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Group Title: Annual report to the Motion Picture Producers and Distributors of America
Title: Annual report
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00094189/00003
 Material Information
Title: Annual report
Physical Description: v. , : ; 22 cm.
Language: English
Creator: Motion Picture Producers and Distributors of America
Publisher: s.n.
Place of Publication: New York
Publication Date: 1939
Frequency: annual
Subject: Motion pictures -- Periodicals   ( lcsh )
Dates or Sequential Designation: Ceased with 1944/45.
General Note: Each report has a distinctive title preceding the words "Annual report..." on t.-p.
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Bibliographic ID: UF00094189
Volume ID: VID00003
Source Institution: University of Florida
Holding Location: University of Florida
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Resource Identifier: oclc - 01645316
lccn - 37015315
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Preceded by: Presidents report
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    Front Cover
        Front Cover 1
        Front Cover 2
    Title Page
        Title Page 1
        Title Page 2
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    Back Matter
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    Back Cover
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Full Text



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Annual Report

To the Motion Picture Producers
and Distributors of America, Inc.
By WILL H. HAYS, President
March 27, 1939

28 West 44th Street, New York City

79 4
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Annual Report

To the Motion Picture Producers
and Distributors of America, Inc.

By WILL H. HAYS, President
March 27, 1939




28 West 44th Street, New York City




MARCH 27, 1939

WHILE the barometer of the box-office went up and down
with picture appeal and entertainment continued to be
the commodity which the public supported, the past year has been
notable for the rising tide of discussion as to the social func-
tion of the screen. In a period of great tension in world affairs,
the conflict of opinion, however, as between those who would
preserve the motion picture theatre as a center of popular recrea-
tion and those who would emphasize the social import of the art
was more often apparent than real. The increasing number of pic-
tures produced by the industry which treat honestly and drama-
tically many current themes proves that there is nothing incom-
patible between the best interests of the box-office and the kind
of entertainment that raises the level of audience appreciation,
whatever the subject treated.

None the less, the discussion that proceeds is the greatest
possible tribute to the progress of the screen. For it is proof of
the fact that an entertainment art for the millions has risen to
such high estate that the best which the living theatre has been
able to produce or which other artistry can create is now de-
manded from the films. It is not so long ago that thrilling action

for its own sake was considered satisfying 'movie'; that the
custard pie was the symbol of hilarity and amusement from the
screen; that the chase was sure-fire entertainment technique; that
boy-meets-girl supplied all the drama that a motion picture au-
dience apparently demanded.
Whatever may have been the merits or demerits of each
picture from an artistic standpoint, today competent critics, in
and out of the industry, are able to point to a succession of
pictures which dramatized present-day social conditions, which
exposed slum areas in many of our great cities, which placed in
true perspective the problems of medicine and medical care.
which dealt with issues of war and peace, which treated of crime
and crime-breeding, which showed human beings struggling for
individuality against the forces of an increasingly complex civiliz-
ation, which discussed the values of our present-day democracy
and emphasized the traditions that have made this nation great,
which exposed racketeering, which treated of the problems o01
adolescence and which dealt with other themes notable for their
educational value.
More pertinent, perhaps, than that an increasing number of
such pictures are being produced by the industry, is the fact that
some of these films proved not merely satisfactory, but outstand-
ing entertainment and all were primarily artistic achievements,
not partisan tracts.
It is inevitable in an art to which many are called but few
are chosen, that there will be those who cry out there is no room
on the screen for their ideas, their artistry or their talents; that
controversial subjects are taboo or that they cannot express their
creative instincts within the limits of the moral code established
and enforced by the industry. These are matters for pictures,
not words, to answer. The fact that the screen has handled
successfully themes of contemporary thought in dramatic and
vivid form and presented the subject matter as splendid enter-

tainment, rather than propaganda, proves how much it can do
today, and how much more it can do tomorrow. Indeed, the
experiments in public interest and public acceptance made by
those producers who have expended millions of dollars during
past months to advance motion picture entertainment into new
high ground have blazed the way for further progress.
In considering the problem of better entertainment-a prob-
lem that should always face the screen--it is to the credit of the
organized industry that it has cooperated with community leader-
ship, from the very inception of this Association, to create the
demand which the industry itself must meet.
The better-picture movement was inaugurated with the help
of important public groups of nation-wide followings, which co-
operated with the industry to help raise public demand in order
to justify the supply of pictures of the better kind.
In this respect the industry itself invited the challenge which
producers, writers, directors and artists must accept in order to
raise ever higher the standards of the screen. That is why today
so many demands are focused on the industry and why our
studios must answer with the greatest possible variety of enter-
tainment for a universal public.
The result is a potential market for film entertainment that
includes the public at large, not a mere movie audience-a market
of 130,000,000 critics in the United States alone-quick to turn
thumbs down on pictures which are not good of their kind.

