Movies, Theaters and Streaming

multibillion dollar communications companies. And then when I decided to do this episode, I found to my surprise that the Supreme Court decision from decades ago, like eighty years ago, was dissolved earlier in and somehow I had never even heard about it. So today I want to talk about the production and distribution side of entertainment, specifically when it

comes to motion pictures. This discussion involves technology, politics, and business, and it also ties into other stuff that we've talked about in recent episodes, like the problem with anti competitive practices and monopolies. So let's get started by going back to the early days of film and theaters. Films have always been a convergence of technology, business, and art. Sometimes one or two of those three points might be emphasized

more than another. So for example, you might argue that a big budget action film could lean heavily on business and tech, but maybe go a little light on the art part of the triangle. Or you might have a really low budget arthouse film that's really heavy on the art and kind of light on the tech, and you wonder who the heck even agreed to fund the thing

in the first place. But I think generally speaking, most movies have these three factors, and on measure, we're going to leave art out of this, as it is subjective and up to the interpretation of each person. There's probably someone out there who objects to me dismissing most big budget action films, for example. But the tech and business

sides are woven together in a really snug way. For one thing, if you invent a technology, you have the opportunity to file for a patent describing how that technology works. Patents are useful because they provide you some protection for your idea. On the one hand, you have to spell out how your invention works, at least on a high level, and you do that in a document that the patent office makes available to anyone who wants to see how

that technology works. But on the other hand, in return for agreeing to have your ideas publicly available, you get

protection for those ideas. If someone else tries to make a you know, whatever it is you made without your permission, you can file a lawsuit for patent infringement, and if you can prove that they in fact violated your patent by creating a competing product based on your design, a court can make them stop and perhaps award you compensation, which would be paid by the accused, assuming that they

can pay it now. One of the important things about patents is that they expire, and once they do, anyone can make a technology based off that patent without having to get the permission from the patent holder. Because the patent itself has expired, it's in the public domain. So a patent grants you a limited amount of time to profit from your ideas. At that time, you can do so without the fear of someone else swooping in and using your ideas without your permission, and you can grant permission.

Typically we see that in the form of licensing agreements. So you come up with a really cool technology. Someone says, hey, I would love to use that how much And the two of you come to an agreement on how much money they pay you in return for being able to use your patented technology. At least that's how it's supposed to work. The alternative to patents is just keeping your technology as hidden and secret as possible. This would be

the trade secret strategy. It's it's one you don't want to share because it would give up a competitive edge in whatever market you're working in. The danger with trade secrets is that if someone susses out how you made your technology, if they reverse engineer it, you don't really have any protection against them copying you. If I make I'll watch him a jig, and I don't patent any of my designs, and you figure out how it all works, you can make your own watch him a jig, and

I'm out of luck. Really now. The reason I even bring this up is that, in the early early days of film, and we're talking like nineteen o eight, a group of motion picture companies, some of the most you know, some of the earliest ones in the assistance along with Eastman Kodak, which was the chief supplier of film stock because this was you know, when films were actually shot on film. And then a film distributor named George Klein all banded together to create an organization called the Motion

Picture Parent Company or mp PC. This was out of necessity because one member of that company, that would be the Edison Manufacturing Company named after Yes, Thomas Edison, was making life really difficult for the other companies. See Thomas Edison was famous for a few different things. One was

inventing stuff. Two was being a really shrewd businessman. Three was that he built up a company that he filled with engineers who invented stuff too, and when they patented those inventions, Thomas hays and always made sure his name was also on the patents, which is part of why he has so many hundreds and hundreds of patents to his name. And four he was fierce you protective of

his patented technology. If he suspected that some other company was making use of his patented tech without a proper license,

he would file lawsuits, lots of them. Well. The other members of what would become the Motion Picture Parent Company were film studios that Edison had kind of sued on multiple occasions and really The purpose of this new entity was to work out some licensing agreements to pool patents together, so that way, when it came to stuff like film cameras, projectors, and the various processes used in making movies on a technical level, there was this agreement. Now, there was also

a holdout company called Biograph. That company had its own camera technology that didn't sit well with Edison because he wanted to have the corner on that market. So Edison was really hoping he could push them out of business. But Biograph wisely went and purchased the rights to another key patent in the film process, which gave the company enough leverage to force its way into mp PC as well. So there were a lot of strange bedfellows, I guess

you could call them now. Before the mp PC, the standard procedure between studios and theaters went something like this.

