We Can (and Should) Ban Netflix from Producing Films
Hollywood needs updated antitrust regulation. It worked in 1948, and it can work again now.
In 1948, the Supreme Court effectively banned movie theaters from producing their own films. The landmark antitrust case (United States v. Paramount Pictures) resulted in the “Paramount Decrees.” These decrees made it illegal for major studios to own or operate theater chains. In 2020, after 72 years, these decrees were repealed by Trump’s justice department.
Before this 1948 antitrust case, eight big movie studios controlled most of the movie theaters in America. At that time, theaters were basically the only way people watched movies, so controlling them amounted to controlling the entire market. The studios exploited this control, guaranteeing their own films preferential release times, even forcing theaters to “blind bid” on studio films - paying for licenses without even seeing the films they were buying. Studios easily muscled out competing independent films. Even the worst studio b-movie could get a guaranteed theatrical release, while independent films had to compete for a late night slot. It was the golden age of big studio power. Eight companies dominated the entertainment market.
When the 1948 Paramount Decrees took effect, this “cartel” of theaters and studios was broken. As a result, theater chains could make their own decisions about what movies they showed. They suddenly had negotiating power, and the freedom to exercise their own taste when deciding which films to show to their community. Independent film flourished during this time. Since indie producers could now compete with the studios for showtimes, new production houses started growing. This also gave rise to more experimental films, and sparked the rise of more mature, R-rated films (though the R-rating didn’t yet exist). Audiences had more diverse options than ever before, and bolder filmmakers were getting their chance to break through to audiences. Films no longer needed to fit a standardized studio slate in order to secure a release.
The ensuing decades saw a boom in independent cinema. Mid-budget movies became a staple at the box office, breaking out new star careers and auteur directors. New genres gained popularity (the rise of film noir is often attributed to the 1948 decree). Indie films took on social issues that the big studios were too cautious to touch - race, sex, war, politics.
In general, the 1948 antitrust case gave rise to a creative flourishing that benefited audiences, creators, and industry alike.
Did the studios make less money? Yes. Did everyone outside the studio system benefit? Absolutely.
So why would the DOJ terminate the Paramount Decrees?
I haven’t researched this deeply, so I won’t conjecture about the corporate lobbying that went into this decision, but a good-faith argument for terminating the decrees would go something like this…
First, the “cartel” of studios/theaters was effectively broken, and it looked unlikely to reconstitute itself. In fact, it was first Reagan’s DOJ (before Trump’s) that took a swing at the decrees in 1985, stating that they would functionally stop enforcing the decrees for this reason, though they stopped short of terminating them. Then, in the 2010s, with the rise of streaming, Trump’s DOJ may have seen the threat of a theater cartel far less consequential to the industry and to consumers. And I would agree with them on this count.
For these reasons and others, it’s reasonable to look at the 1948 decrees as outdated. But that doesn’t warrant terminating them. Terminating the decrees outright wasn’t helpful to anyone except for a few large corporations, and it only changed things on the margin. Indie producers and cinemas still protested the decision, and for good reason.
But today, theaters aren’t the powerhouse they once were. In fact, theaters are entirely the wrong thing to focus on if we’re worried about an entertainment cartel.
Today, the new cartel is in streaming.
Why streamers are the new cartel
Domestic 2025 Box Office (i.e. theater) revenue is on track to total ~ $9 billion by end of year. In comparison, Netflix alone is on track to pull in $45 billion in revenue from streaming. Take that in for a second. Netflix alone will have five times as much revenue as all of the theaters in the US combined. And Netflix’s revenue is growing in the double digits. (Note: Netflix’s revenue isn’t all from feature films, but also from TV, and increasingly sports and other media as well.)
In 1948, there were eight big film studios that basically owned the industry - the “big five,” and the “little three.” That was enough consolidation to gridlock competition and force the 1948 antitrust case that resulted in the Paramount Decrees. Those eight companies had sufficient hold on the industry to constitute a harm to competition, to consumers, and to the country’s economic interest.
Today, there are functionally five streaming companies that own the market: Netflix, Disney (which owns both Disney+ and Hulu), Amazon, HBO, and Paramount. You could charitably include Peacock and Apple, but depending on whose numbers you trust, they each have roughly a tenth as many subscribers as Netflix, so I’m putting them aside.
These are all massive corporate studios with a ton of economic and political power. Ten years ago, they were buying most of their content from other studios, from smaller production houses, or from independent producers. Now, they don’t need to. Netflix in particular has massively grown its in-house production capacity, and while they were a competitive buyer of indie films just a few years ago, now they rely more heavily on their own, in-house, algorithm-inspired content.
