Post-Modern Studio System? What Overturning the Paramount Decision Means for Film Business

While the official announcement was unaccompanied with fanfare, the overturning of the landmark ruling in “U.S. v Paramount Pictures, Inc., et al” (1948) on Friday, August 7, 2020 marks a turning point in the business of modern cinema. Also known as The Paramount Decision and The Hollywood Antitrust Case, this ruling marked the end of Hollywood’s Golden Age and the decline of the Studio System that upheld it. What exactly does this mean for the business moving forward? Short answer: nobody knows, and anyone claiming to know what IS going to happen is incredibly presumptuous. However, by looking at the history of the 1948 ruling and the current events surrounding the August 7th ruling, we can explore this watershed moment in the film business, both past and present. Furthermore, we can extrapolate from past precedent what may happen or even could happen today. One thing is certain, we are in rapidly ranging and even uncertain times due to the direct and indirect impacts of the response to COVID-19. Although the federal court began reevaluating this case in late 2019, it is undeniable that the impact of the response to the effects of the virus may have played a latent role in the final decision. From a massive increase in streaming content options to premium paid video-on-demand (PVOD) to continued (at the time of this writing) delays in returning “big ticket” first-run movies to theatrical exhibition, there are many factors at play here. Not to mention questions such as “if I am an indie filmmaker, will I be able to get my movies in theatrical chains,” “does this mean that Amazon or Apple will buy up struggling chains like AMC,” or “if I am a screenwriter, will I still be able to submit my screenplays to studios if they are completely vertically integrated?” Perhaps this exploration of the past, present, and future of the film business in light of the overturn of the Paramount Decision won’t be able to provide definitive answers, but it will provide historical, empirical, and observational evidences to suggest what may or could happen moving forward. 

In short, the Paramount Decision (1948) was a landmark case in which the US Government forced the eight major/minor studio players to end the practice of block booking, divest themselves of their respective theatre chains (sell them off), and modify the practice of long-term employee contracts (although, this practice would continue until the 1960s). This marked the beginning of the end of the Studio System, AKA Hollywood’s decentralization. But before we can even begin to understand the significance of the August 7, 2020 decision that overturned the landmark ruling, we have to jump in the wayback machine and head to Hollywood’s Golden Age (recently seen on Ryan Murphy’s Hollywood, a 2020 limited-run series on Netflix). 

What was the studio system anyway? It was the arrangement of film production and distribution dominated by a small number of studios in Hollywood. Historically, the term refers to the practice of large motion picture studios, between the 1920s-60s, of producing movies primarily on their own backlots with creative personnel often under long-term contracts, and which dominated exhibition through the vertical integration of company-owned movie theatres. Block booking was also a common practice at this time. This process forced theatres to accept a block of movies from a studio. If an independent theatre wanted to show Movie A, then the studio would require the theatre to also accept and show Movies B, C, D, and E too.

Years before the U.S. Supreme Court ruled against the once powerful Paramount Pictures, the biggest studio in Hollywood at the time, there were constant legal and ethical issues plaguing the storied studio system that produced some of the most foundational films in cinema history. Back during the height of the studio system, there were eight principle players: the Big Five and the Little Three. The Big Five was comprised of: Paramount, MGM, Warner Bros., 20th Century Fox, and RKO; the Little Three included Universal, Columbia, and United Artists. You may (1) recognize some of those names today and (2) notice that there is a famous studio conspicuously missing. The latter is due to Walt Disney Studios being in its infancy during this time. Ironically, it would become nearly completely vertically integrated in the 20th and 21st centuries, minus owning a chain of movie theatres. In a manner of speaking the Walt Disney Company operates in a very similar fashion to that of its older brothers and sisters.

When I took a tour of Paramount Pictures back in 2015, I asked how many full-time staff worked on the lot. And the tour guide responded with 30-40 people. That’s right, only 30-40 people at the time. While that number may have fluctuated in the last five years, it leads me into one of the practices that came to a close when the Studio System fell. Prior to the Paramount Decision and the development of professional unions, studios held movie stars, directors, writers, and others to longterm contracts (with few, if any, options). Contracts were so tightly managed, that studios would loan stars to other studios, for example Paramount may choose to loan out Mae West to M-G-M in exchange for Judy Garland. The on screen talent wasn’t the only area treated as a commodity, virtually every role in front or or behind the camera was under contract to a studio, including directors and writers. 