A theater owner would decide which films they wanted to play in their theater, and they would purchase a film print, So in other words, they would purchase a copy of a film from a studio uh and the studio would make copies from a master and then sell the copies to theaters, and then the theaters would just hold on to that copy because they had purchased it, or they might just you know, throw it away if they didn't hold onto it, but it was theirs. But the mp

PC would change that. They switched it to a rental agreement. So now theaters would pay a certain amount of money to get a copy of a film for a set amount of time. After that set amount of time, they would have to return the copy or they would have to rent it again. And this gives studios a bit more quality control over film prints because they could dispose of any prints that had a lot of wear and

tear on them. And you know, films, the physical medium, it does wear down over time, so that this was important and it was good business because it meant that, you know, audiences wouldn't associate a particular studio with poor quality film. If in fact that copy was starting to break down, they could swap it out for something new. The mp PC was also a trust or you know,

a monopoly. Eastman Kodak held the rights to produce film stock, and other companies could license that technology from Kodak, or you could have someone try and come up with a total alternative to Kodak film and the typical film stock, but that would also mean you would have to have an alternative form of camera and a projector as well, so that was not, you know, a small task. So the mp PC set it up where Kodak would only sell film stock to the companies that were inside the

mp PC. The trust also held the camera and projector rights, and so all of this meant that anyone who wanted to get into the filmmaking side of business had to be a part of the mp PC, or they would have no legal means to get hold of the equipment and film that they needed to make movies. But as I mentioned earlier, patents expire, and by nineteen thirteen, the mp PC no longer had the cudgel of patent infringement

lawsuits to knockdown competitors. In addition, the mp PC was located on the east coast of the United States in New Jersey, that's Thomas Edison's stomping Grounds, and several upstart motion picture companies would set up operations way out west in the world of Hollywood Land, which made it mighty inconvenient to investigate the possibility of patent infringement and hanky panky. So that's on the on the other side of the nation.

And and then the death blow came. The United States government brought an antitrust lawsuit against the mp PC in nineteen fifteen. The government claimed that the actions that the company had taken were anti competitive and it wasn't just the actions of a company trying to protect its own intellectual property, and as a result, the mp PC would

dissolve just a couple of years later. So that's our first example of a monopolistic strategy in the film distribution world, and it won't buy any stretch be the last one. The law of the U. S Government enforced against the

mp PC is called the Sherman Act. It's one of the foundational antitrust laws in the United States, and in fact, it was passed all the way back in eighteen ninety is part of an effort to deal with issues stemming from powerful monopolies and cartel's, largely in industries like steel

and railroad, among a few others. The government found that mp PC was in violation of Section one of the Sherman Act, and that section states that quote, every contract combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states or with foreign nations is declared to be illegal. End quote. Section two of the Sherman Act is the part that really prohibits the monopolization of interstate trade or commerce and

makes it a felony to to do so. While mp PC was crumbling, a new movie studio Powerhouse was taking shape. And someday I'm going to have to do a full episode on this company because it has a fascinating and important history. But it all started off with the merger of two other companies. First was the Famous Players Film Company, which in itself was originally called Famous Players in Famous Plays the early days of films sometimes referred to movies

as plays. And second was the Feature Play Company, which was founded by a guy named Jesse L. Laski, and the merged company would become Famous Players Last Key Company. UH. It would later on merge with a film distribution company

