When I heard that Sony was buying the Alamo Drafthouse movie theater chain, my first reaction was to wonder why the FTC hadn't tried to block it. FTC Chairman Lina Khan is a strong opponent of both horizontal mergers (competitors buying each other) and vertical mergers (companies buying suppliers or distributors). And speaking of vertical mergers, movie studio ownership of movie theaters holds a special place in the history of antitrust enforcement.
In the late 1940s, the landmark case United States v. Paramount and subsequent consent decrees forced the major studios to sell off their cinemas, hastening the demise of the old studio system. Of course, the movie-making business has changed considerably since the 1940s, as the government itself pointed out when the Paramount Decree was finally repealed in 2020. With television, DVDs, and streaming, there are plenty of ways to watch movies without going to the cinema. Still, Kahn made headlines by arguing that the government had become too lenient with big business. It seemed ironic that the big deal linking studios and cinemas would be made during her term.
The boring answer, I eventually learned, is that the Department of Justice, not the FTC, has historically overseen antitrust law in the movie industry. But thinking about it, it raised a more interesting question: not why the FTC didn't step in, but why this deal got so little attention from anyone.
Ten or twenty years ago, this story would have been big news — not just because the Paramount decree was still in effect, but because moviegoing was still a big part of American life. People would have debated how this would change our weekends, our culture, our country. And there would have been many voices calling for the government to do something (even if it was unnecessary) to protect us and independent filmmakers from the restructuring of the old studio system.
Follow this authorMegan McArdle's opinion
So far, the story has received little discussion outside of trade publications and online communities of movie fans, which explains why the deal was so easy to get done, and why it was necessary: movie theaters are becoming less central to our lives.
In the 1980s, when dinosaurs roamed the earth and I was a teenager, “going to the movies” was an all-ages activity. That is, you would decide to go to the movies with a group and then decide which movie to see. Whatever you saw, you got to experience the magic of the movies: the giant screen, the thunderous acoustics, the crowd hushing in anticipation as the lights went down. While we still can’t fully recreate that at home, we can get a lot closer than we did in 1984, or even 2014. So now, many of our former moviegoers only go to the cinema for “event” movies like “Barbie” or “Oppenheimer.” Some don’t go at all. All of this is clearly visible in the decline of box office revenues, especially since the pandemic.
Last year, when Babenheimer lured people back to the cinema, it seemed like the pandemic was really just a temporary thing, that we weren't all trained to stay at home and stare at screens. But on the flip side, the news wasn't so spectacular. Sure, the overall box office was recovering from the pandemic downturn, but it hadn't regained all the lost ground yet. According to Box Office Mojo, domestic box office revenue was $11.4 billion in 2019. It will be $8.9 billion in 2023. And now it seems to be heading in the wrong direction again. Second-quarter revenues were down by a third compared to the same period last year.
An obvious caveat is that last year's double actors and writers strike delayed the release of many major productions. But saying “this is just a temporary pause due to the strike” has a similar flavor to last year's “this is just a temporary pause due to the pandemic.” The pandemic seems to have made some moviegoers prefer their couches. And if the strike means there's nothing left to watch and people now have to find other entertainment, some may never get back to their old movie-going habits. There's never been a more competitive time for viewers than now. Not just network TV and Netflix, but video games, Twitch streamers, YouTubers, TikTok influencers, and probably too many others for me to name in detail.
This entertainment has also changed audiences, to the detriment of cinemas. Now, when you watch a movie at home, many people scroll at the same time. This is part of the charm of the home. No one is asking you to turn off your phone or stop talking to your partner during the movie. Some may argue that this way of watching is inferior to sitting down in a darkened cinema and giving your full attention to a great director. I agree. Unfortunately, I don't know if all other audience members agree.
The more this happens, the less people will want to go to the cinema. As people stop going to the cinema, they become accustomed to treating the cinema as an enjoyable backdrop, rather than a comprehensive spectacle. This will ultimately affect the types of films that are made, as cinemas move towards the kind that are best suited to being watched at home with the distractions of home, making it even harder to draw people into the cinema.
Maybe this is why Sony is buying the Alamo Drafthouse. In the 1940s, owning movie theaters might have been a way to gain an edge in a booming, competitive market. Today, it seems more like a way to ensure that there remains a market for the kind of movies that should be seen in theaters. This is a merger that even the most ardent antitrust hawk should approve. I certainly do.
