Retrospective Praise for the Boss

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The election of Donald Trump — the Boss — drove me out of the Republican Party. Fair enough — the populists, nativists, protectionists, isolationists, and their fellow travelers in organized labor successfully took over the party, and I felt that they were entitled to their prize. I wrote to the RNC, resigning, and asking if they would refund the money I donated to them over 40 years. But of course there was no refund.

However, during the four long years of the Boss’ reign, I tried to give credit when credit was due. I want to discuss a particular example.

One policy that Trump’s Justice Department adopted was to reverse what I regard as the infamous 1948 Supreme Court ruling that destroyed the studio system, by forbidding companies that produce films from distributing them as well. The Supreme Court held that for a studio to make the films and own the theaters constituted an unfair monopoly. How eight large movie studios cranking out hundreds of movies a year, including — as I have argued elsewhere (Cinematic Thoughts: Essays on Film and the Philosophy of Film, Peter Lang [2021] 302–307) — a disproportionate share of the greatest films ever made could be construed as a “monopoly” was bizarre. The fact that a given producer should try to maximize profits by owning the distribution channel as well (often called a “vertical monopoly” — a question-begging epithet if ever there was one) hardly stops any or all other producers from doing the same, or expanding in some other way. Put another way, setting up a vertical company hardly constitutes achieving a “horizontal monopoly,” the true domination of a market by one producer.

The fact that a given producer should try to maximize profits by owning the distribution channel as well hardly stops any or all other producers from doing the same, or expanding in some other way.

 

More importantly, the Supreme Court ruling crippled the studios, limiting their production — something that hurt, rather than helped consumers. The moviegoing public has had to endure endless remakes of superhero movies. Now, since the rise of the internet, a similar integration has begun. Streaming distributors, most famously Netflix, grew enormously when they started producing their own content. And existing content producers — most famously Disney — grow quickly when they develop their own distribution services.

To Trump’s credit, the Justice Department did not try to reverse the process, and has even rolled back some of the 1950s-era regulation aimed at stopping producers from distributing. So far, there have been no indications that the Supreme Court has any cases bearing on the issue of vertical integration in entertainment, nor any indication that the new Biden Justice Department will reverse course in this area.

This led me to muse that we might see theaters owned by Disney, playing two Disney flicks — perhaps a new picture, together with one of its classics from decades back — along with a couple of cartoons, and having a room set aside for selling Disney merchandise. Or perhaps see Amazon-owned theaters, showing Amazon flicks, selling tasty meals (produced by Whole Foods, an earlier Amazon acquisition), and allowing the consumer to pick up recent purchases from a mini-warehouse on the premises.

Several recent Wall Street Journal articles have reminded me of this topic. They concern the aforementioned Amazon, and its newest plan for expansion.

Last month, the buzz hit the business news that Amazon is about to complete a masterful coup: it is about to purchase legendary Hollywood Studio MGM. Amazon is likely going to pick up MGM Holdings for about $9 billion and the assumption of MGM’s approximately $2 billion in debt. MGM has been considered “in play” for some time; but Amazon has apparently has been able to seal the deal.

And what a great acquisition it will be. First, there’s a basket of past movies. Unfortunately for Amazon, the pre-1948 catalog of MGM films — which included such classics as The Wizard of Oz and Gone with the Wind — was sold to AT&T/Warner Brothers some time back, but there is still a large collection of films from the 1950s on, including prominent franchises — James Bond, Rocky, the Pink Panther, Robocop and others. More importantly, the studio — now buttressed with a supply of capital and a dedicated distribution channel — can come up with great new movies and series.

The Supreme Court ruling crippled the studios, limiting their production — something that hurt, rather than helped consumers.

 

You put this together with Amazon’s already formidable production powers (seen, for example, in its new TV series based on Lord of the Rings, which cost $465 million in its first season alone), and watch out, Netflix! Additionally, Amazon has invested heavily in acquiring sports content, as with its deal to stream NFL Thursday Night games (for which it pays $1.2 billion a year). Already Amazon is second only to Netflix in subscribers. Netflix has about 66 million subscribers; Amazon stands at about 51 million, Disney at about 38 million, Hulu at about 38 million, HBO Max at about 20 million, and a few stragglers follow.

All this suggests two questions. First, what posture will the Biden regime adopt on this vertical integration? Amazon is already the target of government, from the FTC and Congress to the EU. Last year, a congressional report alleged that Amazon had monopoly power over its sellers. And Colorado Representative Ken Buck — a loyal Trump ally — has expressed “concern” about an Amazon-MGM deal. Of course, the Boss notoriously hated Jeff Bezos, and the feelings were reciprocated. Bezos also happens to own the Washington Post, a paper not particularly friendly to Trump.

But Trump has been dumped, and Bezos has resigned as CEO of Amazon. What will the soi-disant progressive and egalitarian regime of the Patriarch do about this deal? We’ll see.

Second question: what further vertical integration will there be? Already, there has been the merger of AT&T/Warner Brothers with Discovery. Might we see a behemoth such as Google/Alphabet move in? Google already has a massive delivery channel, YouTube. My suggestion for Sergey Brin is to have Google buy up one more of the remaining stray domestic content providers — such as Paramount, Showtime, or AMC Networks — along with some British independent studios, such as ITC and Granada. Google might rapidly catch up with Netflix and Amazon in producing new content.

Just a thought, Sergey . . .

One Comment

  1. Michael F.S.W. Morrison

    “Bezos also happens to own the Washington Post, a paper not particularly friendly to Trump.”
    Or to freedom, peace, prosperity, or individual rights.
    But, darn good article, Gary Jason. Thank you.

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