by Vanda Krefft
Eisele’s death hit Fox hard. Although Eisele had been forced on him as Fox Film’s treasurer in 1915 because his Newark-based banking firm, Eisele & King, had arranged the studio’s initial financing, Fox had grown to trust and respect him. Considered a magnetic personality with “the ability of bringing out and developing latent powers in others,” Eisele had helped Fox formulate the studio’s financial policy and had taken a keen interest in film production. A real estate expert, he had also played a main role in Fox Film’s 1923 acquisition of the one-hundred-acre Fox Hills studio property—a $300,000 investment that had skyrocketed in value.
“Death has never called a kindlier man or a truer friend, and no one will ever quite fill his place,” said Fox, who served as an honorary pallbearer at Eisele’s funeral.
Admiration and affection for Eisele didn’t prevent Fox from appointing an unqualified replacement as Fox Film’s new treasurer: Douglas N. Tauszig, the husband of Fox’s elder daughter, Mona. Since his marriage four years earlier, thirty-three-year-old Tauszig had been the assistant to Fox Film vice president Jack G. Leo, and by 1927 he also held titles as the second vice president of Fox Theatres and as director of some twenty lesser Fox corporations. The list sounded impressive, but in fact, Tauszig had no substantial duties. His most notable recent accomplishment was organizing the Fox Fun Frolic and Dance, a social gathering for New York employees with a buffet supper and minstrel show at the McAlpin Hotel. He did such a good job that two days before Eisele died, Tauszig was fêted at a testimonial dinner and presented with a cellarette (a small, usually wooden piece of furniture) containing sterling silver coffee and liquor sets. Tauszig also served as the executive adviser to the Fox Film basketball team, which in February 1927 was leading the Motion Pictures tournament.
There was only one reason to choose Tauszig: so that Fox could control company finances without restraint.
Publicly, no one raised an eyebrow about Tauszig’s appointment, but privately, one person became highly alarmed. Thomas N. McCarter, one of Fox Film’s original investors and the president of New Jersey’s utility conglomerate Public Service Electric and Gas Company, immediately resigned from Fox Film’s board of directors and began disposing of all his Fox Film stock. An archconservative to whom “the value of the dollar was awfully important,” McCarter told family members he had lost faith in Fox’s leadership. McCarter did well enough, reaping $2 million from an investment that had cost him $25,000 twelve years earlier. For that, he was grateful. In June 1927, in tribute to show business, he gave $250,000 of his Fox Film stock sale proceeds to his alma mater, Princeton University, as seed money to build the nine-hundred-seat McCarter Theatre.
Son-in-law Tauszig didn’t last long in his new job—not because of professional incompetence or resistance to Fox’s authority, but because his marriage to Mona collapsed. It wasn’t easy being a Fox son-in-law. Not only was it virtually impossible even for an above-average man such as Dartmouth University graduate Tauszig to approach Fox’s professional status, but as a husband, too, he was bound to fail. Both daughters, especially Mona, idolized their father. A story was passed down about his gallantry. One winter evening, one of the younger couples was in the Fox living room, preparing to go out with Fox and Eva. The younger husband, either Tauszig or Schwartz, got his wife’s coat and handed it to her. “No, no,” Fox reprimanded. “That’s not how it’s done.” He got Eva’s fur coat, held it open in front of the fireplace to warm it up, and then helped her into it.
Fox had sent the Tauszigs on a cruise to Havana in early 1927, but the trip didn’t work as a second honeymoon. The couple argued continually over how to raise their three-year-old son, William Fox Tauszig. Given that the young family lived in a guesthouse on the Fox Hall estate in Woodmere (as did Belle, her husband, and their young son, William Fox Schwartz), the issue was probably Fox’s overwhelming influence. In January 1928, after ordering the servants to send Tauszig’s possessions to his mother’s home in Manhattan, twenty-seven-year-old Mona moved with their son to Atlantic City, where she would remain for several months. Tauszig followed and tried to reconcile, but Mona wasn’t interested. Now that she had a child, a husband was unnecessary.
Obviously, Fox could not permit Tauszig to remain near company money. In April 1928 he replaced Tauszig as Fox Film treasurer with his thirty-two-year-old brother, Aaron Fox, and also appointed Aaron as treasurer of West Coast Theaters and vice president of Fox Theatres. The following month, Tauszig gave up and filed for legal separation from Mona.
