RKO Radio Pictures

by Richard B. Jewell

  Odlum's reluctance was based on a number of factors, chief among them the declining performance of the company's pictures. Nearly all of RKO's recent A pictures had bombed: The Toast of New York lost $530,000; Music for Madame $375,000; The Woman I Love $266,000; New Faces of 1937 $258,000; Quality Street (Hepburn) $248,000. The only exception was Shall We Dance, the single Astaire-Rogers musical released in 1937. However, its profit of $413,000 showed a substantial decline from previous efforts, and the duo dropped from third to seventh in the exhibitors' poll of top stars.93

  Compounding the uneasiness, Astaire began once again to lobby for a dismantling of the Astaire-Rogers combination. After working sans Rogers in A Damsel in Distress, Astaire feared “all that ‘well they're back together again’ talk” that would surely arise if he made his next film with Ginger.94 RKO, however, could not afford to grant Astaire's wish. His pairing with Joan Fontaine in Damsel resulted in the first loss ($65,000) posted by any Astaire film. So it would be back to basics—and Ginger Rogers was the basics.

  The most baffling release of 1937 was unquestionably Stage Door. The original Edna Ferber-George S. Kaufman play about a group of young actresses waiting and hoping for their big break had opened on Broadway in 1936. The comedy-drama contained a strong anti-Hollywood bias at its core, but Pandro Berman immediately recognized cinematic potential in the material and convinced Leo Spitz to buy it. From the beginning, Stage Door was envisioned as a costarring vehicle for Ginger Rogers and Katharine Hepburn.

  Morrie Ryskind and Anthony Veiller were assigned to transform the play into a screen story, removing the nasty comments about Hollywood in the process. Then Gregory La Cava, who had managed My Man Godfrey and several other successes since leaving RKO years before, was signed to direct. La Cava rewrote much of the story and dialogue as he filmed, making the final picture quite different from the Ferber-Kaufman prototype.

  The movie had special importance for Katharine Hepburn. After several flops in a row, she had become persona non grata to many exhibitors. Witness what Harry Brandt, president of the Independent Theatre Owners Association, telegrammed to Sam Briskin in early 1937: “Understand you are considering Katharine Hepburn in STAGE DOOR. Consider this collossal [sic] mistake. Believe you have very valuable piece of property in this play. Us [sic] exhibitor with contracts in over sixty theatres with your company and interested in output of your company am advising strongly against Hepburn in this picture. Theatre owners of New York join me in voicing this protest to you.”95 This was the prelude to a war against Hepburn (and other performers) that would take on an ugly complexion in 1938. With respect to Stage Door, the message was clear: Hepburn better not fail this time. Her role indeed seemed molded comfortably to her talents. In a story that bore a marked resemblance to Morning Glory, she would play an idealistic character very much like Eva Lovelace, the part that had won her an Academy Award.

  Figure 17. A Damsel in Distress (1937). Director George Stevens (white shoes) and crew film the “fun house” number. The actors are Fred Astaire, Gracie Allen, and George Burns. (Courtesy of the Academy of Motion Picture Arts and Sciences)

  When the film was completed, Pandro Berman's spirits were buoyant. He called Stage Door “the best picture in RKO's history and I am including them all.”96 Berman was so excited, he tried to twist some arms to get either a cover story in Time magazine or a March of Time segment produced about the picture. He was unsuccessful, but the entire RKO publicity apparatus worked overtime in preparing for its release. Since Stage Door represented one of the first pictures of the 1937-1938 season, there was hope it would melt exhibitor opposition to booking blocks of RKO product.

  Even before the opening of Stage Door, the quality of Hepburn's performance ensured that the company was not going to give up on her, as had been contemplated. Berman wired the actress after the first preview: “A star was reborn last night which is going Gaynor one better. Seriously you came off tremendously and picture looks like smash.”97 Hepburn had indeed delivered a strong performance, fitting in beautifully with the ensemble cast and displaying none of the annoying mannerisms that had perturbed audiences of her recent productions. RKO renewed her option soon after Stage Door opened.

