Answer: D
Correct answer: had already started
When two past actions are described, the earlier takes the past perfect and the later takes the simple past. The film started before the arrival, so it must be had already started. The signal is the phrase by the time, which explicitly sets one action against another and almost always calls for the past perfect in the clause describing what was already complete. The adverb already points the same way, since it belongs naturally with the perfect tenses. Has already started is the present perfect and cannot be used with a stated past time; already starts is present tense altogether; and was already starting would describe an action still in progress, which contradicts already. The same sequence governs hardly had he arrived when, no sooner had she spoken than, and reported speech, where a simple past becomes past perfect after a past reporting verb.