The Movies Become Big Business: Publix Theatres and the Chain-Store Strategy
During the 1920s the American film industry developed into a strong oligopoly. Ownership of a large theater circuit provided each vertically integrated Hollywood firm with significant monopoly power. Historian Lewis Jacobs, using a demand-oriented model, argues that since patrons were willing to pay high prices to see first-run films, the large film producer-distributors purchased theater chains to control access to their customers. Such an explanation is one-sided: were theaters acquired regardless of expense? I think not. Motion picture capitalists sought profit and growth, and hence were quite conscious of costs. Second, Jacobs's (implicit) model ignores issues of business organization. How did Hollywood corporations use their new theater holdings to garner higher profits? In this article I argue that during the 1920s the U.S. film industry became a complete "big business" by adopting the strategy of the chain store. Hollywood-owned circuits increasingly presented a more standardized product, on a national level, at decreasing cost--all directed by a central authority in New York. Exhibition was the branch of the industry which could most easily adopt "big business" practices, and thus accumulate the greatest excess profits. Sam Katz, president of the Publix circuit, pushed most strongly for the chain-store system, and by 1929 Publix had become the most powerful theater organization in the United States.