Leadership Opinion

An informal meeting in New York was held early this year
with present -and former group leaders, some of them orig-
inal members of the Public Relations Committee initiated for
the industry in 1922, and representative of the opinion of leading
educational institutions, religious and civic groups, social service,

welfare, women's club and youth organizations. It is interesting
to note that the discussions sounded the same note that marked
the beginning of the educational activities of the organized motion
picture industry seventeen years ago-that together we must wor(
now as always for a rising standard of motion picture quality, ani
the fullest possible public support for pictures of this character.

In essence the observations and suggestions at this meeting
(1) For the continuance and increase of those themes and
treatments which have made the American motion picture a truL
product of democracy, by emphasizing in popular entertainment
mankind's long struggle for freedom and the hopes and aspira-
tions of free men everywhere.

(2) For the proper emphasis on our own screens of thc
theme of Americanism, by pictures that present the strongest
measure of hope in their portrayal of stories of success attained
through initiative, through perseverance and sacrifice, and
through the triumph of man's spirit over material obstacles.

(3) For pictures, treated with realism drawn from life, of
the problems of the average man and woman among the rank and
file of the people. This is already reflected in the increasing
number of successful entertainment films, presented in simple
terms and without exaggeration, that show the every-day pro-
cesses of American family life with their portrayals of character
that give fresh courage to countless millions.

(4) For pictures, including shorts and travelogues, which
dramatize the home life and habits, the customs and the cultures
of all nations and races; for pictures that deal with the great
figures of all nations, treated with sympathy and fidelity to his-
torical fact. American pictures serve a world audience. They
are universal coinage which must be kept sound and undebased

(5) For pictures that will meet to an even larger extent our
entertainment responsibilities to our sister Americas, and at the
same time help to erase misunderstanding by portraying their
history, ideals and cultural patterns and thus draw our peoples
(6) For the fullest possible opportunity for the newsreels
to continue to give the vivid recording of big events and also to
enlarge upon the background and significance of the news.

(7) For the continuance and development of the short-
subject field, particularly of those pictures which re-create for
the present generation the great events and stirring scenes of
our nation's history.

Larger Scope

It was inevitable that the scope of screen entertainment would
be greatly enlarged with improved dramatic technique and higher
standards of appreciation to a point where the screen would be-
come more and more socially and educationally important. Actual
experience has proven that artistry can treat on the screen any
subject within the boundaries of good taste and sound morals
under the Motion Picture Production Code. And any means any
-even those subjects that serve the important purpose of com-
plete relaxation, that shout no message, point no moral or teach
no lesson.

Snow Ifhite and the Seven Dwarfs, the first cartoon fea-
ture picture, was a unique adventure in motion picture enterprise.
Its tremendous production cost demanded the utmost financial
courage. It has grossed new records at the world's box-offices,
with the end not yet in sight. Yet the fact remains that no
isms whatever were discussed in the film and that the millions
who hailed it did not seem to miss its lack of social significance.
It seems there are still a number of eudemonists left in the world.

Family Pictures
One of the truly significant box-office demonstrations in the
past year, was the growing popularity of family entertainment
films. It is interesting to note that the essence of these pictures
was their topical, human and commonplace treatment of the day-
by-day problems of the average American family.
The emphasis during past months on the significance and
values of free institutions as themes of motion picture entertain-
ment, in short subjects as well as feature films, promises to con-
tinue during the forthcoming season. Very pertinent is the fact
that the current patriotic shorts were educational subjects which
proved to be much more than mere appendages of the entertain-
ment program. The talents of some of the best writers, directors
and players in the industry were used in the production of such
Another trend is that heroes and patriots of South America
will be dramatized in important productions. Features and short
subjects will deal with such themes as the Monroe Doctrine and
the careers of such figures as Simon Bolivar and San Martin.
Many of these pictures will be done in color.

