The Sexopoly
Chapter 4 of my ongoing book review of "The Big Picture: The New Logic of Money and Power in Hollywood", by Edward Jay Epstein
SUMMARY: A behind-the-scenes odyssey into the world of the Hollywood motion picture industry examines the complex ways in which the major entertainment empires—Viacom, Time Warner, NBC/Universal, Fox, Sony, and Disney—make their money, profiling the individuals who created these vast conglomerates and the various ways in which Hollywood has evolved to survive financially (Taken from Amazon.co.uk)
Capitalism, under specific circumstances, tends to promote competition. One of the benefits of such practice is that it usually reduces prices for consumers. However, once all the major players in an industry start cooperating with each other, one outcome is that it creates stronger barriers of entry for small competitors. From this idea ('strategic cooperation'), Epstein constructs the chapter outlining several tactics that studios have used to retain control of how their products are distributed and consumed. Among them, he mentions block-booking, zoning, clearances, full line forcing, minimum admission prices and non-proselytising agreements (not to lure other studios’ stars).
Many of these tactics were put into paper when the Motion Picture Association of America (MPAA) drew up the "Code of Fair Competition for the Motion Picture Industry—a set of regulations permitted under the Depression era National Industrial Recovery Act of 1933. The practices it legitimized under the rubric of 'fair competition' in fact eliminated any possibility of competition" (p. 94). Although many of them were found unconstitutional in 1935, "the studios continued for over a decade to apply these 'trade practices' to maintain their near-monopoly on the distribution of films" (p. 95), which they logically extended to foreign territories, where local law had no bearing at all.
The 'strategic alliances' between the studios, which seem to have "formed […] by 2003" (p. 98), are outlined using the term "axis", and Epstein presents four of them (although he makes it clear that there are many more):
Sony-Time Warner
Sony-NBC Universal
NBC-Universal Viacom
News Corporation (Fox)-Disney
Axis (1) and (4) are closely related, since they deal with a mechanism to bring movies to consumers in a digital form. In the case of (1), Sony, being a Japanese company, was not allowed to own TV stations or broadcast networks in the U.S.A., so it "licensed its films to Time Warner subsidiary HBO" (p. 98). Their alliance also wanted to advanced the DVD format, sell computer games over the Internet, and deliver movies to households just using a code and an Internet connection (see image above). Axis (4) wanted to do something similar, but with a cable box that will deliver movies on a Video-On-Demand basis (VOD).
Axis (2), which also involved Sony, was about music, and it briefly touches on the legal battle with (now-deceased) Napster (MP3 format). And axis (3) refers to international distribution and how the companies created a consortium named United International Pictures (UIP), which used some of the forbidden practices in the U.S.A from days past, but in foreign cities.
"While the studios themselves may compete with one another for stars, publicity, box-office receipts, and Academy Awards, their corporate parents in fact make most of their money from cooperating with one another in less traditional (and visible) markets, such as cable, video, and pay TV. The issue of how these profits are disbursed—or even defined—in this tangle of relationships hinges on a concept that helps define the new Hollywood: the clearinghouse" (p. 105). And off we go to the next chapter.