Four Studios Won't Honor Movie-Booking Practice

Four major Hollywood studios are telling theater owners they will no longer participate in a movie-booking practice that has attracted lawsuits and attention from the Justice Department, according to people familiar with the matter.

For years, theater chains have made "clearance" requests to studios, allowing some exhibitors to show certain movies in a market exclusively. But even fans of the practice have wavered in their support over the past two years, as smaller theater operators say it squeezes them out of lucrative titles and lets larger chains dominate the field.

In March, Twentieth Century Fox told exhibitors it would stop honoring clearance requests altogether, starting with Friday's release of "X-Men: Apocalypse." Viacom Inc.'s Paramount Pictures has long been resistant to clearance requests, and over the past several weeks, two other studios have joined them: Lions Gate Entertainment Corp. and Comcast Corp.'s Universal Pictures.

That means a majority of major Hollywood studios have stopped honoring clearance requests. The three studios that haven't indicated any change in policy are Time Warner Inc.'s Warner Bros., Walt Disney Co. and Sony Corp.'s Sony Pictures Entertainment.

Studios have always had the power to deny clearance requests from exhibitors, but at the risk that those theaters would then refuse to show the movies in that market. Fox's move, however, met little resistance from major exhibitors, who began booking "X-Men" in competitive markets ahead of its release this weekend.

(21st Century Fox, which owns the studio, and News Corp, owner of The Wall Street Journal, were until mid-2013 part of the same company.)

The change in response could mean some theaters will be able to show titles from the all-important summer movie season that would have otherwise been off-limits. In conversations with exhibition executives, studio distribution chiefs cautioned that the changes in policy don't mean that any theater is guaranteed every movie it wants to screen.

Some exhibition executives think the change in practices could allow the clearance debate to end quietly if all major studios agree to stop honoring the requests. "It's all about over, I think," said one exhibition executive.

Others said that its effects could still play out in the courts or through the Justice Department, which has been interviewing executives about it for more than a year, according to people familiar with the matter.

Last year, luxury exhibitor iPic Entertainment LLC filed suit against AMC Entertainment Holdings Inc. and Regal Entertainment Group, alleging that the nation's two-largest theater chains exercised clearance requests to drive business from iPic.

A state court judge in Texas found last week that there is enough evidence to warrant a trial, now scheduled for early October. IPic Chief Executive Hamid Hashemi is pursuing punitive damages for business he says was lost because of clearance requests, so any change in studio policy in the meantime wouldn't stop his suit from going to trial.

AMC and Regal declined to comment.

Write to Erich Schwartzel at [e-mail]

(END) Dow Jones Newswires

May 26, 2016 17:25 ET (21:25 GMT)

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