Motion Picture Exhibits
The panorama of American history as already dramatized
in feature and other productions previously released will be re-
flected in the motion picture exhibits at the World's Fair in New
York as well as at the Golden Gate Exposition in San Francisco.
More than 17,000 titles were considered in the process of
selecting from approximately 2,000,000 feet of film important
episodes of American history, as advised by Dr. James T. Shot-
well, eminent American historian.
The work has proved a vast task of research and it is a
satisfaction to note the wealth of material found in our motion

picture vaults-the story of the Mayas and the Aztecs; the In-
dians of the north; the adventure of Columbus; the coming of the
Colonists; the French and Indian Wars; the Boston Tea Party;
the Continental Congress; the Constitutional Convention; Daniel
Boone and the conquest of the wilderness; the Louisiana Pur-
chase; the War of 1812; the Oregon and Santa Fe Trails; Civil
War scenes; the settlement of the Great Plains; the story of the
struggle for religious and political freedom; the story of inven-
tion and the million-handed industry built upon it. The stories
of Drake and his exploration that just missed the Golden Gate,
and the Lewis and Clark Expedition still wait to be made.
There could be no finer mark of enterprise on the part of
American producers than that they had covered so nearly all
of the great moments of our history in their product.

Production Code Administration
The total number of feature-length pictures approved by the
Association, in the calendar year 1938, was 594. Of this number,
364 were produced by members of the Association and 230 by
non-members; of this 230, foreign companies produced 54 and
non-member domestic companies produced 176. Forty-nine of
the total were re-issues.

The total number of short-subject films, approved during
1938, was 833.

Comparative Total Number of Pictures Approved

1933 1934 1935 1936 1937 1938
486 501 1748* 1594t 1462** 142711

* Includes 412 re-issues
t Includes 161 re-issues
** Includes 63 re-issues
Includes 50 re-issues

Following is a detailed statement of the general activities
during the year under review:
Total number of books, synopses, plays and stories read- 544$
Number of scripts read (including changes)............ 2879
Number of pictures reviewed............ ............ 1539*
Number of consultations............................. 1491
Number of opinions written, dealing with stories, scripts,
pictures, etc. ........... .. .................... 5922

+ Includes short subjects.
* Includes a number of pictures reviewed more than once.

The following table is interesting as indicating source mater-
ial for the 545 feature-length pictures produced during the year:
Total % of Whole
From original screen stories.............. 316 58.0
From stage plays ....................... 30 5.5
From novels ...................... ... 140 25.7
From biographies ............. ....... .. 2 .3
From short stories (including magazine) .. 54 1o.o
M miscellaneous .............. ............ 3 .5

545 100.0

* 2 comic strips; 1 newspaper serial.

Advertising Code Administration

At no time during the past year was there a single serious
violation of the Advertising Code and none of a nature to merit
any substantial condemnation. The advertising of some of the
few films produced outside the services of the Association com-
prised the only instances of deliberate poor taste in motion
picture advertising that were evident during this period.

There was a slight increase in the number of still pictures
rejected during the year. This may be explained, in part, by the
growth of more daring feminine fashions, necessarily empha-
sized by photography. Another factor has been the candid-
camera craze playing up gore and horror whenever possible.

Interesting to note is the fact that of the 434 campaigns in-
cluding advertisements, publicity stories, newspaper art, lobby
displays, outdoor posters and exploitation ideas submitted to the
Advertising Code Administration, 62 of such campaigns were
those of companies not members of the Motion Picture Producers
and Distributors of America.

Deletions and changes were ordered and made while press
books were in proof form and no press book had to be rejected
after completion. Thus the effectiveness of self-regulation saved
much time and expense.

Summary of submission in 1938:
Stills (W est Coast) .................. ... ............ 99,627
Stills (E ast Coast) .................................. 3,730
Publicity stories ............. ....... ............ 15,044
Advertisements ........................ ............ 9,830
Exploitation ideas ............. ................... 9,388
M miscellaneous accessories ................ ........... 6,252
Posters .............. ....... ....... .............. 1,937
Trailers ....................... ............... 747

Community Service
The activities of the Association in respect to communi-
ty contacts and cooperation with those interested in promoting the
better-picture movement included miscellaneous interviews with
more than 20,000 individuals; assistance to community leaders
in their efforts to improve the quality of audience appreciation; ex-

