2  Integration of Exhibition in the European Union
 
 2.1 Horizontal integration
 
The integration of the sector
 
The degree of integration of the cinema exhibition industry can be measured by reference to the numbers of screens controlled by the three most important operators in each country as a percentage of the total number of screens in a country (see Table 10).
 
Cinema exhibition in the EU described in this way shows considerable uniformity. Three tendencies emerge: · at one end, the United Kingdom and Ireland, where the top three companies control over 50% of the sector   · at the other end, the three countries in southern Europe (Italy, Spain and Greece) where the sector remains fragmented: ownership of cinemas is very dispersed, the development of national circuits is very limited, and the three main operators control less than 10% of the sector   · Between the two extremes, the other European countries, where the leading exhibitors own between 11 and 35% of the number of screens; Portugal and the Netherlands have the highest level of concentration amongst these. On an unweighted basis, the three main players in each country control about 28% of the national market; if we weight that average to reflect the relative sizes of the national markets, the figure is 18%. However, the percentage of independently-programmed screens is around 60% (thus, a little less than 10,000 screens throughout the EU), a similar figure to the US, where 50-60% of screens are in the hands of local companies of independents, and where the number of independent single-screen cinemas is estimated at 5,000-6,000.
 
 
 Table 10a: Horizontal integration in exhibition (1992) - Number of screens controlled 
 
Belgium
Denmark
France
Germany
Greece
Main player Bert-Claeys (3)  Nordisk Films/MGM  UGC Riech Assos Odeon 
Number of cinemas 8 8      
    Number of screens 
72 (16.7%)   41 (13%)  231 (5.2%)   420 (11.5%)   14
    Number of admissions
6,550,000   3,000,000   17,100,000      
    Market share of admissions
40% 34.5% 14.8% (15%) (e)  
Player II  UGC Dagmar Scala Gaumont Flebbe  Spentzos
    Number of cinemas
3 2      
    Number of screens 
29 (6.7%)   9 (2.8%)   193 (4.3%)   130 (3.6%)    
    Number of admissions 
2,050,000   847,000   13,213,000      
    Market share of admissions
12.5% 9.5% 11.4% (7%)  
Player III Heylen (2) Grand Teatret  Pathé  UCI   
    Number of cinemas 
10        
    Number of screens 
25 (5.8%)   6 (1.9%)   93 (2.1%)   42 (1.2%)    
    Number of admissions 
1,200,000 367,000   8,460,000   3,600,000    
    Market share of admissions
7.5% 4.5% 7.3% 3% (1)  
Total for 3 Main Players  
    Number of cinemas
21  11        
    Number of screens
126 (29.2%)   56 (17.7%)   517 (11.7%) 592 (16.3%)   (10%) (e)  
    Number of admissions
9,800,000   4,214,000   38,773,000      
    Market share of admissions
60% 48.5% 33.5% 25% (20%) (e)
(1) Box office receipts  
(2) The Heylen network went into liquidation in September 1993. Since then, the third biggest Belgian network is Hanne (with 22 screens)  
(3) The Bert-Claeys network opened a new multiplex at the end of 1993 "Metropolis" in Antwerpen.  
  
Source: MEDIA Salles/BIPE Conseil
 
 Table 10b: Horizontal integration in exhibition (1992) - Number of screens controlled 
 
Ireland
Italy
Netherlands
Portugal
Spain
UK
Main player   Ward Anderson Cinema Cinque MGM  Lusomundo   Cinesa (UCI) MGM Cinemas 
    Number of cinemas 
29  22        25 128  
    Number of screens
80 (42%)   43 (1.4%)   66 (15.8%)  58 (25%)   73 (4.0%)   414 (23.6%)  
    Number of admissions
3,736,000   2,791,400     5,500,000 (e) 8,000,000   29,900,000  
    Market share of admissions
47.5% 3.3% 26%  55% 10% 28.9%
Player II   UCI  Safin   Jogchem's Theatres  Castelo Lopes  Empresa Balana   Odeon Cinemas 
    Number of cinemas 
2       12 72
    Number of screens 
22 (11.6%)   30 (1%)   46 (11.1%)   14 (6.0%)  30 (1.7%) 306 (17.4%)  
    Number of admissions 
1,750,000         4,000,000  21,600,000  
    Market share of admissions
22%   10% 10% 5% 20.8%
Player III  MGM Aldephi Carlton     Wolff   Atalanta  Bautista Soler  UCI 
    Number of cinemas 
        15  24  
    Number of screens 
8 (4.2%)     27 (6.5%)   16 (7.0%) 23 (1.3%)   213 (12.1%) 
    Number of admissions  
840,000       3,000,000   17,800,000 
    Market share of admissions
10.5%   9.5% 5% (e) 3.75% 17.2%
Total top 3 players       (2 players)          
    Number of cinemas  
33 52       52  224
    Number of screens  
110 (58%)  73 (2.4%)   139 (33.4%)  88 (38%)   126 (7%)   933 (53.1%) 
    Number of admissions  
6,326,000         15,000,000  69,300,000  
    Market share of admissions
80% 5%(e) 45.5%  70% 18.7% 66.9%
Source: MEDIA Salles/BIPE Conseil
 

