Federal judge approves ending consent decrees that prevented movie studios from owning theaters

A federal judge has approved the Department of Justice’s efforts to end the Paramount Consent Decrees — 70-year-old court orders that prevented movie studios from engaging in a variety of anti-competitive behaviors, including ownership of movie theaters.

U.S. District Court Judge Analisa Torres cited the rise of streaming services like Netflix as one of the reasons for her decision:

Motion picture distributors that are not subject to the Decrees have entered the market since the 1940s — most significantly, The Walt Disney Company, the leading movie distributor in 2018 with about $3 billion in domestic box office revenues … Other motion picture distributors not subject to the Decrees include Lionsgate (20 films released in 2018), Focus Features (13 films), Roadside Attractions (12 films), and STX Entertainment (10 films). …None of the internet streaming companies — Netflix, Amazon, Apple and others — that produce and distribute movies are subject to the Decrees. Thus, the remaining Defendants are subject to legal constraints that do not apply to their competitors.

It’s not clear whether this decision will have any impact on the big streaming services. Torres acknowledged the argument that even when the decrees do not apply to a given studio, they “serve as a yardstick of acceptable behavior, exerting a normative effect on industry actors who are not parties to them.”

But it’s hard to imagine anyone in 2020 thinking it’s a good idea to get into the theatrical business in a big way. Domestic attendance was already on the decline, even before the COVID-19 pandemic forced most theaters to close.

Netflix and Amazon had shown some interest in owning theaters before this. Amazon was reportedly in the running to acquire Landmark Theatres a couple of years ago, and rumors that it might acquire AMC sent the theater chain’s stock shooting up earlier this year — but no acquisition has been announced, and in the meantime AMC appears to have stabilized its finances.

Netflix, meanwhile, signed a long-term lease for New York City’s Paris Theatre last year, and it may also have been interested in the Egyptian Theatre in Los Angeles. However, these seem less like the first steps in a broader theatrical strategy and more like one-off deals designed to provide the streamer locations that it can use for screenings and fancy premieres.

The real impact of the ruling may be in other areas, like the elimination (after a two-year sunset period) of restrictions on block booking and circuit dealing. Without those restrictions, studios could potentially require theaters that want access to lucrative franchise titles to screen their less popular movies as well.