2.3 Market failure (3)
The extent of competition in EU markets
The extent of competition in the market place is effected by both vertical and horizontal restraints. The diagram below (Figure 16) plots the position of countries in terms of two criteria: the market share of the different circuits (horizontal integration) and the distributors' share of the exhibition market. According to the diagram, the farther towards the top right-hand corner a country is positioned in the graph, the more imperfect the competition. Without taking account of agreements between distributors and exhibitors, nor of eventual correction mechanisms, it appears a priori that the problems of access of independent films to the cinemas and of independent cinemas to films will probably be most acute in Portugal, Ireland and the United Kingdom.

Competition within the theatrical sector
Obstacles to competition within the theatrical sector occur in two dimensions, shown in the table below (4).

Barriers to access
Films with significant commercial potential
Other films
Cinema programmed by a circuit 


- -
Independent, self-programmed cinema 
+ +
- -
++ strong;                          -- weak 
  • Access by independent exhibitors to films

    We have already shown that the problem of restricted access by independents to films because of exclusivity is mainly confined to a limited number of local markets: elsewhere the circuits have gained a monopoly position, or the position of the small cinemas has been improved in some way by additional print subsidy mechanisms. In a sense it is rather late to address the access issue in the European Union where nearly 20% of all screens are now owned by circuits and about another 40% are programmed by them.
    However, for the remaining 40%, the problems of access to copies are different depending on the market served:
       · Access by non-"blockbuster" films to the cinemas
    As will be seen in greater detail in the section analysing programming, the techniques of "intensive" exhibition commonly practised by the circuits throughout the EU make difficult the access to the big complexes and circuits by independent films with less commercial potential. Only a few copies are made available, their distributors do not commit the level of advertising investment of the US majors or the subsidiaries of vertically-integrated companies, so these films very rarely achieve the "cross-over" to being shown in the more important cinemas. When they do arrive, they are only played in the big urban complexes for a very short time, as the complexes prefer to maximise the return on their screens by showing the high profile films for a short period, rather than waiting for word of mouth to spread the fame of an auteur film.
    A strategy which guarantees the existence of an "independent" channel of programming in the face of the integrated circuits, and which provides a channel that gives films other than "block-busters" privileged entry into the exhibition sector, will have first to resolve the problems facing films with only limited audience appeal. It will be made even more difficult by the fact that exhibitors, whatever their standing and their degree of independence, still need "block-busters" to establish their business in such a way that they can give screen time to "independent" films and optimise the returns from their cinemas. Which leads us into the problem of exhibitors' access to films. Only cinemas which are dedicated to "specialist" films escape this need to get hold of the top films as soon as they are released nationally.
    A picture emerges of a "two-speed" exhibition sector: on the one hand, the cinemas organised into circuits, groups or programming agreements which mainly show films on an exclusive basis, and on the other, the independent cinemas, in a delicate position in relation to the distributors. This situation is counterbalanced a little by the actions of exhibitors' associations or public authorities in some countries (Germany, France); they protect the exhibitors' position, and guarantee them fair access to films, as far as they can.
    The access of less profitable films to cinemas is limited by the arrival of intensive release practices. There is a possibility that in the future there will be a ghetto of independent cinemas in the competitive local markets which leave space for alternative programming.


    (3)  These issues are largely dealt with in section 2.2 on vertical integration strategies. 

    (4) In the majority of countries, barriers to access take the following two forms:
         * access to films with significant commercial potential by self-programmed indipendent cinemas
         * access to cinemas belonging to circuits of films with small commercial potential.