Key Points

· Concentration of exhibition.
 
· The absence of vertical integration.
 
· The number and size of multiplexes (up to 24 screens).
 
· The foreign development plans of the Kinepolis group.
 
· The high technical quality of the complexes.
 
· The absence of significant intervention by the public authorities.

Concentration in Exhibition
 

1992	Belgium		EU
	Screens	Admissions	Screens	Admissions
Market share of Top 3 players	29%	60%	18%	34%
Market share of independents responsible for own programming	57%	26%	68%	47%

 

Along with Ireland, the United Kingdom, Portugal and the Netherlands, Belgium is undoubtedly one of the European countries where exhibition appears the most concentrated: the three principal players - the Bert-Claeys-Kinepolis group should be seen as a single player - together represent 60% of the market. The cinemas belonging to the Bert-Claeys-Kinepolis group alone account for 40% of admissions. With the opening of the Metropolis at Antwerp, at the end of 1993, its share of the market should then exceed 55%.
 
In aggregate, the three leading Belgian exhibitors control 126 theatres: they are all directly owned by the companies themselves. The only two outside cinemas whose programming is provided by a circuit are the Beverly Screens Complex and Super City One at Leuven; their programming is provided respectively by Albert and Koen Bert (of the Bert-Claeys-Kinepolis group).
 
The structure of these leading players and the nature of the cinemas which they own are, however, profoundly different: the Kinepolis group, as it is known, in fact refers to cinemas owned separately or jointly by the Bert and Claeys families, operating as a unit in other respects, as a result of family ties. They are a family-owned company which had its birth in the dramatic development experienced by two exhibitors twenty years ago. This group's sites consist of multi-screen complexes, located in various urban centres throughout the country (Liège, Hasselt, Courtrai), but also, and most importantly, of multiplexes: the Decascoop in Gand, and, in Brussels, Kinepolis, which is considered the largest cinema complex in the world, with 24 screens and more than 3 million admissions per year. In the near future, the group will also be opening another multiplex with more than 20 screens, in the suburbs of Antwerp.
 
The UGC "circuit" is a subsidiary of the French company of the same name: it owns three complexes, all situated in the capital.
 
Finally, the third Belgian network, the Heylen "network" (with 25 screens located in Bruges and especially in Antwerp) went into liquidation. This circuit went out of business in September 1993 when bankruptcy proceedings were filed against the proprietor, Baron Heylen, one of the founders of the Belgian exhibition industry.
 
As well as these leading players, the market contains other "circuits" of a more regional nature: Hanne (since September 1993 the third Belgian network), Rastelli, Hemelaer and Drieghe etc. Superclub, of the Philips group, also owns a complex, in Louvain.
 
Access by Films to Screens
 

Companies involved in both distribution and exhibition - 1992	Distribution market share (% admissions)	Exhibition market share (% admissions)
Belga (Hemelaer)	6%	3%
Independent Films	13%	1%
Cinélibre	5%	<1%
Excelsior (Heylen)*	1%	7%

  * Following the declaration of bankruptcy proceedings against the Heylen group, the company ceased trading in  September 1993.

 
Looking at Belgium, it cannot be said that access to films is made particularly problematic by the presence of vertically integrated players. There is, effectively, quite a clear separation between the functions of exhibition and distribution: the most important distributors are hardly present in exhibition; the principal exhibitors only exercise a marginal distribution function. UGC, for example, does not carry out any distribution activity in Belgium.
 
One is entitled, on the other hand, to inquire about the consequences of the concentration experienced at the local market level in the exhibition sector. When looking at films with wide popular appeal, these repercussions appear to be negligible. Without exception, the leading exhibitors are in fact benefitting from a monopolistic or quasi-monopolistic situation in each of the provincial markets where they are present; this makes the question of access to films de facto scarcely pertinent. In Brussels, where competition is lively between UGC and Kinepolis, films are programmed in parallel, owing to the considerable geographical distance between the complexes (Kinepolis on the outskirts, and UGC in the city centre).
 
For specialised films, the position is only a little more difficult. The distributors which specialise in this segment (essentially Cinélibre) will give priority treatment to the Art and Experimental cinemas which they own, or with which they have close relationships. But this type of programming has little overlap with the provincial programming policy of the principal circuits, so it is reasonable to assume that there is very little cause for conflict.
 
The problem does, however, become more acute for "quality" films which have received substantial media coverage, as these are at the same time both indispensable to the Art and Experimental cinemas, and to the complexes belonging to the circuits outside Brussels. In practice, the latter seem to benefit from an effective exclusivity over feature films distributed by the majors, whereas Cinélibre gives priority to the Art and Experimental cinemas.
 
