The Man Who Made the Movies

by Vanda Krefft

  That was about as close as Fox would ever get to acknowledging the lowbrow tone of much of the Fox Film output in recent years, and it was difficult to believe. Film Daily columnist Joe “Danny” Dannenberg wisecracked, “They never use hokum in the Fox studio. They never have. Of course Over the Hill, well, that’s different. And then too, Tom Mix with his hokum with Tony—well, that’s different. And of course, dear old Theda. With her big vamping eyes and tigerish movements—well, that’s different.” Yet, even such a cynic had to concede, “Bill Fox has always been a delightfully intriguing character. Full of charm. Full of unexpected nuances. You never quite know what he is going to do. When or how.”

  Now was one of those times.

  Several new hires signaled the seriousness of Fox’s intentions. On the creative side, although the news wouldn’t be announced for another two months, on January 24, 1925, he signed thirty-six-year-old German director Friedrich W. Murnau to a one-year contract to make his first American film. It was a startling match. An upper-middle-class intellectual with a PhD from Heidelberg University, tall and quiet and elegant, Murnau stood in the forefront of the German Expressionist movement in film. His first movie, The Boy in Blue (1919), had been based on Gainsborough’s famous painting; his subsequent work tended to explore psychological disturbance, with an emphasis on terror and despair. Satanas (1920) depicted the life of the Devil through the ages; Nosferatu (1922), an unauthorized adaptation of Bram Stoker’s Dracula, began by asking about the film’s title, “Does this word not sound like the deathbird calling your name at midnight?” and went on to show the villainous Count Orlok as a ratlike vampire spreading the plague in the early nineteenth century. Most recently, Murnau had directed The Last Laugh (1924), about an aging Berlin hotel doorman who is humiliated by his demotion to washroom attendant. Fox loved The Last Laugh. With almost no intertitle cards and a lighthearted ending in which the former doorman inherits a fortune from a patron who died in his arms in the washroom, the movie had all the elements that Fox valued: intelligence, innovative craftsmanship, panoramic emotion, and commercial appeal.

  In the business realm, in late March 1925, Fox lured James R. Grainger away from his post as sales manager at the industry’s second-largest studio, M-G-M. Motion Picture News called the move “one of the most important in recent years.” The portly, round-faced, extroverted Grainger had close relationships with many of the nation’s biggest exhibitors and was also a charismatic boss who “gets 24 hours a day work out of his gang.” M-G-M had refused to give Grainger a raise or expanded authority. Fox gave him both, appointing him as head of distribution and sales for the United States and Canada.* Grainger’s arrival virtually guaranteed a broad improvement in Fox Film output because without first-class merchandise to sell, his expertise and connections would be wasted.

  Secretly, Fox was working on an even more momentous step: taking Fox Film public. Although for many company founders the prospect of a public stock offering represents an end-of-the-rainbow reward, Fox had little enthusiasm for it. He still equated taking other people’s money with having to give up control, which in turn he equated with personal extinction. He would have vastly preferred to continue running Fox Film as his own private kingdom. He had done extremely well on his own. By 1925, Fox Film had amassed $24.5 million in total assets and had current liabilities of only $2 million. That growth—a 4,900 percent increase in ten years—had been funded entirely by earnings derived from the company’s initial $500,000 capitalization and not from any additional outside investment. Furthermore, Fox Film had more than $8.3 million of its assets in cash, the highest proportion of any major movie studio. The company was, commented Motion Picture News, “one of the financial solid rocks of the industry.” Still, Fox knew the company’s financial structure had to change.

  Two main pressures bore down. First, the advent of national prosperity had incited restlessness among the small group of New Jersey financiers who owned 49 percent of the company stock. True, they had received all their money back, plus 8 percent interest, in June 1919, when Fox retired the preferred stock; and true, since then they had received cash dividends of an equal value. In other words, Fox had eliminated all their risk after four years and doubled their money within ten years. However, as long as Fox Film stock was privately held, the investors had only a limited marketplace in which to sell their shares and thus could not benefit from public enthusiasm for the company. They told Fox he had to let the public in and he had to do it now.

