It's Peter Watkins's _Privilege_, made in 1967 in reaction to Beatlemania, a phenomenon that reminded Watkins frighteningly of the mass hysteria at Hitler-worshipping Nazi Party rallies. The government manufactures a pop icon of their own and the pop icon, Steen Shorter, becomes a success with the youth.
Anyway, he is fed gvot.-approved material to perform, all of which encourages a slavish nationalist Christianity among the screaming, crying fans, who don't suspect they're being led down a sinister path of subservience.
This is a scene of priests and aging hipsters rocking out as the band performs a post-Beatles version of "Onward Christian Soldiers" designed to appeal to youth:
http://youtube.com/watch?v=LMr7JLsEQhk
By the end of the film, the Church-State duopoly has successfully co-opted the rock industry to the point that bands are performing nothing but calls to for obedience to Christ, etc., and the concerts have gone from Beatlemania-esque mayhem to rallies that eerily resemble "Triumph of the Will" Nazi Party gatherings, as shown in this scene:
http://youtube.com/watch?v=l_20Vikpwyg
Priests bless the audience and the British flag; the audience are bearing fascist-like flags and standards, etc.
Such a great, cynical (but in the good way, not the way Horkheimer said) film, and for 1967 especially, as it wasn't really 'til the 80s with the PMRC that folks like the Dead Kennedys, rap artists, Bill Hicks, etc., began to complain in organized fashion about safe "corporate rock," government-approved rock 'n roll, etc.
Check it out while Sundance is still running it, otherwise good luck finding bootlegs (of which - ahem - I have one...)
-B.