The Old and New Systems of Hollywood

by yonirusnak

Jonathan Rusnak – z3265857

All industries are in the business of making a profit and Hollywood is no exception. Hollywood is the largest movie industry in the world and like any other industry it seeks to maximize the capital returns on its commodity by creating systems of production by which they can control, to some extent, the financial risk involved in making motion pictures (Eyman, 1991). This essay will argue that while the old Hollywood studio system has indeed collapsed, a new system as been established in its place, and that these systems are linked through their desire to produce films as commodities by which the studios can make a profit. To begin, this essay will examine the key principles by which the old studio system was defined. I will then go on to explore the legal issues which led the studio systems demise. Furthermore, by exploring the social changes which were occurring during the period of the systems demise, such as television and suburbanisation as presented by Christopher Anderson in his book Hollywood Tv: The Studio System in The Fifties, this essay will demonstrate that it was not an isolated occurrence, but a collection of issues which brought about the collapse of the old studio system. Finally, throughout this essay I will identify the new Hollywood studio system and its driving ideologies in regards to the production, distribution and exhibition of films and how these principles are constructed as an attempt to minimise the risk in making films.

The old studio system in this essay refers to the era of filmmaking from the early 20s up until the early 50s. This was a period in which the Hollywood studios dominated the film industry both domestically in the U.S and internationally. At the height of this period the ‘Major’ studios were releasing on average 52 films a year, which were exhibited in over 20,000 theatres nation wide to audiences as large as eighty million people a week (Mast, 1971). Dixon and Foster (2008) suggest that the old system of Hollywood worked similarly to a factory. It was comprised of a number of large studios that produced approximately one movie per week. These studios were divided into three distinct tiers, the ‘Majors’ which included, MGM, Paramount, Fox, Warner Bros, RKO, the ‘Major Minors’; Universal, Columbia and Uniter Artists and finally ‘Poverty Row’ which included studios such as Monogram and PRC. While each tier is critical for understanding the overall trends of the Studio era, this essay will focus primarily on the ‘Majors’, as it is their ultimate fall from grace that defines the decline of the old studio system.

Schatz (1988, p.11) describes the Majors as “the supreme powers in the industry”. This was due to their vertical integration. Meaning they not only owned the sound studios and facilities that controlled the production and distribution of their films, but also the theatres in which they could exhibit them, giving the studios a monopolistic control over the industry. Schatz (1988, p.11) further explains, “each developed a distinctive production and market strategy related to the number, size and location of its theatres”. These differences defined the look and audience of the respective studios. For example MGM was said to have ‘More stars then there are in heaven’ (Ellis, 1979, p.384). The control over a film from inception to exhibition also meant that the Major studios were able to guarantee a market for their product, allowing them to produce films on a mass scale. As Dixon and Foster point out the studios took a factory like approach to the production of films. They divided their efforts into 3 distinct categories of films. A class, B pictures and C pictures, each of which were produced on different budget scales and had different shooting schedules ranging from 3 days for a C picture to 2 months or more for A class productions. Eyman (1991, p.117) suggests, “A product can be manufactured with greater efficiency and in far greater numbers if it is broken down into standardized interchangeable parts.” This idea was embraced by the studios through the division of work on films into separate departments. Each person who worked on a film, from the technician to the producer, director, editor and even actor was an employee of the studio. This meant that the work could be divided into the different departments to ensure maximum efficiency. The studios also developed different strategies for renting lower budget production. Majors would blind and Block rent films to independent theatres. This required the independent exhibitor to purchase a number of B and C pictures in order to acquire the A class blockbusters (Ellis,1979). All these practices, from factory line production to in-house exhibition and block rentals were developed in an effort to maximise capital returns on the product studios were selling. The old studio system therefore can be defined by its ability to commodities motion pictures for the purpose of raising revenues, and industrialising the movie business.

Having defined the overarching characteristics of the Studio era, the collapse in this essay refers to the dismantling of the factory line approach to filmmaking. The collapse took a number of years to fully impact all the ‘Majors’ and its beginnings can be traced back to a number of key legal cases that altered the business practices that allowed the Major studios to function as vertically integrated companies. The first legal assault on the studio system came in the 1940’s by way of the “de Havilland decision” (Dixon & Foster, 2008, p.172).  An actress, Olivia de Havilland brought about the change when she fought to prematurely end her contract with Warner Bros. During the Studio era performers were regularly signed to seven-year contracts, which the studios used to build careers for the performers (Dixon & Foster, 2008).  These contracts limited the ability of the performers to seek opportunity elsewhere and were extremely one-sided. Dixon and Frost (2008, p.93) explain “The studios had a six-month option clause and could terminate an actor’s employment on the merest whim, or put someone on suspension for refusing to accept an inferior role”. The ‘de Havilland’ decision changed the power dynamic of the system by allowing performers to work between all the studios and seek out the best projects. These effects will later become more influential as independent filmmakers take a dominant role in the film industry.

