A massive storm has just struck Hollywood. And in a matter of months, when the dust settles, it’s likely to be totally unrecognizable.
The emergence of streaming services has generated a surge of new content and investment over the past five years, while the ongoing pandemic has shut down both productions and theaters, sending even more customers to streaming services like Netflix and Disney+.
But a recent court decision could have bigger implications for the future of the film and television industry than even COVID-19.
On August 7, US district judge Analisa Torres granted the Department of Justice’s request to terminate the Paramount Consent Decrees, which have restricted the distribution and exhibition power of film studios since 1948. The decrees were the product of an antitrust case against the studios in which the Department of Justice (DOJ) successfully argued they had illegally monopolized the industry and fixed the price of films through unfavorable terms pushed on theaters.
The decrees did two important things. First, they forced the major studios at the time — Paramount Pictures, 20th Century Fox, MGM Studios, RKO Pictures, and Warner Bros. — to divest of their theater businesses. Even though Disney and newer studios weren’t covered by the rule, they tended to stay out of the exhibition business in any major way, not wanting to provoke the scrutiny of the DOJ.
Second, the decrees ended a number of unfair film distribution practices. These included circuit dealing — the practice of entering into one license that covered all theaters in a given circuit as opposed to a theater-by-theater basis — as well as studios setting the minimum ticket price. But the worst practice was one known as “block booking.” At the time, studios would force theaters to license multiple films at once, often bundling a bunch of their bad movies with one they knew audiences would want to see. With block booking, theaters would have little choice but to take them all — the good and the bad.
The further deregulation of the film and television industry — paired with the explosive rise of streaming services — is likely to spell even more trouble for theaters. But it’s not at all clear that’s in the interest of the public. Rather, it’s likely to benefit massive media conglomerates quickly growing out of control.
A History of Consolidation
Advocates of deregulation always promise a new wave of competition and expanded consumer options that’s sure to follow, pointing to radical technological breakthroughs that demand a reevaluation of federal policy. Innovation demands deregulation, they claim.
But such shifts often merely increase the power of major corporate players in the marketplace. So it has been with every shift toward deregulation in the film and television industry.
After Ronald Reagan came to power in 1981, television was just one of many industries on his administration’s deregulatory chopping block. And here, the Gipper — no stranger to television himself — more than delivered. The financial interest and syndication (fin-syn) rules — which barred television networks from airing programming they owned in prime time or syndicated programming they had a financial stake in — were weakened through the 1980s before a full repeal arrived in the 1990s.
It was said at the time that the emergence of cable television and the new competition that came with it made the rules unnecessary. But in 1997, Thomas Streeter wrote, “Cable was to end television oligopoly; instead it has merely provided an arena for the formation of a new oligopoly.” More superficial consumer choice — more channels, more programming — only masked an even greater media concentration behind the scenes.
And just in the past decade alone, there’s been a gigantic wave of media consolidation. Comcast bought NBCUniversal in 2009. Disney grabbed Marvel that same year for $4 billion, then snatched up Lucasfilm in 2012 for roughly the same amount before finally landing the massive 21st Century Fox in 2018 for over $71 billion. AT&T acquired Time Warner in 2016 for more than $85 billion, and CBS and Viacom are teaming up once again, bringing their total assets to just under $50 billion. A general merger trend fueled these massive acquisitions, but so did the need to compete with tech companies like Apple and Amazon entering the business, all with incredibly deep pockets and easier access to capital than the old media giants.
The pre-coronavirus streaming “war” was already accelerating industry consolidation, but it’s likely the pandemic will kick it into light speed. The longer the industry remains in various stages of shutdown, with limited production only now starting back up among the larger players, the more difficult it will be for smaller companies to survive, which in turn will only fuel a new wave of mergers.
Rather than creating a more competitive media environment, recent trends are only rearranging the existing oligopoly that already controls the industry, further increasing the size and power of those companies. The repeal of the decrees will only enhance this trend and make them even less fearful of pursuing the old vertical integration that first brought FDR’s Department of Justice down on them back in 1938.
The Growing Power of Studios
It’s no secret that movie theaters have been in a tough place for years, with declining box office revenues and dwindling ticket sales. Independent cinemas have been facing particularly difficult times, and they fear the repeal of the decrees will only weaken their hand when dealing with the major studios. The pandemic won’t make things any easier.
Even before the repeal, studios were using their growing power to demand stricter terms from theaters and restrict the films they could license. Disney, which captured 38 percent of the American box office in 2019, is the worst offender.
When Star Wars: The Last Jedi was released, the studio placed new conditions on showing the film. Instead of getting the usual 40–55 percent of ticket revenue, Disney demanded 65 percent. It also required the film be shown on a theater’s biggest screen for four weeks — a particularly onerous requirement for small cinemas with only one or two screens — and would take another 5 percent of ticket sales if any of its terms were violated.
