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The potential of a 2020 decision is finally coming to fruition

You’ve probably already seen the headlines: “Taylor Swift sidesteps Hollywood studios,” “Movie rescheduled to avoid competing with Taylor Swift,” and “Tour movie presales smash all Marvel office records” as the unprecedented move is already making waves in Hollywood.

So let’s talk about what a unique and potentially precedent-setting move Swift made by making a deal directly with AMC Theaters to release her upcoming Eras Tour: The Film. First, by understanding how it is possible.

The separation of studios and theaters

In 1948 the U.S. Supreme Court found Paramount and seven other studios violated antitrust laws by having a near-monopoly in the movie business including owning the theaters where movies were played. This was a big win for the Federal Trade Commission which had declared Hollywood studios anticompetitive in 1921 and had been attempting to abolish “block booking” – a movie distribution tactic that forces theaters to accept movies as a group rather than allowing them to pick and choose individual films – among other studio practices.

Although the 1948 decision recommended that Hollywood studios needed to sell off the theaters, it actually referred the final decision to the lower courts and the legal fight for the studios was not over yet. However, the unity of the studios fizzled when one of the studio owners chose preemptively to sell his theaters in order to remove his studio from the case. Shortly after, Paramount chose to do the same as the legal battle was not only costly but also interfered with their ability to buy into television, which was an up-and-coming fad at the time. Without the power of the studios to fight against it, the district court was able to order the separation of studios and theaters in what is commonly referred to as the Paramount Decrees.

This decision allowed independent movie theaters to pop up and thrive over the next few decades, but as television became more popular movie studios began focusing their efforts on creating TV shows and fewer movies. Even though studios no longer owned theaters, theaters were still directly impacted by whatever choices the studios made. Thus, theaters suffered with the rise of TV as they still relied on studios to produce content for them to show.

Reliance on studios means an unsteady business model

In August 2020, a district court overturned the 1948 decision, as part of a general review of antitrust decrees, stating that the movie landscape had drastically changed in the last 70 years and the ruling was no longer needed. This opened the path for studios to once again own theaters, but as the owner of a Dallas theater chain told the Dallas Observer, there was no immediate threat of studios opening their own theaters. The pandemic had essentially shut down the entire theater business, making it a risky place to venture, and studios were clearly focused on creating their own streaming services.

A bigger risk to theaters is that they are still directly impacted by studio choices, including their decisions in recent years to push some of their content straight to streaming services. With the current dual strikes in Hollywood, some studios have chosen to push their releases back to next year as they are unable to properly promote them, leaving theaters without movies to exhibit this coming fall and no idea when new content will be headed their way.

Therefore, it may be the perfect time for theaters to change up their business model to rely less on studios. This is where Taylor Swift comes in.

A new path forward

After conversations with studios and streaming services, Swift reportedly was disappointed with the deals they proposed and instead chose to finance the film independently and strike a deal directly with AMC theaters for distribution. Swift may have cut out the middleman and set it up so her team will take all the profits, but AMC may also be getting a better deal this way than they usually get from big-time studios like Disney who, according to Insider, may take upwards of 70% of box-office earnings. In fact, AMC stock immediately rose after the decision was announced.

A major difference in making this deal compared to one that would have been made with a streaming service is that AMC is not exclusively showcasing the film on opening day. Instead as a distributor, AMC is able to profit by partnering with fellow theater chains. The film is expected to be on 4,000 screens on opening day.

It was also reported that studios were not given a courtesy heads-up about the announcement and many learned about the deal alongside the general public, forcing multiple movies to change their release dates to avoid competition. Although this may have angered studio partners, a reporter for IndieWire noted that perhaps it is fair play by AMC as it is unlikely that Warner Bros. checked with theaters before pushing Dune: Part 2 to the spring.

This move demonstrates that theaters are able to find programming without the help of studios, and it may be Hollywood studios, and not theaters, that should worry about what the 2020 decision means for their business model.

Author

  • Julianne Culey

    Julianne is the Assistant Director of the Reynolds Center with expertise in marketing and communications and holds a master's in Sociology from Arizona State University.

    View all posts

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