ploitation through community channels of particularly important
current pictures from the social standpoint; information on movie
subjects furnished to many writers of books and magazine
articles; and many other projects.
There has been a marked increase of interest on the part of
schools, libraries and other public groups in this work. It is to
be noted that in a survey made less than three years ago under
the direction of the United States Commissioner of Education,
only 14 colleges and universities reported offering regular courses
in motion pictures. Today, at least 53 major institutions of
learning have either added or are planning to install in the near
future such courses, with more than 200 offering partial instruc-
tion in connection with other departmental work. In New York
City alone motion picture courses are being offered in seven
colleges and universities. In Hollywood during the past year
over 6oo individual teachers called on the Association for in-
formation as to current pictures with reference to educational
and art-appreciation studies.
A total of 30 additional Study Guides based on feature
pictures produced by member companies were prepared in
1938 and have been greatly in demand. These books continued
to prove of much value to educational groups interested in
promoting photoplay appreciation and focused attention on
exceptional pictures. When this project was originated, it was
believed that eventually it would be self-sustaining because of
its value to member companies. It has taken nearly five years
to accomplish such a result. In the earlier years a great deal of
patience and supervision was required, with considerable financial
expenditure on the part of the Association.
What our work in this field was intended to accomplish is
well illustrated by the resolutions adopted by the International
Council of Women held in Edinburgh last year. The delibera-
tions of the Cinema Committee of that organization were crystal-

lized in resolutions which cited as the main objective of their
motion picture discussions for the next triennial meeting-The
Education of Public Taste. This is to be carried on through
conferences, previews, awards and other methods.
From Hollywood, our own regular service which stresses mo-
tion picture appreciation by discussing the educational and other
features of individual film productions has now been extended to
cover 300 local broadcasting stations, whose services tie in with
many local community interests.
Moreover, through the progress of this work the National
Federation of Music Clubs has been added to the list of pre-
viewers, following their approval of what the screen has done
to advance interest in music.

Motion Pictures in Education
The year has witnessed substantial progress in the educa-
tional projects described in my reports published in 1937 and
1938. These projects have been continued in cooperation with
educational leaders who recognize the pedagogic value of motion
pictures produced originally for entertainment. This joint ac-
tivity by educators and the motion picture industry began with
the cooperation between our Association and the National
Education Association in 1922.
Character Education Films: With the cooperation of our
companies, the Commission on Human Relations of the Progres-
sive Education Association has continued to produce human rela-
tions short subjects in the form of excerpts from existing non-
current photoplays. On December 31, fifty-four of these short
subjects had been adapted from 37 photoplays. By July I, 1939,
the Commission expects to have completed 75 human relations
short subjects.
The general studies made by the Commission prior to this
experiment indicate that an American youth passing from child-

hood through adolescence to adult development has to adapt
himself to some 175 difficult human relations situations. These
transitions are imposed on him or required of him by the culture
into which he is born. It is an educational responsibility to aid
him in making these adaptations. It is an educational opportunity
to give him an understanding of why the adaptations are required.
From the social welfare standpoint, it is of the highest importance
that these responsibilities be fulfilled during the course of formal
education in the schools.
Out of these 175 critical situations, it is believed that approxi-
mately ioo can best be approached and understood through the
film-discussion method which was developed by the Committee
on Social Values in Motion Pictures using our Secrets of Success
Series, and has been further extended by the Commission on
Human Relations.
The Commission has presented demonstration discussions
with students before educational conventions, teachers' institutes
and parent-teacher associations in about fifty of the principal
cities of the country. The laboratory evaluation of the short
subjects has been proceeding steadily in twenty or more school
systems. Stenographic records of each discussion are forwarded
to a central committee and checked with the results secured from
similar experiences in other areas.
It is the Commission's purpose to publish within the next
few months in tentative form the teachers' materials developed
by this evaluation, a monograph now in preparation reporting
changes in attitude discovered through the evaluation process and
a monograph presenting film discussion as a technique peculiarly
fitted to serve present-day educational needs. I recommend that
the company members comply with the request of the Committee
that our present cooperation be continued in order that the
experiment may go forward on a somewhat wider scale for two'
years beyond July i, 1939.

Use of Non-Current Short Subjects in Classrooms: The
Advisory Committee on the Use of Motion Pictures in Education
has continued the development of its plan for the use of non-
current theatrical material for educational purposes. With the
cooperation of our companies, additional short subjects that have
become available since 1937 are in process of being reviewed by
this Committee for the purpose of determining their pedagogic
value. A catalogue of these selected films is now in preparation.
It will contain brief appraisals showing the educational usefulness
of each subject and its place in the school curriculum.
Presently the Committee will supplement its report, which
was laid before you in October 1937, by proposing a detailed
plan for making non-current theatrical short subjects available
to schools for classroom instruction. This plan will fully safe-
guard the interest of exhibitors and will avoid injustice to the
present producers of classroom films.

