The pandemic has accelerated transformation within the industry in which China takes the lead as the ‘majors’ prepare to sweep away the halls
On August 7, in the filmy press, the news that a judge of the Federal Court of New York, Analisa Torres, accepted the motion of the United States Department of Justice to repeal the Paramount Consent Decreet, an antitrust law that for years 40 regulates the production-distribution-exhibition chain to prevent the big studios, the ‘majors’ -Disney, Warner, Paramount, Universal, Columbia / Sony- from taking the whole cake. As of the United States vs. Paramount Pictures, in 1948 the Supreme Court decreed that the same people who produced a film could distribute it, but could not own the movie theatres where it would be screened, since then independent cinema would start with (more) disadvantage in the display windows. In other words, Hollywood’s Juan Palomo was considered illegal.
One of the means that echoed this legislative change was the ‘Hollywood Reporter’, who blamed this paradigm shift on trump’s own “deregulatory fervor, and predicted that the end of the ban on operations such as “block reservations” and “circuit sales” — that is, agreeing to display several films in a single pack and negotiating with film chains the screening of titles, instead of room by room as was the case until now – would favor big studios and streaming giants like Netflix, Amazon or HBO to the detriment of independent cinema. Take, for example, the highest-grossing film of 2019: ‘Avengers: Endgame’, a Marvel-Disney blockbuster with a budget of $220 million, distributed worldwide by Disney – in the United States and Canada was screened on 4,600 screens, and won a global box office with $2.7 billion, making it the highest-money title in theatres in history. 4,600 screens are a lot, but if Disney had also owned its own movie network, they would surely have earned more.
The ruling states that “in the current landscape, although there may be some geographic areas with a single one-screen movie theater, most markets have multiple theaters with multiple screens that simultaneously show multiple movies from multiple distributors. There are also many other film distribution platforms, such as television, the Internet, and DVD, that did not exist in the 1930s and 1940s. Given these significant changes in the market, there is less danger that a block reservation license agreement will create a barrier to entry that would exclude independent film distributors from sufficient market access.” However, what the judge defines as favoring competitiveness, actually reaffirms the predominant position of the large audiovisual companies.
This legislative change comes at a critical time for theaters, which, due to the pandemic confinement measures, have been forced to close for months and, when social activity has been reactivated, have suffered reductions in capacity and, therefore, a significant decrease in their income. And that’s without counting the necessary outlay to comply with the disinfection protocols of the premises.
In addition, given the uncertainty due to the evolution of the pandemic, the ‘majors’ have decided to delay the big premieres – the ‘blockbusters’ in the style of James Bond, Marvel or Pixar – and, except for ‘Tenet’, they have not dared to face the possibility – rather than palpable – of a mediocre box office as a result of the lack of public, either due to fear of contagion in closed spaces such as a movie theater or due to the increasingly solid implementation of consumption at home by Video on Demand – offered by streaming platforms. After multiple delays in the release date, Disney decided to launch ‘Mulan’, the best bet of the year, directly on its own platform and at a price of $35.
Disney + just started operating in the United States in November 2019 and in the rest of the world in the midst of the epidemic. And the result of their strategy has been highly profitable – in addition to eliminating the intermediary – and has been a turning point that will determine their future releases, as in the case of ‘Soul’, the latest Pixar feature film, which will be broadcast directly on the platform this Christmas. But this time at no additional cost. The same could be done by Warner with ‘Wonder Woman 84’ on the HBO Max platform, although there is still no official statement to assure it.
Without the big releases, movie theaters are starving. With meager margins, cinemas have had to rely on independent cinema and local production.
Earlier this month, the Regal Movie, America’s second-largest theater chain, announced the closure of its 536 theaters on American soil. In the UK, Cineworld, to which Regal Movie belongs, also closed 100 of its theaters. “Prolonged closures have had a detrimental impact on the release list for the rest of the year and, in turn, on our ability to offer our customers the range of blockbusters they expect from us,” Mooky Greidinger, Cineworld’s CEO, said in a statement. “As such, it is simply impossible to continue operations in our primary markets.” The world’s largest network, AMC, has rented its private screening rooms from $99, depending on the type of film, to try to get a start to weather the crisis.
For this reason, at such a delicate moment for the sector, the repeal of the Paramount Decree is striking. With theaters looking for alternative ways of financing and facing closures, the situation is idyllic for multinationals to have the possibility of taking over the third leg of the chain. What now prevents Warner, Disney, Amazon or Netflix from buying their own cinemas at a bargain price to screen their own films? The new map would further limit the ability of low and mid-budget films to meet audiences. The perfect storm has arrived. The big studios invented the cinema and they are prepared to survive.
Especially in a global context in which Hollywood has lost ground to China, which in this atypical year has surpassed the United States for the first time in the sale of movie tickets. The ‘New York Post’ has advanced the box office data of China, which this Sunday surpassed $1.94 billion of collection compared to the $8.2 million of the United States. A gap that will probably widen by the end of the year, also due to the delay of “the big-budget Christmas premieres, such as the latest James Bond instalment, ‘No Time To Die’, and the superhero movie ‘Black Widow’, starring Scarlett Johansson”.
With a population of 1,393 million people – compared to 328 million in the United States – China has become the candy in which all the major producers want to invest. So far, the Asian giant has displayed a protectionist system in which the Government controls the entry of foreign feature films, whose quota is limited to 34 foreign premieres per year. In addition, the main producer and distributor in the country is the China Film Group Corporation (CFGC), also owned by the State. Therefore, in recent years, Hollywood has chosen to co-produce with China to facilitate the entry of ‘blockbusters’ as the fifth instalment of the ‘Mission: Impossible’ saga, co-produced with China Movie Channel.
Other recent cases include Zhang Yimou’s ‘The Great Wall’, starring Matt Damon, and Jon Turteltaub’s ‘Megalodón’, which mixes Western action stars like Jason Statham with well-known faces in the Asian market, such as Bingbing Li. In return, we must pray for the idiosyncrasies and customs of the country; in 2017, the Government enacted the Film Industry Promotion Act that dictates some rules that should not violate films, such as violation of basic principles of the Chinese Constitution, questioning national unity, disrespecting traditional customs or religious beliefs, promoting pornography, drug use or violence. Concepts are very subject to subjectivity that provoke cases such as ‘Megalodon’, in which the protagonists, who are supposedly sexually attracted
That same year, in 2017, another milestone happened: ‘Wolf Warrior 2’, a Chinese production, as the sixth highest-grossing film of the year – with $854 million in the collection, and that despite a market limited almost exclusively to Asia. “The pandemic has accelerated the predictions of analysts,” explains the article in the ‘New York Post ‘, “which announced the inevitability that the most populous country in the world would one day become number one on the list. The United States has been the center on which the world box office has gravitated since the birth of cinema.” Perhaps, the legislative change of the Paramount Decree is the remedy that the Trump Administration has contemplated to avoid the ‘sorpasso’ and give a bottle of oxygen to the ‘majors’. Betting on an industry in which only mastodons compete, a giant fight in which the first one who loses is undoubtedly cinema itself.