Theaters Have Many Problems, but the Consent Decrees Weren’t One

The Paramount Consent Decrees died today at the age of 61. Cause: Terminal irrelevance. Please do not send flowers. In memoriam, the National Association of Theater Owners stated: “The Paramount Decrees were a remedy fashioned for extreme, anti-competitive behavior in the movie industry. We agree with the Court that anti-competitive behavior remains anti-competitive under existing antitrust law. This decision simply shifts the mechanism for enforcement into regular, existing channels.”

Exhibition now operates like every other industry under the law, including rules governing anti-trust, monopolistic, and unfair business practice behavior. The ruling by U.S. District Judge Analisa Torres means the elevated rules governing studios no longer apply.

Here’s what this means:

It eases the barrier to studios operating theaters

The 1949 decree made it illegal for a theater owner to produce and distribute movies. For about two decades, five studios — MGM, RKO, Paramount, 20th Century Fox, and Warner Bros. — were considered majors because they operated in all three areas. Columbia, Universal, and Republic, which had only production and distribution divisions, were not majors. Disney was production only, and its films were released by other companies. United Artists served as a distributor only, releasing films made by independent producers.

But the decree did not prevent studios from investing in major circuits. In 1986, Universal owner MCA bought a controlling stake in Cineplex Odeon. The Sony Corporation, with Sony Studios as a separate division, bought Loews Theaters in 1989. Later Cineplex and Loews merged, with shared ownership. Warner Bros. and Paramount also jointly owned the important California chain Mann Theaters in 1988, which operated key theaters in desirable Los Angeles locations.

Nothing in the decree would have prevented Netflix, Amazon, or Apple from buying theaters. And, as a non-signatory to the decree, nor would it have automatically applied to Disney.

Block Booking No Longer Banned

Block booking was a practice in which distributors forced theaters to play their films: If you want the A+ title, you have to accept the B and C movies, too. Similarly, circuit deals meant a studio insisted on booking films as a group rather than by title or by theater.

In 2020, those concerns have limited practical application. Multiplexes abound and screen space is plentiful: Top chains already play everything viable from all distributors. (“Parasite” is an extreme case, but Neon had no problem getting booked even though it was a Korean-language film, even before the awards hoopla.)

Some independent theaters have fears, in particular the now-thriving drive-ins (their recent success might strngthen their negotiating position). But in ordinary business, it remains to be seen if there’s a problem. Today’s ruling today allows a two-year sunset period, during which old rules still apply and theaters may raise concerns.

Theaters may welcome studio partnership

Since theaters fear being expendable, studios investing in their future would be reassuring. (In reality, studios have major financial troubles of their own.)

There is one outside possibility: Theaters represent thousands of single-use complexes across the country. If an exhibitor walked away from its properties (very unlikely), landlords would run to studios and try to find a way to play their films. Better there be as few barriers as possible.

One of Cinepolis’s luxury theaters

Cinepolis

Existing laws protect theaters

The consent decree held largely symbolic value for years. When theaters had issues with distributors, it was a handy saber to rattle. Now, as then, all sides will continue to be protected by existing antitrust laws and related statutes.

What’s lost is a vague sense of special treatment that came from circumstances long gone, with little practical application. Yes, it could make a small independent more vulnerable, but the net change is likely minor. Now as before, any complaint requires the willingness to pursue civil legal action. That remains prohibitively expensive.

Is this fair? That question goes to broader issues of how capitalism operates in this country. The distribution/exhibition business will now operate under laws similar to all others. If Coca-Cola is calling on a ma-and-pa convenience store next door to Albertsons, it’s the publicly traded grocery chain that’s going to get the better deal.

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