Excerpt from
Politics, Movies and the Role of Government
by John W. Cones

Efficacy of the Antitrust Laws

" . . . it was production, not ownership of theaters,
which gave Hollywood its commanding power. The
most important barrier to entry was not lack of
access to the theaters but Hollywood's control over
the means of production."

Douglas Ayer, Roy E. Bates and Peter J. Herman

As evidenced by the numerous comments by various authors cited in the preceding chronology of the role played by government in the U.S. film industry (including the antitrust laws), there seems to be a considerable amount of disagreement among film industry observers and scholars with respect to the effects the now famous Paramount consent decrees have actually had on the U.S. film industry. It is not uncommon for people in the industry who represent the point of view of Hollywood insiders to express dismay over what they consider the seriously detrimental effects of the Paramount consent decrees on, at least, the major studio/distributors. On the other hand, the analysis provided in this book, and more specifically set forth below, clearly shows that the effects of the Paramount consent decrees have been greatly exaggerated.

1. Assaulted the Studios--For example, Hollywood historian Neal Gabler in his book An Empire of Their Own claims that the studios were "assaulted . . . by the divestiture of . . . theaters under the consent decrees . . . " On the other hand, it would appear to that a more accurate assessment is that the major studio/distributors of the 1950s deserved to be assaulted by the U.S. Justice Department and the major studio/distributors of today deserve to be assaulted again. Since in reality the Paramount consent decrees only divorced distribution from exhibition (i.e., the decrees reversed the trend toward vertical integration, which is by no means the norm in most industries). In addition, the decrees only divorced distribution from exhibition on paper. The "insider" relationships remained in place, many of the illegal business practices continued in more subtle or devious forms and the effects remained the same (i.e., the U.S. film industry continues to be dominated by the major studio/distributors to the detriment of the independent sector of the industry and the movie-going public.)

2. Broke up the Monopoly--Producer/director Roger Corman once stated that " . . . the Supreme Court's Paramount Consent decrees broke the virtual monopoly in distribution that the studios had enjoyed for decades. It forced the majors to sell off their nationwide theater chains and get out of (exhibition) . . . " The truth is, however, that the Hollywood-based U.S. film industry has never actually been a monopoly in the past and it is not a monopoly now. It could, however, be more accurately described as a shared monopoly or a mature oligopoly with the result that the major studio/distributors utilize reciprocal preferences to continue their joint monopolization over the market for films, thus creating a combination in restraint of trade which is illegal under the Sherman Act.

3. Ended Oligopolistic Structure of Industry--The trio of Douglas Ayer, Roy Bates and Peter Herman have provided the opinion that the " . . . tightly integrated, oligopolistic structure of the industry ended in the early 1950s, pursuant to decrees issued under the Supreme Court's Paramount decision." This too is simply not true. The oligopolistic structure of the film industry continues through today.

4. Shifted Structure of Industry to Bilateral Oligopoly--Gorham Kindem, on the other hand, suggested that the " . . . Paramount antitrust decrees in the late 1940s resulted in a shift from a mature oligopoly/monopoly, or semi-compulsory cartel, involving the Big Five studios (Warner Bros., Loew's/MGM, Paramount, RKO, and Twentieth Century-Fox) and the Little Three (Universal, Columbia and United Artists), to a bilateral oligopoly with six major distributor/producers and a dozen nationwide theater circuits . . . " As reflected by this statement, Gorham Kindem seems to have a better feel for what actually transpired than the team of Ayer, Bates and Herman (cited just above).

5. Divorced Distributors from Theatre Ownership--Ayer, Bates and Herman have also stated that the " . . . effect of Paramount . . . was the divorcement of exhibition from production and distribution." but, these same authors continued by saying that " . . . it was production, not ownership of theaters, which gave Hollywood its commanding power. The most important barrier to entry was not lack of access to the theaters but Hollywood's control over the means of production." Thus, even though there may have been some effective divorcement of theatre ownership from distribution, there was little significant loss of power by the vertically integrated distributor-dominated studios. Furthermore, in the intervening years, the proscriptions of the consent decrees have been weakened under the continued assaults of the MPAA companies and more recently because of the lack of vigorous enforcement by the U.S. Justice Department. Besides the major studio/distributors do not really need to own theatre chains to control access to theatres. They can accomplish the same effect through shear market power and the block-buster strategy which is nothing more than a refined form of block booking (see How the Movie Wars Were Won).