“Of all things for Aaron to be—treasurer of the Fox Film Corporation!” said niece Angela Fox Dunn. “Within the family, eyes rolled knowingly.”
Sixteen years younger than Fox, Aaron had grown up expecting to be taken into his brother’s business, and he had been. Yet, while bouncing among positions in production, domestic and foreign sales, theater construction, and exhibition, he had displayed neither any natural aptitude for nor any interest in any of these fields. For a while, Fox sent him to Los Angeles to manage the Carthay Circle Theatre. “We’ll be lucky if Aaron can manage the popcorn machine,” Fox told his sister Malvina. It didn’t go well. Malvina’s daughter, Angela Fox Dunn, said, “My mother recalled seeing Aaron standing in the lobby in a black suit with a wilting white carnation in his lapel.” Immediately before his appointment as treasurer, Aaron headed the educational and mail order sales department at Fox Film.
Aaron wasn’t just professionally unqualified as an officer of a major corporation, he was also an arrogant and boorish figure. “Homely Uncle Aaron, he looked like a caricature of William Fox—his nose was larger, his hairline more receded, and the dark, sad Fox eyes were more heavily lidded,” said Dunn. “He wanted to be William Fox. Aaron with his big shot manner and pretentious banker’s suit and silver-topped cane, went around town and very grandly introduced himself as ‘Mr. Aaron Fox, brother of William Fox. We own the Fox Film Corporation’ to shoeshine boys, waitresses, hotel managers, anyone and everyone, signing unauthorized checks and promising free tickets, jobs, introductions.” Whereas Fox was gentlemanly toward women and stalwartly loyal to his wife, Aaron could be shockingly crude. His first wife, Hazel, had divorced him in 1922 after nearly four years of marriage, saying he had called her an “impossible idiot,” had left her five times, and “was very fond of gay and immoral women. He never would introduce me to respectable people, but would take me around to strange places and to strange parties and embarrass me very much.” Even his own mother didn’t like him. “I hate to say this because he’s my own son,” Anna Fox told pretty Alice Miller in the mid-1920s after Aaron had proposed to her, “but he’s no good. Don’t marry him.” Soon, to her regret, Alice ignored the advice and became the second Mrs. Aaron Fox.
Just as had occurred with Tauszig, no one publicly questioned Aaron’s appointment to three key positions in publicly traded companies that employed thousands of people and handled millions of dollars. The trade press simply reported the news as a minor event.
The second death that changed Fox’s life occurred five months after Eisele’s passing. On September 5, 1927, shortly after 6:00 a.m., at his home in Glen Cove, Long Island, fifty-seven-year-old Marcus Loew died in his sleep of a heart attack. Although Loew had been practically retired for three years due to ill health and had a round-the-clock nurse, no one expected him to go so quickly. The previous day, he’d returned on his yacht from a month’s vacation at the Saratoga, New York, home of his friend and business colleague Nicholas M. Schenck. Turning in that evening at 10:00, he’d been in good spirits.
Suddenly, the founder of the great Loew’s, Inc. theater chain, parent company of M-G-M, was gone. A great outpouring of grief ensued. Despite Louella Parsons’s observation that “Most great business careers are founded on warfare of one sort or another,” the deceased magnate was understood to have succeeded because of his gentle, trustworthy, and forgiving nature. Before his burial on September 8, at a public memorial service at 11:00 a.m. at Loew’s mansion, more th
an 2,500 mourners showed up and flowers covered the front lawn and much of the rest of the grounds. At the private burial service at Maimonides Cemetery in Cypress Hills, as Loew’s longtime friend, Fox was an honorary pallbearer, a position that traditionally involves accompanying but not carrying the casket. He had “the greatest regard and affection” for Loew, Fox told the press. “His place in pictures is assured for all time, but he will be missed as long as memory runs.” When Variety published a lengthy Marcus Loew tribute issue on October 19, 1927, Fox took out a full-page ad, which he titled with his highest term of praise: “A Leader.”
It was truly very sad, the loss of a great film industry pioneer and all that, but behind the tearstained eulogies loomed the crucial question: who was going to get Loew’s, Inc.?
