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Drive-In Movie Theatres Face Day of Reckoning (#GotBitcoin?)

Drive-In Movie Theatres Face Day of Reckoning (#GotBitcoin?)
On a moon-filled Saturday night, D. Edward Vogel stood in the projection room of Bengies Drive-In Theatre, surveying a field of cars that turned out for a chilly November triple feature. Drive-In Movie Theatres Face Day of Reckoning (#GotBitcoin?)

“How many think we should return ‘Bohemian Rhapsody’ next week? Flash your headlights,” Mr. Vogel said over the sound system during an intermission. Several cars did.

The Bengies, owned by the Vogel family since it opened in suburban Baltimore in 1956, retains the décor and atmosphere of that era, complete with vintage trailers and a nightly rendition of the national anthem. Mr. Vogel, 60 years old, does his own negotiations with movie studios for what he will show each week. “There is less wiggle room than ever,” he said, with studios pushing for evermore favorable terms. “We are on pins and needles to book movies.”

These days his worries extend to Washington, D.C., where the Justice Department is considering whether to wind down the legal decrees that have governed movie distribution and limited strong-arm studio leverage for 70 years, since the Supreme Court dismantled Hollywood’s monopoly over the cinema business. The decrees largely prevent studios from owning movie theaters or imposing onerous terms on theaters, such as setting minimum ticket prices or demanding screen time for a studio’s entire slate of films.

“All of it has me kind of flipped out,” Mr. Vogel said.

The Justice Department’s review of the so-called Paramount decrees, named after the lead defendant in the case, is the highest-profile part of a broader initiative to terminate older antitrust legal settlements that time has passed by.

Unlike modern settlements, which sunset after a limited period, many earlier decrees had no end date and remain on the books.

The department has proposed ending dozens of settlements, including those addressing markets for typewriters, horseshoes and ice-cream cones.

The department hasn’t yet decided whether to ask a court to cancel or modify the movie decrees, but it has noted the film industry has changed greatly since the court battles of the 1930s and 40s, when most theaters were single-screen palaces and consumers didn’t watch motion pictures on television, much less on streaming services like Netflix.

Drive-In Movie Theatres Face Day of Reckoning (#GotBitcoin?)
“We should not ignore the fact that there have been significant technological and market changes affecting how American consumers watch movies and how filmmakers distribute such movies,” said Justice Department antitrust chief Makan Delrahim. “We want to make sure that these government decrees are not standing in the way of competition.”

The Supreme Court’s blockbuster 1948 ruling in U.S. v. Paramount Pictures covered the nation’s eight major motion-picture distributors and broke up a Hollywood machine that allowed studios to control the movie business from start to finish.

Besides largely prohibiting the studios from owning the theaters where their movies played, it said they couldn’t require theaters to play either several of their movies or none at all, an all-or-nothing deal known as “block booking.” And it stopped certain industry practices that limited when and how films could be shown in particular areas.

After the ruling, each studio entered into a decree with the Justice Department setting out the new rules. The movie-theater industry flourished, with more than 40,000 screens now operating in the U.S. and Canada.

Most of those theaters, of course, are not mom-and-pop operations. About half are controlled by the three largest exhibitors— AMC Entertainment Holdings Inc., Regal Entertainment Group and Cinemark Holdings Inc. Many of the smaller operators are struggling to hang on, and they say ending the Paramount decrees could be a final blow.

Five of the six big studios today—Warner Bros., Paramount Pictures, Sony Pictures Entertainment, Universal Pictures and 20th Century Fox—are bound by the decrees; only Walt Disney Co. , which wasn’t a juggernaut in 1948, is not.

The force of the Paramount rules has eroded somewhat over time. Studios have been able to purchase a small number of theaters, and some defendants covered by the decision, such as RKO Pictures, no longer exist. Newer studios such as STX Entertainment have signed distribution deals with theaters typically not allowed by the decrees.

Then there is the emergence of Netflix Inc. and Inc., which produce original movies and can bypass big screens altogether.

