The departure of Ginger Rogers dealt a crucial blow to RKO's withered stock company. Variety assessed the situation in its last issue of the year:
RKO, as result of all reorganization and management turmoil, was weakest of all companies for permanent star listing. It's [sic] best bet, Ginger Rogers, flitted out to free-lance, and company which has been making its product through individual picture deals with outstanding stars, had to take its chances on the open market for its top talent.
…………………………………………………………. .
RKO is figured the problem child of Hollywood, and a frequent query is, “When are they going to get some players, or develop some that mean box office.” Joe Breen and Sol Lesser…have been scouting around, but nothing has happened as yet. Studio had its talent scouts…but their percentage of new faces for the outfit has been nil. May be better luck in 1942.48
The mood at RKO headquarters in Manhattan and at the studio in Hollywood turned very gloomy in early 1942. Since the beginning of trade-show selling in August 1941, the production arm of the corporation had lost money every month. November and December were especially devastating, producing losses of $243,109 and $305,804, respectively.49 Much of the problem was blamed on the necessity to complete pictures far in advance of their actual releases, thus requiring the investment of funds without hope of recovery for many months thereafter. But the other studios adjusted to the new requirements imposed by the consent decree without major strain. Indeed, Twentieth Century-Fox had bounced back from its small loss in 1940 with a corporate profit of $4.9 million in 1941, and MGM, Paramount, and Warner Bros. each performed better financially than Fox.
The root cause of RKO's difficulties was simple and obvious: despite considerable outlays of cash, the studio had not produced a requisite number of commercial films since George Schaefer had assumed the presidency. A special loan of $3 million had to be secured from the Bankers Trust Company in mid-1941 to keep the cameras turning.50 That money was rapidly disappearing. Unless a swift uptick in the performance of RKO pictures occurred, it appeared the studio might run out of cash, thereby causing the corporation to collapse once again into receivership or perhaps quit the business altogether. Of course, the possibility of fresh financing always existed. But considering the company's history and recent performance, the prospects for more funding were not encouraging.
New corporate vice-president N. Peter Rathvon went to work analyzing the picture company's financial needs, while George Schaefer began looking for ways to reduce studio overhead. One positive factor was that by mid-January, only four pictures were left to finish off the entire 19411942 program.51 Thus, the company could coast for a while, planning the 1942-1943 season without expending too much cash. Around January 20, studio manager Sid Rogell was fired, sparking renewed rumors of another shake-up in personnel.52
The Hollywood trade press picked up on the disarray at 780 Gower Street and began publishing speculative stories about studio upheaval. This infuriated George Schaefer, who blamed head of publicity Perry Lieber for allowing the insider information and gossip to leak out.53 Lieber replied to Joe Breen that he realized it was important “to keep bad and false material out of print,” but that there was little he could do about embittered former employees who were feeding the material to trade paper writers.54 He suspected Sid Rogell, Harry Edington, and Erich Pommer were the sources of most of the stories.