While this looks like an infringement upon civil liberties through our 2020 eyes, and there are many reasons it should, there was something positive regarding employment during the Studio System: job security. When you worked for the studio, you worked for the studio and made all its pictures. Meaning, you knew you had regular employment until your contract was satisfied, you quit, or were fired. Employees didn’t have to worry about when and where the next gig was; employees went to work, Monday through Friday if you will, just like other working professionals. Furthermore, this centralized human resources system also made it possible to apply for vacant positions as a director, writer, craftsman, or any other position. There were also a great number of formal apprenticeships for those who were trying to break into the system. Sounds great, right? Well, yes and no. Yes, for reasons of streamlining the hiring process and providing stable employment in the field; and no, because the studio (that also likely controlled movie theatres) would not produce or distribute your picture unless you worked for the studio. It was a closed corporate system, so independents were largely kept out of it. From submitting screenplays to theatrical distribution, aspiring filmmakers either had to join the corporate ranks of the studio system or exhibit their pictures in small independent movie houses, IF they could even get the film developed and edited. 

Even before the 1948 decision, the studio system and studio-theatre relationships were under attack, but the studios were able to find loop-holes and political alliances in order to avoid the breakup of the vertical integration that was expensive to maintain but highly lucrative. As the movie studios regrouped for continued legal battles in the court system and Justice Department, media mogul Howard Hughes of storied RKO Pictures made the decision to sell off his movie theatres. When The Justice Department made it clear that there were to be no more deals between the government and the movie studios, Paramount sold its movies theaters in an attempt to buy into television. However, after the legacy studio’s continued involvement in all the antitrust cases leading to the final decision in 1948, the government did not permit Paramount to maintain any semblance of a monopoly in the frontier of television.The battle to keep the studio system was finally over. In the end, the Paramount case influenced the growth of television because, among other reasons, RKO and other studios sold their film libraries to television stations to offset the losses from the Paramount Decision. The studios also released actors from those longterm contracts, and many became television stars.

Although there are many side-effects and tangential reasons why the studio system (1) was lucrative and (2) hard to dismantle, there is one root reason from which everything else radiated: control. Everything gets back to control. Control of movie stars, control of writers and directors, control of the distribution and exhibition process. With all this control, the Studio System was able to craft its own narrative and success story. While the system was lucrative, it also racked up a lot of debt. Debt that came from borrowing from banks, exorbitant movie star salaries, and fighting legal battles. Even though the system had a lot of problems, it still gave us some of the best movies of all time, motion pictures that are larger than life, and those that typified the Golden Age of Hollywood. However, this system also protected its own when scrutiny or accusations arose, which is reprehensible. The Hollywood Studio System was truly its own self-contained world that outsiders were only let into through the movies and publicity. 

The film business landscape looks much different than it was during and just after the Golden Age of Hollywood. But over time, we have seen a migration back towards the ol’ system of doing things. The most recent examples of borderline antitrust infringement are Disney’s acquisition of 20th Century Fox, AT&T’s acquisition of Warner Bros. Pictures, and Comcast’s acquisition of NBC-Universal. What makes the latter two particularly interesting cases is the simple fact that both AT&T and Comcast own and operate the literal hardware in the ground and air that brings you your connection to the internet. One could read this as a form of distribution. The Disney example is more or less one of reducing the ability to equitably compete for audience dollars and the ability to create jobs. You can read more on the Disney-Fox deal in my article Out-Foxed. While block booking and price-fixing are still illegal, the overturn of the Paramount Decision does create a greater pathway to acquiring movie theatres and the ability to be more greatly vertically integrated than was possible since 1948. Interestingly, movie studios have been legally able to buy movie theatres since 1948, but because of the scrutiny and bureaucratic red tape that would come with it, it was not a practice except in the case of Disney purchasing the historic El Capitan theatre and Netflix purchasing the iconic Grauman’s Egyptian Theatre (sister theatre to the world-famous Grauman’s Chinese Theatre). Disney uses the El Capitan for most of its own premieres, but the movie theatre also shows a variety of other programming. But with this overturning, Disney could choose to only show its movies in the El Capitan, likewise with Netflix and the Egyptian Theatre. 

But, so what if Netflix and Disney want to exclusively exhibit their own films in their movie palaces? And you’re right, those two locations do not significantly make a difference in the grand scheme of things; but, what this represents is a microcosm of what could happen more nationally. And that’s why many of us are fascinated by this ruling; we are both anxious and eager to see what happens in this new frontier. Maybe nothing, maybe something. But film academics have a duty to analyze the situation to inform the public of the possible outcomes.

