Movie theaters have been royally screwed by the global pandemic, and in the latest blow, a federal judge has given the go-ahead to axe the 71-year-old Paramount Consent Decrees, which should elicit shrieks of horror for the four of you who have any idea what that is.
For the rest of the class: what exactly are the Paramount Decrees? Well back in the golden days of Hollywood (1938, to be exact), the Department of Justice lobbed antitrust action against eight companies: Paramount, Twentieth Century Fox, Warner Brothers, Loew’s, Radio-Keith-Orpheum (RKO), Universal, Columbia Pictures, and United Artists. Of these eight companies, Paramount, Loew’s, Warner Brothers, RKO, and Fox effectively had a movie distribution cartel. Because they were studios that also owned major movie theater chains, they could limit which theaters ran their movies and freeze out competitors and indie movie theaters.
Fast-forward to today, U.S. District Judge Analisa Torres ruled that technological changes over the past seven decades mean these decrees are no longer necessary. Torres writes that as “internet movie streaming services proliferate, film distributors have become less reliant on theatrical distribution” and that some of the original studies like RKO no longer exist. Torres also emphasized that companies like Netflix, Amazon, Apple, and Disney have since entered the industry and now not only produce, but also distribute their own films. Because these streaming giants did not exist in the early 1940s, they’re not subject to the Paramount Decrees. “Thus,” Torres writes, “the remaining Defendants are subject to legal constraints that do not apply to their competitors.”
Torres also wrote that she agreed with the DoJ that current antitrust laws and administration will be enough to prevent further anti-competitive practices. Because, as the DoJ puts it, why would studios work in cahoots to limit film distributions to only a select few theaters? Or these days, platforms?
You can start cry-laughing now.
This is bad for already beleaguered movie theaters. Ticket sales have been declining for years, which is only exacerbated by the uncertainty of the movie-going experience after the pandemic. Not only will theaters have to enforce safety measures and battle people’s legitimate health concerns, but without the Paramount Decrees, it’s only a matter of time before studios begin testing how far they can push their boundaries to more closely resemble their monopolistic heydays.
Take block booking and circuit dealing, as two examples of long-outlawed business practices that might now see a fully legal resurgence. Block booking was when studios would force theaters to take a whole slate of its films without the chance to watch them first, while circuit dealing was the act of threatening boycotts against the films of smaller competitors. Under the ruling, these would only become viable for studios again after a two-year “sunset period,” although the Consent Decrees as a whole are now terminated “effective immediately.”
The DoJ argues that these anti-competitive practices are bygones of an older era, and that lifting the decrees would encourage distributors and movie theaters to get creative to address the rise of streaming platforms, video-on-demand, and changing consumer habits.
Theater owners and creatives disagree. The Directors Guild of America wrote a statement against terminating the Paramount Consent Decrees, where it argued that, “while the motion picture and television industry has changed in the 70 years since the first Decree was signed, many of those changes—precipitated by new tech giant entrants—call for greater, not lesser, antitrust oversight.”
Since the onset of the pandemic, studios have experimented with offering new releases on various streaming platforms. So far it seems to be working. That success, plus terminating the Paramount Decrees, only encourages vertical integration, i.e. studios owning the platforms that distribute the content that they create, and then charging what they please. If Disney can make a killing off of releasing Mulan for an absurd extra $30 on Disney+, who’s to say they won’t decide to follow Netflix’s model of only screening a few films in physical theaters per year? If studios previously limited by the Paramount Decrees can now build their own streaming platforms, who’s to say they won’t do the same thing? The cartel theaters of old are back, only as digital walled gardens, which unfortunately the DoJ doesn’t seem to see as a problem.