by Vanda Krefft
No wonder: by 1925, theater ownership had become the main stabilizing force in the highly expensive, highly risky business of film production. Not only did company-owned theaters provide a safe harbor for a studio’s output—and with theaters becoming larger and more luxurious, they often exerted as much of a pull as the movie itself, compensating for weak material—but also theaters, whatever movies they played, were cash registers brimming with money. Among more than twenty thousand U.S. movie theaters, with total weekly attendance of fifty-five million, annual paid admissions now exceeded $700 million. As Adolph Zukor said in a 1925 interview, “The exhibiting end of this business is the best end—by far. It is about time someone said so and said it fearlessly. It is the stable, substantial, profitable side. Production is pure and simple speculation; stars are grief and worry.”
At the outset of 1925, Fox owned only about thirty-one theaters. Most of them were in the New York metropolitan area and most of them, however impressive they once had been, were now too small and faded to count for much. Only two qualified as truly competitive in the contemporary market, the Fox theaters in Philadelphia and Oakland, which Fox had built only because he could not otherwise get his movies shown in those cities.
Once again, money changed everything for Fox. As soon as Fox Film’s public stock offering gave him $6.6 million, he went after West Coast Theaters, a chain of 115 movie theaters along the Pacific Coast. With gross earnings of $9.5 million in 1924 and a half interest in Grauman’s Egyptian Theatre in Hollywood, where The Iron Horse had premiered in February 1925, West Coast Theaters dominated first-run exhibition in Southern California. Acquisition of the chain would solve a major problem for Fox. Other than with The Iron Horse, he had never had much success booking his movies on the West Coast.
Fox learned about the West Coast opportunity through Alfred Cleveland Blumenthal, a go-getter Los Angeles real estate agent of checkered reputation. Fox had known Blumenthal for years—“You could hardly ride a square mile in Los Angeles without seeing a sign that read, ‘This property for sale. Apply to A. C. Blumenthal’ ”—but had long avoided him because mutual acquaintances described Blumenthal as shady and unreliable. Then, in mid-1924, Fox dealt with Blumenthal when he took over the lease on a downtown Los Angeles office building where he planned eventually to build one of his “super theaters.”* “Blumenthal got under my skin,” Fox said. Perhaps he recognized a kindred spirit. The son of a San Rafael, California, grocer, Blumenthal was another restlessly ambitious dreamer. “Blumey,” as his friends called him, may also have activated Fox’s father figure tendencies. Eleven years younger than Fox, he stood only about four foot ten.
In late June 1925, Blumenthal told Fox that West Coast Theatres’ four major stockholders, Adolph Ramish, brothers Mike and Abe Gore, and Sol Lesser, were fighting among themselves and wanted to sell the company. Even better, Blumenthal confided, just this weekend he had been on board Marcus Loew’s yacht playing bridge with Lesser, who owned 30 percent of West Coast Theatres’ stock. When Blumenthal asked if he would sell his shares for $1 million, Lesser said yes.
With characteristic brio, Fox took Blumenthal on Monday morning to the lobby of the Ambassador Hotel to wait for Lesser to return to his room there. As soon he came through the revolving glass door, Lesser recalled, “Fox reached out his hand and shook mine, and before I could even say hello, he said, ‘I’ve bought your stock in West Coast Theaters for $1 million cash!’ ”
But it wasn’t going to be quite that easy. Lesser had been joking when he said he would sell his share of West Coast Theatres. Still, a million dollars was a million dollars. Lesser agreed to meet with Fox that afternoon, and when he did, he was astounded to hear about the rest of Fox’s offer. In addition to paying $1 million in cash, Fox would go in with Lesser on a fifty-fifty basis to establish a theater in any town in which West Coast didn’t have a theater. He would finance any picture Lesser wanted to produce on a fifty-fifty basis. He would pay Lesser $1,000 a week, with a guaranteed five-year contract. It was an incredible deal for thirty-five-year-old Lesser, who had never dreamed of such success.
Lesser felt honor bound to discuss the matter with his partners. That seemed a mere formality. The Gore brothers and Adolph Ramish were also willing to sell, and when the whole group sat down in Fox’s office in New York a few days later, Fox was so confident of success that he had a lawyer and a stenographer ready to draft the sale contract. He was now prepared to pay $8 million for all four partners’ West Coast stock.
