Capra had made two previous attempts at independent production. He formed Frank Capra Productions in 1939 and produced Meet John Doe, but dissolved it when he joined the U.S. Army Signal Corps in December 1941. Later during World War II he unsuccessfully sought a production partnership with director Leo McCarey. All four eventual partners in Liberty Pictures had spent most of World War II as officers making motion pictures for the Army Signal Corps, and were hesitant to return to working under the Hollywood studio system. Capra explained his dissatisfaction in an article for the New York Times: Briskin had been production chief at Columbia Pictures, where Capra had worked since 1927. Within months of Liberty's incorporation, directors William Wyler and George Stevens became partners. Liberty was capitalized at $1,000,000, and it had a standing bank credit of $3,500,000, for which the four owners were individually and collectively responsible. The ownership was divided unequally among the partners: 32 percent to Capra as president and organizer, 18 percent to Briskin, 25 percent each to Wyler and Stevens. But their voting rights were equal. By dissolving Liberty a few years hence, as the partners planned, they would pay only a 25% capital gains tax on the profits instead of the 90% income tax they would pay on their high salaries at a studio.
Production schedule
Liberty contracted in August 1945 to produce nine features for distribution by RKO, three each from the three producer-directors, who were each expected to deliver one picture per year. The production offices of Liberty Films were housed at RKO Studios. The company announced in November 1945 that its first production would be James Stewart in It's a Wonderful Life, produced and directed by Capra. Capra's next pictures were to be adaptations of Jessamyn West's novel The Friendly Persuasion and Alfred Noyes' novel No Other Man. William Wyler planned to direct an adaptation of Stendhal's The Red and the Black. George Stevens was announced to produce and direct One Big Happy Family, written by Joseph Fields. The film rights to the playState of the Union were acquired in late 1946, with an intended release before the presidential election in 1948. To obtain Spencer Tracy for the lead role, when he was under contract to Metro-Goldwyn-Mayer, Liberty Films agreed to pay for use of MGM's production facilities to make the picture, and to pay MGM's parent company a percentage distribution fee.
Fate of studio
Liberty's first release, It's a Wonderful Life, in December 1946, was a financial failure. Although it was in the top 7% of that year's films as ranked by box officegross, it was unable to recoup its high production cost of $2.3 million, much less show a profit. The partners sought a major studio to buy Liberty Films before bank foreclosure, although Wyler and Stevens were "violently opposed" to the idea at first. Paramount Pictures bought the company in May 1947. The four partners were given a total of $3,450,000 in Paramount stock, and Capra, Wyler, and Stevens were given five-picture contracts at Paramount. In the purchase, Paramount acquired Liberty's interest in three movies: It's a Wonderful Life, I Remember Mama, and State of the Union. The multi-picture deal at Paramount resulted in Capra directing Riding High and Here Comes the Groom; Stevens directing A Place in the Sun, Something to Live For, and Shane; and Wyler directing The Heiress, Detective Story, Carrie, Roman Holiday, and The Desperate Hours. The company was finally dissolved in April 1951. It's a Wonderful Life was incorporated into Paramount's pre-1950 library, and in 1955 Paramount sold it to U.M. & M. TV Corporation along with their many of their short subjects, which were all later sold to National Telefilm Associates, and in turn became Republic Pictures, which was sold to Paramount's current parent Viacom in 1999. Hence Paramount now once again owns It's a Wonderful Life. Paramount meanwhile held on to State of the Union for another two years until MCA acquired most of Paramount's pre-1950 theatrical sound features in 1957 then bought the US branch of Decca Records, which owned Universal Studios, in 1962. This explains why EMKA/NBCUniversal owns the rights to State of the Union today. Capra later wrote that the creation of Liberty Films was to " influence the course of Hollywood films, make four former Army officers independently rich, and virtually prove fatal to my professional career."
