Annex 2: Country Studies
Germany
 
Key Points  
 
Screens and Admissions
 
 
 Germany*
EU
Germany
EU
 
Admissions
Admissions
No. of screens
No. of screens
1960-92
-85%
-80%
-53%
-40%
1980-92
-35%
-38%
-5%
-24%
1985-92
-10%
- 3%
5%
- 9%
* West Germany only
 
 1992
Germany*
EU
   
Average**
Total
Number of screens
3,630
  
16,621
Number of seats ('000)
725
  
4,509
Number of admissions per seat
146
124
  
Total number of admissions (millions)
105.9
  
561.0
Number of admissions per head of population
1.32
1.61
  
* West & East Germany  
** unweighted average
 
 
Concentration in Exhibition
 
 1992
Germany
EU
 
Screens
Admissions
Screens
Admissions
Market share of Top 3 players
 
16.3%
 
25%
 
18%
 
34%
Market share of independents responsible for own programming
 
84%
 
75%
 
68%
 
47%
 
 
The first thing that is striking about the cinema exhibition industry in Germany is its "fragmentation": the industry is composed of a large number of screens and of companies involved in exhibition (about 1,200 in 1992), and of independent cinemas, mostly family owned and run. Another characteristic of the sector is the largest proportion of single-screen cinemas in northern Europe (Italy, Greece and Spain also have a majority of single-screen sites). The fragmented nature of the market is further accentuated by its strong regional structure, which makes the sector very difficult to penetrate at the national level by an integrated player.
 
However, a process of concentration is beginning, as much at the level of geographical distribution of admissions as in the number of companies involved in exhibition: the contribution of single-screen cinemas to the industry is diminishing rapidly, influenced by the entry into the market of big multi-screen complexes located in the main urban areas. The smaller operators who find themselves near to the catchment areas of the multiplexes are beginning to lose ground.
 
The leading exhibitor in Germany is well ahead of its competitors in terms of the number of screens it controls: the Riech group manages over 400 screens via its various subsidiaries (UFA Theater Ag, Olympic, Heinz Riech etc.). The majority of screens are located in towns with populations of more than 100,000. This company has concentrated, since it was founded in 1945, on the exhibition sector, and now holds a market share in the region of about 15%. The group does not bring together production and distribution activities; it does however control screen advertising in the country. The group is organised regionally, with its administrative centres in the principal cities of North Germany (Berlin, Hamburg, Mainz and Düsseldorf, where it is headquartered).
 
 
Access by Films to Screens
 
 Companies involved in both distribution and exhibition
Distribution market share
(% admissions)
Exhibition market share
(% admissions)
 
1990-1992
1992
1992
Neue Constantin
6%
4%
1%
UIP
17%
16%
3%
Warner
25%
26%
0.2%
 
 
There is only small-scale vertical integration of distribution and exhibition in Germany. The big exhibitors are not involved in the distribution sector, and the distributors (Neue Constantin, Warner) only play a symbolic part in the exhibition industry.
 
However, it is reasonable to anticipate a growth in the degree of vertical integration parallel to the development in multiplexes: in practice, the firms which enter the multiplex market in Germany are already firmly entrenched in the distribution market (such as Neue Constantin). Moreover, there is a substantial presence amongst them of subsidiaries of the US majors, like UCI and Warner, which are dominant in the distribution sector, particularly internationally. UCI, with 3 multiplexes, is already the biggest non-domestic exhibitor in Europe, and Warner is also present with 1 multiplex.
 
As far as one can tell, however, vertical integration of distributors and exhibitors does not substantially influence programming strategy: the distributors who control cinemas manage their activities in the different sectors as separate profit centres, and the cinemas are not granted any favours as a channel for the distribution of their films. Nor are the other exhibitors deprived of prints in order to enhance the profit of the cinemas controlled by a vertically integrated group.
 
The majority of Länder (regional governments), that regulate commercial practices, tolerate exclusive distribution agreements with exhibitors located in the main towns. Certain Länder allow a block-booking practice. Conflicts are rare, and there are regional offices of fair trading who can be called on to arbitrate.
 
 
Ticket Prices and Exhibitors' Shares
 
 1992
Germany
EU average*
Average ticket price incl. taxes (ECUs)
4.32
4.19
Average rental as a % of box office net of tax
45%
47.2%
Exhibitor's average share (%)
55%
52.8%
Exhibitor's share of ticket price (ECUs)
2.16
1.93
Exhibitor's average share per screen (000 ECUs)
62
63
* weighted average
 
The average ticket price is in line with European norms, but emphasis must be placed on the large discrepancy between the prices charged in the East (2.66 ECUs) and those charged in the rest of the country.
 
Film rental rates are fixed nationally by the distributors, and in the case of films with great potential, which command higher rates, they are negotiated between the exhibitors' and distributors' trade associations. In practice, certain preferential rates are applied to showings in the less profitable local markets where the infrastructure for exhibition is more fragile: this is why industry organisations have fixed the maximum rental for single screen sites in areas with a population of less than 50,000 inhabitants at 45%.
 
The average film rental charged by the distributors has increased significantly over the last ten years: it has changed from 35% of gross receipts in 1980 to 42% in 1992, that is about 45% of net receipts. This increase in the average reflects the decreasing importance of films outside the exclusive first-run market and shorter time runs of higher rates at the beginning of the period of the run.
 
