Wily Fox and
the
Hollywood Hounds
by Ken
Freed.
.
A
cautionary tale of William Fox and his patents for motion
picture sound -- sound lessons for iTV today.
Public
battles for digital TV marketplace dominance do grab the
headlines, but hidden below the surface are wars for
control over the ways and means of doing business in any
form. Often these struggles center on intellectual
properties, usually patents.
The story of motion
picture sound patents offers a case study. Weep and
learn.
Edison had
experimented with playing a primitive phonograph cylinder
during Kinescope exhibitions, but he foresaw so many
problems with synchronizing sound to picture that he did
not pursue development. After broadcast radio debuted in
the United States in 1921, effecting theater attendance,
Warner Brothers began experimenting with playing a
phonographic disk in sync with the movie. The Warners
revived their sagging fortunes in 1926 with "Vitaphone"
musical backgrounds to their pictures, saving the costs
of paying an orchestra at every movie showing. In 1927,
Warner used this method for the first "talking picture"
called "The Jazz Singer," starring radio and recording
artist Al Jolson. Vitaphone records that were not always
in sync with the mouths on screen. but the picture was a
big hit, and the Warner empire prospered.
But a sly guy named
Fox was way ahead of the brothers Warner.
.
Meet William
Fox
Hungarian Jewish
immigrant William Fox entered the motion picture
production business at age 26 in 1904 with $1,600 in
savings, his wife Eve working at his side. The silent
film and newsreel business already was thriving. Although
not known for a kindly aspect, what today we might call a
"difficult personally," Fox was respected because his
movies made money for everyone -- his studio and local
theater owners. He produced silent films like "A Fool
There Was," "The Honor System," and "Mother Knows Best,"
which moved people's hearts and urged them to lead moral
lives, this before the censorship of the Hayes
Commission. Fox produced less inspiring fare, too, like a
package of weekly serials filled with veiled sex and
urgent violence. In the machine age of mass production,
Fox cranked out movies like a Ford assembly line.
Seeing that motion
picture theater operators where making more money than he
was earning by licensing films to them, Fox built his own
chain of 800 movie theaters across the country, tickets
at ten cents for adults and five cents for children.
Multiply all these pennies by millions of patrons
worldwide. Before the 1929 Wall Street crash, the Fox
Film and Fox Theater corporations operated on budgets
approaching half a billion dollars.
A savvy and some
may say ruthless tycoon, Fox was touted as the richest of
the Hollywood moguls, a giant among titans, an absolute
ruler within his realm, just like Warner or Meyer or
Goldwyn, one of an elite few who's word was law on the
back lot. But for all his wealth and glory and power,
William Fox would be laid low by the battle over the
patents to the "talkies."
In late 1925,
William Fox's brother-in-law, Jack Leo, ushered Fox into
a studio projection room where he found himself watching,
and hearing a caged canary singing, then a Chinese man
singing while playing a ukulele. The new method involved
a photographic recording of the electronic soundwaves
themselves and placing the narrow images onto the film
beside each frame. For the first time ever, both sight
and sound could be recorded together while the camera was
rolling on a soundproof stage. Playback required the film
passing across a sensor inside the film projector, which
then translated the soundwaves images into electrical
impulses that came out through the loudspeaker, like a
phonograph or radio speaker.
For one million
dollars, Fox bought the rights for what become the
"Movietone" sound-on-film system. He invested about six
million dollars developing the process, building a
soundstage in his New York studios at 54th Street and
Tenth Avenue. Fox research labs worked on cleanly
recording sounds in the field, too. By spring 1926, Fox
witnessed a talking picture of a Jersey Central railroad
train screeching past him with its whistle wailing for
all the world to hear. The Warners beat Fox to market
with the first talkie, "The Jazz Singer." Fox replied
with the first talking newsreels for the new "Fox
Movietone News,"
Appreciate the
impact. Live radio shows were keeping people out of the
movie theaters. People were already becoming accustomed
to getting their news on the radio, using the "theater of
the mind" to imagine the news stories. Silent movie
theaters already showed newsreels, but Fox replaced
imagined sounds with the real thing. Fox crews with sound
cameras soon were roving the globe to get the latest news
to theater audiences in America and overseas. The stories
were oversimplified and sensational by today's standards,
but people actually went to the movies just to see the
Fox newsreel. Fox followed up with talking feature
pictures. The man understood market timing.
