According to the Wall Street Journal, the Justice Department is moving to completely wipe out the Paramount consent decrees, a ruling which, for the past 70 years, has regulated how movie studios distribute films to movie theaters. If those decrees are indeed overturned (and it looks like they will be), it could have devastating consequences to the theater industry as we know it, and the entire movie landscape could shift as a result. Here’s what this means in practical terms.



What Are The Paramount Consent Decrees?

In the late 1930s, the Justice Department sued the prominent movie studios of the era, claiming that the studios had too much control over the industry. The government won the case in 1948, forcing the studios to give up their ownership of theaters across the country and making several common distribution practices illegal, including block booking (bundling multiple films into one theatre license), circuit dealing (entering into one license that covered all theaters in a theater circuit), resale price maintenance (setting minimum prices on movie tickets), and granting overbroad clearances (exclusive film licenses for specific geographic areas).

Example: if Paramount had a new Mission: Impossible film coming out but the studio knew it also had a dud on its hands, the consent decrees made it illegal for Paramount to basically hold a theater hostage by forcing them to show the dud in order to also show the film they know is going to be a moneymaker.

It’s still not illegal for a studio to own its own theater – Disney has owned the El Capitan in Hollywood for years – but small exemptions like these had to have prior court approval.

What Could Happen When They’re Overturned?

According to the Wall Street Journal, the Justice Department’s antitrust division “has concluded that the rules…have outlived their usefulness in a world where the movie business has changed considerably.” To boil it down, the argument is basically that in the streaming age, the old rules shouldn’t necessarily apply. While it doesn’t seem like a huge change is going to happen overnight – the department is “seeking a two-year sunset period for parts of the decrees that address block booking and certain movie licensing practices for theaters in a specific geographic circuit” – it appears that the department plans to make a motion in federal court in Manhattan to terminate the decrees in the next few days. We’re standing on the brink of a significant change to the way film distribution happens in this country.

“It is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation,” said Makan Delrahim, the department’s top antitrust official. And while I’d love to live in a world in which that bright and cheery outlook prevails, my guess is the changes we see are not going to benefit consumers.

Positives

Let’s look at the bright side first, shall we? When the Paramount consent decrees are overturned, that means that studios should be able to buy their own theaters again. That could allow streamers like Netflix and Amazon to purchase theaters and then potentially offer subscribers access to see their films in theaters, either for free or (probably more likely) for a small additional fee – maybe even a separate subscription tier.

It could also result in a significant divide in movie chains, with major companies like AMC and Regal showing blockbusters and smaller chains and indie theaters showing smaller films. I know this is supposed to be the positive section, but I’m not fully convinced this would work. Would Disney, which now owns Fox Searchlight, really give smaller theaters access to those Searchlight awards dramas without forcing them to also pay up for the next big Marvel or Star Wars film? Maybe an agreement could be reached, but anytime we’re banking on the benevolence of movie studios, consumers are probably going to be disappointed. (See also: Vulture’s recent piece about Disney putting many of its Fox movies in the vault and severely restricting access to titles that used to be commonplace on the repertory circuit.)

Negatives

Sadly, the negatives far outweigh the positives here. My example above about Paramount holding a theater hostage for the ability to show the next Mission: Impossible could now become the new normal, which is not only terrible for theater owners who would be strong-armed into showing movies they wouldn’t otherwise show, but also terrible for consumers, since those screenings would mean that smaller independent films (like this year’s Parasite) wouldn’t be able to play in those theaters like they would have today. Many independent theaters, which are struggling as it is, simply won’t be able to stay afloat without being able to rely on major blockbusters throughout the year.

A Forbes article from last year suggested that if this overhaul indeed comes to pass, it could also mean that smaller studios “may very well cut back their release schedules, fearing a lack of available screens for their smaller titles, thereby limiting the choices that moviegoers have when they head to their local multiplexes.” That same article also points out that under our current laws, “studios are mandated to provide a viewing of all films prior to negotiation and release,” but if the decree is wiped out, “there will be no system of checks and balances to prevent a studio from selling blocks of films sight unseen, as was the case in the early days of Hollywood.” If you complain about the quality of movies in multiplexes nowadays, just wait until theaters can’t even choose for themselves which movies they get to program.

An overhaul like this would embolden studios, one of which is already putting egregious demands in place for its top-tier content. When Star Wars: The Last Jedi came out, Disney forced theaters to agree to secret terms which many theater owners referred to as “the most onerous they’ve ever seen”: Disney took 65% of revenue from ticket sales, which was the highest percentage a studio has ever demanded. On top of that, the studio made sure that The Last Jedi was screened for at least four weeks, and if there was any deviation from that schedule, the studio would take a 5% fee on top of the 65%. Those terms may have been a bit annoying for chains like AMC, but in some indie theaters in small towns, they were a much bigger burden. When the population of a whole small town could cycle through and see the movie in, say, two weeks, keeping the film playing to empty auditoriums for another two weeks when other films could be slotted in instead meant that some theaters just chose not to play The Last Jedi at all.

The one shred of hope came when Delrahim explained that “antitrust enforcers remain ready to act” if studios begin engaging in behavior that harms consumers, but wiping these decrees off the books unquestionably gives studios huge freedoms to establish more dominance across the industry. I hate to be fatalistic, but if antitrust enforcers are our last line of defense against corporate greed, the future of an already dwindling industry could be more dire than ever.