When Fox Made the Wrong Bets — and Wound Up In a Hostile Takeover

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Early in the morning of July 17, 1929, prominent figure William Fox, along with his financial manager Jacob Rubenstein, departed from Long Island en route to a golf game at the Lakeville Golf and Country Club. They were accompanied by film industry colleagues Adolph Zukor, Nicholas Schenck, and actor Thomas Meighan.

As the Rolls Royce driven by chauffeur Joseph Boyes drew near an intersection with reduced visibility, a horn blared. The expensive car collided with another vehicle, flipped over, and landed in a ditch. Tragically, Boyes perished, whereas Fox and Rubenstein survived, though their bodies were battered. Initially, it seemed their injuries were light, but as they departed the crash scene, Fox’s head was fractured, causing him to bleed profusely. He required a transfusion yet anticipated returning to work soon. By now, corporate predators could sense potential danger.

The history of Hollywood has been marked by turbulent times, much like those we face today, following the discovery of its immense profit potential. As movies quickly rivaled the wealth amassed during the Gilded Age, a diverse group of investors, business tycoons, financiers, and even gangsters flocked to the industry. One of many notable fallouts is that of William Fox, whose tale of collapse serves as a cautionary reminder as we navigate another significant phase in Hollywood’s evolution.

In the final years of the Roaring Twenties, Hollywood felt like the Wild West, with studios constantly maneuvering for advantage in a rapidly expanding market. Marcus Loew, the man behind MGM’s Loew’s, left us in 1927, but Warner Bros. made waves by introducing Vitaphone Sound on Disk technology that same year. Meanwhile, William Fox was also making headlines with his MovieTone sound-on-film technology, which eventually became the industry standard. The race to perfect synchronized sound was almost as intense as the competition to lead the biggest film studio on Earth. I couldn’t help but wonder who would step up and take over that mantle.

As a fervent admirer looking back, I’d say it was quite a leap for Fox Studios, with roots deeply embedded in New Jersey during the dawn of moving pictures alongside the legendary Thomas Edison, to set its sights on MGM. Fox had already carved out a formidable presence across the nation, boasting a string of successful films and stars like the captivating Theda Bara, known as “The Vamp”, and the iconic Western figure Tom Mix. Furthermore, Fox boldly introduced German auteur F.W. Murnau to Hollywood, though his life’s journey would unfortunately be marked by sorrow.

Combining Fox and MGM could result in annual savings of $17 million due to efficiency gains in sound-era film production and distribution. This sparked a competitive bidding process between Fox and Warner Bros., but the latter lacked the financial resources to execute the deal, eventually acquiring First National instead. Fox had already weathered numerous legal threats from Edison’s Motion Picture Patents Corporation and political manipulations by Tammany Hall in New York. Moreover, Fox maintained a strong financial footing, thanks to its ability to frequently issue new stocks, fueling rapid expansion.

In her book The Man Who Made the Movies, biographer Vanda Krefft notes that, during his pursuit of Loew’s, Fox was starting to resemble a monopolist concerning antitrust regulations. To counteract these concerns, Fox conferred with William J. Donovan from the U.S. antitrust division and argued that Fox and MGM would have rival theater chains in shared towns. This strategy allowed Fox to profit from both ventures. By June 1929, the deal was almost finalized without much resistance on antitrust issues. However, just before the deal sealed, Fox initiated substantial investments in expansion. Tragically, a car accident in July foreshadowed the weaknesses that would ultimately contribute to Fox’s demise.

In an ambitious move, Fox accumulated substantial debt to buy not only Loews and other properties, but his self-assurance outweighed economists’ warnings of impending doom. As he continued acquiring theater chains, Fox found himself in a precarious position on Black Tuesday, October 29, 1929. With banks collapsing, they demanded repayment. Fox was heavily indebted and his new acquisitions’ shares served as collateral. With assets being seized, he feared a forced sale. The banks that had financed his rapid expansion now refused to help him out. By December 14, 1929, the New York Times labeled Fox a “disturbing factor” due to $90 million in high-interest, short-term loans he took for empire-building. His stockholders grew wary and asked him to sell some assets. The combination of a car accident and the stock market crash put an end to any potential Fox/MGM merger, as Fox no longer had the resources to sustain it.

