Aug 11, 2020 11:30 AM

Maybe Netflix and Amazon Should Just Buy Theater Chains

The rules banning movie studios from owning cinemas have been overturned—just in time for theaters in need of a bailout.

The Covid-19 pandemic has almost completely upended the American moviegoing experience. As the coronavirus lockdowns enter their sixth month, theaters—and theater chains—are facing dire economic circumstances as multiplexes in major metropolitan areas remain closed. Meanwhile, people are using streaming services like Netflix, Amazon, and Disney+ more than ever. Even would-be summer blockbusters, like Disney’s live-action Mulan, are being offered up on streaming instead of getting big national theater rollouts. All of which presents a potential, and potentially anxiety-inducing, solution: What if streaming services just bought theaters?

This would’ve been a bold proposition just a few weeks ago. Ever since 1948, when the US Supreme Court found that movie studios had to divest of their interest in national theater chains, Hollywood has been guided by the notion that a studio can’t own or operate theaters without tiptoeing into antitrust issues. The idea at the time was that studios shouldn’t be allowed to have a heavy hand in which of their movies theaters license and how much it costs to see them. Last week, a judge agreed with the Department of Justice, which had moved to terminate the rules that emerged following that 1948 decision, and effectively ended those stipulations, which had come to be known as the Paramount Consent Decrees. Movies are no longer just released to single-screen theaters, US District Court Judge Annalisa Torres wrote, and the law needed to reflect that. “Moreover, as internet movie streaming services proliferate, film distributors have become less reliant on theatrical distribution,” Torres wrote in her 17-page opinion. “For example, some independent distributors, relying on subscription, instead of box office revenues, currently release movies to theaters with either limited theatrical runs or on the same day as internet movie streaming services.”

Torres is, of course, correct about this. The landscape is very different today than it was in the early 20th century. In fact, the streaming services have caused a huge shift in how movies are made and produced, and the debate over what place services like Netflix and Amazon have in the traditional Hollywood movie system has been a fraught one. Back in 2015, theater chains freaked out when Netflix, presumably looking for a theatrical run in order to qualify for the Oscar race, wanted to release Beasts of No Nation in cinemas on the same day the movie became available to stream. Amazon has largely avoided similar outcry by letting movies like The Big Sick and Suspiria have a few weeks in theaters before offering them on their platform.

Even so, should any of these companies outright own theaters or theater chains? They can clearly afford them—AMC’s $489 million market cap is a rounding error for a company like Amazon—the kind of money CEO Jeff Bezos may not even miss. And there’s no doubt that being able to use your Netflix or Amazon membership to get perks at a theater—like the deals Prime members get at Whole Foods—would be nice. But that doesn’t mean everyone wins. Before last week’s decision, a group of independent theater owners warned the court that if tech companies “purchase cinemas, and throw around their ample weight, independent cinemas confront the predations of Big Distribution, Big Exhibition, and Big Streaming.” If tech giants start running theaters and lure their members to them, indies—the kinds of places that generally show the movies Netflix and Amazon produce—could lose out.

But at a certain point, theater chains may not have a choice. America’s somewhat botched response to the Covid-19 pandemic has made it even harder to reopen cinemas. Of the more than 12,000 theaters worldwide that are currently open, fewer than 10 percent are in the US. The longer this goes on, the more likely it is that the companies that have been doing well in the pandemic may be the only ones in a position to save the ones that are flailing. It’s not nice, but some theaters are better than no theaters.

To be clear, no one is saying this is definitely going to happen; it's just not impossible. Rumors have circulated for some time that Amazon had its eye on AMC. A few years ago, sources told the Los Angeles Times that Netflix was looking to acquire theaters, and the streaming giant has already saved one cinema from closure: New York’s single-screen Paris Theatre. “Buying Theaters” might not be at the top of either company’s to-do list, but it could be.

Will it work? Um, maybe. One of the things Torres noted in her district court opinion last week was that even though the Paramount Consent Decrees were ending, that didn’t mean antitrust laws were. The decrees never technically applied to streaming services, but instead provided guidelines for permissible behavior. Terminating them, Torres wrote, doesn't give any company "free rein to implement the same anti-competitive practices that the decrees remedied." Even if it’s hard to forget that Bezos was just in front of an antitrust committee last month, the possibility that he would buy up AMC and have it only play Amazon-approved movies seems unlikely, if not impossible. It’s also not in any theater’s interest to only offer a small subset of current new releases. There’s no doubt that Netflix or Amazon getting into the ring would be a huge disruption to the American cinematic landscape, but it might be the only way to ensure there’s still a landscape there when the lockdowns are over.