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Paramount Pictures

Paramount Pictures

Paramount Pictures - Ghost in the Shell

Despite Laemmle’s and Fox’s success, it became clear that the newly budding film industry wasn’t going to be taken as seriously as other business investments. In fact, despite Hollywood producing and distributing films, all around the country, even the most audacious banks didn’t want to side with film producers. So a man by the name of W. W. Hodkinson decided to set up a system where both distributors and producers would get a “fair” amount of revenue, from the sales of their films. Thus Paramount Pictures was born.

As the company grew into the role of distribution, many producers became reluctant to join such an overpriced relationship. Paramount Pictures demanded at least 35% of the box office, even as 25% of the film’s budget came towards distribution. In short, the producers got the short end of the stick.


Paramount Pictures
Copyright by Paramount Pictures


Time for a Takeover

Amongst the outraged producers were Adolph Zukor and Jesse Lasky. They felt so cheated that they decided to secretly buy up stocks from Paramount, in order to gain control over what would have been a very expensive investment. Soon, Zukor had enough power to successfully remove Hodkinson, two years after founding the company.

Now Zukor had the reins, appointed a new candidate as president of the distribution company, and became known as the “United States Steel Corp. of the Motion Pictures Industry”. After that, both Zukor and Lasky could finally concentrate on their new production company Famous Players-Lasky. However, their peace was short-lived. One of their partners, a man called Samuel Goldfish, had ferocious energy that rivaled Zukor’s megalomania. The tension between the two grew so high, that Zukor eventually gave an ultimatum for Lasky, “either Goldfish must leave the company or Zukor would”.

Torn between the two, Lasky eventually chose to side with Zukor and the company thrived once more, with Zukor in New York running the company’s finances.


New Faces and Bigger Pictures

With the merger and the now stable company, Zukor signed up as many stars as he could. He even managed to sign up Fatty Arbuckle, William S. Hart, and Douglas Fairbanks, and with their names plastered to posters for Paramount’s films, the rate of production increased by 100 features per year. It seemed life was back on track for Paramount, and its employees.

However, the stable bliss of the company didn’t last long. With the growing influence of First National in 1919, the early stars of Paramount began to leave. Names like Mary Pickford, John Barrymore, and Marguerite Clark fell from the company, and Zukor had to find a way to replace them.

Luckily, he bought up film theatres in the early 1920s. These chains of cinemas continued to expand, even into the late 1920s. Even the quality of Paramount’s features began to improve, and the company now focused on the quality of their films, rather than the quantity. However, despite the profits of the company, there was an even greater threat to their power. The formation of a new challenger in 1924 began to challenge the rule of Paramount Pictures, as the head of the Hollywood film industry. This new challenger was called MGM Studios.


Relocation and Restructure

In the end, it was clear that the company needed new eyes and better equipment. So they relocated from their studios at Sunset and Vine, to Marathon Street. They rehired B.P. Schulberg as a new studio boss, and the company began to improve the quality of their films.

Now with Schulberg at the helm, Paramount Pictures became even bigger than before. He had hired names such as Josef von Sternberg, Ernst Lubitsch, Rouben Mamoulian and William Wellman. In fact, their first picture Wings won the first-ever Best Picture Oscar. With the award, Paramount saw more and more improvements in their pictures and was even one of the first major studios to adopt sound, thanks to Schulberg once again.

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The Great Bankruptcy

Although the company soared higher above everyone else, there was an ever alarming presence of debt as Hollywood’s Golden Age began to die out. In 1932, both Jesse Lasky and Schulberg were forced out of the empire they had fought so hard to build. Zukor, on the other hand, stayed on, but he was forced into the role of chairman, losing much of his power, to the younger, fresher faces that worked for him.

In the following years,  Paramount couldn’t recover and so in the early part of 1933, they filed for bankruptcy. Although a few hits managed to keep them afloat, it wasn’t enough to get Paramount back on its feet. Thus the company decided to reorganize itself, in 1935. Soon Paramount recovered, churning out Western hits and popular epics in the late 1930s and 1940s.


Where Are They Now?