Perry Lieber had his hands full because, soon enough, many of the rumors became facts. In early February Sol Lesser and J. R. McDonough both quit, along with a number of other employees. Needing desperately to reduce the salary requirements of running the studio and believing that Lesser's contributions had been indifferent at best, George Schaefer asked him to “disassociate himself” from the position of “Executive in Charge of ‘A' Production.” Instead, Schaefer requested that Lesser assume a vague job in which he would be concerned with “certain of the business, financial and administrative phases of our problem, and not have any responsibility for the actual production of pictures.”55 In addition, a 50 percent reduction in salary was solicited. After considering Schaefer's proposal for a week, Lesser submitted his resignation to Joseph Breen.56 Lesser had decided that Schaefer's real goal was to get rid of him: “I have been thinking over the accumulating situation not only as it affects me, but as it affects the studio as well. You [Breen] know how troubled I have been because I have spoken of it to you each time we have met since your return. I know that George Schaefer and you must be fully aware of this as I am, and from every indication I must in all frankness say that my feeling is that George does not want me to continue at the studio.”57
Lesser's departure was reasonably amicable, but the windup of McDonough's RKO career was not. Relations between McDonough and Schaefer had been blustery since Mac had taken charge of the low-budget unit. Following the forced resignation, Schaefer refused McDonough's request for severance pay, a request based on some nine years' service to the company. McDonough was outraged. He set to work compiling a report of studio conditions under Schaefer's regime. The picture he painted would not be rosy.58
Other radical changes were occurring at 780 Gower Street. In mid-February, Charles Koerner, head of the theater department, moved to Hollywood to take over production “temporarily” while Joseph Breen recovered from an unspecified illness. On March 2, 1942, Schaefer reported to the RKO board that he believed Breen should “divorce himself from a number of studio details and be relieved of the burden of operating the studio”; he and the board also agreed Koerner should assume permanent production responsibility.59 Joe Breen had been another mistake, a man incapable of piloting the complex production machinery. He was also—it should be emphasized—the latest in a growing list of Schaefer appointees who had failed to come through for RKO. The story released by the publicity department to the trade journals was deliberately misleading. Variety reported that Koerner would be replacing Breen for six weeks while the studio head vacationed in Mexico.60 Upon Breen's return, Koerner was supposed to go back to his theater job in New York, and Breen was supposed to again rule the studio. This was not at all what RKO had in mind.
The strategy George Schaefer and the RKO board contemplated was suggested by recent developments at Universal. There, Nate Blumberg and Cliff Work, who had been hired away from the RKO distribution-exhibition ranks in 1938, had taken on the responsibility of shaping production policies.61 Drawing on their knowledge of theater patrons and the pictures that appealed to them most, the twosome managed to turn out movies that boosted Universal's bottom line. Following seven consecutive losing years, the company brought in profits of $1 million in 1939, $2.2 million in 1940, and $2.3 million in 1941. Koerner had toiled in exhibition since the 1920s. The RKO leaders hoped that, given the opportunity, he would also coax forth films that the public wanted to see.
Unlike his predecessors, Koerner would have a free hand to shape RKO production. George Schaefer no longer required all important matters to be cleared through him. Having seen many of his pet projects turn to ashes, Schaefer may finally have decided to abdicate responsibility in favor of someone else. Perhaps he had more faith in Koerner than he had in Berman, Edington, Lesser, McDonough, or Breen. Or perhaps the board of directors insisted that Koerner be given free rein. Whatever the reason, Charles Koerner enjoyed an attractive bonus that went along with an otherwise unenviable job—freedom from New York interference.
While Koerner was setting up shop in Hollywood, George Schaefer was laboring to keep his company from unraveling completely. His efforts were hampered by an unending stream of bad news, much of it related to Orson Welles.
Welles's second RKO picture, The Magnificent Ambersons, had gone into production in the fall of 1941. The first budget calculation amounted to $987,024, prompting a letter from Schaefer to Welles: “Momentarily I was flabbergasted when I looked at the pre-budget estimate of THE MAGNIFICENT AMBERSONS totalling $987,024 but I came to immediately when I saw the w
ords ‘pre-budget.' Am, of course, taking it for granted that that is just the wildest kind of guess and, when the final budget comes through, it will be less than $600,000.”62 Even before Schaefer wrote that letter, Jack Moss, Welles's business partner, had promised the budget would be reduced, though probably not below $750,000.63 The final budget, however, came to $853,950. This presented a problem. The estimate exceeded not only the $600,000 now established as a maximum in Welles's new contract, but also the $750,000 figure RKO had promised would be the ceiling for a single feature in its bank loan arrangements.64 As had been the case with Bringing Up Baby, Suspicion, and other past productions, the executives were in a hopeless predicament. Sets had been built and commitments signed, and so Orson Welles was allowed to proceed. George Schaefer, Joseph Breen, and the other executives could only wait with fingers crossed, hoping that Welles would bring the film in for less than the projected figure. They should have known better. Welles's dedication to his art, plus a spate of illnesses among cast members and the deliberate working habits of cinematographer Stanley Cortez, boosted the amount expended. When the production finally came to a conclusion, it had cost over $1 million.
