The Formation of the Association of Edison Licensees and the Film Service Association

The "general dissatisfaction with conditions" led to a meeting of manufacturers in New York on November 9, 1907. George Spoor and William Selig attended from Chicago, as did the leading New York producers and importers.^[17] A week later, this group and owners of many of the country's leading film exchanges gathered in Pittsburgh "to discuss matters of vital importance for the regulation and improvement of existing business conditions."^[18] The renters met among themselves and formed the United Film Service Protective Association "for the purpose of working in cooperation with the manufacturers, importers, jobbers and exhibitors of the films and accessories to improve the service now furnished the public, to protect each other in the matter of credits and all other conditions affecting our mutual welfare, and in general to take such action as will be appropriate to improve conditions of the trade."^[19] They adopted a platform that prohibited exhibitors from subletting or "bicycling" prints among several theaters, a practice that wore out their goods and reduced the number of paying customers. To assure themselves adequate profits, they established a minimum rate for service. To make it more difficult for new exchanges to begin, they eliminated sale of second-hand film. Prints were to be retired after a designated period of time and returned to the manufacturer. To prevent small or new exchanges from joining the association, an initial membership fee of $200 was imposed and thereafter raised to $5,000 with a waiting period of one year before the newcomer's membership could be activated.

The renters planned to form an alliance with a separate, but coordinated, organization of manufacturers; this group would marginalize if not eliminate nonmember competitors. Although the renters came to ready agreement at the Pittsburgh convention and subsequent meetings in Chicago and Buffalo, the manufacturers and importers encountered much greater difficulties, for Edison was determined to take control of any organization that might emerge. While the producers recognized that Edison's patents could provide a valuable under-pinning for the organization, the terms had to be negotiated. Moving Picture World later reported: "It is claimed that the motives which led to the combination of interests between the manufacturers were 'ninety-nine parts commercial and one part legal, the legal aspect being only a stepping stone to accomplish the prime object of placing the business on a substantial footing for the ultimate benefit of all concerned.' "^[20]

Edison and Gilmore decided to offer licenses to only seven manufacturers and to exclude importers like George Kleine, Isaac Ullman, and Williams, Brown & Earle. Licenses were designated for Biograph, Vitagraph, Lubin, Selig,

Pathé, Méliès, and Kalem. The inclusion of Kalem was supposed to mollify Kleine. Essanay was viewed as a backup: if Biograph failed to join, Spoor and Anderson would be given a license. Biograph was the source of much difficulty. Since its motion picture patents had been recognized by the courts, it wanted this to be reflected in the new organization. This Edison refused to do. After much hesitation, Biograph finally refused to join, thus enabling Essanay to receive a license.^[21] Edison executives planned to permit these seven licensed manufacturers to operate if they paid a penny-per-foot royalty on the film they used. While this tribute was acceptable to American manufacturers, Pathé Frères insisted on only half that amount. Edison held a legal advantage, but Pathé held the upper hand commercially. Without Pathé's participation, no association was possible. Pathé had its way.^[22]

A formal agreement, effective March 1st, was finally reached at the conference of film renters and manufacturers in Buffalo on February 8th and 9th. Variety noted that "the American moving picture trade was organized into a compact, cohesive system of manufacture and distribution which, it is promised, will revolutionize the business."^[23] This was accomplished through the mutual support of the Association of Edison Licensees (the production companies) and the renamed Film Service Association (the renters): they were conceived of as allied, equal, and independent organizations. Film Service members agreed to purchase films only from the Edison licensees, while the licensees were to sell only to the members of the Film Service Association (FSA). Several exchanges faced difficult choices. O. T. Crawford, the Actograph Company, and the Miles Brothers ceased their production activities and joined the FSA. Mannie, the Edison dog, did not return to the screen. William Goodfellow, however, kept his exchange out of the combination so he could continue his filmmaking activities. Renters were further prohibited from purchasing a manufacturer's business or license, a rule that was later tested in the case of the Méliès company.^[24]

To strengthen the position of the licensees, the Edison Company signed an agreement with George Eastman. This required the licensees to buy all their raw stock from Eastman Kodak; in return, Eastman would not sell to newcomers, including American manufacturers outside the trust, with the sole exception of Biograph. Vitagraph was unhappy that Eastman had not limited his sales to European competitors as well. In a letter to George Eastman marked "strictly confidential," J. Stuart Blackton argued that "the only reason which could induce me to accept a license and permit Edison to make an enormous profit with the royalty would be that in doing so I would thereby keep the foreign competition out of the market."^[25] With George Eastman providing the best, and for practical purposes the only, film for motion pictures in America, this agreement greatly strengthened the position of the licensees by raising barriers to aspiring domestic producers.

Licensed renting activities were concentrated in approximately 120 ex-

changes owned by 60 renters. Some of these were latecomers that were allowed to join the FSA rather than side with the opposition forming around Biograph. Renters were required to buy at least $1,200 worth of film each month. Vitagraph expected this last requirement to increase its sales by at least forty reels of film per month.^[26] It also eliminated smaller exchanges that were a potential threat to more established bureaus. Exchanges were not allowed to rent to exhibitors showing unlicensed films or to undercut the schedule of minimum prices. Violation of these and other rules meant fines or expulsion from the FSA. Some restrictions—for instance, one that prohibited businessmen from acting as both renters and exhibitors—were met with skepticism and never enforced.

The Edison licensees also introduced a formal release system. During the fall, some manufacturers had marketed a new film each week but without specifying the precise day of delivery. Now individual manufacturers released a picture on a given day of the week—every week. Pathé, increasing its production rate to five reels of film per week, released films on Mondays, Tuesdays, Wednesdays, Fridays, and Saturdays. Vitagraph at first released on Thursday and later Tuesday.^[27] Edison shipped prints of a new film every Thursday.^[28] Others sought the most advantageous position. Designed to maximize sales, the release system ensured a steady, predictable flow of new subjects to the exchanges and then on to the exhibitors.

Although the nickelodeons were suppose to receive better service in the form of newer prints, they were the losers under the new arrangements. The announced increase was expected to force some theaters to raise their admission fees to a dime. Others would be forced to close. In Philadelphia, Harry Davis's general manager observed, "while the new agreement entered into by the manufacturers of films would probably force a number of small places out of existence, it would prove beneficial to the larger concerns."^[29] Their rental costs rose as manufacturers and renters were organizing to take a higher proportion of industry revenues. Although barriers were created to deter people from entering production and distribution, no deterrent prevented them from entering the exhibition field. The agreements would initially eliminate some marginal theaters and encourage economies of scale, but the producers' goal was to maximize the number of rentees and the corresponding volume of sale. At the top, the Edison arrangement was monopolistic in intent; at the bottom, free enterprise would reign.

Laying out rules that regulated the principal components of the industry, the Association of Edison Licensees and the Film Service Association prohibited marginal film practices. The production of industrials, advertising films like those Edison made for Walkover Shoes, and special comedies like those made for Lew Dockstader was apparently no longer permitted. Local actuality subjects could not be made or handled by members of the Film Service Association,

pushing nonfiction filmmaking even further to the margins.^[30] Sales of films to schools, hospitals, and amateur exhibitors would continue only under severe restrictions: films had to be at least one year old and under 200 feet in length.^[31] Independent activities by exhibitors such as Lyman Howe, Burton Holmes, and Robert Bonine were theoretically banned; practically they continued in a legal twilight.