The story of the Universum-Film AG, popularly known as "Ufa," is inextricably bound to the history of German cinema in the first half of the twentieth century. As perhaps no other film company in relation to its national film culture, Ufa's changing fortunes were a barometer of the economic, political, aesthetic, and ideological struggles that took place in Germany until the aftermath of World War II. Although Ufa never monopolized the German market the way Paramount-MGM-Fox controlled the American industry, its power was both real, in terms of its combined production, distribution, and exhibition potential, and imagined, as the symbolic core of the German film industry's aesthetic aspirations. Founded by the German High Command in 1917, Ufa was the object of an American takeover in a country torn by postwar inflation, revolutions, and counterrevolutions, then co-opted in 1933 and inflated to a state-owned monopoly operated by the Nazi Party for its own propagandistic purposes, and ultimately deconstructed after the war by the Allies to protect American film interests, mirroring the German experience of war and revolution. Yet, ironically, the company tried to create for both its own employees and its audience a fragile, hermetic world, a Lebenswelt outside the strictures and commands of experience that existed only in the darkened caverns of the studio and in the minds of a people burdened with too much history.
Siegfried Kracauer was the first to recognize Ufa's ambiguous role in German history and cinema, stating unequivocally that "the genesis of Ufa testifies to the authoritarian character of Imperial Germany" (p. 37).
From this thesis he developed his reflection theory of Germany's fall, seeing in the myriad monsters created in Ufa's Babelsberg studios the precursors to the bureaucrats operating the concentration camps. David Stewart Hull, on the other hand, places Ufa at the center of the Filmwelt , a world in a vacuum where the "overriding concern was continuance of the artistic status quo and to hell with politics" (p. 7). Most film historians have taken one of these two positions: while more liberal writers have viewed Ufa as a bogeyman of the German right, bent on ideologically battering the German electorate, conservative historians have described Ufa as an apolitical free-trade zone catering to the desires of German film buffs. Most recently, Klaus Kreimeier has tried to move beyond this dichotomy, arguing that Ufa was always a massive bundle of contradictions and functioned precisely because it was able to bring under one roof German Realpolitik and expressionistic dreams, monopolistic studio policies and individual artistic aspirations, simultaneously surrendering to ideological imperatives while encouraging experimental daring.
Ufa was officially founded after a highly covert operation on 18 December 1917 when the banking firm of Lindstrom AG bought all German branches of the Danish Nordisk-Film Company for ten million reichsmarks. Included in the deal was the largest German cinema chain, Union-Theater AG, its distribution company, and the Oliver-Film, Nordisk's German production studio. Also purchased were Germany's oldest film producer, the Messter company (and its distribution arm, Hansa-Filmverleih), for an additional four million reichsmarks (plus 1.3 million reichsmarks in Ufa stock), and the Projektions "Union" A.G., Germany's second largest producer and owner of fifty-six cinemas, for 1.11 million reichsmarks, as well as several other smaller companies that owned laboratories, manufactured camera equipment, or provided related services. Thus with one fell swoop Ufa became Germany's first vertically and horizontally integrated film conglomerate, controlling exhibition, distribution, and production, which followed similar structural developments among the Hollywood majors. The merger had been organized by Emil Georg von Stauss, director of the Deutsche Bank, who, in association with high-placed individuals in the banking and electrical industry, had convinced the German military High Command under General Erich Ludendorff that such an enterprise was in the national interest: Ufa was to produce war propaganda and pro-German propaganda for neutral countries. Ludendorff had sent a memo on 4 July 1917 outlining the general strategy as well as the Prussian government's secret 55 percent financial participation. With the Armistice in 1918, however, the imperial government abdicated and Ufa was left to its own devices to produce entertainment films.