Hundreds of requests have been received by the editors of Photoplay
Magazine from persons who contemplate investment in moving picture companies
and who seek advice on the subject. In many cases investigation showed
that these people were being solicited to invest money in concerns that,
in the face of existing conditions, did not have one chance in a hundred
to succeed. Mr. Davis will be glad to answer any inquiries from readers.
The incentive for investing in the movies is the chance of making big money. There is the annual group of individuals who have tendencies to grasp at any bait dangled before their eyes. This group might just as well lose in the movies as in any other way.
Unfortunately, most of us are not far remote from this class when it comes to making an investment. We are inclined to take without criticism all of the so called facts and figures that are laid before us. We often pass judgment without reading between the lines and back of the lines. Each incentive is for the most part based on impressions rather than honest-to-goodness facts.
Someone tells us of the movie millionaires- "There was once upon a time a progressive clothing merchant who saw possibilities in the business and although he had little capital he had an idea which has made him a millionaire." We hear of movie stocks that pay enormous dividends, of companies that cut juicy melons. Then we read the circulars of the new companies. Some promise moderate returns commensurate with the risks involved- others predict over 100% a year. Optimists are fine folks to have around. Sometimes, however, it pays to be "from Missouri."
It is a fact that the motion picture industry is one of our greatest institutions. Each year it is growing and developing into a safer and sounder economic system. Its future undoubtedly is brighter than its past. There is opportunity in the business for a pleasant profit, but the investor should not expect the enormous returns that are sometimes promised and occasionally, though rarely, realized.
There are two ways of course of making money out of an investment. The first is by enhancement of the investment itself; the other is by the dividends that are received and as a rule, of course, though not always, the greater the dividends the relatively more value in sale the investment itself has. With few exceptions the motion picture stocks which were available for public investment two or three years ago can be bought today at about the same price that they were sold for then. To give two examples- at the time the Mutual Film Corporation was organized its stock was sold a share of preferred at $100.00 carrying with each share 1/2 share of common, or making an average price of $67.00 a share. At the present time both the preferred and the common stock of this corporation can be purchased at a price under this figure. Yet, in the meanwhile, the Mutual Film Corporation has grown to be one of the strongest companies in the business. The stock of the New York Motion Picture Corporation was sold in 1913 at $65.00 a share. Shares in this company can be bought today at about the same price.
Most of the invitations for investment on the part of new companies quote the favorable showing of established concerns. I want to put before you the facts concerning several of the more prominent film concerns whose stocks have been available for public investment. Inasmuch as it is impossible to get up-to-the-minute reports from each company, these facts cannot be guaranteed, although they are in general dependable.
The General Film Company, which is one of the oldest concerns in the field and probably handles a larger share of the business than any other concern, was incorporated in 1910 with a capital stock of $1,000,000, of which $900,000 is preferred and $100,000 common. The preferred stock found its way to the public inasmuch as a large part of it was used by this concern in purchasing exchanges, and the parties to whom a payment was made in many cases sold their stock. The common stock never reached the public and is still owned entirely by the manufacturing concerns contributing to the General Film Company. The preferred stock of this company has paid 7% per annum. The market on the preferred has ranged from $70.00 a share to $40.00 a share. This preferred stock is preferred only as to dividends and not as to assets. This stock is sold at a lower price today than at any time during the organization of the company, though, as far as can be found out, the dividend has always been promptly paid up. The average investment return to the stockholder of the General Film stock, based on the average market price, is about 13%.
The stock of the Universal Film Manufacturing Company is often quoted, although there is practically no actual market of the shares and the company is what might be called a close corporation. This concern was organized in 1912 with a capital of $1,000,000 preferred and $1,000,000 common, which capital was increased in February, 1915, to $2,500,000 common, the $1,000,000 preferred remaining the same. The preferred of the Universal has paid at the rate of 6% per annum since the company was incorporated: common monthly dividend has been from 1/2 to 3%, the average dividend being reported to be 20% per annum. This concern, as you know, is one of the three largest in the business and is reported to be very successful financially. Yet, its dividends have not been any 100% a year and too, as stated before, this stock is not really available for public investment.
The Mutual Film Corporation, also one of the big three, was incorporated in July 1912, with a capital stock of $3,500,000. At the present time it has outstanding $1,682,500 of common stock and $1,535,800 of preferred stock. The preferred stock has paid at the rate of 7% per annum from the date of incorporation to date, although there is some question as to whether the next preferred dividend will be paid. The common stock paid 1/2 of 1% a month from May, 1913, to August, 1913, and from September of that same year to October, 1914, paid 1/2 of 1% a month regular dividend and 1/2 of 1% extra dividend. In November, 1914, a regular dividend of 1% a month was established. This dividend was continued until June of 1915. From the time of organization to date the Mutual Film Corporation has paid 24% in dividends, or during the 3 1/2 years it is organized has paid an average of 7% a year on the par value of the common stock. When we consider that the average price of the common stock for the 3 1/2-year period has been about $70.00 a share, the average yearly return to the investor is about 10% of his investment. There are several manufacturing concerns that have sold their product to the Mutual Film Corporation that are mentioned as being very successful companies.
