Vertical integration helped Hollywood studios to become the behemoths they are today. Studios were able to produce films in high volume, distribute them to theaters owned by the studios as well as independent studios, and play them basically everywhere. Major theaters, small theaters, the sides of barns, iPhones (they had those in the early 20th century), and the like.
Studios owned a number of theaters across the nation, approx. 25% of American theaters, and owning that many theaters was certainly a boon to business. To make up for the other 75%of theaters that the studios didn’t own, they would sell films in bulk to essentially fill up every theater’s schedule. With a full year of big-studio movies slated, there was no room for smaller independent films. Because large studios distributed so many films to so many theaters, they effectively squashed smaller studios, or at least held them at bay by limiting their business severely.
Because big studios had so much money and power, they were able to attract stars to their pictures. Moreover, they were able to hold stars under contract and produce several movies with said star. These stars were big box office draws, and smaller theaters were unable to contract these stars, which hurt their business even more. Big studios were even able to recruit and groom stars, effectively creating exactly what audiences wanted to see, all but guaranteeing ticket sales. Once more, smaller studios were unable to do this, and had to resort to good film-making or something else silly like that to ensure their own success.
Stars, after a certain point, were absolutely able to exert their own power. Once they became really big, huge, well-loved, famous, groovy stars, they would develop enough clout to make demands of studios. These demands, contracts, etc, could change the films, and slight alterations to films could have huge economic ramifications.
Vertical Integration allowed studios to dominate American cinema through their own means of production (filming, etc), distribution (bulk sales, etc), and exhibition (screening, etc), and also stars were super important and pretty and everyone wants to be them. So go see movies because studios want you to.