Kennedy's next career step appears, at first sight, like a radical departure. In 1926, engineering a deal to buy the company Film Booking Offices, he stepped fully into the still-new and burgeoning movie industry. But as with most of Kennedy's business moves, the decision had long roots and was the result of careful observation. As early as 1919, Kennedy had purchased the Maine and New Hampshire Theatres Company, a small chain of New England movie houses. His experience with the chain showed him the promise of the movie business but also that the real money was being made in production rather than distribution. His first connection with FBO was through Hayden, Stone, which had been approached by a British firm that held a controlling interest in the Robertson-Cole Company, the parent organization for FBO. Dissatisfied with the money-losing habits of Robertson-Cole/FBO, its British owners looked to Hayden, Stone for help in finding a buyer in the United States. Because of his interest in the film industry, the project was assigned to Joseph Kennedy, who was also retained as a financial advisor to Robertson-Cole. Although he was unsuccessful in finding a buyer, his position with Robertson-Cole/FBO gave Kennedy further insight into the movie business and fueled in him the ambition to purchase the company himself. But it was not until the summer of 1925 that Kennedy could put together an offer, in a consortium that included Guy Currier, Louis Kirstein, head of the Boston chain of Filene's department stores, and even his own father-in-law, "Honey Fitz" Fitzgerald. The million-dollar offer was turned down flatly as insufficient; yet a little more than six months later, the British owners, perhaps finally discouraged by the many ways FBO found to lose money, suddenly chose to accept the bid.
Joseph Kennedy represented a new and coming thing for Hollywood. Moviemaking had always been a business, and often a cutthroat one at that, but its newness had worked against it, encouraging lax business practices and deterring stable investment. When he took over FBO, Kennedy brought both the stability and the expertise of an established businessman. With the creation of a finance company, Cinema Credits Corporation, Kennedy could tap into his many contacts in the financial world. At the same time he enforced a fiscal discipline on FBO that was new to the company and, indeed, Hollywood in general.
Marking his new position as movie mogul, Kennedy made a major move personally, taking his family from Boston to the New York suburb of Riverdale. The family had doubled in size. Three more girls had followed Rosemary – Kathleen (February 20, 1920), Eunice (July 10 1921), and Patricia (May 6, 1924) – before a third boy, Robert, was born on November 20, 1925. Another girl, Jean (February 20, 1928) would be born not long after the family settled in New York. In later years, Kennedy would state that the social constraints on his Irish Catholic family in Yankee-dominated Boston had motivated the move, but at least as much of a factor was Kennedy's need to enter a broader, more varied business arena now that his own interests had widened and enlarged.
For the most part, Kennedy spent 1926, his first year as a studio owner, getting FBO on a sound business footing. He did undertake an advantageous side venture, arranging for a series of lectures at Harvard, subsequently turned into a book, on the history of film, to be given by some of the most notable names in Hollywood. These men, many of whom had little organized education beyond elementary school, were immensely flattered by the invitation to speak at one of the great universities of the country. Despite Harvardites who grumbled at a connection with anything so disreputable as the movies, the university also benefited, not least from a sizable donation by Kennedy to help set up a film library. As the recipient of gratitude from all sides, Kennedy profited most of all, gaining an introduction to and the confidence of some of the most powerful men in the film industry.
In the fall of 1927, Kennedy began in earnest his efforts to advance his position in Hollywood by approaching David Sarnoff, head of Radio Corporation of America. As the developer of Photophone, a sound system for the new "talkies," RCA needed to forge a connection with Hollywood to sell its product. At the same time Kennedy knew that he needed to compete in the new market of sound films and to do so he would have to have access to a technology that was not proprietary, which was the case with Warner Brothers' Vitaphone, the most successful sound process to date. The corporate alliance between FBO and RCA was cemented with the purchase by FBO of the Keith-Albee-Orpheum theater chain, which would provide the venues for Photophone process pictures. In the meantime, Kennedy's success with FBO had been noticed, and he was invited in to perform the same kind of corporate turnaround, first for Pathé-DeMille, a production company that already had an uneasy affiliation with KAO, though Kennedy's role was independent, and then with First National. As a condition of his work, Kennedy demanded absolute power in the companies, and in fact wound up in control of Pathé, but the requirement did not sit well with the board of First National, which ultimately dispensed with his services. Still, for a brief period of time in 1928, Joseph P. Kennedy was the de facto head of four different companies.
The degree of vertical integration represented by the FBO-KAO combination suggested to observers an imminent merger, especially because of the connection KAO already had with the production company Pathé-DeMille. The deal that eventually developed involved the purchase by RCA of a major stakeholding in KAO to complement the majority holding it already had in FBO. Pathé for the moment remained outside of the compact, and Kennedy continued to run that company. What emerged in late 1928 was the holding company Radio-Keith-Orpheum, which became a subsidiary of RCA. The prime movers in the merger, Kennedy and Sarnoff and their investors, profited handsomely although there were complaints from smaller and less well-connected shareholders.
Despite these abundant and complex business interests, Kennedy did not ignore opportunities to engage in independent production. As early as 1923 he had arranged a personal corporation to manage the film career of FBO cowboy star Fred Thomson. But his most important independent work was with Gloria Swanson, one of the biggest stars of the silent era. Kennedy met Swanson in late 1927 when the actor was in considerable financial difficulties because of a disastrous attempt at self production under the aegis of United Artists Corporation, difficulties she aggravated with her extravagant lifestyle. Kennedy took over Swanson's personal and professional finances, creating Gloria Productions to oversee her filmmaking opportunities. In early 1928, Kennedy hired director Erich von Stroheim to direct Swanson in a lavish film designed to restore her somewhat dimmed star power. Although the film, Queen Kelly, was never completed, Kennedy and Swanson produced two other films, including Swanson's first talking feature, “The Trespasser” before ending their business relationship in 1930.
Nineteen thirty also saw Joseph P. Kennedy extricating himself from his other Hollywood commitments. From a personal sense of foreboding and on the advice of trusted associates, Kennedy had already divested himself of virtually all of his stock holdings, including the stock he held in Pathé, before the October 1929 crash. He would spend the next year sounding out potential buyers for the company, culminating in a sale to RKO, which already had business connections to Pathé that it had inherited from KAO.