with the more familiar name of Paramount Pictures Corporation. Along the way, the organization acquired several more independent film companies, and it would lead to an approach and filmmaking and distribution that would become a big headache for the industry and the United States government down the line, and the actual merger process was actually a really sneaky one. So you got Adolph Zukor, he's the founder of Famous Players Film Company, and then Jesse Laski, and they both entered

into distribution deals with Paramount Pictures Corporations. So originally this wasn't you know, a merger, that was just a business deal. And the guy who founded the Paramount Pictures Corporation was William Wadsworth Hodkinson, and he was serving the president as president of the company. But then Laski and Zuker thought, hey, you know, if we were able to distribute our own movies, we wouldn't have to share revenues with a distributor. It

would all be our own revenue. So instead of paying this this guy to distribute our films, wouldn't it be better if we just got hold of those assets and we did it ourselves and thus got to keep all the money. So they set about doing a hostile takeover. This is what we would call it in the hades. And sometimes I see Hodgkinson listed as a founder of the movie studio Paramount Pictures Corporation, and it is true. He founded the distribution side of the company, but he

was not involved with it as a movie studio. Because Laski and Zooker bought enough shares to influence the board of directors of Paramount Pictures to have Hodginson ousted as president, then they were able to buy the company because they essentially had the board of directors in their pocket. So they said, hey, board of directors, wouldn't it be cool if we bought your company? And they said, yes, because

you own us. And so they brought Paramount Pictures under the fold and they made this a true force and film and like I said, I have to do a full episode or maybe two, maybe three about Paramounts history and movies because it really did shape the way the film industry works today. Around this time, the various film studios, including the future Paramount Pictures, began to create what we call the studio system. This system would lockdown film production

in various ways. For example, studios would engage directors and performers and others into long term contracts, so the filmmakers and stars wouldn't be full time employees of the studio per se, but they would be locked down to exclusive agreements, and so certain actors would only be found in a particular movie studios films Rudolph Valentino and Gloria Swanson were

two actors exclusive to famous players Laski. For example, Sometimes a studio would negotiate with another studio and they would allow one of their stars or directors to work for another studio in exchange for a trade of you know,

perceived equivalent value. But for the most part, people were stuck working for a single student video until their contract expired, and that would end up being a big part of the problem as it would give the creators in Hollywood a lot less opportunity to pursue their best deals while under contract. So there might be a part that an actor would have been perfect for, they just never would have had the opportunity to do it because they would

have been locked in with a competing studio. Now, the second big part of the studio system was the vertical integration approach. So we can think of there being three major components in the film industry. There are producers. There's the studios that actually you know, make films. There are distributors. These are the companies that arranged for prints of a film to go to theaters. And then there are the

exhibitors or the theaters themselves. And then you've also got you know, other parties involved, like film stock companies like Kodak, which play a part two. But the producers, distributors and exhibitors are what we're really focusing on. In the eyes of the government. These three groups were meant to be separate from one another, but Famous Players Last Sky changed

this by going with a vertical integration approach. With the sniping of Paramount Pictures Corporation, Zukor and Laski checked off the distribution box, and they also began to buy up theaters in various markets. This activity attracted the attention of the US Federal Trade Commission, or FTC in the early nineteen twenties. In the FTC charged the company with conspiracy and restraint of trade, essentially arguing that the company was

violating the Sherman Act. When we come back from break, we'll talk about how that unfolded, how the Great Depression complicated matters, how a movie trade organization would become part of this mess, and how things would get a whole lot worse. But first, let's take a quick break among the problems that the FTC found with Famous Players Last Ski, and I should point out that other studios were doing the same thing. Were some industry strategies that were particularly unfair.

One was called block booking, and here's how it would work. Studios were locking down stars in these long term contracts. So audiences would begin to fall in love with some of these stars, and they wanted to see the pictures the movies that these stars were in. Theater owners would want to run films with those stars in them in

order to attract crowds and sell tickets. And so the movie studios who controlled the stars would say to the theater owners, Okay, I'll lease to you a print of this film with the stars that you want in it, but in return, you also have to promise to rent and exhibit these dozen other movies starring folks that nobody really cares about. Otherwise you don't get the good stuff.

