How ‘It’s a Wonderful Life’ Went From Box Office Dud to Accidental Christmas Tradition

Director Frank Capra’s 1946 classic It’s a Wonderful Life is sacred in the holiday movie pantheon. It’s not as quotable as A Christmas Story (1983) or as lyrical as 1966’s How the Grinch Stole Christmas!, but the story of George Bailey has a universal message behind it that endures more than 70 years later. Though the movie is the quintessential Christmas tale today, when it was first released in 1946, audiences and critics were lukewarm toward the picture, resulting in a box office disappointment that killed Capra’s nascent production company, Liberty Films. In a strange twist, decades after it was first released, an unlikely clerical screw-up managed to turn It’s a Wonderful Life into the Christmastime staple we know today.

In the 1930s, Capra became a magnet for Academy Awards, directing movies like the screwball comedy It Happened One Night (1934) and Mr. Smith Goes to Washington (1939). After Pearl Harbor, Capra knew he could contribute something to the war effort, so he took a post in Washington overseeing the development of U.S. propaganda films for the government—most notably the award-winning Why We Fight series of documentaries.

Upon returning to Hollywood from Washington in 1945, Capra—along with other wartime directors William Wyler and George Stevens—helped finance Liberty Films, an independent production company poised to give filmmakers the one thing they all dreamed of: freedom. The company’s first film would be an adaption of a short story titled “The Greatest Gift,” which would also appear in Good Housekeeping under the title “The Man Who Was Never Born,” and would be adapted for the screen as It’s a Wonderful Life. It’s one of the few movies Capra also received a screenwriting credit for, and with a proposed budget of $2 million, it was a huge gamble for Liberty.

Something Akin to a Nightmare

In the book Five Came Back: A Story of Hollywood and the Second World War, writer Mark Harris describes It’s a Wonderful Life’s production process as something akin to a nightmare. Script rewrites, a bloated shooting schedule, and an ever-changing crew cost the studio nearly all of the original $2 million budget—well before filming was even wrapped. The spending became such a concern for Capra’s partners at Liberty that George Stevens remarked, “Why the hell couldn’t it be springtime?” when he saw how much it cost the production to produce fake snow for shots. Capra bet Liberty’s future on audiences looking for some comforting nostalgia after the war, but he was about to see firsthand just how much the world had changed since he came back.

The original plan was to release It’s a Wonderful Life in January 1947, after the Oscar deadlines, but when RKO—the film’s distributor—needed a movie to release in time for Christmas, Capra’s project was the easy solution. It opened just weeks after William Wyler’s major studio film The Best Years of Our Lives, a hard-hitting drama about a U.S. soldier coming home after the war to pick up his life again. The two films couldn’t be any more different, and the reviews reflected that.

Even at nearly three hours long, The Best Years of Our Lives was an absolute hit with critics and at the box office, recouping its budget multiple times over. It’s a Wonderful Life, with its inflated budget and saccharine tale touting old-timey values, was met with a whimper, making only an estimated $3.3 million against a $3.7 million budget. Wyler beat Capra in every way: reviews, box office, and awards. The Best Years of Our Lives won seven Academy Awards, including Best Picture, while It’s a Wonderful Life received only a lone technical award—ironically for the fake snow Stevens loathed.

Liberty Films had borrowed more than $1.5 million to make the film, and with such a disappointing box office return, the production company was soon sold off to Paramount. Capra only directed five feature films afterwards, none of which ever reached the heights of his pre-war work. As unlikely as it seems today, It’s a Wonderful Life was seen as a flat disappointment destined for anonymity—until a clerical error changed its fate.

A Wonderful Free-for-All

In 1974, the movie entered the public domain after the film’s copyright holder simply forgot to file for a renewal. This meant that TV stations everywhere could play It’s a Wonderful Life all day and all night and not have to pay a cent for it. Networks aren’t necessarily shy about exploiting free Christmas content, and the film’s reemergence on television gave Capra’s story new life. While a post-World War II crowd may have rejected the movie’s sentiment, subsequent generations seem to revel in the opportunity to visit the nostalgic whimsy of it all.

“It’s the damnedest thing I’ve ever seen,” Capra once told The Wall Street Journal about the film’s revival. “The film has a life of its own now and I can look at it like I had nothing to do with it. I’m like a parent whose kid grows up to be president. I’m proud ... but it’s the kid who did the work. I didn’t even think of it as a Christmas story when I first ran across it. I just liked the idea.”

Legalities rewrote the history of It’s a Wonderful Life yet again in 1993. The Supreme Court’s previous ruling in Stewart v. Abend established a precedent that allowed the film’s original copyright owner—Republic Pictures—to regain its ownership of the movie. The ruling claimed that since Republic owned the copyright on the original short story the movie was based on, and the score for the film, they, in essence, still owned the movie. So what was once a near barrage of networks airing It’s a Wonderful Life has since been pared down to just one: NBC.

The network paid for exclusive rights to air the movie, which is why you often only see It’s a Wonderful Life on TV once or twice during the holidays. (Though in 2022, E! scheduled a couple all-day marathons of the film.) The film that killed a production company 70 years ago is now an annual television event and part of countless family traditions around the globe. It turns out Capra always knew what audiences wanted—he just needed to wait for the right clerical error to prove it.

A version of this story originally aired in 2018; it has been updated for 2022.