Sony is the first studio to buy theaters

In 2020, the US Supreme Court ended the “Paramount decree”, which kept movie studios from owning movie theaters, a piece of 1930s anti-trust legislation created in a time when most movie theaters had just one screen and studios self-dealing their own films to their own theaters could block competitors from showing their films in a market for months, even years, at a time. 

Now, with multiplexes standard and the addition of direct-to-consumer streaming platforms, the Paramount decree was declared “outdated”, and the legal sunset period ended in 2022. But because of the economic chaos created by the pandemic, no one was in a position to act on it…until now. Sony has bought the Alamo Drafthouse theater chain.

Sony was actually never beholden to the Paramount decree, because it didn’t exist as a movie studio when the law was written, and they owned the Lowes Theatre chain in the 1990s, but they got out of the exhibition business because the economic model didn’t make sense at the time. Now, I guess, they think it makes more sense in an age of hyper-conglomeration and walled-garden business models. Further, it burnishes Sony’s reputation with filmmakers who prize the theatrical experience—Sony doesn’t have a streaming service, AND they’ve doubled down on theatrical exhibition. How long before Christopher Nolan makes a film with them?

With 40-ish venues, Alamo Drafthouse is the seventh-largest theater chain in North America, with a reputation for putting films first, with well-managed theaters, (generally) clean facilities, an extensive drink and slightly less extensive food menu, and their famous, star-studded PSAs that delineate their strict “no phones, no noise” policy:

 

But Alamo Drafthouse has also had some problems in recent years. They filed for chapter 11 bankruptcy during the pandemic—and bounced back with private equity partners—and just last week, a franchisee had to close five locations in the Dallas-Fort Worth metroplex as well as one location in Minnesota due to chapter 7 bankruptcy. The franchisee cited “economic factors”, saying that “industry-wide guest counts have not rebounded even to pre-COVID levels and coupled with the 100-plus days of the Writers' and Actors' strikes, industry-wide economic performance was severely down in the fourth quarter of 2023 and the first quarter of 2024”.

That tracks with the industry at large, where domestic box office is on an unstable rollercoaster and is expected to lag behind last year’s by an estimated $2 billion. Things were not great with theatrical before the pandemic, and the pandemic just hastened negative trends, like dwindling audiences. With the further interruption of the labor strikes last year, Hollywood has been unable to reestablish an economic ecosystem on par with the before times (which is their own damn fault, but that doesn’t change the outcome). 

Sony, which has not spent untold billions launching a streaming service—has, in fact, MADE money selling their films to other people’s platforms—turned out to be in the best position to snap up a whole ass theater chain, and they got, arguably, the best one. Managing around 40 theaters shouldn’t be too much of a burden, though I won’t be surprised if a few more locations close (I suspect the franchisee is just the canary in the coal mine for a too aggressive expansion of the chain overall). But still, if they can hang onto at least one theater in the top, say, 25-35 markets in North America, Sony would basically have their own repertory chain, one with an already positive reputation with cinephiles and filmmakers alike. Also, Sony is getting Fantastic Fest, the genre film festival homebased at Alamo Drafthouse’s flagship Austin, Texas location, in the sale, too. So, a theater chain AND a film fest? Christopher Nolan movie when?! 

People are naturally worried about the Drafthouse losing some of its independent spirit—they do a lot of specialty programming like mock-a-long screenings, franchise marathons, and theme nights—but the real question is how their quality control holds up under Sony’s management. The Drafthouse built their reputation on providing clean, quiet, quality theatergoing experiences, with a halfway decent meal if you want it, to boot. I can’t imagine buying a business with a very specific reputation and then changing that reputation for the worse, but then, big businesses do stupid sh-t all the time. If Sony upholds the Drafthouse’s reputation as a top-tier theatrical experience for films, with a dedication to cinema and its history, well, okay. Not the end of the world. But if the experience goes downhill? If we start seeing the same corner-cutting and degraded audience experience of other theater chains? I can’t even contemplate it. 

Given the challenges facing the parent companies of so many movie studios right now, it might be a minute before we see another studio buy out a theater chain. But everyone in Hollywood WILL be watching to see what Sony does with the Drafthouse. Not just to judge whether or not their quality control remains up to snuff, but to see how Sony can leverage their own theaters for their bottom line. If this does end up giving Sony an edge in the market, buying theaters will become the hot new trend of the 2020s.

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