The End of the Studio System, Part 1



This is the first post of three parts that is part of the Classic History Project Blogathon hosted by Movies Silently, Silver Screenings, and Once Upon a Screen, and sponsored by Flicker Alley.

These essays are based on previous research that I have done and I will share my sources at the end.


On an early 1948 evening, the Wilders and Goldwyns dined together at a Romanoff’s in Beverly Hills. It was a popular restaurant for the industry, with many top-flight stars showing their faces regularly. The foursome’s dinner was interrupted by an elderly, disheveled man, looking gaunt and possibly drunk. He approached the table and gave Samuel Goldwyn a tongue lashing, criticizing the mogul for the unwarranted success he had achieved. He ranted that “here you are, and I ought to be making pictures, I’m the one.” Goldwyn was shaken, and after the man left the table, revealed him to be none other than D.W. Griffith, one of the most important and influential silent filmmakers that ever lived. The system had made him, and then chewed him up and spit him out. A couple of decades later, and it could have been the studio system saying the same thing to another dinner party.

The Big 5 Studios.

The Big Five Studios.

The studio system was a behemoth. They consisted of the “Big Five,” which entailed Fox, MGM, Paramount, RKO and Warner Brothers, plus there were also Universal, United Artists, and Columbia, often referred to as “the other three” that had plenty of power. The studio controlled the movie process from production to distribution to exhibition. They wrote contracts with actors, writers, directors, producers, and virtually all involved with the industry. They released the “A” pictures (prestigious star vehicles) to the movie palaces, while the lower budget films, often genre or from recycled scripts, comprised the “B” pictures.

During the Great Depression, films were considered to be a populist, relatively inexpensive form of entertainment. Much of the content of the films of the 1930s pandered to the masses, and despite experiencing losses during a few bad years, the studios more or less continued to rake in the profits. During the Second World War, they experienced a boom and seemed to be able to do no wrong. Because of their absolute control and success, they were blinded as to what was taking place behind the scenes that would result in their undoing.


David O. Selznick

David O. Selznick

The move towards independent production started early. There were many wunderkind producers that worked at the major studios. Irving Thalberg was one such youngster who seemed to be able to do no wrong, producing hit after hit for MGM, but he died at a young age. David O. Selznick was another young, successful producer, and he was far more ambitious. He began his career during the silent period at MGM, and then moved to Paramount, RKO, and then back to MGM.

Selznick was confident in his abilities, yet resented the studios for profiting off of him. He decided he wanted to become an independent producer. He was not the first to attempt such an endeavor. United Artists was put together by a number of powerful industry players, including D.W. Griffith and Charles Chaplin, but Selznick’s vision was different.

Selznick founded Selznick International Pictures (SIP), and worked independently as if he were at a studio, yet he was aligned with the studio system. He would produce “A” pictures, choosing top-flight directors, actors and crew without the constraints and meddling of the studio chiefs. He had an obsessive personality and would micro-manage the projects. In many respects, he was at least partly the auteur of his works. Years later, Alfred Hitchcock would do his editing within the camera in order to maintain some sort of creative control of his pictures made with Selznick.

Selznick has his critics, but he was undeniably successful. He released a string of hits, notably A Star is Born, Rebecca and Gone With the Wind. Winning Best Picture at the Academy Awards for the latter two in consecutive years.

Poster - Rebecca_03

Selznick was as successful a talent scout as he was a producer. He was particularly fond of finding leading ladies, such as Ingrid Bergman and Joan Fontaine. He also “discovered” Alfred Hitchcock as a director and brought him to work in the United States with a seven-picture deal. He would contract with them directly through SIP, and if he was not ready to make a picture with them, would farm them out to other studios. As his clients stars rose, so did their fees. Eventually Selznick would become exhausted by the intensity of movie producing, and would lend his stable to studios. He would charge them the going rate, pay his talent based on the contract, and pocket the difference. This amounted to millions of dollars.



During the 1930s and 40s, the Department of Justice was taking a close look at the studio system. They felt that the studios were using unfair trade practices when distributing films to theaters, leveraging their power to get the chains to take inadequate deals. The primary tactics that the DOJ frowned on were block-booking and blind bidding.

Block Booking was the practice of selling a block of films to the theater. This usually would consist of one or two A pictures that would be guaranteed to give them a profit, and a handful of B pictures that may not be as successful. The A pictures were rarely parceled out on their own. It made business sense for the studios because they wanted to find screens for all their pictures, but the DOJ correctly thought that this practice was unfair for the exhibitors. Blind Bidding is just what the name implies. The studios would sell pictures to theaters without letting them see the film. Sometimes this would happen before picture had been produced.

