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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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