The system worked well in the early part of decade, but there were two very serious problems that had to be dealt with. The primary cause was the Great American Depression. At its worst, in 1933, more than 25% of the American work force was unemployed. Banks failed after the 1929 stock market crash and businesses failed. This dealt the industry a severe blow. The studios were not the only part of the economy hurt by unemployment. However, credit was quickly established by the glamour factories and the New Deal began to put people back to work.

The other problem facing the industry in the early 30's was the moralist censure articulated by the Protestant Church, civic and women's organizations and others offended by the moral standards in films. The scandals and licentiousness of the twenties had created the Hays Office in the prior decade. It was the oversight office for the content of film standards. By the beginning of the thirties, the old problem reasserted itself. Martin Quigley, a Roman Catholic layman and newspaper editor from Chicago, weighed in as an arbiter in the conflict. He was assisted by David Lord, a Roman Catholic Priest and advisor on Cecil B. DeMille's King of Kings. Together they drafted the Hollywood Motion Picture Code. It was yet another statement of the industry's articulation of the moral content for film. The Catholic Legion of Decency took the lead in threatening an economic boycott if the code's message was not enforced. With the Depression at its lowest ebb at the time, the code was adopted. By the following year, adjustments were being made to questionable material in films.

By the middle of 1934, Joseph Breene went to work for the Hays Office as head of the new Production Code Administration (PCA). The code was so stringent that films without the seal of approval of the PCA regarding their moral content were fined $25,000. It was because both producers and directors were members of the Motion Picture Producers and Distributors of America (MPPDA); they all subscribed to the Production Code Administration. Initially the Code was adopted to avoid the looming threatened economic disaster. It was dropped by the 1950's to make way for more realistic treatment of social and moral problems in films.