Or did they lock it? Remember when people said that videocassettes and DVDs would destroy movie theaters, well the U.S. Government “un-did” what they enacted over seven decades ago.
What do technology and the Justice Department have in common? Probably the perfect storm (and maybe the pandemic) occurred. What required 58 years to become law … 71 years in force … and only nine months to obliterate.
Is Technology Revolutionary or Evolutionary?
Consider the various popular software applications, such as LinkedIn, Internet Explorer, Facebook, Outlook or Microsoft Office. These applications have not only defined the market (as first-movers) but our everyday lives. For those that have used these applications for a while, you noticed the features and functions have changed radically since their initial rollout. They were depicted revolutionary at the time, but in fact, have evolved.
It is often said that pace of technology advances has changed faster than government, legislative and professionals can govern, lead or regulate their use in society. Moore’s Law. OK, so what happened that changed the streaming, theater and content production markets? Probably evolutionary. Let’s explore.
71 Years in Force – A Historical Perspective
Many of you are familiar with antitrust legislation associated with the Sherman Antitrust Act (1890). Shortly after its enactment, the FTC began to investigate film studios and their ownership (partially or entirety) of theaters. Paramount Pictures was named as the primary defendant in the U.S. Government’s case alleging illegal trading practices. For antitrust lawyers, the historical details are fascinating. For the rest of you, a consent decree was agreed to in 1943 with the studios refusing to comply. Ultimately, the bedrock decision involving Paramount was heard and affirmed by the U.S. Supreme Court in 1948.
Ultimately, the studios controlled the content and distribution of product; in this case, movies. In today’s business language, it is called vertical integration. The government alleged the studios of block booking feature films. That term, resurfaced recently, focuses on bundling blockbuster releases with “second rate” movie releases.
“Stream” Seven Decades Ahead
In discussions and lectures in 2019, I discussed how the entities (studios and theaters) have now become expanded to new markets along with redefined distribution models; a twist of vertical integration. Sense where this is going?
Coincidentally, studios have been disrupted by new market competitors (such as Amazon, Hallmark, Netflix, HBO and Showtime) which were not founded as movie and television production entities. Ironically, each one of these organizations is operating with the model that the U.S. Government outlawed in 1948; controlling the content creation and distribution.
Furthermore, let’s add another chess piece; The House of the Mouse. For almost a century, they have been a dominate production company, coupled with its rollout of Disney+ streaming service, formed the same environment (although began with the cable Disney Channel). Ironically, before the launch of Disney+ in November, along with Amazon, the two heavyweights in this competition began a tussle. Disney requested that its service be integrated into Amazon’s Fire TV platform. Hmm, Pandora’s box is beginning to overflow.
Next Act: Sherman Crumbles
Forgetting the buttered popcorn aroma, is a streaming service the technological version of a theater screen? The content is being developed by a content producer (Netflix) being viewed on a television screen (Netflix subscription service)? Would a company file litigation alleging that this environment violates the 1948 consent decree? The plot of this feature film continues.
In November 2019 (is that date coincidental?), the U.S. Justice Department announced that it began an effort (beginning about a year earlier) to end the Paramount consent decrees and the 1948 agreement. With public comment that followed, you may imagine that some predicted the same anti-competitive behavior would resurface that the Act was supposed to prevent. On August 7, the Justice Department announced the termination of the consent decree and with an agreement of the Federal Court in a 17-page opinion.
Seventy years of technological innovation, new competitors and business models, and shifting consumer demand have fundamentally changed the industry.
U.S. District Court Judge Analisa Torres
HBO Started the Strategy for Streaming
Video content has driven the popularity of the television broadcasting market since the 1950s. It is believed that the first subscription model success was when HBO developed and broadcasted the Sopranos in 1999. HBO established cinematic TV; transitioning a cinematic feel to the small screen. More importantly, it proved the old saying, “If you build it, they will come.” The Washington Post reported that “The Sopranos may have attracted as many new subscribers to the service as any other single HBO program.” Disney leveraged that strategy with the purchase of 21st Century Fox’s content which clearly increases the value of their portfolio; leveraging that content solely for their new streaming service.
The sprint for content and production is not solely owned by the Disney empire. The vast inventory of video produced by “non-traditional” entities is tremendous considering the assets owned by Hallmark, Amazon and NetFlix Originals.
Coincidentally, the increase in streaming services coupled with the content inventory has steadily increased the loss of pay TV subscribers over the last six years. According to Leichtman Research Group, 125K subscribers terminated their cable service in 2014, increasing to 4.9M in 2019; a 3800% increase.
The Future?
So what does the next scene in this feature film hold? Read the conclusion by clicking here.