The Paramount Decrees And The Deregulation Of Hollywood Studios

By: G. Vaughn Joy (Pro Market)

In November 2019, the Department of Justice (DOJ) began the process of requesting a repeal of the Paramount Decrees. The Paramount Decrees were the result of a 1948 Supreme Court decision in United States vs. Paramount Pictures, Inc. in which the Court ordered the divestment of major studios from their cinemas and established a landmark antitrust decision for the motion picture industry. The Decrees were formally repealed in August 2020 with a sunsetting period of two years, potentially unleashing more problems on an industry already struggling with inequitable resources.

The Paramount Decrees originated with a 1938 lawsuit filed by the DOJ against the major studios, then known as the Big Five (MGM, Paramount, RKO, 20^th Century Fox, and Warner Brothers) and the Little Three (Universal, United Artists, and Columbia). According to the DOJ, the Supreme Court found that these studios “had engaged in a wide-spread conspiracy to illegally fix motion picture prices and monopolize both the film distribution and movie theater markets.” This “conspiracy” was functionally known in Hollywood as “vertical integration”, or the Studio System. Vertical integration is a process in which the studios own the production, distribution, and exhibition of their films. In other words, they own the processes of creating, marketing, and screening a film for audiences.

THE DOJ ORDER TO REPEAL THE ANTITRUST DECISION ABANDONED INDEPENDENTS BY ALLOWING ANOTHER CHANNEL OF PROFITS FOR MAJOR STUDIOS AT A TIME WHEN FUNDING FOR INDEPENDENT FILMS IS A CRUCIAL ISSUE IN THE INDUSTRY.

Exhibition was the primary concern for the Supreme Court in their decision-making process, as exhibition was the highest grossing of the three filmmaking processes. The major studios often owned individual theaters in various theater districts or owned theater chains spanning districts. When exhibiting a film, the studios would send it to their cinemas exclusively for their first runs, which invariably were the most profitable releases as marketing, reviews, and word-of-mouth encouraged audiences to see a film in the first weeks of its showing. Films were then sent to subsequent-run cinemas which were either owned by competing studios or independent.

When the Supreme Court handed down the Paramount decisionin May 1948, the eight studios had to sign consent decrees legally binding them to stop monopolistic practices – such as fixed minimum cinema-ticket prices and block-booking – which gave the wealthy studios unfair advantage over competing studios, independent filmmakers, and independent theater owners. The decrees also required them to break ties with their studio-owned picture-houses, though some such as MGM appealed the decision and held out until 1957 before finally signing their decree and selling their cinemas…

CONTINUE READING…