  Second, Fox understood that the future belonged to the giants, those studios with the resources to make big, flashy movies that they could show in their own large, luxurious theaters. The mid-1920s saw many soaring film budgets: $1.1 million for United Artists’ The Thief of Bagdad (1924), with Douglas Fairbanks; $923,000 for Charlie Chaplin’s The Gold Rush (1925); and a staggering $3.9 million for M-G-M’s Ben-Hur (1925). Fox had gotten where he was by making primarily tightfisted, low-budget features to serve second- and third-run theaters. The Iron Horse, which cost $400,000 for production and promotion, had been an exception for him. With his current resources, he couldn’t afford to make such a movie every time. Neither could he keep turning out the program pictures that he had pledged at the beginning of the year to discontinue. As reviewers had consistently told him in recent years, audiences were no longer willing to tolerate glaringly artificial settings and special effects when more money could have dissolved disbelief. Unless he made more expensive movies, Fox knew, Fox Film would “ultimately degenerate and pass out of existence.”

  Proud of his achievements, Fox was determined to have it both ways: to expand and to retain control. In restructuring Fox Film in 1925, he therefore created two new classes of stock. The distinction would be crucial in later years: Class A shares would be sold to the public but would have no voting rights, while Class B shares would have voting rights but would remain privately held. The A shares would raise money. The B shares would be distributed among the original investors in exchange for their current holdings* and would protect Fox’s power. That is, because he owned 50,101 of the current shares,* Fox would receive 50,101 of the all-important 100,000 Class B shares. He would remain Fox Film chairman and president, with full authority to appoint the company’s board of directors. Anyone who bought the Class A shares would have to trust Fox absolutely. If they didn’t like his decisions, their only recourse would be to sell their stock.

  Yet, Fox meant to make good for new investors. He envisioned them not as the wealthy people they were likely to be, but as secretaries and streetcar conductors, waiters and widowed mothers, members of the great, honest, struggling underclass who yearned to belong to a big dream. He pledged to do his best. In early May 1925, while working out the final details of the public stock offering, he advertised, “Every energy of Fox Film Corporation is now bent to the production of motion picture masterpieces.”

  Sadness overshadowed the impending leap forward. On May 17, 1925, Anna Fox died at age sixty-four in Battle Creek Sanitarium in Michigan from the stomach cancer that had long plagued her. If Fox visited his mother at all during the year or two she spent there—perhaps he stopped by on his way to or from Los Angeles, when he spent three months there in early 1925—he wasn’t with her at the time of her death. Neither were any of her other children.

  Fox had his mother’s body brought back to New York for an elaborate funeral in the newly built Fox mausoleum at Mount Hebron cemetery in Flushing, New York. The ceremony did nothing to assuage his guilt. Relatives described him as distraught and inconsolable. He knew he had failed her. He had sent her away to die alone.

  The loss of his mother wounded Fox profoundly. Anna Fox had been the central inspirational figure of his life, the first (and for many years the only) person who believed in him. She had seen the inner light of greatness in the young, hopeful boy. She had encouraged him, helped him, and advised him, always with cheerful, boundless love. To her, his dreams were never foolish. When the struggle had seemed too hard, wh
en, for instance, during the dark years of his partnership with Big Tim Sullivan, he despaired and wanted to give up, she had restored his spirit and given him the words that would protect him from further self-doubt: “You must go forward.”

  Now that voice of faith was stilled. His wife and children were not adequate comfort. Fox believed that the two greatest types of loves, greater even than the love of a man and a woman or the love of a person for his or her country, were a mother’s love for her child and a boy’s love for his mother. He had modeled all the good mothers in Fox movies after her. A remarkable number of them even looked like Anna Fox—plump, white-haired, round-faced, with kindly smiles.

  Fox would never really get over his mother’s death. Decades later, family members said, he still reminisced wistfully about her and bristled at the suggestion that anyone else, even a relative, might resemble her. Now, in the immediate aftermath of the loss, his grief took the form not of tears or of immobilization, but of a frantic burst of activity. It was as if he had to seize his mother’s dream for him all at once, or else risk losing it, along with her, forever.

