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Major antitrust ruling clears the way for movie studios to own theaters

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The repeal of the Paramount Decrees could be an opportunity for Netflix and Disney

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One of Hollywood’s oldest and most significant legal barricades has been terminated. On Friday, a New York judge granted the US Justice Departments motion to terminate a set of Hollywood focused rules called the Paramount Consent Decrees.

Established in 1948, these decrees had a far-reaching effect on the movie industry as a whole, and their long-lasting impact today is in the realm of movie theaters and theatrical distribution. The decrees were part of a set of antitrust rules put in place by the U.S. government to stop movie studios from owning their own theater chains, thus ending vertical integration.

President Trump’s Justice Department terminating the Paramount Consent Decrees means that studios could once again own major theater chains. This opens up the possibility of a major merger or acquisition in the near future, especially for studios like Disney, which obeyed the decree, despite the fact that it was founded after the decrees were enacted and thus not technically bound by them, but also already take up much of the U.S. box office in a normal year.

While studios owning their own chains and shutting out the competition from other studios was a major concern during the Hollywood studio system of the early 20th century, that’s no longer the case. In her 17-page opinion written on the case, U.S. District Court Judge Analisa Torres explains that the possibility of studios colluding to shut out certain other studios or theater chains seems unlikely.

Judge Torres goes on to explain that just because the decree has been terminated doesn’t mean that studios and theaters could merge or be acquired with impunity. Any merger, Judge Torres explains, would still be subject to the standard antitrust laws applied to any business deal.

The Court finds that changes to antitrust administration, in particular, the HSR Act, provide federal antitrust agencies with notice and opportunity to evaluate the competitive significance of any major transaction between a movie distributor and a theater circuit, which suggests low likelihood of potential future violation.

What’s more, certain companies were already outside the scope of the Paramount Consent Decrees. For instance, Disney already owns the El Capitan Hollywood theater, where it plays its own movies, and Netflix — a streaming company, production studio, and distributor all on its own — owns the Egyptian Theater in Hollywood, and the Paris Theater in New York.

With the old decrees out of the way, the road is now open for big studios like Disney to look beyond single small theaters and set their sites on nationwide giants, if they’re so inclined.