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At a time when theatrical distributors and movie theaters are facing unprecedented challenges, the federal government just dealt them another blow.
On Friday, a New York federal judge approved a motion from the U.S. Department of Justice to end the Paramount consent decrees, which have dictated the movie industry's licensing rules for over 70 years. "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," U.S. District Court Judge Analisa Torres wrote in a 17-page court opinion.
The landmark 1948 decision of the United States v. Paramount effectively ended the classic Hollywood studio system, forcing the major studios, including Paramount, RKO, MGM, Universal, Columbia, and Twentieth Century Fox, to divest from vertical integration. At the time of the decision, it was commonplace for these studios to own large swaths of theaters in the country, which they filled with their own output.
With the Paramount decrees, studios were ordered to get rid of their distribution arms or theaters, requiring them to sell their theaters to independent companies. They were also made to end the practice of what was known as block booking, bundling multiple films under one license, forcing theaters to take subpar content alongside major releases, and circuit dealing, which licensed a film to all theaters under common ownership rather than a theater-by-theater basis. These two terms have been given a sunset period of two years in the new decision, to allow theaters time to build new business practices.
Last November, the Department of Justice moved to abolish these decrees with the argument that they have outlived their usefulness due to changing business models. Judge Torres agreed with this argument, suggesting that the shifting media landscape and the rise of new studios not bound by the decrees has made them irrelevant.
"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," states the order. "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."
The order further emphasizes that many movie studios were already technically not subject to these decrees and that existing federal and state antitrust laws should work to protect against future abuses.
While it is true that studios like Disney, Amazon, and Netflix were not subject to the decrees in the technical sense, there was a general understanding that all studios were guided by these laws. The decision seems to make a huge assumption that all studios will now continue to act in good faith, using a hope for best practices as a justification for ending these anti-trust laws.
This is foolhardy for a multitude of reasons. For starters, the decision could not come at a worse time for movie theaters. Felled by a loss of income due to coronavirus closures, movie theaters are already scrambling to stay afloat as their earnings drop precipitously. The Paramount decrees essentially give studios the opportunity to act as vultures, clearing the way for them to feast on the carcasses of the weakened theaters. The combination of changing legal precedent and theaters potentially looking for a financial saving grace could open the door to a major acquisition in coming months.
Studios have already used the circumstances of the pandemic to justify shortened VOD windows (and in the case of titles like Trolls: World Tour and the upcoming Mulan, bypassing them altogether). With the rise of streaming and home video, studios have long yearned to chip away at that distribution window, and the pandemic has given them the perfect opportunity to steamroll through it, leading major multiplex owner AMC to forge a new 17-day premium video on-demand agreement with Universal. They are also offering a similar agreement to other studio partners.
CEOs have made noise about this new model that cuts out exhibitors being temporary or a one-time thing, but if it proves profitable, how likely is that to last? The theatrical model won't go away entirely, but it could be revolutionized by studio ownership.
We've already seen what happens when we give studios an inch. They take a mile. The court decision cites current antitrust law, such as the HSR Act, which requires acquisitions and mergers to be evaluated for competitive significance before being approved, as a check against potential abuses. But let's consider the merger between Disney and Fox, giving Disney the keys to several huge franchises and a huge library of titles, after they'd already consolidated lucrative franchises like Star Wars and the Marvel Cinematic Universe under their banner.
In October 2019, Matt Soller Seitz outlined in a Vulture article the disturbing trend of Fox titles joining Disney films in the so-called "vault," making them suddenly unavailable to screen at movie theaters, particularly independent repertory houses across the country. The article said the policy predominantly seemed to impact "theaters that screen first-run Disney and Fox content alongside older titles." The idea seemingly being that Disney wished to prevent back catalog titles, now largely streaming on Disney+, from competing with new content.
How is this different from a version of the vertical integration and block booking practices that led to the Paramount decrees in the first place? As streaming platforms rise and are increasingly attached to studios in the case of platforms like Disney+, Warner Media's HBO Max, and NBC Universal's Peacock, they exercise a content monopoly in miniature. You pay a monthly fee for a personal block booking — to access Hamilton, you also agree to pay for The Little Mermaid II. Let's consider Mulan, where you must not only pay a PVOD fee (the at-home equivalent of a movie ticket), but have a Disney+ subscription. Multiplexes already have fan subscription programs like AMC Stubs. Is a similar model for theatrical moviegoing really that far-fetched?
Disney has already worked hard to become a monolith, aiming to make all content adhere to one anesthetized brand where anything provocative or truly inventive is the exception, not the rule (remember when there was talk of cutting any scenes of smoking out of Spielberg's West Side Story because it wasn't family-friendly?). So, it's not difficult to extrapolate that out into a potential future where Disney (or any major studio) owns a block of theaters and decides that for the weekend, they would rather fill their screens exclusively with the latest Marvel release than allow for any competition from other studio releases or indie titles.
You need only look at the theater Disney already owns, the El Capitan on Hollywood Boulevard, to see that model in action. The beautifully restored movie palace is a tribute to Hollywood history in more ways than one. Its incredible art deco architecture is enhanced by moviegoing experiences of old, a live pre-show and accompaniment from an organist. But unless it happens to be home to a rental for the day, you have one choice of content: Disney movies. Both new releases and special engagements of classics like Beauty and the Beast and seasonal showings of The Nightmare Before Christmas. Just as the old Fox theaters and Warner Grands of the '30s and '40s exclusively focused on their studio's offerings.
In so many ways, this doesn't leave a lot of room for filmmakers who want to take a risk or try something wildly out of the box. It instead runs the risk of further homogenizing content to ensure distribution.
In the 1920s, following the economic impact of the 1918 flu epidemic, studios swept in to buy struggling independent cinemas and build up their distribution arms. As early as 1928, the Federal Trade Commission was filing against studios for violation of antitrust laws, but it took an avalanche of egregious practices and 20 more years to curb abuses.
With the abolition of the Paramount decrees, the court has opened the door for history to repeat itself. With multiplexes facing staggering losses, studios could be their only saving grace. And they now have tacit permission to do it. But at what cost?
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