At the time of writing this article, Disney has made no claim regarding any real interest in purchasing the struggling AMC movie theatre chain nor Regal (owned by CineWorld). That said, there is more to explore that isn’t quite as in the face of the public as purchasing theatre chains. While control is the root cause for the machine that was the studio system, the reason the government went after the big studios was in-part because the studios made it nearly impossible for independent filmmakers to get their films into theatres or land distribution deals. If the studio did not produce your film, then it would not distribute it. The inequitable competition field led the US Government to bring about the landmark antitrust case. Lack of competition or lack of an opportunity to compete is what many independent producers, directors, and other creative and technical personnel fear most moving forward. It is highly unlikely that anything major is going to happen overnight; however, the studios now have the latitude, or horizontal if you will, to test the boundaries of their vertical integration and ability to strong-arm the marketplace. Suffice it to say, the studios will be “testing the fences for weaknesses, systematically…they remember” (Robert Muldoon, Jurassic Park). 

While Disney may not be presently interested in purchasing a movie theatre chain (according to the August earnings call), the three companies to watch out for are: AT&T, Amazon, and Apple. The AAA threat. Interestingly, AT&T is no stranger to monopolies or even oligopolies (like a monopoly, but when a market is controlled by a few big companies instead of one). Without going into too much detail on the U.S. v American Telephone and Telegraph (AT&T) case, the antitrust case was brought against the telecom giant, owner and operator of Bell Systems. Bell Systems held a monopoly over American and Canadian phone systems, a monopoly that was held since the dawn of the telephone. The end result of the 1982 ruling brought about the breakup of the Bell Systems company into seven regional “Bell” markets. From this breakup we got seven telecom companies, each operating a particular geographic region. Interestingly, four out of the seven companies are now back under the control of AT&T. The remaining three former Bell markets are owned by Verizon and CenturyLink.

If we use the AT&T case study as a parallel model for understanding studios and the film business, we can posit ideas of what may happen in light of the recent overturn. The AT&T model bares many similarities to the Studio System model. We have a monopoly (or oligopoly) that was broken up by the US Government. Then there was a time of division; but slowly those once divested companies were bought up by the big company again, and in AT&T’s case, the original company. Full circle. What’s funny is that this parallel case study involves one of the likely players in this post-Paramount Decision world. By using the AT&T model, reason stands that a big company or two (maybe three) can and will buy up smaller companies to have a larger footprint, thus reducing competition. It happened the telephone world, it can happen in the film world. After being broken up, AT&T made many smart, seemingly benign moves in order to essentially become a phoenix that is greater than it was before its empire was broken up. 

What does this mean for studios and movie theatres? It simply means that it is very likely that a major company with deep pockets will purchase movie theatre chains. Simple as that. We have seen this before in the AT&T case study. But it won’t be Disney, Universal, or even Netflix buying the theatres, it will be AT&T, Amazon, Apple, or and/or Sony. Inarguably, the first three are some of the largest, wealthiest, and most influential companies in the world, with the latter having an incredibly diversified portfolio that includes technology and more; what better way to showcase your audiovisual technology than in movie theatres??? Each of these companies has the assets necessary to acquire AMC, CineWorld (Regal), Cobb, and even Cinemark. Interestingly, AT&T, Amazon, Apple, and Sony all have investments in film and tv production. AT&T owns WarnerMedia et al., Amazon operates Amazon Studios, Apple creates original content for Apple TV+, and Sony operates Sony Entertainment et al. It is unlikely that the US Government would permit any of these companies to buy up more than one of the major movie theatre chains, but we could easily see each of the four major movie theatre players getting bought up by corporate conglomerates. While there isn’t evidence to suggest that these four corporate giants would force audiences to go to one of their theatres to see one of their movies, it is entirely possible that those corporate giants would offer additional programming (maybe certain movies primarily released on streaming services) at their company owned movie theatres. Between original and licensed/distributed content, these movie theates, tied to media conglomerates that have major studio investments, may pack the theatres with so many movies that independent filmmakers will have to see alternate means of securing distribution, be that through streaming services, independent movie theatres, or or smaller specialized chains like Studio Movie Grill and Alamo Draft House, both of which are known for catering to cinephiles, including horror fans.

