A film studio denotes a controlled environment for the making of a motion picture. This environment may be interior, exterior or both. Generally these studios function as large production companies. However, worldwide, the majority of production companies have never owned their own studios, but have had to rent space. Likewise there are film studios which have never produced their film.
Earlier, the film industry was controlled by a handful of studios. Major film studios owned the theaters. Those theaters showed only their motion pictures. Thus specific theater chains showed only the films produced by the studio that owned them. The studios created the films, had the writers, directors, producers and actors on staff. They also owned the film processing laboratories. This in turn resulted in the industry violating antitrust laws. At a certain time studios owned either partially or outright 17% of the theaters in the country, accounting for 45% of the film-rental revenue.
Eventually the government sured Paramount Studios for antitrust violations. That case, United States v. Paramount Pictures, Inc., 334 US 131 (1948), more commonly known as the Hollywood Antitrust Case of 1948, was a landmark US Supreme Court antitrust case that decided the fate of film studios owning their own theatres. The Court held in this case that the existing distribution scheme was in violation of the antitrust laws of the US, which prohibit certain exclusive dealing arrangements. The verdict went against the film studios, forcing all of them to divest themselves of their movie theater chains. The decision also led to the emergence of more independent producers and theatres airing foreign films.