This is important. Producing content in-house gives rise to a lot of anti-competitive behavior, price gouging opportunities, and other practices that can hurt consumers, industry, and overall economic growth.
Many have written about the increasing homogeneity of Netflix’s library. Everything sort of looks the same now? Feels the same? Is it harder these days to find Netflix shows that feel especially exciting or fresh? That’s not an accident! Netflix producing their content in-house results in this homogeneity by design. Specifically, they do three things that result in what I’d call a boring slosh of mediocrity: (1) produce everything through a single corporate production process instead of buying from a diverse array of independent producers, (2) ensure that content is standardized, and everything from storyline to director to what camera you use is data-optimized, and (3) have your recommendation algorithm preferences Netflix productions over independent productions. (I can’t confirm that Netflix does this because their company and their algorithm are a black box. Don’t sue me.)
Streamers like Netflix have a big incentive to produce in-house: it’s cheaper. They get to keep all the royalties and profits from their own shows instead of sharing them with producers. They get to produce at scale, working with the same teams over an over, sharing accounting resources, legal teams, etc. They also get to standardize everything - shooting with the same cameras, using the same postproduction teams. This is part of why all their productions look and feel the same. But as a result, indie producers and production houses are going out of business. Netflix isn’t buying from indie producers anymore. Instead, Netflix is competing with them. And how do you compete with Netflix when they own the largest distribution platform in the world? You can’t.
It’s not that different from the studio cartel’s playbook 75 years ago. In economic terms, it’s the same problem: if the people who own distribution also own production, then they can muscle out their competition, and everyone is worse off except for the 5-8 biggest players in the industry.
Why we need an antitrust suit against Netflix and the other big streamers
Streamers have been killing independent film for years now, and as they continue to consolidate their market share (and theaters continue to fall behind) independent filmmakers only get squeezed more. Crews are increasingly dependent on just a few massive corporate employers. At the same time, audiences are left with less variety, less quality, less depth, less…everything. But Netflix and other massive streamers are making more profit than ever.
At the same time, we’re seeing these same massive companies prove their willingness to capitulate to political power. Just look at Amazon’s $40 million commitment to making a Melania Trump documentary, or Paramount paying $16 million dollars to Trump in what most lawyers see as a bid to get the Paramount-Skydance merger approved. Many of these companies own news stations, newspapers, and other essential information sources, which they are now corrupting for the sake of their bottom line. It is bad for America to have these massive corporations consolidate control over our media.
We can wait for this to get worse. The situation can get a lot worse. I expect the coming years will see more theaters closing, more production companies filing for bankruptcy, more international sales agents and distributors shutting down, and salaries for filmmakers/actors/crews diminishing (except for those few stars who are deemed by Netflix’s algorithm to be the new money-makers).
The fundamental problem here is that 5-6 massive companies have all the control, and film is one of those industries where you really don’t want that. The film industry (and entertainment more broadly) thrives on having a lot of creative voice in the room, and having plenty of competition. No film executive should be paid 50 million dollars (in 2024, Ted Sarandos made north of $60 million). It’s not good for filmmakers, and it’s not good for audiences.
I would argue that things are already worse now than they were in 1948. The level of consolidation, the size of these corporations, and the breadth of their reach in today’s media landscape…it surpasses the harm that the theater-studio cartel caused in 1948.
Fortunately, the 1948 Paramount Decrees proved a clear and simple solution to this problem. We know that the 1948 decrees led to a flourishing in the industry. It showed the benefits that regulation can bring to both industry and consumers alike. And now we have the opportunity to repeat that success.
My proposition is simple: sue Netflix and reach an agreement in court that major streaming platforms cannot produce their own content. This will stimulate a new, more competitive marketplace for stories, and it will benefit the industry and audiences alike.
Disclaimer: I’m pretty sure less than 100 people will read this newsletter, but in the interest of not getting sued (these companies are letigious as hell), obviously take my argument with a grain of salt. I’m getting these figures from online sources (not AI, but still…). I’m sure some of them are off. I’m making sweeping generalizations about “streamers” and broad claims about Netflix in particular that I’m sure paint over a lot of detail and nuance. This is a substack post, not a fact-checked NYT article. I’m pretty sure I did my homework here, but apologies if I missed some important details. Please comment below if you think I need to retract or amend anything.