Edison wanted to sell equipment and films but theater owners really needed a lot of films. People always wanted to see new films. This was a problem for theater owners who bought films.
Theater owners began to set up film exchanges: rental services that provided films to theaters, generally by the foot.
Once the theaters and exchanges were established, some owners took the next logical step: make the film themselves, cutting out Edison and similar companies.
Next: new moguls
In the late 90s and 00s Edison and Eastman tried but failed to
control the growing movie industry. Over 500 legal actions were taken
as movie makers sued each other. Companies hired thugs to destroy each others' equipment. In 1908 these disputes were temporarily solved when the nine leading film companies formed the MPPC (the Motion Picture Patents Corporation, often called The Edison Trust, or just The Trust). The MPPC tried prevent any additional companies from entering the film industry.
However, the MPPC failed rapidly and by 1918 not only had the Trust disappeared, but virtually all of its individual members were gone.
Here's what happened to most of the original members of the MPPC: Edison Studios closed 1918. Biograph disolved 1915. Lubin was acquired by Vitagraph in 1916 Kalem was acquired by Vitagraph in 1917. Essanay and Selig were was acquired by Vitagraph 1918 (the Selig lot became a zoo). Despite these acquisitions, Vitagraph continued to decline and was eventually bought by Warner Bros in 1925. Star (owned by Melies brothers) was sold to General Film 1917 which was itself sold in 1918 and again in 1919 essentially disappearing in the process. American Pathe became Pathe Exchange 1914 and was eventually acquired by RKO in 1927.