Full opinion text
YANKWICH, Chief Judge. The action was originally instituted by the Government against six motion picture producers and six distributors of feature motion pictures, charging violation of § 1 of the Sherman Anti-Trust Act. On September 12, 1955 a consent decree was entered against Republic Pictures Corp., a producer and its wholly owned subsidiary, Republic Productions, Inc., a distributor. On September 22, 1955 a consent decree was entered against Pictorial Films, Inc., and Films, Inc., distributors. Involved in the case is the legality of the distributing methods of the defendants as they relate to the 16mm films. Before outlining in greater detail the pleadings and issues in the case, we give the following accepted definitions of the trade terms used. “Sixteen millimeter films” are motion picture films 16mm in width, in contrast with “standard films” which are 35mm in width. “Feature films” are motion pictures four or more reels in length other than those of strictly educational, religious or commercial character. “Theatres” are motion picture houses in which feature films are exhibited to the public for profit. “Theatrical exhibition” is any showing of a motion picture for the profit of an exhibitor. “Exhibitor” includes all persons, firms, corporations and public agencies engaged in the exhibition of motion pictures. “Clearance” is protection granted to an exhibitor or exhibitors by limiting the terms on which motion pictures may be exhibited by other exhibitors. “Merchants' free shows” are exhibitions of motion picture films sponsored by merchants to enhance their good will and to obtain publicity. They are open to the public, no admission being charged. “Roadshow men” are itinerant exhibitors who make a profit from showing motion pictures to the public for admission charges. “Coin-operated machine” is a mechanical device containing a 16mm film, automatically projecting it upon insertion of a coin and arranged so as to make the projection viewable by one person at a time. Other terms will be defined as the discussion progresses. I The Pleadings and Issues The corporate defendants are incorporated either under the laws of Delaware or New York. All except one, Republic Productions, Inc., have their principal place of business in New York City, New York, but each of them transacts business and is found in the Southern District of California. The producing companies named as defendants remaining in the case are: Twentieth Century-Fox Film Corporation (to be referred to hereinafter as Fox); Warner Bros. Pictures, Inc. (to be referred to hereinafter as Warner); RKO Radio Pictures Inc. (to be referred to hereinafter as RKO); Columbia Pictures Corporation (to be referred to hereinafter as Columbia); and Universal Pictures Company, Inc. (to be referred to hereinafter as Universal). RKO, in addition to producing motion pictures, also distributes them, including motion pictures in 16mm width. Warner, Columbia, and Universal each has a wholly-owned subsidiary engaged in the distribution of motion pictures, including 16mm pictures. These subsidiaries, named as defendants, are, respectively; Warner Bros. Pictures Distribution Corporation, Screen Gems, Inc., and United World Films, Inc. The two other distributing companies named as defendants are: Films, Inc., (to be referred to hereinafter as Films) and Pictorial Films, Inc. (to be referred to hereinafter as Pictorial). Both defendants Films and Pictorial are engaged primarily in the distribution of 16mm motion picture films. Films distributes the 16mm product of, among others, the defendants Fox and Warner. Six exhibitor associations and an organization representing all phases of the industry (Council of Motion Pictures Organizations, Inc., to be referred to hereinafter as COMPO) are named as co-conspirators in this action. Of the six exhibitor associations, two, Theatre Owners of America, Inc. (to be referred to hereinafter as TOA) and Allied States Association of Motion Picture Exhibitors (to be referred to hereinafter as Allied) are national trade associations composed primarily of local, regional or state associations of theatre owners. The other four exhibitor organizations, Independent Theatre Owners Association, Inc., Metropolitan Motion Picture Theatres Association, Inc., Southern California Theatre Owners Association and Pacific Coast Conference of Independent Theatre Owners, are regional exhibitor associations. The complaint charges that beginning some years prior to 1945, the exact date being unknown, and continuously since 1945, the defendants have been and are now engaged in an unlawful conspiracy in restraint in interstate trade and commerce in 16mm feature films. More specifically, it is charged: “29. During the period of time covered by this complaint, and for the purpose of effectuating the aforesaid combination and conspiracy, the defendants did the things alleged in paragraph 28 hereof and entered into written and oral agreements containing restrictions hereinafter set forth, limiting the purposes for, locations at, times when and conditions under which sixteen millimeter films may be exhibited. “30. The aforesaid restrictions on sixteen millimeter feature film exhibitions consist of the following: “(a) Refusing to license any one to telecast sixteen millimeter feature films; “(b) Refusing to license others to exhibit sixteen millimeter feature films in locations which áre open to the public within a zone, usually ten miles in radius, around any established 35 millimeter theatre; “(c) Restricting licenses for exhibition of sixteen millimeter feature films in churches, schools, clubs, hotels, and drive-in theatres by limitations upon admission prices, advertising, categories of persons to be admitted, or hours of showing. “(d) Imposing arbitrary and excessive clearances between the first release of a feature motion picture of 35 millimeter width and its exhibition on sixteen millimeter films; “(e) Refusing to license others to exhibit sixteen millimeter feature films at free merchants’ shows, taverns, or in coin-operated machines and refusing to license roadshow men; “(f) Reserving for each of the defendants severally, or for some of them jointly, the right to approve or disapprove each location for the exhibition of sixteen millimeter feature films produced or distributed by such defendant or defendants, before or after the licensing of such location by distributors or dealers, coupled with the right to arbitrarily abrogate any license granted pursuant to a given location approval;; a,nd “(g) Granting or withholding licenses to exhibit sixteen millimeter feature films in conformity with lists of locations ‘approved’ or ‘disapproved’ by the defendants or some of them. “31. The defendants have maintained an intricate system to police and enforce, and with the assistance of Theatre Owners of America, Inc., have policed and enforced, the license restrictions imposed upon exhibitors of sixteen millimeter feature films, and have blacklisted or boycotted exhibitors who disregard such restrictions.” The effects claimed for the alleged illegal actions of the conspirators are stated, generally, to be: (a) suppression of telecasting of the better feature films to television audiences; (b) unreasonable restraint of competition in the interstate distribution of feature films; (c) foreclosing actual and potential exhibitors of 16mm