If the coming of sound changed the aesthetic dynamics of the filmmaking process, it altered the economic structure of the industry even more, precipitating some of the largest mergers in motion-picture history. Throughout the 1920s, Paramount, MGM, First National, and other studios had conducted ambitious campaigns of vertical integration by ruthlessly acquiring first-run theater chains. It was primarily in response to those aggressive maneuvers that Warner Brothers and Fox sought to dominate smaller exhibitors by providing prerecorded musical accompaniment to their films. The unexpected success of their strategy forced the industrywide conversion to sound and transformed Warner Brothers and Fox into major corporations. By 1929, Warner Brothers had acquired the Stanley theater circuit, which controlled nearly all the first-run houses in the mid-Atlantic states, and the production and distribution facilities of its former rival First National to become one of the largest studios in Hollywood. Fox went even farther, building the multimillion-dollar Movietone City in Westwood, California, in 1928 and acquiring controlling shares of both Loew’s, Inc., the parent corporation of MGM, and Gaumont British, England’s largest producer-distributor-exhibitor. Its holdings were surpassed only by those of Paramount, which controlled an international distribution network and the vast Publix theater chain. In an effort to become even more powerful, Paramount in 1929 acquired one-half of the newly formed Columbia Broadcasting System and proposed a merger with Warner Brothers. It was then that the U.S. Department of Justice intervened, forbidding Paramount’s merger with Warner Brothers and divorcing Fox from Loew’s.

Without government interference, “Paramount-Vitaphone” and “Fox-Loew’s” might have divided the entertainment industries of the entire English-speaking world between them. As it was, by 1930, 95 percent of all American production was concentrated in the hands of only eight studios—five vertically integrated major companies, which controlled production, distribution, and exhibition, and three horizontally integrated minor ones that controlled production and distribution. Distribution was conducted at both a national and an international level: since about 1925, foreign rentals had accounted for half of all American feature revenues, and they would continue to do so for the next two decades. Exhibition was controlled through the major studios’ ownership of 2,600 first-run theaters, which represented 16 percent of the national total but generated three-fourths of the revenue. Film production throughout the 1930s and ’40s consumed only 5 percent of total corporate assets, while distribution accounted for another 1 percent. The remaining 94 percent of the studios’ investment went to the exhibition sector. In short, as film historian Douglas Gomery pointed out, the five major studios of the time can best be characterized as “diversified theater chains, producing features, shorts, cartoons, and newsreels to fill their houses.”

Each studio produced a distinctive style of entertainment, depending on its corporate economy and the personnel it had under contract. MGM, the largest and most powerful of the major studios, was also the most “American” and was given to the celebration of middle-class values in a visual style characterized by bright, even, high-key lighting and opulent production design. Paramount, with its legions of UFA-trained directors, art directors, and cameramen, was thought to be the most “European” of the studios. It produced the most sophisticated and visually baroque films of the era. Conditioned by its recent experience as a struggling minor studio, Warner Brothers was the most cost-conscious of the major companies. Its directors worked on a quota system, and a flat, low-key lighting style was decreed by the studio to conceal the cheapness of its sets. Warner Brothers’ films were often targeted for working-class audiences. Twentieth Century–Fox was formed in 1935 by the merger of Fox Film Corporation and Joseph M. Schenck’s Twentieth Century Pictures after William Fox was bankrupted through his financial manipulations. The studio acquired a reputation for its tight budget and production control, but its films were noted for their glossy attractiveness and state-of-the-art special effects. RKO Radio was the smallest of the major companies and never achieved complete financial stability during the studio era; it became prominent, however, as the producer of King Kong (1933), the Astaire-Rogers dance cycle, and Orson Welles’s Citizen Kane (1941) and also as the distributor of Disney’s features.

