#1502 1948 · Hollywood major studios (Paramount et al.) · film industry
Sell the Slate, Not the Film - Until the Court Says Stop
the problem
A studio's year is a few hits and many duds; if theaters cherry-pick, the duds never find a screen.
background
In the studio era, major Hollywood distributors controlled exhibition through owned theater circuits. Licensing practice included block booking, in the Justice Department's words 'bundling multiple films into one theatre license', along with circuit dealing, one license for a whole chain, resale price maintenance on tickets, and overbroad exclusive clearances.
In United States v. Paramount Pictures, 334 U.S. 131 (1948), the Supreme Court sustained findings that eight defendant studios, Paramount, Twentieth Century-Fox, Loew's, RKO, Warner Brothers, Columbia, Universal and United Artists, had engaged in a wide-spread conspiracy to fix motion picture prices and monopolize distribution and exhibition. Each then entered consent decrees.
what everyone would do
License each film on its own merits and let theaters choose.
what they saw
Individual films are unpredictable, but a slate's average is not. Forcing exhibitors to buy the bundle let studios sell certainty, and owning the theaters let them keep the whole margin, until antitrust cut the rope.
the move
The bundle is the pricing machine: a theater that wants next season's star vehicle must also license the B-pictures, so every film in the slate finds a screen and the studio's average, not any single film's quality, sets the revenue. Packaging plus owned exhibition let studios price at the system level and capture the theater's margin too, exactly the integration the decrees severed.
why it works
A theater's demand for the hit is inelastic, so attaching duds transfers surplus to the studio; system-level pricing averages out hits and misses; owned circuits guarantee outlets and discipline independent exhibitors.
the payoff
The decrees banned block booking and circuit dealing, barred distribution-plus-exhibition ownership, and forced studio divestiture.
where it breaks
Forced bundling of separable goods invites antitrust challenge, and once severed the seller loses its guaranteed shelf; the industry structure the decrees created lasted seventy years.
what came after
Reshaped Hollywood into distributor-financiers and independent theaters; the decrees stood for over seventy years until a Department of Justice review culminated in a termination order.
references
- [1]The Paramount Decrees (Antitrust Division review page)US Department of Justice, 2020justice.gov