The End of the Nickelodeon Frontier
The nickelodeon boom was coming to an end by late 1907. Towns in most parts of the country had at least one motion picture theater. Nickelodeon managers were operating within a competitive environment that required them to show more and newer films and to change programs more frequently. Expenses therefore rose. Since most of these improvements made the shows last longer, fewer patrons could be admitted. Since admission remained at five cents, box-office grosses declined. With expenses increasing and revenues decreasing, many small theaters could not seat enough customers to survive. Economies of scale, upgrading and expansion of facilities, and elaboration of exhibition practices
Thomas A. Edison in 1906.
became necessities for many showmen. Larger theaters spread operating expenses over more seats and were able to offer a superior show at a lower cost per customer.
A brief, sharp depression, started by a financial panic in October 1907, intensified competition and the process of rationalization both within the moving picture field and between different parts of the amusement industry. By late
November Film Index reported: "All must admit that there has been a stringency in the moving picture field as far as patronage is concerned. It would be an extraordinary thing had that field alone withstood the 'squeeze.' Every line of business in the country has felt it to a more or less severe extent and none more so than the theatrical."[2] Vaudeville houses in big cities drew fewer customers, reducing their profitability. In New York, Keith & Proctor responded by converting many of its vaudeville theaters to moving pictures.
Manhattan's downtown section became a center for motion picture exhibition. William Brady acquired the 1,200-seat Alhambra Theater on Fourteenth Street and reopened it as a motion picture house, the Unique, at the end of 1907.[3] People had predicted that this change would adversely affect neighboring vaudeville and burlesque houses. These expectations proved correct. By late June not only Keith's Union Square Theater but the Dewey, acquired by William Fox, and Pastor's had been converted to motion picture shows. On a single block between Broadway and Third Avenue on Fourteenth Street, there were five picture houses. Competition was so intense that Variety called it "the Battle of 14th Street." To attract patronage, Pastor's offered a four-reel, one-and-a-quarter-hour program. Unable to compete, the Miles Brothers closed their Fourteenth Street storefront theater at the end of June.[4] Across the country, managers were using films to replace vaudeville or fill a house that would have otherwise been dark.
Opportunities for safe investments by small-time entrepreneurs were giving way to competition and big business not only among exhibitors but among the film exchanges as well. By December 1907 Carl Laemmle had opened exchanges in Evansville, Indiana; Memphis, Tennessee; and Council Bluffs, Iowa.[5] Less than a year later, he had six offices outside Chicago.[6] William Swanson bought out his partner, James H. Maher, and opened a new exchange in New Orleans in September 1907; a third Swanson exchange was started in St. Louis two months later.[7] Similar moves were made by other prominent renters.
By the end of 1907, a web of film exchanges stretched across the country. Subsequent growth for these companies was no longer based on the exploitation of new territories. Superior service, aggressive promotion, and/or lower prices were needed to maintain a competitive position and to win customers away from rival businesses. During the general financial panic, however, prices were slashed relentlessly. One trade journal called it a "renters' panic":
From reports of progress from all over the country it is very evident that something must be done now, as regards the competition among film renters. The best of things do at times outgrow their usefulness, and the healthy influence of competition has been worn threadbare in this case; it is no longer the healthy competition which is said to be "the life of the trade," but a menacing, detrimental scramble for all that is within reach, without regard for the ordinary ethics of a self-respecting commercial man.
Yes it is a panic. Why is it that a renter sends emissaries around the showmen
soliciting business, not at any fixed price but at any price at all, just so it is lower than the other man's?[8]
Less efficient exchanges operated at a loss or cut corners. To avoid purchasing new prints, they sent exhibitors "junk"—worn-out prints that should not have been screened. Short on cash, they sometimes paid film manufacturers with bad checks.[9] Some unscrupulous renters—notably the 20th Century Optiscope Company—made or purchased illegal dupes, depriving the original producers of significant revenue.[10]
Although established producers continued to make good profits throughout the fall of 1907 because of the continued shortage of films, they felt uneasy about the future. As a new generation of successful renters looked for growth opportunities within the industry, they followed the leads of Vitagraph, Kalem, and Essanay by moving into production. William H. Goodfellow, owner of the Detroit Film Exchange, started the Goodfellow Manufacturing Company. In St. Louis, Oliver T. Crawford, who owned several exchanges and many theaters, moved into production. His company's first film was of the International Balloon Races in October. Comedies and dramatic films were to follow shortly.[11] The Actograph Company was taking actualities by August and was ready to make fictional subjects three months later. One of the enterprise's assets was the dog Mannie, which had starred in many previous Edison films.[12] Looking toward the future, established producers realized that unregulated competition assured eventual overproduction, falling prices, and lower profits.
Established motion picture manufacturers were caught between aspiring production companies on one hand and Edison litigation on the other. If the validity of Edison's patents was upheld, they, too, would be treated as upstarts. After Edison's partial victory against Biograph in March 1907, the inventor's lawyers reactivated a suit against William Selig and began to build a case against Vitagraph. Edison hired George E. Stevens away from Vitagraph, where he had worked as a stage manager between October 1906 and April 1907. Stevens provided Edison's lawyers with evidence that proved Vitagraph had been using the infringing Warwick camera and had subsequently converted to the Demeny beater camera made by Gaumont in an attempt to circumvent Edison's patents.[13] Six years later, Smith was to recall, "We were very perturbed and disturbed over the fact that they had gotten this evidence and shortly after that suggestions were made to us that we could get together with the Edison Company and pay a license, the probability was that some sort of agreement could be reached, whereby we could proceed with our business in a state of peace and security, with the assurance that we would be no further disturbed in the development of the art, and the investment of our money."[14] Smith's sentiments were echoed by George Spoor and other producers.[15] When an injunction was entered against Selig on October 24, 1907, it was clearly time for the manufacturers to reach an agreement with Edison.[16] Such an agreement, moreover,
could provide the basis for an association that might regulate aspects of the industry for the benefit of its members.