On the morning of July 17, 1929, American film industry titan William Fox and his treasurer Jacob Rubenstein were on their way from Long Island to a round at the Lakeville Golf and Country Club with fellow producers Adolph Zukor, Nicholas Schenck, and actor Thomas Meighan.
Fox’s Rolls Royce, driven by chauffeur Joseph Boyes, approached an intersection with poor visibility when a horn sounded. The luxury vehicle glanced off another car, spun around, and turned over in a ditch. When it was all over, Boyes was dead, while Fox and Rubenstein were alive in a pile of broken class. While injuries appeared minor at first, as Fox and Rubenstein walked away from the crash, Fox’s skull was fractured and was losing blood. He needed a transfusion but still expected to be back to work soon. By this point, corporate sharks could smell blood in the water.
The history of Hollywood is full of hostile takeovers, shakedowns, and eras of uncertainty not unlike today. As soon as movies proved to be an incredibly profitable enterprise, rivaling that of the Gilded Age titans, the industry attracted a range of investors, business leaders, bankers, and gangsters. William Fox’s downfall is one of many, though its epic scale makes his story one that should be more frequently remembered in the 21st century as the industry journeys through another major period of transition.
The last years of the Roaring Twenties were a Wild West in Hollywood. Studios jockeyed for position, looking for an edge in a booming business. Marcus Loew (of Loew’s MGM) died in 1927, Warner Bros. had secured the imagination of the industry’s future with Vitaphone Sound on Disk technology that same year, while William Fox secured the sound-on-film MovieTone technology to become industry standard. The synchronized sound arms race was only rivaled by the question of who would take over the head of the largest film studio on the planet.
Hollywood, circa 1927. A sign for William Fox Studios is seen above “Tire Bargains.”
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Having got into moving pictures during its New Jersey infancy alongside Thomas Edison, Fox was in a powerful position to make a move for MGM. Fox was successful coast to coast, with successful films and stars like “The Vamp” Theda Bara and Western mainstay Tom Mix. Fox also brought German auteur F.W. Murnau to Hollywood, though the director’s life would also soon find tragedy.
Merging Fox and MGM would save $17 million a year by streamlining sound era production and exhibition. A bidding war began between Fox and Warner Bros., though Warners didn’t have the capital to pull it off and would soon instead purchase First National. Fox was in a strong position, having survived the onslaught of legal intimidation in New York by Edison’s Motion Picture Patents Corporation and survived forced dealings with the Tammany Hall political machine. Fox was also balancing his investments with an ability to regularly issue new stocks that fueled exponential growth.
As Fox biographer Vanda Krefft wrote in The Man Who Made the Movies, “in his bid for Loew’s, Fox was beginning to look dangerously like a monopolist.” The Justice Department was keeping an eye on the movie industry, and Fox met with William J. Donovan of the U.S. antitrust division to argue that Fox and MGM would have competing theater chains in the same towns (where Fox would rake in profits from both, of course). Without pushback on antitrust, the deal was nearly done by June 1929. Fox began investing heavily in expansion just before tragedy struck. The July car accident foreshadowed the coming vulnerabilities that would lead to Fox’s downfall.
Fox took on massive debt to acquire not only Loews and other assets while also letting his confidence get in the way of economists’ concerns that disaster was coming. Continuing to acquire theater chains, Fox was incredibly vulnerable on Black Tuesday, October 29, 1929. As banks failed, they called in notes. Fox was in deep with both monetary debt and shares of his new acquisitions being held as collateral. All those assets were now being seized, and Fox feared a fire sale. Banks that had recently fueled Fox’s massive expansions now refused to bail him out. On December 14, 1929, the New York Times stock market analysis called Fox a “disturbing factor,” on account of $90 million worth of short-term high interest loans he took out to expand his empire. Stockholders became weary and asked Fox to sell some assets. The car crash and stock market crash ended the possibility of a Fox/MGM merger as Fox no longer had the funds to support the merger.