.
Chasing the
Fox
Now the cat was out
of the bag. Every film production company converted to
sound. To get a feel for the era, go rent the video for
the film classic, Singing in the Rain. The advent of
talkies meant the motion picture business was back in
business. Radio be damned. Within a decade, in fact,
Hollywood movie scripts would be the mail fuel for the
consuming demands of daily live radio theater.
Despite his success
with the talkies, William Fox still worried about
competition. By the mid-Twenties, he could foresee the
emergence of television, and Fox felt unwilling to be
caught napping with TV as had been with radio.
"I reached the
conclusion that the one thing that would make it possible
[for film] to compete with television," he later
told writer Upton Sinclair, "was to use a screen ten
times larger than the present screen, [which
meant] a camera whose eye could see ten times as
much. The screen I proposed was ninety feet. I believed
this 'Grandeur' would come closer to the third dimension
we hear scientists talking about." Using his own money,
in 1928 he formed the Fox Grandeur Corporation to build
and sell the larger format cameras, projectors and
screens to anyone in the trade.
The idea spooked
Paramount president Adolph Zukor, a fellow Hungarian
immigrant. Also alarmed was RKO overseer David Sarnoff,
president of the Radio Corporation of America (RCA).
Sarnoff was a Russian immigrant who, when working for
Marconi in 1912, was the radio operator who first picked
up the Morse Code distress signal from a sinking Titanic.
Zukor and Sarnoff together paid a visit to Fox, he
recalled. "They said I was about to make a great mistake.
The industry has just changed from silent to sound... and
we were just about catching our breath, and here I was
trying to upset it again." Fox ignored them and premiered
the first Grandeur film, "Sunny Side Up," winning wide
acclaim for the bigger screen. Other movie moguls
grumbled, but followed suit.
Yet William Fox
apparently was not yet done making enemies.
On the
Scent
The American
Telephone and Telegraph Company claimed to control all
the critical patents for sound pictures. In 1927,
AT&T had demonstrated the very first two-way picture
telephone call between Washington DC and New York City.
The Fox empire was buying sound equipment from the
"Telephone Company," yet that was not enough, apparently.
The telephone company asserted that the Movietone patents
fell under the phone company's umbrella rights for all
pictures with sound. Fox was not a happy
camper.
The ensuing events
remain controversial. The reader is invited to believe or
not what Fox reported in a 1933 book, Upton Sinclair
Presents William Fox, a curious volume, resulting
from the capitalist asking the socialist to help him get
out his side of the story after press blamed him for his
own collapse. Fox claimed in the Sinclair book that the
Telephone Company used third parties to manipulate him
into overextending himself to affiliated creditors,
allegedly putting out the word on the street that if
anyone bailed out Mr. Fox, they would regret it. The
allegedly a scheme aimed at wresting control of the
talking picture patents. Please note that Fox's version
of events does not square with news accounts, but he
claimed the press was bought. Sinclair would hand you his
book, Brass Check. Ask Mr. Ripley to believe it or
not.
Fox said there were
deals within deals. Take a glimpse into the action.
Following the death of Marcus Leow, founder of the Leow
theater chain that owned Metro Goldwin Meyer, Leow's
company was a ripe target, just to gain control of the
MGM patents and IP licenses. The brothers Warner wanted
to obtain a controlling share of Leow shares, effecting a
merger, so MGM would become part of Warner Bros. Fox
reported being approached by investment banker Harry
Stuart about buying that same stock, so MGM would merge
into Fox instead. Stuart seeded the plan with a loan for
$10 million. He supposedly then persuaded the Telephone
Company to loan Fox another $15 million for the
acquisition. Stuart introduced Fox to other respected
investment bankers from financial companies, said to
include New York Life, all supposedly affiliated with the
honored and respected J.P. Morgan bank, from whom Fox was
invited to borrow yet another $23 million toward buying
Leow. The Fox theaters Corporation itself raised another
$16 million by issuing more stock.
With more than $60
million behind him, Fox beat the Warner bid with $7
million to spare. The stock sale took place on 24
February 1929, and the merger was a done deal, pending
virtually certain federal approval. Big front-page
headlines announced the news to the world. An equivalent
today would be the AOL-Time Warner deal.
