The Master Switch: The Rise and Fall of Information Empires

by Tim Wu

The Edison cartel of 1908, for instance, fixed prices aggressively to make sure that, across the industry, costs would never exceed revenues. Likewise, the cartel’s enforcement of a certain homogeneity of product—simple plots, short films, no stars, and a ban on most imports—had the effect of ensuring that one film was as good as (or as bad as) another; by making all their offerings “fungible,” as an economist would put it, the cartel sought to iron out the discrepancy between the hits and flops, making the fate of any one film that much more predictable. The vertical integration of the studios that arose in the 1920s with Paramount and the rest can also be understood as an attempt to minimize risk to their investments. By owning every single part of the production and exhibition process, from the actors down to the seats in the theaters, the studios were able not only to control costs, but also to guarantee the size of their audiences, to some extent.