feature films from significant parts of the United States market, and (d) denying to persons living in theatreless towns or in institutions (both governmental and other) which prohibit their inhabitants to leave their premises the opportunity to see anything but outmoded feature films. In their separate answers the defendants denied these allegations. Their proof in the record was directed to showing that whatever restrictive practices existed as to the exploitation of 16mm feature films were the result not of concerted action between the producers or the producers and distributors, and/or unindieted co-conspirators, but were dictated by the particular exigencies and needs of the market of each producing company, and that they were “reasonable” in the circumstances. II The Concept of Reasonableness The object of the Sherman Act was stated in one of the older cases to be “to preserve the right of freedom to trade.” Later cases have stressed this object. However, the Sherman Act condemns only “unreasonable” restraints. The Supreme Court has read the concept of “reasonableness” as it existed at common law into the Act. This concept applies to all practices which were not at common law, and which the courts do not now consider illegal per se. This phase of the problem is of primary importance in this case. The Government’s complaint alleges that by the practices charged in the complaint, “competition in the interstate distribution and exhibition of feature films has been unreasonably restrained.” (Emphasis added.) However, the Government’s testimony was directed to proof of (a) the existence of the restrictions and (b) that they were the result of a conspiracy on the part of the defendants and others. No direct proof was offered by the Government to show that the restraints were unreasonable, the Government contending that unreasonableness could be inferred from the nature of the practices. The reasonableness of the restraints is a cardinal fact in a case of this character. The most benign agreement concerning trade,' — the ordinary manner in which an industry selects its custom, and makes its decision to deal or not to deal with others, — restrains, to some extent, whether this be the result of the individual action of one or the concerted action of many. As stated by the Supreme Court in one of the older cases: “Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress Or even destroy competition. To determine that question the court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after' the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts. This is not because a good intention will save an otherwise objectionable regulation or the reverse; but because knowledge of intent may help the court to interpret facts and to predict consequences.” (Emphasis added.) In a more recent case the badges, the criteria, by which reasonableness is determined are spelled out: “In determining what constitutes unreasonable restraint, we do not think the dollar volume is in itself of compelling significance; we look rather to the percentage of business controlled, the strength of the remaining competition, whether the action springs from business requirements or purpose to monopolize, the probable development of the industry, consumer demands, and other characteristics of the market.” (Emphasis added.) These cases recognize that if actions spring from “business requirements” or “consumer demands”, they will be upheld although they may result in restraint. These criteria apply with greater force to a business of the character here involved. Motion pictures cannot be marketed like other products. The system of clearances whereby protection is granted to exhibitors against competition by restricting the area and period in which motion pictures may be exhibited by subsequent exhibitors is legitimate. The Supreme Court has said that clearance “is in part designed to protect the value of the license which is granted.” These general considerations are of utmost significance in the case before us. For it cannot be contended that the mere fact that the showing of 16mm films was restricted to certain groups and areas where they did not impinge upon the patronage of the regular theatres was per se a violation. Television stations which telecast motion pictures are both customers and competitors of the producers and exhibitors. For it is shown in the record that some of them are engaged in producing motion pictures for telecasting, thus competing not only with the motion picture exhibitors, but with the motion picture producers for the patronage of the public from whom the viewers of this type of entertainment are recruited. So the problem before us is to determine whether the practice as to either group is reasonable. Ill Inferences from Similarity of Action Before doing this, we consider the question to which most of the Government’s evidence was directed: Were the practices the result of a conspiracy between the defendants? The courts have laid down rather liberal rules of proof. Express agreement is not necessary. Any conformance to an agreed or contemplated pattern of conduct will warrant the inference of conspiracy. Conscious parallelism of action may be the basis of an inference of pre-existing agreement. However, where positive evidence is offered to show the origin of a policy and the business considerations which motivated its establishment, parallelism, conscious or unconscious, ceases to be the determinant. To such a situation the language of the Supreme Court in one of the latest cases applies: “ * * * To be sure, business behavior is admissible circumstantial evidence from which the fact finder may infer agreement. * * * But this Court has never held that proof of parallel business behavior conclusively establishes agreement or, phrased differently, that such behavior itself constitutes a Sherman Act offense. Circumstantial evidence of consciously parallel behavior may have made heavy inroads into the traditional judicial attitude toward conspiracy; but 'conscious parallelism’ has not yet read conspiracy out of the Sherman Act entirely.” IV The Alleged Conspiracy- Two problems are before us: (a) the existence of a conspiracy as to, and (b) the legality of, certain restrictive practices of the producers as to the exhibition of 16mm films under § 1 of the Sherman Anti-Trust Act. A. The Quantum of Proof. Even a motion to dismiss made at the conclusion of the plaintiff’s case on the ground “that upon the facts and the law the plaintiff has shown no right to relief”, may now be turned into a decision on the merits. In acting upon it, the Judge is “bound to take an unbiased view of all the evidence” then before him and to accord to it the weight to which he believes it is entitled. In rendering judgment after full trial, we have greater freedom to choose between conflicting versions as to facts and between divergent inferences from controverted or even undisputed facts. In making the choice, we are not concerned with theoretical concepts as to burden of proof but are governed only by the preponderance rule. In approaching the matter we consider the nature of the product involved. B. The Nature of 16mm Films. The standard gauge for motion picture films is 35mm. The 16mm films were not originally intended for commercial exr ploitation. Their use began in 1935, and arose out of demands for home showings and showings before “non-theatrical” audiences. During World War II the major producers, including the defendants, released 16mm versions of their feature films for showing by the Armed Forces, Veterans’ Hospitals, the American Red Cross, and the United Services Organization, Inc. (USO), furnishing them free to the Armed Forces. The demand from military and auxiliary organizations diminished at the end of the war, but increased from the civilian market. A majority of all 16mm feature films exhibited in the United States are produced and distributed by the defendants. However, it should be borne in mind that the standard 35mm versions of feature motion pictures are, as one of the former officers of RKO put it, “the life blood” of the motion picture business. By contrast, 16mm films constitute, at most, a minimal percentage of this business. The actual or potential market for 16 mm feature films includes the following, among others: (a) Armed Forces of the United States, Veterans’ Hospitals and various other Government agencies, American Red Cross, and United Service Organizations, Inc. (USO); (b) theatreless towns, hotels, clubs, camps, roadshow men, drive-in theatres, merchants’ free shows, coin-operated machines, and private homes; (c) schools, churches, and charitable organizations; (d) hospitáis, sanatoria, homes of the aged or disabled, and convents; (e) ships, trains and planes. There is testimony in the record that, on the whole, 16mm films are not so suitable for theatrical exhibition as the 35mm films. This for the reason that the larger the gauge of the film, the better the opportunity to achieve clarity in projection. In contrast, when the optical image is reduced from 35mm to 16mm and is blown up on a big screen, there is loss of clarity. Because of this deficiency, no substantial number of theatres exhibiting 16mm motion pictures commercially has ever existed or exists today in the United States. And, at best, commercial distribution of 16mm films is and always has been marginal. There is, however, increasing demand for 16mm feature films for television programming, since a majority of telecasting stations in this country are quipped with facilities for the telecasting of 16mm and not of 35mm films. The following statistical data are illuminating. The number of stations having 16mm projection equipment only increased from 67 in 1952 to 372 in 1955 (August 5). According to statistical data compiled by a Government economist, and placed into the record, the number of television stations having both 35mm and 16mm equipment actually decreased from 22 in 1952, to 19 in 1955. The percentage distribution for the same period was 20.3 in 1952 for 35mm and 16mm, 62.1 for 16mm, 4.6 in 1955 for 35mm and 16 mm and 95.1 for 16mm. While this increase in the possibilities for televising 16mm versions of feature motion pictures was taking place, the major producers were experimenting with diverse methods for the enlargement of the vista beyond that provided by the standard 35mm film. To attain this object, a larger gauge was and is being developed ranging from 55mm to 70mm. Reduction from standard to the smaller gauge in order to achieve a wider exploitation of 16mm feature films would be a reversal of this trend in the production of motion pictures. Against this changing technological and market background, what were the actions of the producers after the war demands ceased? C. Independent Action or Concert. In seeking to satisfy the needs of the market just outlined, the producers were compelled to take into consideration the individual demands and distinct needs of the various exhibition outlets already enumerated. These outlets which we have designated as (a), (b), (c), (d) and (e) can be reclassified into two general groups. The first group ( (a), (c) and (d) ) consists of establishments to which the general public is not admitted and where no admission fee is charged. To those in this category, 16mm films were made easy of access, — the postwar policy being to allow exhibition at low rentals a few months after the release of the standard versions, the lowest period being six months. To certain persons and institutions in the second group ( (b) and (e) ) some of the producers, at one time or another, denied access to 16mm films altogether. When they were offered to them, the availability period ranged'froih twelve to eighteen months. Comparative tables and data as to this will be given further on in the discussion. For the present we confine ourselves to a brief summary of the bases for the policy of denial or total exclusion. In the establishments included in the first group motion pictures are exhibited to build morale. The viewers are persons who would not patronize commercial motion pictures, because they could not, at the time, leave the institutions. For this reason practically no territorial restrictions are applied. In the establishments in the second category were persons who sought diversion and could patronize commercial theatres. Because of this, territorial limitations were applied which differed in various areas depending on the assumed habits of theatre-goers, — longer in the Western states where, presumably, persons will travel farther for entertainment. These factors applied also to certain theatrical locations where motion pictures in substandard size were exhibited to the general public for a small admission fee. This included theatreless towns, in which a person would seek permission to exhibit a film at intervals in a private residence, or, as has been testified, on the side of a farmer’s barn. As to these, several considerations determined availability: (a) price; (b) the character and responsibility of the person to be entrusted with the film; and (c) proximity of 35mm theatre. In these instances, all other considerations being equal, 16mm films were made available within eighteen months, more or less. Distance was important in accepting and rejecting locations. But there was no uniformity of policy as to it between the defendants. Several charts indicating the action of other companies on certain rejected locations are reproduced here: RKO Radio Pictures, Inc. Action of Other Companies Prior to July 22, 1952 on 2,107 Locations Rejected by RKO Radio Pictures, Inc. from 1946 to July 22, 1952 Twentieth Century-Fox Film Corporation ' Universal Pictures Company, Inc. Warner Bros. Pictures, Inc. ' Approved 497 209 67 Rejected 48 38 1 No application 1,562 1,860 2,039 Total ’ 2,107 2,107 2,107 Twentieth Century-Fox Film Corporation Action of Other Companies Prior to July 22, 1952 on 2,651 Locations Rejected by Twentieth Century-Fox Film Corporation from March 10, 1941 to July 22, 1952 RKO Radio Pictures, Inc. Universal Pictures Company, Inc. Warner Bros. Pictures, Inc. Approved 168 100 106 Rejected 48 125 9 No application 2,435 2,426 2,536 Total ’ 2,651 2,651 2,651 Universal Pictures Company, Inc. Action of Other Companies Prior to July 22, 1952 on 2,022 Locations Rejected by Universal Pictures Company, Inc. from 1946 to July 22, 1952 RKO Radio Pictures, Inc. Twentieth Century-Fox Film Corporation ' ’ Warner Bros. Pictures, Inc. ' Approved 273 486 52 Rejected 38 125 No application 1,711 1,411 1,970 Total 2,022 2,022 2,022 Warner Bros. Pictures, Inc. Action of Other Companies Prior to July 22, 1952 on 30 Locations Rejected by Warner Bros. Pictures, Inc. from Aug. 1, 1951 to July 22, 1952 RKO Radio