  Ned Depinet, after seeing it, predicted the film would gross $1.5 million in the United States alone.98 It opened big in the East, then slumped a bit in the Midwest and South. When final figures were tallied, the domestic gross was $1,250,000, and the final profit only $81,000. Of course, this still meant the picture had done a lot of business, because its production cost had been $952,000. Nevertheless, Pan Berman and Leo Spitz were disconcerted; their surefire blockbuster had turned out to be a modestly successful picture. Why this excellent film failed to earn more substantial profits and did not put Hepburn back on top will forever remain a mystery. At least the Hollywood establishment recognized its achievement—Stage Door garnered four Academy Award nominations: Best Picture, Best Director, Best Screenplay, Best Supporting Actress (Andrea Leeds).

  Concerns about RKO production were underscored by an exchange that took place near the end of 1937. A. H. McCausland from Irving Trust wrote Leo Spitz suggesting he sell Gunga Din, one of the few exciting unproduced properties the company owned.99 MGM had made a firm offer that RKO had rejected, even though the studio was having difficulty casting the picture. Another negative factor was that the now infamous Howard Hawks was scheduled to direct. When Spitz expressed a disinclination to part with Gunga Din, McCausland reminded the RKO president of the current state of the company's filmmaking business: “With respect to Gunga Din, the question of whether or not this picture should be made ties in with the question of the picture company finances which, as you appreciate, are in a very bad condition. We have been requested to loan additional money to the picture company to see it through to the end of the year, even in the face of the loan they received from the Bank of America.”100

  This did not mean that RKO's other large divisions, distribution and exhibition, were faltering. It did, however, not bode well for the future. Once again, as in the early 1930s, studio operations could not pay for themselves. No wonder Floyd Odlum backed away at this time and adopted a wait-and-see attitude, rather than investing several more millions in RKO Radio Pictures.

  At least the final release of the year cheered everyone up. Walt Disney's first feature, Snow White and the Seven Dwarfs, had been eagerly awaited, but no one quite expected the avalanche of critical and audience approval that greeted its arrival. William R. Weaver of the Motion Picture Herald called its December 1937 baptism at Hollywood's Carthay Circle Theater “the most extraordinary world premiere in cinema history.”101

  Statistics released by RKO indicated that the film had taken three years to complete at a cost of $1,500,000. A total of 570 artists worked on the production, and some 250,000 drawings came together to create the finished product.102 All the painstaking effort, however, was overshadowed by the extraordinary media blitzkrieg that accompanied the opening. There were features on Snow White (several of them cover stores) in Life, Time, McCall's, Collier's, PopuIar Science, Town and Country, Better Homes and Gardens, Popular Mechanics, and practically every important newspaper in the country. National radio broadcasts joined the parade, bombarding listeners with the eight hit songs from the picture. Snow White dolls, toys, books, and novelties soon popped up throughout America, all bringing substantial royalties into Disney's coffers (but not RKO's).103 RKO's distribution arm was not complaining; in five weeks an estimated 800,000 people paid to see this triumph of animation art at Radio City Music Hall, meaning that almost half of the cost of production had been grossed at this one site.104

  Throughout 1938 the Hollywood trade papers continued to run stories about the incredible performance of Snow White. By July it appeared the film would post the highest domestic gross in the history of the business.105 Although financial records from the silent era were incomplete and notoriously unreliable, Snow White was sure to surpass such earlier successes as Warner
Bros.' The Singing Fool, Paramount's The Covered Wagon, and Metro's The Four Horsemen of the Apocalypse. These pictures had each accumulated known revenues of $4.5 million or more.106 When the smoke finally cleared, Snow White was on top, having piled up $7,846,000 in film rentals.

  RKO's profit was only $380,000.107 The company had offered Disney very favorable terms in its distribution contract, meaning it would never earn large profits on his releases. The trade-off was that the Disney name and prestige would help sell the studio's blocks of product and make exhibitors more favorably inclined toward RKO. Sam Briskin had certainly pulled off a major coup when he enticed Walt Disney to join forces with the studio. Briskin, however, was not around to receive the well-deserved hurrahs.

