Justice Department to End the Paramount Consent Decrees

The Justice Department’s antitrust division plans to terminate the so-called Paramount consent decrees governing movie distribution, indicating they are no longer useful. Those rules were established in the wake of a landmark 1948 Supreme Court ruling covering the eight major movie distributors in the U.S. Their end will dramatically change movie distribution. DOJ antitrust official Makan Delrahim noted that streaming services and new business models have opened the door to “consumer-friendly innovation.”

The Wall Street Journal reports that the Paramount consent decrees “largely prohibited the studios from owning the theaters where their movies played, as well as from requiring theaters to play either several of their movies or none at all, an all-or-nothing deal known as ‘block booking’.”

Since the rulings, the movie theater industry “flourished and expanded.” Now, the Justice Department “is seeking a two-year sunset period for parts of the decrees that address block booking and certain movie licensing practices for theaters in a specific geographic circuit.”

Delrahim noted the decrees are no longer relevant since “the conspiracy among movie-industry giants from the 1940s no longer exists.” To officially terminate the decrees, the Justice Department “will have to make a motion in federal court in Manhattan.”

The decision will be a “particular blow to the nation’s dwindling number of independent theaters and smaller studios trying to squeeze movies into a release calendar increasingly dominated by big-budget franchise titles.” That’s because these smaller operators can’t “afford the onerous distribution terms required by studios to show their biggest blockbusters.”

“In extreme cases,” says WSJ, “up to 70 percent of ticket sales on a major release can flow back to the studio.”

Currently, AMC Entertainment Holdings, Regal Entertainment Group and Cinemark Holdings, the nation’s top exhibitors, control about half of the U.S.’s 40,000 movie screens. Box Office Mojo reported that so far this year, the five highest-grossing movies were responsible for more than 27 percent of the box-office grosses in the U.S. and Canada.

The National Association of Theatre Owners (NATO) stated that the biggest movie titles “could be used as leverage by studios if the decree disappears and block booking allowed.” “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,” said NATO.

In addition to the Paramount decrees, the Justice Department is examining other old legal settlements across numerous industries, including the music industry, which also relies on music licensing rules established in the 1940s.