A ban on movie studios owning theaters that dates back to Hollywood’s Golden Age was scrapped by a federal judge who said changes in the industry have rendered the restriction obsolete, in USA v. Paramount Pictures Corp.
U.S. District Court Judge Analisa Torres in Manhattan on Friday terminated the previous ruling in United States v. Paramount Pictures, Inc., 334 U.S. 131 (1948), at the request of the Justice Department’s antitrust division.
“Seventy years of technological innovation, new competitors and business models, and shifting consumer demand have fundamentally changed the industry,” the judge said in her decision.
While it’s unlikely the news will encourage Walt Disney Co. or Comcast Corp. to buy a cinema chain, the decision should give theater owners more freedom to talk about new distribution models with the studios. Last month, for example, AMC Entertainment, the largest U.S. chain, cut a deal with Comcast’s Universal to receive a cut of some home video purchases after an exclusive 17-day window for its theaters expires.
Shares of theater chains rose on the news, with AMC jumping as much as 27%. Cinemark Holdings Inc. rose as much as 11%, and Cineplex Inc. climbed 5.7%.
The decrees, which resolved antitrust litigation from the 1930s, were the product of a pre-television era when the movies played a far more significant role in America’s entertainment options and the powerful Hollywood studios dominated every aspect of production, distribution and exhibition. The Justice Department moved to terminate the restrictions as outdated.
“‘Gone with the Wind,’ ‘The Wizard of Oz,’ and ‘It’s a Wonderful Life’ were the blockbusters when these Decrees were litigated,” Makan Delrahim, the assistant attorney general for antitrust, said in a statement. “The movie industry and how Americans enjoy their movies have changed leaps and bounds in these intervening years.”
The Supreme Court found at the time that the studios abused their position by, for instance, excluding independent theaters from the most profitable first runs of their movies. Torres pointed out that simply doesn’t happen anymore, since major movies are nowadays released to thousands of multiplex theaters on the same day.
Even that hasn’t happened since March, when movie theaters across the U.S. largely shut due to the coronavirus pandemic, battering the shares of theater chains. Meanwhile, studios have been releasing some movies directly to consumers, through their own streaming services or third parties such as Amazon.com Inc. and Apple Inc.