Pictures, Inc. ’ Twentieth Century-Fox Film Corporation ' Universal Pictures Company, Inc. Approved 2 16 Rejected 1 9 No application 27 ' 5 25 Total 30 30 30 These charts indicate independent action by each of the companies involved with reference to these locations, — of the type that would not have been taken if there had been preagreed understanding or even intentional conformity. Indeed, individual distributors did not follow a uniform or consistent policy as to locations, — they accepted locations at certain distances at one time and rejected others of the same distance at other times. So while there is similarity in the pattern, there is enough variation to dispel the idea of concert as the source of the policy. This is especially true when we consider the emphatic testimony of the officers of the producers at the trial that there was no understanding, tacit or other, as to the policy. The same officers testified that the failure to release feature motion pictures in the vault to television was the result of their individual determination considering the market, the price, the effect of release on the reissue value of the motion pictures, the effect of television on the personality of the actors, and similar considerations. These were all of the type which are determinative of distribution policy in the case of any commercial product. In short, the testimony in the record warrants the conclusion that whatever similarity exists in the restrictions adopted as to the exhibition of 16mm films was due to the similarity of the problem with which the producers were confronted. Each of the companies had also to consider the effect of the release of 16mm pictures on the custom of their regular customers, the 35mm theatre exhibitors. For each of the 35mm theatre owners in the field was either a customer or a prospective customer of each of the producing companies. So the effect of the release upon them had to be borne in mind. If in so doing the producing companies, so far as television is concerned, bided their time, the attitude was commanded by the effect which an unrestricted policy would have upon theatre viewers of motion pictures. In the last analysis, therefore, similarity of problem engendered similarity of action, a phenomenon recognized by lawyers and economists alike, which will be treated further on in the discussion. D. The Role of TOA and other exhibitor groups in Television Policy. The Theatre Owners of America (TOA) is not only named as one of the co-conspirators, but is treated by the Government as the béte noire in the case. It has been pictured as the chief instrument for making effective the restrictive policy. While some of the officers of the producing and distributing companies have been in correspondence with the organization, and others may have even kept informed of, or spoken at, some of its meetings, the evidence in the record shows that the organization, instead of being a means for carrying out the producers’ policies, — as is often the case, —was constantly complaining that the producers and distributors had failed to adopt a definitive policy of exclusion as to 16mm films. Indeed, in the exhibits offered to show the activities of TOA, both at regional and national level, its relation to the producers seems to be not that of a co-conspirator helping effectuate policies mutually agreed upon, but rather as a gadfly, constantly urging the producers to adopt a definitive policy. One of the Government’s exhibits is a letter dated October 7, 1948 sent to all the producers, in which the President of TOA informed them of the resolution adopted at their convention and which stated: “We would very much appreciate it, if you will, at your earliest convenience, reply to this request from our members and advise us of the position of your Company in this matter.” This letter does not read like the peremptory urging or command of a co-conspirator, saying in effect: “This is the policy adopted to which you must conform.” Rather, does it sound like a humble petition to some one whose actions it cannot control that the supplicant be informed of the position the producing company would take. And the producers so understood it. For in answer to the letter the President of Universal stated: “ * * * We will, of course, give due consideration to it in any future decisions by this Company. “As you know, television is still in its formative stage. We are watching it very carefully, as I am sure everyone in the motion picture industry is doing, and it appears as though it will be some time before any of the companies will be in position to make any determination with respect thereto.” On January 29, 1949 TOA’s television committee made a report which had among its recommendations the following: “a) We recommend that this association go on record as commending heartily those industry leaders in production and distribution who, in the protection of their own business and the business of their exhibitor customers have adopted a sound and long range point of view and have declined to make available to Television, those films which were created for and paid for by the motion picture theatres. “b) We further recommend that all producing and distributing companies be counselled by this association in the strongest terms that a grave danger and injustice would be presented should Television be provided with motion picture film designed and created for exhibition in motion picture theatres. This recommendation is not made to repress or hamper a new art. It is based on the truth that any such practice would cripple the theatres and diminish the power of the theatres of the country to continue to support the fine productions that the theatre industry has made possible. We feel that the ‘giving away’ of the industry product on television is economically indefensible from the point of view of the theatres. We believe it to be equally unsound from the point of view of the producers and distributors who would soon find that they have jeopardized their own income as would be evidenced by the diminishing returns at the box office.” One of the most active regional exhibitor groups is Allied Theatres of Illinois, Inc. Its correspondence, through its very vocal President, Jack Kirsch, appears in the record. In a letter addressed to him on May 14, 1951, by Herbert J. Yates, President of the Republic Pictures Corp., as to which a Consent Decree has been entered in this case, it was stated that “Republic’s sole television activity has been to consider the sale of some of our old pictures produced approximately ten or more years ago and which are obsolete for Motion Picture theatres.” Mr. Kirsch’s answer showed very emphatically his disapproval which extended not only to an actual inauguration of a policy of distribution but even to its consideration: “In spite of all you say in your letter, we can’t see the moral justification of any producing-distributing company even considering making their films available to television regardless of their age. Those pictures which you refer to as being ‘obsolete for Motion Picture theatres’ were made specifically for theatre consumption and the film rentals from exhibitors which went towards making the production of these pictures possible are now going to be diverted to a use that is absolutely detrimental to those same exhibitors’ interests. “Our organization has consistently taken the