· The number and power of the networks.
 
· The growing presence of foreign investment.
 
· The market power of the distribution companies.
 
· Particularly high rentals.
 
· The number of multi-screen complexes.
 
· The perverse effects of programming quotas.

Exhibition in Spain is controlled by less than thirty players throughout the country. 26 circuits between them account for 80% of the market. And the five leading players, with 244 screens, receive over a third of the box office revenues. The vast majority of the circuits are family enterprises, which have progressively developed. However, four exceptions should be highlighted:

• two circuits run by foreign operators: Edeline, linked to the principal French circuits; and, above all, the market leader, Cinesa, a subsidiary of UCI, which, with 73 screens, is responsible for 10% of the market.

• two "circuits" resulting from the grouping together of independents: ACEC comes from the union in 1985 of 13 Catalan exhibitors, and Cines Centro, based in Galacia.

For exhibitors, access to films is firstly likely to be complicated by movements towards vertical integration. Nearly 200 screens (including a fifth of all-year round screens) are at present controlled by the big distribution houses like UIP (Cinesa), Yelmo Films, Lauren Film, Alta Films (Cines Renoir) and Izaro Films (Empresa Reyzabal).
 
But we must emphasize that these vertical integration phenomena have very different consequences in terms of programming. Cinesa tells us that UIP only supplies 30% of its programming, but Lauren Films' cinemas show very little except the films which are distributed by their mother-company.
 
As well as these vertical integration phenomena, there are numerous more or less formal ties between distributors and circuits. The ties between Warner Española and the Bautista Soler network are one example.
 
Whatever ties there may be, the increasingly frequent adoption of "intensive programming" techniques helps reinforce the position of the distributors in every way, particularly as the distribution sector is peculiarly concentrated, with less than 10 companies controlling 90% of the market. The margin for manoeuvre of exhibitors, particularly the independents, is therefore considerably reduced. In these circumstances, it is very rare to see programming which is not determined by the distributors.
 
In the smaller towns, the distributors generally channel all their films through a single establishment. In the more important ones, the distributors decide how films are shared out between the different exhibitors: this is why they are called "circumstantial circuits" ("circuitos de circumstancias"). Cinemas sink or swim according to the whims of the distributors.
 
These practices have led several independent exhibitors, especially in major cities, to enter programming agreements with circuit owners, making it easier for them to access successful titles. In certain instances they may even obtain more competitive rates, since it is reckoned that a margin of 2-3% exists between rates paid by independents and those negotiated by the circuits.
 
There are other programming agreements which allow independent cinemas access to successful films at the same time as the major circuits.
 
Finally, in future, owing to a judicial decision, block-booking is now forbidden: this has until now been imposed by several members of the ADICAN (the association of distribution companies dependent on the "majors").
 
 
Ticket Prices and Exhibitors' Shares
 

1992	Spain	EU average
Average ticket price incl. taxes (ECUs)	2.75	4.19
Average rental as a % of box office net of tax	53%	47.2%
Exhibitor's average share (%)	47%	52.8%
Exhibitor's share of ticket price (ECU)	1.20	1.93
Exhibitor's average share per screen (000 ECUs)	55	63

 
The average ticket price stands at 350 Ptas, which is certainly higher than Portugal, but clearly lower than the prices recorded in the majority of European countries. Despite the variations recorded according to the location of the cinema and the nature of the establishment (in certain cinemas in Madrid and Barcelona, the lowest price is 600 Ptas) it still seems that the cinema is good value in Spain. Cinesa initiated the practice of declaring Wednesday the "spectator's day", and, as a result, numerous cinemas now apply a general reduction of 50% on that day.
 
There are basically two forms of contractual relations between distributors and exhibitors: proportional remuneration and a fixed payment.
 