 
Cinemas Provision
 
 1992
Germany
EU*
Number of screens per 100,000 population
4.56
5.24
Number of seats per screen
200
266
% large screens
19%
24%
% Dolby
55%
51.4%
% multiplexes (7+ screens)
11%
10.7%
* weighted average
 
The first multiplex with more than 9 screens was built by UCI in 1990, and included within the same complex leisure facilities and a restaurant. Nowadays, there are 7 complexes of this sort, which together have 90 screens. In 1992, the total admissions for these theatres, which only represent 2.5% of sites, was more than 6.5% of the national total. In the areas in which they have been built, they have breathed new life to cinema-going.
 
These multiplexes are beginning to play a crucial role in the exhibition industry. The success of this type of establishment has resulted in a wave of projects emanating from the current operators, particularly UCI, Warner (in conjunction with Neue Constantin), UFA and the Flebbe group, which plan to build more than 20 new multiplexes in the big German urban centres over the medium-term.
 
The influence of the multiplexes on the average quality of German sites is obvious: the sound equipment of the theatres, now mostly fitted with Dolby stereo systems, is an indicator of the movement towards modernisation which the big complexes' high quality screens have begun. In common with the rest of Europe, the least well-equipped cinemas are those with only one screen, outside the urban areas, which are increasingly rare, and tend to disappear unless aided by the town councils or the Länder. The cinemas in former East Germany are also clearly distinct from those in the rest of the country: they are characterised by single-screen sites, with a big screen and a larger seating capacity than the German average (329 seats in the theatres in the East compared with only 234 in the West).
 
The large size of East German cinemas in relation to new exhibition strategies is also reflected in the level of their commercial performance: exhibitors in the East achieve only 94 admissions per seat per year, compared with 122 in West Germany.
 
Average performance in terms of seating occupancy of German cinemas is clearly below the European average (124), and particularly below the average recorded in countries which have a strong multiplex presence (Belgium, with 163 admissions per seat per year, and the UK, with 199). This confirms the duality of the market, which, despite radical changes spearheaded by the presence of multiplexes, is characterised by numerous single-screen operations and still experiencing poor performance levels.
 
 
Programming
 
 1992
Germany
EU*
US films' market share
83%
74%
European films' market share 

  - of which national films
16%
 
10%
24%
 
17%
Art-house & experimental: screens as % of all screens
15%
10.8%
Art-house & experimental: share of admissions
16%
9.7%
* weighted average
 
The codes of practice for programming have evolved alongside distributors' marketing strategies. This relates to the release of mostly American "blockbusters", which are only shown for a very short period. The distributors make available to the exhibitors an increasing number of copies of these films (300 - 600 of the most successful), enabling them to "flood" the market on the first week of a run, and to concentrate admissions into a maximum period of six weeks (compared with the average run at the beginning of the 1980s of three months).
 
It is interesting to note that this practice, which has developed at the expense of repertory, of second-run films, or of more specialised films (where films are released with fewer prints) has incited exhibitors to seek a limit to the number of prints of top films, in order to protect the programming diversity offered by cinemas. This proposal, which has not yet been implemented, goes against the flow of exhibitor's wishes in other countries in Europe. They favour the release of a maximum number of copies for "blockbusters", in order to benefit from the nationwide promotion of the film, and to stimulate more visits to their cinemas.
 
Despite the large size of the art-house sector, US films account for an increasing share of admissions, a trend which will no doubt accelerate with the growth of multiplexes.
 
Distributors' and exhibitors' trade associations define art-house fairly loosely, as establishments where programming includes a large variety of types of films. About 200 screens are thus classified by the industry organisations and 300 classify themselves as "art-house". This section of the cinema market has tended to grow slowly, reaching 16% in 1992. It is, however, worth noting that programming in these cinemas now includes an increasing number of very popular films, and this is in spite of subsidies for quality of programming granted by many of the Länder. So it would be too simplistic to impute the good performance of these theatres solely to art-house films.
 
 
Role of the Public Authorities
 
 1992
Germany
EU**
Taxes: 

                              - VAT 
                              - Other taxes 
                              - Rights (musical) 
 
 
7.00%
2.00%*
0.49%
 
 
10.80%
5.18%
-
- Total/ticket (in ECU)
0.40
0.65
Financial assistance: 

                             - Total (in ECU Millions)
 
 
5.2
 
 
52.7
                   - Per ticket (in ECU)
0.05
0.09
* average 1.5-2.5%
** unweighted average
 
The Länder governments hold most of the responsibility for regulating exhibition located within their jurisdiction. However, Germany also has a public body which is responsible for supervising the sector at the federal level: the Filmförderungsanstalt (FFA). The role of industry associations is also important: the SPIO, which supervises and brings together the different professional committees for the film industry, is often consulted about, and used as a mediator over, regulatory decisions and the implementation of new commercial practices.
 
Taking into account interest-free loans, over DM 20 million of public funds were distributed to the exhibition industry in 1992 by the different federal and regional bodies. The FFA made DM 13 million worth of interest-free loans to exhibitors, and part of the federal subsidies came from a system of taxation of cinema takings (which corresponds to less than 2% of net receipts).
 
The principal institutions dispensing these funds are the FFA, financed by the tax on exhibition and by levies on the distributors and on video clubs, and the Ministry of the Interior (BMI). The FFA finances cinema renovation programmes, and a subsidy to the release of prints of films to towns with a population of less than 20,000. The BMI favours subsidising exhibition, and specialist programming. Over and above this, certain Länder, especially the regions of Nordrhein Westfalen and Bavaria, have provided important financial assistance (DM 2.7 million each), and play an important role in the development of the cinema exhibition industry in Germany.