6. Shifted Power to Distribution--Gorham Kindem further states that " . . . when the decrees forced the studios to divorce their exhibition holdings from production and distribution the locus of power in the film industry simply shifted to distribution." Again, this statement by Kindem seems to be accurate. The power assaulted by the government in the Paramount case was wielded by vertically integrated film companies with strong exhibition arms. The film industry powers that have survived the Paramount consent decrees are pretty much the same vertically integrated companies, operating with strong distribution arms.

7. Took Away Guaranteed Market from Majors--Fredric Stuart reports that " . . . the 'major' companies lost a guaranteed market for feature films of inferior grade after the divorcement . . . " On the other hand, films of inferior grade are still being produced and/or released by the major studio/distributors today, and they are still being exhibited by theatres to the exclusion of superior quality motion pictures produced by independent producers and distributed by independent distributors. Thus, it would appear to be more accurate to say that even though the Paramount consent decrees took away a guaranteed market for the major studio/distributors, it was merely replaced by assurances provided through the reciprocal preferences of movie industry insiders, and the use of the blockbuster strategy (which replaced block booking). Thus, the major studio/distributors accomplished their guaranteed market first by owning many of the best first-run theatres, then by engaging in block booking then by using the "blockbuster" strategy combined with reciprocal preferences with friendly theatre owners. There are only very subtle differences between block booking and the blockbuster strategy as practiced today, thus the Paramount consent decrees seem to have had little actual effect on the practice on the ultimate results.

8. Permitted More Rentals to Flow to Indies--Fredric Stuart also reports that " . . . a larger share of rental receipts has accrued to independent production companies after the court decision. Competition from smaller producers was encouraged by the Court when it outlawed the specific restrictive practice of 'block booking,' the industry version of the tie-in sale." If this statement were true during the early years following the Paramount consent decrees, it is probably not true today. The statement confuses independent producers with independent distributors. There are no available records showing what percentage of rental receipts actually end up with "smaller producers". There are records, however, to indicate how much of the film rentals each year go to the major studio/distributors as opposed to the independent distributors and a study analyzing that information from the time the Paramount consent decrees went into effect until today would be quite instructive. As new markets and media came into play, however, such an analysis would have to consider the overall revenue stream including television, video and cable. The analysis of whether the independent producers are better off today as opposed to immediately after the implementation of the Paramount consent decrees is even more complex. After all, many films produced by independent production companies are released by the major studio/distributors and information relating to how much of a movie's revenue stream actually gets back to the independent producer of a major studio/distributor release is very spotty at best. One of the studies that has been conducted, indicates that the rental ratio for independent productions is lower than that for studio productions (see the discussion relating to the Settlement Transaction in The Feature Film Distribution Deal).

9. Permitted the Formation of Independent Companies--"By forcing theaters to rent pictures in large lots, the major companies had been able to dispose of low-cost, low-quality pictures, and effectively block the formation of independent production companies." In truth, however, blocking the formation of independent production companies was never the goal of the major studio/distributors, nor is that the goal of the majors today. Independent producers have been forming independent production companies right along. It is their ability to survive and prosper that is blocked by the continuing activities of the major studio/distributors. Besides the independent producers have always served a valuable purpose in the industry from the perspective of the major studios. The indies come up with new ideas for films and develop innovative screenplays. The majors simply use their superior market power to take those ideas and innovations away from the indies at one stage or another (idea, screenplay or movie stage).