The second legal barrage came about via the Paramount case in 1948. It proclaimed the vertical integration of the ‘Majors’ a violation of Anti-Trust laws in the U.S and subsequently ruled that the ‘Majors’ be divested of their theatre chains (Eyman, 1991). This meant the ‘Major’ studios no longer had a guaranteed market for their films, but would have to compete with other studios for screening time at independent exhibitors. The decision separated the ‘Majors’ from exhibition but allowed them to maintain the rights for distribution. Dixon and Forster (2008) sustain that this again ultimately favoured the studios, as they were able to dictate the terms of their A class films. The ‘Majors’ maintained a level of power over exhibition by demanding studio blockbusters command enormous guarantees for screen time, or taking 90 percent of the first weeks box office intake (Dixon & Foster, 2008, p.173). Block and blind renting was also banned under the paramount case as it was deemed an unfair trade practice (Balio, 1990). The banning of such practices meant that the Studios films would now have to compete on its merits as an individual film and could not be packaged as they were in the past. The dismantling of such sales tactics and the divorcement of exhibition lead to a breakdown in the factory line production of films, and studios were now required to produce and sell each film independently. Elise (1979, p.317) explains, “The enormous overheads in real estate, sound stages, expensive equipment, high salaried technicians and creative personnel on long term contracts could no longer be supported by the fewer, more costly films that current audience response dictated.” Under the new laws the Old Studio System began to crack. Studios began producing less B and C films and focused on producing higher quality, bigger budget blockbusters. Furthermore, what were once the studios two greatest commodities, property and people, became their biggest burdens (Mast 1971). The Old Studio System could no longer sustain its chosen path of factory line production and new modes of production would be required if the ‘Majors’ were to remain afloat. This change was eventually modelled on the production and distributional structure of United Artists, who during the era of the Old Studio System was only a minor player (Scott, 2005). United Artists who had never controlled any theatres or studio property had primarily produced films by backing independent filmmakers and then uses its money and power to distribute the final product, taking a large percentage of the box office intake. The ‘de Havilland’ decision allowed the independents to slowly rise to power and producers, directors and writers who worked for the studios of yesteryear moved into independent projects. They were however still dependent on the studios largely for their distributive powers over the market, which would later become the studios main industrial power in the New Studio System (Ellis, 1979). This move to independent filmmaking indicated the beginning of the end of the Old Studio System.

The collapse of the Old Studio System was not merely brought about by legal changes, but by social ones as well. Two major social changes affected audience attendance at movie theatres. The first was the suburbanisation of the American population. Balio (1990, p.3) identifies the recession in Hollywood as being in large due to the “Migration to the suburbs and the baby boom, which focused consumers spending on appliance’s, automobiles, and new housing.” The move to suburban areas meant that families were further away from the city theatres and could not attend the pictures daily. The disbursement of the population also meant that the audience demographics were becoming increasingly segregated. Ellis (1979, p.375) argues “the former ‘Family audience’ was now a minority audience” further altering the final products of studios. It was no longer enough to produce a blockbuster, which catered to all audiences, but the films needed to be specifically tailored to its area of exhibition. Box office intake dropped from $1,700,000,000 in 1946 to $900,000,000, indicating nearly half the revenues had dropped off (Mast, 1971). The Old Studio model was failing to engage the audiences who had now found alternate means of entertainment. Among the new forms of entertainment was the second social change, which accompanied the move to suburbia, the growing popularity of television.

In 1946 there were some 500 television sets in the U.S, however by 1950 this number had jumped to 4,000,000 (Ellis, 1979). Hollywood’s initial reaction to television was to try and incorporate it into the vertical integration of its exhibition capabilities. The Studios invested large amounts in the development of technologies, stations and networks to insure their monopoly over another arm of exhibition (Anderson, 1994). However this attempt was thwarted by the Paramount decision, which denied Hollywood studios access to the ownership of television stations (Anderson, 1994). Only once Hollywood realised that it could not control the exhibition of its content, and would be at the mercy of others, did it resist the move to television. During the early growth of television the studios “directly apposed television and disallowed the screening of Hollywood films and the use of film actors for television”(Mast, 1971, p.317). Instead it devised alternative gimmicks in the hope that they would entice views back to the picture palaces. These alternatives included, 3-D films, Smell-o-vision, Cinemascope and Cinerama, all of which were only minor success and did little to prevent the growth of television (Ellis, 1979). These gimmicks represented the old views of the system, which dictated that the studios have complete vertical control of their products. The studios believed that the audience would stay true to better quality of viewing experience and by disallowing its films on television the audiences would return to theatres. When the studios eventually realised that the audience were not returning they changed their approach to television and began to embarrass its possibilities. The changed in attitude was a slow and gradual process with the studios originally selling its backlog of old films to the television companies and gradually moving into the production of content specifically for television (Ellis, 1979). Schatz (1988, p.482) eloquently describes television as “a mixed blessing for Hollywood, revitalizing studio-based production but bringing a decisive end to the studio system as Hollywood had known it.”

