We Should Be Concerned About Sony Buying Alamo Drafthouse
https://open.spotify.com/episode/4nYHwDLYm9Q1kpGPZmNfnB?si=s8LvymQ3Qc-NC2OJwsO35A
So it's time for a little history lesson. In 1938, the United States Department of Justice sued the major movie studios (Paramount, MGM, 20th Century Fox, Warner Brothers, and RKO Pictures) for unfair business practices after a lengthy investigation by the Federal Trade Commission over, among other things, the practice of the major studios owning some theaters and forcing others into exclusivity contracts. This case (United States v. Paramount Pictures) ended up before the Supreme Court in 1948 and, following a 7-1 decision in favor of the government, led to the creation of the Paramount Decree which ended the old Hollywood studio system that dominated from its inception through the 1940s and also prevented production companies from owning theaters.
Fast forward to 2019 when the William Barr-led DOJ under the Trump Administration decided to sunset the Paramount Decree with the thought process that it was unlikely that the studios as they stand now (the big five now comprised of Disney, Universal, Paramount, Warner Brothers, and Sony) would be able to "reinstate the cartel" they previously had. As usual, it appears that the former AG's editorializing was incorrect as Sony has made the move to buy Alamo Drafthouse and its film festival Fantastic Fest, marking the first such acquisition since the decree was struck down.
This level of vertical integration is potentially a harbinger of catastrophe for the film industry as this could have the same potential negative impact to independent theater owners that the original court case was striving to prevent. Alamo Drafthouse does not have a ton of locations or the market share of say AMC, Regal, or Cinemark but they do have some pull and Sony could use this foothold in these markets to strong-arm smaller theaters into taking worse exhibition deals. If they can claim 100% of the ticket sales for the next Ghostbusters or Bad Boys or Spider-Verse movie, what incentive do they have to give a good cut of ticket sales to a small theater in the same market?
On top of this, Sony buying Alamo Drafthouse could signal to the competition like Disney, Universal, Amazon, or Netflix that the drawbridge is down and a company like AMC could be up for sale to one of the larger studios. If Disney were to buy AMC the impact on Regal and the other chains, let alone smaller theaters, would be catastrophic. Posing Disney as a potential buyer for AMC is not hyperbole considering Bob Iger's return to the helm, considering his role in Disney's serial acquisitions of Pixar, Lucasfilm, Marvel Entertainment, and 20th Century Fox.
It is also worth noting that United States v. Paramount Pictures is the quintessential vertical integration anti-trust case brought by the Department of Justice that set the groundwork for the near century of legal precedent that has come since. In recent years the courts have not been doing their jobs in the merger and acquisitions department by allowing Disney to buy 20th Century Fox and Microsoft to buy Activision but this is a cut-and-dry case that, if it is not handled, could be catastrophic for the film industry.
