Studio system
Star-driven system

In the 1950s Hollywood faced three great challenges: The Paramount case ending the studio system, the new popularity of television, and consumer spending providing its audience with many other leisure options. The scale of both box office successes and flops grew, with a "dangerous middle" consisting of films that in the previous era would have made money. A filmmaker stated in 1957 that "he one absolute disaster today is to make a million-dollar mediocrity. One of these you can lose not only your total investment but your total shirt." By that year Hollywood was only making about 300 feature films a year, compared to about 700 during the 1920s. Darryl F. Zanuck, head of 20th Century Fox, had no direct involvement with the studio from 1956 to 1962, and Louis B. Mayer, sacked in 1951 from MGM, died in 1957. Harry Cohn of Columbia, who died the following year, informed investors in the studio's annual report of 1957 that:

We find ourselves in a highly competitive market for these talents. Under today's tax structures, salary to those we are dealing with is less inviting than the opportunity for capital gains. We find ourselves, therefore, dealing with corporations rather than with individuals. We find ourselves, too, forced to deal in terms of a percentage of the film's profits, rather than in a guaranteed salary as in the past. This is most notable among the top stars.

Most actors became freelancers after the end of the studio system. Financial backers increasingly demanded star actors, directors, and writers for projects to reduce risk of failure. The growing importance of the overseas market—40 to 50% of Hollywood's total revenue by 1957—also emphasized stars' names as box-office attractions. With their new power, "working for nothing"—receiving a percentage of profit instead of a salary—became a status symbol for stars. A top actor could expect 50% of profit, with a minimum guarantee, or 10% of gross revenue. Cary Grant, for example, received more than $700,000 (equivalent to $ 6.2 million in 2023) from his 10% of the gross for To Catch a Thief (1955), while director and producer Alfred Hitchcock received less than $50,000. In one extreme case, Paramount promised Marlon Brando 75% of the profit of what became One-Eyed Jacks (1961). (Because of Hollywood accounting, studios still received much of the revenue before any profit sharing; thus, they preferred 50% of profit to 10% of gross.) The larger paychecks also increased the power of talent agents such as Lew Wasserman of MCA, whose office was now nicknamed " Fort Knox ".

By 1957, independent producers made 50% of full-length American films. Beyond working for others, top actors such as Gregory Peck and Frank Sinatra created their own production companies and purchased scripts. Top independent directors George Stevens, Billy Wilder, and William Wyler also saw their paychecks increase, in part because their involvement attracted star actors. Studios increasingly provided funding and facilities to independent producers as opposed to making their own films, or just like United Artists, they focused on distribution. While television had damaged Hollywood, TV production companies such as Desilu and the film studios' own TV divisions helped save the industry by using otherwise-unused facilities.
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