And when I say dozen, that's not an exaggeration. In fact, some block booking would be up to a hundred and four films, which was a year's worth of movies in one go. And this practice is called block booking. Theater owners were being pushed to rent out entire blocks of films if they wanted to exhibit an anticipated film in their theaters, so it was saying, if you want this one, you also have to take all these other ones. In addition, block booking would affect the variety of movies that theater

owners could show. If you're running a theater that has a single screen, as many theaters had back in the early days, there are really only so many different movies you can exhibit in a week, and if your agreement with Studio A means you have to take you know, a dozen or more of their films, that might be

all you can show. You could presumably pay the studios for all these movies but not actually show them, and opt instead to also deal with Studio B. But then you're wasting money, right because you're spending money to rent out blocks of films that you never show, you only show a couple of them. That makes it much harder to make your money back as an exhibitor, and the exhibitors were over a barrel on this one, as were

the directors and stars. In fact, you could argue that the only party to really benefit from this arrangement would be the studios. Another practice the FDC found questionable was called blind booking or sometimes called pre selling. So with this approach, theaters would agree to pay studios up front to rent film prints of movies that hadn't even been made yet, and these could often be lumped in with

the block booking. So you might get a deal where you're dealing with Paramount, for example, and Baramount tells you, all right, we'll give you will We'll let you rent this one film, but you have to agree to rent these one and three other movies, and a lot of

them haven't even been shot yet. If you have watched a movie about the Golden Age of Hollywood, you may have seen some sort of parody of this, where you know, a film has its director and its cast, and maybe even has a ooster for the movie, but the film doesn't have a script and no one has shot a foot of film yet. Barton Fink has a scene that

specifically sends this up. Well, that kind of stuff was actually happening, and again exhibitors were being pressured to play ball and pay up without a chance to even see the film first, often because there was no film to see if they hope to get the movies that their customers were willing to pay for. And as I mentioned, earlier studios were also buying up theaters or building theaters

of their own. The FTC alleged that famous players last Kie had even gone so far as to lean heavily on a theater owner to sell their movies to or to rent their movies too, and if they encountered resistance, they would threaten to open up a competing movie house

in a nearby location, like literally across the street. And then after opening up the competition, the studio would undercut the prices of the competing theater and would sell tickets at a huge loss just to attract customers away from the theater owner that had shown resistance and hopefully forced them to go out of business as a result. So it's a very cutthroat way of doing business. Lumping the theaters under studio ownership gave studios even more control of

which films would play in various regions. Studios could block a theater from exhibiting a film from a rival studio. The vertical integration was creating a real stranglehold on the entire process, and the average American customer had fewer options to buy a ticket to the films they really wanted to see, so then the FTC comes in and says, hey,

this doesn't seem fair. It appears that Famous Players Last Key is engaged with some anti competitive practices meant to restrict other companies from doing business in the film industry. But the FTC's pursuit of a judgment against the company would take, let's call it, a leisurely path. It wasn't until the summer of nineteen twenty seven. Keep in mind,

this investigation began in the one. It wasn't until that the courts a warded the FTCs call for a cease and desist order against Famous Players Last Key for practices like block booking, and a call for the company to

stop purchasing theaters. The court ordered Famous Players Last Key to comply within sixty days of the judgment or otherwise produce a darn good excuse as to why it had not yet done so, and the company played for time they asked for, and they received extensions on this judgment twice. Then in nine, when the stalled tactics were at an end, the company claimed it wasn't really guilty of the charges after all, at least not the way they had been

framed in the court case. That did not sit well with the f TC, and in the meantime, the Commission was expanding its investigations into the movie industry at large, with the Famous Players Last Key case at the heart of it. The FTC began to escalate its charges against movie studios and going for a more direct antitrust case.