  The tenure of Snow White atop the list of all-time box-office successes would be short-lived. By 1940 Gone With the Wind had eclipsed the former champion. But Walt Disney would not be outclassed by any of his Hollywood competition. Having established himself as a major filmmaker with his first feature, his name would continue to penetrate every facet of American life for years to come. Perhaps the fundamental reason for Disney's success is contained in a memorandum written by one of his employees in 1938: “May I add that Walt built this institution up to what it is today by concentrating on one idea—that of giving quality entertainment no matter what the cost, and, as you know, in spite of many protests from the bookkeepers and financial departments, he has, up to this time always, without exception, been right.”108 RKO's executives should have paid closer attention to their new partner's approach.

  Numbers don't lie…except when they do. Judged purely on the basis of financial reports, RKO appeared to make impressive strides after Floyd Odlum gained the upper hand in the company's affairs. Odlum's hand-picked Spitz-Briskin regime once again came through with a net profit for 1937: $1,821,165.109 Although this was about $600,000 less than the year before, the figure still seemed encouraging, especially when compared to the disastrous 1932-1934 period. But 1937 was a bountiful year for the entire film business: MGM made a profit of $14.3 million, followed by Twentieth Century-Fox with $8.6 million, Paramount with $6 million, and Warner Bros. with $5.9 million. Placed in this context, the RKO yield was less than spectacular. In addition, the receivership situation was still unsettled. Roy Chartier of Variety called the RKO reorganization “something that's been reported around the corner for so long it must be an awfully long corner.”110 Indeed, Odlum's men had not, as promised, brought a speedy conclusion to the situation, and no end was yet in sight.

  The performance of Odlum's appointees also left much to be desired. Leo Spitz had so far displayed no special abilities or strengths in steering the entire organization. And Sam Briskin's departure from RKO in October was a clear indication that he had failed to deliver. In addition to the many obvious signs of deterioration at the studio, the film unit reported a net loss of $236,909 for 1937.111

  Briskin was not stupid, as the deal with Disney demonstrated, nor did he lack an understanding of the inner workings of Hollywood. But turning over production to him, a man who had never functioned in a purely creative capacity before and who had no prior service with RKO, and thus did not perceive its special demands, was a mistake. Sam Briskin never straightened out the disordered state of affairs he inherited when he took over his position. Like other past and future RKO executive producers, he lost his job before he fully understood it.

  Looking ahead, there was reason for hope. Thanks mainly to theater operations, RKO was still in decent financial shape, and a few winning pictures could bring studio operations back into the plus column. The naming of Pandro Berman as production head also conjured positive vibrations. Berman had taste, talent, and years of service to the company. Although he did not savor the prospect of supervising a large number of films, it is hard to imagine anyone in Hollywood who could have been more right for the job. Pan Berman knew the strengths and weaknesses of the studio and its personnel. The era of uncertainty would continue, but at least Berman offered qualities some of his predecessors lacked: knowledge, experience, creativity, achievement, continuity.

  7. “Plaything of industry”

  The Spitz-Berman Regime (1938)

  RKO celebrated its tenth birthday in 1938. During its lifespan, the organization had experienced six major shake-ups in leadership. This was not the case with its competitors. At MGM, Nicholas Schenck and Louis B. Mayer had directed their company throughout the same period; so had Harry and Jack Warner at Warner Bros. and Harry and Jack Cohn at Columbia. Upper management at Paramount, Fox (Twentieth Century-Fox), and Universal was less settled during the same time frame, but these companies now employed trustworthy executives who would offer positive guidance through the war years and, with the exception of Universal, beyond. Only RKO remained an uncertain, confused operation.

  Consequently, the corporation's trustee, the Irving Trust Company, decided to take a more active role in management. Irving Trust was, in fact, said to have forced Sam Briskin's resignation.1 This situation caused rumors to reverberate concerning RKO's executive alignment. Reports circulated, for example, that Merlin Aylesworth would be returning to replace Leo Spitz as corporate president. Full charge of production might go to J. R. Mc-Donough or even Ned Depinet, although Pandro Berman, who held the position, was a leading candidate to continue. The chairmanship of RKO was likely to be assumed by N. Peter Rathvon.2 Rathvon, an Odlum man, had been laboring on the receivership predicament for more than two years.