The proportional remuneration system is strongest in theatres where box office receipts are more than 25 million Ptas. These are essentially theatres located in the big cities. Rentals are not fixed by any specific regulation. Consequently, it varies according to the likely success of the film, and the period for which it is likely to be shown. Thus, for a film with high commercial potential, the rental in the first two weeks is likely to be 60%. For an average film, in the fourth week of showing, it is 50%. A variant on this system of remuneration is to review the rental in terms of the receipts received during the screening of the film.
 
With some exceptions, a guaranteed minimum is not applied. The distributor's share, however, is one of the highest in the European Community: in the case of proportional remuneration, the average proportion of takings is 53%. This extra cost is therefore significant in relation to other European countries.
 
Cinemas which receive less than 25 million Ptas a year, that is establishments in rural areas or small towns, are subject to a system of fixed remuneration, except for successful films for which a proportional remuneration is applied. The precarious financial position of this type of cinema has led the Association of distributors (the FEDCINE) to make an agreement with the exhibitors' association, in order to set a maximum rental for this type of cinema. It is currently 60,000 Ptas per film. This agreement, however, is not respected.
 
 
Cinemas Provision
 

1992	Spain	EU*
Number of screens per 100,000 population	4.63	5.24
Number of seats per screen	498	266
% large screens	27%	24%
% Dolby	40%	51.4%
% multiplexes (7+ screens)	8%	10.7%

* weighted average
 
The Spanish exhibition industry has undoubtedly seen significant efforts to modernise in the last decade. In fact, 50% of screens have now been renovated, or are part of recently-built cinemas.
 
This modernisation drive has mostly consisted of building multi-screens. At the beginning of 1993, there were 200 complexes of this sort, which together possessed 684 screens, which is 38% of all screens, and nearly 70% of the screens which are open all year round. The majority of complexes have appeared since 1980, and modernisation investment since then has almost exclusively affected towns with more than 100,000 inhabitants.
 
By contrast, the profitability of the single-screen establishments in the small towns is too low to allow their operators to undertake any of the necessary modernisation. The technical state of this part of the sector has hardly changed, and stays very mediocre compared with the sector as a whole. It is on the basis of these reports that distributors state that Spanish exhibition is 10 years behind the countries of Northern Europe. All the more so since it seems that, due to insufficient maintenance even some recently-opened cinemas run the risk of ageing quickly.
 
Nevertheless, Spanish exhibition undoubtedly has at its disposal several cinemas which are in a better state than any other Mediterranean country: the number of screens equipped with Dolby, computerised box offices or air-conditioning, as well as the proportion of multi-screens, are clearly higher than for instance in Greece or Portugal.
 
The impetus towards modernisation, in Spain as elsewhere, is driven by the circuits.
 
The market forces which brought these changes have also caused the closure of a significant number of cinemas located in the small towns. Of the 5,222 closures recorded between 1966 and 1991, more than 4,000 were in rural areas, or in communities with less than 50,000 inhabitants. In Andalusia, some provincial capitals only possess one cinema.
 
On the other hand, the new multi-screen complexes are clearly well-established in the big towns, often in commercial centres located in the outskirts. When it comes to the big urban areas, it is clearly closeness to other commercial activities, and the ease of access and parking, which appear to be the decisive factors in the location of the new cinemas.
 
 
Programming
 

1992	Spain	EU*
US films' market share	77%	74%
European films' market share    - of which national films	22%   9%	24%   17%
Art-house & experimental: screens as % of all screens	6%	10.8%
Art-house & experimental: share of admissions	6%	9.7%

* weighted average
 
Since 1980, programming practices have also witnessed a profound transformation: in a few years, the number of films distributed has decreased by half. There is also a growing concentration of admissions towards a small number of films: in 1980, the top ten films recorded less than 10% of admissions; in 1992, they achieved more than a quarter (25.7%).
 
Moreover, as the scale of releases has grown, the life cycle of the film in the cinemas is significantly reduced, from 2 years at the beginning of the 1980s to less then six months currently.
 