  On May 27, 1925, only ten days after his mother’s death, Fox went ahead with Fox Film’s financial restructuring, officially increasing the total shares from 100,000 to 1 million. On June 15, the new Class A nonvoting stock was admitted to the New York Curb Exchange* and trading began the following day. (Three months later, Fox Film would switch to the New York Stock Exchange, joining Famous Players–Lasky and M-G-M there.) The transaction terms were curiously conservative. Although Fox had authorized 900,000 Class A shares, he released only 400,000 of them*—and of that number, he gave 235,000 to his original investors and to important Fox Film employees such as Sheehan and Wurtzel, to bolster their loyalty. That left only 165,000 Class A shares to be put up for sale through brokers, who paid $40 per share to Fox Film and charged investors $43 per share.

  Rather than ballyhooing the stock to the public with the sort of magniloquent claims he used to promote his movies, Fox substantially understated Fox Film’s worth. He had never revised the value of fixed assets since 1915, but instead listed the studio’s two real estate parcels in Los Angeles at the combined price he’d paid, $525,000, even though the market value had increased about five times. Similarly, despite a $5.6 million investment from earnings in the foreign sales organization, he carried that part of the business on the balance sheet at only $1. Also, according to the Wall Street Journal, Fox Film had the industry’s most conservative policy of writing off inventory, so that movies that were still earning substantial rentals weren’t carried on the books, and contrary to common practice, Fox didn’t list any “goodwill” value on his balance sheet.

  The point of the relative scarcity of publicly traded shares, combined with an actual asset value far in excess of stated value, was to ensure that Fox Film’s new stock sold out quickly. Fox did not want any of the 165,000 Class A shares to remain in the hands of brokers, who would then have a basis to interfere in operations. The strategy worked. The shares promptly sold out, generating $6.6 million for Fox Film. By the end of June 1925, the stock was trading at 50½, about a 17 percent increase in only two weeks. By year’s end, the price had reached $85, nearly double the initial asking price.

  With new money in hand, Fox tore ahead. Between mid-1925 and the end of 1926, he spent about $3 million to improve his West Coast studios. By now, he had to admit that he’d been wrong. Despite the $2.5 million he’d invested only five years earlier to build Fox Film’s state-of-the-art headquarters at 850 Tenth Avenue, American film production was not coming back to New York. More than 75 percent of the world’s movies were made in Southern California, and most of the best creative talent lived there. In the summer of 1924, he’d started renting out studio space at Tenth Avenue and shifting the rest of filmmaking operations westward. There was no point in holding on to a bad idea, even an expensive one.

  Previously, Fox Film’s main lot in Los Angeles, at Western Avenue and Sunset Boulevard, had been Tenth Avenue’s poor relation, a collection of drab, utilitarian buildings. Now, a $1 million overhaul resulted in new construction of a large, Spanish-style administration building with a red tile roof and wood trimmings; a block-long reception building; three of the largest movie stages in the world, each the size of a regulation baseball field; a three-hundred-seat, Mission-style preview theater; a new two-story wardrobe building, and even a small hospital with a full-time surgeon and a schoolhouse for fifty child actors. The prop department added $150,000 worth of new furniture, including pieces from European palaces, and on the second floor of the new administration building, Fox installed a twenty-thousand-volume research library, anchored by the newly purchased $100,000 George Ingleton rare document collection.* With elaborate new gardens planted all around, Western Avenue emerged as a smart, modern showplace where anyone would be proud to work.

  Finally, Fox also began developing the one-hundred-acre plot of West Los Angeles farmland that he had bought in May 1923, only to find himself stymied by bureaucratic delays. The last remaining objection was from University of California officials, who were about to buy land nearby for the future UCLA campus and didn’t like the idea of having a motion picture studio in the vicinity. In August 1925 the university site advisory committee told Fox that a $25,000 donation might change their minds. After Fox sent his check, the wheels of government started to turn. Although in October 1925, the Los Angeles Planning Commission put the Fox property in Zone A, for residential use only, commission officials recommended that the studio apply for an exception. Fox Film did so, and on December 29, 1925, the company received permission to build a motion picture studio. That outcome was actually preferable to having the land placed in Zone D, for industrial use, because it gave the studio a far better class of neighbors.

