Why did the Supreme Court force Hollywood studios to sell their cinemas?

Because the same companies made the films and owned the cinemas, and the government sued them for illegal trade practices, a charge the courts upheld. In United States v. Paramount Pictures (1948) the Supreme Court ruled 7-1 for the government and forced the studios to divest themselves of their theatre chains.

Before that, the big studios were vertically integrated. They employed the writers, directors and actors, owned the labs, made the prints and showed them in theatres they owned: a de facto oligopoly. By 1945 the studios owned part or all of 17% of the country's theatres, and those theatres brought in 45% of film-rental revenue.

Studios also used block booking, requiring theatres to take an entire slate of films, sometimes unseen and sometimes before the films were even made. The Department of Justice sued all the major studios in 1938. Paramount, the largest, was the primary defendant, so the case carries its name.

Paramount Pictures Inc. was split into a film company and a theatre chain, and the chain later merged with the American Broadcasting Company. The ruling also opened the door for more foreign and independent films in American theatres, and that, in time, helped to weaken the Hays Code. The decrees themselves lasted until 2020, when a court agreed to lift them after a two-year sunset period.