Can Hollywood's 'Golden Age' return if the Dept. of Justice has its way?

Netflix, major studios could become theater owners

With comments aimed at the likes of Netflix and the onslaught of streaming services, the federal government is looking to scrap the rules that changed the Hollywood movie business for the last 70 years.

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In a speech to the American Bar Association Monday, Assistant Attorney General Makan Delrahim said the Department of Justice "will be asking the court to terminate the Paramount consent decrees." The "Paramount decrees" is the outcome of the landmark 1948 ruling by the Supreme Court in an antitrust case against the Hollywood studios. Although Paramount Pictures was the primary defendant in the case and received the "title" of the decree, MGM, Warner Bros., 20th Century Fox, Universal, United Artists, Columbia Pictures and RKO Pictures were also involved in the action.

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Before the ruling, studios owned movie theaters and held exclusive rights on which theaters would show their films. So when RKO Pictures released "Citizen Kane" it was more than likely the critically acclaimed film would be shown at an RKO-owned theater. The decree forced the studios to sell their theaters.

This altered the studio system. With a loss of revenue from those theaters, it became increasingly difficult for studios to keep actors under "contract" as the studios opted to make fewer movies. The National Constitution Center calls the day of the original ruling "The Day the Supreme Court Killed Hollywood's Studio System."

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Ironically the word of the Justice Department's decision to ask for the decree to be revoked comes just days after reports of Netflix negotiating a deal for the famed Paris Theater in New York on the heels of its talks to purchase the legendary Egyptian Theater in Los Angeles. In his remarks to the bar association, Delrahim mentioned the advent of streaming played a part in this decision to ask for the decree to be rescinded. "Technological advancements, most recently subscription streaming services, have permitted more American consumers to watch movies anywhere they want at any time. Competitive pressures have emerged from unexpected sources," said Delrahim.

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After his speech was made, the stock of the country's largest theater chain, AMC, fell through the floor, closing down more than 3 percent. Competitor Cinemark's stock was basically flat.

TickerSecurityLastChangeChange %
AMCAMC ENTERTAINMENT HOLDINGS INC8.29+0.06+0.73%
CNKCINEMARK HOLDINGS INC34.47+0.14+0.41%

If there is fear by the current theater chains or independent theater owners that the studio's monopolistic ways of the 1940s would return, Delrahim dismissed the thought. "Changes over the course of more than half a century also have made it unlikely that the remaining defendants can reinstate their cartel," he stated.

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