Lehman Brothers Collection - Contemporary Business Archives

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Lehman Brothers Collection

Twentieth-Century Business Archives

Keith-Albee-Orpheum Corporation - Lehman Brothers Collection

Keith-Albee-Orpheum Corporation

List of Deals

The 1920s were years of much technological change and product innovation, which had an impact on many industries including broadcasting, motion picture production, and the theatre industry. The RCA Corporation played a large role in all three of these industries during these years. By the mid-1920s RCA had already established itself as a major player in radio broadcasting, and in 1926 it formed the National Broadcasting Company to control the radio stations owned by RCA.

In 1927 RCA’s parent company, General Electric, developed a system of recording sound on film called RCA Photophone. This new technology, which was considered superior to an existing system called Vitaphone, was viewed by RCA as a way in which the company could expand into the talking-picture business. Unfortunately, however, RCA was a late entry into the field.

The Vitaphone system had been developed by a Western Electric subsidiary, Electrical Research Products, Inc. (ERPI). Warner Brothers entered into an exclusive agreement with Western Electric in 1925 to produce talking pictures using the Vitaphone system. In 1926 several films using the Vitaphone musical sound tracks were produced. In October 1927 Warner released the first full-length sound film, The Jazz Singer, using the Vitaphone. This film created a national sensation and marked the beginning of the end for silent movies.

By the time RCA was ready to introduce the Photophone (which was not compatible with Vitaphone), the ERPI-Vitaphone system already enjoyed a near-monopoly position. In addition to retaining its original agreement with Warner Brothers, ERPI had signed up the "Big Five" motion picture companies: MGM, United Artists, Paramount, Universal, and First National Pictures. It had also begun to wire many American theatres for this system.

Faced with such a large obstacle, RCA concluded that it had little chance of winning away business from ERPI. The company decided that the only way to enter this industry and create a market for the RCA Photophone was to acquire an interest in a motion picture studio, which would then be joined with a theater chain.

RCA began the process of entering the motion picture business in October 1927 with the assistance of Joseph P. Kennedy by first purchasing a $400,000 interest in the Kennedy-controlled Film Booking Office of America (FBO).

Shortly afterwards, in January 1928, Kennedy organized a new company called the Keith-Albee-Orpheum Corporation. This new corporation would be formed from merging (1) the B.F. Keith Corporation, (2) the Greater New York Vaudeville Theatres Corporation, and (3) the Vaudeville Collection Agency as well as controlling interests in the B.F. Keith-Albee Vaudeville Exchange and the Orpheum Circuit, Inc. The merger as described in the KAO documents would be "a chain of vaudeville theatres, both in the United States and Canada, extending from the Atlantic to the Pacific coasts, and also a single booking office to book their own as well as independent theatres.”

Finally, in October 1928, RCA achieved its aim of entering the motion picture industry by organizing the Radio-Keith-Orpheum Corporation. This new corporation was formed by the merger of FBO Productions and the Keith-Albee-Orpheum Corporation, which gave RCA both the film production company and national chain of theaters that it desired. In exchange for its Photophone patents and the equipment installed in approximately 200 theaters, RCA was given a 20 percent interest in RKO, which began business with assets of $72 million.

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