Unlike its competitors, Paramount couldn’t transition into the TV industry, as smoothly as it did into sound filmmaking. Even today, there aren’t as many Paramount Pictures shows as their rivals. Thus, their reliance on feature films themselves is rather telling. However, it is not a testament to their success. With the help of Viacom, Paramount was able to purchase CBS, one of America’s leading channels in TV. So it is not yet known whether or not Paramount might just break into the TV business. After all, they did manage to take over America’s biggest movie industries before, what’s keeping them from doing it again?


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View Comment (1)
  • This statement is wrong: “As the company grew into the role of distribution, many producers became reluctant to join such an overpriced relationship. Paramount Pictures demanded at least 35% of the box office, even as 25% of the film’s budget came towards distribution. In short, the producers got the short end of the stick.”

    Asking 35% of the net returns WAS NOT at all exorbitant. The producers still got 65% of that return. Also keep in mind that the way Hodkinson set this up, Paramount was putting up the money for the productions. Most investors I know want at least 50% of the returns on a film project, so Hiodkinson’s Paramount was quite generous indeed.

    The REAL reason that Zukor and Lasky engaged in the secretive hostile takeover of Paramount was because Hodkinson would not go along with their idea to turn Paramount into a full vertically integrated operation. What this meant was that Zukor and Lasky wanted to combine production and distribution, but ALSO wanted to buy up as many theatres as they could — thus the company would control its own production, distribution, AND exhibition– just as other studios were doing. According to film historian Tino Balio:

    “Hodkinson vetoed the idea [of the vertically integrated scheme], arguing that the three branches of motion pictures – production, distribution, and exhibition – should be kept separate. In his view, better pictures, better distribution and better theatre management would result if a lively independence existed among them.” [1]

    So this was the REAL reason that Zukor and Lasky bought up the shares and ousted Hodkinson — to get him out of the way so they could go along with their plan to turn Paramount into a fully integrated system. However, I would say that both men lived to see the day they regretted this decision, because as they saddled themselves with over 2,000 brick and mortar theatres across the United States, they ALSO took on an incredible overhead. No sooner than they get their system established than the Warner Bros. in a desperate bid (that paid off) to jump into the big time, jumped the gun on everybody else and release “The Jazz Singer” (1927) a (part) talking (and part-singing) picture.

    The major studios were NOT “blindsided” by the coming of sound pictures. They already knew it was coming, but the trouble was there were so many systems to choose from. RCA was trying to promote an ingenious sound on film system that involved the optical track (which eventually WOULD become the standard), William Fox had bought into and was experimenting with a system he dubbed “Movietone” and Western Electric had this incredible sound-on-disk system, that was crazy (I say “incredible” because I STILL cannot figure out HOW they maintained synchronisation with this system!). However the ONE thing that the Western Electric system DID HAVE going for it was a better amplification system. The major studios, WISELY, had an agreement where they would WAIT until one system emerged as the best overall and then they would all go with that. The Warner Bros, ran with the Western Electric system and through everything and everyone into disarray.

    Which of course INCLUDED Zukor and Lasky’s Paramount. Now they, like everyone else were saddled with the expense of converting all their theatres to sound, and they had to pick a system. Just as they became burdened with this major undertaking, the Stock Market collapses in October of 1929. What’s next? The Great Depression — NOT a good time to be a fully integrated company with all that brick and mortar overhead to keep up — studio facilities with their offices, shops, massive sound stages & backlots, which was bad enough, but now add to that thousands of movie theatres across the country. Yeah a bloody horror for sure. Though considered a “Golden Age”, ironically most of the major studios in Hollywood struggle to survive. Most didn’t or took severe hits. The Leammle’s (Carl Sr & Jr) lost Universal (to a bad bank deal really) and Paramount Publix went into receivership, eventually losing their beautiful Astoria Studio in New York City, and many of their theatres.

    As an aside the ONLY company to not go bankrupt during the 1930s was MGM, who’s parent company, Loews Inc., ironically owned the LEAST amount of theatres — roughly about 135, but in the choicest pieces of real estate in every major city they were found.

    [1]. Tino Balio. “The Rise of Paramount” p. 110. ‘The American Film Industry’. Various / Tino Balio Ed. University of Wisconsin Press. 1976

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