This would ultimately rise to the Supreme Court. The Supreme Court would ultimately decide that the practice of block booking was inherently anti competitive and thus would be illegal under the Sherman Act, and that studios that practice block booking would be subject to criminal proceedings and fines. However, at the same time, the United States was dealing with the Great Depression, which began in October of nineteen twenty nine with the stock market crash, and then it got worse

due to multiple complicating factors. Meanwhile, the film industry was actually seeing more competition, not less, but that had to do with a technological advance rather than trumped up charges against the Famous Players Last Key Company. See. In the late nineteen twenties, talking pictures were becoming a thing which created a new type of film experience that various studios were trying to capitalize on. While simultaneously trying to figure out how to salvage the assets that were more suitable

for silent films. That's a nice way of saying that not all directors or actors were equally adept at making talking picture as they had been with silent films. But the talking pictures revolution would create competition between various studios. Okay, to understand what happened next, we need to rewind a little bit. As the FTC and famous players last Kie were wrestling in the courts, the movie studios as a whole were converging. In an effort to protect the industry

against US government regulation. The studios formed an organization called the Motion Pictures Producers and Distributors of America, or the mpp d A. This organization would later become the Motion Picture Association of America a k a. The m p a A until twenty nineteen, when it would turn into its final, at least for now, form of Motion Picture Association or mp A. The purpose for this trade association was to bolster the financial support of Hollywood and to

encourage investment in the film industry. As part of that strategy, the association also took it upon itself to create a system to ensure that the films produced in America met a strict moral code, the idea being that investors would be hesitant to pour money into an industry that had

a seedy reputation. The first president of this association was a man named will H. Hayes, Postmaster General of the United States, and the moral code applied to the content of films, and it would become known as the Haze Code. That in itself is a subject suitable for a full episode, though I'm not sure that would fit within the bounds of tech stuff. What is important is that at first,

movie studios paid little mind to the Haze Code. They had similarly ignored an earlier set of guidelines that were called the don'ts and be carefuls because the mp p d A had no real way to enforce the code.

The studios wanted to use every trick in the book to get more butts and seats because the depression was really taking a toll on businesses in general, including the film industry, so part of that included producing and distributing films of what would be considered questionable moral character for

the time. Today, we'd probably think of it as quaint. However, various state governments in the United States began to pass censorship laws to protect the delicate citizens of those states from seeing such scandalous material, and out of a concern

that the federal government might get involved. As more and more states were taking a heavy hand with censorship, the movie industry largely agreed to abide by the Hayes Code, and they formed the Production Code Administration or p c A to do so, and with the threat of substantial fines for any film that failed to adhere to that code, provided that the film came from a studio that was also part of the mp p d A. But the mp p d A would also play a part in

the battle over anti competitive practices. As a trade association, it was tasked with helping studios attain financial stability during

a depression. That's a tall order, but the US government was receptive to suggestions, as the thought was that people needed distractions from the hardships of going through an economic depression, kind of similar to the way people are talking about, you know, dealing with the pandemic, and the film industry was a way to provide diversions for a suitably low cost per experience, and so, faced with a dilemma, the US government agreed to dismiss the whole judgment against stuff

like block booking if it meant that studios could continue to provide entertainment for Americans undergoing a really tough economic time. The mp P d A successfully argued that motion pictures should be protected under a larger national strategy called the National Industrial Recovery Act. In nineteen three, the industry had only faced consequences for the vertical integration strategy that it had employed for a very short while, and some really

hadn't faced any consequences yet at all. And so through the nineteen thirties, the studio system approach grew more powerful. Studios continued to grow and expand their influence. They pushed harder into the various components of film production, distribution, and exhibition. Things got mighty anti competitive, but the US government saw

it as unnecessary evil. However, various court cases in different industries would ultimately test the National Industrial Recovery Acts constitutional basis, and these cases would eventually come before the Supreme Court, and in ninety five, the Supreme Court decided that the Act was in fact unconstitutional and therefore it would be overturned that would remove the protection for the film industry, which for a couple of years had really gone hog

wild with the anti competitive strategies. Pretty Much everyone outside of studio executives were unhappy with these anti competitive strategies. Directors and actors were unhappy because they couldn't pick and choose their projects the way they wanted to. They had to respond to studio mandates. Theater owners were unhappy that they had to comply with studio wishes and distribution practices.

