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1903: The Emergence of the Film Exchange
The introduction of the film exchange into the fledgling movie business swiftly transformed the industry and made possible its rapid expansion. Until their inception exhibitors had purchased their films, a heavy financial investment which eventually saw them exchanging films amongst themselves.
Harry J. Miles, a freelance cameraman, was one of the first to see the need for a company that neither produced or exhibited films, but acted as a middle-man, distributing them from the manufacturers to the exhibitors. Early in 1903 he established the Miles Brothers’ Exchange with his brother Herbert. This new company purchased films from the manufacturers then rented them out to exhibitors at one-quarter of their purchase price.
The arrangement quickly proved to be a huge success, with all involved benefiting: Manufacturers now had one large customer who virtually guaranteed to buy nearly all their output at an increased price, and enjoyed an increased market for their films because exhibitors, who were now paying less for their films, could change their programs more frequently. Exhibitors could also now compile a program of films from several manufacturers without taking the time and trouble to obtain the pictures from different sources. For their part, the exchange could continue renting out a film long after they had recouped the cost of its purchase.
The Miles Exchange Co was so successful that it wasn’t long before they found themselves competing with rival exchanges, the more important of which were Percival Waters’ Kinetograph Co in New York, Eugene Cline & Co and George Kleine in Chicago. Films began to be graded in accordance with their value, and exhibitors bid with each other to obtain the latest releases first, which stimulated competition amongst the exchanges to get first choice of new releases from the manufacturers. A first run film would cost an exhibitor 20 times the cost of an older ‘twentieth run’ movie. [ADD]
(Source: The Rise of the American Film: A Critical History, Lewis Jacobs; Harcourt Brace, 1939)
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