As stated in the opening part of this letter, we agreed to make pictures at a cost of about $500,000. CITIZEN KANE cost nearly $900,000 and, because of all the controversy that arose in connection with it, it is doubtful that we will ever come out whole. Let's forget about the cost as to dollars. What it cost this organization, and me, personally, never can be measured in dollars. All of that, however, I accepted willingly so far as you are concerned. You made a production of which I was proud but which was severely condemned by all my associates and my friends of long standing in the motion picture industry.
The abuse that was heaped upon myself and the company will never be forgotten. I was about as punch-drunk as a man ever was. I made my decision to stand by you and I saw it through. I have never asked anything in return but in common decency I should expect that I would at least have your loyalty and gratitude. To the extent I have received it with respect to the Brazilian enterprise up to the present time, I would say it has been merely lip service.94
The final portion of the letter informed Welles that Reisman was empowered to shut the picture down if he deemed it necessary.
In mid-May, Schaefer received more discouraging news. The studio budget department forwarded a report showing that $526,867 had already been expended on It's All True and estimated that $595,804 more would be needed to complete it. That placed the total budget in the neighborhood of $1,120,000.95 Shortly thereafter, Schaefer cabled Reisman:
After careful thought and considering all circumstances have decided best thing to do discontinue all work and arrange Welles and troupe return. Would much prefer do best we can with film so far received and write off our loss than continue. Be assured this comes only after most careful deliberation and with full recognition of our responsibility to company and stockholders…. Under certain conditions I would be willing let Welles continue, namely that he deliver to you immediately complete story outline covering material to date and his plans from this point on including shooting FOUR MEN RAFT delivering at same time schedule of shooting days and permitting him finish within a maximum cost of $30,000.96
Additional bad luck struck on the day after this cable was sent. Manuel Olimpio Meira, one of the four fishermen and a national hero of sorts known as Jacare, drowned in an accident that occurred while the fisherman's raft was being towed to a filming location. There was no negligence on RKO's part, but the tragedy did not endear the company, or Welles, to the local inhabitants.
After further negotiations, Schaefer agreed to allow Welles and the crew to continue filming until June 8. At that time, the technical crew and most of the equipment would be shipped back to Hollywood. Since Reis-man's arrival, Welles had been working very hard, perhaps because the RKO executive was constantly looking over his shoulder.97 Following the departure of the studio contingent (except for Lynn Shores, who would have to stay behind tying up loose ends and arranging for the shipping of equipment and film), Welles, Wilson, and a small group of his associates would be allowed to go to Fortaleza for about a month to shoot material for the section about the four fishermen. Despite the tragic death of Meira, Welles did not intend to abandon this section of the story. He planned to find someone to double for the deceased jangadeiro.
RKO still hoped to get a picture out of the It's All True fiasco.98 It would not matter to George Schaefer, however. The film, among other things, had broken him—just as Reg Armour predicted. Schaefer's tenure as RKO president was rapidly drawing to a close.
In first position among those other things was the embarrassing product. Of the pictures released in the first five months of 1942, only Joan of Paris made a six-figure profit ($105,000). Nearly all of the other A pictures were hammered by critics and lost money: Four Jacks and a Jill ($113,000), Obliging Young Lady ($118,000), Valley of the Sun ($158,000), Sing Your Worries Away ($255,000), The Tuttles of Tahiti ($170,000), Syncopation ($87,000).
Schaefer shared the blame for the poor pictures with Joseph Breen, the man who headed up the studio when they were produced. Breen returned from his Mexican vacation in early May. As rumored, he took up his former post as director of the Production Code Administration instead of going back to RKO. Geoffrey Shurlock had functioned as acting head of the censorship board after Breen's departure, but some Hollywood moguls were apparently not pleased with Shurlock's performance.99 They banded together and lobbied RKO to allow Breen to return to his old job. The studio was more than happy to oblige. By mid-May, Joseph Breen was the chief censor of the industry once again, and Charles Koerner had the “acting” removed from his title as general manager in charge of RKO production.100 Edward Alperson succeeded Koerner as head of the RKO theater circuit. Koerner had the full support of the RKO board of directors; although he had no production experience, the men at the top seemed convinced that he possessed the right instincts and would give RKO what it needed most—box-office winners.101
Shortly after Koerner's official appointment, it began to look as if the new studio chief might never have an opportunity to prove himself. Financial projections indicated that around the middle of June, the company would not have enough cash to meet the studio payroll. Unless more capital could be raised quickly, there appeared to be only two possibilities—the studio would either be closed or plummet once again into receivership. The chances of new funding were not good, because the major ownership groups (Atlas, RCA, the Rockefellers) “could not agree upon any method of getting new money into the company.”102
George Schaefer was finally held accountable. In late April two board members who represented minority interests, Raymond Bill and Lawrence Green, returned from a fact-finding trip to Hollywood, “where they went all over the RKO production unit with the officers.” According to a letter from Burton Turnbull to Nelson Rockefeller, they came back “very much disappointed with the management and very critical of Schaefer—so much so that it is reported they would vote against renewing Schaefer's contract at this time.”103 Two days later, Nelson replied: “I must say there seems to be a growing lack of confidence in our friend.”104 One can almost hear him sigh.
