Between 1895 and 1908, film evolved from static one-shots to an increasingly fluid and visually effective series of sequences. The audiences began recognizing cinema’s allure and film became a highly profitable business.
In 1902, Thomas L. Tally’s Electric Theatre in L.A. was the first permanent movie theatre in the U.S.
In 1905, an even plushier establishment with piano accompaniment opened in Pittsburgh. It charged its customers a nickel, so it became known as a nickel theatre (“Nickelodeon” was the fancy term), and within a few years there were over 5,000 in the U.S.
The relationship between the producer (the one who makes the film), the distributor (the one who sells the film) and the exhibitor (the one who shows it in a theatre) began here. This threeway relationship was so effective it remains to this day.
One of the earliest problems with the film industry in these days was the chaos over ownership and theft. Filmmakers were constantly stealing the techniques of other filmmakers without giving them credit.
As film gained in popularity there was pressure, threats, bankruptcy and collusion involved behind their production, but law and order was intended to finally arrive in 1908 when a treaty was formed between the nine leading film companies at that time: Edison, Biograph, Vitagraph, Essanay, Lubin, Selig, Kalem, Méliès and Pathé.
The combine was called the Motion Picture Patents Company. The members agreed to share the legal rights to their various machine and film patents, and after ten years of piracy and bickering, the war of the patents was finally over.
Of course, this meant that only people who worked at one of these nine companies were allowed to distribute films in America, and the company was so powerful that they even got the exclusive rights to George Eastman’s film stock factory and would only work with exhibitors who worked exclusively with their label, the General Film Company.
As if this wasn’t Draconian enough, the censorship issue caused the formation of the self-monitoring National Board of Censorship in 1908 (renamed the National Board of Review in 1915), and this was a roadblock on artistic freedom that hurt the film industry more than help it.
The grip of the Board of Censorship prompted a rise in independent distribution and some people who were opposed to the Motion Picture Patents Company became independent producers.
Among these independent producers were Carl Laemmle, the man who would eventually found Universal, and William Fox, founder of the company that would eventually become 20th Century Fox. Both Laemmle and Fox (pictured below) were distributors and theatre owners who became film producers to have more control over the movies they sold.
Adam Kessel and Charles Baumon formed the New York Motion Picture Company, which eventually founded the film careers of important players like Thomas Ince, Mack Sennett and Charlie Chaplin. Edwin S. Porter founded Rex Company (later swallowed by Paramount). Most successful of all was Laemmle’s Independent Motion Picture Company (IMP).
By late 1915, the independents had risen and the Motion Picture Patents Company had fallen. The Patents Company was busted as an illegal trust with poor business management (plus the nine film companies that formed the trust were dying), and the independent companies (Fox, Universal, Paramount) prospered and propelled the movies into their next era.
The last of the original trust companies, Vitagraph, was swallowed by Warner Bros. in 1925.