The Last Picture Show?

The U.S. Justice Department is preparing to end the so-called Paramount consent decrees that have long barred major movie studios from owning movie theaters.

The decrees have been in place since 1949, the result of a series of anti-trust actions brought by the department against various studios over restrictive booking practices, including the favoring of their own theaters over others in distributing their movies and “block booking,” in which studios forced theaters to book an entire slate of films to get the highest-profile releases.

In announcing the move, the head of DOJ’s anti-trust division, Markan Delrahim, noted that technology and market realities have long-since left the original purpose of the decrees behind, as streaming and other non-theatrical forms of distribution have grown more important to Hollywood’s bottom line and reshaped how people watch movies.

“We cannot pretend that the business of film distribution and exhibition remains the same as it was 80 years ago,” Delrahim said. “Much of our movie watching is not in theaters at all.”

The news briefly put a charge into the shares of the major theater chains as investors bet on potential acquisition offers. But most analysts agreed the studios are unlikely to start buying up brick-and-mortar theaters, for many of the same reasons highlighted by Delrahim.

Yet, as many commentators have noted, while the market and technology may have evolved since 1949, the fundamental problem the consent decrees were meant to address — self-dealing in the distribution of movies — hasn’t gone away. It has simply changed venues along with the movies.

With streaming services like Netflix, Amazon Prime and Hulu relying increasingly on exclusive original content to lure and keep subscribers, and the parent companies of Disney, Fox, Warner Bros. and Universal hoarding their own content as they role out their own direct-to-consumer platforms, restrictive distribution practices are alive and well.

“The consent decree may be outdated, but the idea that there’s danger in someone bulk-producing content and then controlling the distribution is not outdated — it’s very current,” Public Knowledge legal director John Bergmayer, told the Washington Post. “We should be taking the concept behind the consent decree and applying it to that.”

Ironically, the Justice Department need only look to its own recent history to find precedent for just such an approach.

The department’s (ultimately unsuccessful) case for blocking AT&T’s merger with Time Warner rested largely on its contention that the merger would give AT&T both motive and means to extort higher prices from competing pay-TV distributors to benefit its own DirecTV service by threatening to withhold “must have” programming, thereby ultimately driving up prices for consumers.

I wrote at the time that the DOJ’s case was not a strong one overall (and may even have been influenced by President Trump’s animosity toward CNN). But the notion that vertical integration in video between content producers and distributors is potentially problematic at least echoed the concerns the department raised in its earlier, successful effort to impose conditions on Comcast’s merger with NBCUniversal requiring Comcast to offer NBCU content to competing MVPDs on fair terms (those conditions expired in 2018).

The conditions surrounding cable TV distribution and streaming are not entirely parallel. Cable providers, for the most part, are not producing original programming for use on their own platforms in competition with the studios and networks as Netflix and Amazon are.

But if the department were genuinely interested in promoting innovation and competition in the distribution and exhibition of movies and other programming, allowing the studios to own theaters while turning a blind eye to the effects of vertical integration in the streaming business is not the way to do it.

Proprietary distribution strategies ultimately restrict choice and raise prices for consumers by forcing them to subscribe to multiple, all-or-nothing streaming services to watch the the various movies and shows they want to see.

As Derek Long, a professor at the University of Illinois at Urbana-Champaign and an expert on the decrees, put it, “What is streaming if not the ultimate form of block-booking — making consumers take the good with the bad? You can get rid of the consent decree, but you’ll still have the same issues from the 1930s that made them necessary.”

It also has the effect of prevent the emergence of independent operators who might be able to devise innovative packages and consumer value propositions by aggregating content from multiple studios and suppliers, much as Netflix itself used to do.

DOJ may think it’s moving forward by eliminating the old consent decrees. But it’s really going backwards.