Paramount Consent Decree Review Public Comments 2018: Comment 8

COMMENTS OF

U.S. DEPARTMENT OF JUSTICE, ANTITRUST DIVISION

REVIEW OF PARAMOUNT CONSENT DECREES

October 4, 2018

INTRODUCTION

respectfully submits the following comments in response to the U.S. Department

of Justice Antitrust Division’s (the “Department”) announced intentions to review the Paramount

Consent Decrees (the “Decrees”). comment will focus on only two key

provision of the Decrees. Specifically, urges the Department to maintain the

prohibition on block booking, as that prohibition supports pro-competitive practices.

PROHIBITION ON BLOCK BOOKING

American movie-goers demand and deserve a wide variety of films, from low budget, art,

independent, documentaries and blockbusters. Should block booking be allowed, exhibitors will

be forced to show films that may not cover all their customers’ interests. Movie-goers’ choices

will be limited and over time, this will result in fewer and fewer “alternative” or non-blockbuster

films being made. Not only does this limit the availability of films at the theater, but it may also

result in fewer choices for in-home entertainment.

Should the block booking prohibition be lifted, the studios could then engage in discriminatory

distribution and pricing practices. Studios could then require exhibitors to purchase entire blocks

of content, including non-desirable content, in order to secure a small subset of desirable films

with top talent. Small exhibitors could be forced to opt out completely, if they cannot afford to

book large quantities of film at once, or do not want wish to pay for films their audiences

wouldn’t watch. The practice of block booking “prevents competitors from bidding for single

features on their individual merits.”

As studios are now producing global blockbuster movies, there is less production and

distribution of low- to midrange movies. Just like exhibitors, filmmakers are also being forced to

decide between low-cost “passion” projects and huge priced blockbuster titles. Recently, new

independent and smaller studios have entered the market in effort to revive the midrange movies.

Exhibitors are eager for these independent and smaller studios to have their content available on

their screens, and therefore screen inventory is essential.

Without the prohibition on block booking, studios might push this trend to the extreme, requiring

exhibitors to book multiple screens for multiple weeks on their entire slate, thus leaving no

variety for its customers. A system of long runs of entire slates could be devastating to small

town and/or limited screen exhibitors and their consumers, who want family-friendly and faith-

based entertainment from distributors of all sizes. In addition, allowing block booking could

render exhibitors unable to effectively program and leave consumers with fewer options for

quality entertainment in the community.

II.

PER CAPITA

Despite, the Decrees prohibiting distributors from requiring “fixed minimum admission prices”

for the licensing of their films by exhibitors, most exhibitors currently offer a standardized ticket

pricing model, regardless of the cost, quality of the content, or the number of screens licensed.

Except for matinees, youth/senior discounts, and markups for specialized formats, customers

pay the same price regardless of the movie or timeslot they choose to watch the movie. As

distributors use a per capita requirement, this sets a floor on pricing per customer for licensing

fee purposes and this standardized ticket pricing model is the result.

Through the use of loyalty programs and third-party analytics, exhibitors now have much more

insight into their customers buying and movie watching habits. Exhibitors who want to utilize

these insights and new technologies, such as apps, to grow their box office must often fight with

their studio partners in order to charge variable ticket prices. The ability for studios to threaten

to pull content is a huge barrier to exhibitors providing variable ticket prices. In addition, the

exhibitor’s agreements with the studios include terms such as bans on screen splitting and

demands for a minimum exhibition period, regardless of consumer demand, which makes

variable ticket pricing virtually impossible. The combination of loyalty data, ticketing apps, and

variable pricing models could allow exhibitors to innovate in order to grow their customer base.

However, if block booking is allowed, the scale of release needed by independent distributors

and exhibitors to prove that variable price options can effectively grow the box office could be

prevented by large distributors. Without the ability to secure screens, independent studios will

not have the visibility they require for midrange movie success and therefore will eventually

disappear. In the end, per capitas result in discouraging discounting and price competition as

much as direct price fixing would.

III.

CONCLUSION

Abandoning the prohibition on block booking will likely reduce competition and incentivize

anti-competitive behavior. As demonstrated above, the current distribution model depends on a

small number of studios with significant bargaining power. These studios are producing

increasingly expensive content for global audiences, and demanding longer runs on more

screens from exhibitors, as the overall financial success of a movie is increasingly dependent

on theatrical box office. At the same time, major studios are also decreasing their slates and

abandoning production of many small and midrange titles that American audiences demand,

leaving independent distributors to produce the content studios no longer make.

Exhibitors require a variety of content in order to appeal to the varied tastes of their consumers.

The prohibition on block booking has allowed exhibitors to use their screens to program both

major studio content and other, more targeted fare. If distributors are permitted to block book,

they could demand exhibitors book an entire slate on multiple screens, leaving little room for the

independent and smaller distributors to finance and distribute films that consumers demand.

Without the block booking prohibition, major studios will continue to demand longer runs

on more screens, which results in the driving the smaller studios out of business and even

less possibility of developing consumer-driven pricing incentives in partnership with

exhibitors.

Based on the above reasons,

implores the Department to maintain the

prohibition on block booking as set for in the Decrees, as removal of such prohibition would

support anti-competitive practices.