position against any company making their film available to television, because by doing so they are breaking faith with their theatre customers. We have restated this position on each occasion when such a move was contemplated or consummated by any distributor. If we did otherwise we would be derelict in our duty and responsibilities to the hundreds of independent theatre owners whom we represent and who rely on us for guidance and assistance. “We must therefore take the same position in voicing our serious objections to your considering the sale to television of pictures regardless of their age or quality. If the sale to television of pictures ten years old went unchallenged there would be no end to this practice. “I am sorry, Mr. Yates, that we must of necessity disagree with the reasons which you set forth as motivating your decisions, but we shall continue to cling to the hope that on reflection and in the best interests of the future welfare of our great industry you will reconsider your action.” In forwarding the correspondence to the General Counsel of Allied States Association of Motion Picture Exhibitors (Allied) one of the exhibitor associations named as co-conspirators in this action, Mr. Kirsch made this notation: “To my mind we shouldn't relax our objections to any distributor who might be thinking along similar lines. First it will be pictures 10 years old, then 5 and the next thing we know they’ll be selling TV right out of the can.” On February 25, 1952 a progress report of TOA, signed by all three of its national chairmen, still considered the policy unsettled so far as the major producers were concerned. It stated: “Sale of Films to Television “Wants Issue Settled “Walter Reade, Jr., urged that President Mitchell Wolfson be authorized to name a committee, representing the West Coast, Chicago, and New York areas, to call upon the heads of each company to settle once and for all the position of that company with regard to the sale of films to television. “Committee Appointed “Wolfson appointed the following exhibitor-leaders to serve as a committee to approach producers and let them know that ‘we are fully opposed to their selling film to television “Walter Reade, Jr., Eastern Chairman. “Sherrill Corwin, Western Chairman. “Eddie Silverman, Chicago Chairman.” On March 6, 1952, at a meeting of the Independent Theatres Association, its President, Harry Brandt, according to a Government exhibit, spoke: “in some detail about the exhibition of theatrical films on commercial television stations and castigated the practice as detrimental to the industry.” These instances show that: (a) there was no uniform policy as to television; (b) the theatre owners’ associations, although alleged to be co-conspirators, had evidently not been instrumental in securing the adoption of such uniform policy; (c) some of the producers were considering the sale of or actually selling feature pictures for television; and (d) that in so doing they were not consulting other producers or the theatre group, which was constantly clamoring for, but evidently not receiving, the assurance of a uniform practice. So the activities of these trade associations, expressive as they may be of the wishes of the exhibitors, fail to show transmutation into action or even promise of action by the producers. On the whole, we are led to the conclusion that while the restrictive practices of which the Government complains were, in the main, actually practiced by the defendants, they were determined upon individually by the producer-defendants and were not the result of concert or conspiracy between the producer-defendants and/or any of the other co-conspirators named or unnamed. In what precedes we have outlined with brevity the basis for this conclusion. Additional facts will be adverted to as we discuss the problem of reasonableness. For as I insisted throughout the trial, two problems are before the Court: (a) the existence of a conspiracy to restrain commerce through certain restrictive practices; and (b) the reasonableness of the practices. The two problems are interrelated. Of necessity the facts relating to them overlap. And an attempt, in an opinion, to separate too rigidly the facts as they relate to one or the other of the problems would result in unnecessary length and repetitive treatment. V The Problem of Reasonableness The reasonableness of the restrictive practices shown to exist is a cardinal issue in this case and was adverted to in what precedes. Some of the principles, such as uniformity of conditions for which only one remedy exists, were also alluded to. However, they and others require a greater elaboration. A. Identity of Problem and Remedy. Courts and writers have for a long time taken cognizance of the fact that in our modern economy the units which compose a particular activity, no matter how independent they may be, are, to a great extent, interrelated. The problems which arise are of a character which affect all, and when this is the case uniformity in the solution of the problem may result “from active, free and unrestrained competition.” Economists have noted the occurrence of this fact in cases where the number of sellers of the product is small and the group of buyers is large. In these instances, especially if the product has become standardized, “all buyers and sellers are in full communication with each other, so as to constitute really one market.” The act of each, no matter how independently taken, may have a striking similarity, for the very obvious reason that the measures taken are the only ones which commend themselves in the circumstances. As the same writer has put it: “Each is forced by the situation itself to take into account the policy of his rival in determining his own, and this cannot be construed as a ‘tacit agreement’ between the two. “This is true, no matter how complex the manner in which his competitor’s policies figure in the determination of his own. A certain move, say a price cut, may be advantageous to one seller in view of his rival’s present policy, i. e., assuming it not to change. But if his rival is certain to make a counter move, there is no reason to assume that he will not; and for the first seller to recognize the fact that his rival’s policy is not a datum, but is determined in part by his own, cannot be construed as a negation of independence. It is simple to consider the indirect consequences of his own acts — the effect on himself of his own policy, mediated by that of his competitor. Of course, he may or may not take them into account, but he is equally independent in either case.” (Emphasis added.) So when we are dealing with free entertainment, whether by permitting distribution of 16mm films to non-paying, nontheatrical audiences or theatreless towns, or with television, which is essentially an advertising method, in which entertainment is used as a channel for selling a product, — the problem confronting the producers of motion pictures is that of retaining the customers who come from a common audience. Just as in the case of clearances and runs, the problem is to make such territorial and time restrictions upon the availability of the product as will protect the value of the license granted to the exhibitor. In both instances the factors which bear on reasonableness are numerous and involve the accommodation of a variety of apparently conflicting economic