Monopoly Oligopoly Panoply

The overwhelming prominence of the ‘Big Five’ studios monopolising the landscape of cinema ultimately led to the United States vs Paramount Pictures case of 1948, also referred to as the Hollywood Antitrust Case.

The famous entrance to Paramount Studio

Over the course of the 1930s, each of the ‘Big Five’ owned the cinemas in which their films were exclusively shown, either independently or as a partnership with another studio. This meant that only films produced by a specific studio were able to be shown in those cinemas. By 1945, the film studios owned an overall 17% of cinemas in America, accounting for 45% of the film-rental revenue. This meant that it was not financially viable to release a film independently, or show any film made outside of America in these cinemas. It was clear that the studios were dominating the film industry, establishing an illegal oligopoly.

This led to a group of filmmakers filing a formal complaint to the US Department of Justice, suggesting that the studios’ tactic of vertical integration was an illegal situation that violated antitrust law. In 1938, the studios were all sued by the justice department, with Paramount acting as the primary defendant due to its status as one of the biggest of the ‘Big Five. With the seven other studios – alongside a multitude of subsidiaries – being co-defendants of the case, each head of the studios were prosecuted and personally at risk of losing their livelihoods. The case was settled in 1940 with a consent decree, allowing the government to resume prosecution if the studios did not comply to four conditions by a reassessment that would take place in November 1943. These conditions included the following:

• Each of the ‘Big Five’ studios could no longer block-book short films that would accompany the feature-length main film at the cinema
• The studios could continue to block-book feature-length films, but the block size was now limited to five films
• The practice of ‘blind buying’ was made illegal. This practice involved the studios selling their films to the cinemas without showing them beforehand
• A voluntary industry-wide administration board would be created to ensure that these practices were adhered to

After reviewing the case in 1943, it became abundantly clear that the studios had not fully complied to the conditions of the decree. The studios went to trial once again in 1945, with the District Court ruling in favour of the studios, after which the government promptly appealed to the Supreme Court. After reaching the Supreme Court in 1948, they ruled that the studios did not fully comply with the consent decree, and declared that the studios were not allowed to own cinemas anymore, and must sell all of them.

This, coupled with the rising popularity of television in the 1950s, led to a steep decline in the revenue of the studios. Audiences could now watch films from the comfort of their own homes, and others did not have easy access to a cinema, meaning that television was the more convenient option. This ruling also broadened the range of films that American audiences had access to: smaller, independent films were now able to be shown in cinemas, due to cinemas now being able to freely show films from different studios. This ultimately decimated the fortune of the Hollywood studio system – the studios were forced to diversify their practices and the rise in competition skyrocketed.

The United States vs Paramount Pictures case of 1948 was a turning point for Hollywood. The ruling of the Supreme Court ultimately spelled the end of the Golden Age era and birthed the ‘New Hollywood’ era of filmmaking, in which directors began to claim much more creative control over the studios.