or their leaders because of their activities. Mr. Lydon himself was strong enough in his business to be able to exclude from his theater "in more than one season the entire product of both Metro and Paramount," notwithstanding the fact that his annual film requirements on a double-bill basis is 312 features.

You have been told by exhibitor witnesses such as Mr. Samuelson, Mr. Coles, Mr. Yamins, and Mr. Myers that block booking and blind selling are not practiced by the distibutors upon the affiliated theaters but are reserved for the independent theaters, and the implication and charge is that this is deliberately done to drive them out of business by subjecting them to unequal competition. I am sorry that time did not allow of the testimony of some of the affiliated exhibitors and some of the operators of independent theaters chains. They would have told you this statement is not true. They would have told you that, by and large, affiliated and nonaffiliated chains of theaters are required to and do license feature motion pictures, shorts, and newsreels with no more rights of cancelation, rejection, or selectivity than their independent competitors. I, who am familiar with exhibition contracts held by theaters affiliated with the Paramount Co., tell you that this is the fact. I also tell you that there are independent exhibitors who enjoy a higher degree of selectivity than their affiliated competitors. Of course you can find instances where affiliated theaters making a small number of changes of program per week do not contract for all of the features of various companies because obviously they cannot use them, and the distributors are not impractical enough to try to require it, but in such instances the distributors have other customers whose theaters are of such a character that they can suitably use the rest of their programs or at least large portions of them. You will also find independent theaters making a great many changes per week, operating on a double-bill program, and you may find that the distributors require them to take from 80 percent to 90 percent of their respective feature output because if those theaters did not do so, their competitors would. It all depends upon local competitive conditions. You cannot generalize as these men have been doing at this hearing. Mr. Samuelson was asked by your chairman: "Is there competition existing between the Big Eight at the present time?" and he answered: "Sort of-just sort of. Pseudo competition." This, gentlemen, is the utterest nonsense. There exists the keenest and at times the bitterest competition among all members of this industry, whether you call them the Big Eight or anything else, in production, distribution, and exhibition. From my vantage point in the industry, it seems to me that this ought to be obvious and axiomatic, but I suppose it isn't and that repeatedly we have to deny and disprove such loose general claims.

Mr. Samuelson read you a long list of names of the national and State-rights firms in existence in 1923 and he told you which of them survives today. He did not tell you, however, what type of pictures, as to quality, box-office or esthetic, these respective concerns handled. He did not tell you the circumstances under which each of them went out of business. He did not say what organization they had, what financial responsibility, what personalities appeared in their pictures. He did not tell you the crushing effect of the introduction of sound into the industry upon producers and distributors alike.

Mr. Chadwick did touch upon this. He left you with the impression that the reduction in the number of producing and distributing companies in this period of 17 years was the result of block booking, blind buying, and other alleged bad practices. When I say to you, gentlemen, that these companies went out of business as the result of fair but hard competition, you would think that block booking and blind selling came into this industry along about 1922. Mr. Chadwick told you that 1926 was his peak year and that in 1925 and 1926 there was good competition, that there was group selling but not block booking. The truth of the matter is that this business started out with block booking and blind selling in its extremest form and that in competition with each other, distributors from year to year tested out new methods of marketing their product, and from actual experience they have found that the selling methods presently prevailing have enabled them to provide a greater amount of better entertainment for the public at the comparatively low admission prices which prevail in this business and of which the business can be and is proud.

Mr. Chadwick told you that 5 of the 10 national distributors will not allow anybody to release through their facilities. When asked which of the 5 did allow it, he named United Artists. I don't suppose it would be relevant if the entire 10 insisted on releasing only their own product but the truth is that every one of them is not only willing but delighted to release a picture of real merit independently made and financed, and that not only 5 of them but the vast majority of them actually do distribute such independently produced pictures. However, as Mr. Freeman told you, speaking for Paramount, the picture must have merit.

Mr. Chadwick also told you that the affiliated theaters do not even bother about buying pictures. Their film buyer goes to New York. He walks in and settles his deal for Paramount or other company's pictures at the opening of the season and he has a selective contract that he agrees to use 20 or 30 out of 60, that he ties up all of the 60, however, and they are not for sale for that same run to any other exhibitor. Mr. Chadwick does not know what he is talking about. This is not so.

