You can comb through the silent films Ernst Lubitsch made in Germany searching for the fabled "Lubitsch touch" and you'll hardly find a trace of it. He made a few elegant historical spectacles and a lot of very silly comedies, though they're silly in an elegant way. Their tone is reminiscent of the Offenbach operettas, whose farce plots are so outrageously daft that they set off the sweet melodies (with their daft lyrics) perfectly. Lubitsch didn't have such melodies to work with in his silent films, of course, but he used mise en scène in their place -- he could send his actors off in preposterously choreographed evolutions that made his images sing.
It was when Lubitsch came to Hollywood that his "touch" was born. Probably under the influence of Chaplin's A Woman Of Paris, he began making far more sophisticated comedies, bittersweet and adult, with that subtle indirection of narrative that people came to recognize as his signature style. His masterpiece in this style was The Marriage Circle, a wry, complicated, rueful, generous look at the delusions of romance, at the delicate improvisations of marriage.
Then sound came in and Lubitsch realized that, with the aid of music and song, he could return to the style of his silent farces, that he could be wildly silly again -- and that's just what he did. The silliness soared to sublime new heights, however, because the "touch" he'd developed allowed him to create a lighter-than-air world on screen where every moment had the quality of music.
The actual music in these films was not, sadly, on a par with Offenbach's-- it was usually a sort of pale imitation of it -- and this led to a curious imbalance. The elegance of Lubitsch's choreography, his visual wit, the charm of his players was often dragged down by uninspired patter songs sung in a vaguely operatic style. He could provide an ironic visual counterpoint to these dull songs, and that could be very funny, but he had few chances to lift the musical numbers into transcendent realms, because the music just wasn't good enough.
The Lubitsch musical became a kind of dead end. Its lighthearted tone found more favor when expressed in uniquely American terms -- in Astaire's dancing, for example, and in the pop songs of the great Broadway composers. Those who still longed for the middle-brow European sophistication of the Lubitsch musical preferred to take it in straight doses -- in screen operettas, the most popular of which starred Jeanette MacDonald, who had been Lubitsch's leading lady in many of his early musicals at Paramount.
But nothing was ever again quite like the Lubitsch musical. Only Minnelli's musicals made for the Freed Unit at MGM developed a coherent visual style out of which song and dance numbers could flow gracefully, but Minnelli had a heavy hand compared to Lubitsch, whose touch was gossamer. Lubitsch hardly ever found musical material suited to that touch. He needed gossamer music like that churned out on a regular basis by Offenbach, "the Mozart of the Champs Elysées" -- which I guess is a roundabout way of saying that, visually, Lubitsch was the Mozart of Melrose Avenue.