The Studios Owned the Cinemas

The phrase studio system gets used loosely, usually to mean a period when films were made efficiently by companies with house styles. The actual system was narrower and more interesting: the studios owned the cinemas.

Paramount, Loew's, RKO, Warner Bros. and Twentieth Century Fox produced films, distributed them, and owned theatre chains that exhibited them. Not every cinema in America, but the best ones in the biggest cities, which is where the money was.

That is vertical integration, and the consequence is the part worth understanding. A competitor could make an excellent film and have nowhere to show it, because the screens that mattered were already committed to their owners' product. Distribution was the chokepoint, which is the same shape of power the geopolitics book describes in dollar clearing: control the only door and you do not need to control anything else.

The practice that brought the case was block booking. An exhibitor who wanted the prestige picture with the star had to license a bundle, several of which they had not seen and nobody wanted. Independent cinemas took the bundle because the alternative was no major films at all. The result was guaranteed revenue for weak pictures and almost no screen time for anybody outside the system.

In 1948 the Supreme Court decided United States v. Paramount against the studios, and consent decrees followed. The studios divested their theatre chains and the bundling practices ended.

What happened next was not a smooth continuation. The decrees arrive at the same moment as television, and together they dismantle the economics the studios were built on. If you cannot guarantee a film a run in your own cinemas, you cannot carry a large permanent payroll of contract staff on the expectation of a fixed release slate. The contract system went with the theatres.

Which brings us to the actors, and to the thing the craft books in this subject quietly assume away.

Under the studio system a performer signed with one studio for seven years. The studio assigned roles. It could loan the performer to another studio and keep the difference. It could suspend somebody who refused a part, and it took the position that suspension time was added to the end of the contract, so a performer who declined roles could be held indefinitely.

Olivia de Havilland sued Warner Bros. over that in 1943 and won. California law capped personal service contracts at seven calendar years, and suspensions could not be stacked to extend them. The decision is still cited, and the freelance career that every modern discussion of acting takes as the natural state of affairs is a legal artefact of that ruling and the decrees that followed five years later.

And then, in August 2020, a federal court terminated the Paramount decrees at the Justice Department's request.

The reasoning was that the industry had changed beyond recognition: seventy years of new competitors, new business models and new ways of watching, with none of the 1948 defendants holding anything like its old position. The block-booking and circuit-dealing prohibitions were given a two-year sunset and then lapsed as well.

Whether that is correct depends on what you think the chokepoint is now. If it is cinema screens, the decrees were obsolete. If the relevant bottleneck has moved to streaming platforms that commission, distribute and exhibit their own work on infrastructure they own, then the structure the decrees were written against has been rebuilt somewhere the decrees never applied.