Department of Justice Reviews antitrust judgement, the Paramount Consent Decrees

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On August 2, 2018 the Department of Justice announced that it would review 1,300 legacy antitrust judgements including the Paramount Consent Decrees, a series of consent decrees that restricted certain behaviors by specific motion picture studios.

During this review the Department of Justice will determine if  the decrees should be terminated or modified The Department of Justice will review responses until October 4, 2018.

What are the Paramount Consent Decrees?

In 1938 the Department of Justice filed a lawsuit alleging that eight motion picture studios had conspired to control the motion picture industry. Following the trial the district court and Supreme Court found these studios guilty of a widespread conspiracy to illegally fix motion picture prices and monopolize film distribution and movie theatre markets. Following these rulings the defendants entered into the Paramount Consent Decrees, agreements with the Department of Justice that regulated specific behaviors related to motion picture distribution and exhibition.

Which studios are subject to the Paramount Consent Decrees?

The remaining studios that are subject to the Paramount Consent Decrees are MGM, Sony Pictures, 20th Century Fox, Universal Pictures, and Warner Bros. as well as their subsidiaries.

What behaviors do the Paramount Consent Decrees restrict?

  1.  Vertical Integration of motion picture distribution and exhibition: The decrees separated film distribution and exhibition and divested five studios of their theaters, requiring them to receive special court permission to acquire theaters in the future.
  2. Block Booking: The decrees regulated the practice of bundling multiple films into a single license — licensing one film or group of films on the condition that an exhibitor would also license another feature or group of features. Studios could no longer force exhibitors to book their entire slate, instead the decrees gave exhibitors the right to reject 20% of feature films not previously trade shown.
  3. Circuit Dealing: Studios were required to license each film individually, theater by theater without discrimination in favor of specific theaters.
  4. Resale Price Maintenance/ Price Fixing: The decrees prohibited studios from setting minimum prices for movie theater admission.  
  5. Overbroad Clearances: The decrees prohibited studios from granting clearances (exclusive film licenses) between theaters that are not in substantial competition.

What other antitrust laws regulate the motion picture industry?

Since 1890 the Sherman Antitrust Act has made certain types of anticompetitive and monopolistic behaviors illegal.  The Act outlawed concentrations of power that restrained trade or inhibited interstate commerce.

Take Action: Protect Quality Film Exhibition

It is an important time to voice your support for the regulation of the monopolization of  the motion picture industry.

As mission-driven, community-based cinemas we purposefully program and exhibit motion pictures in service of the towns, cities, and regions where we are based. Our sustained commitment to community-service — to recognizing the needs, questions, and concerns of specific people and places — improves the quality of film exhibition, contributes to the economic wellbeing of the cities and towns where we are located, and increases consumer choice.

The regulation of anticompetitive behaviors in the motion picture industry is absolutely essential to preventing market consolidation, ensuring fair pricing, and protecting quality film exhibition. Allowing a small, powerful group of motion picture producers and distributors to own theaters risks making independent theaters dependent upon their competitors for content. While allowing large studios to set prices, control clearances, and bundle films into a single license hampers the ability of small business to innovate, collaborate with other small business (particularly small distributors), develop eclectic screening series, and initiate programs intended to invigorate their local economies — in short, it could give consolidated, large corporations excessive influence over programming, strategy, and pricing — allowing them to withhold content and obstruct efforts to work with multiple distributors/ suppliers.

While enforcement of many of the provisions of the Paramount Consent Decrees has eroded over time, with a variety of studios receiving special permission to enter into the film exhibition business in the 1980s, and disputes over licensing and clearances becoming the subject of multiple lawsuits over the course of the last decade, this does not mean that anti-monopolistic  regulation no longer serves a purpose in the motion picture industry. Instead, it is a moment to consider how enhanced regulations could ensure that small, independent exhibitors are able to continue innovating, working with multiple distributors, and providing consumers across America with access to quality film exhibition.

What You Can Do:

Tell the Department of Justice why antitrust legislation is important.

Remember the Department of Justice’s inquiry is focused on how the Paramount Decrees protect market competition and efficiency. Since much antitrust regulation focuses on protecting competition, focus your response on the ways that regulation can enhance and protect consumer choice, fair pricing, competition, and commerce.

Check out our glossary below.

The DOJ is accepting comments on the following questions until October 4, 2018.

