RKO Pictures - Origin of Company

Origin of Company

In October 1927, Warner Bros. released The Jazz Singer, the first feature-length talking picture. Its success prompted Hollywood to convert from silent to sound film production en masse. The Radio Corporation of America (RCA) controlled an advanced optical sound-on-film system, RCA Photophone, recently developed by General Electric, RCA's parent company. However, its hopes of joining in the anticipated boom in sound movies faced a major hurdle: Warner Bros. and Fox, Hollywood's other vanguard sound studio, were already financially and technologically aligned with ERPI, a subsidiary of AT&T's Western Electric division. The industry's two largest companies, Paramount and Loew's/MGM, with two other major studios, Universal and First National, were poised to contract with ERPI for sound conversion as well.

Seeking a customer for Photophone, in late 1927 David Sarnoff, then general manager of RCA, approached Joseph Kennedy about using the system for Kennedy's modest-sized studio, Film Booking Offices of America (FBO). Negotiations resulted in General Electric acquiring a substantial interest in FBO—Sarnoff had apparently already conceived of a plan for the company to attain a central position in the film industry, maximizing Photophone revenue. Next on the agenda was securing a string of exhibition venues like those the leading Hollywood production companies owned. Kennedy began investigating the possibility of such a purchase. Around that time, the large Keith-Albee-Orpheum (KAO) circuit of theaters, built around the then-fading medium of live vaudeville, was attempting a transition to the movie business. In mid-1927, the filmmaking operations of Pathé (U.S.) and Cecil B. De Mille's Producers Distributing Corporation had united under KAO's control. Early in 1928, KAO general manager John J. Murdock, who had assumed the presidency of Pathé, turned to Kennedy as an adviser in consolidating the studio with De Mille's company, Producers Distributing Corporation (PDC). This was the relationship Sarnoff and Kennedy sought.

After an aborted attempt by Kennedy to bring yet another studio that had turned to him for help, First National, into the Photophone fold, RCA was ready to step back in: the company acquired Kennedy's stock in both FBO and the KAO theater business. On October 23, 1928, RCA announced the creation of the Radio-Keith-Orpheum holding company, with Sarnoff as chairman of the board. Kennedy, who withdrew from his executive positions in the merged companies, kept Pathé separate from RKO and under his personal control. RCA owned the governing stock interest in RKO, 22 percent; in the early 1930s, RCA's share of stock in the company rose as high as 60 percent. The company's production and distribution arm, presided over by former FBO vice-president Joseph I. Schnitzer, was incorporated early in 1929 as Radio Pictures. Looking to get out of the film business the following year, Kennedy arranged in late 1930 for RKO to purchase Pathé from him. On January 29, 1931, Pathé, with its contract players, well-regarded newsreel operation, and Culver City studio and backlot, was merged into RKO as Kennedy sold off the last of his stock in the company he had been instrumental in creating.