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» Film-Tech Forum   » Community   » Film-Yak   » DOJ Will Review 70-Year-Old Consent Decree

   
Author Topic: DOJ Will Review 70-Year-Old Consent Decree
Jim Cassedy
Phenomenal Film Handler

Posts: 1567
From: San Francisco, CA
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 - posted 08-02-2018 10:55 PM      Profile for Jim Cassedy   Email Jim Cassedy   Send New Private Message       Edit/Delete Post 
VARIETY: DOJ Will Review 70-Year-Old Consent Decrees That Regulate
How Studios, Exhibitors Do Business


<Story Link>

WASHINGTON — The Justice Department said it will review consent decrees which for
almost 70 years have regulated how major movie studios distribute films to exhibitors.

If the review leads to significant changes to the consent decree, it could alter the
dynamics of the business and perhaps lead to consolidation. It will examine whether
the longtime prohibition on studio distributors owning movie theaters is still necessary
to protect competition.

The DOJ’s Antitrust Division is opening up a 30-day review period for public comment,
with a deadline of Sept. 4.

A landmark 1948 Supreme Court decision in favor of the government forced major
studios to sell their theater chains, a decision that has had a huge influence on the
legal interpretation of antitrust concerns when it comes to vertical media mergers.
It led to the demise of the so-called studio system, in which the seven major studios
of the time held tight control over all aspects of production, distribution, and exhibition.

Since that ruling, consent decrees, known as the Paramount decrees, have governed
the way that studios do business with exhibitors. They include restrictions on “block
booking,” or bundling multiple movies into one theater license. The decrees also set
limits on other practices, such as circuit dealing and setting minimum pricing, and the
practice of giving exclusive film licenses for certain geographic areas.

The DOJ said the review will determine “whether they still serve the American
public and are still effective in protecting competition in the motion picture industry.”

The review is part of the Justice Department’s Antitrust Division initiative to terminate
long-standing antitrust judgment, including many that have no termination date.

“The Paramount Decrees have been on the books with no sunset provisions since
1949. Much has changed in the motion picture industry since that time,” Makan
Delrahim, the DOJ’s antitrust chief, said in a statement. “It is high time that these
and other legacy judgments are examined to determine whether they still serve to
protect competition.”

The DOJ said a review is needed given the huge changes in the business since the
1930s and ’40s, when consumers still went to single-screen neighborhood theaters
and movie palaces. By the 1970s, single-screen cinemas gave way to multiplexes.
The past few years have seen increasing experimentation with day-and-date
releases of movies in theaters and on streaming platforms.

Spokesmen for the MPAA and the National Association of Theater Owners had no
immediate comment.

Schuyler (Sky) Moore, partner at Greenberg Glusker in Los Angeles, said removing
the consent decrees would be significant for major studios, as “they have been
hanging over everyone’s head for a long time” and have created a sense of
uncertainty of whether they apply to certain types of distribution and exhibition.

He said they are anachronistic, particularly as Netflix and Amazon disrupt
traditional models, and studios look to more direct-to-consumer streaming options.
The Walt Disney Co., for instance, is creating its own streaming service.

“What it does is say to them, ‘Vertical integration is not a problem.’ Studios can now
own direct-to-consumer [platforms] without fear of antitrust attacks,” Moore said.

As part of the review, the Justice Department set up a series of questions, including:

Do the Paramount Decrees continue to serve important competitive purposes today?
Why or why not?

Individually, or collectively, are the decree provisions relating to
(1) movie distributors owning movie theaters; (2) block booking; (3) circuit dealing;
(4) resale price maintenance; and (5) overbroad clearances necessary to protect
competition? Are any of these provisions ineffective in protecting competition or
inefficient? Do any of these provisions inhibit competition or cause anticompetitive
effects?

What, if any, modifications to the Paramount Decrees would enhance competition and
efficiency? What legal justifications would support such modifications, if any?

What effect, if any, would the termination of the Paramount Decrees have on the
distribution and exhibition of motion pictures?

Have changes to the motion picture industry since the 1940s, including but not
limited to, digital production and distribution, multiplex theaters, new distribution
and movie viewing platforms render any of the Consent Decree provisions unnecessary?

Are existing antitrust laws, including, the precedent of United States vs. Paramount, and
its progeny, sufficient or insufficient to protect competition in the motion picture industry?