Integration of the sector in terms of admissions
 
The degree of integration can, however, also be measured by the market share (in terms of the numbers of admissions) of the three main players in each country (see Table 11).

· The extent of integration of exhibition in the various national markets is, based on share of admissions, very high, as the three main players' (unweighted) average share of their national market was about 48% in 1992. The weighted average was 34%.
 
· By contrast, looking at the EU market as a whole, the degree of integration is low. The five main players in the EU control 14-18% of recorded admissions in the ten countries studied. So exhibition is still fragmented and compartmentalized at an EU-wide level, in the hands of different companies in each country.

· The degree of integration of the market is also very variable: ranging from 10% (Italy) to 80% (Ireland). This variation suggests that defining a common, coherent and relevant regulatory regime for the whole of the European Community will prove difficult.

· The countries where the highest degree of integration occurs are mostly the smaller ones. Here one company, or a group of companies, tends to control nearly all the market (in terms of admissions): this is the case in Ireland, with Ward Anderson, Belgium with the Bert-Clays group, and Portugal with Lusomundo. In these three cases, the companies concerned are all nationally-owned and controlled. In the United Kingdom, there is also a high degree of horizontal integration. But the structure of the industry there is different: the market is obviously substantially larger than that of the countries mentioned above; it is also by nature more oligopolistic, as the proportion of the market controlled by the main player does not exceed 30%; the major players are also North-American companies or their subsidiaries(2).
The Netherlands' industry also belongs to this group of highly-integrated countries, as a fourth player, Minerva, closely follows Wolff; it controls 9% of the market. The four main players between them account for 73% of admissions (including programmed cinemas).

· The degree of integration is lower in Denmark and France, where the proportion of the market by admissions controlled by the three main players is 30-50%. Netherlands and Denmark are characterised by the power of MGM's cinemas (a 50/50% joint-venture with Nordisk in Denmark), however in France the three main circuits are national players.

· In Germany and Spain, the market is more fragmented, and the three main players account for less than one third of admissions. The degree of integration is at its lowest in Italy, as, apart from Cinema Cinque, the rest of the sector was dominated by regional companies until 1992. The founding, in 1993, of a new cinema network by Cecchi Gori has to be taken into account, but has not, as yet, fundamentally altered the situation. Moreover, the big international players (particularly UCI and Warner) are now taking an active interest in Italy. It is worth noting in this context that these three countries - Germany, Spain and Italy - are countries where regional factors are very strong, a fact which undoubtedly creates a powerful obstacle to the creation of national networks within the exhibition sector. These countries constitute the majority of the "extensive pole" of the exhibition industry as defined above.

· If their contribution is measured by admissions rather than numbers of screens, then the part played by the market leaders is mostly larger, as Figure 14 shows: there is a marked "leader-effect" which is by no means confined to exhibition, but which, in exhibition, is derived chiefly from the fact that the screens of the main players are almost invariably in the best locations. This "leader-effect" is also linked to the nature of programming of the circuits, as the "leader" can benefit, in terms of advertising, choice of films and cinema quality, to a greater extent than the rest of the sector.

· The difference between screen share and admissions share is not uniform across countries. It is particularly high in Belgium, Portugal and Denmark; this is partly because the three main players' numbers of admissions and the number of weekly admissions per seat are both higher there than elsewhere. By contrast, the difference is more moderate in the UK and Ireland, which reflects the fact that the big networks there (MGM and Odeon in the UK, Ward Anderson in Ireland) have a mixed bag of cinemas: certainly, some of these are modern and profitable, but there are also some old cinemas of which it is difficult to dispose.

 
 
 
 Table 11: Horizontal integration in each country
 
% of screens controlled by the three main players
% of total admissions accounted for by the three main players
Belgium
29.0%
60.0%
Denmark
18.0%
49.0%
France
12.0%
33.5%
Germany
16.0%
25.0%
Greece(e)
10.0%
20.0%
Ireland
58.0%
80.0%
Italy (e)
3.0%
10.0%
Netherlands
34.0%
45.5%
Portugal
38.0%
70.0%
Spain
7.0%
19.0%
U.K.
53.0%
67.0%
Unweighted Average
28.0%
48.0%
Weighted Average
18.0%
34.0%
Source: MEDIA Salles/BIPE Conseil
 

The circuits and joint-programming arrangements
 
The arrangements for programming screens allows us to create another indicator to measure integration. In order to increase their bargaining power vis-à-vis the distributors, exhibitors effectively band together to form groups or programming collaborations.
 