  At a cost of $2 million, the “Fox Hills” lot, as it was then called, was intended as an outdoor location studio, cheaper in the long run than actually going on location—which Fox had always hated to do—and able to accommodate almost as much variety as the world itself. In only a year, workers built permanent sets of Spanish, French, Irish, German, and Siamese (Thai) villages, an English estate, a Bolivian jungle, an Aztec temple in Mexico, and a replica of the Arc de Triomphe. There was still plenty of room left over on the site, a fact that would soon matter for Fox’s resurgent conquering ambition.

  Nationwide, Fox Film’s sales and distribution offices were expanded and refurbished. The new Los Angeles exchange building, on Vermont Avenue not far from the Western Avenue lot, was considered the best in the business. Done up in Spanish Mission style, it had imported Italian tile floors, a state-of-the-art projection room, and all new furnishings. Not a lamp or a chair or a filing cabinet had been transferred from the old office—only business records, advertising materials, and film. In an industry where images rather than words had to convey the greatest meaning, the thorough renovation of Fox Film testified to a majestic vision.

  None of it—not the new personnel, not the first-class facilities, not the shining financial profile—was going to matter unless Fox also acquired a substantial number of first-run theaters in which to show his movies. The trend toward vertical integration, that fear-driven desire of producers to control distribution and exhibition, was now firmly entrenched, and the federal government’s best effort to curtail it, the 1921 antitrust lawsuit against FPL, had by 1925 crumbled. After Calvin Coolidge’s arrival in the White House following Harding’s sudden death from heart trouble in August 1923, the U.S. Justice Department softened up considerably on antitrust prosecution. FPL lawyers were allowed to make their case that the company had a right to sell its products directly to the consumer without an expensive middleman and to argue that if Henry Ford could sell his cars through Ford dealerships, then FPL should be allowed to present its movies in company-owned theaters. It helped, too, that while government investigators were rooting around for evidence, FPL founder Adolph Zukor “acted like a good boy; he stopped buying theatres and b
ooked in his theatres many outside productions.” Gradually, the government discarded all allegations made in the original indictment against FPL except that of block booking, the practice of requiring exhibitors to take bundles of movies that packaged the bad in with the good.

  After testimony taking ended in September 1924, Zukor felt so confident of victory that he immediately went back to his old ways and launched “a theater-buying orgy” that pushed Fox further into a corner. (In fact, the antitrust case wasn’t over yet. It would reopen in 1926 to take additional testimony, and final arguments would not conclude until January 27, 1927, but in substance, Zukor was right. The lawsuit had lost all its teeth.) In May 1925, FPL announced that it had acquired the Olympia Theatres chain, which operated thirty-eight movie theaters in New England and also owned half of another chain that controlled forty theaters in the region. The deal, estimated at $12 million, seemed blatantly defiant of the rules of fair play. With no solid evidence, Harrison’s Reports wondered if Zukor had bought off federal officials via “a trail of black satchels that stretches from Wall Street to Washington.”

  Fox’s peers were taking steps to protect themselves. M-G-M, the second-ranked studio, was sheltered by its parent company, Loew’s, Inc., which operated a deluxe theater circuit nationwide, yet also took care to maintain a friendly, subservient posture toward FPL. (Conveniently, in January 1920, Zukor’s daughter, Mildred, had married Marcus Loew’s son Arthur.) In late 1924, unveiling his company’s $11 million plan to build its own national theater chain, Warner Bros. president, Harry M. Warner, said, “We are taking off our coats to do battle.” Universal was also aggressively hunting for theaters to buy and, having gained control of at least one hundred, would, in late 1925, announce its goal of acquiring a total of more than a thousand.