ST chs 25, 26 Norma Shearer, Irving Thalberg, William Fox

[Robin Landseadel]

In the transformation of William Fox, one more step upward remained: to ascend into
the elite tier of American industrialists and to dominate his industry the way that Rockefeller,
Carnegie, and Morgan had dominated theirs. He was entitled to do so, he believed. “I have put
my soul into motion pictures—have devoted my life to them.” In his view, no one else loved the
movies more, had done as much for them, or was better qualified to lead them into the future.

Vanda Kreftt, The Man Who Made the Movies: The Meteoric Rise and Tragic Fall of William Fox,  pg. 518
 
. . . The idea of acquiring Loew’s was audacious, yet there was now no one to stop Fox—no
John C. Eisele to put a hand on his arm and urge caution, and no blustery Thomas N. McCarter
to rage against wildcat spending. Son-in-law Douglas Tauszig had been Fox Film treasurer
since April 1927, and incompetent brother Aaron would take over in April 1928. In the spring of
1927, only one outside director remained on the Fox Film board, Eisele’s investment banking
firm partner, Nathaniel King, who appears never to have presented any forceful opposition.
 
The Loew’s, Inc. acquisition involved a series of delicate negotiations. First, acting Loew’s chief
Nicholas Schenck, who stood to earn a hefty commission, had to soften up Carrie Loew. It was
one thing for her to indicate, as she had done, a willingness to part with her husband’s life work,
but quite another to face hard numbers and specific terms and to realize she would be severing
forever a link to the past. Schenck took the posture of a family protector and, Fox said, “worked
on the theory that Mrs. Loew had too many of her eggs in one basket and it would be a good
thing for her to release some of this capital.” As a woman, Schenck counseled his dear friend’s
widow, she ought to put her money into bonds instead.
 
Reportedly, Fox began with an offer of $80 per share for the Loew family’s stock, at a time when
the market price was around $60 per share. Then Warner Bros. jumped into the bidding,
pushing Fox higher and higher.
 
The Warners? Where were they going to get that kind of money? Although the Warner Bros.
had been doing well since the October 1927 release of The Jazz Singer and would show a net
profit of more than $2 million for the fiscal year ending August 31, 1928 (compared to only
$30,426.88 for the 1927 fiscal year), the company had a shaky financial history and an
uncertain future. In May 1928 the Warners’ Vitaphone sound technology was effectively doomed
when the other major studios began to adopt Fox’s Movietone system instead, and the Warners’
ongoing contract arbitration battle with Western Electric ensured no help from that quarter. In
more rational times, the Warners probably would not have been seriously considered as buyers
for Loew’s.
 
The late 1920s, however, were not rational times. Beginning in March 1928, the stock market
began a spectacular run-up, yielding “a year when everything one touched seemed to turn to
gold,” writes historian William E. Leuchtenburg. “Customers crowded into brokers’ offices in
midmorning and stood staring at the blackboard or inspecting the tape until closing time. They
borrowed money, bought more stock, watched the stock go up, and borrowed still more money
to buy still more stock.” By that summer, the seemingly endless upward spiral had ensnared
“people who never dreamed they would be caught in the speculative frenzy. How much longer
could you hold out when your neighbor who bought General Motors at 99 in 1925 sold it at 212
in 1928?”
 
Suddenly, not even the Warners themselves knew where they belonged on the financial map. In
 early August 1928, studio president Harry Warner received a $10 million purchase offer from
Paramount, which realized it was behind the game in adapting to sound. Then Fox found out
and, unwilling to see Paramount strengthened, bid $12 million for Warner Bros. Paramount shot
back with a $15 million offer. All this happened within days, and rumors of the negotiations sent
Warners’ stock soaring, so that within one week, the share price jumped by twenty-one points,
to reach $81. Now Harry Warner started thinking. First, he said he would accept $20 million for
Warner Bros.—then he changed his mind altogether.
 
“I don’t think I would take $40 million,” Warner told Variety. “After all, why should some other
interest reap the benefit of our success? We are making plenty of money today—all kinds of
money. It took us many years and a lot of hard work to get where we are.” The more Warner
talked, the more he convinced himself he ought to be on the other side of the fence, a buyer and
not a seller. “If I could buy some company that would help our present interests, I would do so
immediately.”
 
The only possible “some company” was Loew’s, Inc. The Warners’ bankers, Goldman Sachs, he
artily encouraged their clients’ ambition, pledging to arrange all the money necessary. Harry
Warner commented, “Ten years ago when I walked into a bank to borrow $1,000, the banker
looked at me as if I were a thief. Today the money of the world is at the command of this
industry.”
 
Fox’s negotiations for Loew’s would continue through the end of 1928.It was an extremely busy
year. In addition to ensuring Movietone’s victory as the dominant talking pictures technology;
building the forty-acre Movietone City from scratch; watching over a slate of new releases
crowned by Four Sons, Mother Machree, and Street Angel; and enduring the final commercial
disappointment of Sunrise while trying to set Murnau in the right direction with 4 Devils, Fox was
aggressively trying to expand Fox Theatres’ holdings.
 
Some efforts succeeded. Following his $16.5 million purchase of the remaining two-thirds of the
stock of West Coast Theaters in January 1928 and his $25 million purchase of the Poli Theaters
chain in New England in July 1928, Fox achieved another major coup. Between August 1928
and mid January 1929, he arranged to take over almost all the independent theaters in the New
York metropolitan area—about 200 of them, with a combined seating capacity of 280,000 and
combined annual gross revenues of $25 million. That made him by far the largest theater owner
in New York City, the movie industry’s largest and most influential market. Fox didn’t buy the
properties outright, but instead agreed to pay a total of about $13 million for leases that had an
average duration of more than twenty years. With the 200 theaters to be run under a new Fox
Metropolitan Theatres division of Fox Theatres, Fox expected the acquisition to generate up to
$7.5 million in annual profits.
 
As always, many more attempts to buy theaters fell through. Most notably, in early 1928, Fox
tried to buy the Stanley Company, a Philadelphia-based chain of 270 theaters operating in
seven states and Washington, DC, that had been his bitter rival in that area for a decade. The
Stanley Company had an additional potential benefit. Because Fox had received about 28
percent of the stock of First National Pictures along with his purchase of the West Coast
Theaters shares, and because Stanley owned another 25 to 30 percent of First National shares,
control of the Stanley Company would have given Fox control of the sixty-eight acre First
National studio in Burbank, California. Some speculated that Fox wanted real estate so he 
could move Fox Film there and sell off the Fox Hills lot in West Los Angeles, which was worth
ten times what he had paid for it five years earlier. Warner Bros., however, outmaneuvered Fox
and got the Stanley Company in September 1928, so that company instead moved to Burbank
to take over the lot it still occupies.
 
Vanda Kreftt, The Man Who Made the Movies: The Meteoric Rise and Tragic Fall of William Fox,  pgs. 524-528