In a manner of speaking, what we are looking at here is a post-modern Studio System. You’d once again have the BIG FIVE (AT&T, Apple, Amazon, Disney, and Comcast) and the LITTLE THREE (Sony, Viacom/Paramount, and Netflix). These eight companies would control the media landscape. And there will be just enough competition that it avoids any antitrust lawsuits (until it doesn’t; that’s how this goes, if you haven’t figured it out), until history repeats itself again. This new studio system will flourish for decades, but then something will happen and the government will step in and break up the companies again, most likely resulting in selling of movie theatre chains or even more sobering, movie theatres become a shadow of their former selves. It is unlikely that movie theatres will completely go away, but their purpose and role in show business may be relegated to little more than a novelty. These studios may reimagine the movie star star system, film/tv/production related unions could lose their power because of the increasing number of employees (not contractors) at movie studios, and/or there could even be more theme parks as a means to generate quick revenue to funnel back into the studio model, much like Disney and Universal Parks and Resorts do for their parent companies. Lots of job creation may happen, but these will lack in the creative latitude that many filmmakers crave.

For many independent filmmakers, the fear of the fallout from the overturn of the Paramount Decision is reduced opportunities to secure distribution deals. But it’s not only the production talent that is concerned. Writers could be greatly impacted; because, in a more heavily vertically integrated system, writers will have far fewer outlets for purchasing or licensure of their screenplays. Disney is a good example of this. Disney rarely purchases screenplays from screenwriters; their common practice is to use in-house screenwriters or commission a writer to pen a screenplay. So, if you are not IN the Disney studio system, then your chances of selling or optioning your screenplay are minimal. Since Disney owns 20th Century Fox, then this same practice carries over into that branch as well. That said, Searchlight Pictures is still a production and distribution company to which independent filmmakers and screenwriters can submit work for purchase, licensing, etc. While Disney is the easy example here, this same practice could be said of any major studio. 

More vertical integration means larger companies in a world that is shrinking. This shrinking world could mean trouble for the aspiring filmmaker or screenwriter because of the lack of opportunities to make the transition from page to set to distribution. While this new world may make it more difficult for a screenwriter to sell a screenplay to a studio that is vertically integrated, the director will also face new challenges. Independent filmmakers will have to get their films bought or licensed by a major company in order to get the exposure needed to be able to develop a substantive career. Netflix has a history of being friendly to independent filmmakers (although it has more and more original programming), so an advantage to getting Netflix to buy or option your movie is that you may just be able to screen it at the Egyptian Theatre, which would greatly aid in qualifying for the Oscars or Golden Globes. 

While independent filmmakers may face increasing odds against them for theatrical distribution, this post-modern Studio System could create thousands of jobs in the industry. But you will create what the studio wants you to create, which may not necessarily be the stories that you want to tell. And amidst this possible creation of jobs may be a world with far less opportunity for equitable competition for that golden statue and audience eyes.

Ryan teaches screenwriting and American cinema at the University of Tampa. If you like this article, check out the others and FOLLOW this blog! Interested in Ryan making a guest appearance on your podcast or contributing to your website? Send him a DM on Twitter or email him at RLTerry1@gmail.com! If you’re ever in Tampa or Orlando, feel free to catch a movie with or meet him in the theme parks!

Follow him on Twitter: RLTerry1

Ryan teaches screenwriting and American cinema at the University of Tampa. If you like this article, check out the others and FOLLOW this blog! Interested in Ryan making a guest appearance on your podcast or contributing to your website? Send him a DM on Twitter or email him at RLTerry1@gmail.com! If you’re ever in Tampa or Orlando, feel free to catch a movie with or meet him in the theme parks!

Follow him on Twitter: RLTerry1

OutFoxed: Exploring the Effects of the Disney-Fox Acquisition

The Simpsons predicted it nearly twenty years ago, but it’s now a reality. Last week Comcast (parent company to NBC Universal) conceded victory to The Walt Disney Company for the acquisition of most of 21st Century Fox. This bidding war has been closely followed over the months, however, the war has ended and to the victor go the spoils. Today, shareholders approved the acquisition. While the broadcast channel, news, and sports will be absorbed by NewsCorp, most of the Cable/TV, Hulu, and cinema IPs will now be owned by Mickey Mouse including American Horror StoryX-MenFamily Guy, Alien, Halloween, and Deadpool, several cable/satellite channels, and more. While Disney theme park enthusiasts and MCU fanboys and girls out there are, by in large, celebrating this news, there is a lot more at stake that may alter the landscape of cinema and theme parks. Furthermore, the recent AT&T-TimeWarner and Disney-Fox deals may affect the rate at which independent filmmakers can secure distribution for their films or sell/option screenplays to producers. The world of media and entertainment is rapidly changing, but all these changes may not be for the betterment of society.