  • Do the Paramount Decrees continue to serve important competitive purposes today? Why or why not?
  • Individually, or collectively, are the decree provisions relating to (1) movie distributors owning movie theatres; (2) block booking; (3) circuit dealing; (4) resale price maintenance; and (5) overbroad clearances necessary to protect competition? Are any of these provisions ineffective in protecting competition or inefficient? Do any of these provisions inhibit competition or cause anticompetitive effects?
  • What, if any, modifications to the Paramount Decrees would enhance competition and efficiency? What legal justifications would support such modifications, if any?
  • What effect, if any, would the termination of the Paramount Decrees have on the distribution and exhibition of motion pictures?
  • Have changes to the motion picture industry since the 1940s, including but not limited to, digital production and distribution, multiplex theatres, new distribution and movie viewing platforms render any of the Consent Decree provisions unnecessary?
  • Are existing antitrust laws, including, the precedent of United States v. Paramount, and its progeny, sufficient or insufficient to protect competition in the motion picture industry?

Organizations can submit their commits via email to atr.mep.information@usdoj.gov

Read more about the review here.

Glossary

  • Competitive/ Market Competition Conditions in which different companies or economic entities sell or provide similar products or services and rival for consumers. According to the Federal Trade Commission “Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation.”
  • Monopoly When a company becomes the only provider of a good or service with no reasonable or tenable substitute.
  • Monopsony When a single entity becomes the only buyer for a good or service (imagine if all food suppliers sold to a single food retailer).
  • Price Fixing an agreement among competitors that raises, lowers, or stabilizes prices or competitive terms  (since the 1980s, regulation has primarily been concerned with raising consumer prices, less attention has been paid to when competitors lower prices)
  • Trust A group of businesses or companies tied together through contracts and cross-ownership.
  • Vertical Integration When a company controls multiple stages of the supply chain.  

Questions? Contact us.

 

A Letter to The Los Angeles Times

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As a coalition of mission-driven film exhibitors committed to using cinema to foster shared experiences and inspire collective action, we share the outrage voiced by Haifaa al-Mansour, Susanne Bier, Sara Colangelo, Nicole Holofcener, and Tamara Jenkins’ in The Los Angeles Times‘ August 30 piece “Five Female Directors, many stories: A conversation on filmmaking, Netflix and more” about the lack of funding and support for projects helmed by female-identifying and gender nonconforming filmmakers. To remain relevant and compelling the motion picture industry must dismantle its established power structures and support the careers and visions of filmmakers who have remained unrepresented and unheard for far too long. Change is imperative and long overdue.

However, in light of the roundtable’s diminishment of the importance of movie theaters, we must assert the vital part we have to play in advancing equity in the motion picture industry. Art House cinemas connect films to the public in ways that are substantive and offer tangible benefits. We teach media literacy, art appreciation, critical viewing practices, and we help audiences speak with each other — using films as the basis for conversations about race, gender, and policy. In a fragmented media landscape we remain committed to facilitating meaningful exchanges between people of diverse backgrounds and perspectives.

Recently Art House cinemas have celebrated the trailblazing women who shaped the film industry, as the Brattle Theatre in Cambridge, MA did with “Year of Women in Cinema,” women’s contributions to the labor movement, as the BAMcinématek in Brooklyn did with “Women at Work: Labor Activism,” devoted festivals to showcasing work by female and queer filmmakers, as Cinema Detroit does with “Shetown” and “Trans Stellar,” and reserved entire months for films directed by women, as FilmScene in Iowa City did with “Women’s March.” We have screened films by Agnès Varda,  Aurora Guerrero, Chloé Zhao, Ava DuVernay, Lucrecia Martel, and foregrounded the work of women activists, educators, and lawmakers in events to accompany documentaries like Whose Streets? and RBG.

Art House cinemas support women as leaders — we employ women executives, programmers, educators, and managers — yet there is still a long way to go.

Publicly accessible cinemas and shared experiences are essential tools in the fight for equity.  We invite inspiring filmmakers like Haifaa al-Mansour, Susanne Bier, Sara Colangelo, Nicole Holofcener, and Tamara Jenkins, and powerful corporations like Netflix, to work with us.

We want to screen your films. We want to include them in conversations, roundtables,  retrospectives, and series. We want to invite you to our theaters, and to continue to support and program the local and emerging filmmakers inspired by your achievements.

Sincerely,

Alison Kozberg
Managing Director
Art House Convergence

AHC Statement on Harassment in the Workplace

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The Art House Convergence, as the largest active group of those working in the Art House world, is an organization that believes in creating a community where the safety and comfort of our Art House colleagues is our key concern. There is no room in the Art House community for harassment of any kind. We believe in and are committed to preserving independent film exhibition as a place where everyone feels safe and welcome to participate in the shared experience of film.

Due to recent events in two theaters, it is vital that we restate our commitment to a harassment-free environment for our colleagues and communities and strongly condemn any organization or individual who engages in and/or allows this behavior.  It is intolerable.