Loew had left most of his estate to his wife, Carrie, and their two sons, Arthur M. and David Loew, so that, jointly, the family owned 400,000 shares of Loew’s, Inc. Although less than one-third of the total 1,334,453 outstanding shares, that block nonetheless constituted a controlling portion because the other shares were so widely distributed that it would have been practically impossible to organize effective opposition. Neither the widow Loew nor either son wanted to run Loew’s, Inc. The heirs were not take-charge types. At the time of their father’s death, Arthur Loew was a vice president in M-G-M’s foreign department, while David Loew was a vice president in the theaters and real estate division. Loew’s, Inc. executive vice president Nicholas Schenck had been the company’s active head.
Through Alfred Blumenthal, Fox’s partner in Foxthal Realty and a friend of Schenck, Fox learned that the Loew family was willing to sell its stock.
It was a glittering proposition. Loew’s wholly owned subsidiary M-G-M was the second-ranked studio after Paramount, and the Loew’s theater chain, although medium-size rather than large, with 175 properties, was first in quality. Other than Fox Film* and Fox Theatres, Loew’s was the only other well-established movie company that had consistently operated its theaters profitably. By contrast, Paramount’s Publix chain, which had swallowed up countless regional theater chains in a feeding frenzy that began in 1919, had a lot of badly managed properties and still needed to shake out the losers and acquire more large theaters.
Acquiring Loew’s would put Fox in first place in the motion picture industry and usher him into the pantheon of American business leaders.
A Loew’s takeover also made strong business sense. In late 1927 and early 1928, as the other major studios prepared to join Warner Bros. and Fox Film in converting to sound, no one had any idea what to expect financially. Fox was especially concerned about the impact on foreign revenue, which accounted for at least 40 percent of Fox Film’s gross income. Other forces had already threatened overseas markets. Foreign governments, worried about both outgoing revenue and the cultural impact of so much exposure to American customs, values, and traditions, were increasing restrictions on incoming movies and encouraging domestic production. Experts estimated that investment in foreign film production companies increased sevenfold in 1928 compared to 1927. “It came into my mind: What was going to occur when an English-speaking talking picture was going to Czechoslovakia or to Hungary or to Romania or China or Japan, from which countries we were receiving substantial revenues?” Fox said. “I saw those revenues disappear. It was clear we could not make talking pictures in every language, and I could see no reason why these obscure countries would change their language to suit the American producer.”
Convinced he would have to reorganize his entire business to adapt to the sound era, Fox commissioned a study of the likely financial impact of a Fox-Loew’s merger. Accountants forecast $17 million in annual savings, to be accomplished by combining overhead expenses and implementing more efficient operations. That $17 million, Fox believed, would substantially outweigh foreign revenue loss.
The idea of acquiring Loew’s was audacious, yet there was now no one to stop Fox—no John C. Eisele to put a hand on his arm and urge caution, and no blustery Thomas N. McCarter to rage against wildcat spending. Son-in-law Douglas Tauszig had been Fox Film treasurer since April 1927, and incompetent brother Aaron would take over in April 1928. In the spring of 1927, only one outside director remained on the Fox Film board, Eisele’s investment banking firm partner, Nathaniel King, who appears never to have presented any forceful opposition.
The Loew’s, Inc. acquisition involved a series of delicate negotiations. First, acting Loew’s chief Nicholas Schenck, who stood to earn a hefty commission, had to soften up Carrie Loew. It was one thing for her to indicate, as she had done, a willingness to part with her husband’s life work, but quite another to face hard numbers and specific terms and to realize she would be severing forever a link to the past. Schenck took the posture of a family protector and, Fox said, “worked on the theory that Mrs. Loew had too many of her eggs in one basket and it would be a good thing for her to release some of this capital.” As a woman, Schenck counseled his dear friend’s widow, she ought to put her money into bonds instead.
Reportedly, Fox began with an offer of $80 per share for the Loew family’s stock, at a time when the market price was around $60 per share. Then Warner Bros. jumped into the bidding, pushing Fox higher and higher.
The Warners? Where were they going to get that kind of money? Although the Warner Bros. had been doing well since the October 1927 release of The Jazz Singer and would show a net profit of more than $2 million for the fiscal year ending August 31, 1928 (compared to only $30,426.88 for the 1927 fiscal year), the company had a shaky financial history and an uncertain future. In May 1928 the Warners’ Vitaphone sound technology was effectively doomed when the other major studios began to adopt Fox’s Movietone system instead, and the Warners’ ongoing contract arbitration battle with Western Electric ensured no help from that quarter. In more rational times, the Warners probably would not have been seriously considered as buyers for Loew’s.