The New York Motion Picture Corporation which, until recently, was affiliated with the Mutual and is now with the Triangle Film Corporation, was incorporated in January, 1913, and is a holding company, owning the controlling interest in the Keystone Film Company, the Broncho Company, The Domino Company and the Kay-Bee Company. Its capital at the time of organization was $1,000,000 and has remained the same to date. The stock of the New York Motion Picture Corporation, as mentioned before, was sold to the public at $65.00 per share. In the period between the date of its organization and November, 1915, the stock has sold as high as $98.00 and low as $55.00 a share. This concern started paving dividends in June, 1913, at the rate of 1% a month, which dividend was continued until November of that same year. From December, 1913, to July, 1914, dividends at the rate of 2% a month were paid. Then from July, 1914, until April, 1913 there were no dividends. From April, 1915, to October, 1915, dividends at the rate of 1% a month were paid. From the time of organization to date the New York Motion Picture Corporation has paid a total of 29%, or an average of 10% a year for the three years that it has been organized. Considering the average price of the New York Motion Picture stock for this period to have been $75.00 a share, the investor buying at the average price will have received 13% on his investment.
The Reliance Motion Picture Corporation, which was organized in January 1914, with a capital of $1,000,000, consisting of $800,000 common stock and $200,000 preferred, has paid dividends at the rate of 7% per annum on the preferred stock, but no dividends on the common. The stock of this concern, while it has been on the market, has been rather inactive yet, undoubtedly, this concern is one of the best producing concerns in the business.
The Majestic Motion Picture Corporation. which was organized September, 1911, originally had a capital of $80,000. It is reported that the company increased its capital to $120,000 by stock dividend of $40,000. This concern at the resent time is not paying dividends, though the stock is quoted at $175.00 a share.
The Thanhouser Film Corporation, which also sells its product to the Mutual Film Corporation, was organized in 1910 with a capital of $400,000. At the time of the original incorporation each stockholder received two shares of stock for each $100.00 invested. This stock paid dividends as follows: In 1913 the Thanhouser Film Corporation plant was destroyed by fire and the necessity of rebuilding this plant made it impossible to pay any dividends until later. Then in May 1915, the capital of the Thanhouser Film Corporation was increased from $400,000 to $1,000,000 and the par value reduced from $100.00 a share to $5.00 a share. For each share of old stock of the Thanhouser Film Corporation the stockholders received 45 shares of new at the par value of $5.00. This concern has paid 125% in stock dividends and a total of 17% in cash dividends. The average cash return has been under 6%.
The stock of the Biograph Company is traded in occasionally. This concern was originally organized in 1895 as the American Mutoscope Company. In 1899 it was changed to the American Mutoscope and Biograph Company and in 1909 its present name was adopted. This concern has outstanding at the present time $1,999,000 worth of stock. It is reported that its low as $65.00. The company paid 8% dividends from September, 1909, to December, 1910. From February, 1911, to February, 1913, they paid 1% a month; from March, 1913, to January, 1915, 1/2% a month. On February 1, 1915, a 50% script dividend was declared, which dividend is convertible into cash at par on or before December 31, 1916. At this time it was announced that the dividend for the ensuing year would be 1% quarterly.
The World Film Corporation, which is a large feature film company, both exchange and producer, has a capital of $2,000,000, par value of $5.00 a share, of which about $1,500,000 is outstanding. On its public statement for the year ending June 27, 1915, this concern showed a net profit for the year of $329,000 or a little over 20% earned on the stock outstanding, but as yet it has paid no dividends. The stock of this concern has been active on the New York Curb Market at prices both below and above its par value.
The concerns mentioned above are often quoted in the circulars of new companies and are used as specific examples of the enormous profit to be made in the motion picture business. It appears, however, that while these companies have for the most part held their own, that there has not been any enormous increase in value in the securities, nor does it appear that the concerns have paid what might be considered enormous dividends. There have, of course, been one or two concerns not mentioned above which have paid enormous dividends. These have, however, for the most part been organized for a specific purpose, such as that of distributing a serial film, and may have struck a peculiar situation that cannot be found every day.
What I desire to emphasize is that the past experience of the established motion picture companies points to the fact that reasonable returns may be expected front an investment in the business, but that the average investor does not get a chance to make more than a reasonable return.
When a promoter tells you to invest in company, promising dividends ranging from 50 to 100% a year, ask him why some of these above mentioned companies have not paid dividends equal to those he is working out on paper.
Paul H. Davis, "Investing in the Movies," Part Seven, Photoplay Magazine, February 1916, pages 71-73, 164.
© 1999, David Pierce, on editing and revisions (if any)
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