Figure 24. The Magnificent Ambersons (1942). Joseph Cotten, Agnes Moorehead, Dolores Costello, Orson Welles, Ray Collins, Anne Baxter, and others eat lunch outside an ice house where winter scenes were filmed. (Courtesy of the Academy of Motion Picture Arts and Sciences)
Even so, high hopes for the finished product abounded. In early December, George Schaefer saw approximately one hour of the footage and felt very enthusiastic. He wired Welles: “Even though I have seen only a part of it, there is every indication that it is chock full of heartthrobs, heartaches and human interest. From a technical standpoint it is startling and I should not forget to mention especially that Agnes Moorehead does one of the finest pieces of work I have ever seen on the screen. Although I saw only part of the picture her work in particular made a tremendous impression on me. Again I am very happy and proud of our association.”65 Joe Breen was equally thrilled. “I have not been so impressed in years,” he wrote Welles. “The material we saw was really excellent, and although you know me to be a chronic kicker, in this instance I have nothing but praise—from my heart.”66
The final editing could not be supervised by Welles, who left for Brazil in February to make It's All True. Studio cutter Robert Wise had to assemble the footage with Welles cabling instructions and calling Wise to discuss problems. RKO fully expected the film to be a success and, needing a big winner, scheduled its release for Easter week. The great distance between Welles and Wise made the editing difficult, and the studio contemplated sending Wise to Rio de Janeiro in early March so that Welles could put the final touches on the picture.67 Wartime travel restrictions prevented this, however.
Meanwhile, the distribution department formalized its campaign for The Magnificent Ambersons, placing advertisements in Life, Time, Look, Good Housekeeping, The New Yorker, and other magazines.68 The ads would run in late March and throughout April.
In mid-March, the initial preview was held in Pomona, California. George Schaefer attended. He described the evening in an airmail, special-delivery letter to Welles marked “Personal—Confidential”:
I did not want to cable you with respect to THE MAGNIFICENT AMBERSONS as indicated in your cable of the 18th, only because I wanted to write you under confidential cover.
Of course, when you ask me for my reaction I know you want it straight, and though it is difficult to write you this way, you should hear from me.
Never in all my experience in the industry have I taken so much punishment or suffered as I did at the Pomona preview. In my 28 years in the business, I have never been present in a theatre where the audience acted in such a manner. They laughed at the wrong places, talked at the picture, kidded it, and did everything you can possibly imagine.
I don't have to tell you how I suffered, especially in the realization that we have over $1,000,000 tied up. It was just like getting one sock in the jaw after another for over two hours.
The picture was too slow, heavy, and topped off with somber music, never did register. It started off well, but just went to pieces.69
After describing preview card comments that decried the “artiness” of the film, Schaefer chastised Welles for his extravagance and his failure to establish contact with the movie audience:
In all our initial discussions, you stressed low costs, making pictures at $300,000 to $500,000, and on our first two pictures, we have an investment of $2,000,000. We will not make a dollar on CITIZEN KANE and present indications are that we will not break even. The final results on AMBERSONS is [sic] still to be told, but it looks “red.”
All of which again reminds me of only one thing—that we must have a “heart to heart” talk. Orson Welles has got to do something commercial. We have got to get away from “arty” pictures and get back to earth. Educating the people is expensive, and your next picture must be made for the box-office.
God knows you have all the talent and the ability for writing, producing, directing—everything in CITIZEN KANE and AMBER-SONS confirm that. We should apply all that talent and effort in the right direction and make a picture on which “we can get well.”