10. Prohibited Certain Distributor Trade Practices--Joseph Phillips states that "[b]efore 1948 the motion picture industry in the United States was dominated by five major companies (and three smaller firms) . . . Their control of distribution was the key to their domination . . . Certain trade practices--block booking, blind buying, formula deals, franchises, master agreements--and ownership of the majority of the better theaters gave them control of exhibition as well . . . they (also) . . . got 95% of film rentals . . . The Paramount decision in 1948 and the related antitrust settlements separated ownership of theaters in the United States from production and distribution and prohibited most of the trade practices that had given the Big Five such a dominant position." Unfortunately, many of the prohibited trade practices continue today in a slightly modified form and the major studio/distributors continue in their dominant position. Thus, it appears that the Paramount consent decrees accomplished very little.

11. Prohibited Discrimination in Favor of Affiliated Theatres--The prescribed manner in which theatrical distributors were supposed to license their film product to exhibitors in the U.S. theatrical marketplace, pursuant to the Paramount consent decrees, was on a theatre-by- theatre basis, (i.e., without discrimination in favor of affiliated theatres). But, since the decrees went into effect, the major studio/distributors have been able to engage in a series of reciprocal preferences with the theatres owned and/or controlled by the other major studio/distributors. Thus, they are accomplishing the same goal (i.e., discrimination in favor of friendly theatres).

12. Eliminated Block Booking--As we noted earlier, block booking is the film distribution practice of tying together one or more motion pictures for licensing within a market, (i.e., a distributor will accept a theatre's bid on a desirable film or films contingent on the exhibitor's promise that it will also exhibit a less desirable film). This practice was addressed by the Paramount consent decree of 1948 in which the major distributors at that time were forbidden to employ the practice. The basic premise of the Paramount consent decrees was to prohibit block booking, (i.e., that motion pictures must be licensed picture by picture, theatre by theatre, so as to give all exhibitors equal opportunities to show a given film). Like, other practices described above, block booking has a tendency to prevent independent producer and independent distributor access to certain theatres. Today, block booking continues but is merely more difficult to detect because the major studio/distributors have learned to be more discreet. In addition, the blockbuster strategy provides the major studio/distributors with the same opportunities to exert leverage on exhibitors, saying, " . . . if you will show this mediocre film in your theatre the next couple of weeks, we will remember that when our next blockbuster comes out." The effect is the same and anti-competitive. Independently produced and distributed films only rarely get shown in those theatres.

13. Stopped Minimum Admission Price Conspiracies--Another of the conduct restrictions of the Paramount consent decree was designed to prevent the major studio/distributors from conspiring to fix minimum admission prices among the theatres they either owned or controlled. Until the consent decrees, the distributors conspired to set minimum admission prices, (i.e., specified amounts below which motion picture theatre ticket prices could not fall. On the other hand, individual distributors still continue to contractually require exhibitors to charge a minimum per capita amount for admission tickets for children, senior citizens and all other patrons. It is the conspiracy part that is more difficult to prove since information regarding pricing is readily available to anyone who calls into a theatre box office for ticket information. In addition, much of the information transferred between MPAA members companies goes through the central facility of their association chief staff executive Jack Valenti who conducts one on one conversations with each of the studio heads. Additional information regarding the operations of competing major studio/distributors is exchanged in informal social gatherings, sporting events (e.g., tennis games) and outdoor adventures (e.g., annual white water rafting or deep sea fishing trips).

14. Promoted Licensing by Competitive Bidding--Competitive bidding became the primary method of licensing films following the Paramount consent decrees. With competitive bidding an exhibitor " . . . who made a sealed bid was tempted to set his offer high, whereas in an open negotiation he might have discovered the seller's final offer before he disclosed his own. Some exhibitors consequently felt they were being forced to bid themselves into insolvency . . . Competitive bidding had its origin in the Paramount decision, with the resulting increased demand by theaters for films on the same run. Distributors had to find a way of choosing among them without running into a charge of discrimination."

In many instances today, competitive negotiation has replaced competitive bidding. As marketing and distribution executive Fred Goldberg explains, "[c]ompetitive negotiation is equivalent to competitive bidding except that the offers are made verbally rather than in writing. The distribution executive calls all of the exhibitors in a market and offers them the movie. The exhibitors make their offers, and the distributor decides which offer is best for the movie. The offer with the best terms may not be the one that is accepted. The distributor may feel that another theatre offers a better opportunity for a long run and better total film rental." Films are also licensed today through negotiation since a " . . . distributor may prefer to work with a few favored exhibitors. In this case, the distributor will call or meet with the exhibitor, and they will negotiate a mutually acceptable deal." Thus, the question arises, are motion pictures being licensed by distributors to exhibitors in the manner prescribed by the Paramount consent decrees (i.e., on a theatre by theatre basis, without discrimination?). Answer: Probably not.