It’s not everyday that a major news story falls within my niche area of expertise on media conglomerates with major investments in themed entertainment and cinema, but this is definitely one that does. During graduate school at the preeminent University of South Florida, I studied the convergence of cinema and theme parks. This empirical study (available on Amazon) analyzed the relationship between motion pictures and theme parks/attractions as it pertained to the media holdings companies that make decisions that affect both their theme park and cinema divisions. A predictable model for creative design was produced for companies that have investments in both, are the licenser, or the licensee. Although my areas of expertise on theme park and cinema studies can be pulled on often when talking about one and/or the other, this story gets to the heart of my thesis because we are dealing with not only two, but three companies. Three? Yes. Disney and Fox are obvious, but NBC Universal may also be effected since it licenses Marvel (X-Men and Fantastic 4) and Fox (American Horror Story, Simpsons, and more) IPs for its parks. Spiderman belongs to Sony, but we won’t get that deep into this issue. With lots of IPs moving ownership and with a mostly vertically integrated company absorbing a more horizontally integrated company, there are positive and negative effects that concern producers, screenwriters, attraction designers, and others in motion picture, “television,” live entertainment, and theme parks. And not only those of us who work in showbusiness (live themed/family entertainment, here), but the fans too.

Corporate monopoly is the enemy of creativity and variety. This deal, which is one of the biggest film/media deals ever, has far reaching effects upon the industry. Some may even argue that it has danger written all over it. If there wasn’t already a rigid oligopoly amongst the studio/distribution companies, there will be now. The lion’s share of the cinematic marketplace is now controlled by Disney, TimeWarner (Warner Bros.), and Comcast (Universal), with Sony (Columbia) and Viacom (Paramount) bringing up the rear. Five. That’s right. Five companies essentially determine the future of the industry, and control the majority of the motion pictures released in theaters and the content on cable television (and the streaming services that access it). It’s a mirror image of the 1940s. Instead of The Big Five and The Little Three, we have The BIG Three and the Little Two. In the mid-20th century when the U.S. government cited anti-trust issues with the vertically structured Hollywood entertainment business model, the forced the studios to divest themselves of movie theatres, longterm talent contracts, and more in order to level the playing field for competition and creativity to thrive. The decision to end the process of being vertically integrated is known as The Paramount Decision (U.S. vs Paramount Pictures, 1948). From the big screen to the small screen, from screen to theme park, you will notice the effects of this merger. When one company controls the majority of any marketplace, it usually spells disaster for the consumer; furthermore, it means that there will be a primary gatekeeper in future artists getting his or her work out there.

Let’s explore The Paramount Decision [(U.S. V. PARAMOUNT PICTURES, INC., 334 U.S. 131 (1948)] a little more. Firstly, prior to the Paramount Decision, the motion picture industry was controlled by a few companies. Secondly, the studio owned the facilities, production companies, staff (under long-term contracts), the films themselves, distribution channels, and the movie theaters. When the studios were growing so large that they began infringing upon the free marketplace, the US Government forced the (then) eight major/minor studio players to end the practice of block booking (meaning, films would now be sold on an individual basis), divest themselves of their respective theatre chains (sell them off), and modify the practice of long-term employee contracts (though, this would continue until the 1960s). This marked the beginning of the end of the Studio System, AKA Hollywood’s decentralization. There are many similarities between the situation in the late 1940s and today. In fact, it’s a little worse today because the industry is mostly controlled by five (instead of eight) companies, and these companies have heavy investments in streaming and television programming.

Essentially, the number of gatekeepers is shrinking. The streaming service landscape is also changing because Disney’s acquisition of Fox means that Disney now has the controlling share of the streaming giant Hulu. It’s entirely probable that independent production companies and filmmakers will find it more difficult to get their content out to the public on a well-known platform. Fortunately, Amazon still allows for self-publication but Disney’s control of Hulu will probably see fewer indie films added in the future. The media conglomerates are growing so large that if you’re not in their circle, it will be increasingly difficult to secure a distribution deal for theatrical or streaming. For many, it will feel like there are only 2-3 primary companies controlling the majority of programming on TV and a few more companies controlling a large portion of the movies that get released in movie theaters. Independent filmmakers will have to hustle and work exponentially smarter to navigate the film marketplace. It may get to the point that theatrical releases are no longer realistic or viable for small to medium sized companies because of the stiff competition for the few massive media giants pumping out blockbuster after blockbuster. Conventions like the American Film Market and companies like Distribber will become even more important for indie filmmakers.

