Summary
Sony PicturesEntertainment’s recent acquisition of the Alamo Drafthouse Cinema chain marks the first time a major Hollywood studio has owned a theater chain in over seven decades. Hollywood and the major studios continue to adjust to the rapidly evolving landscape of the entertainment industry, which has been greatly disrupted as tech companies such as Netflix, Amazon, and Apple gain more and more momentum and prominence in both the streaming and theatrical spaces. With the move,Sony has broken new ground in the 21st century as its competitors continue to expand their streaming services, which Sony notably does not offer.
Before 2020,Sony’s acquisition of Alamo Drafthousewould have been illegal under the Paramount Consent Decrees as implemented by the United States Department of Justice. The Alamo Drafthouse theater chain was founded in 1997 in Austin, Texas, and has expanded across the United States to major cities such asBoston, Los Angeles, San Francisco, New York City, Chicago, Houston, Dallas, St. Louis, and Denver. Alamo Drafthouse filed for bankruptcy in March 2021, which led to the closure of several locations and canceled expansion plans. The amount that Sony Pictures paid to acquire Alamo Drafthouse is estimated to be around $200 million (perDeadline).
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Sony Pictures' Purchase Of Alamo Drafthouse Explained
Sony will operate the theater chain under a new division while retaining Alamo’s CEO
As part of Sony Pictures' acquisition of Alamo Drafthouse, the major studio will own and operate the existing 35 locations that are currently open across the United States.
Alamo Drafthouse offers a signature experience for movie-goers with its original preview content, excellent food and drink menu that can be ordered during screenings with the push of a button from your seat, and a strict no talk, no text policy that is typically enforced. As part of Sony Pictures' acquisition of Alamo Drafthouse, the major studio will own and operate the existing 35 locations that are currently open across the United States. The deal also includes the rights to the Fantastic Fest film festival held annually in Austin, Texas since 2005.Alamo previously started its streaming service “Alamo On Demand"in 2020 which has since shut down.
The best news coming out of this deal is that the Alamo Drafthouse cinema chain, which is beloved by many casual viewers and cinephiles alike, will not be forced to shut down anytime soon. PerVariety, “Alamo has been quietly soliciting offers for the past several months, but had struggled to find a buyer. Under its new ownership, Alamo Drafthouse will be managed under a newly established division, Sony Pictures Experiences.” Even under Sony’s new ownership,the CEO of Alamo Drafthouse Michael Kustermann will continue to hold his positionand act as the head of Sony Pictures Enterprises.
It’s unclear exactly how Sony plans to best utilize its acquisition of Alamo Drafthouse or how the deal will impact the offered titles available to screen at Alamo’s 35 nationwide locations. Sony will likely not prohibit certain movies from its competitors from being screened in its theaters, which sounds like it would enter some legal gray areas, but like a streaming service could license certain original titles to be screened exclusively through Alamo theaters.Sony also owns and operates its Sony Pictures Classics and could offer exciting and exclusive screeningsof some of its best productions, such asCall Me By Your Name,Whiplash, andCrouching Tiger, Hidden Dragon.
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Why A Movie Studio Hasn’t Owned A Major Theater Chain Since The 1940s (& How Sony Can Now)
United States law made it illegal for studios to own theaters from 1948 until 2020
The Paramount Consent Decrees were established in 1948 by the U.S. Department of Justice to prevent major studios, such as Sony, from outright owning any movie theater chains or exhibition companies.
The Paramount Consent Decrees were established in 1948 by the U.S. Department of Justice to prevent major studios, such as Sony, from outright owning any movie theater chains or exhibition companies. This essentially single-handedly changed the infrastructure of the old studio system in Hollywood, making it illegal for studios to hold exclusive distribution and exhibition rights to their own productions.The Paramount Consent Decrees were enforced to uphold the United States antitrust lawsthat were implemented to promote fair competition in the entertainment industry.
As the film and theater industries modernized in the later 20th century, certain exceptions were made that softened some of the regulations of the Paramount Consent Decrees. Sony and Universal partially owned the former theater chain Loews during the 1990s, with the theater chain initially planning to change its name to Sony Theatres. These relaxed regulations made it possible for multiple studios, and even major companies like Coca-Cola, to partially own movie theater chains, since it didn’t necessarily impede on antitrust laws. Whenthe Paramount Consent Decrees were rescinded in 2020 by the U.S. Department of Justice, this opened the door for Sony to make a bold yet 100% legal move to acquire Alamo completely.
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Sony’s move is bold but completely legal with potential antitrust risks in the future
The U.S. Department of Justice rescinded the Paramount Consent Decrees because the old Hollywood studio system could not be replicated in modern times.
Sony Pictures owning and operating Alamo Drafthouse is first and foremost completely legal but virtually unprecedented in modern times. This makes the entire situation complicated since there’s really nothing in recent history to compare it to. The Hollywood studio systems are no longer entirely running the entertainment industry, thanks to tech and streaming disruptors.The rules against studios owning theaters were put in place for a reasondue to things like block booking, or “bundling multiple films into one theater license”, and circuit dealing, which involves “entering into one license that covered all theaters in a theater circuit” (viaThe Hollywood Reporter).
The old studio system did end up crumbling in response to the Paramount Consent Decrees, but it’s important to note just how different the framework of Hollywood is nowadays. The U.S. Department of Justice rescinded the Paramount Consent Decrees because the old Hollywood studio system could not be replicated in modern times, primarily due to all the well-established independently owned theater chains, distribution companies, and streaming services. This all currently promotes competition and no longer violates antitrust laws, sothe Sony-Alamo might not be that big of a deal as it stands (yet).
On the other hand, the deal is worrying from an antitrust standpoint and the potential for monopolization is certainly a concern, especially now thatwe are seeing more and more mergers of studios and streaming serviceslike Disney and Fox in recent years. Netflix and Amazon also own theaters, so Sony is not the first to test the post-Paramount Consent Decree landscape. Ultimately, the Sony-Alamo deal could further add to having everything in production, distribution, and exhibition shrink down to just a few companies. The biggest takeaway from all this is that theater chains are struggling more than ever, even ones like Alamo that offer an elevated moviegoing experience, andSony Picturesstepped in to save it.