15. Caused a Product Shortage and Higher Distributor Rentals--Major studio/distributor divestiture from its exhibition holdings may be partly responsible for the reduction in the number of films released each year (product shortage) in the years following implementation of the Paramount consent decrees. The product shortage, in turn, allowed the distributors to extract higher rentals from the exhibitors. "Sindlinger & Company, a firm that . . . specialized in motion picture statistics, used exhibitor sources to estimate that film rentals increased steadily from 27.1 percent of box office receipts in 1947 to 33.6 percent in 1955 . . . Price Waterhouse . . . using data supplied by the ten largest distributors, found an upward trend from 1947 to 1953, but a sharp drop in 1954 and 1955, and a lower ratio throughout (the period) 26.0 percent in 1947, 35.0 in 1953, and 27.8 in 1955 (but still an increase)."

First, it is interesting to note that even firms specializing in industry statistics could not get figures from exhibitors and distributors that agreed back in the early '50s. Using either set of figures, it is clear however, that the " . . . ratio of rentals to box office receipts . . . increased." Based on the studies cited in The Feature Film Distribution Deal, it is also clear that the rentals ratio has continued to increase, since in the current marketplace, the ratio of distributor rentals to box office gross receipts averages about 43% for the major studio releases.

16. Initiated Flood of Antitrust Litigation Against Majors--Simon Whitney states that the " . . . most serious effect of the Paramount case on the defendant producers was in setting loose the greatest flood of treble damage suits in Sherman Act history." The term "producers" here is used to denote the vertically integrated production/distribution and exhibition companies known as the majors at that time. Most of these antitrust lawsuits, however, were settled for amounts far less than the claims.

17. Provided Help for Independent Exhibitors--Douglas Gomery reports that the " . . . breakup did open up the market to independent exhibitors. Many new circuits were started, especially those centered around the only new type of profitable theatre, the drive-in." On the other hand, the era of the drive-in theatre has now passed and best theatre screens continue to be concentrated in the hands of a few. Also, even when new exhibitors were entering the industry, the " . . . Hollywood film companies retained direct control of their markets through distribution. They still had the best films and dictated to whom they sold them. Thus, Hollywood was not broken by the Paramount decision, just wounded."

18. Provided Help for Independent Producers--Both Simon Whitney and Roger Corman point to the benefits for independent producers. "One result of the antitrust suits has perhaps been some assistance to independent producers." The Paramount consent decrees " . . . opened the market to smaller independents who would eventually have a better chance to get their low-budget films shown." Unfortunately, the opportunity for smaller independent producers and distributors (as observed by Simon Whitney and Corman/Jerome team) was only a temporary phenomenon. The major studio/distributors have continued to abuse their power to squeeze the little guys out of the marketplace. Comments heard today about supposed improving conditions for independent filmmakers represent so much wishful thinking.

19. Improved Quality of Movies--Whitney also suggests that the Paramount Consent decrees have " . . . probably had a modest effect in improving the quality of pictures, since a firm could no longer automatically show poor pictures in its own theaters and foist them off on others through block booking." On the other hand, if as noted above, the major studio/distributors still to continue to practice block booking or some slight modification of the same technique (i.e., through the block buster strategy), "poor pictures" are still being foisted off on theatres and the American public. Clearly, poor pictures are being exhibited quite often. Surely exhibitors would not do that without the involvement of some coercion.

20. Major Changes Brought About--The Hollywood insider position is illustrated by this Mark Litwak quote: "The motion picture industry has undergone a remarkable transformation over the past forty years. Major changes began in 1948 when the United States Supreme Court upheld the Justice Department's anti-trust suit against the studios, which divested the studios of their theater chains." The Litwak position is reminiscent of the "glass is half empty" analogy. Not nearly as much change was brought about by the Paramount consent decrees as the Hollywood establishment would have us believe, thus the film industry glass is still half full.