Cinemas can be classified into four main categories:

 The Circuits
 
Alongside the principal national circuits, whose significance we have already considered in the previous section, there are also regional circuits in several of EU countries, whose activities are limited to a town, a district, a province, a region, or a "Land"; this is the case in Ireland (32% of admissions), Belgium (29% of admissions, with UGC particularly, whose activities are restricted to Brussels), Denmark (7.5% of admissions), Italy (5%), Germany (5%), France (5%) and Spain (4.3%).
 
 Programming groups
 
Programming groups are both most numerous and most powerful in France. For the most part, they operate nationally. About 412 screens are affiliated to at least one of the three national groups. In only four other countries, notably the three southern European countries, do programming groups operate, and they play a less significant part: Italy, where about 250 cinemas are managed by Cinema Cinque, Spain, where the Cinesa group brings together about 40 affiliated cinemas, and the Netherlands, where 73 screens, some 18%, have an agreement with at least one of the four circuits.
 
 Programming alliances
 
France is also the country where voluntary associations of independent cinemas are most developed (there are 30 regional alliances). In Spain, 48 cinemas are affiliated to the ACEC. In the rest of Europe, programming alliances are either forbidden, as in the UK, or play only a minor part.
 
 Table 12a: Circuits and programming agreements (1992)
Circuit, group or alliance
Relevant markets
Belgium
Denmark
France
Germany
Greece
Principal circuits  
(screens owned)
National Bert-Claeys  
72  
 
40%
MGM/Nordisk  
41
UGC         231 (14.8%)  
Gaumont 193 (11.4%)  
Pathé         93 (7.3%)  
                   33.5%
Riech  

420  
10-15%

Assos  

14

(Principal circuits, number of 
screens owned, share of 
admissions)
Regional UGC           29 (13%) 
Heylen (1)  25 (7%) 
Hanne        22 (5%) 
Rastelli       16 (3%) 
Drieghe      16 (3%) 
Hemelaer    15 (3%) 
34%
Dagmar }  
Warner } 9 (9.5%)  
Scala }
Soredic  
Davoine 
Raymond  
Other 
Flebbe  

130  
 
7%

 
Principal circuits or groups  
(screens affiliated)
National   MGM Nordisk   
 
15
     
(number of screens affiliated, 
share of admissions)
Regional          
Principal alliances; National          
(Principal alliances, 
number of screens;  
members' share of admissions)
Regional          
Independent, self-programming 
cinemas
         
Number of screens   
% of all screens    
Share of admissions
247  
57%  
26%
246  
79%  
52% (2)
2,640  
60%  
40%
3,157  
87%  
75%
 
(1) The Heylen circuit went into liquidation in 1993  
(2) With the Grand Teatret  
  
Source: MEDIA Salles Survey
 
 
Table 12b: Circuits and programming agreements (1992) 
Circuit, group or alliance 
Relevant markets 
Ireland 
Italy 
Netherlands 
Portugal 
Spain 
UK 
Principal circuits  

   

   

   

(screens owned)  

   

(share of admissions) 

National  

 

Ward Anderson  
80  

  

  

42% 

Cinema Cinque 43  
Istituto Luce 10  

 

MGM(6)    66 
Jogchem's  46 
Minerva     36 
Wolff          27 
 
 
 

42%  
 
 

55%

Lusomundo 58 
Castelo Lopes 14 Atalanta 16 
 
 

  
 
 
 
 

70%

Cinesa 35 

8.5% 
 
 
 
 
 
 
 
 

10%

MGM } 
Odeon } 
Warner } 
UCI } 1161 
Apollo } 
Nat.Am.}
(Principal circuits, number of screens owned, share of admissions)  Regional  UCI 22 (12%) 
MGM 8 (4%)
Other circuits (30 
to 50 cinemas 
each): Safin, 
Arco Film, 
Germani-Poggi, 
Quilleri-Di Sarro
    Empresa 
Balana 
(Catalonia) 
30 
5%
Minors 
80
Principal circuits or groups 
(screens affiliated)
National Marginal Cinema Cinque 
(programs for 250 
cinemas)
73 screens which have an agreement 
with at least one 
of the four major 
distributors: 
Marginal Cinesa 
38 affiliates 

