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Movie Studios Can Now Legally Own Their Own Movie Theaters

The year keeps getting worse for movie theater owners. Their business has been devastated by the effects of COVID-19, keeping their doors closed since March. AMC Theaters and other major chains expect to reopen this month, but given the unpredictable times we’re experiencing, it’s no sure thing. Now, movie theaters have to worry about major movie studios now being able to own their own movie theaters.

The News

A federal judge has reversed the rulings of the Paramount Consent Decrees of 1948. Basically, that kept movie theaters from controlling both the making-of and — this is where it concerns theaters — distribution of movies. At the time, the big studios were 20th Century Fox, Paramount, and Warner Bros., so they could never own their own theaters. Newer studios, like A24 and Lionsgate, could open their own theaters if they pleased.

A Movie History Lesson

For over 70 years, this law has protected movie theaters from studios completely controlling the game and the profits. Via The United States Justice Department, here’s a little breakdown of the law: 

The Paramount case and the resulting decrees significantly altered the structure of the motion picture industry. First, the Supreme Court ordered and the decrees mandate a separation between film distribution and exhibition by requiring the five defendants that then owned movie theatres to divest either their distribution operations or their theatres. Going forward, the decrees prohibited those defendants from both distributing movies and owning theatres without prior court approval. Second, the Supreme Court and the decrees outlawed various motion picture distribution practices including block booking (bundling multiple films into one theatre license), circuit dealing (entering into one license that covered all theatres in a theatre circuit), resale price maintenance (setting minimum prices on movie tickets), and granting overbroad clearances (exclusive film licenses for specific geographic areas).

What’s Next?

The most powerful studio in Hollywood, Walt Disney, has been able to open their own movie theaters for a long time. The studio owns the lovely El Capitan in Hollywood, California. The studio could easily open up their own chain of theaters. Disney and no major studios have expressed interest in doing so, though. 

No More Middle Man?

Studios would, however, be able to cut out “the middle man,” like AMC and Regal, and take home more of the profits from their releases. If there’s more money to be made in the future, would a studio such as Disney really pass up creating their own line of theaters? It might be beneficial for streaming giants such as Amazon and Netflix. Major theater chains will not show their movies, which is an especially big shame for movies such as The Irishman and Roma. Now, the streaming giants could say screw’m and build theaters to show their own movies and maybe other studios’ movies. Again, this is all possibilities for the future, nothing more. 

The Threat of VOD

It’s not disastrous news for movie theaters, but it does spell trouble for the distant future. For years, theaters have been increasingly worried about their place in the world after VOD and the rise of streaming. This year only made the situation worse for them. Major movies released on VOD during COVID-19 have been a huge success. Netflix and Amazon’s streaming numbers are up high. 

Worst of all, a week or two ago, AMC Theaters and Universal struck a game-changing deal that would allow the studio’s movies to hit VOD less than three weeks after opening in theaters. Other major theater chains were not happy about the deal, which would give AMC a cut of the VOD profits. That is the future, for better or for worse. Movie theaters will never die, but they will continue to hurt and probably worry long after COVID-19.