If the Old Studio System could be defined by its ability to commodities motion pictures for the purpose of raising revenues, and industrialising the movie business, then the New Studio System is not much different. By 1962 the studios had begun to collapse as independent entities. Commercial conglomerates began taking over the studios one by one.  For example Universal was taken over in 1962 by Music Corporation of America, Paramount by Gulf and Western Industries in 1966 and United Artists by Transamerica in 1967 (Eyman, 1971). This signified a changing of the guard form the Old Studio System which was run by movie producers, to the New Studio System of Global corporations who had no prior affiliation with movies but were now running the largest movie-making industry in the world. Where the Old System tried to industrialise movies by producing them in a factory like manner, the New System sort to add movies to a factory line of products. Kristin Thompson (2007, p.4) explains that the franchising of films began in the 1920s, “The popular Felix the Cat cartoons led to stuffed toys and other tie-in products.” However she continues by stating that the “Blockbuster Franchise of modern Hollywood did not begin until the late 70’s”. Hollywood’s new industrialisation of films came in the form of movie franchises. The major studios of today are all linked to the various media industries within the modern mediascape. Fox for example, was bought by Australian’s ‘News Corporation’, which owns television stations, distribution companies, and subsidiary production houses such as Fox search light and New Regency. Likewise Sony Corporation purchased Colombia, which is now part of a corporation that deals in music production, electrical goods, film distribution as well as acquiring other smaller studios such as Columbia Tristar. (Scott, 2005) This globalisation of Hollywood has created an environment where films are no longer reliant on their box office intake, but are tied in with soundtrack releases, video games, theme park rides, DVD distribution and other spin offs and sequels (Thompson, 2007). Similarly to the Old System, films become a commodity by which the studios are able to increase revenues and minimise financial risks.

Further to the corporatisation of Hollywood, the Old Studio System saw somewhat of a renaissance in the 80s when the ability to vertical integrate was returned to the major studios (Neale, 2000).  By the end of the decade the studios once again owned 3,500 of the nation’s 22000 theatres. Studios once again began signing stars to long-term contracts, for example, Eddie Murphy at Paramount or Bette Midler with Disney (Eyman, 1971). The difference however between the Old Studio System and the New Studio System is the Independent collaboration on each project. While the studios may consist of contracted stars, the work of the technicians, editor, DP, designer, are all usually one off contracts with freelance professionals (Tashiro, 2002). The Old Studio System was constructed in such a way that the Studios controlled all areas of the production from inception to exhibition. In the New Studio System, control of a film is disbursed amongst the key creative figures and the studio is used mainly for global distribution and possible franchising. By producing films through independent channels the major studios are able to reduce costs of maintain large numbers of staff and can maximise the funds allocated to each project.

In conclusion this essay has endeavoured to illustrate the key factors, which brought about the collapse of the old studio system and identify the new system that has arisen in its place. By defining what the old studio system represented this essay laid the foundations for arguing its ultimate demise. It presented the legal and social issues which impacted the collapse. And finally analysed Hollywood’s new business practices, which reflect largely on the old models of film production that explore the various ways in which Hollywood is able to commodities films and minimise financial risk.


A. J. Scott, 2005, On Hollywood: The Place, The Industry, Princeton University Press, New Jersey

C. Anderson, 1994, Hollywood Tv: The Studio System in The Fifties, University of Texas Press, Austin

C. S. Tashiro, ‘The Twilight Zone of Contemporary Hollywood Production’, Cinema Journal 41, no. 3, Spring 2002 (internet source)

G. Eyman, 1991, Flashback: A Brief History of Film, 2nd edn, Prentice-Hall, New Jersey

G. Mast, 1971, A Short History of The Movies, Pegasus, New York

J. Ellis, 1979, A History of Film, Prentice-Hall, New Jersey

K. Thompson, 2007, The Frodo Franchise: The Lord of the Rings and Modern Hollywood, University of California Press, Los Angeles

S. Neale, 2000, ‘Genre and Hollywood’, in Genre in Hollywood, Routledge, London and New York, pp.231 – 257

T. Balio, 1990, Hollywood in The Age of Television, Unwin Hyman, London, pp. 3 – 40

T. Schatz, 1988, The Genius of The System: Hollywood Filmmaking in The Studio Era, Pantheon Books, New York

T. Schatz, 1997, Boom and Bust: The American Cinema in The 1940s’, Macmillan, New York

W.W. Dixon & G. A. Foster, 2008, A Short History of Film, Rutgers University Press, New Jersey