  Pandro Berman became so frustrated that he wired Leo Spitz denying the rumors that a meeting had been held in Hollywood to discuss what would happen to RKO if Spitz stepped down. Berman told his boss he was having a tough time keeping studio employees working “with full morale and top speed in view of daily editorials and stories tossing company to and fro like rubber ball. Hope they someday establish this organization on businesslike basis so it is not plaything of industry.”3

  The disorder calmed down in late February. Both Leo Spitz and Pandro Berman were officially confirmed in their respective positions. Spitz, not Rathvon, would continue as chairman of the RKO board. The only addition was the naming of McDonough as a vice-president and board member to oversee financial matters at the studio.4 Irving Trust, during a series of conferences held in Hollywood and New York, had recommended that this operational group be given full control of the company's future.

  The most interesting aspect of this announcement was the return of J. R. McDonough to prominence. Formerly president of the production arm of RKO, McDonough had faded to virtual invisibility after Floyd Odlum took control of the corporation. Now he regained a position of importance at the studio, where he would once again focus his meticulous eye on expenditures. His appointment also suggested renewed interest by David Sarnoff in RKO's affairs. McDonough had joined RKO originally at Sarnoff's behest; since the company had not thrived after Odlum's handpicked management took over, and since Odlum himself had postponed his decision regarding acquisition of RCA's remaining RKO stock, it was understandable that Sarnoff would resurface, if only to protect RCA's substantial investment in the movie company.

  The RKO receivership, always a complex state of affairs, became even more exasperating in 1938. The various interested parties had never come to an agreement on the reorganization plan submitted in 1937. The early months of 1938 were filled with delays in the proceedings, necessitated by uncertainty over the corporation's executives, controlling interests, and financial status. Federal judge William Bondy became irked: “RKO has been reorganizing for five years now. In that time, creditors of the company have died, stockholders have changed and, I suppose something has happened to the lawyers, too. It seems to me that this reorganization ought to be disposed of soon.”5

  Although the judge had a point, nothing would happen right away. The 1937 plan was already out of date and needed amending. It had been based on company earnings in 1935, 1936, and the first half of 1937 and presupposed that the RKO performance would continue at the same
rate of improvement.6 But profits had decreased during the final months of 1937, and this trend continued in 1938. Thus, the process would begin again; a new, “amended” plan had to be drawn up before any positive action could be taken.

  Judge Bondy attempted to stimulate the proceedings by threatening in court that “unless a plan of reorganization [is] formed, the company [will] have to be liquidated.”7 Printed in various newspapers, this remark caused repercussions at the Hollywood studio. The Disney organization expressed special anxiety. Disney representative Gunther Lessing forthrightly explained his concerns to J. R. McDonough, who then wrote A. H. McCausland: “He is doing business with a company which apparently is unable to get itself reorganized, a company that has no stability of organization or management; while he is pleased with the job that RKO is doing for the Disney product now, he is still concerned as to whether the company is a permanent factor with which to continue doing business.”8

  The situation was also damaging the studio's relations with its contract players. As McDonough told McCausland in May, Fred Astaire's future association with the company was a question mark. Astaire was “unwilling to commit himself…with any company whose management may be subject to change and whose financial set-up is indeterminate.”9

  The revised reorganization plan was finally submitted to Judge Bondy in late May. It called for holders of the old common stock to receive one-sixth of a share of new RKO common for each share currently held, “plus a warrant to buy one share of new common at $15 a share for a period of ten years, or at the option of the holder to buy one-half share of new common at a price of $10 per full share for a period of five years.” General creditors were to collect ten shares of new common stock for each $100 in claims. Rockefeller Center, whose claim had been reduced, would still be granted 464,000 shares.10 The Atlas Corporation promised to provide $1,500,000 in new cash to the company and to underwrite a sufficient amount of new common stock. Rather than dealing with the plan himself, Judge Bondy referred it to Special Master George Alger who, for a second time, was charged with determining its fairness.