The problem with the current state of capitalism in the United States isn’t worries of monopolies but oligopolies (monopolistic practices between a few firms that essentially control a market). Certainly the state of the film industry already lends itself to an oligopoly because of the few companies; but the buyout of 21st Century Fox by The Walt Disney Company greatly increases this issue of a blatant oligopoly. If a monopolist (in many other industries) did what Disney has done, neither the public nor the government would stand for it; but because it’s Disney, and because it’s the film industry, most of the general public is unaware of the negative consequences of such a buyout and therefore only focus on the X-Men being added to the MCU and the trademark trumpet fanfare preceding the opening title sequence of the Star Wars movies once again. Technically speaking, oligopolies are not illegal nor is monopolistic competition; however, this can be a slippery slope towards stifling creativity or making it increasingly difficult to break into any given industry as a newly emerging competitor. Incidentally, monopolistic competition causes the variety or level of differentiation of similar products (i.e. moves and TV shows) to become less heterogeneous and nearly come across as homogenous.

When a strong oligopoly exists within a specialized industry (for our purposes, media & entertainment), one of the side effects is a concept known as parallel exclusion. This concept can be described as the collective efforts of the few industry leaders who essentially act as the main gatekeepers to prevent or make it difficult for would-be newcomers to enter the arena. Parallel exclusion is nothing new, and has been in the news as recently as the last 2-3 decades within the airline and credit card industries. Throughout the eighties and nineties, Visa and MasterCard essentially blacklisted any bank that set out to do business with AmEx. Thankfully, the U.S. Justice Department stepped in when the manner in which the exclusionary rules were written crossed legal, fair trade boundaries. There were similar issues within the airline industry as well. When a few companies control the content or services in the marketplace, antitrust issues are raised

Although we are not technically facing a monopoly with the Disney-Fox acquisition, we are looking at an abuse of power that may lead to anticompetitive conduct. If nothing else, the consumer should be worried about having fewer options for programming. Not that the number of programs or movies will shrink, but there will be little difference between what is released under the Disney banner and the Fox name (if it’s still even called that). In a deal like this, it’s the consumer who gets the short end of the stick. Examples of this may be found in future Simpsons and Family Guy episodes. One of the consistently running lines of jokes are at the expense of The Walt Disney Company. Jabs at Disney can also be found in Deadpool. It will not surprise me that the humor of Simpsons, Family Guy, and Deadpool will change to no longer include jokes at the expense of the hand that now feeds them. If, through contract negotiations, shows and movies like these moved to a different company, then the humor that we have come to know and love may largely be unaffected. As it stands, we will likely see fewer (if any at all) Disney jokes in the aforementioned. These are just examples of the larger problem a few companies controlling the majority of media and entertainment content. The consumer would be wise to the possibility of a lack of competition between brands thus mitigating innovation, variety, and creativity. Innovation is often the product of healthy competition in a free marketplace just as necessity is the mother of invention.

Because the Walt Disney Company is primarily focussed on producing the biggest movies possible (after all, they made the majority of the highest grossing films last year and this), the mid-budget dramas and comedies that used to thrive in Hollywood–you know, the ones that cause you to cry and laugh–could dwindle in number–there now may be little room for them to make their respective ways into theaters with Disney controlling a significant percentage of the industry. Of course, Disney is not alone. With the recent acquisition of TimeWarner by AT&T, both Disney and AT&T are now at the top of the food chain, followed closely by Comcast and then the rest of the media companies who are small in comparison. What we are essentially talking about here are entertainment corporate monoliths, the likes of which, have never been seen before. There is one key difference in the Disney-Fox and AT&T-TimeWarner deals, and one that gives AT&T a slight advantage over Disney and deeper pockets. Disney does not own the hardware in the ground that serves as the conduit for your internet service provider (or ISP) but AT&T does. Not only does AT&T control a huge share of the media/entertainment marketplace, but it also owns a significant share of the technology that brings entertainment content to your home and mobile devices including cable, satellite services, and wireless services. Issues of net neutrality are more important now than ever because the pool of competition is shrinking in number but growing in sheer size.