Then, after purchasing 21st Century Fox, Disney started putting the studio’s old films into its vault. A lot of independent theaters do good business licensing old Fox classics — for some, it provides the revenue to stay open — but Disney severely restricted access to many of those films, presumably to funnel people into its streaming services. These actions have led people to argue that Disney is increasingly resembling MGM in the 1930s, whose power helped lay the groundwork for the antitrust case in the 1940s.
Disney already owns the El Capitan Theatre in Hollywood, where it only exhibits its own films. The repeal of the decrees allows studios to now buy their own theaters, meaning they could easily put together a chain of theaters in big cities where they only show their own films, maybe even with perks for subscribers to their streaming platforms, as Amazon does now for Prime members at Whole Foods.
The last time studios were able to put together massive theater chains of their own? Just over a hundred years ago, when the Spanish Flu of 1918 made them incredibly cheap to scoop up.
The Fight for the Future of Media
Both the DOJ and Judge Torres cited the advent of streaming to justify the end of the decrees — once again, a technological shift is being used to jam deregulation down the public’s throats. But there’s little reason to believe this will result in either greater competition or more consumer choice.
The decrees ensured that the studios who make films couldn’t also control how people view them. But that’s exactly what’s happening now, with the rush toward streaming platforms like Netflix and Disney+.
Not only is the industry consolidating, but these new media conglomerates are creating siloed online platforms for people to access their content. Entertainment reporter Maureen Lee Lenker explicitly compared this to block booking:
As streaming platforms rise and are increasingly attached to studios in the case of platforms like Disney+, Warner Media’s HBO Max, and NBC Universal’s Peacock, they exercise a content monopoly in miniature. You pay a monthly fee for a personal block booking — to access Hamilton, you also agree to pay for The Little Mermaid II.
The choice presented by these platforms could also be compared to a very limited slate of television channels, where you choose which ones to subscribe to, à la carte, shelling out for each individual channel at an even greater expense. Either way, it’s not clear that the way things are developing is in service of anyone but the conglomerates themselves.
Yes, the scramble for streaming content has produced some good film and TV shows, including things that may not have been made before — there’s just so much more money sloshing around Hollywood these days and, increasingly, foreign film markets as well. That’s also created work for some people in the industry, though others say that work is more precarious than ever.
But that scramble for new content is the exception, not the rule. Streaming analyst Eric Schiffer says streaming’s “golden age” is already over. As streaming consolidates, in a repetition of a long history, the companies that control the platforms will have more power over what gets made and what terms get handed out to everyone else. It will take no less than federal action to once again ensure the public good is being served.
Both the implementation of the Paramount Decrees in the 1940s and the financial syndication rules in the 1970s led to a boom in independent production in film and television, as the power of studios and broadcasters was finally reined in. Arthouse and foreign film theaters flourished in this new environment. A rising generation of young American filmmakers like Martin Scorsese, David Lynch, and Francis Ford Coppola got to see movies by Ingmar Bergman, Akira Kurosawa, Roberto Rossellini, and Jean-Luc Godard for the very first time.
In our streaming age, the equivalent regulation to the Paramount Decrees would be to bar or limit platform owners’ ability to produce their own content. Instead, platforms like Netflix or Apple TV would have to buy or license content from separate production companies.
Platforms could also be regulated as public utilities to ensure that they better serve public goals. The algorithms that determine what content we see would be made more transparent and could even be regulated to ensure a directive other than “keep watching at all costs.” But there could also be a role for a publicly funded platform to finance programming that wouldn’t otherwise be created, possibly even with a democratic element, so residents can help to decide the type of content that gets funded — a cinematic equivalent of the New Deal’s Federal Theatre Project. A public chain of theaters could even be built, focused on independent and lower budget productions instead of the blockbusters that fill the multiplexes.
It should go without saying that a socialist film and television industry would be quite different than its capitalist equivalent, and it may be difficult to imagine what exactly it would look like. Queensland University of Technology professor Amanda D. Lotz has detailed how changes to financing practices and means of distribution always alter the type of content that gets produced.
Eliminating or severely restricting the profit motive would inevitably result in the production of a different form of film and television, just as the WPA’s Federal Theatre Project brought a new kind of theater to the masses. WPA productions like Orson Welles’s Caribbean version of Macbeth starring an all-black cast, or Sinclair Lewis and John C. Moffitt’s adaptation of Lewis’s anti-fascist novel It Can’t Happen Here, are still remembered today for vividly capturing the public’s imaginations during the Great Depression.
Technological innovation in streaming has indeed created new possibilities in arts and entertainment for the masses. But by throwing out the Paramount Consent Decrees, the giant media companies dominating that technology are set to restrict those possibilities in the service of even greater profits.
With this new media oligopoly on the rise, we should take up the fight that FDR’s Department of Justice started with Hollywood more than seven decades ago. If we’re all to ride out the pandemic by streaming our favorite film and television, then it’s time federal policy recognize it as the public good it now officially is.