During 1938 American newsreels in their world-wide ser-
vices added to the headlines of history by recording the vital
events of the year wherever they occurred.
American cameramen were foremost with films depicting the
struggle and ruthlessness of the undeclared war in China, the
horror of bombings in Spain and front line and behind-the-scenes
pictures of the contending forces, and the tragic events in Central
Europe that resulted in the collapse of governments and stream-
ing lines of refugees. Through our newsreels all shared in the
triumph of a young American who encircled the globe and all saw
the devastation of the worst storm ever experienced by New
These were the banner headlines in addition to the changing
panorama of the new in science, in fashions, sports and other
events brought to the theatre public by our newsreel services.


From Hollywood, the film capital of the world, spreads an
antenna of news coverage-press, radio and other media-that
reaches into every land. There are more than 350 accredited
American and foreign correspondents in this center of motion
picture production. Too, because of the importance of the art
and the industry, bankers, industrialists, artists, educators, busi-
ness men, civic and religious leaders, and other representatives
of groups and committees who come to Hollywood constantly
require information for their studies and surveys.

Serious students have found little, indeed, to sensationalize
about a community of men and women whose work demands the
utmost concentration upon their art if they are to win public
applause and retain public favor. But such a community is
libeled by false impressions given of the life and manners of
the creative personnel of the picture industry.
Drawing, as Hollywood does, a great throng of people who
come in the vague hope of some association with the movies, it
is unfortunate that if such people get into difficulties they are
described as "movie artists." While a vast majority are anxious
to portray the reality rather than the fiction of Hollywood life,
there are still instances of a type of publicity that is completely
out of line with the facts and is exceedingly harmful to the

The fact of the matter is that there are few communities in
the United States in which members display greater civic or
patriotic consciousness, where a larger proportion is represented
in worthwhile social movements, or where a greater number
contribute more generously of their time, money and effort to
help the needy. Some of the activities, for instance, in which
leading stars are engaged include hospital aid, the financing of

working girls' clubs, orphanages, homes for the aged, aid for
refugees from Europe, as well as actual service and money con-
tributions to many other projects of community welfare.
These creative personalities in all branches are solid citizens,
home owners and taxpayers-an integral part of their commu-
nities of which they are proud and to which they have contributed
From the cultural standpoint, too, it is notable that within
the past year, producers, artists, directors and others have re-
ceived honorary degrees from universities, recognition from
other educational groups and patriotic organizations, and cita-
tions and orders from foreign governments.
In religious interest, Hollywood supports four Baptist and
five Roman Catholic churches, four Churches of Christ-Scientist,
four Congregational, five Episcopal, two Evangelical, four
Lutheran and seven Methodist churches, four Jewish synagogues,
five Presbyterian and numerous Unitarian, Nazarene, Unity,
Spiritualist and other churches. And Hollywood is a community
of 125,ooo people of which the great majority are either em-
ployed in motion picture studios or some allied line.
There can be no shutters to the glass house which is Holly-
wood, but any misrepresentation may well be corrected by en-
larged services of authentic information which will satisfy news
needs, develop the best possible press relations and project Holly-
wood as it is.
Relief and Security
Always the entertainment industry has been active and
generous in the virtue of charity and especially so in the cases of
those of its own people, who through illness or misfortune have
required aid. The efforts of those who in 1938 raised
$268,266.19 for the Motion Picture Relief Fund are deserving

of the highest appreciation. Yet so wide and varied is the field
to be covered and so numerous the demands, that it is evident
that expectation of securing annually the money needed to carry
on this work must be based on a system actuarily sound. This
means an exhaustive study of the entire subject of relief and
security in the industry with all the complexities involved. This
is being undertaken with the cooperation of those who are so
effectively carrying on the current service.

Other West Coast Activities

Through the Call Bureau maintained by the Association of
Motion Picture Producers, approximately 5,200 requests for
artists and bit players were sent out during the year to those who
had registered with the Bureau. From these calls more than 2,400
artists received one or more weekly engagements. In addition,
the Bureau continued to issue weekly lists of all available con-
tract players to producers, supervisors, casting directors and
assistants, in the effort to serve the needs of production as well
as of employment.
Notwithstanding the decreased opportunities for work as
extras, the pressure of unemployment during the past year taxed
more than ever the facilities of the Central Casting Corporation
maintained by the industry. Whereas in 1934 incoming tele-
phone calls from extras seeking work amounted to 7,600 per day
and could be handled by three operators, last year the calls ex-
ceeded an average of 18,ooo per day and required the services
of seven telephone operators to handle.