The late 1920s, however, were not rational times. Beginning in March 1928, the stock market began a spectacular run-up, yielding “a year when everything one touched seemed to turn to gold,” writes historian William E. Leuchtenburg. “Customers crowded into brokers’ offices in midmorning and stood staring at the blackboard or inspecting the tape until closing time. They borrowed money, bought more stock, watched the stock go up, and borrowed still more money to buy still more stock.” By that summer, the seemingly endless upward spiral had ensnared “people who never dreamed they would be caught in the speculative frenzy. How much longer could you hold out when your neighbor who bought General Motors at 99 in 1925 sold it at 212 in 1928?”
Suddenly, not even the Warners themselves knew where they belonged on the financial map. In early August 1928, studio president Harry Warner received a $10 million purchase offer from Paramount, which realized it was behind the game in adapting to sound. Then Fox found out and, unwilling to see Paramount strengthened, bid $12 million for Warner Bros. Paramount shot back with a $15 million offer. All this happened within days, and rumors of the negotiations sent Warners’ stock soaring, so that within one week, the share price jumped by twenty-one points, to reach $81. Now Harry Warner started thinking. First, he said he would accept $20 million for Warner Bros.—then he changed his mind altogether.
“I don’t think I would take $40 million,” Warner told Variety. “After all, why should some other interest reap the benefit of our success? We are making plenty of money today—all kinds of money. It took us many years and a lot of hard work to get where we are.” The more Warner talked, the more he convinced himself he ought to be on the other side of the fence, a buyer and not a seller. “If I could buy some company that would help our present interests, I would do so immediately.”
The only possible “some company” was Loew’s, Inc. The Warners’ bankers, Goldman Sachs, heartily encouraged their clients’ ambition, pledging to arrange all the money necessary. Harry Warner commented, “Ten years ago when I walked into a bank to borrow $1,000, the banker l
ooked at me as if I were a thief. Today the money of the world is at the command of this industry.”
Fox’s negotiations for Loew’s would continue through the end of 1928. It was an extremely busy year. In addition to ensuring Movietone’s victory as the dominant talking pictures technology; building the forty-acre Movietone City from scratch; watching over a slate of new releases crowned by Four Sons, Mother Machree, and Street Angel; and enduring the final commercial disappointment of Sunrise while trying to set Murnau in the right direction with 4 Devils, Fox was aggressively trying to expand Fox Theatres’ holdings.
Some efforts succeeded. Following his $16.5 million purchase of the remaining two-thirds of the stock of West Coast Theaters in January 1928 and his $25 million purchase of the Poli Theaters chain in New England in July 1928, Fox achieved another major coup. Between August 1928 and mid-January 1929, he arranged to take over almost all the independent theaters in the New York metropolitan area—about 200 of them, with a combined seating capacity of 280,000 and combined annual gross revenues of $25 million. That made him by far the largest theater owner in New York City, the movie industry’s largest and most influential market. Fox didn’t buy the properties outright, but instead agreed to pay a total of about $13 million for leases that had an average duration of more than twenty years. With the 200 theaters to be run under a new Fox Metropolitan Theatres division of Fox Theatres, Fox expected the acquisition to generate up to $7.5 million in annual profits.
As always, many more attempts to buy theaters fell through. Most notably, in early 1928, Fox tried to buy the Stanley Company, a Philadelphia-based chain of 270 theaters operating in seven states and Washington, DC, that had been his bitter rival in that area for a decade. The Stanley Company had an additional potential benefit. Because Fox had received about 28 percent of the stock of First National Pictures along with his purchase of the West Coast Theaters shares, and because Stanley owned another 25 to 30 percent of First National shares, control of the Stanley Company would have given Fox control of the sixty-eight-acre First National studio in Burbank, California. Some speculated that Fox wanted that real estate so he could move Fox Film there and sell off the Fox Hills lot in West Los Angeles, which was worth ten times what he had paid for it five years earlier. Warner Bros., however, outmaneuvered Fox and got the Stanley Company in September 1928, so that company instead moved to Burbank to take over the lot it still occupies.