In 1949, the studio system began to decline as a result of a number of interrelated factors:
• Divorcement in 1948 effectively ended vertical integration as the US courts required the 'Big Five' studios to divorce production and distribution from exhibition because the practice broke anti-trust laws; this brought to an end the oligopoly of the studio era. In the 1940s the studios had already agreed to end other restrictive practices such as block booking and blind selling.
• The huge demand for films during the 1940s led to a rise in independent production, and in an attempt to reduce overheads the majors subcontracted production to such companies.
• Stars began to seek greater independence from the studios. In 1943 Olivia de Havilland took Warner Brothers to court over her contract; this resulted in the development of fixed-term rather than unlimited contracts. Stars and crew now had greater freedom than ever before.
• Costs of production rose as a result of wage increases brought about by the growth of trade unions in the industry.
• Import tariffs were imposed on Hollywood films, as foreign countries wanted to prevent the export of dollars while audiences were growing more interested in European art cinema.
• During the 1950s many Americans moved to the newly established suburbs; this had an adverse effect on audience figures, as cinemas were mainly located in urban rather than suburban areas. Although drive-ins were introduced, this did not help to arrest the declining trends since such enterprises tended to favour independent films.
• Television competed with cinema after 1948 and attendances fell as TV became the focus for leisure activity.
Together, these seven factors combined to increase the costs of production while decreasing the revenues which films brought in. Audiences fell by half between 1946 and 1956, approximately 4,000 cinemas closed, and there were massive staff cuts. This led to the end of the 'factory' production-line system as the studios had no guaranteed outlet for their films. Facing competition from the independents, the studios discovered that their structure was too expensive to maintain. In 1957 RKO, for example, was disbanded. In place of the studio system a new structure for the film industry gradually emerged.
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