How the Paramount Decision and the Hollywood Blacklist Changed Hollywood

Rapid post-war changes in American society put downward pressure on studio revenues and profits.  But the Paramount decision and the Hollywood blacklist led to permanent changes that determined how Hollywood studios would conduct business from then on.

Once the Justice Department set its site on the Hollywood filmmaking industry, there was no turning back.  The first antitrust challenge by the Department of Justice came in 1938.  The Hollywood studios operated as trusts, and the Department of Justice was determined to break them up (Lewis 194).

Operating as trusts, the studios held almost complete control over the industry from film development to exhibition.  Studios released new films via a two-tier system.  Most first-tier theaters were owned by the studios.  Second-tier theaters, owned mainly by independents, were pressured by the studios into accepting certain terms if they wanted to screen first-run movies.  The studios used other scams to keep the theaters under their thumbs, such as “blind bidding (the licensing of films sight unseen) [and] block booking (the licensing of an entire slate of films in order to get access to one or two hit titles)” (Lewis 194-195).

After much legal wrangling, the Big Five – MGM, Warner Bros., Paramount, 20^th Century-Fox, and RKO – signed an “interim consent decree” (Lewis 195) with the Department of Justice on October 29, 1940.  This decree allowed a system of arbitration to be set up that could resolve conflicts between theater owners and the studios.  But the decree did nothing to break up studio monopolies and end their monopolistic practices.  This led to the studios and the theater owners arbitrating a new consent decree in 1941 called the United Motion Picture Industry (Unity) plan.  The plan gave theater owners more leverage but did not go far enough to limit the power of the studios (Lewis 195).

The Supreme Court agreed to hear the Paramount case in 1948 (which also included RKO, Warner Bros., 20^th Century-Fox, Loew’s-MGM, Columbia, Universal, and United Artists.)  On May 3, 1948, the Supreme Court ruled that the studios must divest themselves of studio-owned theaters across the country.  The Court reasoned that the studios had colluded to “restrain free and fair trade and to monopolize the distribution and exhibition of films” (Lewis 195).

On the plus side, the Court found the fines imposed on theater owners by the MPAA [Motion Picture Association of America] for screening films without a PCA [Production Code Administration] seal, unconstitutional (Lewis 196-197).

While domestic revenues and studio profits declined after the Paramount decision, “foreign demand for American films after the war” (Lewis 197) grew steadily.  The Cold War was in full swing.  “The Office of War Information . . . cooperated with the MPAA to establish for the studios an ideological and industrial presence abroad” (Lewis 197) which would ensure that American filmmakers would depict America in a positive light.

Within this climate of anti-Communism and competition with the Soviet Union, the Hollywood blacklist was born.  Fearing Communist propaganda and influence in Hollywood, nineteen studio employees were subpoenaed in 1947 by the House Committee on Un-American Activities.  Only ten were required to show up for questioning (called the Hollywood Ten.)  Noted playwright, Bertolt Brecht, testified in a closed session and later emigrated to East Germany (Lewis 197-198).

Members of the Hollywood Ten were generally uncooperative with the House Committee on Un-American Activities and were ultimately indicted and imprisoned for contempt of Congress.  At first, the MPAA publicly supported the Hollywood Ten.  Its president, Eric Johnston, declared, “There’ll never be a blacklist” (Lewis 200).  But shortly after he backtracked, saying, “We did not defend them” (Lewis 200).  After the Hollywood Ten were indicted and sentenced, the MPAA helped to institute “an industry-wide blacklist” (Lewis 200).

The blacklist benefited the studios financially because the contract system was slowly being replaced by “the union-guild movement” (Lewis 200).  The blacklist allowed studios to exert a certain amount of control over actors, guilds, agents, and lawyers.  At the same time, financiers in New York supported the MPAA and gave them more control over the Hollywood studios (Lewis 200).

As a result of the indictments and subsequent blacklist, the studios cancelled contracts and refused to pay members of the Hollywood Ten.  Civil suits dragged on for years.  Hundreds of “writers, directors, producers, and actors were blacklisted between 1947 and 1957” (Lewis 200), resulting in bitter feelings against the Hollywood studios.

Although the Hollywood studios lost financially when divestiture was ordered by the Supreme Court, they gained more power and control as a result of the Hollywood blacklist when the union-guild movement eventually replaced the contract system.

Dawn Pisturino

Thomas Edison State University

January 9, 2018

Copyright 2018-2021 Dawn Pisturino. All Rights Reserved.

Works Cited

Lewis, Jon. American Cinema: A History. New York: Norton, 2008.

The Rise and Fall of the Hollywood Studio System

1928 MGM Logo

The studio system has its roots in the principles of Henry Ford, whose success in the automobile industry led other industries to adopt his assembly-line production process.  The high risks and costs associated with making movies led the studios to adopt more controlled, streamlined processes.

After the Wall Street crash of 1929, the eight major movie studios developed the contract system (Lewis 102-103).  All people associated with making a movie (writers, directors, actors, technicians, etc.) worked on an exclusive contract with the studio.  Studio executives managed the production of the movie and the labor force.  It was a top-down style of management that included a General Manager, Executive Manager, Production Manager, Studio Manager, and individual unit production supervisors (Barsam 470).

“The studio used its contracts to control production costs and efficiently staff the production teams at work on its slate of films” (Lewis 103).  The result was a polished product which reflected the individual style of each studio.  These contracts only worked one way, however.  The employee was required to work for the studio according to the terms of the contract.  But the studio had the option of cancelling a contract at will.

The studios cranked out quantities of movies (538 movies were produced in 1937) (Barsam 473), but they were not so concerned with quality.  After World War II, the number of movies produced in 1946 fell to 370 (Barsam 473).

Three factors ultimately led to the downfall of the Hollywood studio system: studios had become such efficient production machines, they no longer needed big name central producers; the rise of the labor unions and the government’s interference in their monopoly over production, distribution, and exhibition; “the studios began to reorganize their management into the producer-unit system” (Barsam 474).

Additionally, the creative talent—writers, directors, actors, etc.—demanded contracts that would allow for more creative freedom and better quality of movies.  World War II profoundly impacted the number of personnel and film supplies available to make movies.  And finally, the invention of television created a new form of competition (Barsam 474).

The glamorous Golden Age of Hollywood was supported by the studio system, which controlled all means of movie production, distribution, and exhibition.  As the world and technology changed, the studio system was forced to change, too.

 Dawn Pisturino

Thomas Edison State University

December 21, 2017

Copyright 2017-2021 Dawn Pisturino. All Rights Reserved.

Works Cited

Barsam, Richard, and Dave Monahan. Looking at Movies, 5^th ed. New York: Norton, 2016.

Lewis, Jon. American Cinema: A History. New York: Norton, 2008.