Theater owners, including Mr. Vogel, submitted a barrage of comments to the Justice Department this fall arguing that eliminating the decrees could badly hurt the film industry. The National Association of Theatre Owners, which represents both chains and independents, said removing the block-booking prohibition could give studios even more power to leverage their big-budget movies, which are essential for theaters’ bottom line.

This year, three movies alone—“Black Panther,” “Avengers: Infinity War” and “The Incredibles 2”—accounted for more than $2 billion in ticket sales domestically. Theaters say that if studios can force them to take their less desirable titles along with such blockbusters, that could crowd out movies from independent companies like A24, the upstart studio behind films such as “Moonlight” and “Hereditary.”

The Writers Guild of America West says giving dominant studios more power would squeeze out competition, leaving writers “with fewer jobs and consumers with fewer choices for what to see at the theater.”

No studio has publicly weighed in on the Justice Department review, but the major studios in recent years have considered advocating for lifting the decrees, according to two distribution executives.

Studio executives say privately that they long for the day when they no longer must grant an exclusivity “window” to theaters, which keeps movies off home services like iTunes or video-on-demand for about 90 days. Under current conditions, if major exhibitors don’t get such an agreement, they can refuse to screen the movie.

It is a challenging time for independent theaters. While ticket sales are expected to hit a record this year thanks to higher prices, attendance is stagnating, and studios are seeking a higher percentage of the box-office gate on major releases.

A shrinking supply of movies has tipped the balance of power to studios. In 2017, the six major studios released an average of 14 movies each, down from 23 in 2002.

Mr. Vogel said he needs reasonable financial terms and flexibility to show films from a range of distributors, principles that are at the heart of the Paramount case.

“It’s extremely difficult for us to survive,” he said, “and the distributors know that.”

Amazon Is In the Running To Buy A Movie Theater Chain Inc. is in the running to acquire Landmark Theatres, a move that would vault the e-commerce giant into the brick-and-mortar cinema industry, according to people familiar with the situation.

The company is vying with other suitors to acquire the business from Wagner/Cuban Cos., which is backed by billionaire Mark Cuban and Todd Wagner, according to the people, who asked not to be identified because the discussions are private. The chain’s owners have been working with investment banker Stephens Inc. on a possible sale, the people said. No final decisions have been made, and talks could still fall apart.

Pushing into movie theaters would follow Amazon’s expansion into myriad other forms of media, including a film and TV studio and music service. With Landmark, it gets a chain focused on independent and foreign films that was founded in 1974. The company has more than 50 theaters, including high-profile locations in New York, Philadelphia, Chicago, Los Angeles and San Francisco, with about 250 screens in 27 markets.

Amazon, based in Seattle, declined to comment. Officials at Landmark couldn’t be reached after normal business hours.

Though the acquisition price for Landmark would likely be small, it would mark a significant new incursion by Amazon into the physical world. The online retailer shocked the supermarket industry last year by acquiring Whole Foods for $13.7 billion, positioning the organic-food chain in the middle of its campaign to sell more groceries.

Prime Subscribers

The e-commerce company already spends billions each year on movies and TV shows, saying it helps entice shoppers to join its Prime subscription plan and makes existing members more likely to renew.

Amazon, founded as a book seller, previously disrupted that industry by giving authors an alternative to the big publishers, eliminating a middleman between readers and artists. It opened its first brick-and-mortar bookstore in 2015 in Seattle and now has nearly 20 around the country.

The U.S. government has previously barred film studios from the theater industry. But the U.S. government said earlier this month that it was considering terminating a 70-year-old Hollywood settlement that halted the vertical integration of studios and theaters. The so-called Paramount decree may have prevented smaller films from getting wider distribution.

Cuban and Wagner also own Magnolia Pictures, the production company 2929 Productions, and the networks AXS TV and HDNet Movies. Cuban, a 60-year-old who also appears on the reality show “Shark Tank,” told the Hollywood Reporter in April that he hired a bank to evaluate offers, but said at the time he was in “no rush to sell.”