Schaefer had no one left to blame the problems on; no one left to fire. He had ruled RKO like a potentate for more than three years and now had to take responsibility for the organization's dire condition. The numerous box-office failures, the independent deals that had miscarried, the multitude of expensive stories bought but never produced—all had contributed to the current state of affairs. The RKO board was even unhappy about the Sam Goldwyn arrangement. They second-guessed Schaefer's decision to allow Goldwyn such a small distribution fee that RKO would lose money every time it released one of his pictures.105 The Little Foxes and Ball of Fire, each brought in more gross film income than any of the 1941-1942 releases except Suspicion. Yet the first two Goldwyn RKO releases were carried on company ledgers as $140,000 and $147,000 losers, respectively. And then there was Orson Welles, hanging like the proverbial albatross around Schaefer's neck. He knew he could not hold on much longer.
But George Schaefer refused to give up. In late May he and Malcolm Kingsberg, vice-president of the RKO theaters, attempted to convince several powerful financial groups to invest in the company. Floyd Odlum had made it known that he would be willing to sell his interest in RKO for $7.8 million. If a new financial connection could be made, one willing to bankroll RKO through the uncertain days ahead and absorb Odlum's considerable stock holdings, Schaefer would have a second chance. Several groups with Wall Street and show business connections were mentioned as possibilities, but nothing came of Schaefer's quest.106
Having failed with potential investors, George Schaefer tried another eleventh-hour gambit. For some years, the major film companies had maintained a united front with respect to frozen monies in Great Britain. In sympathy with the war effort, the companies had been content to allow their profits to accumulate in the British Isles, asking only for a small percentage of the funds to be disbursed to them each year. At the time, RKO was owed approximately $3 million in frozen Eng
lish funds. Realizing that this money could avert disaster at least for a time, and perhaps save his job, Schaefer went to Washington and requested that the Treasury Department intercede on RKO's behalf.107 The plea was to “unfreeze” $2.8 million of RKO's money.108
The U.S. government did not receive Schaefer with a deaf ear. A major corporation was in danger of collapse, so an agreement was made to negotiate with British authorities. However, delicate matters of this type always take time, and Schaefer's had run out. With no immediate assurance of funding and RKO approaching collapse, Schaefer tendered his resignation.109 One day after his meeting at the Treasury Department, he wrote Nelson Rockefeller, informing him of his decision and telling him that it “was physically and mentally impossible to bear up any longer.” He added: “I am mostly sorry because of my personal relationship and regard for you.”110
George J. Schaefer was one of the most iron-willed and vigorous leaders in RKO's history. But today he is remembered, if at all, primarily because of a 1999 HBO film about the Citizen Kane controversy, RKO 281. Like much of the film's content, its portrayal of Schaefer contains many inaccuracies. As played by Roy Scheider, Schaefer is a spineless “suit” who offers no resistance against Louis B. Mayer and the other studio heads who wish to placate Hearst and destroy Welles's film. In the film's fabricated climax, Citizen Kane is saved because of Hearst's massive financial difficulties!
Published opinions of George Schaefer vary widely. On the one hand, John Cromwell, who directed Abe Lincoln in Illinois, characterized him as a figurehead “controlled by the financial people.”111 On the other, Orson Welles biographer Roy Alexander Fowler described the RKO president as “at the time the most enlightened and progressive man to be head of a major Hollywood studio.”112 In fact, neither of these descriptions fits.
Although the Rockefeller influence may have affected Schaefer's preference for “quality” production, it is impossible to believe he was the family's puppet. The Rockefellers never became actively involved in the functioning of the studio, and Schaefer was too engaged, too determined to have things his way, to be anyone's puppet. Nor was George Schaefer the “most enlightened” of the various studio heads. Sadly, he was one of the most inept.
Schaefer deserves praise for his attempts to make quality product, to be innovative, and to give special filmmakers more freedom than was generally available throughout Hollywood. But he went about it the wrong way. Making blind deals with untested producers was foolhardy. Had Orson Welles and his cohorts not created Citizen Kane, this experiment would be viewed as a total fiasco. Schaefer certainly deserves commendation for fighting to save Kane. But it was ultimately a Pyrrhic victory because of the immense toll the battle took on him and on the organization.
Schaefer's intentions were always admirable. He wanted to raise RKO's reputation as well as make it a successful business enterprise. But he failed to accomplish his goals in almost every way. Schaefer demanded the final say in production decisions, yet proved manifestly incapable of nurturing a significant number of films that were either distinctive or profitable. After driving off one of the best production minds in the business, Pandro Berman, Schaefer hired a number of “experts” unable to do much of anything—either because he interfered in their work or because they were ill-suited to their jobs. Harry Edington, J. R. McDonough, Sol Lesser, and Joseph Breen must have considered their production experience at RKO during this period an absolute nightmare.