interests. No refusal to sell a product to customers similarly situated is involved. At most, there is restriction in the sale of competitive 16mm films which may reduce the custom of theatres for which motion pictures in standard size are primarily made. For as non-theatrical groups and television audiences may draw from the common pool of diversion-seekers, the restrictions protect the producers’ main source of income. This protection may produce some assymetry, but this is inevitable, in any classification. B. Some Business Consideration. Certain fundamental facts require assertion. The Producer-defendants cannot be compelled by decree of court to make 16mm versions of any of their productions. Two of . the major producing companies, Metro-Goldwyn-Mayer and Paramount,, were not made parties to. this action because they do not produce films of that dimension. We assume that as the backlog of old pictures and the copyrights to them are the private property of the producers, they could, if they so desired, entirely destroy the master negatives after a film has had its run. If this were done, no subsequent exploitation would be possible. And a Government which has sanctioned and compensated for curtailment or even destruction of food products could not complain of the use of similar methods for preventing a possible “glutting” of the film market. The accessibility of 16mm films to distribution could not be absolute or unrestricted. At the argument, the Government conceded that a minimum time for full exploitation of motion pictures in 35mm films would have to be allowed before the 16mm versions were ordered ■marketed. The Government is, likewise, powerless to fix the prices for the exhibition of 16mm films.. However, a court could decree (as was done in . the consent decree here) that they should be obtainable at a reasonable price, because ,this is, a norm valid in law, flexible and capable of exact ascertainment. So the problem, in the last analysis, is one of degree. The evidence shows that the policy of each of the producer-defendants as to 16mm films has not. been static. On the contrary, it has been and' still is fluid. This is especially true as to their attitude towards releasing 16mm feature films for telecasting. Granted that at the inception of television there may have been a policy of opposition to the use of 16mm films, there has been a gradual deviation from this rigid attitude. The record, in- the case discloses the willingness of each of the producing defendants to consider proposals for use of feature films in television if the terms, including price, are reasonable and acceptable. Specific facts will appear further on in the discussion. A Government witness, General David Sarnoff, Chairman' of the Board of Radio Corporation of America, which owns the National Broadcasting Company, very frankly summed up the difficulties engendered by the development of television and the need for-material for its programs in a deposition offered by the Government. After referring to discussions had over the years with some motion picture producers about releasing pictures for general use in television, General Sarnoff stated: “I had not supposed that a major motion picture company, making a feature film for distribution to theatres, could be expected to make that film available to a television station because of the economics of the situation in television to pay for a new feature film which might cost millions of dollars. “I had a different feeling with respect to feature films already in the vaults and which were not being distributed to theatres. “I want to make that distinction because I don’t want to leave a false impression that I am publicly complaining against the motion picture industry for not making their new feature film available to television. I am making no such complaint. I am not complaining as to their pictures in their vaults, either. I am merely suggesting that I thought they were missing a good bet in their refusal to make those pictures available, and I thought that television was missing the opportunity to make those pictures available to the viewing public. “I have understood and appreciated the fact that the motion picture producers have theaters to serve; they are their large, and major customers, and that these motion picture .theaters looked askance upon the motion picture producers making any of their pictures, old' or new, available to this new arrival, television. “So, when you take these factors into consideration in toto and strike a balance, I am not prepared to say that so far as the motion picture producers are concerned that their decision or their practice, or their wish, not to make the product of their vaults available to television, was necessarily false economics from their standpoint. “They know their business better than I do, and therefore, if they felt that they shouldn’t make them .available on economic grounds, that was their business. “Now, television has survived and it is thriving despite that, and as you know, in recent months, there has been a perceptible change of attitude on the part of some motion picture producers, and pictures are, in some instances, now being made available to television stations and networks. Not feature pictures, but shorter pictures, and pictures that these producers are making specifically for television. “In fact, there is a rush to get on the wagon right now.” This witness, representing a competitor of both the producers and the exhibitors in the field of entertainment, while critical of the attitude of the motion picture producers, nevertheless saw a business justification for their practice. One fact is significant in his deposition. He saw, as did the various witnesses of the producers who testified in the case, the problem of price. And while he applied it only to current features, the testimony of others makes it evident that the problem exists so far as . the so-called “vault” is concerned, that is, feature pictures which are on the shelves of the producers. There is ample testimony in the record that the prices offered were minimal to start with but have been on the rise constantly. The time element is important, both from the standpoint of the price that may be secured, its effect on the general demand for motion pictures for theatrical purposes, and the possibility of reissue or remaking. It may well be, as General Sarnoff said, that in some instances, the value of the backlog may diminish and that if colored television becomes the rule, black and white features may not be in great demand. But, in the last analysis, these facts must be borne in mind: Television is a new medium. Motion pictures antedated it by many decades. The motion pictures are produced primarily for theatrical exhibition. The theatre-goers are and have been the main source of the motion picture industry's custom. The motion picture or the public at large could not anticipate the rapid development which television has achieved. Reduction in price in less than a decade has brought television sets of excellent performance within the reach of everyone. Granted that the motion picture industry must anticipate and supply demand and that the practice of some restriction towards new demands may contravene the antitrust laws, the fact remains that in the matter of distribution, with which we are concerned here, to warrant the condemnation of