This situation causes conflict. Besides, we cannot rule out within the hypothesis the likelihood that the future will bring an increase, if not an acceleration, of the movements towards concentration which are already occurring. The principal circuits will surely be tempted to use their dominant position in the capital and the large towns to try and obtain exclusive control over particular provincial markets. This trend is likely to be reinforced by the lack of any specific regulation seeking to limit exclusivity practices, as the only recourse for an aggrieved exhibitor is to take an action with reference to the necessity for them of obtaining a specific film.

 
Ticket Prices and Exhibitors' Shares
 

1992	Belgium	EU average
Average ticket price incl. taxes (ECUs)	4.26	4.19
Average rental as a % of box office net of tax	49%	47.2%
Exhibitor's average share (%)	51%	52.8%
Exhibitor's share of ticket price (ECU)	1.87	1.93
Exhibitor's average share per screen (000 ECUs)	72	63

 
 
The average price of a ticket (171 Belgian francs, including tax) corresponds closely to the European average. On the other hand, it is lower than the price reported by neighbouring European countries (France, UK, Germany etc.). Competition, which is particularly strong in Brussels between UGC and Kinepolis, however inhibits any further increase in price.
 
Agreements to supply films to cinemas are most often in the form of proportional rentals. Sometimes distributors obtain a minimum guarantee from the weakest cinemas. In the case of very small establishments, rentals are sometimes based on a fixed fee, but this practice is quite unusual.
 
A government order fixes the maximum level of rentals as a function of "reference levels", that is to say, in terms of the average number of admissions to the various cinemas. In principle, the rentals cannot be higher than 50% of net takings (35% for cinemas recording an average weekly attendance of less than 300). If, however, during the screening of a film the tickets sold total more than the "reference level" for the cinema concerned, then the maximum rate can be 55% (40% for smaller cinemas). This mechanism has been formalised by an agreement between exhibitors and distributors which provides for a "sliding scale", as a result of which the exact remuneration of the distributor is determined with reference to the commercial terms negotiated between himself and the exhibitor, the recorded performance of the film, and in relation to the "reference level" of the theatre.
 
In spite of their legal status, these terms are not always respected: one quite often sees distributors - amongst them the independents - applying less favourable (to the exhibitors) conditions than those provided by the regulations. Despite this, there are very few cases brought to court; the majority of exhibitors prefer to settle amicably their differences with the distribution companies.
 
According to the National Institute of Statistics, box office receipts (including tax) are distributed as follows: VAT, local taxes and copyright, 14.6%; distributor's share, 38.1%; exhibitor's share. 47.3%. In relation to net receipts, the distributor's share increases to 44.6%. This estimate, however, is a lot less than the 49% rental posited (for 1987-88) by the national cinema federation, the FCB. If this latter estimate, which effectively corresponds to the figures which circulate within the profession, is correct, it would mean that Belgium would stand alongside Portugal and, of course, Italy, as one on the countries where exhibitors experience the least favourable marketing conditions.

 
Cinemas Provision
 

1992	Belgium	EU*
Number of screens per 100,000 population	4.3	5.24
Number of seats per screen	235	266
% large screens	39%	24%
% Dolby	72%	51.4%
% multiplexes (7+ screens)	30%	10.7%

* weighted average

 
The decrease in the number of admissions to cinemas resulted in profound restructuring of the exhibition industry: a decrease in the number of screens, a reduction in the average number of seats, and, as a corollary to these two preceding phenomena, a rapid fall in the total capacity of the sector (ie the number of seats) which has been divided by eight in the space of thirty years.
 
These movements have obviously affected the rural and semi-rural areas most; the areas of higher population proved more resistant to change: whereas 10% of screens were located in the large towns (more than 100,000 population) in the country 30 years ago, today nearly 45% are there. Inversely, communities with less than 20,000 inhabitants, which in 1960 had two-thirds of the cinemas, today only possess a mere 15% of the screens, and account for only 4% of box office.
 
In a first instance, in the towns, multi-screen complexes were developed. The population density (more than 300 inhabitants per square kilometre) and geographical concentration of Belgium both favour the building of multiplexes (more than 10 screens) in Brussels, Gand, Charleroi, Mons, and now at Antwerp. Amongst the country's five cities, only Liège does not yet have a multiplex, but there, too, there is a project to build one.
 
For the audience, the development of multiplexes brought hitherto unknown comfort and technical quality. Moreover, this competition acted as a spur to other operators, forcing them to put considerable effort into modernisation. This explains why the Belgian sector is, from a technical point of view, one of the best in Europe.
 
