The Famous Players-Lasky Antitrust Case
Further Complaints Against Paramount—Studio Insiders
Testimony of W. L. Sherry
New York Telegraph - May 3, 1923:
W. L. Sherry, vice president of the Paramount Pictures Corporation, owner of
a motion picture exchange in New York City, told yesterday ...how after the
Famous Players secured 51 per cent of the stock of Paramount Pictures by giving
Famous Players stock in return for the Paramount picture stock, he had lost
though his connection with the Famous Players Corporation stock estimated to be
worth $800,000 . . . .
Mr. Sherry said that the Paramount Pictures Corporation stock was selling at
80 at the time the deal was made with the Famous Players. That he was the
largest stockholder in Paramount, and that at this price this stock was worth
$800,000.
He was given stock in the Famous Players Corporation, he said, and it was
agreed that he was to have a contract to distribute the Famous Players pictures.
He said some of the others connected with Paramount did get contracts for
various territory. He mentioned one who received $1,000 a week and 2 per cent of
the gross.
Mr. Sherry said he never got his contract. The Paramount was taken over by
Famous Players in 1915. Mr. Sherry said that several weeks following that he
received no compensation, but afterwards was allowed a drawing account of $250 a
week. He said he was called to the home office and was there for a few weeks at
the head of the purchasing department. He said he told Mr. Zukor that he did not
like this, and Mr. Zukor had told him that he was glad to have a man like him as
the head of the purchasing department.
"I realized," said Mr. Sherry, "that I had been brought down
to the home office to make room for Arthur White, who was then with the Artcraft
Company."
Mr. Sherry said that while drawing the $250 a week he was distributing
pictures in the New York territory.
He said in 1918 Mr. Zukor wanted him to buy a motion picture--"Joan the
Woman"--for the New York territory.
He said he told Mr. Zukor that the picture was not worth that price, but
finally at the solicitation of Mr. Zukor, said he bought the picture for
$100,000 in cash and gave his note for $25,000, with the understanding that he
was not to lose on the picture.
"Mr. Zukor gave me his promise in the presence of others," sand Mr.
Sherry, "that I should not lose on the picture. He said if the Famous
Players did not pay me for any loss I might have he would pay it himself."
M. T. Farrington, counsel to the commission, asked the witness how the
picture turned out.
"The picture never grossed over $5,000, if that," said Mr. Sherry.
"I had been obliged to borrow the $100,000 from the Irving National Bank,
and put up my Famous Players stock as collateral on it. I was obliged to sell my
stock to pay the loan and at this time the Famous Players discontinued playing
the dividends and the stock fell so that I had to dispose of it at 22 to 30, at
a great loss."
After he was brought to the home office he saw that they were trying to get
him out of the exchange he had formerly owned and been running, and he resigned
from the Famous Players Corporation and opened another exchange, he said. He was
asked by Mr. Farrington whether he ever spoke to Mr. Zukor about the contract he
had been promised after leaving the Famous Players.
"I spoke to Mr. Zukor on several occasions about it," he said,
"telling him I had been cheated out of my contract. A few months ago I was
entirely without money and I went to Mr. Zukor and told him that I needed money
badly and he said he would put it up to the board of directors. They loaned me
$15,000, but not until I had signed an agreement waiving all claim on the Famous
Players' Corporation, the Cardinal Film Company, which had produced the picture,
'Joan the Woman,' and Adolph Zukor. I had to sign the agreement to get the
money. I paid interest on the loan, but I have been unable to do that recently
and I still owe them the $15,000. They canceled my note for $25,000 which I gave
at the time I purchased the picture."
Testimony of Walter W. Irwin
New York Telegraph - May 8, 1923:
Walter W. Irwin, a pioneer in the film industry, who organized the old V. L.
S. E. Distributing Corporation and was connected with the Famous Players company
from 1916 to 1920, told how he happened to join the concern at the request of
Adolph Zukor, the president. The latter had mentioned to him that certain cities
in the Middle West, notably St. Louis and Indianapolis, were not turning in an
amount of revenue for his product that localities of such size ought to.
Accordingly, it was arranged that Mr. Irwin should make a survey of these
cities and see what could be done to give the pictures better representation. He
became vice president of the company. Investigating conditions in St. Louis, Mr.
Irwin found that the best theatre was used by First National, with only an old
auditorium left.
In order to obtain good showings in the city, he acquired some property
opposite to the theatre of the rival circuit and had plans immediately drawn up
of a theatre. This was built soon after.
In Indianapolis it was also necessary to build a theatre in order to
guarantee first run showings that would influence small exhibitors in that
district.
Questioned further by Daniel Farrington, counsel for the commission, Mr.
Irwin declared the sales department had made up a statement on the returns from
the so-called "key" cities, and this disclosed bad conditions, not
only in St. Louis and Indianapolis, but also in Milwaukee, Toledo, New Haven,
Pittsburgh, Boston and Cincinnati. In each of these latter cases no theatre was
acquired at the time, except in New Haven.
The fight between the Famous Players and First National forces was outlined
in detail by Mr. Irwin, who explained why the Paramount organization took
drastic steps to face the competition of the new circuit.
He said at the time First National was formed it was claimed they were to be
the champions of the exhibitors and would rescue them from the Famous Players'
alleged trust.
He said Zukor told him that Mr. Williams and another member of the twenty-six
men who made up the First National firm had sent word to him that they intended
to get Mary Pickford away from him, and that no matter how much Zukor bid for
her, First National would outbid him. Irwin said Zukor told him he was advised
that he might as well stop bidding for Miss Pickford.
Zukor, he said, also told him Mary Pickford and her mother notified him they
had received the same information. He said Zukor said to him that he did not
propose to allow any man or group of men to destroy a business he had built up
out of the hollow of his hand, and that he would fight in every possible way to
prevent it. Zukor asked him what advice he could give him. He said he advised
Zukor to tell the film industry through published affidavits and letters in the
advertising column the purpose of the First National and their declared objects.
"I advised him," Irwin said, "to point out to the exhibitors
that this alleged exhibitors' organization would only result in the increased
price of pictures, through the bidding of the Famous Players for stars, result
in increasing the prices tremendously, and also the tell the exhibitors that
instead of the First National being their friend, it was their commercial
enemy."
The witness said he advised Zukor that as a matter of self-protection, Famous
Players should decline to serve pictures at the time to exhibitors or
sub-exhibitors who held franchises of the First National on the ground that they
were a part of the declared conspiracy to ruin Famous Players.
He said he told Zukor he felt justified that it was the proper action to take
in face of the conditions. Irwin, who has been prominently identified with the
film industry from 1909 on, and who served for a while as theatre manager for
Famous Players, gave a survey of all of the different conditions covering the
distributing system, from the first policy of selling the "program,"
"open booking," and the "rotary star" system.
He declared it was next to impossible for men who proposed to produce
independent pictures to get financial backing unless the backer was assured he
could contract for the distribution of pictures before the picture was made. The
witness said that an open market for pictures was the only solution for
conditions, and he decried the blocking system whereby groups of theatres have
their programs booked months ahead through contracts with big distribution
agencies and booking companies . . . .
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