The Art House community is founded on principles of transparency and trust. Without these in place, our colleagues and our theaters would not be able to create community-based, mission-driven programs for our audiences. It is the responsibility of each of us to engender a harassment-free environment that supports the behaviors and culture that are central to our mission. We support our colleagues, including those working at the two organizations in question, as they work to rebuild the trust in their communities.

Harassment is a pervasive issue and is not exclusive to any one industry. In order to combat it in our own community, we must address these insidious behaviors in a direct way.

In support of that, we will be engaging in plenary dialogues, town halls, and action-oriented meetings throughout the 2018 Art House Convergence, January 15-18, 2018. Our conversations will be ongoing, extending beyond our community and we will be continually reviewing and discussing how we can, as an organization, constructively address these issues and best move forward. This includes an ongoing review of our activities in our theaters and reviewing and reinforcing our policies. Our position on a harassment-free environment and these actions we are taking should signal to our theaters and communities the values we believe in and the kind of organization we are committed to be.

-The Art House Convergence Team

An Open Letter from Art House Convergence regarding “Screening Room”

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The Art House Convergence, a specialty cinema organization representing 600 theaters and allied cinema exhibition businesses, strongly opposes Screening Room, the start-up backed by Napster co-founder Sean Parker and Prem Akkaraju. The proposed model is incongruous with the movie exhibition sector by devaluing the in-theater experience and enabling increased piracy. Furthermore, we seriously question the economics of the proposed revenue-sharing model.

We are not debating the day-and-date aspect of this model, nor are we arguing for the decrease in home entertainment availability for customers – most independent theaters already play alongside VOD and Premium VOD, and as exhibitors, we are acutely aware of patrons who stay home to watch films instead of coming out to our theaters.

Rather, we are focused on the impact this particular model will have on the cinema market as a whole. We strongly believe if the studios, distributors, and major chains adopt this model, we will see a wildfire spread of pirated content, and consequently, a decline in overall film profitability through the cannibalization of theatrical revenue. The theatrical experience is unique and beneficial to maximizing profit for films. A theatrical release contributes to healthy ancillary revenue generation and thus cinema grosses must be protected from the potential erosion effect of piracy.

The exhibition community was required to subscribe to DCI-compliance in a very material way – either by financing through VPF integrators (and those contracts have not yet expired) or by turning to other models which necessitated substantial time and commitment. Those exhibitors who were unable to make the transition were punished by a loss of product. The digital conversion had a substantial cost per theater, upwards of $100,000 per screen, all in the name of piracy eradication and lowering print, storage and delivery costs to benefit the distributors. How will Screening Room prevent piracy? If studios are concerned enough with projectionists and patrons videotaping a film in theaters that they provide security with night-vision goggles for premieres and opening weekends, how do they reason that an at-home viewer won’t set up a $40 HD camera and capture a near-pristine version of the film for immediate upload to torrent sites?

This proposed model would negate DCI-compliance by making first-run titles available to anyone with the set-top device for an incredibly low fee – how will Screening Room prevent the sale of these devices to an apartment complex, a bar owner, or any other individual or company interested in creating their own pop-up exhibition space? We must consider how the existing structures for exhibition will be affected or enforced, including rights fees, VPFs and box office percentages.

A model like this will also have a local economic impact by encouraging traditional moviegoers to stay home, reducing in-theater revenue and making high-quality pirated content readily available. This loss of revenue through box office decline and piracy will result in a loss of jobs, both entry level and long-term, from part time concessions and ticket-takers to full time projectionists and programmers, and will negatively impact local establishments in the restaurant industry and other nearby businesses. How many of today’s filmmakers started their careers at their local moviehouse?

There are many unanswered questions as to how this business model will actually work. The proposed model, as we have read in countless articles, suggests exhibitors will receive $20 for each film purchased. At first glance, an exhibitor may think it represents a small, but potentially steady, additional revenue stream. But how will this actually be divided among the number of theaters playing the purchased title; will exhibitors who open the title receive more than an exhibitor who does not get the title until several weeks later (based on a distributor’s decision); who will audit the revenue to ensure exhibitors are being paid fairly; does this revenue come from Screening Room or from the distributor… these are just a few of the issues yet to be explained.

Similarly, Screening Room promises to give each subscriber two free cinema tickets with each film purchase. Yet to be disclosed is how an exhibitor will recoup the value of those tickets from Screening Room so they can then pay the percentage of box office revenue owed to the distributor of the film. Yet to be explained is who will manage the ticket program details such as location choice, method of purchase, and so on. Will all exhibitors be expected to honor Screening Room free tickets, or will some exhibitors receive preferential treatment over others?