Here is a list summarizing the claimed benefits of the Paramount consent decrees:

Broke up the monopoly;
Ended oligopolistic structure of industry;
Shifted structure of industry to bilateral oligopoly;
Divorced distributors from theatre ownership;
Shifted power to distribution;
Took away guaranteed markets from majors;
Permitted more rentals to flow to indies;
Permitted the formation of independent companies;
Prohibited certain distributor trade practices;
Prohibited discrimination in favor of affiliated theatres;
Eliminated block booking;
Stopped minimum admission price conspiracies;
Promoted licensing by competitive bidding;
Created a product shortage;
Brought about higher distributor rentals;
Initiated a flood of antitrust litigation against majors;
Provided help for independent producers and exhibitors;
Improved quality of motion pictures; and
Brought about major changes in the industry.

Unfortunately, only two of these claimed effects of the Paramount consent decrees remains significant today (1) the higher distributor rentals and (2) the shift of power to distributors.

If the Paramount consent decrees, in fact, weakened the power of the major studio/distributors and increased the opportunities for independent production companies, distributors and exhibitors, it was only a temporary phenomenon. After all, the contemporary U.S. film industry is still dominated by a strikingly similar small group of studio/distributors. Merely comparing the major studio/distributors in the years prior to 1948 and today makes the point.

Pre-'48 Lead Distributors / Current Leading Distributors

Warner Bros. / Warner Bros.
Paramount / Paramount
Universal / Universal
20th Century Fox / 20th Century Fox
Columbia / Columbia/Tri-Star
Loew's/MGM / MGM/UA
United Artists / Disney/Buena Vista
RKO / New Line

It would appear that the only distribution company to fall out of the short list of leading distributors since implementation of the Paramount consent decrees was RKO, and historians have cited numerous other reasons for its downfall other than the effects of the Paramount consent decrees. It was also the one major studio/distributors owned and/or managed by Hollywood outsiders for significant periods of time (see "The Hollywood Outsiders" in How the Movie Wars Were Won). All of the rest of the pre-'48 leading distributors still exist today in some form and still can lay claim to being part of that small group of film distributors that dominates the industry. Obviously, the Loew's connection to MGM had to be severed because of the consent decrees and subsequently MGM merged with UA to form MGM/UA. Disney came on the scene, later than the other original majors, in 1923 and New Line has established itself at least as a mini- major in the past few years, outpacing MGM/UA and Orion (the management spin-off from the former UA). Orion, however, has also fallen on hard times in recent years.

Thus, it would seem clear, merely by analyzing who the leading distributors were prior to the 1948 Paramount case and who the leading distributors are today, that the Paramount consent decrees did not have that much effect on leveling the playing field in the U.S. film industry. Very few independent distributors gained a significant foothold in the distribution arena despite the supposedly "devastating effects" of the Paramount consent decrees.

Industry Still Concentrated--Again as Pierce O'Donnell argues, the " . . . federal government is largely to blame for the concentration in film distribution. Since the historic Paramount Consent Decree in 1948 that broke up production/distribution and exhibition at the studios, there has been no effective antitrust enforcement in Hollywood. Congress and the President--Democrats and Republicans alike--have closed their eyes to evidence of widespread abusive practices, the erosion of the Paramount Consent Decree, and the undeniable fact that the studio's economic grasp on Hollywood has progressively tightened over the past four decades. Whether it is because of heavy studio political contributions or fear of reprisal, politicians have steered a wide berth around Hollywood . . . " Of course, this book provides clear evidence of just why this has happened.

Relevant Market--Spokespersons for the interests of the major studio/distributors are also fond of arguing that for the purpose of antitrust analysis, the relevant market for films should be expanded to include home video. On the other hand, there appears to be some evidence that home video and the theatrical market for films are two separate and distinct markets. For example, Steven Scheuer reports that "[i]ndustry analysts who predicted that the video market would kill the film business were wrong; in fact, the video market seems to have given the movie industry a booster shot, since box-office attendance records were broken in 1987 . . . " and in the years that have followed. In addition, New York Time's chief movie critic, Vincent Canby, provides additional support for the counter-argument, saying, "[t]he development of the videocassette recorder has been the greatest boon to theatrical films since the refinement of sound. It has reclaimed audiences that had stopped going to movie theaters."

