Repeal of Paramount Decrees Allows Movie Studios to Own Theater Chains

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A judge has repealed the 1940s-era Paramount Decrees, opening the door for movie studios to own theater chains for the first time in 70 years.

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The decrees were designed to break up the cartel of eight Hollywood studios that controlled the movie distribution and exhibition business at the time. 

In 2018, the Department of Justice filed a motion to terminate the decrees, claiming that they were no longer necessary as the movie business had substantially changed since the Supreme Court ruling in 1948. 

Judge Annalisa Torres of the Southern District of New York concurred. “Seventy years of technological innovation, new competitors and business models, and shifting consumer demand have fundamentally changed the industry,” she wrote in a 17-page opinion

The move comes at a precarious time for the movie exhibition business. Netflix and Amazon Studios have begun to dominate legacy Hollywood studios in both production and distribution, theaters have been losing to streaming and online distribution for years, and the theatrical release model is under threat. 

Since the start of the pandemic, which forced movie theaters to close, some studios have begun releasing movies online, jeopardizing the 90-day distribution window that gives theaters 90 days to show a movie before it can be released online. And, just last week, theater chain AMC Entertainment struck a deal with Universal Studios that would allow the movie studio to release a film online after 17 days in theaters.

“Sometimes, one has to stare change in the face, recognize that it has or soon will arrive, and reshape it to one’s own benefit. That’s what we’ve done at AMC,” CEO Adam Aron said during the firm’s second quarter earnings call last Friday. 

AMC, along with other theater chains, has delayed the reopening of its theaters in the United States several times, as coronavirus outbreaks continue to rage throughout the country. It now plans to open them in mid-to-late August, per the call.

Whether this means the movie studios will swoop in to buy theaters, all of which are hurting from the extended shutdowns, or put the theaters at even more peril, is too soon to say. 

Either way, the timing is ironic, because it was the 1918 pandemic that helped lead to Hollywood’s control of the movie industry to begin with, according to historians. During the Spanish Flu, the fledgling movie industry all but shut down, and it was the production studios that began buying up the shuttered theaters in its aftermath. That led to the industry’s vertical integration, and the monopoly power of the studios during Hollywood’s golden age, prompting the antitrust case that led to the Paramount Decrees in 1948. 

In addition to the prohibition against owning theaters, the decrees banned two practices common at the time: block booking and circuit dealing, which forced theater owners to run a block of studio releases, or forgo the hits, and to run them in all of their theaters within an area. Those two rules have a sunset period of two years, and will be permitted beginning in 2022.