Not the Last Picture Show

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In a recent piece in this journal, I noted with enthusiasm the move by the Trump regime to allow content producers — the traditional studios, plus thrusting newcomers such as Netflix and Amazon — to own distribution outlets, in effect putting aside the asinine 1948 Supreme Court ruling in US v. Paramount Pictures. In that ruling, an activist court broke up a decades-long business structure under which the studios (the movie producers) owned many of the theaters (the movie distributors). The result was now considered a “monopoly.”

In this classic case of regulatory agitation, it was the independent movie distributors (those that were not owned by major studios, and therefore had to wait for the studios to release films to them) who convinced the Court that the production companies were monopolistic. That was their claim, despite the fact that there were five major studios and several minor ones — in the U.S. alone — all in obvious hot competition. The effect was a cornucopia of increasingly good films (in the 1930s through the 1950s) in a wide variety of genres, employing ever more talented writers, directors, and actors.

But that ended with the Supreme Court’s supremely silly decision. Public Choice 101: in the name of the consumers — who were being supremely well-served — the regulators protected the rent-seekers.

With the rise of internet streaming, past producers such as Disney and newer producers such as Netflix have created a whole new distribution channel — one that seems to have been putting traditional movie theaters out of business. And with the advent of the coronavirus, people have even less incentive to go out to the theater to see a movie.

The effect was a cornucopia of increasingly good films. But that ended with the Supreme Court’s supremely silly decision.

I suggested that there might be reasons for the producers to reopen some of the closed theaters or build their own new ones. First, the producers will want to do as Netflix did with The Irishman and release new movies first in theaters, where they can charge a higher ticket price and earn money from the concession sales. This would bring in even more revenue, the better to build or refurbish more theaters and create more new major productions. Second, some of the new producers — especially Amazon — can create “mixed use” theaters where people can pick up orders as well as watch good movies. That might tempt other major retailers — such as Walmart — to start producing their own movies.

A couple of recent Wall Street Journal articles suggest further ideas about how content providers could profit from brick-and-mortar movie theaters.

The first article reports that Hollywood studios are already planning what will happen when state governments start allowing people back into theaters (as Texas and Georgia are doing). The studios have few new releases in the pipeline, so what to do? They will re-release past major hits (such as Back to the Future, Jaws, and Psycho) and charge lower prices (as low as $2 to $5 per ticket).

I hope the major studios try this as a new strategy for at least some of their theaters. Actually, it isn’t a new idea. When I was a college student in LA in the 1960s, my friends and I would often go to “art houses” — which were older theaters in the smaller business districts that showed movies from the classic era, for prices that even a struggling student could easily afford. I recall learning to appreciate dance as an art form by watching Astaire-Rogers musicals on the big screen. With studios’ newly reclaimed right to distribute their own products, we could see a renaissance of art houses allowing younger filmgoers to appreciate classic cinema.

Some of the new producers — especially Amazon — can create “mixed use” theaters where people can pick up orders as well as watch good movies.

Along the same lines, it may be that some non-producing distributors — such as Hulu — will set up connections with large numbers of small independent film production companies (“indies”), both to stream their movies online and to show them in proprietary chains of indie art houses — perhaps upscale ones with wine bars, tasty salads, and fine charcuterie plates. Two tasty films for a $10 ticket might tempt customers to run up a big tab for the extras. Perhaps the chain could throw in some relatively unknown early TV shows — colorized for modern audiences? — for the same low price.

The second Journal article suggests yet another idea for newly-integrated production and distribution companies. Disney is looking at streaming the recent Broadway megahit musical Hamilton. Since it first appeared on the stage five years ago, it has won a Pulitzer Prize and 11 Tony Awards. Now that live theaters have been shut down, Disney has the opportunity to film and stream the production.

In fact, given the general Broadway shutdown, more and more live theater producers are looking at streaming their shows. And as Broadway has learned from the hits Chicago and The Phantom of the Opera, having hit films of a play may actually enhance ticket sales.

Besides filming theatrical productions — Broadway or off-Broadway — for online presentation, big distributors such as Amazon could show them in brick-and-mortar theaters. This would be especially welcome in upscale suburbs with no civic theaters. Civic theater was widespread in America well into the mid-20th century but has been in decline since then. It is expensive to employ actors and support staff in smaller cities, but maybe streaming Broadway productions directly into selected local theaters will be a profitable distribution niche.

Brick-and-mortar movie theaters may actually increase as the Justice Department rolls back the 1948 ruling. That would be deliciously ironic.

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