Will Studios Rush To Buy Theater Chains Without The Paramount Decrees? Don’t Bet On It

Photo by Cliff Owen/AP/Shutterstock (10466401e) Assistant Attorney General Makan Delrahim, Antitrust Division.

In the hours after the Justice Department announced it would move to terminate the Paramount consent decrees, the stock price in AMC, Cinemark and IMAX all popped in after-hours trading.

But even if studios are freed from 71-year-old restrictions that prevent them from exercising significant control over the exhibition pipeline, it doesn’t necessarily mean they will rush to buy up theater chains.

Studio sources expressed doubts that many would move to buy brick and mortar businesses at a time of upheaval. Rather, supporters of the government’s proposal believe that it could lead to other types of innovations, like subscription plans, and more experimenting with day and date theatrical and streaming releases. At a time when just about all of the major studios are launching streaming services, there could be more flexibility to tie subscriptions to theatrical exhibition offers.

The landmark U.S. vs. Paramount decision in 1948 forced the studios to divest their theater chains, signaling the end of the studio system itself.

Since then, the Justice Department has had in place a set of restrictions on the way that studio distributors do business with exhibitors, including such things as “circuit dealing,” in which a single license covers all theaters in a circuit, or granting exclusive rights to a movie in a geographic area.

One issue raised by the National Association of Theater Owners is the impact that lifting the consent decrees would have on mid-range and independent movies, at a time when studios have shifted their focus to global tentpoles.

In their comments to the Justice Department, NATO expressed particular concern with what happens with block booking, in which films are bundled into a single theater license.

Supporters say such bundling could help riskier fare — for example, a “prestige” picture could be paired with a surer bet, like a big budget tentpole. But NATO is wary.

“The ensuing freedom of exhibitors to book picture by picture formed the backbone of the modern theatrical and exhibition system,” NATO told the DOJ. “Indeed, the success of both the modern multiplex system and the home entertainment market is directly tied to the consumer-targeted programming that has thrived following the prohibition on block booking.”

Their argument is that without restrictions on block booking, “studios could require exhibitors to book their entire slate of films in wide release for multiple-week runs.” If that happens, they argued, it would “leave little to no room for important films from smaller studios,” or for documentaries.

The Writers Guild of America West also warned the DOJ that without the decrees, “vertically integrated studios will advantage their own films by putting them on more screens for longer, thereby foreclosing movie-going customers to competing producers and narrowing consumer choice.”

In his speech on Monday to the American Bar Association, the Justice Department’s antitrust chief, Makan Delrahim, suggested that even without the Paramount consent decrees, the Antitrust Division would still review some of the banned practices like block booking to see if they harm consumers.

He has been reviewing all sorts of consent decrees that have been on the books for decades, looking to terminate those viewed as out of date. But he also said that removing the restrictions could lead to greater innovation.

Delrahim also cited the case of Moviepass, which charged one flat price to see an unlimited number of movies. With a flawed business model, it shut down in September, but Delrahim said that it still affected how movie chains were responding to market demands, what with AMC launching its own program.

“These changes illustrate that markets can evolve, and no one can predict with certainty from where and in what form innovation will appear,” he said. “Once innovation has occurred, however, it would be a mistake for antitrust enforcers to limit the potential for consumer-enhancing innovation.”

The DOJ is expected to file to terminate the decrees in the next week. A federal judge would then have to approve it. NATO said that it will comment further once they review the government’s motion.

This article was printed from https://deadline.com/2019/11/paramount-decrees-antitrust-makan-delrahim-1202789365/