Next to its importance to aviation and shipping, it is probable
that weather service is most important to the economics of motion
picture production. During the past year, the weather service
operated by a staff of the California Institute of Technology at
Pasadena has further demonstrated the fact that such reports

made possible substantial savings to motion picture studios.
During the year more than 6,ooo requests for weather informa-
tion from the industry were serviced. These reports varied from
detailed information covering a few hours to a general outlook
on the weather covering a month or more. The increased use of
color in picture production has made more essential than ever the
best possible forecast of photographic conditions.

Studio Relations

As an art-industry, above all we must strive continually to
develop and maintain the best possible relations among and
with the talent groups whose expression is on the screen. The
process of making pictures is a creative process. The producer,
the director, the actor, the writer and the technician are creative
Lack of harmony, misunderstanding or other unsatis-
factory conditions that may affect this process are quickly reflected
in the entertainment product which supports the artistic and busi-
ness structure of the industry.
The current efforts to consummate the fullest understandings
among and with all branches, therefore, deserve every possible
cooperation. Not only is it important that the fairest standards
and methods be agreed upon and maintained, but that the inter-
ested parties truly accept them as the fairest. Upon the faith-
ful and earnest execution of such understandings will success be
determined with all that it implies to the welfare of the industry
and to the entertainment service of the public.

Technical Developments

Perhaps the most outstanding factor during the year in this
field was the development and marketing of new panchromatic
negatives which greatly increased speed of photography.

There was also some progress in the field of better lighting,
and a number of accessories were brought out during the year,
all of which added to the general improvement in technique and
in production quality.
The continued effective fire prevention work illustrates the
value of our system of self-regulation. During the year no
fires occurred in film exchanges in the United States operated by
distributing companies which are members of this Association.
Although the motion picture exchanges of the country examine,
store and ship more than 27,000 miles of motion picture film
daily, no film was destroyed by fire in exchanges.
Because of the discontinuance of Film Boards of Trade
during the latter part of 1937, it was necessary to devise ways
and means of carrying on conservation activities in the thirty-
one film distributing centers located in the United States. An
entirely new system was developed and put into effect January
I, 1938.
During the year the Conservation Department examined
and recorded more than 5,100 monthly inspection reports and
the Director of Conservation personally inspected 168 exchanges
located in fourteen different territories.

Campaign for Increased Attendance
The campaign in the summer of 1938 for greater theatre
attendance during the Fall season proved a splendid example of
cooperation among all elements in the industry. Producers,
distributors and exhibitors met on a common platform of industry
promotion to center attention on the better pictures of the
season, recognizing that it was the common denominator of
better entertainment that drew people to the theatres. It received
full newspaper and trade press support.

The significance of America's leadership in motion picture
production was never clearer than today.
From the standpoint of government, it is evident that Amer-
ican pictures distributed abroad are a great factor in building
goodwill and understanding of our way of life and the hope that
is in democracy for free men everywhere. That the industry is
responsive to our national policy of goodwill and neighborliness
is apparent from the pictures made or planned on themes of
interest to all the countries of the American continent. This is
all the finer in that it represents a bona fide extension of enter-
tainment theme, and not propaganda.
This is the contribution made by an industry, operating
entirely on private capital, without government subsidy, pro-
tective quotas, or barriers against the competition of pictures
produced in any other country. On the other hand, it is rec-
ognized that other governments-some for the announced rea-
sons of nationalism and propaganda-have spared no effort in
developing, protecting and nourishing economically and other-
wise the motion picture industries of their own lands. Foreign
quotas, kontingents, subsidies, prohibitions, decrees, exchange
control and censorships form an ever higher barrier to the dis-
tribution of American pictures abroad.
From the standpoint of American trade and industry, it
is inevitable that our great entertainment films should be the
messengers of our foreign trade in every field where they are
exhibited. Obviously the backgrounds of our pictures present
in the most vivid form the best products and services of Amer-
ican life. Public interest has an important stake, therefore, in
the maintenance of foreign markets for the American motion
picture industry.
Even more important than this, perhaps, is the fact that
through the exhibition of American pictures on the screens of

the world, our country maintains a great communications service
to many peoples with whom we wish to be at peace. Govern-
ment-controlled news services may misrepresent our democratic
ideals. Government or controlled broadcasting may bleat out
distortions of our policies, but American pictures, even when
censored by foreign agencies, necessarily carry their own refu-
tations of the alleged failures of our ideals, our policies, our
efforts and our system. In this lies our continuing responsi-
bility for the production and distribution of such films abroad
as will give a balanced picture of American life.

