| > Frankly, I don't understand why any of the movie/TV studios need Netflix when they can simply sell their own content direct to the consumer via Internet. Because they remember what happened to them the last time they tried this trick (actually they don't remember that well but we will come to that). Let me explain, it all dates back from Hollywood infancy. So, let's go back to the beginning of cinema at the very start of the past century. Edison just invented the kinetoscope which is seen as a novelty. Immigrants, mostly Jewish, looking for work see in the exhibition of such shows a way to make a living, bought projection material and funded the first cinemas, the nickelodeons. Quickly, it appeared clear to the most entrepreneurial that to make customers come back, you need a constant flow of new movies to show. They decided to move to production and fled the east cost settling in California in order to avoid paying Edison for his patents (kind of ironic, isn't it ?). Most of these people came from the distribution sectors. They understood its importance and quickly passed contracts with theaters circuit. These circuits actually predate cinema era . They were initially showing vaudeville. In the end, the biggest studios of the period ended in possession of their own movie theaters distribution circuit. As long as studios were numerous, everything was fine. But, the formation of the MPPDA what will become the MPAA in 1922 by the then three majors studios started making some players uncomfortable and independents quickly accused them of forming a trust. Then comes the 30's. Talkies become the norm. Productions costs skyrocketed. Early players like Warner won big and started buying smaller studios. By the end of the decade, Hollywood was entirely dominated by five really big studios. As production costs were so high, these studios were in the habit of bundling movies when selling them to make a profit even on the not so stellar ones. As a non-negligible share of cinemas were owned by the productions company and thus buying blindly, others had to buy bundled too (generally the whole season) or be unable to show the blockbusters. The majors add shifted the production risk for them to exhibitors putting all independent in a difficult position. Thankfully, it was another time. The federal government was still somewhat working and the studios were sued by the Department of Justice in 1938. It reached the Supreme Court in 1948 (see http://en.wikipedia.org/wiki/United_States_v._Paramount_Pict...) whose verdict went against the studios. Finally, they had to separate themselves from their distribution outlet and laws were passed ensuring a more fair market. Now, the really funny part is that the way these same studios actually sell their catalogue to digital distributors is strangely similar to the bundles they used to sell to cinemas in the 30's. But, as they don't have their own distribution network, they don't fell under antitrust law. TL; DR : Because they lost an antitrust case against the US government in 1948 for owning large part of the distribution circuit and using bundling practices not that far removed from the way they sell their catalogue to digital distributors. |