The minor studios were Carl Laemmle’s Universal Pictures, which became justly famous for its horror films; Harry Cohn’s Columbia Pictures, whose main assets were director Frank Capra and screenwriter Robert Riskin; and United Artists, which functioned as a distributor for independent American features and for Alexander Korda’s London Film Productions. In terms of total assets, the five major studios were about four times as big as the three minor ones, with MGM, Paramount, Warner Brothers, and Twentieth Century–Fox all about the same size and RKO approximately 25 percent smaller than its peers. At the very bottom of the film industry hierarchy were a score of poorly capitalized studios, such as Republic, Monogram, and Grand National, that produced cheap formulaic hour-long “B movies” for the second half of double bills. The double feature, an attraction introduced in the early 1930s to counter the Depression-era box-office slump, was the standard form of exhibition for about 15 years. The larger studios were, for the most part, not interested in producing B movies for double bills, because, unlike the main feature, whose earnings were based on box-office receipts, the second feature rented at a flat rate, which meant that the profit it returned, though guaranteed, was fixed at a small amount. At their peak, the B-film studios produced 40–50 movies per year and provided a training ground for such stars as John Wayne. The films were made as quickly as possible, and directors functioned as their own producers, with complete authority over their projects’ minuscule budgets.

An important aspect of the studio system was the Motion Picture Production Code, commonly known as the Hays Code, which was implemented in 1934 in response to pressure from the Legion of Decency and public protest against the graphic violence and sexual suggestiveness of some sound films (the urban gangster films, for example, and the films of Mae West). The Legion had been established in 1933 by the American bishops of the Roman Catholic Church (armed with a mandate from the Vatican) to fight for better and more “moral” motion pictures. In April 1934, with the support of both Protestant and Jewish organizations, the Legion called for a nationwide boycott of movies it considered indecent. The studios, having lost millions of dollars in 1933 as the delayed effects of the Depression caught up with the box office, rushed to appease the protesters by authorizing the MPPDA to create the Production Code Administration. A prominent Catholic layman, Joseph I. Breen, was appointed to head the administration, and under Breen’s auspices Father Daniel A. Lord, a Jesuit priest, and Martin Quigley, a Catholic publisher, coauthored the code whose provisions would dictate the content of American movies, without exception, for the next 20 years.

In a swing away from the excesses of the “new morality” of the Jazz Age, the Production Code was monumentally repressive, forbidding the depiction on-screen of almost everything germane to the experience of normal human adults. It prohibited showing “scenes of passion,” and adultery, illicit sex, seduction, and rape could not even be alluded to unless they were absolutely essential to the plot and severely punished by the film’s end. The code demanded that the sanctity of marriage be upheld at all times, although sexual relations were not to be suggested between spouses. It forbade the use of profanity, vulgarity, and racial epithets; prostitution, miscegenation, sexual deviance, or drug addiction; nudity, sexually suggestive dancing or costumes, and “lustful kissing”; and excessive drinking, cruelty to animals or children, and the representation of surgical operations, especially childbirth, “in fact or silhouette.” In the realm of violence, it was forbidden to display or to discuss contemporary weapons, to show the details of a crime, to show law-enforcement officers dying at the hands of criminals, to suggest excessive brutality or slaughter, or to use murder or suicide except when crucial to the plot. Finally, the code required that all criminal activity be shown to be punished; under no circumstances could any crime be represented as justified. Studios were required to submit their scripts to Breen’s office for approval before beginning filming, and completed films had to be screened for the office, and altered if necessary, in order to receive a Production Code Seal, without which no film could be distributed in the United States. Noncompliance with the code’s restrictions brought a fine of $25,000, but the studios were so eager to please that the fine was never levied in the 22-year lifetime of the code.

