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.
It is about time for the new model self-starting 1916 get-rich-quick movie companies to be exhibited to the public.
The printing shops are busy getting out the nice yellow and green stock certificates that are sold to the investor for real money- and that are often useful later to paper the garret. The coming season promises big returns for the promoters. Everyone is enthusiastic about the movies. All your friends are fans. Every paper and magazine you read has story after story about this great industry. You also hear the glowing, though often exaggerated, accounts of profits made in stock in and out of Wall Street. These two big news items are often put together so that the words "Movies" and "Profits" are thought by many to be synonymous.
No one doubts that the motion picture industry is here to stay. Its place in the social life of the nation, of the world, is established. But, as I have pointed out in other articles, the business is so rapid and its changes so sudden it is almost impossible to predict how this industry will finally crystallize.
Many prospective investors have asked for specific information concerning the future success of specific motion picture companies. It is difficult to answer with any degree of certainty for the established concerns, and harder still for those just breaking into the game.
You are the real basis of the motion picture business- for you are the patron who demands and enjoys the photoplays. You, too, may be the possible investor. It's your own money that is risked. You often can predict success or failure more accurately than a man narrowed by the detail of the business. Before you pass judgment, however, you should appreciate that the motion picture business as a whole is no snap.
As you know, when you buy a share of stock you become, loosely speaking, a partner in a business enterprise. As such the problems of the business are your problems. At this particular time there are several angles of the business that are causing a lot of worry. Before investing in the movies it may interest you to consider several of the more important problems.
You have read many times of the enormous salaries paid to movie actors. When you hear of the earnings of Mary Pickford, Billie Burke, Charlie Chaplin, and a long list of others, you naturally say to yourself, "Any business that can pay such salaries must be the real thing. The men who contract for these stars are surely making so much money they are ashamed of themselves." Unfortunately this is not always the case. Movie men say that the salaries now paid leave little profit for the producers and distributors.
A well known producer said to me last week: "Something will break soon. We can't stand the strain of high prices much longer. Only a year or two ago a star could be engaged for two hundred dollars a week, which, though a high price gave us a chance to make a little money. Today we must pay from three hundred dollars a week up to several thousand for a star of the same magnitude. The public has been educated to demand these high-priced actors. We must supply the demand- and usually at the star's own figure. If this situation continues long I fear for the future of the producing end of the business because of this tremendous drain." New concerns have had a lot to do with the development of this condition. I know of several companies, called "promotions" by some people that have engaged stars at outlandish figures merely to have a "working asset." Most of these companies have not only made no profit for themselves, but they have injured the industry greatly by helping to establish an artificial worth for the actors.
The same may be said also of the directors. As a matter of fact the aggregate salary list of most motion picture concerns has reached an almost prohibitive figure. Some adjustment must be brought about. It is well to have this problem in mind. When a new concern says it has "This great star" under contract, figure out for yourself whether this is an asset or a millstone tied where a necktie ought to be. The producer, the distributor and the exhibitor stay awake nights trying to forecast the public taste. The public always wants something new. It is mighty hard to figure out what that something new should be. Not so long ago the demand was for single reel productions- each reel a complete story. Then came pictures of various lengths,- serials,- adaptations of famous books and plays. I know of a producer who has twenty thousand dollars invested in the photoplay rights of a series of plays. If for any reason. or lack of reason, the public taste changes before these plays are released, the investment will be a loss. A few months ago long comedies were successful. Today the public seems to want short, snappy laughs. One producer made a fine five reel comedy when the vogue for such appeared to be at its height. He was a few weeks too late in releasing his photoplay. He has already lost several thousand dollars on this one production. The organization you invest in must be able to anticipate the public demands for each picture must be planned and made weeks or months before it is shown to the public. Some companies seem to be able to guess the demand- but it may be good fortune with them. There may come a time when the public taste will become standardized and classified. That's what the movie men hope for.