This "intensive" programming policy particularly favours products from the other side of the Atlantic: the market share of American films is growing significantly, attaining a level of just a little less than 80% at present, whilst it was only 41% in 1981. By contrast, European films' market share, despite programming quotas (see overleaf), is in free fall: more than 50% in 1981, just a little more than 20% twelve years later, which shows, amongst other things, the fact that, calculated by showings, the performance of EU films is a long way below that of American products.
 
Spain is distinct from other European countries in that the proportion of non-national European films remains higher (as a result of quotas).
 
According to the law, Art and Experimental cinemas are classed as "those which programme films which, according to the Institute of Cinema and Audiovisual Art (ICAA), display either cultural interest or have an experimental form" for at least a minimum number of days, fixed according to the location of the cinema (every day in the year in Madrid and Barcelona, 25 days per year in the towns with less than 50,000 population).
 
This very strict definition dates from the Franco period, and its aim was to limit the numbers of this type of cinema - it has effectively caused the almost total disappearance of cinemas which, in strict terms, could be defined as art or experimental. By contrast, there has been a slight growth in the number of cinemas which now show films in original language version.
 
 
Role of the Public Authorities
 

1992	Spain	EU*
Taxes:                                - VAT                                - Other taxes                                - Rights (musical)	6% - 0.66-1%	10.80% 5.18% -
- Total/ticket (in ECU)	0.20	0.65
Financial assistance:                                - Total (in ECU Millions)	2.18	52.7
- Per ticket (in ECU)	0.03	0.09

* unweighted average
 
The rate of VAT applied to all admissions is 6% (15% for films classified "X"). With the exception of taxes levied on all businesses (property tax etc.) there is no tax which applies particularly to exhibition.
 
Since 1985, the ICAA, under the supervision of the Ministry of Culture, has been in charge of film policy. It is therefore this institute which monitors admissions. Since 1990, in order to accelerate computerisation, and to facilitate the adherence to regulations and the calculation of subsidies granted to producers, it has promoted the computerisation of box offices by meeting the cost of equipment and software. This explains the peculiarly high level of cinemas with computerised box offices.

In the field of regulation, programming quotas are the most important characteristic of the Spanish industry. Since 1986, exhibitors who show dubbed films have, in practice, to show one day of EU films for every two days of foreign films. If a cinema does not abide by this regulation, sanctions are applied which go as far as the closure of the cinema. This system, supported by producers, has been the object of substantial industry criticism: it seems to have effects on profitability. Certainly it decreases demand for American "B" films, but it contributes to stimulating demand for the most successful US films. In the absence of regulation on rentals, it pushes the prices of these products up higher. Amongst other things, given the lack of success of European films, exhibitors claim that the regulation diminishes their operating returns to the extent that they are constrained from investing in the sector.
 
In view of these criticisms, the next review of quotas may seek to lower them.
 
On the subject of release windows, regulation is by contrast less rigid. As a general rule, films, be they Spanish or foreign, cannot be made available unless they follow the provisions of the law of 1988 on domestic television: this requires that two years elapse after cinema release before they are shown on television (6 months in the case of a co-production). Films which have benefitted from a subsidy are subject to even stricter rules: 6 months after cinema release for release on video, a year (reduced to six months for co-production) for a TV showing (pay TV or free TV, domestic or public). Other than that, there is no specific regulation concerning access to films, nor on the split of revenues.
 
Public subsidies given to exhibition fall into three categories: automatic subsidies, selective subsidies and low-interest rate loans.
 
For showing an EU film which receives a distribution subsidy, cinemas have received, since 1992, a maximum of 5% of gross takings recorded at the time they screened the work. For 1993, these subsidies rose to 100 million Ptas.
 
There are also subsidies available for renovation of cinemas in rural areas or those which have low profitability. Their amount will depend on the ICAA's budget; since 1991, the budget designated for this was low (of the order of only 50 M Ptas per year), so the number of cinemas benefitting from these was necessarily limited (only a score of theatres a year).
 
Finally, exhibitors who have an account at the International Bank of Spain are also eligible for a reduction in interest rates, thanks to an agreement made between that bank and the ICAA.