Anti-Trust Decisions: From 1938 to 1940, there were a series of decisions that limited block booking, blind bidding, and other unfair trade practices. The first decision in 1938 was targeted towards all eight large studios, while the latter decision in 1940 was limited to the five majors. The repercussions of these decisions actually benefited the studios. They had to cut back on B pictures and focus on larger A productions. Because of the film boom during the war years, this helped the studios as the large productions were overwhelmingly successful and profitable. Losing the B pictures helped them slim down their overhead.

Revenue Act of 1941: With an expensive war in process, the need for tax dollars rose. The Revenue Act was passed in order to impose high tax rates on people who were in the upper tax brackets. There was approximately a 70-80% tax rate for those earning $200,000 annually. Of course a lot of the stars in Hollywood, behind and in front of the camera, earned salaries of this magnitude. For instance, all three of the leads of Double Indemnity earned $100,000 for their roles. Under the Revenue Act, they would have to pay roughly $80-90,000 to the IRS.

The repercussions of this legislation pushed the talent closer to independence. Rather than continue to pay flat fees, the studios changed contracts so that the talent would get a percentage of the profits. This meant that they would be taxed as capital gains at a far lower tax rate. Frank Capra’s Meet John Doe was one of those first deals.

Olivia de Havilland Decision: The star actress wanted out of her contract and the studio was effectively holding her hostage, unable to leave for a rival studio. She sued successfully to get out of her contract. The ruling kept the studios from adding suspension time to contracts to keep them from being free agents.

Post-war DOJ Initiative: With the studios continuing to be unfettered by any government intervention, the DOJ wanted to move aggressively at breaking up the studios. The issue at hand was the amount of the control. The studios were by definition a monopoly, vertically integrated to control production, distribution and exhibition. The DOJ wanted to break these three pieces up.


As contracts ended, directors wanted to follow the Selznick model and forge their own independent companies. Several famous directors took this route and released films under their own “studios.” Some of them were more effective than others. Some of the filmmakers would remain independent, while others would return to the studios.


Alfred Hitchcock, reeling from his bad deal with Selznick, created Transatlantic Pictures. Under this company he made Rope (1948) and Under Capricorn (1949) with more creative freedom. Rope was more of an experimental film, and probably not one that would be possible for a filmmaker without Hitchcock’s caliber, and definitely not under the studio system. The experiment did not go as well as planned and was financially unsuccessful. The follow-up, Under Capricorn was less successful and that marked the end of the famous auteur’s independence. Hitchcock would make some of his best pictures in the 1950s for various different studios.


Frank Capra, William Wyler and George Stevens formed Liberty Films. Only two films were made through this company, and both of them were from Frank Capra. They were It’s a Wonderful Life (1946) and State of the Union (1948). It is difficult to believe given the reputation today, but It’s a Wonderful Life was a financial failure. This ended the project, with Paramount buying the assets and finishing the second Capra film. They also signed deals with the three principal directors. William Wyler made The Heiress for Paramount in 1949.

The most successful of these early director forays was John Ford’s Argosy Pictures. Ford had a lot going for him. For starters, he was reliable director, churning out quality content that did well at the box office. He was also an efficient director, usually coming in below budget. Ford did not strictly work on projects for his own company, working occasionally with the studios as needed, but he kept Argosy going for some time. Some of the notable Argosy films were Fort Apache, She Wore a Yellow Ribbon, Rio Grande, and The Quiet Man. Even with longevity and success compared to the others, a financial failure doomed his company and Ford also returned to the studios.

Next: The Beginning of the End

Posted on June 21, 2015, in Essays, Film. Bookmark the permalink. 8 Comments.

  1. Richard Finch

    Another early independent producer was Samuel Goldwyn. He founded his own production company in 1923, the year before he sold his studio to MGM. He was never part of the MGM management but kept control of his production company and independently produced nearly eighty pictures between 1923 and 1959, which were distributed by United Artists and later RKO. His best known pictures were directed by William Wyler. “The Best Years of Our Lives” (1946) earned Oscars for Wyler as best director and Goldwyn as producer of the best picture.

  2. Thanks, Richard. I mentioned him in my intro (although not by name), and it is interesting that Griffith made these comments to two men who were not on board with the system. Wilder was a king at Paramount, but he was mostly independent from his success and fought any sort of intervention.

    There were a number of other independent producers. I focused solely on Selznick because of how his career transitioned from producer, to talent agent, and then he comes back into play a little later.

  3. Wow – amazing research here, and fascinating history. The studio system filmed a lot of interesting stories, but I think their demise is almost more mesmerizing than the movies they produced.

  4. Such an interesting article Aaron!

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