Uneasy Entertainment

The tycoons who run the entertainment industry have not lately found it particularly entertaining. Last week's news was full of their worried maneuverings and head-scratchings.

R-K-O./- Pinched for cash, a few weeks ago Radio-Keith-Orpheum Corp. devised a means of selling stockholders new debentures. The conditions of the offer made it practically an assessment; the shareholder who did not subscribe would lose 75% of his proportionate ownership of the company (TIME, Nov. 23). Last week after a touch & go fight the R-K-O management, headed by Hiram S. Brown, backed by a directorate including Owen D. Young, obtained formal approval of their plan. One impediment was the large number of R-K-O shares registered in brokerage house names. Such stock is rarely voted. But the main impediment came from shareholders who thought the R-K-O plan too stiff. And while RKO's management claimed victory, dissenters were soon filing suits of protest.

First big protest came from a group of shareholders who united to form a protective committee, devise a substitute plan. At last week's meeting they admitted they thought the management's plan best, provided only half of the subscription ($2.50 per share) would have to be made at once. To this R-K-O agreed. Second challenger was aged Mrs. Caroline Lewis Kohl of Chicago, owner of 4,900 shares, widow of Charles E. Kohl who founded the oldtime Orpheum circuit. Represented by smart, aggressive little Lawyer George Langer Schein of Chicago, she wanted an adjournment, time to devise a reorganization scheme. But Lawyer Schein failed to round up enough proxies to be effective. R-K-O management mustered a vote of 66% of the outstanding stock, apparently was stronger than all dissenters combined. A threat was made by Hon. Clarence Cleveland Dill of Washington, member of the Senate's Interstate Commerce Committee. Ever alert to catch Radio Corp. off base, last week he said the R-K-O scheme unduly favored Radio Corp. (which controls R-K-O), took "advantage of the poor devil who has stock but no money." He threatened an inquiry by the Senate Banking Committee.

Warner Bros, was the first of the major companies to play a tragic role. Last week tragedy stalked it again. One Jules Endler, real estate dealer of Aygrigg Avenue, Passaic, N. J., saying he owned 310 shares, sued for a receivership. He charged the company was hopelessly insolvent, badly managed, paying preferred dividends out of surplus. Last year's losses, said he, were greater than reported (net income $7,074,000). The company replied that he was not a stockholder of record, that in any case his allegations were untrue. It claimed to be solvent, to owe no money to banks, to be buying things for cash in order to obtain discounts. No new knife-thrust was this for Warner Bros. Last year the company rode through a receivership suit, then carried on last spring after its bankers (Hayden, Stone & Co., Goldman, Sachs & Co.) abandoned it. The three Warner Brothers have lent their support to the company, have cried "the pay's the thing," have been among the leaders in reducing Hollywood salaries.

With Kuhn, Loeb & Co. as bankers, with a businesslike management, Paramount-Publix Corp. was long considered a model cinema company. It expanded, issued stock to pay for acquisitions. When last spring it was revealed that Paramount had agreed to buy the stock back should it drop, the model was no longer a model. A total of 153,485 shares at an average cost of $80 was the liability involved in this black cinemagic. Paramount stock dropped; cash dividends were replaced by stock dividends. Last month William Wrigley Jr., Albert Davis Lasker and John Daniel Hertz were added to the board, strong new blood from Chicago. All three are reputed large shareholders, ready to support the company in a crisis. Last fortnight President Adolph Zukor gave out a statement indicating there is no crisis at present. He said the company still has a $6,500,000 liability for the repurchase of its stock. Of this $2,500,000 falls due Jan. 2, the remainder is the balance of the $5,500,000 paid for a half interest in Columbia Broadcasting System. Inc. Bank loans, said President Zukor, were $8,200,000 against deposits of $5,500,000. The Wrigley-Lasker-Hertz touch was seen when he said: "The company has more than adequate confirmed bank credits to take care of all current obligations."

Flicker. Many a cinema bond & stock last week sold at prices which in normal times would indicate that the companies were flickering out into receivership.

High Last Week General Theatres, stock 15 1/2 1/2 bonds 74 3 Fox Film 38 3/8 3 Paramount, stock 50 1/4 7 1/2 Warner Bros. Stock 20 3/8 2 1/8 bonds 74 1/4 27 1/2 Columbia Pictures 22 - 7/8 Loew's 63 1/2 26

/-R-K-O production officials in Hollywood last week were amazed and delighted at the speed with which Edgar Wallace was turning out scenarios, told how he had written his first one in eight hours on his second day in Los Angeles.

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