The Paramount company was founded by W. W. Hodkinson on May 8, 1912, as a merger of 11 film rental bureaus, Paramount was the first company that did nationwide distribution, thus gaining a huge efficiency advantage over the old regional States' Rights system. The company did 5-year exclusive contracts with Adolph Zukor's Famous Players, Jesse Lasky's Feature Play and with Bosworth, the contracts were expanded to 25 years later (see Vertical Integration). Paramount also introduced the block-booking system, which meant that an exhibitor who wanted to show a particular Famous Players movie had to buy an entire package, containing a set of (mostly mediocre) films from all companies that worked together with Paramount. This system was very efficient for the involved production firms and in 1917, Adolph Zukor bought Paramount and merged it with Famous Players.
The new firm was called Paramount Pictures Corporation, and was the dominating force in the American market, it had most of the major stars under contract (like Mary Pickford, Douglas Fairbanks). Adolph Zukor also fired W. W. Hodkinson, who founded First National to challenge Paramount's power. First National controlled a large portion of the nation's cinemas and thus Paramount decided to build its own chain of cinemas and achieved yet greater control of the market (in 1920, it controlled 5000 cinemas, 25% of the market). In 1919, First National and Paramount planned to merge, to gain full control of the market and to cut production cost, because they figured that stars couldn't demand huge sums if there was only one major company to work for. But the plan was uncovered by a private eye hired by Charlie Chaplin, Mary Pickford, Douglas Fairbanks and David Wark Griffith, who wanted to know why the major companies did not prolong their contracts. In reaction to the plan, they decided to found their own distribution company, United Artists, which effectively ended the efforts to found a monopoly. Nevertheless, Paramount was one of the dominating companies in the Second Oligopoly until the United States Supreme Court split the company in two in 1949.
After World War II, Paramount struggled to keep up with the changing movie business. It sold its pre-1950 back catalog of features to MCA (then a talent agency and fledgling TV production company); when the company was split, the theater half became United Paramount Theatres, which later merged with ABC. Paramount also had a hand in creating (and, ultimately, destroying) the DuMont network through its ownership of Los Angeles TV station KTLA.
In 1966, Paramount was purchased by Gulf+Western, an industrial conglomerate. Gulf+Western also purchased the Desilu television studio from Lucille Ball the next year, reincorporating it as Paramount Television. G+W installed producer and actor Robert Evans as studio head; this proved to be a smart move, as in the next ten years Paramount would become the Number One studio in Hollywood, and produce such classics as the Godfather series and Rosemary's Baby, despite Evans' snarky personality and penchant for getting himself into trouble. Above him were first Frank Yablans and then Barry Diller, each answering to G&W chief Charles Bluhdorn. Paramount Television was also very successful, creating such classics as Happy Days, The Brady Bunch, and Cheers, and maintaining the Star Trek franchise that had exploded in the early 1970s after NBC's cancellation of the series in 1969 and its subsequent sale to syndication.
Paramount's successful run extended into the 1980s and 1990s, generating such hits as the Friday The 13th slasher series, Raiders of the Lost Ark and its sequels, Beverly Hills Cop (part of a string of films starring comedian Eddie Murphy) and the Star Trek feature films, as well as Oscar winners like Atlantic City and Forrest Gump. By this time, G+W had sold off most of its industrial divisions, and in 1989, they changed their name to Paramount Communications. In 1993, Viacom entered a bid to purchase the studio, which they won in 1994.
Paramount Pictures was unconnected to Paramount Records, until it purchased the rights to use Paramount Records' name (but not its back catalogue) in the late 1960s. Paramount used the name to publish soundtrack albums and pop records from the Dot Records back catalogue, since Dot had been switched over to all-country . In 1974, Paramount sold all of their record holdings to ABC Records.