Although moving picture concerns take in $500,000,000 admissions a year, and spends half of this on new productions an housing, they have not a speaking acquaintance with most leading banks of the country. Of the $200,000,000 which goes into new films each year only 35% comes from the banks. Outside private lenders put up about 1%. The moving picture people put up the remainder.
Only one move concern can get its bills discounted by the Federal Reserve Bank. in general, bank inspectors put moving picture credits down as slow, according to C.S. Pinkerton, comptroller of the First National Motion Picture Co. He insists that reputable moving pictures concerns have for years been paying their bank debts promptly.
What Bankers Say
Bankers who have to do with moving picture investments give a wide variety of answers to questions about their experiences. Boards of directors and trustees of the big banks are in general hostile to moving pictures as sound investments. One vice president gives limited credits to movie theaters in his neighborhood where the borrowers have assets at least twice the value of the credit advanced.
One big bank which has carried 28 new productions in the last six months, sometimes investing $3,000,000 to $5,000,000 a day in motion pictures, is enthusiastic over returns and is constantly enlarging the amount of credit given. The bank does business with five of the leading motion picture companies. All of the 28 pictures paid back credit advanced. The bank sent out an inspector to look over studios seeking money, just as it would have looked into the assets of any other concern. It checked over the motion picture company's notes, cash inventory and current liabilities.
Banks are often shocked by the high inventories motion picture companies carry, relatively much higher than those in other industries. Goldwyn, for example, has enough properties and equipment to "shoot" 11 pictures at a time. Some of this is doubtless a burdensome overhead.
Banks also look with disapproval on the high salaries paid some of the stars. Producers shrug their shoulders and say the number of stars is small, and that salaries are fixed by competition in the market, and what the public is willing to pay for favorites.
The principal objection bankers make to producers' methods is not so much in the sums of money they spend in staging a story as in their failure to keep within agreed limits. It is here that the producers' association is carrying on its most active agitation for more business-like methods. Most of the big concerns have already adopted a budget system.
Production Economy
The first conspicuous move toward production economy was made last October when Famous Players-Lasky shut down their plants at Hollywood and Long Island City for a couple of months. In the last two years all the big companies have adopted the budget method, estimating their production costs when the scenario is agreed upon.
The four companies with their stock listed on the Stock Exchange publish annual statements. Others prepare them for the banks, but have not adopted the policy yet of making them public. In a word the motion picture industry is being put on a business basis. Mr. Saunders, comptroller of Famous Players, said:
"It is just as well that there is not a rush of investors into the moving picture field. The big companies already have bank contacts and are getting more credit as they demonstrate that they run their business along sound, profitable lines. The plungers and hokum experts in the business are being gradually weeded out and the line is constantly more sharply drawn between legitimate and fly-by-night business."
"Most Banks Shun Movie Promoters," The Wall Street Journal, April 3, 1924, page 5.
© 1997, David Pierce, on editing and revisions (if any)
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