In his seminal work, The Business of the Theatre: An Economic History of the American Theatre 1750-1932, Alfred L. Bernheim found that the economic organization of the American theatre changed little from colonial times to the middle of the 19th century, but thereafter "the star system was the ferment which brought about a new economic order in the theatre" (1964, 26). The proliferation of stars in the 1880s only increased the public's demand for them; this caused managers to bid their salaries up, which necessitated reducing expenses elsewhere. The consequent demise of resident stock companies coincided with the rise of traveling combinations, which led to centralized production and booking out of New York.The entertainment industry ranked among America's big businesses, but sending combinations on the road for a season was complicated, all too often causing companies to be stranded.
As early as the 1880s, regional circuits began to be formed to facilitate the annual booking of attractions, each circuit represented by one theatre manager traveling to New York to visit the booking offices. Abraham Erlanger and Marc Klaw formed the Klaw & Erlanger booking agency in 1887, while Charles Frohman teamed up with Al Hayman. Those two partnerships joined with a third, Nixon and Zimmerman, in 1896 to form the Theatrical Syndicate or Trust with the intention of controlling distribution to the first-class theatres in every city across the nation. By 1903, the Syndicate exercised direct control over 70 theatres and indirectly influenced bookings in as many as 500 others (Bernheim 1964, 51-52), as well as powerfully influencing newspaper coverage.
During the first decade of the 20th century, the Syndicate's monopoly was challenged and broken by the Shuberts, who proceeded to operate every bit as ruthlessly as their rivals did. Bernheim notes that the period of most intense rivalry between the Syndicate and the Shuberts, 1909 to 1913, was also the period of decline of the road: "From being the backbone of the theatre business, the road became its diseased member" (1964, 79). Inferior plays were sent out, often performed by third-rate companies, while ticket prices steadily increased. Legitimate theatre also lost customers to vaudeville, motion pictures, radio, and the pleasures of the automobile.
The response of rank and file theatre workers to management's high-handedness was unionization: Actors' Equity Association (1912), United Scenic Artists of America (1918), the Dramatists' Guild (1919), and others. During the 1920s, theatre thrived in New York; the 1927-1928 season set the all-time record number of productions opening: 264. Meanwhile, the little theatre movement compensated for the dearth of professional productions in cities outside New York.
See also Speculation.