restrictions as detrimental to the free flow of commerce which the antitrust laws are intended to protect, the situations to which the practices relate must be comparable. This is the test by which the legality of classification is judged generally and which has been applied to motion pictures. All cases justify the staggering of releases and reasonable differentiation as to runs between theatres depending on location, customers, price and the competitive position towards one another. Availability is, in a sense, a form of “staggered” distribution. Clearances and runs stagger distribution by agreement with distributors; availability is a unilateral policy established by the producers through which films are made available generally after a certain definite period, which, in the case of RKO, was six months, and in the case of Fox and Warner, one year. Universal had no definite time policy. It evolved a pragmatic system in which the time element for availability conformed to no specific formula. It merely expressed the practice evolved by the men in charge of their 16mm distribution. After 1951 Warner distributed 16mm films through Films, Inc. While the time limitations were similar to those of other companies, they were not identical in all respects. And the evidence in the record shows that they were determined by the similarity of the problems involved. At times the longer periods were dictated by the factor of cost, despite the fact that they related to nontheatrical showings such as schools. The charge for showing was so insignificant that it was decided to use over and over again a small number of prints rather than print additional ones. In all, the injurious effect of the showing on the income to the producers from theatres was one of the considerations. Its validity as an economic reality cannot be impaired by calling it, as some of the agents of the producers' did in correspondence, “a protection” from unfair competition. For, as already appears (II and V-A), such aim does not violate the antitrust laws. But while in the case of theatres the effect of other showings on revenues is only one of the elements to be considered, this element becomes all important when we are dealing with a medium like television which competes not only with a particular theatre, but' with the whole field. For any exhibition of 16mm films anywhere competes with the theatre. The rapid development of television competition was not anticipated; and an industry is not expected to have prescience. More, it is not required to sacrifice its established custom in order to supply a late-comer in the field who is also a competitor. This is especially true when its production has been geared to the old customer, the motion picture theatre, for whom the production has been historically made, and distribution through whom is and has always been the main means for reimbursement of the cost of the product. C. Reissues. One of the considerations governing the restrictive policy as to television is the loss of the value of motion picture reissues. An increasing practice in the industry in recent years has been to take a picture which had been in the vault for some time after a complete run and reissue it for the benefit of those who had not seen it. Witnesses for the defendants have testified that aside from the question of price, a rapid distribution of old pictures through television, even at an acceptable price, would destroy their value for reissuing and remaking purposes. Indicative of the revenue which lies in reissue is the fact that from June 1947 to early in 1955 Realart, which distributed reissues for Universal received as film rentals for feature films the sum of $20,835,218.17. Of this amount, Universal received as its net proceeds the sum of $6,816,429.84. A chart introduced on behalf of the defendant RKO indicates that the revenue from reissues is not only substantial, but that in some instances, it exceeds the income from the original. The following data culled from one of the exhibits show the income of RKO from reissues as contrasted with the income from the original distribution and the very minimal income from 16mm distribution: Title U. S. Gross Film U. S. Gross 16mm Income Not In- Film Income Grosses eluding Reissue from Reissue The Lost Patrol 327,286.30 257,559.97 Last Days of Pompeii 2.986.00 469,890.25 298.415.93 Snow White 7.492.00 3,739,095.74 3,070,250.34 Alleghany Uprising 12.931.00 641.560.81 30,885.92 Hunchback of Notre Dame 9.528.00 1,416,406.20 133,964.26 Dumbo 14.296.00 957,919.16 251,222.62 Tarzan Triumphs 95.00 847,832.78 224,392.73 Lady Takes a Chance 9.478.00 2,039,344.51 156,827.42 Tarzan’s Desert Mystery 95.00 860,229.61 213.038.51 Tall In The Saddle 10.377.00 1,470,262.58 279,469.57 Tarzan and the Amazons 58.00 979,540.55 156,469.19 Sunset Pass 7.315.00 253,150.57 27,833.37 Bachelor and the Bobby Soxer 25.591.00 4,012,097.93 1,420.24 King Kong 1.569.00 710,653.08 1,607,999.93 Gunga Din 10.090.00 1.433.397.16 455.507.51 Bombardier 2.849.00 1,653,846.32 161,019.39 Mr. Lucky 5.446.00 2,536,426.64 137,645.90 Saludos Amigos 7.054.00 488,000.58 189.031.47 Marine Raiders 3.061.00 1.300.701.17 210.634.48 Back to Bataan 3.595.00 1,733,631.07 242,974.25 Bringing Up Baby 12.288.00 687.662.82 91,931.44 Vivacious Lady 7.456.00 799,133.15 192,786.21 Too Many Girls 5.899.00 440,375.00 16,903.32 Look Who’s Laughing 7.202.00 1,117,455.35 16,713.14 This led several of. the witnesses for the defendants, among them Ned Depinet, a former president of RKO, and Jack L. Warner, in charge of production for Warner, to state that it is really impossible to fix a definite time beyond which a motion picture has no reissue value. The appeal of some of the pictures is perennial. Each new generation of children would wish to see Snow White, Bambi, Dumbo, Pinocchio, Wizard of Oz, Cinderella and others, just as different generations of adults may wish to see the jungle adventures of Tarzan and other adventure and action pictures. Pictures with Indian and frontier background and the typical “western” depicting the hardships of the pioneer have a constant appeal to both young and old, because the western pioneering spirit has played so important a part in the development of our country. The motion picture as a popular art is especially adapted to help the masses, in these days of “mass culture”, identify themselves with the characters of the pictures, give them a sense of belonging and to aid them to relive vicariously a past which disappeared long ago. The experience with reissues stands as proof of this fact. However, the destruction of the reissue value would entail other losses. It would affect adversely the value of the pictures for remaking purposes and would also force the motion picture producers to acquire other stories to replace the stories used in the old feature films. Remade films constitute a substantial percentage of the production of the five producing defendants, as is indicated by the following chart: The money value of the reissues is an important factor, as appears from the substantial income derived from the contract already referred to between Universal and Realart, relating to the reissue of a group of old pictures produced between 1933 and 1946. On a recent remake of “Magnificent Obsession” which, when originally issued in 1934, gave only a fair return, Universal has grossed over $5,000,000 to date from