That's the story, Orson, and I feel very miserable to have to write you this.70
Schaefer was not being fair to Welles. After all, the RKO president had hired the wunderkind and his Mercury Theatre group to upgrade the studio's prestige—which, it could be argued, is exactly what Welles had accomplished with Citizen Kane. Also, Schaefer had allowed Welles to go forward with films even though he had contractual authority to stop them because of their excessive budgets. One can, however, certainly understand Schaefer's miserable feelings. He had fought for Welles throughout the Citizen Kane brouhaha, thereby alienating some members of the RKO board of directors. The critical esteem accorded Kane had been a momentary vindication for Schaefer, but its box-office failure and now the prospects of an Ambersons catastrophe provided ample ammunition to Schaefer's detractors. On top of this were the simple economic facts of life. At a time when the company desperately needed income, the release of Ambersons would have to be postponed while further cuts were made.71
The development of Welles's next project, It's All True, began in the summer of 1941. The director had in mind an omnibus film composed of at least four separate stories. A portion of the shooting of one of these stories, tentatively entitled “Bonito the Bull,” was done in Mexico while The Magnificent Ambersons was in production. Welles, in fact, had little to do with this section; being preoccupied with Ambersons, he surrendered the directorial reins to Norman Foster. In December the plan for It's All True changed. Originally, the stories were to be set in North America, but the Office of Inter-American Affairs became involved, and before long, the project acquired a Brazilian background.
As previously noted, Nelson Rockefeller headed up this new government office, ostensibly created to foster good relations between the United States and countries in Latin America. His primary duty, however, was to make sure none of America's southern neighbors drifted into the enemy camp. The Roosevelt administration was concerned that the Nazis might attempt to persuade the leaders of Argentina, Brazil, Chile, and other countries to side with the Axis in the global conflict and wanted to preempt any action of this kind.72
It is not possible to determine if Orson Welles approached the government office with the idea of making It's All True in Brazil, or if Rockefeller approached him. John Hay Whitney, a good friend of Nelson's and by then a Hollywood fixture, thanks to his investments in Technicolor, Pioneer Pictures, Selznick International, and Gone With the Wind, had been placed in charge of the agency's motion picture division. A wire from Whitney to Welles dated December 20, 1941, does establish the position of the office clearly: “We understand you are willing and may be able to undertake a trip to Brazil where you would produce motion pictures in cooperation with Brazilian government. If this can be arr
anged it will be enormously helpful to the program of this office and energetically supported by it. Personally believe you would make great contribution to hemisphere solidarity with this project.”73
Since Nelson Rockefeller was an important behind-the-scenes power in RKO and had been the main supporter of George Schaefer in the first place, he may have used his leverage to “encourage” this particular project into being. At any rate, by early January it was settled: Welles would soon be headed for Rio de Janeiro to make a multistory film, at least one section of which would revolve around the famous Rio Carnaval in February.74 “Bonito the Bull” would probably still be part of It's All True, but the other contemplated sections, including one about the history of jazz and another about a San Francisco fisherman, were abandoned. Welles was going to Rio without a script; presumably, the atmosphere would inspire him and he would come up with suitable stories.
The logistics involved should have been enough to make Schaefer wary. It would be necessary to ship nearly all the equipment down, as well as the personnel necessary to operate it. Part of the film was to be shot in color, thus complicating the production further. And to top that off, America was at war, and there were travel and shipping restrictions to cope with. The Inter-American Affairs Office promised to help facilitate matters. It also offered a financial incentive, which definitely made the venture more attractive to George Schaefer. The government would not actually invest in the picture, but if It's All True showed a loss after its release, the office promised to make good the loss up to $300,000.75 Schaefer expected Welles to spend no more than $600,000 on the production; thus, it appeared RKO could contribute to the needs of the government without any serious risk to its own financial well-being. The arrangement made sense, on paper.
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