<END>

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Leo Enticknap
Film God

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 - posted 08-03-2018 09:36 AM      Profile for Leo Enticknap   Author's Homepage   Email Leo Enticknap   Send New Private Message       Edit/Delete Post 
I suppose the big question is that if the Paramount Decree were to be scrapped (which would have to be by primary legislation, given that it was established by a SCOTUS decision - this is not something the DoJ could do "under the radar" without Congressional involvement), would it result in the remaining major studios rushing to build or buy movie theaters, and thereby cut the major multiplex chains out of the market?

If that were to happen, there would at least need to be some protections for independent exhibitors, especially in territories that are too small for the big players to be interested in, to prevent the studios from shutting them out of profitable movies altogether.

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Terry Monohan
Master Film Handler

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 - posted 08-03-2018 10:01 AM      Profile for Terry Monohan   Email Terry Monohan   Send New Private Message       Edit/Delete Post 
Netflix can buy some old theatres and show their movies soon? Regal and other chains will be glad to sell some of them off as a few are still not giant multiplex cinema buildings. Thanks Jim for the news.

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Mike Blakesley
Film God

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From: Forsyth, Montana
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 - posted 08-03-2018 02:13 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
quote: Leo Enticknap
there would at least need to be some protections for independent exhibitors, especially in territories that are too small for the big players to be interested in, to prevent the studios from shutting them out of profitable movies altogether.
Being an independent in a town small enough to guarantee no major is ever going to want to locate here, I fail to understand why the studios would want to shut us out altogether. We send them quite a bit of money every year, after all, so...?

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Mitchell Dvoskin
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 - posted 08-03-2018 03:49 PM      Profile for Mitchell Dvoskin   Email Mitchell Dvoskin   Send New Private Message       Edit/Delete Post 
If the decrees are scrapped, I'm not sure that much will change, at least in the short term.

Every studio that has asked the DOJ for a waver to buy theatres, and every theatre circuit that has asked for a waver to by a distributor, has gotten their waver. If memory serves me, this goes back to when Sony, then (and still) owner of Columbia Pictures, asked and received a waver to buy Cineplex Odeon's theatres in the USA. And of course, United Artists was never subject to the consent decrees. They owned their production/distribution and theatres up until the production/distribution division was sold to TransAmerica in the 1960's.

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Stephan Shelley
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 - posted 08-03-2018 07:43 PM      Profile for Stephan Shelley   Email Stephan Shelley   Send New Private Message       Edit/Delete Post 
Not sure that UA owned theatres after the anti trust action. I know the UA theatre in Berkeley CA which was a real UA theatre was run by UATC (united artist theatre circuit)in later years and had no affiliation with UA the studio. UATC was purchased by Regal some years back. The UA theatre in San Francisco was never a real UA as it was the rename of the Imperial and run by the Blumenfelds. It late became Lowes Market St and then a General Cinema house for a bit.

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Leo Enticknap
Film God

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 - posted 08-03-2018 10:36 PM      Profile for Leo Enticknap   Author's Homepage   Email Leo Enticknap   Send New Private Message       Edit/Delete Post 
quote: Mike Blakesley
Being an independent in a town small enough to guarantee no major is ever going to want to locate here, I fail to understand why the studios would want to shut us out altogether. We send them quite a bit of money every year, after all, so...?
My fear is that the studios would figure that they could maximize their revenue stream by releasing major titles on their own (fully owned) screens in the big metro markets, plus streaming (possibly premium rate screening) to customers not within a viable distance of one of their theatres on the break, but then not let independent theaters in smaller markets have it until the movie is effectively played out.

When The United States v. Paramount Pictures, Inc. was decided, theatrical was the only market for new movies: even the TV broadcast of second run and repertory titles was almost a decade away. Other markets exist now that are not covered by that ruling, streaming being chief among them. If the theatrical sector is deregulated as well, then the risk is that the studios will use the vertical integration expertise that they have developed for other release channels to gobble up the theatrical sector again.

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Tony Bandiera Jr
Film God

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 - posted 08-04-2018 06:39 PM      Profile for Tony Bandiera Jr   Email Tony Bandiera Jr   Send New Private Message       Edit/Delete Post 
Once again, an example of government meddling that will seriously impact the "mom and pop" operations.

The decree has, by virtue of not allowing studios to own cinemas, protected the small and independent operators.

As Leo stated, I agree that the small operators will be effectively forced out if the decree is lifted.

quote: Mike Blakesley
Being an independent in a town small enough to guarantee no major is ever going to want to locate here, I fail to understand why the studios would want to shut us out altogether. We send them quite a bit of money every year, after all, so...?
Mike, the way the studios have run roughshod over even some (ok all) of the major cinemas by shrinking the "window" down to damn near day and date with theatrical release, do you REALLY believe that the studio bean counters would say that ANY independent theatre is sending them "quite a bit of money"? Unless one is sending them high six figures every weekend they would consider it "lunch money."

