In 1914, film-production companies Famous Players Films (founded in 1912 by Adolph Zukor in partnership with the Frohman brothers) and Jesse L. Lasky Feature Plays (founded in 1911) signed a distribution deal with Paramount Pictures Corporation (founded by William Wadsworth Hodkinson in 1914). Under the agreement Hodkinson would distribute the two companies' films through a 65/35 arrangement in which the producer agreed to take only 65% of film profits with 35% of the gross revenue going to Hodkinson's Paramount. While initially the agreement seemed like a good deal, Zukor and Lasky quickly realized that they could make much higher revenues if they could integrate the production and distribution of their films. Accordingly, less than a year into their distribution contracts the two men began looking for a way to buy Hodkinson out of Paramount and to incorporate the three companies.[8]
In late 1915 Zukor began buying as much Paramount stock as possible, including stock belonging to Hiram Abrams, a member of the Paramount board of directors. On July 13, 1916, at Paramount Corporation's annual board meeting, Hodkinson found himself ousted from the presidency and replaced by Abrams, who won the seat by a single vote. After accepting the presidency, Abrams announced to the board, "On behalf of Adolph Zukor, who has purchased my shares in Paramount, I call this meeting to order."[8]
Within a week of removing Hodkinson, on July 19, 1916, Famous Players and the Lasky Feature Play Company merged to form Famous Players–Lasky, with Zukor as president and Jesse L. Lasky as vice president. For a brief period Famous Players–Lasky acted as a holding company for its subsidiaries: Famous Players, Feature Play, Oliver Morosco Photoplay, Bosworth, Cardinal, Paramount Pictures Corporation, Artcraft, and The George M. Cohan Film Corporation. However, on December 29, 1917, all of the subsidiaries were incorporated into one entity called the Famous Players–Lasky Corporation.[8]
The push for vertical integration
However, Zukor was not satisfied simply with consolidation. The cost of producing films was rising – screenplays cost more to purchase and the rise of the star system meant that celebrities were demanding higher salaries. The problem of fog inside the Islington Studios in London was solved by Carrier Engineering Corporation's innovative air treatment system.[9] Zukor needed to increase revenue, and he would do so over the next ten years by integrating film production, distribution, and exhibition into one corporation.[8]
In 1919, Famous Players–Lasky faced a boycott from the First National Exhibitions Circuit, a group that controlled nearly 600 theaters nationwide. The Circuit disagreed with the corporation's distribution practices, which required theaters to purchase large blocks of feature films, often sight-unseen. In addition to selling strategic blocks of features, theater owners were offered options such as "program distribution", in which the exhibitor booked a single evening's worth of entertainment, and "star series" in which the exhibitor signed up for a given number of pictures per year featuring a particular star. "Selective Bookings" in which exhibitors were allowed to purchase a single film, made up only a small percentage of the corporation's offerings.[8]
The finish
On April 24, 1930, Paramount-Famous Lasky Corporation became the Paramount Publix Corporation.[14][15] Financial problems within the movie industry as a result of the Great Depression pushed Paramount Publix Corporation, with $2,020,024 in debts but only $134,718 in assets, into receivership on August 3, 1933.[16]