Mr. Chadwick referred to the Perleman case and narrated to you what he described as a matter of sworn statements in that case. He told you that in 1932 or thereabouts, in Los Angeles, Mr. Louis B. Mayer addressed a group of independent exhibitors and producers and said

If you independent producers do not stop selling pictures on double features we have a way of driving you out of business and will drive you out of business. Then Mr. Chadwick says

What was the device to drive us out of business? A new discovery-a production-what became known as the "B" picture. Prior to that time a major producer did not make "B" pictures deliberately, but all of a sudden he created a new department to make "B" pictures, the primary purpose being to flood the market so that we independents would not market it and that purpose was accomplished, gentlemen.

When asked whether the second-rate or "B" picture was not an accident but a premeditated proposition, Chadwick said:

In its origin it is a premeditated manufacturing process to fill the market because block booking guarantees the market.

This is a most interesting statement. I am quite familiar with the record in the Perleman case. Mr. Chadwick testified there. The plaintiff in that case sought and obtained an injunction against distributors' including in their respective contracts a prohibition upon the showing by an exhibitor of one of the particular company's pictures with another feature, whether of the same company or any other company. The claim was that the independent exhibitor needed double features and the independent producer wanted to supply that market and that if he were prevented from showing his picture with one of the strong pictures of a major company, the independent producer would be at a disadvantage. A conspiracy was claimed and largely upon the testimony of Mr. Chadwick it was found that the distributors had gotten together and agreed to put in their contracts this double-feature clause. Mr. Chadwick testified in that case that Mr. Louis B. Mayer stated at a meeting that the use of double features is a great menace; that the use of double features must be stopped and will be stopped and that ways and means have been worked out by the distributors in New York to wipe out the menace and stop the double-feature practice; that if the exhibitors did not want the major companies who made the important pictures, to cheapen their product, they had better not use double features; that the exhibitors must take the choice of using the major pictures and not double-feature them or using the independents' pictures if they wanted to double-feature. Mr. Chadwick said:

That is approximately the gist of the argument he presented for that.

There was not one word of his testimony or of any other testimony in the Perleman case indicating that the plan of the major companies was to themselves deliberately make "B" pictures.

But now for the purpose of an argument before your committee on the Neely bill, Mr. Chadwick tells you that the ways and means worked out to wipe out the double-feature menace was the deliberate making of "B" pictures by the majors. Again, this is untrue.

Mr. Chadwick, explaining why men who work in independent studios are not now finding employment, told you that if a man works for an independent producer he is not legally barred but effectively he is almost barred because they tell actors very frequently, "We cannot use you; you have worked for independent producers.' "That is especially true if they have got any kind of a name."

This extraordinary and I submit, untrue, statement is in strange. contradiction of Mr. Chadwick's proud enumeration to you of the artists, directors, and other people who have worked for him and went on to make great names in the picture world. If people who have engaged in making pictures cannot presently find employment with the larger companies, it is for one of two reasons only. Either the employment requirements of the large companies have been filled or the applicants do not measure up to the standards for such employment.

Mr. Abram Myers treated you to a description and analysis of the bill and his own opinion that it was needed and that the industry could well and profitably operate under it. I will presently give you my own views on that subject which are not merely mine but those of the competent and successful people in this industry who would have to work under its conditions. Mr. Myers told you that the inferior pictures are not shown in the producers' own theaters. The affiliated

exhibitors would be delighted if this were the fact. Unfortunately, it is not. The affiliated theaters have to take and exhibit poor pictures along with good pictures and great pictures, and by poor pictures I mean what I suppose Mr. Myers means-pictures that have small drawing power at the box office. This is because of scarcity of product and not for any other reason. Mr. Myers was asked by a member of the committee how prices for films were set for various theaters.

I interpreted the question to mean how are the film rentals arrived. at, not the admission prices--what factors entered into it. He answered: "It is largely conducted under the principle of taking all that the traffic will bear." "It is largely on a mathematical formula. based upon the prior experience in the theater." He or another exhibitor complained that film rentals are sometimes set after the picture is played. Now I submit that Mr. Myers' first answer was untrue except in a limited sense and that the second answer that the rentals are based on prior experience in the theater is true and that this measure of charge is sane and just. You gentlemen can take a sort of judicial notice of the fact that it is impossible in this business to base rentals or license fees on production cost and that as near as is humanly possible, it must be based primarily upon box-office value. What is box-office value in one theater differs greatly from what it is in another theater, and what is value in one territory or community varies greatly from what it is in another community.