Fox Film Corporation chief William Fox, as seen in 1930.
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In April 1930, Fox was forced to sell his voting shares in the company he founded. The buyer was Harley Clarke, a Midwest salesman and “merger specialist” who dabbled in everything from real estate to theater and film. Clarke first became friendly with Fox to explore new finance options for his empire. Fox was looking to fund a new 70mm widescreen format under the title Grandeur.
Clarke, who took a 50 percent stake in Grandeur, offered to manufacture the technology and purchase Fox stock, but the mogul turned Clarke down. After being forced to sell his voting stock to save the Fox Film and theater chain, Fox would forever refer to Clarke as a “vulture.” After a series of public denunciations, an April 1930 Motion Picture Herald headline read “mudslinging out as Fox executives buckle down to work under new boss.”
The Hollywood Reporter‘s March 2, 1931 front page.
In October 1930, Billy Wilkerson, fresh off creating The Hollywood Reporter, wrote “that fellow William Fox will not be kept out of the film business.” In what would become his famous “Tradeviews” column, Wilkerson was adamant that “the picture business needs Bill Fox because, aside from being an organizer, an operator, and an executive of the highest type, he has foresight, he knows values (picture values).” Wilkerson rightfully saw Fox’s foresight for moving the industry forward, but underestimated or didn’t realize the hole Fox was in.
Famed author Sinclair Lewis was commissioned by Fox to write a story that told the mogul’s side of his plight. Titled Upton Sinclair Presents William Fox (1933), Fox told Sinclair that after suffering the Great Depression and the pending loss of his life’s work, he would do two things. First, “he would like to see a law abolishing short selling.” Fox lost a great deal of money from people selling stocks that we in transition during a sale. The second, more important to Fox, was not allowing banks to have security organizations. These, in Fox’s estimation, were “nothing more than a gambling scheme to use funds belonging to the depositors for speculation.” Fox was understandably bitter at how Wall Street managed to get the mogul booted from his own company, but Fox also set up his own pitfall by ignoring the increasingly turbulent economy.
In May 1933, the New York Times wrote of the book, “Sinclair leads his subject through the torturous mazes of finance and the law, fighting the bankers and bitterly assailing the morality of their financial dealings with the movie emperor.” By October, Fox was looking for a million dollars’ worth of revenue from sound films, which he claimed a patent on, but the bitter shots in the Sinclair book made no friends in Hollywood or Wall Street. On October 14, the New York Times wrote that “the slams [Fox] put forth in print under the supervision of Sinclair seemed only like adding insult to injury.” Fox’s defenders were growing slim.
Fox had also been involved in litigation around his acquisition of the Tri-Ergon sound-on-film technology in 1929 and had been suing much of the industry for patent infringement. The lawsuits were flying for years. By 1934, Motion Picture Daily’s Terry Ramsaye described Fox’s legal assault as being “louder than it is large.” Fox believed his patent on a Tri-Ergon weighted flywheel that held the film steady for optimal soundtrack application carried enough power to bring in further royalties. In fact, this was the same tactic Thomas Edison deployed against rival companies that were using products claimed to be patented by the famed inventor. Similarly, there were cross-licensing arrangements that allowed other companies to produce similar components. Fox’s sway kept lawyers and politicians busy, taking his case to the Supreme Court where he would ultimately lose in 1935.
The Fox Film Corporation ultimately moved on with Harley Clarke in the top spot. The “merger specialist” wasn’t done, of course, as Fox would combine with 20th Century Pictures in 1935. The head of 20th Century Fox was Darryl Zanuck, who recently freed himself from a bitter struggle at Warner Bros. The lessons from yesteryear are the same as they are today. Every move made by a Redstone, Iger, or Zaslav is being watched by 21st Century vultures ready to prey.
The Hollywood Reporter‘s August 19, 1935 front page.
