In 1944, the U.S. Supreme Court handed down what became known as the de Havilland decision, ruling that the standard seven-year contract then given to most actors could not be indefinitely lengthened by suspensions caused when an actor balked at appearing in a particular project. Olivia de Havilland, best remembered for playing the sweet and gentle Melanie in Gone with the Wind, had brought the suit against Warner Bros. that would help lead to the eventual collapse of the studio system. Bette Davis had tried the same tactic in the early 1930s, but at the time did not possess the star power to make her rebellion successful. Now, under the de Havilland decision, actors would know exactly when their contract was up, and key players within the industry, no longer indentured servants to their home studios, began to look around for better scripts, directors, and projects.

Then came another ruling: in 1947, the Supreme Court declared that the long-approved practice of block booking, in which a studio could force an exhibitor to take an entire slate of films, many of them inferior, in order to get more desired films, violated federal antitrust laws. Again, the studios reeled. As a result, each film had to be sold solely on its individual merits. The distribution strong-arm tactics that had served the studios so well for nearly half a century were suddenly outlawed, and thus the studios cut back on production, making fewer films but with higher budgets and production values, signaling the beginning of the end for the "B,” or "second,” features. This was followed by yet another ruling: the government filed antitrust suits against Technicolor and Eastman Kodak, alleging that the companies held an effective monopoly on the production of color motion pictures. The industry had gradually begun to shift from three-strip Technicolor to Eastman’s monopack system, using a single strand of film to record the full spectrum of color. By late 1948, Kodak agreed to make its color film patents available to competitors, ending Kodak’s lock on raw stock production and color processing.

The same year, RKO Radio decided to sell its theaters, anticipating that the other studios would soon be forced by the government to take the same action. Owning production, distribution, and exhibition facilities clearly constituted an unfair business advantage that the studios had been taking for years. In May 1948, the Supreme Court ordered a district court to look into the possibility of forcing the other studios to sell their theaters, thus signaling an end (for the time being) to Adolph Zukor’s master plan of vertical integration.

Paramount, which had fought the government the hardest on this decision, finally signed a consent decree in 1949 that required it to sell its theaters and distribution exchanges, concentrating solely on the production of motion pictures. Soon Twentieth Century Fox, MGM, and Warners were forced to sell their theaters as well. No longer did the majors have a guaranteed market for their films. Now, theaters could play whatever films they wanted, and the majors had to compete in an open marketplace.

In the final analysis, however, the consent decree eventually favored the studios, who could now dictate the terms for their key films, forcing theater owners to increase concession prices to defray operating costs.

The biggest studio blockbusters commanded enormous guarantees from the theater chains, which rapidly consolidated to offset their weak bargaining power. The studios also demanded a hefty percentage of the box office, often a 90-10 split in their favor for the first week of a major attraction. Despite this bargaining advantage, the studios were being backed into a corner by a combination of rising costs, shrinking markets, and new legal restrictions on their methods of doing business. To compete, the studios cut production costs to the bone, recycling scripts, sets, costumes, and musical scores to create cost-conscious films. Theater owners, with their new freedom to book whatever they wanted, began to turn to independent producers, who offered more favorable terms and reacted swiftly to fill the power vacuum left by the studios’ loss of power.

With the abrogation of the seven-year contract, one-year contracts or multiple-picture deals (usually two or three films at a time) became the industry norm. James Stewart became the first actor to command a percentage of a film’s gross with Anthony Mann’s brutal 1950 western Winchester ’73, part of a two-picture deal with Universal. The other film was Henry Koster’s Harvey (1950), based on the Broadway play about a man whose best friend is an imaginary six-foot rabbit. Universal paid Stewart a straight salary for Harvey, but then gave him a huge chunk of the gross for Winchester ’73, which the studio viewed as just another program western, unlikely to arouse much audience interest. The psychological penetration of Stewart’s performance, however, coupled with Mann’s aggressive visual style, made the film a breakout hit and turned Stewart into a millionaire almost overnight.

In the wake of Stewart’s successful deal, arranged by legendary Hollywood agent Lew Wasserman, other actors began leaving the security of studio contracts to freelance on a picture-by-picture basis, selling their services to the highest bidder. Humphrey Bogart, for example, left Warner Bros. after more than twenty years to form his independent Santana Productions, releasing his films through Columbia Pictures and working on material that both deepened and enhanced the depth of his range as an actor, such as Nicholas Ray’s superb Hollywood drama In a Lonely Place (1950).