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How Supreme Court Changed Course of Studio System 70 Years Ago

Debates over Netflix and other steaming services have raised the question about movie distribution. It’s the latest twist in an argument that goes back a long time. Next month marks the 70th anniversary of a key moment in movie history, when the Supreme Court on May 4, 1948, made its game-changing decision that one company could not own both a film studio and theater chain. That ruling helped tear down the old system and led to a radical rethink in studios’ greenlight decisions, distribution plans and the moviegoing experience.

Before that, studios engaged in block booking, in which a theater would agree (sometimes begrudgingly) to a package of movies from one studio. After the Supreme Court decision, each film was scrutinized for its potential profitability. Executives relied less on gut instinct and more on “safer” choices.

And they relied even more on star power. In 1944, the California Court of Appeals ruled in favor of Olivia de Havilland in her suit against Warner Bros. She had contested details of her seven-year contract, which led to the end of the “peonage” of actors’ long-term contracts. With single-film negotiations, stars began to exert their power in ways that were unprecedented.

Those two moves began the end of the old studio system, and the final nail in the coffin was just around the corner: television.

Seventy years after these battles, the studios are still trying to define themselves. Would the 1948 ruling, called the Paramount Consent Decree, be enforced today? Probably not. There are so many options for audiences that the question of monopoly is hard to prove.

The 20th-century movie industry was a radical innovation, allowing audiences around the world to see the exact same performance. The public was enamored. Variety is credited with publishing the first film review ever, on Jan. 19, 1907. Amid reviews of new vaudeville acts, Variety included a little box explaining that it was inaugurating “moving picture reviews,” with critics evaluating shorts of six or seven minutes in length. (In its early days, the movie business was not far from the 21st century’s YouTube.)

When feature-length movies boomed in popularity starting around 1915, many vaudeville theaters converted to movie houses. Several theater chains ventured into film production simply to guarantee a steady supply of product. As it turned out, their studios were more successful than they had imagined.

There were a series of trials, with small, independent exhibitors claiming they were being thwarted by the majors. The Supreme Court’s 1948 ruling agreed that the studios were giving preference to their own theaters, which was a violation of antitrust laws.

Targeted were Metro, Warners, Paramount, RKO and 20th Century Fox, which were ordered to get rid of their theater holdings. Also affected were “the little three defendants, United Artists, Universal and Columbia,” according to Variety at the time.

In its ruling, the court found “at least 70% of all first-run theaters are affiliated with one or more of the five majors.” The court also found that there were no independent first-run theaters in 38 of the country’s 92 cities with a population of more than 100,000.

The divestiture — or, as Variety called it, “divorcement” — of theater ownership meant studios had to rethink how movies were booked. That started a chain reaction that considered which films were made, who would be signed for a film and what the terms would be.

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