The leadership of American pictures on the world screen,
is not due to the deliberate or accidental production of an occa-
sional hit picture. We have no monopoly on artistry. What-
ever strains and stresses still need to be corrected, our industry's
strong position in world trade is due to the inherent strength
of its economic structure, its ability to respond quickly to changes
in public taste, its willingness to experiment with pictures in
advance of the box-office demand, and the high investment delib-
erately made for the production of top ranking pictures.

In many foreign countries political censorship is the wasting
disease of the film industry. Orders, taboos and restrictions are
throttling the possibility of better domestic entertainment there.

Among the unfavorable factors that developed in the export
field during the year was the distribution monopoly decreed by
the Italian government. American companies that carried on
distribution in the Italian market found themselves unable to
abide by the provisions of that law. In addition, it is to be noted
that today distributors' quotas for the showing of foreign pic-
tures exist in the states of New South Wales and Victoria of the
Commonwealth of Australia, New Zealand, Germany, England,
Trinidad and Portugal, while France restricts the number of

pictures that can be imported and Japan has cancelled all im-
portation of motion pictures until such time as a new law covering
this commodity may be enacted. In many other countries of the
world where there are exhibitor quotas our distribution is defi-
nitely affected.

Somewhat counter-balancing factors during the year were the
increase of more than 3,700 theatres in 96 countries over the
number that existed in 1937, and the benefits accruing to the
industry from some of the reciprocal trade agreements negoti-
ated by our Government. Nevertheless, there are no indications
of the lessening of restrictions in the way of quotas, external or
internal taxes, or exchange control.

It is interesting to note, however, that even in countries where
every barrier-political, racial and financial-has been erected
against American films, the reception of such pictures as are
shown indicates that the censorship is of the government, not of
the people.


In Canada, as well as in overseas countries, the number of
theatres is growing steadily and American pictures have had a
most favorable reception during the past year. Canada has a
critical theatre-going public and it is a satisfaction to note that
1938 has brought improved conditions for American pictures
over 1937.

Industry Issues

Developments during the year in the field of motion picture
trade practices, which are quite outside the authority of this
Association, indicate the possibility of constructive adjustments
highly important to the future of the industry.

It may not be generally recognized that in the trade practice
discussions undertaken by leaders of all branches of the industry
the result being sought is a solution unique in the field of self-

The exceptional conditions are quite evident in an industry
whose product in commerce is entertainment which of necessity
must be exhibited in different stages of time or runs in order to
return the cost of the picture and a reasonable profit, if possible.
The impossibility of comparing movie entertainment with the
normal products of commerce is made evident by the fact that in
the last analysis it is the public that must determine the return for
a film, for an entertainment production, regardless of the invest-
ment involved, is only as good as the public think it is. In a
popular entertainment service like the movies the interest of
producers must be synchronized not only with that of exhibitors,
but with the interest of the public which must come first.

In all these problems the industry has dealt with government,
not on the theory that it enjoys immunity as distinguished from
other industries, but rather that its special significance and pecu-
liarly difficult problems should be factors in reaching the proper
The objectives-economic, legal and artistic-must be to
provide the people with good and necessary recreation at a mod-
erate cost. For this purpose there is constantly being impressed
upon the industry the importance of developing within itself
those methods and relationships best calculated to enable it to
produce the best pictures at proper cost and to market this enter-
tainment service in the fairest and most efficient manner.
As to the trade practices raised for legal determination in
the Government's suit in equity, the motion picture industry has
welcomed any such constructive effort by the Department of

Justice as is indicated in the following statement of policy by the
"The Department desires to encourage and not
retard the development and orderly operation of the
motion picture industry. It must act through litigation
because it has no power to speak authoritatively or finally
on any issue except through institution of judicial pro-
ceedings. However, though the form of its action be
adversary, its substance permits and the policy of the
Department encourages the fullest cooperation with the
In the meantime, responsible factors in the industry are to be
commended, with all the difficulties involved, for initiating a
series of conferences in which practical men of all branches are
participating, looking toward a program which will eliminate
many of the problems now current in distribution and exhibition.
If such a program is achieved in the manner best serving the
interests of both industry and public, the method will not be one
of mere negative prohibition by court injunction, nor of inflexible
statutes heedlessly imposed on the industry's trade structure.
The breadth of the undertaking is made evident by the par-
ticipation of exhibitor leaders of some 20 regional or state asso-
ciations represented in the Motion Picture Theatre Owners of
America; some 15 regional or state associations represented in
the Allied States Association; and 7 active regional associations
not affiliated with either national association and located in New
York, Iowa, Virginia, Colorado, Utah, West Virginia, and
Economic Studies
Studies now being made of the economic structure of the
industry indicate many problems which only future developments
can resolve. It is not easy to measure the effect of what may be