I so wish I could time travel back to before all this insanity from the studios started so I could go to each and every one of them and beat some sense in the folks making these suicidal decisions...

So glad I reconsidered my attempt to purchase and operate a theatre 20 years ago...

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Mike Blakesley
Film God

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You have a point, but there are a lot of us small operators. If they all disappeared it'd amount to millions of lost dollars. Not to mention the lost moviegoers -- people who would just never see movies in theaters.

Gotta hope this just doesn't go anywhere.

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Martin Brooks
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 - posted 08-07-2018 12:51 AM      Profile for Martin Brooks   Author's Homepage   Email Martin Brooks   Send New Private Message       Edit/Delete Post 
I don't think it would make any difference because theaters are a lousy business and I doubt any of today's studios want to own a chain of theaters. Sony owned a chain for awhile and got out of it.

AMC lost $487 million in 2017 (although much of that was debt and acquisitions). In the first quarter of 2018, their net earnings were only $17.7 million which works out to $193 of net earnings per location per day.

When theaters were single-screen, it made some sense for studios to own theaters, because it was viable to play only the films of that studio or distributor. But in the multiplex era, would the theaters owned by a studio play everything or only their own films?

The Consent Decree never should have been enacted. The Feds should have realized that TV was coming in and was going to negatively impact the theatrical business in a big way. In spite of still relatively low TV set penetration in 1948, theatrical revenues had already dropped substantially.

The biggest year for the industry was 1946 when there was about 86 million weekly admissions and 61% of the population saw a movie each week. By 1950, that would drop to 50 million weekly admissions. By 1964, that would drop to 20 million weekly admissions. It was 23.53 million weekly admissions in 2017, but the population is 70% larger.

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Mike Blakesley
Film God

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 - posted 08-07-2018 01:04 PM      Profile for Mike Blakesley   Author's Homepage   Email Mike Blakesley   Send New Private Message       Edit/Delete Post 
quote: Martin Brooks
By 1964, that would drop to 20 million weekly admissions. It was 23.53 million weekly admissions in 2017, but the population is 70% larger.
Yes, but the other entertainment options competing for eyeballs and the available platforms for watching movies are about 50 times greater than what they were in 1964. I think the fact that we're still here at all is a testament to the staying power of the exhibition business.

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Mike Spaeth
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I think that the conditions in the market have sufficiently changed to look at this again. When this was written, most theatres were single-screens, and the process of block-booking could make or break a theatre's ability to turn a profit. With an average screen count of 10+ these days, hardly seems like the same situation. Also, this could be a good thing for exhibition if they revised the decree to prohibit clearances, which is something unique to the theatre industry. It's like Pepsi telling the Walgreens on one corner can sell Pepsi and the CVS across the street can sell Diet Pepsi.

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Justin Hamaker
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 - posted 08-07-2018 03:37 PM      Profile for Justin Hamaker   Author's Homepage   Email Justin Hamaker   Send New Private Message       Edit/Delete Post 
I see a couple potential problems with the idea of changing this.

First, I think it's easy to imagine Disney, and possibly other studios, building their own theatres in major markets and then icing out the chains.

Second, I could foresee the studios becoming more heavy handed in requiring specific booking arrangements for their movies. We already see Disney doing this in requiring double booking Disney titles in drive-in theatres (by charging ridiculous film rental if you don't run two Disney). But this could give the studio added power to mandate specific screens, auditorium specifications, and more.

Third, this could have a detrimental impact on the growth of independently produced movies, and the access these movies have to theatre screens. Because screens are a finite resource, especially in smaller markets, any additional demands by the studios could ice out product from distributors with less clout.

I'm not really as concerned with streaming services because these are not really a finite resource. If this market becomes too fragmented, it will lead to consumers being more selective about which services they subscribe to. However, there is not shortage of "space" for streaming services, and there is plenty of content. In fact, I think Netflix and Amazon expanding their services has led to more interesting content available to consumers.

Beyond the movie industry, I am concerned about the potential impact on the economy of vertical consolidation within industries. I think this could be very bad for small businesses. Large companies controlling their own supply chain may have a positive benefit to those companies and the prices of their products, but it potentially creates a barrier to entry for small businesses on many different levels.

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Adam Martin
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"Throwing out [legislation] when it has worked and is continuing to work [to its purpose] is like throwing away your umbrella in a rainstorm because you are not getting wet." -- Associate Justice Ruth Bader Ginsburg

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