H.—44A

7. The box-office returns from films vary to an extent which is not generally realized by the public. It will be seen from paragraph 43 of the Appendix that most of the principal theatres in the cities and large towns are operated by chain theatre companies, and it is the practice in the cities for exhibitors to divide the films available between their theatres according to a grading made after preview of the films—the better-class films being exhibited in the larger and more comfortable theatres. Confidential returns for the year ending 30th September, 1933, submitted to the Committee in respect of operations in one city showed that even in the theatres in which the higher-grade film is screened the maximum and minimum weeklv receipts varied in the proportion of eight to one, while the variation between the maximum weekly receipts for first-grade and the minimum for second-grade films was in the proportion of seventy to one. 8. The evidence showed that the general policy adopted in New Zealand differed from most other countries in that, as a general rule, only one "feature" or long-story picture is shown at each performance, while in America, Great Britain, and Australia it is customary to show two "features" on the one programme. The question of the quality of the film is therefore more important under New Zealand conditions, and it was made clear in evidence that a theatre cannot operate successfully unless a fair proportion of films of reasonably high entertainment value are screened. Obdeb of Refeeence No. (1) Whether the 'present forms of contract used by the film exchanges are reasonable and equitable, and as to the desirability or otherwise of the provision of a standard form of contract and the terms and conditions of such contract. 9. The question of contracts for renting film must be considered in relation to the " blind " and " block " booking of film, described in paragraphs 19 to 24 of the Appendix, which is general in the industry. The form of contract which was selected for particular consideration during the inquiry as being the most comprehensive, was that used by Warner Bros. First National Pictures, Ltd., and a copy of this is printed at the end of the Appendix. It will be noted that this contract form comprises no less than sixty-five clauses. 10. The contract forms used by the other renters, and particularly American-owned companies, contain most of the important clauses of this contract, although in some cases expressed in different wording. During the inquiry some exception was taken by counsel and the principal the Film Exchanges' Association to the contract form being referred to as " definitely one-sided " in paragraph 28 of the Appendix. (Reference should also be made to paragraphs 29 to 32 and 50 to 56.) After perusal of the contract forms in use and consideration of the statements made on behalf of the Exhibitors' Association and by counsel for the renters, the Committee had no difficulty in coming to the conclusion that this description was amply justified. 11. The concensus of opinion of exhibitor witnesses appeared to be that the reform of the contractual arrangements between renter and exhibitor was one of the most important matters brought before the Committee. Several witnesses with long experience in the business expressed the view that if an equitable standard contract were arranged, most of the difficulties in the industry as at present operated would be overcome. The only exhibitor witness giving negative evidence was the representative of Amalgamated Theatres, Ltd., but this witness admitted in cross-examination that his firm was in a particularly fortunate position with respect to its contractual relations, firstly, because it had considerable buying-power as being the second largest chain of theatres, and, secondly, that it was in the renters' interests to keep his company operating in opposition to the other chain-theatre interests, which are more or less associated in business. 12. On behalf of the exhibitors generally the representative of the Exhibitors' Association took exception to the whole or part of the following clauses of Warner Bros.' contract: 6, 6a, 9, 10, 15, 16, 17, 19, 21, 23, 25, 26, 28, 29, 30, 32, 34, 37, 41, 45, 46, 48, 50, 51, 61, 63, and 64. It is considered desirable to make special reference to the more important of these clauses. 13. Renter s Right of Cancellation. —This clause, which reads as follows, is numbered 21 in Warner Bros.' contract " If by reason of the burden of any existing or future duties taxes charges or impositions or the award of any industrial arbitration or conciliation court tribunal board or committee or by reason of any legislation or statutory ordinance rule or regulation it should at any time hereafter be in the opinion of the Distributor no longer commercially profitable to carry on its business as a Distributor of films and/or sound records and/or advertising materials and/or accessories either in whole or in part or to perform this agreement (of which matters the Distributor shall be the sole judge without its decision being subject to review by _any court or tribunal) the Distributor may at its option terminate this agreement on giving thirty days' notice of its intention so to do to the Exhibitor without incurring any liability whatsoever to the Exhibitor by reason of such determination. Such determination shall be without prejudice — " (a) To the right of the Distributor to recover from the Exhibitor all moneys due and payable by the Exhibitor to the Distributor up to the date of such determination and "(b) To the right of the Distributor to recover from the Exhibitor damages for any breach of this Agreement committed by the Exhibitor up to the date of such determination and " (c) To all causes of action which shall have accrued to the Distributor prior to or on the date of such determination." This was inserted in identical form in all the American contracts at the time trading was renewed after the hold up of film during the film-hire-tax dispute in 1930. It was suggested by the principal

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