It was a dark and stormy night on December 18, 1908. Okay—maybe it wasn't so dark and stormy. But it should have been, because that was the night Thomas Edison tried to hijack the motion picture industry.

"With his beetle brows, long wispy hair, and beatific look, Edison might have seemed the addled inventor," writes the historian Neil Gabler, "but he was a shrewd businessman and a fearsome adversary who was never loath to take credit for any invention, whether he was responsible or not."

Edison assembled representatives of the nation's biggest movie companies—Biograph, Vitagraph, American Mutoscope, and seven others—and invited them to sign a monopolistic peace treaty. Since 1891, when the Wizard of Menlo Park filed his first patent on a motion picture camera/film system, his lawyers had launched 23 aggressive infringement suits against other production outfits.

Sometimes Edison won. Sometimes he lost. But the costs of these battles overwhelmed his rivals, and that was the intent.

"The expense of these suits would have financially ruined any inventor who did not have the large resources of Edison," one of his lawyers boasted, "and it could hardly be expected that he would be able to prosecute simultaneously every infringement as it arose."

Thus his victims sold their patents, making the Edison movie empire ever larger.

But the old man wanted it all, so he assembled his rivals and proposed that they join his Motion Picture Patents Company. It would function as a holding operation for the participants' collective patents—sixteen all told, covering projectors, cameras, and film stock. MPPC would issue licenses and collect royalties from movie producers, distributors, and exhibitors.

To top it all off, MPPC convinced the Eastman Kodak company to refuse to sell raw film stock to anyone but Patent Company licensees, a move designed to shut French and German footage out of the country.

"The negotiations were finalized in December," Gabler notes, and by early January, "the company made its announcement that the old laissez faire of the movie business was being abruptly terminated."

Make no mistake, had Thomas Edison succeeded in this scheme, he would have killed the motion picture industry or at least delayed its flowering by a generation. The good news is that the Patents Company foundered for a couple of years, then was declared in violation of the Sherman Anti-Trust Act by a federal court.

But why did MPCC fail even before its legal demise? We have here an object lesson that the Internet empires of our time ought to consider. In essence, Edison's forces thought that they could dominate their industry via legal control over technology, in tandem with a cynical alliance with morals groups. Giving the public the kind of movies that it really wanted came last on their list of priorities—which was the cause of the Edison Trust's downfall.

The system

By 1908, the public's demand for silent films was already insatiable. "For the millions of urban working-class people and new immigrants, going to the movies represented not only an affordable amusement but an extraordinary fascination," writes the film historian Eileen Bowser. "It is possible that motion pictures have never had such a devoted and enthusiastic audience since these early years."

To this day scholars struggle to count the number of "nickelodeons" that operated at the time. Most of them ran about three or four short silent films over the course of a half hour and charged a nickel for the service. At least 2,500 operated in that year across the United States. Five years later there were 14,000.

Immigrant-stuffed Chicago was America's number one movie loving city. It boasted 407 theaters in 1909—in a region of two million people. "The foreigners attend in larger proportion than the English speakers," noted the Saturday Evening Post around this time. "This is doubtless because the foreigners, shut out as they are by their alien tongues from much of the life about them, can yet perfectly understand the pantomime of the moving pictures."

For the mostly lower-middle class Jewish and Catholic entrepreneurs who ran these theaters, the big challenge was providing consumers with a steady stream of new movies. The easiest way to get a film was to buy it from a producer. But individual production outfits took too long to come up with new fare, and given the short shelf life of a film, it was smarter to rent.

Enter the distributor: "It was a logical step for a supplier of lantern slides and optical goods, such as George Kleine in Chicago, to add a stock of films for rent or sale," Bowser notes.

But this was the vulnerable nexus upon which Edison and his allies pounced—the need for a predictable stream of product. The Patents Company created a subsidiary called General Film Exchange to enforce its rules and take its fees. General Film Exchange set up a strict procedure for collection and distribution. On Mondays, its administrators bought a predetermined quota of movies from the same five producers. On Wednesdays, they purchased films from another fixed group.

The compliant trade press told exhibitors what releases would be available when, and that was that. Movie house owners could not choose among these films, especially if they served small towns. They also couldn't hold films over due to popular demand.

"General Film did not usually allow for extraordinarily popular films by buying extra copies," Eileen Bowser adds. "Since an expensive production sold for the same price as the cheapest, the incentive was lacking, for both exhibitor and producer, to improve."