The end of the Paramount antitrust rules signals an opportunity for new vertical integration

A federal judge has approved an end the Paramount Consent Decrees which prohibited the Golden Age Movie Studios from a number of anti-competitive practices, including block booking and blind bidding. The consent decrees also stopped those movie studios from owning theatrical exhibitors.

U.S. District Court Judge Analisa Torres provided an example of the modern movie business in her decision:

Motion picture distributors that are not subject to the Decrees have entered the market since the 1940s — most significantly, The Walt Disney Company, the leading movie distributor in 2018 with about $3 billion in domestic box office revenues … Other motion picture distributors not subject to the Decrees include Lionsgate (20 films released in 2018), Focus Features (13 films), Roadside Attractions (12 films), and STX Entertainment (10 films). …None of the internet streaming companies — Netflix, Amazon, Apple and others — that produce and distribute movies are subject to the Decrees. Thus, the remaining Defendants are subject to legal constraints that do not apply to their competitors.

Coming off the financial precipice that many of the theatrical exhibitors presently face, the timing of this decision could trigger a massive shakeup in the motion picture space. One or more of the traditional Motion Picture Association membership could decide to return to the business model of complete vertical integration. If a studio’s parent company can pick up a major theater chain on the cheap during the pandemic bankruptcies, that company could reposition itself for a very strong distribution strategy.

The play would be a gamble that live entertainment will be returning to North America, but over the next five years, that is likely a reasonable bet.


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