To the Big Screen (and a Billion TV Screens)
Sometimes, all you have to do to get a movie made is warm the heart of a Hollywood executive—with a Christmas card. At least, that's how It's a Wonderful Life came into existence. But, the path from studio executive's heart to finished movie wasn't an easy one.
A producer at RKO Pictures named David Hempstead received a short story/Christmas card in the mail entitled "The Greatest Gift." The story was written by Philip Van Doren Stern, and the plot is basically that of It's a Wonderful Life (guy contemplates suicide, guardian angel shows him what life would've been like, guy realizes life is worth living, etc.). Hempstead was moved and saw cinematic possibilities, so he bought the rights to the story for $10,000.
This was in 1939. The movie wouldn't come out until 1946.
It's a Wonderful Life quickly went into what's called "development hell." The idea gets turned into a script, and tinkered with, and developed, and re-drafted and … doesn't quite seem to ever go into production. Hempstead initially wanted to do the movie with Cary Grant, but after three unsuccessful drafts of the script, Grant ended up doing another Christmas classic (also with an angel in it) instead, The Bishop's Wife.
Eventually, RKO sold the rights to the project to Liberty Films, a small, independent production company founded in 1945 by Frank Capra and a partner. Capra was disillusioned with the big studio system and wanted more control over production. He wrote, "Undoubtedly there will always be big studios, but we hope they will be divided by the individual creative efforts of the independents, of which, fortunately, I happen now to be one […]." (Source)
Shooting began at RKO's studios in Los Angeles and at the RKO Film Ranch in Encino, California. The ranch was a sprawling 4-acre set in California's San Fernando Valley—a far cry from the movie's upstate New York location. Capra—who specialized in heartwarming classics—directed, and the rest is movie history. (Source)
Liberty Films only produced one more film in its short life: State of the Union, with Spencer Tracy and Katharine Hepburn. Strapped for cash, due in part to the financial failure of It's a Wonderful Life, Capra sold Liberty to Paramount in 1947.
In a case of life definitely not imitating art, the big guys won this round.