Cinema and TV are not the only arms of the media and entertainment industry that will feel the effects. Major theme parks, the cash cows of media conglomerates, will change as well. How exactly is this deal going to effect the theme park industry? The short answer is, it is too early to tell; however, we can explore this topic nevertheless. If you’ve been to Universal Orlando resort, you’ve undoubtedly noticed that Marvel and the X-Men have an entire island AND the Simpsons is a land in and of itself. While I am not aware of the license agreement details with both IPs, I can tell you that typically if the ownership of an IP changes hands during the lifetime of license agreement, the agreement is grandfathered in for the length of time that is left in the contract. There are sometimes caveats to that. Often a company that holds the license (for purposes of our example)–a license that belongs to someone different than the original licenser–for a theme park attraction, the licensee cannot make any significant modifications to the look, add to the established attractions, or allow the image to fall into disrepair. If significant changes are made to the look or if the attraction falls into disrepair or if additions are made under the old agreement without consent from the new licenser, the agreement could be nullified. There is a lot more to copyright and IP law than what I’ve outlined, but I wanted to hit some main points on this issue but keep it as simplified as possible. Universal Parks may have to rebrand existing Marvel and Fox attractions as another IP within its library or license an IP from Paramount, MGM, Sony, or another media conglomerate. Presently, the licensing agreement between Universal and now Disney-Fox (Marvel, etc), should stand for now. Regarding the addition of new IPs as replacements, fortunately, DreamWorks and Nintendo give NBC-Universal plenty of latitude for creativity.

Suffice it to say, it is reasonable to conclude that Universal Parks will have to eventually remove the Marvel and Fox properties from the parks because not being able to significantly modify or add to the offerings will become too burdensome. Universal’s Halloween Horror Nights will likely also see some changes in the future because it may become more difficult to license Fox properties for houses and scare zones as Universal and Disney are direct competitors in themed entertainment. This includes American Horror Story, Alien, Predator, and Halloween. In terms of how Disney parks will benefit after this deal, the theme park division will save money on Pandora: the World of Avatar because it will no longer need to be licensed from Fox because Disney now owns the Avatar movies. Eventually, a significant Marvel presence will be felt at Disney World and any loose ends in the ownership of Star Wars will be nullified because Disney now owns the original trilogy, and not just the distribution rights. The ability to enjoy shadow casts of the iconic cult classic Rocky Horror Picture Show may also be effected because it is not unrealistic to think that Disney may crack down on RHPS troops around the country or make the licensing fees so high that many troops may not be able to afford to continue with the live performances. These weekly or monthly performances of troops around the country are an important part of the visual and performing arts. Speaking of which, if you’re in the Orlando area, checkout the Rich Weirdos at Universal Studios CityWalk and if you’re in Tampa, checkout Hell on Heels at the Villagio Cinema and Bar.

While the full effects of the recent mega media deals won’t be felt for a while, it is important to be aware of how acquisitions can effect cinema, TV, theme parks, and independent filmmakers. Corporate oligopoly is a slippery slope that can lead to anticompetitive conduct, fewer options, and become the enemy of creativity and variety.

Don’t Pass GO, Don’t Collect Your Oscar

Corporate monopoly is the enemy of creativity and variety. The biggest news in entertainment this week was the talks between Disney and Fox to sell most of 21st Century Fox to The Walt Disney Company. Whether the talks are still going on behind closed doors or not presents a fascinating topic to discuss! This deal, which would be the biggest film/media deal ever, has far reaching effects upon the industry. Some may even argue that it has danger written all over it. If there wasn’t already a rigid oligopoly amongst the studio/distribution companies, there will be if this goes through. Should this go through without the government swooping in to save the day with monopoly claims in the vein of the historic Paramount Decision, the lion’s share of the cinematic marketplace would be controlled by Disney, TimeWarner (Warner Bros.), and Comcast (Universal), with Sony (Columbia) and Viacom (Paramount) bringing up the rear. Five. That’s right. Five companies would essentially determine the future of the industry, and control the majority of the motion pictures released in theaters and the content on cable television (and the streaming services that access it). It’s a mirror image of the 1940s. Instead of The Big Five and The Little Three, we have The BIG Three and the Little Two.

From the big screen to the small screen, you will notice the effects in the programs you watch. When one company controls the majority of any marketplace, it usually spells disaster for the consumer; furthermore, it means that there will be a primary gatekeeper in future artists getting his or her work out there. Not to mention that the programming on FX and other Fox (non-broadcast) subsidiaries could begin to gradually feel and look more like ABC programming. Could this put shows like The Simpsons and Family Guy on an endangered species list of sorts? Not right now. The deal, in off-and-on talks, would sell off 21st Century Fox (movie studios) and not Fox or Fox Sports (an acquisition of that sort would not be permitted because it WOULD be illegal). So, even if this buyout were to happen, The Walt Disney Company would still continue to be the brunt of many jokes on The Simpsons and Family Guy. A buyout could mean, however, that program options will seem less varied and just more of the same ABC-schlock that already pervades the bandwidth. The two companies that have the most TV programming are Fox and Disney, with Sony (CBS), Viacom (non-broadcast Nickelodeon), Comcast (NBC), and TimeWarner (CW) trailing in original programming. That being said, TimeWarner has done very well with The CW, and I hope it continues to churn out programs such as Vampire Diaries, Supernatural, Riverdale, etc.

