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Studio system

 

The studio system (which was used during a period known as the Golden Age of Hollywood) is a method of film production and distribution dominated by a small number of "major" studios in Hollywood. Although the term is still used today as a reference to the systems and output of the major studios, historically the term refers to the practice of large motion picture studios between the 1920s and 1960s of (a) producing movies primarily on their own filmmaking lots with creative personnel under often long-term contract, and (b) dominating exhibition through vertical integration, i.e., the ownership or effective control of distributors and exhibition, guaranteeing additional sales of films through manipulative booking techniques such as block booking.
The last of the "Big Five" Hollywood conglomerates of the Golden Age emerged in 1928: RKO. The Radio Corporation of America (RCA), led by David Sarnoff, was looking for ways to exploit the cinema sound patents, newly trademarked RCA Photophone, owned by its parent company, General Electric. As the leading film production companies were all preparing to sign exclusive agreements with Western Electric for their technology, RCA got into the movie business itself. In January, General Electric acquired a sizable interest in Film Booking Offices of America (FBO), a distributor and small production company owned by Joseph P. Kennedy, father of future president John F. Kennedy. In October, through a set of stock transfers, RCA gained control of both FBO and the Keith-Albee-Orpheum theater chain; merging them into a single venture, it created the Radio-Keith-Orpheum Corporation, Sarnoff chairing the board. With RKO and Warner Bros. (soon to become Warner Bros.–First National) joining Fox, Paramount, and Loew's/MGM as major players, the Big Five that would remain for thirty years were now in place.
Hollywood's success grew during the Great Depression, possibly because films helped audiences escape their personal difficulties. President Franklin Delano Roosevelt said of Shirley Temple, "When the spirit of the people is lower than at any other time during this Depression, it is a splendid thing that for just fifteen cents an American can go to a movie and look at the smiling face of a baby and forget his troubles". By 1939 there were 15,000 movie theaters in the United States, more than banks; the number of theaters per capita was twice that of the mid-1980s. The cinema industry was larger than that for office machines. While only the 14th largest by revenue, it was second in the percentage of profits that its executives received. Top stars such as Bing Crosby and Claudette Colbert were paid more than $400,000 a year ($7,204,785 today).
Through Hughes's deal with the federal authorities, and those by the other studios that soon followed, the studio system lingered on for another half-decade. The major studio that adapted to the new circumstances with the most immediate success was the smallest, United Artists; under a new management team that took over in 1951, overhead was cut by terminating its lease arrangement with the Pickford-Fairbanks production facility and new relationships with independent producers, now often involving direct investment, were forged×a business model that Hollywood would increasingly emulate in coming years. The studio system around which the industry had been organized for three decades finally expired in 1954, when Loew's, the last holdout, severed all operational ties with MGM.
By 1957, independent producers made 50% of full-length American films. Beyond working for others, top actors such as Gregory Peck and Frank Sinatra created their own production companies and purchased scripts. Top independent directors George Stevens, Billy Wilder, and William Wyler also saw their paychecks increase, in part because their involvement attracted star actors. Studios increasingly provided funding and facilities to independent producers as opposed to making their own films, or just like United Artists, they focused on distribution. While television had damaged Hollywood, TV production companies such as Desilu and the film studios' own TV divisions helped save the industry by using otherwise-unused facilities.
In the mid-2010s, major studios shifted towards producing mainstream films that appeal to the audience (genre films, sequels, 3-D, and superhero films). As these films risk losing money at the box-office (and some, in fact, have), an opportunity opened up for independent companies to produce films that in recent years have upset other major studio films for the Academy Award for Best Picture. The Academy of Motion Picture Arts and Sciences (which produces the annual Academy Awards) generally award Best Picture Oscars to films of substance and high quality rather than the popular mainstream film. Between 2014's Birdman and 2017's The Shape of Water (both produced by the same major studio, 20th Century Fox), the multiple award wins for independent films such as Spotlight (Open Road, 2015) and Moonlight (A24, 2016) had a major impact on box-office intake of other major studio films, and possibly the fate of major studios themselves, and even so today with the latest wave of independent films. This continuing dominance of the independent film is proof that its success is not dependent on any film format, whether it be 3-D, CinemaScope, or any large-format such as IMAX. The recent outcomes of the Cannes Film Festival and the lack of American films winning these awards may also have affected the dominance of independent film.