We strongly urge the studios, filmmakers, and exhibitors to truly consider the impact this model could have on the exhibition industry. We as the Art House and independent community have serious concerns regarding the security of an at-home set-top box system as well as the transparency and effectiveness of the revenue-sharing model. Our exhibition sector has always welcomed innovation, disruption and forward-thinking ideas, most especially onscreen through independent film; however, we do not see Screening Room as innovative or forward-thinking in our favor, rather we see it as inviting piracy and significantly decreasing the overall profitability of film releases.

At this time and with the information available to us we strongly encourage all studios to deny all content to this service.

The Interview

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Network of leading independent cinemas support freedom of expression with request to screen controversial title

Art House Convergence, the national coalition of independent art house cinemas in America has set up a petition for independent exhibitors to pledge their support of Sony for a theatrical release of THE INTERVIEW.

“Your Art House motion picture colleagues wish to support you and your company,” said Russ Collins, Director of the Art House Convergence, in his open letter to Sony’s Michael Lynton and Amy Pascal. “Circumstance has propelled THE INTERVIEW into a spotlight on values, both societal and artistic, and in honor of our support, we want to offer our help in a way that honors our long tradition of defending creative expression.”

The petition, which can be found at http://www.change.org/p/sony-we-the-undersigned-support-sony reads as follows:

We, the independent art house community, specifically the theaters below, express our support for Sony Pictures and all of its employees worldwide in this difficult time. We want to share our encouragement and appreciation for Sony and the great contributions it has made to the film industry, especially to our sector of art houses and independent cinemas.

On December 16th, the Terrorist Organization, “The Guardians of Peace,” escalated their threats by promising terrorist attacks against cinemas showing THE INTERVIEW.  “The world will be full of fear,” their message read, “Remember the 11th of September 2001. We recommend you to keep yourself distant from the places at that time. (If your house is nearby, you’d better leave.)”

With this threat, the issue became larger than any film, larger than Sony and larger than the entertainment industry: societal and artistic values are in peril. We are at an important crossroads with an opportunity to reaffirm clearly our dedication to the value of freedom and the absolute necessity to keep our film industry free of restriction, censorship and violent intimidation. We implore our fellow exhibitors and our nation of moviegoers to stand up in recognition that freedom of speech and artistic expression are vital not only to the entertainment industry but for all art and commerce worldwide.

We stand in solidarity with Sony and offer our support to them in defense of artistic integrity and personal freedoms; freedoms which represent our nation’s great ability to effect change and embrace diversity of opinion.

We understand there are risks involved in screening THE INTERVIEW.  We will communicate these risks as clearly as we can to our employees and customers and allow them to make their own decisions, as is the right of every American. Understanding those risks, the undersigned, independent cinema owners and operators of America under the banner of the Art House Convergence, do hereby agree to support Sony and to support theatrical engagements of THE INTERVIEW should Sony, at its sole discretion, decide to release it to theaters.

About the Art House Convergence:

In 2008, the first Art House Convergence, an industry educational program designed to empower and inform independent cinemas nationwide, was presented. It grew out of a collaboration with the Sundance Institute Art House Project in 2006. Now in its eighth year, the growth of the Art House Convergence and its development of research, surveys and year round communication among art house theaters affirm that the organization has evolved into a leading national resource for the support of independent exhibitors and the promotion of film culture in local communities.  For more information about Art House Convergence visit www.arthouseconvergence.org

 

 

An Open Letter to Sony

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Michael Lynton, Chairman and CEO Sony Entertainment, Inc.
Amy Pascal, Co-Chair Sony Pictures Entertainment Motion Picture Group

Dear Mr. Lynton and Ms. Pascal

Your Art House motion picture colleagues wish to support you and your company at this difficult time. We empathize with the ruthless attack your company suffered and we want to help in our small but powerful way.

The enormity of the attack your company has suffered and the difficulty of the decisions you have been forced to make in recent days are nearly unimaginable; similarly is the monumental nature of the business disruption your company has endured in recent weeks. Your life, and possibly your judgment, has been disrupted beyond comprehension. The financial bottom line impact will be, frankly, unfathomable for an independent Art House to comprehend. However, in life and art, values are the ultimate “bottom line” and striving for freedom and goodness are the sometimes conflicting, but paramount values of enlightened societies.

We understand that “The Interview” is on one level “just a movie,” meaning, in terms of human history, a probably facile entertainment and business investment. But circumstance has propelled this work into a nexus of values, both societal and artistic. It is also, as an artistic and national community, an opportunity to respond clearly to the behavior of an international bully opposed, by word and deed, to the value of freedom.