domestic distribution alone. The phenomenal success of a recent picture dealing with juvenile delinquency, “Blackboard Jungle”, by one of the producer-defendants led to a revival by Universal of an old picture, “City Across The River”, dealing with the same subject which is meeting with greater success than the original exploitation. Teamed with another picture on the same subject it has grossed in excess of $150,000 in ten or twelve weeks of exhibition in theatres. The value of the stories from which the pictures are made was stressed in the testimony of Jack L. Warner, Vice-President of Warner, in charge of the production of films, and others, who stated that in the light of present market conditions some of the stories from which old pictures were made and to which the producers have absolute right have a value as high as $500,000. This would be an important item of cost saved should the company decide to remake a picture or to produce a musical version of it as was done successfully by Warner and others with similar properties. The release of the old version of the picture to television would result in the loss to the producer of this residual value also. In the light of this it can be well understood why producers like Warner and others are of the view that no arbitrary time limit can be established at which the residual value becomes minimal or has been wholly dissipated. Nor is it possible to choose between pictures with any accuracy. To the question “Is it possible for you now to tell which of your older films have remake values and which do not?” Warner answered: “Well, I could — most everyone of them have, according to the time, the tenor of the public, the susceptibility of the people. It is a showmanship feeling whether you can or cannot remake a story. “For example, I will give you the name of a story, Saratoga Trunk by Edna Ferber. We made that into a film that was highly successful. We have the right to make that picture as a musical version. That has been done time and time again where you use a book or a play and you make it first as a dramatic or comedy film, and then one, two, three, four, five years, ten years, sometimes 15 years later you may make it as a musical version, which is a common practice in the theatre, as well as in film. Therefore, you have a ready property in a manuscript form which would probably sometimes cost you two, three, four hundred thousand dollars, in the market of today as high as a million, to buy the proper story or a play. And, again, there is a big percentage that they receive today now. In addition, a man with a good book or play, there isn’t any limit to what he can get. We have just been through it with pictures like Mr. Roberts, and many, many more, I won’t go into them now, where we give tremendous percentages to the authors and the producers of the stage plays and the novels. “If we would get rid of this film at a very early date, we would find that we couldn’t use that again, because the complete value would be lost. I feel I am speaking from experience and the tenor of the public.” Significant also are his answers to two succeeding questions: “Q. Do you feel that the showing of a film of that kind on television would make it unsuitable for remake? A. It wouldn’t make it unsuitable, but it would lose its complete commercial value, or a great degree of it, which wouldn’t make it worthwhile for us to remake it, I don’t think. “Q. What about re-issues? A. About the same problem, the same thing. There isn’t any reason for us, if we did sell a feature of some kind, whether important or not to important, to television — you can imagine if you had to remake that again and advertise to the public it is coming back to X theatre, I don’t think you would get very much of an audience.” So while the range of prices now being paid by television for feature pictures may be approaching the average income for reissues, the loss of the stories for remaking purposes, and the need for their replacement by new stories to be acted in by the same or other actors, are not compensable by the income from the televising of features. Statistical data in the record confirm this. On the whole, the reissue value is, as one witness stated, “unpredictable”. Some of the data bearing on the subject were compiled only recently. However, the oral testimony referred to and that of others in the record indicates that while each of the producing companies may not have had -the benefit of the computation as to the others, and, in some instances, the benefit of its own exact computation, they were fully cognizant of the facts as they affected -the industry, — such as (a) the value of reissues, (b) the destruction of the stories and of the motion picture personalities, and others, — and that the problems which .they created were constantly before them. The more exact statistical data lend strength to their reaction to the business and economic factors which the distribution of 16mm pictures entailed. And, in all cases of this character, justification may be found in economic facts if they were apprehended by the industry, even though not reduced to mathematical or statistical form. An other compelling consideration is the fact that writers, actors' and musicians, either personally or through their unions, are making demands for additional payments from revenues derived from television exhibition of motion pictures. As early as March 16, 1948, Screen Actors’ Guild gave notice to all the motion picture producers that no motion picture produced after that date could be exhibited • on television without additional compensation to the actors. The notice stated: “Screen Actors’ Guild, Inc., takes the position that no producer has the legal right to sell or use for television any motion picture film made for theatre exhibition. “In our continuing negotiations this will be an important subject. We feel it only fair that you should know that the Guild will take the position in such negotiations that film made for motion picture theatre exhibition may not be used for television without compensation to the actors, to be agreed upon between us as part of a collective bargaining agreement.” The Screen Writers’ and Screen Directors’ Guilds have taken a similar attitude. Provisions recognizing the right to seek additional compensation have been inserted into subsequent contracts. The Musicians’ Union sought recognition of their right to compensation retroactively for all television showings of any motion pictures regardless of age. There was testimony that the defendants considered the demands onerous. Each has tried to deal with the problem in its own way. Columbia decided to remake some pictures for television with other artists. RKO considered and finally made a sale in bulk in which a definite sum could be agreed upon as compensation to guild members for television purposes; As to others, the problem is still open, to be determined finally whenever their feature films are released to television. D. Decline in Number of Theatres and Attendance. The matters just adverted to and their impact upon the thinking of the producers must be equated with another factor which appears in the record, i. e., the actual decline, both in the number of motion picture theatres and the attendance in them. There was testimony on the part of the defendants that thousands of motion picture theatres closed in the postwar y