The American consumers, while happy to watch movies, weren't being well served by the vertical integration approach either, and so once the n I r A protection dissolved. Once that act was overturned by the Supreme Court, the U. S Department of Justice began a renewed legal attack on the

anti competitive practices of the movie industry. Among the issues were not just the vertical integration or block booking or blind booking, but also the industry forcing conditions like the length of a film's run in theaters and dictating what the minimum admission price for a ticket should be in distribution contracts. The Department of Justice charged eight defendants, including

Paramount Pictures. What would follow would be a long series of cases and consent decree ease that ultimately resulted in the Court finding the process of vertical integration anti competitive. The movie studios received a mandate to split up so that they would no longer be production studios that also controlled exhibition of films. So when we come back, we'll talk more about the outcomes of that Supreme Court decision and then do a big jump in time to talk

about how this decision was recently reversed. But first let's take another quick break. So eventually, the decision that would you know, determine the fate of the film industry for eighty years or so, finally came about in nineteen forty six, after World War Two. To keep in mind, the original decision had been back in nineteen twenty nine, and a few factors led into this change. One was that the world of nineteen forty six was very different from the

world of nineteen twenty nine. In nine, at the beginning of the Great Depression, there was a perceived need for entertainment and a fear that the economic depression would destroy the film industry, that they would go out of business and you'd be left with nothing, and so the anti competitive practices were seen as sort of the necessary evil

to keep the industry afloat. But in ninety six we were out of the Great Depression, World War two was over, soldiers had returned home, and more people were going to the movies than ever before. The film industry was no longer precariously positioned in an existential crisis. It was doing really well. Further, only the five largest studios paramount included had agreed to consent decrees that the court had previously issued, and the consent decrees were essentially a temporary agreement to

stop doing stuff like blind booking and block booking. But three smaller studios would not sign the consent decrease. They argued that they actually needed those practices to be competitive with the five larger studios because, unlike the major studios, these three did not own their own theaters. So the ninety six decision would eventually lay down the law for everybody. It took some time, but eventually the movie studios all capitulated to the pressure from the U. S. Department of Justice.

But the results of this might not have been what the courts had originally intended. Over the following two decades, more than five thousand movie theaters closed. The studios began producing fewer movies. They had been producing several hundred per year now it was a few hundred per year total, and ticket prices were still on the rise. So there were some definite downsides in the wake of this decision.

We can't blame it all on the court, of course, because there were other elements at play, including the rise of television, which was a big one, so it's pretty complicated stuff. In addition, while the intent was to disrupt anti competitive practices, it didn't really do that so much. On the books, it was forbidden for a studio to own its own chain of theaters. Soon new theater chains

would rise up instead. And while in theory the court decision would have busted open the stranglehold that big studios had on exhibition, that didn't play out so much. In reality. The means to produce films became more attainable for independent filmmakers, but the means to distribute movies for exhibition did not.

So in other words, you might be a humble little film production studio and you might make real art on film, but you would still probably need to find some distribution company to strike up a deal with so that you could get your finished movie into actual movie theaters. Otherwise, you've got this amazing piece of art, but you don't really have a way to show it off beyond maybe

some small screenings. As for movie theaters, they gravitated toward carrying films that were likely to attract routes, which in turn would gradually fuel the cycle of the blockbuster. You can trace that history up to present day, when a cinema complex with like twenty four screens will be showing maybe a dozen films, with most screens dedicated to big budget movies from a small handful of studios. And at least that would be the case if it weren't for

the pandemic. Okay, but let's switch gears a little bit and talk about streaming. Online streaming, much like TV and the home video market, which obviously came before streaming, it became a big disruptor in recent years. Early on, the concern was that a single entity like Netflix would dominate the space, and if Netflix were to become the default option for most consumers, they would give Netflix an enormous amount of leverage When working out deals for carrying content