According to marketing and distribution executive Fred Goldberg, "[t]heatre owners who declared ruination when movies became available for the multiplying VCRs, now see the videocassette as a support for the movie-going habit. Some experts credit video for reminding television addicts that going to see a movie is more fun that watching television. Mary Ann Grasso, executive director of the National Association of Theatre Owners, admits that 'video has exposed people who wouldn't ordinarily go to the movies. TV viewers might rent a movie, like the director, and then go to see his or her next film in a theatre.' Despite the fact that movie theatre attendance has increased significantly in recent years and the box-office gross exceeded $5 billion in 1990 in the United States, more people watch movies at home on their VCRs than in theatres."

As Michael Medved states, "[f]or most people, home video has developed as an alternative to television, rather than a threat to the already severely diminished audience for feature films." Also, David Rosenberg states that home videos and movies differ in another significant respect, " . . . a movie, seen in a theater, in the dark hush, is a continuum (but) . . . videos have . . . changed this experience profoundly; being able to press 'rewind' and 'fast forward' indefinitely means that any ordinary viewer can analyze the movie in its considered and reconsidered scenes."

It is also common in the film industry now for feature films being released on video or on laser disc to include scenes that were not included in the movie's theatrical release. For example, in New York, New York, (1977) " . . . in the video version . . . they've put back two musical numbers that weren't seen in the theater." As Roger Ebert points out, "[e]ver since Steven Speilberg released the 'Special Edition' of his Close Encounters of the Third Kind, directors have been reediting their movies and releasing versions that are longer, or sexier, or more profound, or in any event different from the versions that were originally released to theaters."

Part of the concept is to encourage those who saw the theatrical version to also see the different version on video or laser disc, or in the alternative to encourage those who chose not to see the theatrical version to be motivated to see the video or laser disc version. Obviously, this means that the two versions are considered different product, thus it is not appropriate to include video or laser disc movies with theatrical movies in the same relevant market for antitrust analysis purposes.

Film industry scholars Ralph Cassady and Simon Whitney even go so far as to question " . . . the ability of government legal action to ensure free competition." On the other hand, Ralph Cassady, Jr. states that " . . . trade-restrictive activities on the part of a temporarily dominant firm might result in the elimination of competent but vulnerable competitors before they have a chance to exert their beneficial influence on the industry . . . (thus) our antitrust laws with all their limitations may play an important role in the promotion of vigorous competition in American industry." In either case, the American antitrust laws must be vigorously enforced in the U.S. film industry before we can know if they are effective, and if they are not, then we may recognize that they need to be strengthened.

The relaxation of the federal enforcement of anti-trust laws in the years during and since the Reagan presidency may have resulted in numerous activities by film distributors that would otherwise be actionable under the antitrust laws, if such laws were being more vigorously enforced. Movie profit participants and even exhibitors must be more aware of such activities and be willing to litigate when appropriate in order to stem any potential trend toward more anti- competitive practices and greater concentration of power in the U.S. film industry in the hands of a few.

It would appear safe to conclude from this review of the history of the enforcement of the U.S. antitrust laws, combined with the study of movies, politics and the role of government, that at varying times during much of the nearly 90 year history of the film business, the exhibitors and distributors have been engaged in a vigorous economic war, using all sorts of predatory and otherwise anti-competitive business practices against each other. Finally, after the Paramount consent decrees and other changes in the marketplace, the distributors got the upper hand and were able to increase their rentals while distributing fewer movies and were able to continue effectively block booking through use of the blockbuster strategy. Then came the struggle over blind bidding which eventually was amicably resolved as between distributors and exhibitors. Of course, if the exhibitors and distributors are getting along, one must wonder who is getting hurt.