Within hours, the deal blew up. Mid-morning, the phone rang for Abe Gore, who ran out without his hat and coat and never came back. Around 2:00 p.m., Lesser’s brother arrived and pulled Lesser out into the hallway. Lesser, too, left behind his hat and coat and never returned. The next Fox knew, Lesser and both Gores had backed out of the deal.
Only the older, more seasoned Adolph Ramish sold his West Coast Theatres stock to Fox. He did well, exchanging his 45,000 shares (representing one-third ownership of the company) for $2.25 million and clearing a profit of nearly $1.6 million. Fox was bitterly disappointed. Although Ramish’s stock entitled Fox to a seat on West Coast’s board of directors, 100 percent control would have made Fox “without doubt, the outstanding theatre operator on the coast.”
In perspective, the outcome should not have surprised Fox. West Coast Theatres wasn’t a freestanding company. Through crisscrossing stock ownership, it was one of the most important components of the First National theater consortium.* When First National officials learned that Fox was about to buy West Coast Theatres, they panicked and rushed to New York. It was they who had pulled Abe Gore and Sol Lesser out of Fox’s office. In Lesser’s case, Ernest V. Richards, a New Orleans theater owner and one of First National’s founding members, had been waiting in a taxi around the corner. Lesser recalled, “I sat with him in the taxi for over an hour while he spun a most heroic tale. He spoke as an idealist would of the significance of my remaining as a leader of the motion picture exhibition field, of the necessity of combating evil influences such as Mr. Fox, who had ambitions to gobble up First National, how I would be a traitor to my fellow members if I were responsible for letting Fox get into the organization.”
As Lesser later discovered, that was merely a fanciful tale. In fact, First National wasn’t really First National anymore. It had become a front for Adolph Zukor, who, having set out six years before to smash First National, had already done so and was now pulling the organization’s strings from the outside. In July 1925, Variety estimated that Zukor’s FPL either owned or had significant financial influence over about 59 percent of First National’s theaters and commented, “[T]o look upon First National and Famous as actually opposing each other is just a gag.” Ernest Richards, who had worked on Lesser, was essentially Zukor’s errand boy. Zukor owned 40 percent of the Saenger Company, the theater circuit run by Richards—nearly ten times as much as Richards himself, who was the next-largest stockholder. Thus, it hadn’t really been First National, but rather FPL, that sabotaged Fox’s attempt to buy all of West Coast Theatres.
Feeling double-crossed, Fox at first refused to speak to Lesser. “After the excitement died down, I called on Fox and told him the reasons for my not selling to him. I’ll never forget his prophecy,” Lesser would recall forty-six years later. “He said, ‘You’re too trusting, my boy. If any of them [others in the First National network] get the chance to sell and can work out a deal like I’ve offered you, they’ll sell and nothing will keep them from it.’ Well, how true!”
Worried that Lesser and the Gore brothers might reconsider Fox’s offer, First National executives pressured them to pool their West Coast stock in a voting trust, the governing board of which was chaired by Ernest Richards. That meant they couldn’t sell without permission. Then, about a week after that arrangement was settled on July 7, 1925, a curious event took place. The owners of the sixty-nine-theater Chicago-based Balaban & Katz theater circuit, which owned the First National franchise for Illinois,
were revealed to be negotiating a merger with FPL. The deal, finalized in September 1925, was the biggest theater merger in history and led to the creation of FPL’s mighty Publix Theatres. Although Balaban & Katz was at least as important to First National as West Coast Theatres, First National’s leaders didn’t utter a word of protest. Of course not. Adolph Zukor, as the force behind First National, was not going to object to a sale to Adolph Zukor as the head of FPL.
Disgusted by the swift betrayal of those whom he had refused to betray, marginalized within West Coast operations, Lesser had no heart to continue. In early 1926, he sold out (on terms much less attractive than those Fox had offered) to a newly formed Wall Street syndicate composed of First National executives and bankers and the Gore brothers. Through First National, FPL now had indirect influence over West Coast Theatres.