on their platform. As such, a lot of different entertainment and cable companies began to launch competing services. So that's why we've got stuff like Hulu and Amazon Video and HBO Now and HBO Max and Disney Plus and Peacock and such. And here we see an interesting evolution of that old problem of vertical integration. This is exacerbated due to the various acquisitions and mergers that film studios have been part of over the last few decades. So let's

go over a few of them in brief. There are a few movie studios that really exist only as a brand, which means that you know, you might see a movie branded as a particular studios production, but ultimately it belongs to a much larger company, like a larger production studio, and it's just sort of a way to brand that film a specific way. So we're going to ignore those. I mean, there's no point in talking about them because they don't really exist on their own. They're part of

a bigger company, alright. So Universal Pictures, one of the oldest studios that's still around, is now part of NBC Universal and Comcast. So within that family, you've got a telecommunication company that's Comcast. You've got a TV network in NBC, and a film and more TV studios with Universal, and this company has the streaming service Peacock. Then we've got Warner Brothers Pictures, which is part of A T and T.

So we've got another telecommunications company. And we've got Warner Media, which was formerly known as Time Warner, which is a production company that includes film and TV studios. It also owns cable channels like HBO and a ton of others like Cartoon Network and CNN and TBS and more. So this company has HBO Max as a streaming service. Then we've got Columbia Pictures, which is part of a group

of studios owned by Sony, the Japanese mega corporation. Sony A one time owned a streaming service called Crackle, but has since divested itself of that. So it's kind of the odd man out when it comes to production, distribution, and exhibition with this particular use case. There's Paramount, of course,

which is part of Viacom CBS. That's an other super complicated story that I should dive into at some point, but this company includes Viacom, a cable company that owns networks like MTV, Comedy Central, Showtime, and Nickelodeon, among others. CBS another TV network, and Paramount Pictures, a film and television production company, and they have their own streaming service

in the form of Pluto TV and CBS All All Access. Uh. Finally, we've got the Mouse House, truly gargantuan media and entertainment company also known as Disney. So we've got Walt Disney Pictures. We've got the former twentieth Century Fox, which had film and TV studios. You've got properties like ABC, another television network, and you've got Disney Plus as a streaming service as well as some other streaming services like ESPN Plus and

Disney also owns Hulu. Now. So, in the era of the pandemic, when movie theaters are closed in many locations in some theater chains have shut down at least for the time being, the vertical integration approach creates a new opportunity. Studios can, if they so choose, opt to release properties on streaming services that they own, rather than sit on films until it's safe for theaters to open it full capacity.

So movie studios depend heavily on box office returns typically, the first weekend of box office returns tends to be the most important. Not in every case, but in the vast majority that's true. So there's a strong incentive to hold off on releasing films before our theaters can open

in full again. But at the same time, there's a lot of uncertainty about when that will ever happen, and there's an even bigger question if audiences will flock to theaters once they are open for for business as usual, and if this takes too long, we might see some movie theaters just go out of business. Both on the smaller independent scene and even with the bigger theater chains, there's talk of insolvency among some of those operating a

theater is already tough. Most theaters make the bulk of their revenue not through ticket sales but through concessions, which is why it costs so dang much to get snacks, because that's where the profit margin really is for theaters.

On the one hand, studios run the risk of alienating theater owners, and I think mostly we're talking about the big chains like AMC and Regal here in the United States, so there's been some reluctance among studios to make a big move toward releasing films online, even on their own services.

But on the other hand, studios need to pull in revenue, and so many are part of these bigger companies, these bigger telecommunications and entertainment companies, and they look to their streaming service as a way to bring in cash regularly every month by building a subscriber base, and that they have to make a uh an incentive for people to

subscribe to those services. So you can use movies to convince people to subscribe to say HBO Max for example, and maybe they otherwise wouldn't, but they'll do it in order to be able to see you Wonder Woman ur or something. So some studios are making compromises. For example, Paramount has negotiated a deal with theaters that narrows the exclusive window that theaters have for carrying a first release film.

