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Paramount Pictures can trace its beginning to the creation in May 1912 of the Famous Players Film Company. Founder Hungarian-born Adolph Zukor, who had been an early investor in nickelodeons, saw that movies appealed mainly to working-class immigrants. With partners Daniel Frohman and Charles Frohman he planned to offer feature-length films that would appeal to the middle class by featuring the leading theatrical players of the time (leading to the slogan "Famous Players in Famous Plays"). By mid-1913, Famous Players had completed five films, and Zukor was on his way to success.
Beginning in 1912, both Lasky and Famous Players released their films through a start-up company, Paramount Pictures Corporation, organized early that year by a Utah theatre owner, W. W. Hodkinson, who had bought and merged several smaller firms. Hodkinson and actor, director, producer Hobart Bosworth had started production of a series of Jack London movies. Paramount was the first successful nation-wide distributor; until this time, films were sold on a state-wide or regional basis. Not only was this inefficient, but it had proved costly to film producers. Also while Famous Players and Lasky were privately owned Paramount was a corporation so the other two companies were merged into Paramount on September 28, 1916. Soon the ambitious Zukor, unused to taking a secondary role, began courting Hodkinson and Lasky. In 1916, Zukor maneuvered a three-way merger of his Famous Players, the Lasky Company, and Paramount. The new company, Famous Players-Lasky Corporation, grew quickly, with Lasky and his partners Goldfish and DeMille running the production side, Hiram Abrams in charge of distribution, and Zukor making great plans. With only the exhibitor-owned First National as a rival, Famous Players-Lasky and its "Paramount Pictures" soon dominated the business.
Because Zukor believed in stars, he signed and developed many of the leading early stars, including Mary Pickford, Marguerite Clark, Pauline Frederick, Douglas Fairbanks, Gloria Swanson, Rudolph Valentino, and Wallace Reid. With so many important players, Paramount was able to introduce "block booking", which meant that an exhibitor who wanted a particular star's films had to buy a year's worth of other Paramount productions. It was this system that gave Paramount a leading position in the 1920s and 1930s, but which led the government to pursue it on antitrust grounds for more than twenty years.

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The driving force behind Paramount's rise was Zukor. All through the teens and twenties, he built a mighty theatrical chain of nearly 2,000 screens, ran two production studios, and became an early investor in radio, taking a 50% interest in the new Columbia Broadcasting System in 1928 (selling it within a few years; this would not be the last time that Paramount and CBS crossed paths, as time proved). By acquiring the successful Balaban & Katz chain in 1926, he gained the services of Barney Balaban, (who would eventually become Paramount's president in 1936), his brother A. J. Balaban, (who would eventually supervise all stage production nationwide and produce talkie shorts,) and their partner Sam Katz, who would run the Paramount-Publix theatre chain from New York City. Zukor also hired independent producer B. P. Schulberg, an unerring eye for new talent, to run the new West Coast studio. This new 26 acre studio, at 5555 Melrose Avenue, cost $1 million. In 1927, Famous Players-Lasky took on the name Paramount-Famous Lasky Corporation. Three years later, because of the importance of the Publix theater chain, it was later known as Paramount-Publix Corporation.

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Also in 1928, Paramount began releasing Inkwell Imps animated cartoons produced by Max and Dave Fleischer's Fleischer Studios in New York City. The Fleischers, veterans in the animation industry, would prove to be among the few animation producers capable of challenging the prominence of Walt Disney. The Paramount newsreel series Paramount News ran from 1927 to 1957.
Eventually, Zukor shed most of his early partners; the Frohman brothers, Hodkinson and Goldfish/Goldwyn were out by 1917 while Lasky hung on until 1932, when, blamed for the near-collapse of Paramount in the Depression years, he too was tossed out. Zukor's over-expansion and use of overvalued Paramount stock for purchases led the company into receivership in 1933. A bank-mandated reorganization team, led by John Hertz and Otto Kahn kept the company intact, and, miraculously, kept Zukor on. In 1935, Paramount Publix went bankrupt. in 1936, Barney Balaban became president, and Zukor was bumped up to chairman of the board. In this role, Zukor reorganized the company as Paramount Pictures, Inc. and was able to successfully bring the studio out of bankruptcy.

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As always, Paramount films continued to emphasize stars; in the 1920s there were Swanson, Valentino, and Clara Bow. By the 1930s, talkies brought in a range of powerful new draws: Miriam Hopkins, Marlene Dietrich, Mae West, Gary Cooper, Claudette Colbert, the Marx Brothers, Dorothy Lamour, Carole Lombard, Bing Crosby, the band leader Shep Fields and the famous Argentine tango singer Carlos Gardel among them. In this period Paramount can truly be described as a movie factory, turning out sixty to seventy pictures a year. Such were the benefits of having a huge theater chain to fill, and of block booking to persuade other chains to go along. In 1933, Mae West would also add greatly to Paramount's success with her movies She Done Him Wrong and I'm No Angel. However, the sex appeal West gave in these movies would also lead to the enforcement of the Production Code, as the newly formed organization the Catholic Legion of Decency threatened a boycott if it was not enforced. Paramount cartoons produced by Fleischer Studios continued to be successful, with characters such as Betty Boop and Popeye the Sailor becoming widely successful. One Fleischer series, Screen Songs, featured live-action music stars under contract to Paramount hosting sing-alongs of popular songs. However, a huge blow to Fleischer Studios occurred in 1934, after the Production Code was enforced and Betty Boop's popularity declined as she was forced to have a more tame personality and wear a longer skirt. The animation studio would rebound with Popeye, and in 1935, polls showed that Popeye was even more popular than Mickey Mouse. After an unsuccessful expansion into feature films, as well as the fact that Max and Dave Fleischer were no longer speaking to one another, Fleischer Studios was acquired by Paramount, which renamed the operation Famous Studios. That incarnation of the animation studio continued cartoon production until 1967, but has been historically dismissed as having largely failed to maintain the artistic acclaim the Fleischer brothers achieved under their management. In 1940, Paramount agreed to a government-instituted consent decree: block booking and "pre-selling" (the practice of collecting up-front money for films not yet in production) would end. Immediately Paramount cut back on production, from sixty-plus pictures to a more modest twenty annually in the war years. Still, with more new stars like Bob Hope, Alan Ladd, Veronica Lake, Paulette Goddard, and Betty Hutton, and with war-time attendance at astronomical numbers, Paramount and the other integrated studio-theatre combines made more money than ever. At this, the Federal Trade Commission and the Justice Department decided to reopen their case against the five integrated studios. Paramount also had a monopoly over Detroit movie theaters through subsidiary company United Detroit Theaters as well. This led to the Supreme Court decision United States v. Paramount Pictures, Inc. (1948) holding that movie studios could not also own movie theater chains. This decision broke up Adolph Zukor's creation and effectively brought an end to the classic Hollywood studio system.

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