Some of George Schaefer's other shortcomings are obvious. He allowed the RKO stock company to dwindle to the point that the studio had no stars left under exclusive contract. He spent large sums of money purchasing literary properties that presented significant challenges in their adaptability to the screen. Most were never made, and those that were (such as Abe Lincoln in Illinois and They Knew What They Wanted) turned out poorly. Schaefer's efforts to cope with the loss of foreign revenue caused by war in Europe and the cash-flow problems necessitated by the consent decree also left much to be desired. All these liabilities contributed to the devastating financial predicament that cost him his presidency. George Schaefer will always deserve a place in some cinematic Hall of Fame for his encouragement of Orson Welles and his defense of Citizen Kane. But Schaefer's egocentric approach to corporate management nearly destroyed the “Titan” studio.113
APPENDIX
“The whole equation of pictures”
RKO and the Studio System
While many of the pioneering motion picture companies still exist today (unfortunately, RKO is not among them), they now operate very differently than they did in the 1920s through the 1950s. Thus, it should prove valuable to those unfamiliar with the workings of the “old” studio system, and augment the knowledge of individuals who understand the ins and outs of the system, to read this primer on RKO operations. It describes the corporation's general business practices and organizational structure.
RKO's business model was based on a prototype developed by other movie companies, and it functioned in a way that mirrored the operations of its competitors. Each studio, however, had its own organizational quirks and special policies.
Like most of its competitors, RKO was bicoastal with its business headquarters in New York and its filmmaking plant in Los Angeles. Five of the organizations—MGM, Paramount, Warner Bros., Fox (later Twentieth Century-Fox), and RKO—were vertically integrated. They operated a studio to produce their product, a worldwide distribution arm to market it, and a chain of theaters where the films almost always played. Columbia and Universal were also considered major studios, though they did not own theaters, and United Artists rounded out the “Eight Majors” even though UA was purely a distribution enterprise releasing independently made films. In addition, a number of smaller, “poverty row” movie concerns existed during RKO's lifespan. Mascot, Monogram, Republic, Majestic, Grand National, Producers Releasing Corporation (PRC), and a few others turned out, almost exclusively, cheap genre pictures that did not challenge the oligopoly enjoyed by the majors.
MANAGEMENT
RKO's corporate president resided at the top of the company's administrative pyramid. He was responsible for the overall performance of the organization and for hiring the other major executives. Though RKO's structure included a large number of subsidiary companies (most set up to handle distribution in specific countries or regions of the world), the pivotal executives were the ones with primary responsibility for production, distribution, and exhibition. The latter two were based in New York along with the corporate president, while the head of production worked in Hollywood.
Each of the principal components of the corporation was expected to run in an efficient and profitable manner, but everyone knew the most important of the three was production. Success in the movie business depended on the creation of feature films that would attract enough paying customers to generate profits after all the attendant costs had been subtracted. Thus, the head of production at the studio was arguably the most critical company employee. In addition to understanding story, personnel, and budget, a superior head of production needed to combine the best qualities of a drill sergeant, a high-stakes poker player, a cheerleader, a psychiatrist, and a soothsayer. It was one of the toughest jobs imaginable, not just in the movie business but in any business. F. Scott Fitzgerald recognized this when he wrote, “Not half a dozen men have ever been able to keep the whole equation of pictures in their heads.”1
The production chief along with his staff had to develop, oversee, and complete forty or more feature productions a year. One of the overriding issues of RKO's history was “final production authority,” the ability to make all-important decisions about which stories would be made and how they would be staffed and cast. At most companies, final decisions of this kind were unquestionably the responsibility of the head of production. But this was not always the case at RKO, where the function was sometimes usurped by the corporate president or another powerful executive. Serious problems always resulted from this managerial rup
ture.
Industry personnel understood that the movies released by a company like RKO fell into two basic categories: A pictures and B pictures. The A films were also known as “important productions.” They showcased a studio's top talent (actors, producers, directors, writers, technical talent) and were accorded the most fulsome budgets and longest-running times (generally seventy-five minutes or longer). Most important, they were leased to theaters for a percentage of the box-office intake.
B films, which usually ran about an hour, were made for much less money than the A pictures. From top to bottom, they featured individuals who were not considered capable of generating any special excitement among theatergoers. At a time when many theatrical programs included two features, the B film settled comfortably into the bottom half of the double bill. Still, these pictures enjoyed an importance that transcended their economical origins. They (along with the shorts that studios also produced) offered a platform to try out new talent. Some of RKO's most successful writers, directors, and actors cut their teeth on B pictures before graduating to the big leagues. B pictures also provided a reliable source of income to the company. Leased to theaters for a flat fee, most brought in a small profit.
In the mid-1930s, RKO management determined that superintending a full slate of feature releases was too demanding for one individual. After that, the studio added an executive producer for B films who worked closely with the production chief but freed him to concentrate on the A pictures. Both men had considerable resources at their disposal. For most of its history, RKO controlled two studios: the main lot at Gower Street and Melrose Avenue in Hollywood and the RKO Pathe lot on Washington Boulevard in Culver City. In addition, the company owned a ranch in Encino where outdoor pictures (mostly Westerns) were shot and large standing sets (such as the cathedral square for The Hunchback of Notre Dame) were erected.
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