In normal circumstances, theaters have dibbs on a new release for at least a few months before a studio pivots towards the home theater market and streaming market, but Paramounts deal narrows that down to seventeen days, so a little more than two weeks after a movie hits theaters. Paramount can then make that film available to various streaming services, most likely its own. Warner Brothers went a step further.

Warner Brothers announced that its entire slate of films for one, which includes seventeen films into total, will be available both in theaters and streaming on HBO Max on day one of that film's release. However, in sort of a reverse move from what Paramount is doing, these films will only be available in HBO Max for thirty one days after the film's released or thirty one days including the film's release, so it would disappear from the service thirty one days

after the movie comes out in theaters. And I find it fascinating that movie studios, now part of even bigger media companies, have turned the vertical integration dial up to eleven. My original plan for this episode was to talk about how this new situation is kind of a workaround of

that old restriction that says studios can't own theaters. But hey, jokes on me, because in August, the Department of Justice decided to dissolve those restrictions on studios, citing that because it's a different world than what we had back in the nineteen forties, those restrictions don't really apply anymore now. I don't think in the end that this is that big of a change, but that's because the Supreme Court ruling didn't necessarily have the effect that I think the

justices intended in the first place. But really, what I guess I need to say is that it's really all a moot point. Vertical integration is here big time, and what happens next will largely depend on how things play out with the pandemic and vaccines. If the theater experience is fading into the past because of you know, the economics of running a theater house and the fears of things like pandemics and other health issues, we should expect to see a change in the way movies are produced

as well. I suspect movies aren't going anywhere. There will always be a desire to create among directors and actors. That's going to stick around no matter what the circumstances. But if theaters can't recover, there will be no hope of having that big box office weekend to recoup the

cost of production. And without that payout, it would make little sense to see big budget films move forward because the chances of making your money back would go down, particularly as consumers have to pick and choose which streaming services they subscribe to. That can also be a pain point. It's eerily similar to the prospect that the theater closest to you is only running movies from a single studio.

You have less choice unless you're willing to pay the subscription fee to numerous services so that you have access to everything. It's not great for consumers, and it's not super great for creators because they're going to see their budgets shrink. It's not even great for the studios. If you hit your saturation point for subscribers, meaning no matter what you do, you are not likely to increase your

subscriber number in any significant way. You have hit that saturation point for the market, then at what point do you have incentive to invest in interesting projects. You can't get any bigger, so why would you spend more than you have to? You just you just need enough stuff to keep people subscribed. That's all you need. You don't need to attract more people because more people aren't coming.

We see this in the cable industry too. By the way, cable companies will hit a saturation point within a market, they literally can't get into more homes in that market. Well, the only thing you can do is to maybe launch a new channel or try to go into a country where you don't have a presence already. I saw that firsthand when I was working with Discovery Communications. And there's a lot that I think is wrong with the entertainment industry.

I haven't really scratched the surface of all of that because it goes deep, but I do hope that we can see a recovery with movie theaters. One thing I do take comfort in is that we have always loved stories since before the time we could write them down, So that loves stories that's not going anywhere. We just my see some big changes in the ways that we tell them. But I do hope that movie theaters make a recovery and that we can continue to see innovative

and big budget films. I mean, I have a lot of feelings about various big budget movies. You can hear more about my feelings on the podcast The Large Nerdron Collider that will be available later this week. It launches on Wednesday, so keep an ear out for that, but I'll save it for that In the meantime, if you have suggestions for future topics that I can cover here on tech Stuff, reach out and let me know what you are thinking. Because I cannot do it by myself.

I am not psychic, So the best way to do that is to reach out on Twitter. The handle is text stuff H s W and I'll talk to you again really soon. Text Stuff is an I heart Radio pre aduction. For more podcasts from I Heart Radio, visit the i heart Radio app, Apple Podcasts, or wherever you listen to your favorite shows. H