This modernisation has especially helped to check, or in some cases, to stop, the slump in the number of visits: the opening of the Decascoop in Ghent has already, since the beginning of the 1980s, brought a revival of cinema-going in that town. In Charleroi, the number of admissions increased by nearly 50% in the 4 years following the opening of Carollywood, and in Brussels, the figures leapt 30% in 3 years after the opening of Kinepolis. Moreover, the largest complexes show the best films; have the best seat occupancy rates (for example, nearly 8 visits per seat per week at Kinepolis against a national average of 3.5); seats are more expensive there; and they record the best monthly results per screen (nearly BF 2 million per screen at Kinepolis, against a national average of BF 0.5 million).
 
 
Programming
 

1992	Belgium	EU*
US films' market share	73%	74%
European films' market share            - of which national films	23%   4%	24%   17%
Art-house & experimental: screens as % of all screens	4%	10.8%
Art-house & experimental: share of admissions	4%	9.7%

* weighted average

 
As the principal circuits try to achieve a quicker return on investment, the number of showings per screen has clearly increased: from 713 showings per year in 1980 to 1,002 in 1991.
 
In other respects, the increasingly urban nature of the sector has worked to limit the number of cinemas which close certain days each week, or for certain periods during the year. In 1960, only one cinema in two was open all year round; but as a result of these trends, this proportion is now more than 70%.
 
The increase in the number of screens per complex has led exhibitors more and more to organise their programming according to the principle of one film per screen. Among the cinemas open all year, there are scarcely more than one in five which present two or more different programmes each week.
 
Allocating one film to each screen each week constrains the exhibitors to choosing films which seem most likely to prove profitable, that is primarily American films. The market share of American films was less than 60% in 1986/87; it nearly achieved a level of 80% in 1991/92. During the same period, the market share of European films has dropped, from 32.6% to 18.9%. Other statistics confirm this phenomenon: amongst the 20 top films at the Brussels box office in 1991/92, only two films were not US productions.
 
Many European films, which achieve performances below the increasing levels demanded by the complexes, are quickly taken off the screen, without being given a chance to get established. It seems that occasionally even the self-image of these new complexes may preclude the more demanding films. It is also significant that specialist films, coming from the EU frequently achieve better results in the modest Art and Experimental cinemas than they do in the large complexes in the capital or principal towns.
 
Despite the above mentioned trends towards concentration, about a dozen cinemas still survive in the large towns which can be grouped together into the "Art and Experimental" category. In fact, they are the only cinemas to show a wide variety of non-national EU films. Their market share is obviously limited (between 3 and 4%), particularly as these establishments are not found - with the exception of Courtrai - outside the larger urban areas.
 
 
Role of the Public Authorities
 

1992	Belgium	EU*
Taxes:  - VAT  - Other taxes  - Rights (musical)	6.00% 9.60% 1%	10.80% 5.18% -
- Total/ticket (in ECU)	0.60	0.65
Financial assistance:  - Total (in ECU Millions)	0.40 (est)	52.7
- Per ticket (in ECU)	0.02 (est)	0.09

* unweighted average

 
Cinema admission is subject to VAT at a reduced rate of 6%. There is also, in most places, a local tax on exhibition, which is also applied to box office. This latter can vary, according to the area, from 0 to 20%. It averages at 9.6% of box office. The cumulative effect of these two measures is to return to the public authorities nearly BF 400 million per year, that is an average of BF 1 million per screen.
 
Since 1980, cultural affairs have ceased to be the responsibility of national government, and have become that of the three Communities: the French, the Flemish and the German. When it comes to economic affairs, exhibition still comes under the national government, as a responsibility of the Ministry of Economic Affairs. It was this Department which was responsible for the regulations relating to film rentals.
 
With the exception of that regulation, intervention in the exhibition sector has been rather rare: there is no specific regulation in existence, for example, to limit exclusivity practices or block-booking. Finally, there are no regulations seeking to define rules concerning windows for feature films (cinema, video, pay TV, free TV).
 
Public subsidies to the exhibition industry also depend on the country's various "Communities". There are no subsidy mechanisms in Flanders or Wallonia for investment or operation. Even the Art and Experimental cinemas are not generally in receipt of subsidies.
 
Some of them, however, benefit from a specific aid, which is given in practice case by case. Some cinemas also benefit from a refund, or indeed an exemption, from local taxes on exhibition. The European support from MEDIA Salles or Europa Cinémas must also be mentioned. Whatever the source of the subsidy, total aid given to cinemas is less than BF 20 million, which is 20 times less than the amount collected by the public authorities from its levies on tickets.