Is the Movie Theatre Era Over? Chapter 1: The Great Monopoly

Chinese Theatre in Los Angeles

In 1896, the world's first movie theatre opened up in New Orleans, LA. Called the Vitascope Hall, it held seats for 400 people, and it mainly showed short films depicting various cityscapes and images from the big events of the time. Quickly, the practice swept across the nation, and by the 1920s, there were roughly 15,000 movie theatres across the US. The theatre experience was much different than one had today. The films were silent pictures, almost always accompanied by an orchestra of some kind. The theatres were grand buildings with flashing neon lights, intricate Victorian stone work, and huge auditoriums that seated hundreds at one time. These theatres emulated the style of the opera houses and drama theatres popular in the time. The venues held one maybe two screens, and they would only play a certain film maybe once or twice a day. It was a memorable experience the simple people that attended who marveled at the new technology and grand surroundings. The same is for me today when I visit one of these old theatres. They are truly marvelous buildings.

A theatre from the 1920s

Movie Theatre data from this era is suspect at best, but it is estimated that in 1930 at least 80 million Americans attended a movie theatre weekly. That was 65% of the US population at that time. It would be the peak of movie theatre popularity in terms of real attendance. At the heart of the Great Depression, people came in droves to drown their cares away in slap-stick comedies, whimsical musicals(the first talking film came out in 1927), and military dramas. In 2024, only about 4% of Americans attended a movie theatre weekly. What happened? When did the magic stop? Is it time to say goodbye to an American institution? It is easy to blame the advent of television and later streaming for these changes, and those two phenomenon did have big effects on the industry. However, there are two big events in the history of film that play a crucial role in the problems theatres have today. These events shaped how movie theatres operate today, and maybe the path forward for movie theatres is go back to their roots.

Hollywood's leaders visit the White House in 1938. From left to right: Barney Balaban (Paramount), George Schaefer (Paramount), Harry Cohn (Columbia), Sideny Kent (Twentieth Century-Fox), Nicholas Schenck (Leow's-MGM), Nate Blumberg (Universal), Will Hays (MPPDA President), Albert Warner (Warner Bros.), Leo Spitz (RKO).

United States v. Paramount Pictures, Inc.

On June 25th, 1938 a group of Hollywood's major studio executives were shut up in a meeting with President Franklin D. Roosevelt at the White House. The President was concerned about the studios' monopolistic practices. Practices that had been well documented for years. The Justice Department had been investigating the studios since the early 20s. These executives tried in vain to convince the President that they were willing to self-regulate. A common argument by business executives but rarely executed properly. The profitability of their business was at stake, they claimed. It was to no avail. The President was unconvinced by their arguments. The top of the industry had too much power. This proved to be the opening salvo in a 10 year long fight over the future of the film industry.

By the late 1930s, the movie business had become big business. It was the so called "Golden Age of Hollywood" responsible for many films we now regard as classics. Despite falling regular attendance in theatres, the industry had become a titan in the American culture. Hollywood was as American as George Washington and the Stars and Stripes. Movies were almost exclusively made by the so called "Big Five" studios MGM, Paramount, Warner Brothers, 20th Century Fox, and RKO Pictures and the "Little Three" studios Universal, Columbia, and United Artists. These studios dominated the industry by vertically integrating and conspiring together to squash any new competitors. What does this mean you ask? Well starting in the 1920s, the big studios bought and built their own movie theatres, so they would control the film supply chain from production to viewing. Each of the big studios had their own theatre chain that played mostly their movies. For example, in 1938 the original Snow White and the Seven Dwarfs was produced by Disney and released by RKO. Throughout the country, the only film that would be shown at RKO's theatre chain at a certain time would be Snow White.

Disney's Snow White and the Seven Dwarfs

This in itself wouldn't be monopolistic, but it does heavily restrict the consumer's choice. The Big Five's other practices were much more egregious. The studios practiced a tactic called "Block booking" which forced independent theater operators to show a block of a studios films in order to get one A list film. Following our same example, an independent chain, my local chain Malco Theatres, wants to show Snow White to the Mid-South. RKO would force them to also show their B list films such as Radio City Revels, Double Danger, & Wise Girl. These were much less anticipated films, and they would likely be poor draws for Malco's business. In other words, if you want the big draw film, you have to sign up to take our slop films as well. The worst part about the practice was that theatres would often have to agree to show films that they hadn't even seen prior to the agreement. The studios could use this practice to shut out new players as well. The Big Five would force independents to fill up their show times with Big studio films and shut out foreign and smaller domestic films. For this and other monopolistic practices, independent theatre operators successfully lobbied the Justice Department to file an antitrust suit against all 8 of the studios in 1938. In their suit, the Justice Department charged that just 10 entities controlled 98% of the domestic theatrical distribution.

It would take 10 years to resolve through the court process, but in 1948, the Supreme Court ruled against the film studios in what became know as United States v. Paramount Pictures, Inc. The court set up a series of rules for the film industry that became known as the Paramount Decrees. Under this new system, the studios would be forced to divest from the theatre business altogether and be prevented from Block Booking. This really was the death blow to the old Hollywood order, and some studios like RKO never really recovered. Independent movie theatres began popping up everywhere and expanding. With more access to consumers available now, independent producers and smaller studios were able to create some of the best films in the next era of film. The studios were out of the theatre business for good. Well, maybe not. In 2020, the Paramount Decrees were lifted by the DOJ after nearly 75 years. This allowed studios to once again start showing their content direct to the consumer. However, the results of this has had little to do with theatres(at least for now).

The repeal of the Paramount Decrees removed the final hurdle for Hollywood Studios to the create their own streaming services. The big players of film: CBS/Paramount, HBO/Warner Bros, Disney/20th Century Fox, and NBC/Universal had been forced to the sidelines of streaming by this degree. The studios had merged and acquired various media properties to survive, but their cash cow cable businesses were dying. These big media conglomerates were forced(and pretty happy to do so for most of them) to sell their streaming content to sites like Netflix or Hulu to avoid violating the set antitrust law. After this decision in 2020, they were now allowed to make their own streaming services. Disney+ launched November 2019, HBO Max launched in May 2020, Peacock(Universal) launched in July 2020, and Paramount+ launched in March 2021. This development turned the clock back 75 years to a time when you had to go to different theatres to see different studios' films. This is about movie theatres though, not streaming, and there is another big reason why theatres as we know them are dying. That is in Chapter 2......