In April 1930, the founder of the company, Fox, was compelled to transfer his voting stocks. The purchaser was Harley Clarke, a versatile businessman from the Midwest known for his expertise in mergers, who had diverse interests ranging from real estate to theater and film. Initially, Clarke developed a rapport with Fox to explore financial opportunities for his expanding empire. At that time, Fox was seeking funds for a pioneering 70mm widescreen format called Grandeur.

Clarke, who acquired half of Grandeur, proposed making the technology and buying Fox shares, but the magnate declined his offer. In order to save the Fox Film and theater chain, Fox was compelled to sell his voting stock, which led Fox to label Clarke as a “vulture” forevermore. Following a string of public criticisms, an April 1930 headline in Motion Picture Herald declared “mudslinging ensues as Fox executives prepare to work under the new owner.

In October 1930, Billy Wilkerson, following his establishment of The Hollywood Reporter, penned an assertion that the film industry would not be able to exclude William Fox. In what later became known as his “Tradeviews” column, Wilkerson strongly believed that “the film industry requires Bill Fox due to his skills as an organizer, operator, and executive, but also because he possesses vision and understands the value of films.” Wilkerson correctly recognized Fox’s vision for progressing the industry, yet may not have been aware or underestimated the predicament Fox found himself in.

Renowned writer Sinclair Lewis was contracted by William Fox to pen a narrative portraying Fox’s perspective on his predicament, which became known as Upton Sinclair Presents William Fox (1933). In the midst of grappling with the Great Depression and the potential loss of his lifelong accomplishments, Fox expressed two intentions to Sinclair. Firstly, he expressed a desire to see a law enacted that would prohibit short selling. This practice had cost him substantial sums because people were selling stocks during a transaction. Secondly, and more crucial to Fox, was preventing banks from owning security organizations. According to Fox, these entities were essentially a high-risk gambling scheme that used depositors’ funds for speculative purposes. Fox harbored resentment towards Wall Street for orchestrating his ousting from his own company; however, he also set himself up for failure by disregarding the worsening economic climate.

In May 1933, the New York Times reviewed a book written by Upton Sinclair, titled “Sinclair criticizes Fox’s financial dealings and morality in the movie industry.” By October, Fox was seeking profits of one million dollars from sound films, which he claimed as his patent, but the harsh words used against him in Sinclair’s book didn’t win any allies in Hollywood or Wall Street. On October 14, the New York Times wrote that “the criticisms [Fox] made under the guidance of Sinclair seemed to be more like adding injury to insult.” Fox was losing supporters quickly.

In 1929, Fox found himself embroiled in numerous lawsuits concerning his acquisition of Tri-Ergon sound-on-film technology. He accused many industry players of patent infringement and these legal battles persisted for several years. Terry Ramsaye of Motion Picture Daily even described Fox’s legal onslaught as being “more noisy than substantial.” Fox felt that his patent on a weighted flywheel for the film stabilizer in soundtrack application would generate significant royalties. This tactic, using patents to exert pressure on competitors, was also used by Thomas Edison. However, there were cross-licensing agreements that enabled other companies to produce similar components. Fox’s influence kept legal professionals and politicians occupied, eventually leading him to the Supreme Court where he lost his case in 1935.

Eventually, Harley Clarke took over as head of Fox Film Corporation, remaining in that position even after the corporation merged with 20th Century Pictures in 1935. Darryl Zanuck, a well-known merger specialist at 20th Century Pictures, had just broken away from a contentious fight at Warner Bros. The strategies employed by Redstone, Iger, and Zaslav today are still being closely observed by modern vultures waiting to capitalize on any potential missteps.

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2025-07-03 18:55