Finally, with the election of Ronald Reagan to the White House during the '80s the powerful major studio/distributors were able to influence a reversal in the manner in which the Justice Department enforces the antitrust laws in the film industry, thus turning back the Paramount consent decrees and allowing the major studio/distributors to once again become vertically integrated. In the meantime, the distributors and exhibitors are getting along better than ever and the reason is that they have realized they by working closely together they could stop fighting among themselves and make more money by excluding most of the other participants in the industry. The victims of the current system are the independents (producers, distributors and exhibitors), along with much of the creative community, outside investors and the moviegoers themselves.

U.S. Federal government policy, specifically regarding antitrust law enforcement, currently encourages further vertical integration and enhances the ability of the major studio/distributors to control and dominate the marketplace, thus, such government policy favors big business interests over small interests in the film industry and indirectly supports the "blockbuster" mentality of the major studio/distributors as opposed to more diversity in the film marketplace. In addition, as Gorham Kindem states: "U.S. government foreign policy and aid may . . . have helped the film industry in its efforts to maximize profits and dominate world markets. In return American films have sometimes performed political propaganda functions throughout the free world."

As Norm Chomsky explains, "[s]tate capitalist democracy has a certain tension with regard to the locus of power: in principle, the people rule, but effective power resides largely in private hands." Chomsky goes further to say that "[t]here is scarcely a pretense that substantive issues arise in presidential campaigns. Articulated programs are hardly more than a device to garner votes, and it is considered quite natural for candidates to adjust messages to audiences as public relations tacticians advise, another reflection of the vacuity of the political system and the cynicism of those who participate in it."

Douglas Gomery also points out that economic theory posits that " . . . in the Marxist model the government is an ally to big business . . . " On the other hand, according to neo- classical economic theorists, " . . . the role of government or the state is to step in only when an imbalance or aberration has occurred, tuning the economy sightly and once again removing itself from market operations." The history of the film industry appears to suggest that the major studio/distributors' approach to conducting their business and their relationship to government comes closer to the Marxist model that the neoclassical model of the marketplace. As Gorham Kindem reports " . . . the general tendency toward a concentration of power among a few has persisted throughout the (film) industry's history. This fact raises several important questions . . . Is government the film industry's advocate or adversary? Is government antitrust action an effective means of ensuring free competition? What are the effects of the concentration of power in the hands of a few as opposed to free competition? These are the kinds of questions that do not get adequate serious review by film industry professional and trade associations, the industry trade press or the academic community. And, these are the kinds of questions that are not being considered in relation to government policy, at least partly because none of the many disparate interests in Hollywood have seen fit to organize and communicate with their government about such important issues.

Returning to economic models, for the moment, the neoclassical economists state that " . . . the modern capitalist system functions optimally when competition dominates and their exists minimal government interference in the marketplace. To initiate any action, a governmental unit should demonstrate there exists a market failure which only collective action can correct. The working assumption is that unless it can prove interference in the marketplace will make the economy run more efficiently or the distribution of income more equitable, governmental action causes harm." This book takes the position that a "market failure" exists in the U.S. film industry and that only "collective action" can correct it; also that governmental interference in the film industry is necessary in order to bring about a more equitable distribution of revenues, to bring about more equal opportunities for employment for all persons, regardless of race, ethnicity, culture or religion, and, ultimately, to improve the quality of movies and the fairness of the portrayals of our diverse populations as seen in such films (see the related analysis in companion volume Who Really Controls Hollywood, and the documentation of consistent negative or stereotypical portrayals for certain populations in Patterns of Bias in Motion Picture Content, along with a discussion of possible remedies in Motion Picture Industry Reform).

In the final analysis, it is indeed quite ludicrous, considering the lengthy and complex history cited above, for anyone to suggest that government should not play a role in assuring that all cultural groups within our diverse society have a fair and equal opportunity to tell their important cultural stories through motion pictures (i.e., this significant medium for the communication of ideas). After all, government has been manipulated for years by and for the benefit of the Hollywood establishment in its relentless campaign to gain and maintain control over this important communications medium. And, most detrimental effects of government attempts to regulate the film industry have been effectively avoided by the industry itself.


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