Back in 1948, the Supreme Court ended the stranglehold Hollywood studios and distributors had on the U.S. picture industry. Ordering the studios to dispossess their ownership of movie theaters and cease additional non-competitive clinics, with the lawsuit U.S. v. Paramount Pictures, et al., the Court opened the movie industry to independent theaters and manufacturers, who changed the way we watch films.
Hollywood Studios and Vendors controlled movie theatres in the U.S.
Before the federal government’s efforts to break their faith, a small number of Hollywood studios and vendors controlled nearly all of the movie theaters in the United States, either through direct or indirect ownership or even by the system of “block booking.” It is because of this latter; the big boys insisted that separate theatres contract and run a “block” of films. These few organizations between controlling the distribution and presentation, and its own strong-arm negotiating chose not only where and when any picture will be shown, but also finalize admission prices.
State versus the Big Studios
It was at the beginning of 1928, and Uncle Sam sought to limit the studio’s power. Founded from the Federal Trade Commission (FTC), a monopoly, more than 98 percent of national film supply, the Justice Department brought suit in 1929. It was The Supreme Court that affirmed the decision on November 25, 1930, for Paramount-Famous-Lasky Corporation, First National Pictures, Metro Goldwyn Mayer, Universal, United Artists, Fox, Pathé Exchange, FBO Images, Vitagraph, and Educational Film Exchanges.
They continued to own and control movie supply as amidst the Great Depression, and the decision was never enforced. Later in 1933, under the National Industrial Recovery Act, it was agreed that the studios would continue the business as usual.
When the situation stabilized, the government decided that the big studio’s grip on distribution should be limited, and therefore another lawsuit was filed. The trial had been stopped only fourteen days later it began. The parties reached a mutual compromise on November 20, 1940, wherein the studios will keep the ownership but inhibited block booking.
Eventually, the antitrust suit returned to the Federal Court on December 31, 1946. The district court found the defendants in violation of antitrust legislation. Therefore, it ordered that bidding must be competitive and movies were to be licensed in addition to prohibited block-licensing of all copywritten movies entry price-fixing, and ownership of theaters by distributors and exhibitors combined.
The Court and the district court agreed most points, including affirming the prohibition against famous franchises, Price Fixing, joint ownership, and obstruct licensing. The Court remanded and reversed on the issue of competitive noting, bidding, “The system would be more apt to take as close supervision as a continuous receivership. Even the judiciary is unsuited to affairs of business control through the power of contempt that is clumsy and crude.”
The decision of The Supreme Court still controls movie distribution and movie display in the U.S. Also today; Hollywood studios divide gross profits with theatres. However, the way they do it is pretty impressive.