Sony Pictures Entertainment acquired Alamo Drafthouse Cinema in June 2024. While we can’t wait to see the Beyond the Spider-Verse Dine-In menu Alamo Drafthouse will offer, some implications of this purchase aren’t quite as exciting…
To further unpack the significance of this unprecedented buyout, we need to go back to Hollywood’s “Golden Age.” Way back before 1950, major studios like Paramount, Warner Bros., and MGM owned extensive movie theatre chains in the US. This vertical integration allowed them to control the production, distribution, and exhibition of their films, creating a powerful monopoly. Back then, there was no aftermarket for films like DVD or OnDemand, so once a movie left theatres, it was largely forgotten about. This gave the Hollywood Studios a huge monopoly over the exhibition and sales of their films, essentially being able to control everything consumers watched.
This eventually culminated in the 1948 Supreme Court case: United States v. Paramount Pictures, Inc., which ended the practice of Hollywood studios owning moving theatres in America. This precedent lasted over 71 years until in 2019, the Department of Justice issued a “sunset” on US v Paramount. Starting in 2020, they made it legal (again) for studios to own their own theatres. In the face of a changed production and distribution landscape, the new major players acquiring movie theatres were streamers.
Netflix and Amazon rushed to scoop up theatres in Los Angeles and New York for a couple of different reasons. There’s obviously profit to be made with theatrical distribution, but they don’t want to take those eyeballs off their services. The major advantage was being able to control the theatrical release schedule of their films to qualify for prestigious awards like the Oscars and Golden Globes but minimize any unnecessary screens and showtimes.
Despite a couple of theatres here and there finding homes with streamers, none of the big five Hollywood studios capitalized on this ruling until recently. A bombshell development this month saw Sony Pictures Entertainment acquire Alamo Drafthouse Cinemas. Drafthouse had filed for Chapter 11 bankruptcy in early 2021, and despite being bailed out, was still struggling and closing stores pre-acquisition.
While there’s some silver lining to this deal, the long-term implications are less exciting. Sony can now control Drafthouse’s entire programming schedule. Sony produces and distributes dozens of films a year through their banners; Sony Pictures, Colombia Pictures, Destination Films, Screen Gems, and Tri-Star. While there probably aren’t enough movies to fill an entire multi-screen theatre every week, Sony can certainly prioritize their own movies and taper the competition. Don’t forget, Drafthouse is the 7th largest theatre chain in North America.
This acquisition feels like the start of what could be a very slippery slope. The reduction of competition can lead to higher ticket prices and fewer viewing choices for consumers. This can also hurt smaller theater chains if Sony is strategic in their releases. While Sony releases a great range of films, the inherent content bias could also lead to independent, foreign, and niche films to suffer, and struggle to find an audience. Alamo Drafthouse is known for its unique and eclectic movie-going experience. Under Sony’s ownership, there might be a push toward standardization and commercialization, potentially diluting the brand’s distinctive character and appeal. Acquisitions often lead to corporate restructuring, which can result in job losses or changes in management. Employees at Alamo Drafthouse could face uncertainty or unfavorable changes in their roles and working conditions. Drafthouse locations are often deeply embedded in their local communities, supporting local filmmakers and hosting community events. Corporate ownership might shift focus away from these community-oriented activities in favor of more profitable ventures.
These are all hypotheticals, but a lot of theatre chains are struggling right now. Regal’s parent company, Cineworld, filed for bankruptcy and has been exploring options, including selling off assets to repay debts. AMC has faced significant financial challenges, especially since the pandemic, and has been seeking ways to restructure and reduce debt, potentially putting it up for sale or seeking new investors. There isn’t much stopping another Big 5 studio from acquiring a top-3 theatre chain in North America, and furthering this monopoly.
What do you think about this news? Drop a comment on what you think might happen next.