Opinion ID: 400121
Heading Depth: 2
Heading Rank: 1

Heading: Organization of the Motion Picture Industry

Text: 3 The parties form part of a tripartite system of film production and marketing in the United States. At the originating level, production companies are responsible for the financing and creation-at least economically-of motion pictures. They market the films to exhibitors through distribution companies, which they control. Each distributor defendant in the lawsuit is affiliated with a producer and distributes the producer's films. Although the motion picture industry was once vertically integrated, court decrees have forced distributors and producers to divest themselves of ownership in theatres. See M. Conant, Antitrust in the Motion Picture Industry, 88-112 (1960). 4 Southway has sued the seven major distribution companies operating in the United States. It states that these defendants handle films accounting for over 85% of total national box office revenue each year. Each distributor defendant operates nationwide and maintains branch offices in approximately thirty key cities. Atlanta is a key city and the distributors' offices in Atlanta do business in Georgia and portions of Tennessee and Alabama. 5 The distributors market motion pictures to theatre owners, who are known as exhibitors. Southway distinguishes between two kinds of exhibitors, the circuits and the independents. Circuits are chains of theatres under common ownership, while independent theatres are individuals unaffiliated with any circuit. Under Southway's view of the case, the circuits wear black hats and the independents wear white hats: Southway accuses the circuits, who allegedly have greater bargaining power, of inducing distributors not to provide the independents with desirable films. The exhibitor defendants-Georgia Theatres Company, Storey Theatres, Inc., and Weis-Theatres, Inc.-own most of the theatres in the Atlanta region. 6 Motion picture distributors market their films by licensing the right to exhibit them for a specified amount of time. The exhibitor rents a print of the film along with a copyright license of limited duration. Licensing agreements generally provide for payment to the distributor of a percentage of the gross box office profits earned by each exhibitor, and often also include a guaranteed minimum to be paid regardless of the success of a film. Under this system the distributors retain a direct interest in the profitability of each picture, and they carefully control the availability and distribution patterns of films so as to maximize return. 7 Films are ordinarily released in three runs, known as first run, intermediate run, and wide break. A first run will produce greater box office profits than subsequent runs and is therefore the most desirable run for an exhibitor. The distributor is in turn able to exact proportionately higher license terms for a first run film. First runs are often accompanied by major publicity campaigns financed solely by the distributor or collectively by the distributor and one or more licensed exhibitors. First run films are often limited to centrally located, well-known theatres. A particularly desirable film may be given an exclusive first run, which is limited to a single theatre. In a restricted first run, the film is licensed to several theatres. In a multiple first run, a still larger number of theatres will exhibit a film. A distributor will usually license a film to a smaller number of exhibitors on first run than on intermediate run; distribution is, in turn, more limited on intermediate run than on wide break.