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The First World War entered its third year in 1917. From late August 1916 on, the Supreme Command was led by Chief of Staff Paul von Hindenburg and First Quartermaster General Erich Ludendorff, who for all practical purposes held power in the empire. Developments abroad exacerbated social tensions in Germany: the revolution broke out in Russia in February 1917, and on April 6 the USA declared war on Germany, provoked by the "unrestricted submarine warfare" of the Imperial Navy.Against this backdrop, military commanders turned to film as a means of influencing public opinion both domestically and abroad. In a #L#letter to the Royal War Ministry#L# (Material Ludendorff’s Letter) dated July 4, 1917, Ludendorff demanded "a consolidation of the German film industry" with the aim of "exerting an empathic, methodical influence on the broad masses in the interest of the state and in keeping with consistent, important viewpoints." Just a few months later, on December 18, 1917, Universum Film AG was established with a capital stock of 25 million marks—a fitting sum given the strength of the international competition, particularly the major French film groups Pathé and Gaumont.The capital stock was supplied by Deutsche Bank, the electricity companies AEG and Robert Bosch AG, the Hapag and Norddeutscher Lloyd shipping lines, as well as by the gramophone manufacturer Carl Lindström AG. Lindström was called in to negotiate with Nordisk-Film, a Danish company that had a strong position in the German market through its subsidiary Nordische Film GmbH. In exchange for its subsidiary, Nordisk-Film received a share of the capital stock. In a highly clandestine move, the state bought a stake worth 8 million marks (acquired later, in 1921, by Deutsche Bank). This stake was intended to ensure the influence of the imperial government, which was soon felt in the appointment of Ludendorff’s propaganda specialist, Major Grau, to the chairmanship of Ufa’s board of directors. Just before Christmas 1917, Director Stauß received a letter of congratulations from General Field Marshall Paul von Hindenburg: "A company has emerged with great national, political, commercial and cultural importance."
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The film company, which was Europe’s largest at its founding, did not materialize out of thin air. Via company acquisitions and exchanges of stock, the founders brought together a number of firms that were already successfully established in different areas of the film industry (technical services, production, distribution, movie theater operation, etc.). These firms formed the three pillars of the Ufa group, which came to include numerous smaller enterprises:— The Danish company Nordisk-Film gave up both its German subsidiary Nordische Film GmbH (including foreign interests) and the Oliver-Film GmbH production company.— The film pioneer Oskar Messter sold the diversified group he had set up himself, handing over to Ufa his glass studio in Tempelhof, which became the group’s preliminary central production studio. — The third pillar of the new film giant was Paul Davidson’s Projektions-AG Union (PAGU), which owned a second glass-and-steel building in Tempelhof. To the great annoyance of patron Ludendorff, though, the production departments of the new company (which operated under the old name) pursued their old artistic styles, primarily influenced by their successful stars and directors: together with Ossi Oswalda, Ernst Lubitsch shot his PAGU comedies; Henny Porten, the great star of the day, continued her work on Messter’s team; director and producer Joe May, whose company/studio "Weißensee" was temporarily part of the group, impressed audiences with his monumental three-hour work "Veritas Vincit" (1918/19) and with the lavish eight-part serial "Die Herrin der Welt" (Mistress of the World, 1920), a May production that Ufa distributed.
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