Paramount Is Paramount Again

Paramount Pictures, declared Joseph Patrick Kennedy, “is a chain of incompetent, unbusinesslike and wasteful practices” for which another receivership seemed inevitable. That was five years ago. Last week Paramount stockholders got their third-quarter report: profits were $3,071,000, highest since 1930 and almost double the $1,726,000 cleared a year ago. More significant, this net was twice that of archrival Loew’s Inc. After ten years of tussling, Paramount was again the biggest money-maker in show business.

When Joe Kennedy wrote his epitaph of Paramount, many a Wall Streeter figured he was dead right. Paramount had just stumbled out of bankruptcy without appearing to shed any of the overgrown ineptitude that had put it in there. Adolph Zukor put Paramount together in 1912. Its roots were in the days when nickelodeons were gold mines and Mary Pickford made her first $20,000 a year. An expansionist of such resolution that the trade began calling him a monopolist, Zukor bought stars and studios until Paramount and Hollywood were synonymous.

Then he went after theaters, tacked them on like tails in a donkey game. By 1932 Paramount was a complex mass of 500 subsidiaries, 1,310 theaters costing about $150,000,000, a payroll (counting nephews) of 29,000 names, and a drooping revenue curve.

Bankruptcy ridded Paramount of at least 265 theaters, slashed the value of its properties to $86,000,000, but failed to make it profitable. It was then that Joe Kennedy, at the request of the directors (notably John Daniel Hertz) wrote his report, for which he was paid $50,000.

Despite Kennedy’s bearishness, the Hertz group chose to retain control, putting in a new management headed by bald, pleas ant Barney Balaban, oldtime Chicago exhibitor.

Meanwhile wealthy Wall Streeter Stanton Griffis, partner of Hemphill, Noyes & Co., had bought enough stock to become chairman of the Executive Committee. By 1937 Paramount had paid up all arrears on its first preferred stock, chopped the second preferred arrearages in half.

Since about a third of Hollywood’s prewar gross came from abroad, the picture business feared the war more than most U.S. businesses. The foreign markets have practically vanished, but the fears never materialized. Domestic theater receipts have more than made up the differences, will touch $1,100,000,000 this year — equal to the record made in 1930. Furthermore, Hollywood has little fear of priorities. Its chief raw material — talent — is just as scarce as ever, but no scarcer.

This week Paramount stockholders were the happiest of a happy lot. At its present rate, Paramount should earn $10,000,000 this year—a record since 1930. Loew’s earnings rate points to $8,500,000-$9,000,000. Moreover, the very brick-and-mortar which swamped Paramount in 1933 is now its most profitable possession.

Stockholders can even be grateful to Adolph Zukor for the inflated prices at which he bought the theaters. Under the tax laws, Paramount can compute its excess-profits credit on the theaters’ original cost. To shareholders, this means a tax credit of about $10,000,000 a year.