 

Marginal
number of screens 
affiliated, share of 
admissions)
Regional    Marginal MGM        10  
Jogchem's 39  
Minerva      7  
Wolff        17  
18% 
     
Principal alliances;  National             
(Principal alliances, 
number of screens;  
members' share of admissions)
Regional          ACEC 
48 
1.5%
 
Independent, self-programming  
cinemas 
           
Number of screens  
% of all screens  
Share of admissions 
79 (4)  
42%  
20% 
2,550 (5)  
89%  
88% 
168 
40% 
27%
130 (e)  
55%  
29% 
N.D. 
69% 
65%
420 
25% 
20% 
(4 ) Independent cinemas = ICAI (the Independent Cinemas Association of Ireland)  
(5)  Of which FICE: 294 members - 9% market share  
(6)  From 1994, there is a cooperation between MGM and Minerva.  

Source: MEDIA Salles Survey

 
 

Market share of jointly-programmed screens
 
The share of the total EU market (in terms of admissions) of jointly programmed screens (including circuits, groups and alliances) is about 56% (unweighted) or 53% (weighted to take into account the sizes of different national markets).
 
Once again, this indicator shows considerable variation around the mean:

 
 Table 12c:
 
Percentage of total screens represented by independent self-programming screens
Share of total admissions of independent self-programming screens
Belgium
57%
26%
Denmark
79%
52%
France
60%
40%
Germany
87%
75%
Greece
80%
80%
Ireland
42%
20%
Italy
89%
88%
Netherlands
40%
27%
Portugal
55%
29%
Spain
69%
65%
U.K.
25%
20%
Unweighted Average
62%
44%
Weighted Average
68%
47%
Source: MEDIA Salles/BIPE Conseil
 

Independent cinemas probably encounter most difficulty in obtaining prints of the films they want in the first two groups of countries, or may find it increasingly difficult to do so. Independent exhibitors are likely to become increasingly marginalised as the power of multiplexes grows.
 
It is worth noting that in certain countries - the Northern European ones - dealings between self-programming independents and distributors are generally facilitated by the existence of standard conditions for the exhibition of films which are negotiated between the distribution companies and the exhibitors' trade associations.
 
The intensity of competition within local markets
 
In order to understand better the extent of competition within the principal European countries, we have split the urban areas into three categories:

Table 13 shows, for each of these categories, the position of the first-run cinemas, which allows us to get a better sense of the level of horizontal integration.
 
The capital cities 
 
The capital city tends to be the most competitive market within each country: thus in Portugal where the sector is effectively monopolistic, the presence of independent and "specialist" cinemas in Lisbon means a degree of diversity in the range of films available. In at least three other countries (Germany, Italy and the United Kingdom), independents still play a significant part in exhibition in the capital, even though it is mostly integrated (with Germany and Italy we are talking about the major centres: Berlin, Frankfurt, Hamburg, Munich, etc. and Milan as well as Rome).
 
However, even in the capitals, first-run cinemas are increasingly programmed by the major circuits: in France, Parisian cinemas owned and/or programmed by Gaumont and UGC account for 66% of admissions; with the exception of specialist exhibitors, self-programming independents have now practically disappeared from the capital. In Belgium, UGC and the Bert-Claeys group together control 93% of the Brussels market; in Ireland, Ward Anderson, UCI and MGM control all of Dublin's cinemas except for two. In Spain, circuits play the most significant part; in the Netherlands, MGM has a monopoly in the exhibition sector of the big towns in the west of the country. 
 
In urban areas outside the capital
 
Outside the capital, the nature of competition varies from country to country:
 
In the large cities (more than 250,000 population), monopolies are found in Denmark, the Netherlands, Belgium and Portugal, and certain French cities. In general, independent operators have disappeared in these markets, to the benefit of the circuits. In the UK, the choice of cinemas in the large cities is less than in London, mostly because of the establishment of multiplexes, which soon put paid to independent exhibitors, even if some still remain. In France, independents do continue to be significant in some parts of the country, but the circuits are equally dominant.
 
In middle-sized cities (from 100-250,000 population), monopoly is the rule in the majority of EU countries, but the nature of the dominant players differs: in the UK and Denmark, independents may even control some local markets. In some other countries, it is the circuits which matter, mostly occupying a monopoly position (Ireland and several of the regional circuits which dominate in France). In the rest of the EU, there is competition among few competitors (Italy, the Netherlands, Spain, etc.).
 