Beyond the negative impacts on content, which, in all honestly, can be quite subjective in nature, are there legal or ethical implications here? Is there perhaps a past precedent that could be used in the courts to stop such a buyout (or sellout rather–Fox)? Let’s look at the most famous suit brought against the major motion picture studios: The Paramount Decision [(U.S. V. PARAMOUNT PICTURES, INC., 334 U.S. 131 (1948)]. Prior to the Paramount Decision, the motion picture industry was controlled by a few companies that were heavily vertically integrated. The Studio owned the facilities, production companies, staff (under long-term contracts), the films themselves, distribution channels, and the movie theaters. When the studios were growing so large that they began infringing upon the free marketplace, the US Government forced the (then) eight major/minor studio players to end the practice of block booking (meaning, films would now be sold on an individual basis), divest themselves of their respective theatre chains (sell them off), and modify the practice of long-term employee contracts (though, this would continue until the 1960s). This marked the beginning of the end of the Studio System, AKA Hollywood’s decentralization. There are many similarities between the situation in the late 1940s and today. In fact, it’s a little worse today because the industry is mostly controlled by five (instead of eight) companies, and these companies have heavy investments in streaming and television programming.

The problem with the current state of capitalism in the Unites States isn’t worries of monopolies but oligopolies (monopolistic practices between a few firms that essentially control a market). Certainly the state of the film industry already lends itself to an oligopoly because of the few companies; but the buyout of 21st Century Fox by The Disney Company would greatly increase this issue of a blatant oligopoly. If a monopolist (in many other industries) did what Disney is doing, neither the public nor the government would stand for it; but because it’s Disney, and because it’s the film industry, most of the general public is unaware of the negative consequences of such a buyout. Technically speaking, oligopolies are not illegal nor is monopolistic competition; however, this can be a slippery slope towards stifling creativity or making is increasingly difficult to break into any given industry as a newly emerging competitor. Incidentally, monopolistic competition causes the variety or level of differentiation of similar products (i.e. moves and TV shows) to become less heterogeneous and nearly come across as homogenous. For many, it will feel like there are only two primary companies controlling the majority of programming on TV and a few companies controlling a large portion of the movies that get released in movie theaters.

When a strong oligopoly exists within a specialized industry (for our purposes, media & entertainment), one of the side effects is a concept known as parallel exclusion. This concept can be described as the collective efforts of the few industry leaders who essentially act as the main gatekeepers to prevent or make it difficult for would-be newcomers to enter the arena. Parallel exclusion is nothing new, and has been in the news as recently as the last 2-3 decades within the airline and credit card industries. Throughout the eighties and nineties, Visa and MasterCard essentially blacklisted any bank that set out to do business with AmEx. Thankfully, the U.S. Justice Department stepped in when the manner in which the exclusionary rules were written crossed legal, fair trade boundaries. There were similar issues within the airline industry as well. When a few companies control the content or services in the marketplace, antitrust issues are raised.

Although we are not facing a technical monopoly with the possible acquisition of Fox by Disney, we are looking at an abuse of power that leads to anticompetitive conduct. If nothing else, the consumer should be worried about having fewer options for programming. Not that the number of programs or movies will shrink, but there will be little difference between what is released under the Disney banner and the Fox name (if it’s still even called that). In a deal like this, it’s the consumer who gets the short end of the stick. The consumer would be wise not to give Disney a pass just because there are a small group of big film studios instead of just one. While Marvel fans may be excited that the X-Men can join the MCU (Marvel Cinematic Universe), there is the possibility of a lack of competition between brands thus mitigating innovation and ingenuity. Competition is the mother of innovation just as necessity is the mother of invention.

Because the Walt Disney Company is primarily focussed on producing the biggest movies possible (after all, they made five of the 10 most successful films last year), the mid-budget dramas and comedies that used to thrive in Hollywood–you know, the ones that cause you to cry and laugh–would dwindle in number–there would be little room for them to make their respective ways into theaters in a predominantly Disney controlled industry. What we are essentially talking about here is a corporate cinematic monolith, the likes of which, has never been seen before.

Written by R.L. Terry

Graphic by Tabitha Pearce