The studio system was a means of film production, distribution and exhibition dominant in Hollywood from the early 1920s through the 1950s. The term studio system refers to the practice of large motion picture studios:
(a) Producing movies primarily on their own film-making lots with creative personnel under often long-term contract
(b) Pursuing vertical integration through ownership or effective control of distributors and movie theatres, guaranteeing additional sales of films through manipulative booking techniques.
The studio system was a model of vertical integration. The Big Five studios (MGM, Paramount, Warner Bros, RKO and Fox) all had controlling stakes in their own theatre chains, ensuring that their films would get distributed. There were a number of situations where one studio would control all the theatres in a town or city.
A key part of the studio system was block booking. They would sell a year’s worth of films to the theatres as a unit. Blocks would include a number of particularly attractive, big-budget films, which would be used to entice theatres to buy the whole block, as well as a mix of lower-budgeted B-movies of varying quality.
Foreign films could not get a foothold in the US unless they had arrangements with one of the eight US film companies in the Big 5 and Little 3. UK film companies such as London Films, Imperator Films and Rank Organisation did successfully distribute in the US by going through companies UA, RKO and Universal.
A 1948 Supreme Court ruling against those distribution and exhibition practices hastened the end of the studio system. This resulted in the majors being forced to divest themselves of their cinema chains. In 1954, the last of the operational links between a major production studio and theatre chain was broken and the era of the studio system was officially over.
The Golden Age of Hollywood 