You think Hollywood studios are too powerful now? It’s nothing compared to the golden age of the ’20s and ’30s. Back then, movie studios were essentially monopolies, owning large blocks of movie theaters, controlling the means of production, distribution, and exhibition. That was until a landmark 1948 Supreme Court decision in United States v. Paramount Pictures. The studios were forced to divest of their exhibitor holdings, and rules were put in place to control the licensing relationship between the major studios. Those rules have been in place ever since, until now.
The Paramount Consent Decrees have been in place since the 1940s, and have governed the licensing rules of every major studio, including Disney who weren’t part of the original antitrust action. In layman’s terms, because I’m no lawyer and won’t pretend to be one, the Decrees prevented studios from taking ownership of movie theater chains, creating monopolies all across the country. They also prevented strongarm tactics such as “block booking” and “circuit dealing”.
Block booking would force theater owners to show multiple films from a single studio if they wanted an exhibitor license. Basically, if you wanted to show Avengers: Endgame which is going to make a bunker full of money, Disney would also make you pick up and promote some tiny Fox Searchlight movie which nobody knows about and would probably flop on its own.
Circuit dealing allows studios to demand that all theaters in a single region show their movies. Think of it like this: Disney (I’m not picking on them, seriously) strikes a deal to show Avengers: Endgame at AMC and Regal, but nobody else gets it at all. AMC and Regal would, for such exclusivity, pay a higher licensing fee.
You can see why these practices were frowned upon, and could be taken advantage of again now. The judge’s ruling today opens up the door to mega-mergers between studios and large theater chains, but also for tech companies like Amazon to swoop in. What happens if Amazon, Netflix, or Apple start buying up theaters and instituting these same strongarm tactics? Theater exhibitors, who have seen their power dwindle tremendously this year during the whole COVID-19 crisis, will have even less control.
Now, the regulation-opposed Trump DOJ and U.S. District Court Judge Analisa Torres believe the Decrees have outlives their usefulness because of the radically-changed marketplace. Movies have more ways to make money, many more theaters exist (although that’s changing), and there are definitely more outlets for distribution.
“Given this changing marketplace, the Court finds that it is unlikely that the remaining Defendants would collude to once again limit their film distribution to a select group of theaters in the absence of the Decrees and, finds, therefore, that termination is in the public interest,” Torres writes in a 17-page opinion.
Sounds like she’s basing that simply on faith that corporations will act in the public’s interest, and not that of their shareholders.
I would call that naivete, which continues as Torres comments on the possibility of studios licensing their projects to exhibitors in a pre-packaged basis when the two-year sunset period ends.
“In today’s landscape, although there may be some geographic areas with only a single one-screen theater, most markets have multiple movie theaters with multiple screens simultaneously showing multiple movies from multiple distributors. There also are many other movie distribution platforms, like television, the internet and DVDs, that did not exist in the 1930s and 40s. Given these significant changes in the market, there is less danger that a block booking licensing agreement would create a barrier to entry that would foreclose independent movie distributors from sufficient access to the market.”
What the judge fails to consider is that the Decrees were put in place to foster competition and diversity. What this decision assures is that there will eventually be less of both. It won’t happen immediately, but a studio will eventually test the waters. Think about what we’ve seen this year already. Look at the ripple effect of Universal simply releasing Trolls World Tour and other films early on VOD, and look at where we are now with the distribution model forever changed.
Obviously, I see this is a terrible decision. It was a bad idea when the DOJ set forth on this a year ago when nobody thought it would actually happen. Well, never put it past this government to sew as much chaos as possible in as many places as possible. When people ask me why I treat politics with such importance, it’s because politics touches on everything I care about and that you care about. Movies may be a form of entertainment, but they are as privy to the whims of the government as anything else. [THR]