Three days later,
Stuart allegedly turned around and told Fox that he
urgently needed back his $10 million, thereby inducing
Fox into borrowing more to cover him, placing Fox behind
the fiscal power curve. This was the first link in a
daisy chain. About that same time, Fox was introduced to
public power utility magnate Harley Clarke, who proposed
forming a movie theater equipment company. The numbers
worked on paper, and Fox put up stock in Grandeur for his
half of the grubstake. In these and other deals, Fox
steadily increased his obligations, imperceptibly
stretching himself thinner and thinner. Was he
outsmarted, or was outsmarting himself ?
.
Bloodsports
On 17 July 1929,
Fox went out to play golf at Lakeview Country Club with
the president of Leow's (Fox swung his golf club with his
right arm alone). En route, the chauffeur somehow lost
his way on a back road. At a crossroads where a hill
obscured the view of side traffic, the Fox car was struck
by another vehicle, driven by an inexperienced driver who
may have been speeding. When the Fox car finished
rolling, the chauffeur was dead, and Fox was severely
injured. Slowly recovering after the accident, Fox was
visited by Clarke, who offered to buy half or even all of
Fox's voting shares in Fox Film and Fox theaters. Clarke
supposedly wanted to purchase Paramount, inviting Fox
along for the ride. Fox declined the offer, not having
the strength for it. A quite sympathetic Clarke allegedly
offered to lend Fox any cash he needed at any time --
just in case. Again, Fox thanked him and declined, for
now.
Meanwhile, back at
the courthouse, the Bell Telephone Company was still
asserting its overarching rights to the Movietone patents
as well as the new "Tri-Ergon" patents. Fox had acquired
a new German photoelectric sound-on-film process
promising to improve sound quality. Fox said to Sinclair
that the Telephone Company told him the Tri-Ergon patents
were "worthless," but the rights still belonged to them
anyway. Had he not been recovering from the accident, Fox
said, he might have held his faith that photoelectric
audio was the wave of the future. (Yes, it's the basis
for the magnetic audio drums in all the modern film
projectors.) Had he not been weary with pain, he
declared, he might not have finally agreed under
unrelenting pressure to cede all the sound patents to the
phone company. In trade, he retained exclusive rights to
make sound newsreels -- the lucrative business of Fox
Movietone News, a very important concession, but
ultimately this was an illusion. The emotional clincher
for Fox was keeping the rights to install free sound
systems into schools and houses of worship -- his own
personal pet project. For whatever reason, the phone
company kept deferring final delivery of the official
papers, but this was a handshake deal among gentlemen, so
Bell technicians enjoyed open access to the Fox labs, and
the Fox trade secrets.
Everything came to
a head in mid-October 1929. Without warning, the federal
government announced that it would not approve the merger
between Fox and Leow. Fox's plans and company flew into a
tailspin. Then the stock market crashed October 29. Like
others with overextended credit who were overexposed on
the New York Stock Exchange, Fox desperately searched for
capital. Promises of help came from chums like Stuart and
Clarke, Fox said later, but the checks never arrived in
the mail, maybe because they had their own fiscal woes,
or were the earlier promises false?
When push came to
shove, Fox was forced to relinquish all rights to his
sound-on-film patents to AT&T and surrender ownership
of his empire to a court-appointed receiver. William Fox
was ruined, and he never fully recovered. Protesting foul
play in related court actions, he was labeled in the
press as a greedy Jewish capitalist who destroyed himself
with his own cunning, Fox properties changed hands
several times -- gutting the assets before the slow
rebuild in the Thirties. Seven decades later, the venture
we now call 2Oth Century Fox is a division in Rupert
Murdoch's NewsCorp.
The William Fox
story is only one of many from the heyday of the
Hollywood movie moguls, yet his contributions are
singular and historic. Fox invented the global media
newsgathering organization emulated today by CNN, BBC,
ITN, DW and others. Fox secured his place in history by
commercializing talking pictures and then introducing a
larger movie screen. His innovations enlarged the
adventure of going to the movies for audiences worldwide
today. Watching movies became more engaging than ever,
more emotionally interactive. more powerful as a cultural
force penetrating our minds.
Is there a moral to
the story? Aesop might say: A clever fox rarely escapes
hungry hounds once they have him cornered. 
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