The studio heads were willing not merely to accept but also to institutionalize this system of de facto censorship and prior restraint because they believed it was necessary for the continued success of their business. The economic threat of a national boycott during the worst years of the Depression was real, and the film industry, which depends on pleasing a mass audience, could not afford to ignore public opinion. Producers found, moreover, that they could use the code to increase the efficiency of production. By rigidly prescribing and proscribing the kinds of behavior that could be shown or described on the screen, the code could be used as a scriptwriter’s blueprint. A love story, for example, could move in only one direction (toward marriage); adultery and crime could have only one conclusion (disease or horrible death); dialogue in all situations had well-defined parameters; and so forth. The code, in other words, provided a framework for the construction of screenplays and enabled studios to streamline what had always been (and still is) one of the most difficult and yet most essential tasks in the production process—the creation of filmable continuity scripts. Furthermore, the Depression was a time of open political anti-Semitism in the United States, and the men who controlled the American motion-picture industry were mainly Jewish; it was not a propitious moment for them to antagonize their predominantly non-Jewish audience.

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Between 1930 and 1945, the studio system produced more than 7,500 features, every stage of which, from conception through exhibition, was carefully controlled. Among these assembly-line productions are some of the most important American films ever made, the work of gifted directors who managed to transcend the mechanistic nature of the system to produce work of unique personal vision. Those directors included Josef von Sternberg, whose exotically stylized films starring Marlene Dietrich (Shanghai Express, 1932; The Scarlet Empress, 1934) constitute a kind of painting with light; John Ford, whose vision of history as moral truth produced such mythic works as Stagecoach (1939), Young Mr. Lincoln (1939), The Grapes of Wrath (1940), My Darling Clementine (1946), and She Wore a Yellow Ribbon (1949); Howard Hawks, a master of genres and the architect of a tough, functional “American” style of narrative exemplified in his films Scarface (1932), Twentieth Century (1934), Only Angels Have Wings (1939), and The Big Sleep (1946); British émigré Alfred Hitchcock, whose films appealed to the popular audience as suspense melodramas but were in fact abstract visual psychodramas of guilt and spiritual terror (Rebecca, 1940; Suspicion, 1941; Shadow of a Doubt, 1943; Notorious, 1946); and Frank Capra, whose cheerful screwball comedies (It Happened One Night, 1934) and populist fantasies of good will (Mr. Smith Goes to Washington, 1939) sometimes gave way to darker warnings against losing faith and integrity (It’s a Wonderful Life, 1946). Other significant directors with less-consistent thematic or visual styles were William Wyler (Wuthering Heights, 1939; The Little Foxes, 1941), George Cukor (Camille, 1936; The Philadelphia Story, 1940), Leo McCarey (The Awful Truth, 1937; Going My Way, 1944), Preston Sturges (Sullivan’s Travels, 1941; The Miracle of Morgan’s Creek, 1944), and George Stevens (Gunga Din, 1939; Woman of the Year, 1942).

The most extraordinary film to emerge from the studio system, however, was Orson Welles’s Citizen Kane (1941), whose controversial theme and experimental technique combined to make it a classic. The first of six films Welles had contracted to produce for RKO with his Mercury Theater radio ensemble company, Citizen Kane made radically innovative use of sound and deep-focus photography as it examined the life of Charles Foster Kane, a character based on the press baron William Randolph Hearst. The film employs a complicated flashback structure in which Kane’s friends and associates give their accounts of the man after his death, paradoxically revealing not greatness or might but pathetic insecurity and emptiness. In creating this portrait of a powerful American who could bend international politics to his will but never fathom human love, Welles stretched the technology of image and sound recording beyond its contemporary limits. Using a newly available Eastman film stock with increased sensitivity to light, plastic-coated wide-angle lenses opened to smaller-than-normal apertures, and high-intensity arc lamps, cinematographer Gregg Toland achieved a photographic depth of field that approximated the perceptual range of the human eye and enabled Welles to place the film’s characters in several different planes of depth within a single scene. These deep-focus sequence shots are complemented throughout the film by the techniques of ambient and directional sound that Welles had learned from radio. Most important of all, the resonance of the film’s narrative matches the technical brilliance of its presentation, functioning on several levels at once: the historical, the psychological, and the mythic. Although recognized by many critics as a work of genius, Citizen Kane was a financial failure on its release, and Welles directed only three other films under his RKO contract. Citizen Kane remains, nevertheless, one of the most influential films ever made and is widely considered to be one of the greatest.