Speaking of admission prices at the box office, Mr. Myers said that the distributor would want to insure as high an admission price as possible because the higher the admission price, if the traffic will bear it, the more he will realize from his percentage of the gross receipts. This, I suppose, is fairly obvious. But he said that often in these contracts which do not involve percentage, there is nevertheless a 15 cent minimum price printed in and that in that case the distributors' revenue is not fixed by the gross box office receipts. If you ask a distributor why he does it, he will say, "because I want to protect the good will of my pictures and not have shown at too cheap a price." "But I suspect," says he, "the real reason is they don't want that price to get embarrassingly low in comparison with the price charged by their own prior-run theaters." If Mr. Myers wants to suspect some ulterior motive on the part of the distributor other than the forthright purpose stated by the distributor as Mr. Myers quotes him, I suppose there is nothing I can do about it, but there are many thousands of theaters which producers and distributors do not own and have no interest in whose business and welfare is a natural and legitimate concern of the distributor, and the distributor depending entirely upon his own idea of what minimum admission price will protect his good will and that of his customers, requires the same minimum admission price, whatever it may be, in situations where he has no theater ownership or interest.

As Mr. Myers put the proposition to you, it seemed that he was claiming that there was something unnatural and unlawful about the fixing by distributors of minimum admission prices of their customers. You gentlemen, however, will remember that Congress amended section 1 of the Sherman Act in 1937 by the Miller-Tydings amendment to take out of the operation of the Sherman Act, resale price fixing of commodities bearing label, trade-mark, brand, or name of the

producer or distributor in such States as had enacted laws permitting it. Such laws now exist in all the States of the Union except fourVermont, Missouri, Texas, and Delaware.

The right of the producer or distributor of a copyrighted article not sold but merely licensed, to fix the price at which the sublicensee may permit the public to enjoy the use of the copyrighted article, has never come under the condemnation of the Sherman Act or of any other act. Mr. Myers tells you that compulsory block booking and blind buying have been condemned by industry figures such as the late Carl Laemmle, Samuel Goldwyn, and David O. Selznick. Mr. Selznick and Mr. Goldwyn are great producers and deserve the ecomiums of Mr. Myers and others, but each of them has recently been quoted in the newspapers and trade press as advocating the manufacture by producers of a greatly reduced number of pictures to be shown to the public at high admission prices, resulting in large returns to the producers. They are entitled to their views but they should hardly be quoted as patron saints for those who hope to see motion pictures sold to the public at low admission prices.

Mr. Myers called attention to Mr. Youngdahl of the situation in Minneapolis where he says the Minnesota Amusement Co., a Paramount affiliate, has the first-run situation "as a matter of grace because it is the affiliate of Paramount." He says it fixes the pricing policy in Minneapolis. He should have told you that the Minnesota Amusement Co. operates the best theaters in Minneapolis and St. Paul which the distributors are eager to have their pictures shown in and that these theaters in turn were acquired as part of a circuit from Messrs. Rubin and Finklestein, who operated them for many years and who enjoyed the same first-run, not as a matter of grade but because the distributors wanted to sell them their pictures. Being first-run theaters, operated at large expense, advertising the pictures extensively and thereby improving their value for subsequentrun theaters which do not advertise, at least to anything like the extent or degree that the first-run theaters do, and paying very large amounts for film rental, these theaters must be and are protected against early repeat showings at greatly reduced admission prices. If they were not, the distributors' revenue in the entire situation would be greatly impaired. Furthermore, if the large downtown theaters, either in Minneapolis or other cities, could afford to and did lower their admission prices, a scream would go up from the competing subsequent-run and neighborhood theaters that the big theaters were indulging in unfair practice and trying to destroy their competitors. I leave Mr. Myers with one last observation. At page 294 of your record, he argues that if litigation under this bill, if enacted, should ensue it would not be widespread because the suits would wait upon the outcome of a suit by the Government. He states:

It has been my observation that when a particular question under a public statute is involved in litigation instituted by the United States, the litigation takes precedence over all other similar private actions by common consent or a sort of unwritten comity.

Gentlemen, nearly 2 years ago the United States commenced the suit which goes on trial in New York today and shortly thereafter commenced three other suits. There are now pending in Federal courts throughout the United States, in the neighborhood of 80