The End of Competition in Film Distribution: An Argument to Reboot the Paramount Consent Decree

Abstract

The movie theater industry of the 1930s saw relationships between movie producers, distributors, and independent exhibitors become tense. Studios and distributors, which made films available to the public, threatened the livelihoods (and existence) of independently owned movie theaters when they decided to compete directly with those smaller businesses. Independent exhibitors throughout the early 1900s continually invested in their theaters and evolved the moviegoing experience for consumers. This evolution was powered by healthy competition among theaters owners. But competition became restrained once the corporate film studios accelerated their expansion in film exhibition. Studios restricted film distribution to their own (or affiliate) exhibitors. Meanwhile, independently owned theaters were coerced into controversial distribution deals in exchange for access to major films. Those deals reduced the number of businesses that truly operated as free enterprises. Many independents reluctantly became extensions of their film suppliers. Moviegoers in the 1930s ultimately paid higher ticket prices and had fewer film choices once film distributors gained control of non-studio theaters in local markets. Economist Adam Smith warned that allowing corporations too much control could lead towards anti-consumer monopolies. A successful capitalistic economy requires regulation to protect consumer choice and encourage continued evolution of the industry. The SCOTUS ruling in U.S. v. Paramount Pictures restored free commerce via precise, industry-specific regulation. The result, known as the Paramount Consent Decree, accomplished what the Sherman Antitrust Act failed to do. However, the Paramount Consent Decree was ended August 2022 because the federal court felt the law was no longer relevant. This study explores the history of that regulation and the reasons for its termination. The study argues that the Paramount Consent Decree remains relevant and should remain as a deterrent against organizations that may want to drive out smaller independent theatrical competitors. Historical accounts are used to examine why general antitrust regulation alone (the Sherman Act) would not appropriately protect independent theaters from another attempted takeover. Finally, arguments are made in defense of maintaining the Paramount Consent Decree.