 Table 13a: Intensity of competition within local markets (1992)
Local Markets
Germany
Belgium
Denmark
Spain
France
Capital Strong competition Duopoly: Kinépolis + UGC = 93% market share Oligopoly: Nordisk + municipal exhibitors; Nordisk: 20% Dominance of the major circuits  
(Madrid, Barcelona)
Dominant position of two circuits, UGC and Gaumont;   
Competition between independents
Big towns  

(*more than 250,000)

Varies from town to town Quasi-monopoly: Antwerp: Heylen (2)  85% Aarhus: Oligopoly: 3 exhibitors Few competitors: 1-3 circuits per big town Often duopoly (1) or dominant position of two circuits  

 

Middle-sized towns  

100,000-250,000

Varies from town to town; regional circuits 2 quasi-monopolies; 2 duopolies; 1 dominant position Odense (Nordisk)  
Esbjerg (Nordisk)  

Monopolies

Few competitors Dominant position or monopoly (due to recent swaps of cinemas between the circuits)
(1) In France in the big towns, 2 circuits control between them 60-85% of the market; there are some monopolies (Caen; Nancy)  
(2) In September 1993, the Heylen circuit went into liquidation. In October 1993, the Kinepolis group opened a multiplex in Antwerp, which gave them a quasi-monopoly of that market.  

Source: MEDIA Salles/BIPE Conseil

 
 
 Table 13b: Intensity of competition within local markets (1992)
Local Markets
U.K Ireland Portugal Netherlands Italy
Capital Strong: all national circuits + independents and art-houses Dominant pos.  
Ward Anderson - UCI - MGM  
But competition from art-houses
Dominant position   
Lusomundo  
Some independents
Dominant position  
MGM (+specialist cinemas)
Dominant position Cinema Cinque - Safin; some independents  

 

Big towns 
(*more than 250,000)
Dominant position  
(Multiplex+ Odeon or MGM + independents)
not applicable Dominant position or monopoly Lusomundo Rotterdam and the Hague: monopoly MGM; other towns: competition between circuits and independents; Utrecht: duopoly MGM and Wolff (and art-house and experimental cinemas) Strong competition in the North & Centre (except Florence); average in the South  

 

Middle-sized towns  
100,000-250,000
Odeon or MGM or minors +  
indep. in some cases
Monopolies (Ward Anderson or independent) Monopolies Duopolies: circuits and a little competition from independents Average competition
 Source: MEDIA Salles/BIPE Conseil
 
 
Internationalisation of the sector
 
The degree of internationalisation of the sector is still small. Only nine players are present at any significant level in more than one national market.
 
The most active moves towards internationalisation come from US-based companies: UCI, MGM and Warner. Basing their operations originally in Britain, these firms have since gone on to penetrate other EU countries. In Germany, UCI and Warner are now present, and even though their influence is still limited, their plans to build multiplexes (8 screens or more) allow us to predict that their share of admissions will rapidly grow. Elsewhere, they have avoided direct competition with each other: MGM has chosen the Netherlands and Denmark; UCI, Spain.
 
 Table 14: The top five European exhibitors (1992)
 
Numbers of admissions
(Millions)
Share of EU market
MGM (with MGM/Nordisk) 
           (MGM on its own)
39.3
35.6
7.0
6.4
UCI   (with Cinesa) 
         (without Cinesa)
31.8
23.8
5.7
4.2
UGC
25.6
4.6
Odeon
21.6
3.8
Gaumont
19.0
3.4
Higher total:
137.3
24.5
Lower total:
125.6
22.4
Source: MEDIA Salles/BIPE Conseil survey 
 
 
There are far fewer EU companies active in more than one national market, and the extent to which they are internationalised is limited compared to the US majors:  
By contrast, the low level of integration of the Italian and German markets does not encourage the emergence of an export-oriented dynamic.
 
Exhibition in the EU is gradually opening up, but recent investment has mainly been by US companies. International investment projects almost always take the form of the construction of multiplexes. The three US Majors currently operating in the EU will probably wish to continue to develop their international profile (development being limited in their own market due to US regulatory constraints) and will turn their attention to countries in which exhibition continues to be fragmented, where there is scope for screen refurbishment (as in Italy) and where the market share of US films is high. The countries which attract US investment will also need to have a healthy exhibition sector, and one where the barriers to entry are not crippling: large groups of foreign operators might well have trouble in Greece, where the exhibition sector is in too poor a state to attract foreign capital. In France, the entrenched position of national players and the nature of State intervention within the exhibition sector (a barrier which favours Pathé over MGM, for example) makes entry difficult by foreign players.

 

(2) As of November 1993, MGM, the largest exhibitor in the UK, is controlled directly by Crédit Lyonnais in Paris, rather than by MGM/U in Burbank, CA.