We, the independent Art House community, will gladly exhibit “The Interview” as a special, one-day showing without pecuniary expectation, or as a regular part of our cinema programming. We do this to express the value and power of freedom and to support you, our artistic and business colleagues, during a time of great vexation.

Best wishes to you and all your Sony Entertainment colleagues as you endeavor to restore normalcy (if that is possible in show-business!) to your work-life and your business.

Most Sincerely — Russ Collins, Director, Art House Convergence

Six Steps to a Successful Art House

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[Excerpted with permission from a keynote speech by Stephanie Silverman, Belcourt Theatre, at the 2014 Art House Convergence]

You have been my teachers; we have been each other’s teachers. I wanted to take this moment, the closing of another remarkable convergence, to name what I think makes us special and where we have room for growth. Because these are the things I learned from you….

  1. Start at home.

Care most about programming for your community, and do it with exceptional creativity. We all love a tent pole, and there have been some magical ones over the last few years. Great filmmaking exists, and we are the lucky ones who get to share it with our audiences — but building a theatre that’s sustainable in years when the tent poles are pup tent size, rather than circus tent proportion — or when the big guy down the road decides he wants to be more “creative” — is not simple. You have to be able to survive, but that survival may just be where you find your programmatic voice — and is absolutely where you build audience trust, where you begin to teach your community to check in on you every week just to see what’s going on.

  1. Teach your children well.

Film organizations like ours are in a remarkably unique position to engage young people creatively —because kids love movies. Take it from someone who came from the contemporary dance world. Kids do not love modern dance as much as they love movies. We are an art form that is both accessible and challenging — and one that can tell stories which hit close to home, or make connections across the globe. Yes, we need to raise young people to be the engaged film audiences of the future, but even bigger and more important, we need to raise young people whose eyes are wide open and whose world views are informed and broad — even if it’ll be years before they get to move far past their front porch in Nashville, Tennessee or Omaha, Nebraska or Anchorage, Alaska, all of which have great art house cinemas.

  1. Run a damn good business.

Know how to make your year successful, and know that those transactional relationships whether via a ticket, a popcorn purchase, a membership purchase or a contribution — those are where the gold lies. In the world of the art house, those people are your tribe. They trust you to do right by them, and of course, it starts with the films — but it has to exist in every other detail in your institution. How we gracefully and warmly navigate each interaction is how trust is built…how recommendations are made…and why audiences are drawn back to us. Even if they’ve never heard of the film…

  1. Work with amazing people.

I have never, in my professional life, been surrounded by better colleagues than I am every day at the Belcourt. They are exceptional. I feel the freedom to brag about this freely here because I know I’m not alone. I also know, though, that there’s a place for us in the national conversation about hourly wages.  Different communities have different stories — and, in our theatre, we certainly don’t have the ability to instantly address what I personally believe to be a substantive issue for our part time staff. But within the film exhibition world, we are the institutions who could start to improve pay for our hourly workforce. I don’t know about yours, but mine lowest paid employees are largely from the much-heralded creative class, most of whom have college degrees and know more about film that I ever will. The value of those people being on our front lines is extraordinary — and it is my goal, at least, to begin to pay them more what they are worth.

  1. Fight for your place in your cultural community.

Evangelize your philanthropic community, your tourism board, your chamber of commerce. Know them, talk to them, and remind them endlessly that a great film house is as important on any community’s cultural map as a symphony hall or a museum. And in some communities where symphony halls and ballet companies are not possible, it’s the film house that can step up and bring great symphonic music and world-class ballet to those communities.

And here’s the point that is closest to my heart. It’s the one that frustrates me the most and galls me the most in terms of the national narrative about art houses.  It’s this:

  1. Aggressively refute the myth of the dying art house.

The typical story I’ve been called on to address by the media (barring some of the smarter publications sitting in this rooms) is a straight up Goliath vs. David narrative. Only it seems like there’s a predisposed desire that Goliath wins. Seriously—I was interviewed for three or four articles in the height of the economic downturn. And when I’d mention that we were having amazing years……end of conversation.

We, as a community, have weathered some tremendous storms from shifting formats to digital conversion. And there are only more to come. It’s the nature of this business and the nature of life — but unless a bomb drops on the Zermatt in the next few minutes — fantastic film exhibition is not going anywhere, and in fact we are healthier and more vital than ever.

There could not be a better time to be in our world, either in the year round exhibition business or the festival business. I love being here now, and I love having all of you as my colleagues, mentors and friends. Cheers to all of us. We are doing something special in communities around this country and around the world. You all inspire me to keep being better and I thank you for that every single day.