So, there he was again, Fox’s main rival to rule the motion picture industry: the perfectly groomed, tightly wound, poker-faced Zukor, watching everything and missing nothing.
Although it was far less than he wanted, Fox’s one-third ownership of West Coast Theatres paid off quickly. Within two months, Fox Film had booked its movies into about 85 percent of West Coast’s theaters in California, with projected additional annual income of $800,000. That result propelled Fox into a cyclonic program of theater buying and building. City by city, he unleashed whatever money was necessary to establish an imposing presence.
In New York, he started construction of a new $1.5 million, 3,800-seat Academy of Music directly across Fourteenth Street from the old Academy of Music, which the owners had recently sold to the Consolidated Gas Company. The new building, meant to serve as the anchor for a nationwide chain of Fox “super” movie theaters, showed how far Fox had come: the new Academy of Music would encompass the site of Big Tim Sullivan’s firetrap Dewey Theatre, where in 1908 Fox had taken his first steps into the forefront of the entertainment industry.
In Washington, DC, Fox outbid Adolph Zukor for the right to run the 3,200-seat movie theater, under construction in the fall of 1925, in the new National Press Club building. It would be the city’s largest theater; Fox promised $200,000 annual rent for thirty-five years. In November 1925, he began building a five-thousand-seat theater in St. Louis. In December 1925 he bought into the nineteen-theater Ascher Brothers’ chain in the Chicago area and confirmed plans to build fourteen deluxe, five-thousand-seat Fox “super theaters” in major cities. Sites had already been acquired in Boston, Detroit, Chicago, Buffalo, San Francisco, and Los Angeles.
For all the deals that went through, many others failed. Within the last six months of 1925, Fox unsuccessfully bid for the Mark Strand theater circuit in New York and Massachusetts; the Whitehurst chain in Baltimore; the Jensen and Von Herberg circuit in the Pacific Northwest; the Crandall circuit in Washington, DC; and for $7 million, his arch rival in the Philadelphia area, the ninety-theater Stanley Company of America. In November 1925 he reportedly tried to buy Universal Studios, but negotiations fell through when Carl Laemmle refused to let him examine Universal’s books.
Between September 1924 and the end of 1925, Fox had acquired an interest in 162 theaters, outpacing all his rivals. Accordingly, Fox Film’s rentals surged. Between September 1 and November 28, 1925, profits more than doubled compared to the same period in the previous year, rising from $437,000 to $954,000. By December 1925, the studio’s assets had grown to $26.7 million, up 9 percent in six months. Motion Picture News commented, “There’s more talk along Broadway right now about the Fox Film Corporation than any other concern.”
Although Fox’s sole purpose in acquiring theaters was to gain more and better outlets for his movies, he couldn’t very well acknowledge this publicly. A laissez-faire climate might now prevail, but Fox understood how quickly and capriciously the moods of government might change. If he were to get caught in an antitrust prosecution, even if he were to win, the consequences would be severe. FPL had spent hundreds of thousands of dollars defending itself in the lawsuit filed against it by the Federal Trade Commission in 1921. An appearance of separation between production and exhibition was essential.
Consequently, on November 4, 1925, Fox created the Fox Theatres Corporation and turned over to it all the theater interests he’d bought on behalf of Fox Film as well as the thirty-one theaters he’d personally owned and operated as separate companies. Of course, Fox became president and chairman of the board of Fox Theatres. This time he avoided the mistake he’d made with Fox Film—that of giving away any portion of control. Like Fox Film, Fox Theatres had two classes of stock: nonvoting A shares, which would be sold to the public, and B shares, which would have voting rights but which would remain privately held. Fox took all 100,000 B shares of Fox Theatres himself, ensuring absolute authority.
Fox also took 300,000 Class A shares as the remainder of his compensation for his theater properties and then put another 500,000 A shares up for sale to the public at $25 apiece. With $3 per share subtracted for the brokers’ commission, Fox Theatres quickly brought in $11 million.
