreign markets. It is unnecessary because the public interest would not be affected by this bill. Whatever trade grievances are still to be settled in the industry-and there is much to be done-the record proves that from the standpoint of public interest, more and more good pictures, fine pictures, and even great pictures, are being produced and exhibited year after year, and that the moral tone of the screen has never been higher. It is unworkable in the sense that various sections of this bill would bring about chaos in the industry and substitute litigation for any possible arbitration or conciliation in the trade relation, between buyer and seller. Finally, it is un-American in principle, for it is clear that it would bring about pressure group censorship against the screen and give unfair advantage to the buyer as against the seller of film entertainment. I propose to discuss these points one by one. First: Even before the war now raging in Europe, foreign countries subsidized and protected their own motion picture industries. England had quota laws compelling American producers to make pictures there; France, Germany, and other countries had definite restrictions through which American films were the main sufferers; there was hardly a country in Europe which did not have special taxation affecting American pictures. Today war is upon us. Even with the reduced outtake, our English market hangs by a thread. We are getting no money out of France; nothing out of Italy; Australia, South Africa, and other countries are putting into effect the strictest of exchange regulations. At one fell swoop the industry has lost Holland, Belgium, Denmark, Norway, as foreign markets for its films. Austria, Czechoslovakia, Finland, Poland had gone before. The American motion-picture industry has drawn millions of dollars of investment and given employment to many thousands of people because it commanded the export markets of the world. Today the industry is in the midst of an economic revolution fighting desperately to adjust itself to the new conditions created by the present war. Tomorrow the situation may be even worse. And yet in this crisis, the bill before you would attempt to remake the trade practices of the industry. It would destroy a trade structure that has made America the world center of motion-picture entertainment, given American studios established leadership in the art and created an industry in which $2,060,000,000 of capital is invested in theaters, studios, and distribution offices and facilities; in which $1,000,000,000 is paid annually in box-office admissions, which normally draws at least $100,000,000 in film rental from foreign markets; employs more than 240,000 people, and pays $100,000,000 annually to the Federal Government in taxes. I say, therefore, that a bill which would destroy some of the trade. practices by which this has been achieved and add to costs is most untimely in the present crisis. Second: The bill is unnecessary, because the true public interest is being achieved through self-government in the industry, through self regulation at the source through the industry's record in cleaning up the screen so that the motion-picture theater may be a safe source of family entertainment, and through adjustments being made in the interest of the exhibitor by the producer and distributor of motion pictures in the United States. Nothing can be more significant than the fact that during 1939 not a single film produced by the organized motion-picture industry was classified as condemned in the movie listings of even the strictest of the public moral and religious groups whose representatives actually preview pictures and approve them or reject them on social grounds for the millions they represent. This does not mean that we have reached perfection. But show me any other entertainment industry that can boast a better record. Over the course of years we have perfected a very simple distribution system. When the negative picture is completed approximately 250 prints are struck off. A branch office in New York, for instance, which has a large number of theaters to serve receives as many as 20 positive prints on a given subject. A branch office in Washington, not having the same number of theaters in a concentrated district, may receive only 8 positive prints. These prints cost considerable sums to make, in addition to the cost of shooting the picture. It is only by making the same print go on a journey to a number of theaters that pictures can be leased so cheaply. Remember that it is because of this system that a great feature picture first shown in the Radio City Music Hall is eventually exhibited in the smallest neighborhood theaters in Greater New York. Yet the Music Hall, for the right of prior showing, may pay as high as $100,000 film rental, whereas the very same film is subsequently rented to the small theater for as little as $15 and made available to the public for admission prices as low as 15 cents. If economic adjustments must be made, if trade practices need to be improved, if arbitration and conciliation is again to operate in the industry-and an arbitration plan that did work was upset by the courts because it was declared to be compulsory-certainly these adjustments should be made inside and not outside the industry. There is not a single record in this country where any business has been improved merely by legislative fiat. The present bill is unnecessary because it does not add an iota to the system of self-government by which the industry now insures its social obligation to the public not only with regard to what goes on the screen but with regard to the way in which pictures are advertised to the public. It has both a production code and an advertising code which are effectively operated. The bill is unnecessary because it offers nothing by which the trade practices of the industry could be improved, and because, in effect, it destroys wholesale selling with its economies, in the distribution of pictures. Furthermore, this bill is unnecessary to insure that selection which exhibitor proponents demand and which the public should have. Nothing could be more false than the supposition that today the public is not given the right of selection. The fact is that the public does select its pictures and selects them with a vengeance. That's why some pictures are such extraordinary successes while so many others are equally extraordinary flops-using a box-office term. That's why no producer knows, until the public has given its verdict, whether any given film is a success or a failure. Nothing could be more false than the impression which self-interested groups have sought to convey to the committee that there is a full-line forcing in the motion picture industry. I have had figures compiled by my own company, which shows as good a picture as any, of what actually occurs. For instance, during the 1936-37 season, RKO offered 46 feature pictures. We secured only 3,289 contracts calling for the exhibition of a total of all these pictures; 897 contracts calling for the exhibition of from 40 to 45 of these pictures; and 5,915 contracts calling for the exhibition of less than 40 pictures. In other words, 67 percent of the contracts called for the exhibition of less than our full line. During the 1937-38 season we offered 48 pictures. RKO secured only 3,224 contracts calling for the exhibition of a total of all; 1,147 contracts calling for the exhibition of 40 to 47 of these pictures, and 5,698 contracts calling for the exhibition of less than 40 pictures. Here, again, about 67 percent of our contracts called for the exhibition of less than our full line. During the 1938-39 season, RKO offered 48 pictures. Contracts for the exhibition of the total number were 3,082; contracts for the exhibition of from 36 to 47 pictures amounted to 1,880; contracts for the exhibition of less than 36 pictures amounted to 4,578. Thus, more than 67 percent of our contracts during the past season called for the exhibition of less than the number of pictures we had to offer, and 48 percent of our contracts were for 36 pictures or less out of our total production of 48 pictures. Finally, there is the fact that in recent years most producers and distributors of motion pictures have granted exhibitors throughout the country a 10 percent cancelation clause, of which the exhibitor can avail himself in the selection and elimination of films if he desires. Certainly if selection is the watchword of this legislation, the bill is unnecessary. Third: The blitzkrieg, which this bill would unloose upon the industry, would bring in its train many unworkable provisions. For instance, take section 3 of the bill before you which provides that the distributor must not lease or offer to lease films in a block or group of two or more, if-and I quote from this section An aggregate price for the entire block or group and at separate and several prices for separate and several films, or for a number or numbers thereof less than the total number, which aggregate price and separate and several prices shall bear to each other such relation (a) as to operate as an unreasonable restraint upon the freedom of an exhibitor to select and lease for use in exhibition only such film or films of such block or group as he may desire or prefer to procure for exhibition, or (b) as tends to require an exhibitor to lease such entire block or group or forego the lease of any number or numbers thereof, or (c) that the effect of the lease or offer to lease of such films may be substantially to lessen competition, or tend to create a monopoly in the production, distribution, and exhibition of films and to lease or offer to lease for public exhibition films in any manner or by any other means the effect of which would be to defeat the purpose of this Act. I have sought the best legal advice I could obtain but I found none that could guide me through the mazes of this bill. They are as obscure as a black cat in a dark room on a dark night, when the cat isn't there. For the fact is that wholesale selling would be destroyed in the industry, unless the distributor desired to remain in constant jeopardy. The ambiguity, the vagueness, the uncertainty of these provisions would make it impossible for any distributor to know defi |