done to, for, or by the motion picture industry on the permanent
progress of the art, the demand for motion pictures or the
attempts to meet it. The vital elements of this great entertain-
ment structure cannot be easily destroyed.
However, the effect of violent, heedless changes on the form
of the structure is quite a different matter. Pictures have no
monopoly of entertainment service. What would be affected
by such changes is an industry which, from the public standpoint,
has furnished a vast and progressively better entertainment ser-
vice to more than 8o,ooo,ooo people weekly in the United States;
which has made the screen a more important arm of information
and education year by year; which has produced more costly,
elaborate and more successful entertainment as the industry has
grown; and which has nevertheless kept the price of admissions
down to a level which the poorest can afford. What would be
affected is an industry that normally employs more than 280,000
people under wage and working conditions of the highest stand-
ards; that keeps 17,500 theatres in more than 9,000 cities and
towns of this country in regular operation; that produces
$1,000,000ooo,000 worth of business annually in local communities;
that pays to the Federal government alone about $100oo,ooo,ooo
a year in taxes; and that has given to America world leadership
in a great and significant art-industry.
In its present form, the motion picture industry, from the
theatre standpoint, is a great mass entertainment structure sup-
ported at the box-office by a universal audience. It is on that
basis that great theatres justify their capital investment, protect
hundreds of thousands of local investors and provide exceptional
business incentive to the communities in which they are located.
At present, the motion picture industry, from the production
standpoint, is an industry geared to the support of the existing
theatre structure whose life-blood must come from the studios.

It is in the realm of theory, not fact, whether the great in-
vestments involved in making, distributing and exploiting pro-
gressively finer and more successful feature pictures could have
been found if the risk had not been at least partially met by the
fact of assured exhibition, at paying rentals, in theatres owned,
controlled by, or affiliated with producers or distributors who
accepted this risk. Today, even smaller communities in the
United States are represented by large, modern, safe and luxur-
ious film houses. These were brought into being by the compe-
tition of the de luxe theatres built by producer-exhibitor interests.
It is doubtful whether production which draws only on our
theatres, rather than from a world market, could plan or produce
a constantly growing list of pictures requiring the most popular
stars, the ablest writers and the best directors; whether it could
prosper financially or whether it could even survive. Some of
our pictures secure as high as 6o% of their gross from foreign
What is indubitable is the fact, in countries where a pro-
duction-distribution-exhibition structure comparable to ours does
not exist, that domestic film industries remain milk-fed by govern-
ment subsidies, quotas, kontingents and other protective measures,
that producers are in constant financial difficulty, that there is a
disastrous shift of talent from such fields, unstable business
organizations and a cry for artificial barriers to meet the com-
petition of American pictures.
It must be recognized, from the public standpoint, that
extraordinary, not ordinary, pictures are necessary to maintain
and step up public interest in movie entertainment, to justify the
large public investments in theatres, to maintain employment at
high wages, and to retain the prestige and leadership of Ameri-
can pictures abroad. The production of such "banner" films
must be the result of a deliberate policy to produce the best pos-
sible entertainment. The continuous operation of 17,500 thea-

tres depends upon organized and continuous production in our
studios, not upon hit-and-run speculative enterprise.
The Government's bill in equity to determine judicially
certain trade practices and structural relations in the industry
has stated the formula by which such progress is now obtained
when it declares that today motion pictures of the finer
type, featuring well known stars and having the greatest public
appeal, are produced for the most part by the major companies
who can do so because of their position in the industry, their
financial power, equipment and organization, "which enables
them to command the services of the finest stars, the most accom-
plished directors and the most skillful technicians, whose com-
bined efforts must insure the production of successful pictures."
In a three-sided industry, consisting of production, distri-
bution and exhibition, only short-sightedness could dictate the
conclusion that any one factor could permanently benefit at the
expense of the others. The industry must rise or fall through
the cooperation or lack of it by all these interests, not through
the division into air-tight groups each of which seeks an economic
advantage over the others.
This is what thoughtful leaders in every branch of the
industry-producers, distributors and exhibitors-strive to attain.
It is through give and take, through honest and faithful cooper-
ation and conciliation, that the industry must prosper and that
the public will benefit.

-*.rK'T!9 4o3 FRINTED -N U :.A

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