Vertical integration meant that the major studios dominated film production, distribution and exhibition. They made, released and marketed their films, even owning the cinemas in which they were shown: exhibition was the most profitable sector of the film industry. In the days before television and VCRs, box-office sales were the source of income for recouping budgets spent on making films. The heads of the major studios wanted to ensure that there was a constant outlet for their product, and this led to a series of initiatives designed to dominate the industry.
In 1916 Adolph Zukor developed a system of 'block booking' for film distribution. He forced theatre owners to rent Paramount's star vehicles along with groups or 'blocks' of other less desirable and less commercially viable films. Zukor thus ensured a steady outlet for his films regardless of their quality, meaning that money was made on everything Paramount produced.
Within a year every major production company had adopted this practice. The studios already controlled production and block booking represented an attempt to control distribution and exhibition as well. This desire to dominate exhibition was extended by the studios' attempts to acquire as many cinemas as possible during the 1920s. By the 1930s the majors were pouring most of their investments into exhibition, and as a result between 1930 and 1949 they owned almost three-quarters of first-run US cinemas. The majors had divided the country into 30 markets and these were again subdivided into zones, in which the cinemas were classified as first-run, second run, and so on. First-run cinemas showed films as soon as they were released. They tended to have large numbers of seats, were situated in key locations in urban areas, and charged higher admission prices. Each film had to be shown for 14 to 42 days before it could move to the next zone, and this meant a maximum profit for the majors from each release. The majors' ownership of theatre chains, in particular first-run cinemas, together with block booking practices, ensured maximum exhibition of their films.
As mentioned above, the studios had already established an impressive global distribution system by the 1920s, and a major factor in their success was an international market for their films. The major studios dominated this distribution network as a direct result of their control of exhibition. The minors had some involvement in distribution, most notably United Artists, which was set up in response to Zukor's block booking initiatives by Mary Pickford, Douglas Fairbanks, Charlie Chaplin and D.W. Griffith in 1919 for the exclusive distribution of their films. However, they had to co-operate with the majors' system of distribution, and in practice this meant that the majors ensured that their own films received priority over those of the minors. It was these initiatives that increased cost-effectiveness and guaranteed profits and helped to account for the commercial success of the Hollywood Studio System after 1930.
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