the “option contract”
The economics of the star system is a necessary prelude to understanding how the studios safeguarded their most precious asset. The studios devised an ingenious legal document to control their high-priced talent, the “option contract.” This is how the contract worked. In signing an aspiring actor or actress, the studio used a contract that progressed in steps over a term of seven years. Every six months, the studio reviewed the actor’s progress and decided whether or not to pick up the option. If the studio dropped the option, the actor was out of work; if the studio picked up the option, the actor continued on the payroll for another six months and received a predetermined raise in salary. Note that the studio, not the star, had the right to drop or pick up the option. The contract did not provide reciprocal rights, meaning that the actor or actress could not quit to join another studio, could not stop work, and could not renegotiate for more money. In short, the contract effectively tied a performer to the studio for seven years.
The option contract did more than that: it had restrictive clauses that gave the studio total control over the star’s image and services; it required an actor “to act, sing, pose, speak or perform in such roles as the producer may designate”; it gave the studio the right to change the name of the actor at its own discretion and to control the performer’s image and likeness in advertising and publicity; and it required the actor to comply with rules covering interviews and public appearances. Another restrictive clause concerned picture assignments. If the aspiring star refused an assignment, the “studio could sue for damages and extend the contract to make up for the stoppage.”
The studios argued that the option contract was not as inequitable as it seemed because developing talent was expensive and risky. If a new player clicked, the studio was justified in wanting to cash in on its investment. If a new player showed little or no promise, it made no sense for the producer to carry him or her for seven years. Be that as it may, stars exercised little control over production. Some stars had story-approval rights and could refuse to appear in an unsympathetic or unflattering role, but in that event, the studio simply assigned the role to another performer. And once into a picture, a star had no say in the interpretation of his or her role, let alone the script, since that was largely the prerogative of the director.
from Tino Balio, Grand Design: Hollywood as a Modern Business Enterprise, 1930-1939 (University of California Press, 1993), p. 145-46