Outwardly, Fox Theatres seemed to be a proud new addition to the Fox business family. Actually, the company was more like a second child conceived to save the life of the first. Fox didn’t want it for its own sake, and he didn’t feel the same affection for it. With Fox Film, he had always been fiercely protective about the company’s financial profile and its reputation as a well-run business. Every possible penny had to show up on-screen; all executives were paid relatively modestly, and all expenditures were rigorously scrutinized. Fox Film’s books had to be scrupulously clean, and they had to be known as such.
No so with Fox Theatres. The company’s initial public offering was handled mainly through Eisele & King, the Newark, New Jersey, brokerage firm that had negotiated the start-up of Fox Film and whose cofounder John C. Eisele was Fox Film’s treasurer. At a meeting in early November 1925, the Fox Theatres board of directors entered a secret agreement requiring Eisele & King to return 25 percent of its $3-per-share commission. The arrangement wasn’t necessarily illegal,* but it was shady, and Fox knew it. At first, he planned to have his name on the kickback checks. Then, concerned about the way that would look to brokerage employees, he changed the payee to a person identified merely as “Tauszig” and ambiguously referenced as both “he” and “she.” “Tauszig” was, in fact, Fox’s elder daughter, Mona Fox Tauszig, and out of a total of $1.5 million in brokerage commissions, she ultimately received about $411,000.
If anything, the commission rebate should have gone back to Fox Theatres, not into Fox family private pockets. It was the first time Fox had behaved in an underhand way with company finances.
It wasn’t the money he wanted. If that had been the case, he could simply have awarded himself a handsome compensation package to run Fox Theatres and justified it by the weight of responsibility. Fox, however, refused to take either any salary or profit percentage from Fox Theatres, and he would never charge any personal expenses to the company. He was wealthy enough already, he said, and would be content to profit only to the extent that the company did, as reflected in stock dividends and price appreciation. While it was true that upfront he had received 400,000 shares of Fox Theatres stock worth $8.8 million, that amount represented the independently appraised value of the properties he had given in exchange. In effect, Fox paid himself only what he would have had to pay an outsider for an essential block of assets, and he then volunteered to run the company for free. He was satisfied enough with the arrangement that in 1926 he discontinued his $200,000 annual salary at Fox Film. As at Fox Theatres, he took no percentage of Fox Film’s profits and charged no personal expenses to the company. He later explained, “I was paying for the privilege of being president of these two companies.”
Not the money, then, but the egregious lack of economy—that was what irked Fox about the brokers’ commission. Eisele & King had done nothing to contribute value to the Fox Theatres stock, nor would they do so in the future, and they almost certainly wo
uld face no risk of getting stuck with unsold stock. (Brokers were required to take up any part of the stock issue not bought by the public.) William Fox had made Fox Film a tremendous success, and he promised to do the same for Fox Theatres. Those facts alone would sell the new stock.
So Fox believed, and he was right. Although the Fox Theatres’ issue was then the largest individual stock offering for a theatrical company in the history of Wall Street, advance demand more than doubled the amount of stock available, and allotments had to be made. For the second time in a matter of months, the financial markets vigorously endorsed Fox’s vision and ability.
With millions of dollars to spend, Fox Theatres rampaged into 1926. By midyear, the circuit controlled ninety-three theaters, including seventeen first-runs, and had a 50 percent interest in seventy-eight First National theaters. Additionally, Fox “super” theaters were planned for Passaic, New Jersey; Detroit; St. Louis; Kansas City; Baltimore; Atlanta; Los Angeles; and San Francisco. On October 11, 1926, the New York flagship, the new Academy of Music, had its grand opening, revealing French Renaissance architecture, a marble lobby decorated with tapestries, and its own symphony orchestra.
In the public mind, the rapid ballooning of Fox Theatres pushed Fox uncomfortably close to the rapacious Adolph Zukor. Fox insisted he was different. In many ways, he was. As he had with Sol Lesser, Fox usually made generous offers for the theaters he wanted. He knew what kind of dreams most exhibitors had tied up in their business, and he preferred to use friendly persuasion rather than predatory coercion. Still, the ferocity of his ambition stirred doubts. When, for instance, Fox pledged that if other exhibitors gave Fox movies “adequate and fair representation,” he would not build a rival theater in their town, “no matter how tempting the proposition,” it was difficult to tell how much he meant the statement as a promise and how much as a threat.