Trump’s Justice Department Wants to Change the Movie Industry

The administration is preparing to get rid of old antitrust rules that keep major film studios in check. This could be bad news for smaller theater chains and audiences alike.

Associated Press

One of the most pivotal moments in Hollywood history came in 1948, not on a soundstage or in a cinema, but at the Supreme Court, via a case known as United States v. Paramount Pictures, Inc. In a 7–1 decision, the Court ruled that film studios couldn’t legally own their own theaters, disrupting a system by which major distributors had controlled every level of the moviegoing experience. That vertical integration, which had meant that many theaters were allowed to show only one studio’s films, was dashed in the name of antitrust laws. A decades-old system was shattered, creating more competition. Now, more than 70 years later, Donald Trump’s administration is announcing that it wants those rules undone.

According to the Department of Justice, abolishing the strictures of Paramount is a long-overdue move that will acknowledge the shifting realities of an industry that has come to rely on online revenue. “As the movie industry goes through more changes with technological innovation, with new streaming businesses and new business models, it is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation,” Assistant Attorney General Makan Delrahim said Monday at an American Bar Association conference in Washington, D.C. While eliminating Paramount will certainly encourage change, it could be for the worse, and major-studio power may end up more centralized than ever before.

Before Paramount, big studios either had relationships with theaters or owned them outright. That was part and parcel of the entire moviemaking process, which also bound actors, writers, and directors to studios in often exploitative contracts: Everything, from scripting to postproduction to distribution, was under one umbrella. In 1938, the U.S. government sued every major studio for violating antitrust laws, naming the largest (Paramount) as the chief defendant but also bundling in giants such as MGM, Warner Bros., 20th Century Fox, Universal, and Columbia, all of which still exist in some form.

The suit didn’t include Walt Disney Studios, today the most colossal film company of the bunch, because Disney didn’t function at the time as a distributor (it mostly relied on the now-defunct RKO Pictures to put out its animated movies). But even Disney has abided by the rules laid down in the Paramount decision. “Block booking,” a practice that forced independent theaters to agree to screen a studio’s entire upcoming slate of films, sight unseen, was constricted. Studios were required to show films to theaters at special trade screenings, rather than insisting on “blind buying.” Most important, studios had to divest themselves of all theater chains.

Paramount upended the business for more than 20 years, and was the beginning of the end for the classic studio system that powered Hollywood’s golden age. The decision led to the flourishing of independent theaters, arthouse cinema, and foreign films. In the 1970s, the modern blockbuster model took hold with movies such as The Godfather and Jaws, and the current system, in which multiplexes mostly show major releases and smaller studios rely on independent theaters, settled into place.

It’s unlikely that the DOJ striking down Paramount will suddenly turn back time for Hollywood. For one thing, the theater business isn’t the guaranteed profit-maker it used to be. Ticket sales have been erratic for years, and companies such as AMC depend heavily on big grosses. Online companies such as Netflix have been at war with major chains over strict “windowing” requirements that demand a three-month wait between theatrical release and online availability, a stalemate that shows no sign of resolution.

But if a company like Disney were to buy a major theater company—something the impending DOJ change would permit—it could have drastic consequences for Hollywood. Disney already controls an alarmingly large portion of ticket revenues and just bought its competitor 20th Century Fox; since doing that, the company has quietly restricted repertory showings of old Fox movies, a practice it has long enforced for Disney movies. A hypothetical Disney-owned theater chain that prioritized Disney films for its screens would squeeze an industry that’s already struggling to offer a breadth of options to consumers, thanks to the overwhelming success of family-friendly brand-name blockbusters.

Without strict antitrust rules, independently owned theaters could have trouble affording big studio movies. A crucial part of the old centralized system was that theater chains rented screens to their studio owners at a massive discount; were that model to return, it would be hard for indie theaters to compete. We live in a world where more than 30 percent of all ticket revenues are earned by one company—it’s arguable that the movie system needs more market restriction, not less.

Delrahim, who upon his appointment to office in 2017 was presented with a red hat that read Makan Antitrust Great Again, doesn’t agree. If consumers end up being harmed by the new changes, “antitrust enforcers remain ready to act,” he said, according to The Wall Street Journal. The rise of companies like Netflix, which have bypassed the theater system to make profits entirely online, does suggest that the restrictions enforced by Paramount belong to another era. But changing Paramount means nothing to Netflix, since it was never legally governed by that ruling in the first place. In fact, the company has already explored the acquisition of theater chains such as Landmark to create its own brick-and-mortar foothold.

The National Association of Theatre Owners, which represents major chains, expressed its concern about the murky future the DOJ could create. “If exhibitors were forced to book out the vast majority of their screens on major studio films for most of the year, this would leave little to no room for important films from smaller studios,” the group said in a statement. The DOJ issued its own comments, saying the evolution of the business over the decades has made Paramount meaningless: “New technology has created many different distribution and viewing platforms that did not exist when the decrees were entered into.” (While details on exact timing remain vague, the department said it plans to phase out the rules over a two-year sunset period.)

In all likelihood, even with Paramount gone, the status quo will hold in the short term. Studios are far more interested in launching their own streaming companies—Disney with Disney+, Universal with Peacock, Warner Bros. with HBO Max—than in getting into the exhibition business. But any tectonic shift in the world of distribution would see pluckier, more adventurous companies with smaller margins suffer, and companies such as A24, Neon, IFC, and Bleecker Street could find themselves crowded out by block booking and blind buying. Especially in a movie age when big studios are backing away from financially risky projects, that outcome could be disastrous for cinemagoers and artists alike.