Updated: 11-18-2019

Justice Department to Terminate Longstanding Legal Rules for Movie Distribution

Antitrust officials conclude legal settlements from 1940s are outdated for governing movie industry.

The Justice Department is moving to terminate legal rules that have governed the movie industry since the late 1940s, a step that could shake up how movies are distributed and the terms on which they hit the big screen.

The department’s antitrust division has determined that rules limiting film studios’ influence over theaters have outlived their usefulness in a movie business that has changed considerably since the curbs were first imposed. The rules set to be lifted were laid out in decades-old legal settlements known as the Paramount consent decrees.

“As the movie industry goes through more changes with technological innovation, with new streaming businesses and new business models, it is our hope that the termination of the Paramount decrees clears the way for consumer-friendly innovation,” Makan Delrahim, the department’s top antitrust official, said at an American Bar Association conference in Washington, D.C. on Monday.

The decrees clipped the wings of a core group of dominant studios in the post-World War II era, the result of a government lawsuit alleging the studios conspired to control the movie business from start to finish.

The decrees followed the Supreme Court’s blockbuster 1948 ruling in U.S. v. Paramount Pictures that covered the nation’s eight major motion-picture distributors.

The ruling largely prohibited the studios from owning the theaters where their movies played, as well as from requiring theaters to play either several of their movies or none at all, an all-or-nothing deal known as “block booking.” And it stopped certain industry practices that limited when and how films could be shown in particular areas.

After the ruling, each studio entered into a decree with the Justice Department memorializing the new rules. The movie-theater industry flourished and expanded in the decades that followed.

The Justice Department won’t seek to drop all the rules right away; it 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.

Mr. Delrahim said the decrees were no longer needed because the conspiracy among movie-industry giants from the 1940s no longer exists. If modern practices arise in the movie industry that harm consumers, “antitrust enforcers remain ready to act,” he said.

The department will have to make a motion in federal court in Manhattan to terminate the decrees. That filing is expected in the coming days.

The Justice Department’s decision is a blow to the nation’s dwindling number of independent theaters and smaller studios trying to squeeze movies into a release calendar increasingly dominated by big-budget franchise titles.

Smaller operators have complained in recent years about not being able to afford the onerous distribution terms required by studios to show their biggest blockbusters—terms that major chains can stomach but mom-and-pop operations cannot. In extreme cases, up to 70% of ticket sales on a major release can flow back to the studio.

The termination of the decrees could speed up a consolidation happening across the industry as independent chains throw in the towel. About half of the nation’s roughly 40,000 movie screens are controlled by the top three exhibitors: AMC Entertainment Holdings Inc., Regal Entertainment Group and Cinemark Holdings Inc.

When the Justice Department invited theaters and studios to comment on the pending decision in 2018, no major studio weighed in. Instead, the comments were mostly left to small exhibitors and drive-in theaters, which cited a top-heavy box office as a concern.

So far this year, more than 27% of the box-office grosses in the U.S. and Canada have been generated by the five-highest grossing movies, according to Box Office Mojo. Four of those movies were released by Walt Disney Co. , which currently holds a commanding market share over the industry but wasn’t a party to the Paramount decree because it wasn’t a juggernaut back then.

Since blockbusters like “Avengers: Endgame” or “The Lion King” are too lucrative for most theaters to pass up, those same titles could be used as leverage by studios if the decree disappears and block booking is allowed, the National Association of Theatre Owners argued in comments submitted to the Justice Department.

“If exhibitors were forced to book out the vast majority of their screens on major studio films for most of the year, this would leave little to no room for important films from smaller studios,” NATO argued. The organization said Monday it would wait to review any motion filed by the Justice Department in court before commenting further.

The Justice Department’s review of movie-industry rules has been part of a broader initiative in which department antitrust officials have revisited long-ago legal settlements across a range of industries that have remained on the books with no expiration date.

The other big review that remains pending is in the music industry, where the department is considering whether to revise or terminate decrees that have set rules for music licensing since the 1940s. The outcome could shake up how businesses, broadcasters and digital streaming services secure rights from songwriters and publishers.

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