🍿Disney May Soon Own All the Movie Theaters in America
Disney has become a behemoth. If you walked into any major movie theater last year, it was statistically impossible for there not to have been at least two (and likely far more) Disney movies playing at any given time. In fact, seven of the top ten grossing moves from 2019 were Disney films.
Even this crazy infographic cannot capture the insanity of just how much stuffDisney owns
And as of last Friday, the law that prevented a studio from buying major theater chains ... is gone ... making it possible that your local cinema could also be owned by Disney.
On Friday a federal judge agreed to vacate a decades old consent decree that forbade Paramount Studios from vertically integrating in the film sector. This 1948 decree effectively ended the studio system of the early 1900's and allowed for the creation of independent movie studios as well as smaller theater chains.
This decision wouldn't be an issue except for the fact that we have a pandemic on our hands - one which has made movie theaters extremely vulnerable to the largess of behemoths like Disney. Moreover, it's not like consolidation in the media sector wasn't already happening prior to the pandemic - the modern Disneyplex is itself is a result of a decade-long spree of mergers and acquisitions.
The Paramount Consent Decrees
Hollywood was already a consolidated industry by the time the first bombs began falling in London at the eve of World War II. At that time, power in the American film industry was concentrated in the hands of the "Big Five" film studios: Paramount, Warner Brothers, MGM, 20th Century Fox and RKO.
These studios controlled everything: from the entire production of a motion picture to its distribution and exhibition. Because they cornered the market, the Big Five functioned like a cartel - they set ticket prices amongst themselves and also caps on actor contracts and behavior (down to which car actors could drive and in who's company they could be seen).
But spurred by the Great Depression and numerous complaints, in 1938 the Department of Justice filed suit alleged that the Big Five were violating antitrust and price-fixing laws. The case made its way to the Supreme Court which ordered the studios to "break up" their cartel. The government enforced this ruling by forcing the studios to sell or spin off their movie theaters. In an instant, every single movie theater in America was up for grabs - and many vets returning from the war bought a number of these now-independent theaters.
Fifty years later we are returning to the era of the Big Five. Throughout the 1990's and early 2000's pressure from outfits like Blockbuster Video and then from the Internet forced many theater chains to consolidate once again. Before the pandemic, over 90% of theater locations were owned by two companies: Regal and AMC.
Still, despite this new wave of consolidation the Paramount ruling kept theaters and film production separate ... that is, until last Friday.
In 2018 the Trump Administration began to look at all existing consent decrees - from agreements forbidding police departments from profiling African-Americans to the agreement the Big Five had made to keep production and distribution separate.
A notice and comment period of 60 days was provided so that the judge assessing the validity of existing consent decrees could gauge what the public, as well as independent movie theater operators thought of vacting the Paramount decree. But ... there were so few independent movie theaters left in 2018 that the handful of comments that came in made it seem like opposition was non-existent.
Still some tried. Here's one comment I found submitted by Studio 35 Cinema and Drafthouse in Ohio:
Unsurprisingly, Judge Analisa Torres found these and other similar statements unconvincing and agreed to terminatethe Paramount consent decrees "effectively immediately."
Why This is a Problem
In 1938, 95% of all U.S. film production was controlled by five studios. This was enough to encourage the DOJ and the Supreme Court to break them up.
Today the situation is worse as only four companies control 90% of U.S. film production. And unlike the past, today the DOJ and federal courts are encouraging greater consolidation by terminating protective consent decrees.
Every movie theater chain in the U.S. reported massive losses in the most recent quarter as COVID kept their doors locked and screens dark. AMC is essentially bankrupt and temporarily surviving due to a last minute debt restructuring deal.
In the last five years, AT&T bought Warner Bros. and Comcast bought NBC/Universal, but Disney (which was already a content juggernaught) beats them both with its $71 billion acquisiton of Fox. When Star Wars: Episode VII came to theaters in 2017, Disney's size and influence allowed it to demand and receive an unheard of 65% profit from all ticket sales. It also demanded every theater exhibiting the film to reserve its largest screen exclusively for the movie for at least four weeks. No exceptions.
Cinema owners had little choice but to comply. Said one theater chain VP:
"They're in the most powerful position any studio has been in since the 1930's ... maybe even more powerful."
The Fox acquisition also gave Disney leverage to affect independent art house theaters. Fox's archival library goes straight back to the dawn of the US film industry, but those films began falling into the infamous "Disney vault" in late 2019, as Vulture reported in depth. Those small theaters began losing access to license classic Fox films for distribution, with rules that felt draconian and unevenly applied.
Those showings of classic films, such as The Fly, The Day the Earth Stood Still, or even Alien, Vulture reported, bring in a great deal of the cash that independent venues use to cover their expenses, which in turn allows them to run new, overlooked, or experimental exhibit works from "international filmmakers, documentary filmmakers, and filmmakers of color who are going to lose access to these venues" if the repertory library isn't subsidizing their showing anymore.
The Year Theaters Became Just Like Locked-in Streaming Platforms
Today, no law bars any film studios from owning a movie theater. They are free to make the film, hire the actors and determine their contract, screen the film at their own theaters, television channels or streaming platform, sell the merchandise at their own stores (like the Disney store) and theme parks and perhaps even prioritize the streaming of their content using their own broadband and cable infrastructure.
Runaway consolidation has led to nearly all wide-release theatrical films being controlled by the new "Big Four" studios. Small to medium sized theater chains were already collapsing prior to the pandemic. The COVID-19 pandemic as well as the recent recession of the consent decree will make this collapse complete.
I think that a massive media company that wants to pocket as much money as possible from its releases could easily decide that acquiring screens outright is a way to make more money. Disney also has experience in live-action entertainment and knows how to sell concessions, and it has access to most of the biggest news releases every year, plus an enormous back library of beloved films. A deal, in the long run, seems to make a distressing amount of sense.
That being said, it's likely any such acquisition will be remain on hold as the pandemic plays out and perhaps when it's all over, theaters may become a distant memory and purchasing them may make little business sense in the face of dominant streaming platforms.
But if not, it's likely that the age of the Disney movie theater has arrived.
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