You are familiar with the ways of Mr. David W. Griffith, who spares no expense to get the finesse of artistic effects. He has set a pace for the rest of the producers. Nowadays realism predominates the photoplay. If the story calls for a millionaire's drawing-room, a real drawing-room is built- not of canvas and paint, but of the same materials that the millionaire’s home would be built of. Dollar down. dollar a week furniture and props are of the past. If the scene calls for elegance you will find genuine Oriental rugs on the floor. The gowns of the movies are planned by the great modistes of the country. This artistic development is a wonderful thing for the business, for it adds an important value to the photoplay. But it takes careful management to keep this up and still make a profit.
The courts recently handed down a decision against the General Film Company, on the ground that it was a "bad trust." As I have explained in several articles, the nature of the motion picture business is such that it must develop along big lines. The producer, to make money, must produce many pictures. The exchange must distribute to many theatres. The exhibitor must show to audiences. Organization worked out to the finest detail will eventually take the place of the present somewhat chaotic economic form of the industry.
Not until the industry is organized will it be a safe sane plan for the investor who does not want to take a flier. Every week one hears of proposed moves on the part of movie men and bankers to bring about such organization. These plans usually end up. "Let George do it." Everyone is waiting until the Government and the courts define more accurately how far one can go in lining up the film business. It is hoped by everyone that this problem will soon be solved.
Congress recognizes that the motion picture industry is one of the nation's greatest industries. It compliments its development by desiring to have some supervision over it. Right now there is much agitation over the form of the censorship bill, before a committee of the House. Many states and municipalities now censor all films. Every manufacturer must produce film that will "get by" the censors of the different states. The human equation is the great factor here. A film that is approved in Chicago may not do at all in Columbus or Philadelphia. If the Government also takes a hand this situation will be still further complicated for the movie men. One of the early forms of bill now being considered had the screws on so tight that a producer in New York could not take scenes in New Jersey and bring them to its plant in New York to be developed without having the scenes inspected. If Government censorship is instituted it will doubtless be a fair censorship- but while the system is being installed there is liable to be a lot of expensive confusion. I shall speak of this problem later when the case is better defined. But inasmuch as it has a decided bearing on the business it will pay you to watch the developments.
Competition is stronger today than ever before in part of course because the European market for film is far below normal, making American producers hustle to sell all they can on this side. New concerns at this time find it difficult to market their products. The established concerns with their well-developed markets are producing more and better films than at any time in the past. It stands to reason that a new concern cannot make the headway, unaided, that it could have made a few years ago. There is one producing company that has made over fifty photoplays. People who have seen these films say they are for the most part excellent; yet not one reel has been released. It is the old story- the manufacturer jumped at the business before securing a sure market for his product. I am told this particular concern has $250,000 invested in plant and completed photoplays. A market may be developed but that remains to be seen. I know of another company now out of business, that had $100.000 to spend. Ten photoplays were produced- they are still on the shelf. One hears of such ventures every week, yet the promoters say "all you need is a plant- a producing company- grind out the film- it sells itself." This market problem is a serious one.
A new and very practical problem is confronting' the industry, one that appears minor but is most important. Practically all of the chemicals used in the motion picture arts come from abroad. Certain of the coal tar products necessary for the development of negatives are not to be had at any price. Numerous American substitutes are being tried out. If they are not successful, the cost of production will be greatly increased. At this time, when the margin of profits is not over large, this may put any concern that is not well established out of the running. This situation probably will not be mentioned in the stock circular you will receive of the new "Wonder Film Company," or whatever it is.
All these problems have a decided bearing on an investment you may make in the movies. I call your attention to these problems lest they be shadowed in the glowing success of the industry as a whole. In the next few months there will be many changes in the business. If you can afford to risk picking the winners- go to it. But bear in mind that the words "Movies" and "Profits" are not always synonymous, and while most stock certificates look like a million dollars- paper is cheap.
Paul H. Davis, "Investing in the Movies," Part Nine, Photoplay Magazine, April 1916, pages 74-76.
© 1999, David Pierce, on editing and revisions (if any)
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