Annex 2: Country Studies
Italy
Key Points
· Concentration takes many forms.
· The part played by programming
agreements in each local market.
· A particularly speedy fall in the
numbers of screens after 1980.
· The development of multi-screens
and the progressive improvement in the quality of sites.
· The importance of the art-house
and experimental cinema network.
· The actions of the regional and
local governments.
Screens and Admissions
|
Italy
|
EU
|
Italy
|
EU
|
|
Admissions
|
Admissions
|
No. of screens
|
No. of screens
|
1960-92 |
-
|
-80%
|
-
|
-40%
|
1980-92 |
-64%
|
-38%
|
-64%
|
-24%
|
1985-92 |
-28%
|
- 3%
|
-38%
|
- 9%
|
1992
|
Italy
|
EU
|
|
|
Average*
|
Total
|
Number of screens |
3,020
|
|
16,621
|
Number of seats ('000) |
902
|
|
4,509
|
Number of admissions per seat |
93
|
124
|
|
Total number of admissions (millions) |
83.6
|
|
561.0
|
Number of admissions per head of population |
1.45
|
1.61
|
|
* unweighted average |
Concentration in Exhibition
1992
|
Italy
|
EU*
|
|
Screens
|
Admissions
|
Screens
|
Admissions
|
Market share of Top 3 players |
3%
|
6%
|
18%
|
34%
|
Market share of independents responsible for
own programming |
89%
|
88%
|
68%
|
47%
|
* weighted average |
Since 1980, falling admissions have brought in their wake a certain
concentration of the exhibition sector. But, in contrast to the experience
of other countries, this has taken several forms. As numerous cinemas organised
themselves into circuits, others associated themselves to programming groups
or entered programming agreements; and the precise form that each of these
took varied considerably. Certain circuits owned their theatres; in other
cases they were simply affiliated; groups or agreements might programme
the cinemas concerned, or merely give them technical, administrative or
commercial support.
The areas of activity of these circuits or groups is also very variable:
they can cover a whole region, or just a province, or even just one locality.
Given that such diversity exists, it is difficult to estimate the proportion
of screens which are members of a circuit, a group or an programming agreement.
Their number is, however, growing, and the power of these networks is developing.
National circuits like Cinema Cinque, have begun to appear in a significant
way only in the last few years.
This circuit, created in 1988 by Fininvest, on the basis of establishments
owned by Gaumont and by Cannon (Paretti), owns 22 establishments (43 screens)
located in the main towns in the centre and north of Italy. With three
million admissions, it controls barely 4% of the Italian market. But its
market share is nearly 20% in Milan and Rome, and reaches more than 45%
in Genoa. Besides this, as well as the establishments which it manages
directly, Cinema 5 programmes about 250 screens located throughout Italy.
The movement towards integration has only just begun, however. The
existing circuits must effectively reinforce their positions in years to
come. Cinema 5 has announced, for example, that it wishes to open new cinemas
in Rome, Milan, Turin and Bologna. And other national circuits, particularly
those linked to production or distribution houses (Cecchi Gori and Mikado)
are in the course of being set up.
The picture which emerges is increasingly an industry moving at two
speeds: on one hand, the cinemas organised into circuits, groups or programming
agreements, which programme the majority of first-run, mainstream films,
and, on the other hand, a collection of independent cinemas, fragmented,
and in a difficult position in relation to distributors.
Access by Films to Screens
Companies involved in both distribution and exhibition
- 1992
|
Distribution market share
(% admissions)
|
Exhibition market share
(% admissions)
|
Penta |
37%
|
3.3%
|
Istituto Luce |
0.4%
|
NA
|
The distributors, who have seen their power reinforced as a result
of a reduction in the number of releases, and by the fact that films are
released on the same day in the majority of towns (see below), generally
prefer to deal with the circuits, alliances or groups, drawing up programming
agreements with them.
The situation is, however, very varied from one provincial centre to
another. In certain "piazze" (areas) a group of exhibitors, organised into
a kind of circuit or group, controls programming. When dealing with the
distributors, they are therefore in a position of power, and can choose
films according to their own needs and obtain exclusivity. The "piazze"
thus seems to be locked-in by more or less permanent agreements between
certain distributors and certain exhibitors. In other cases, however, the
situation is more open.
In the big Italian towns and cities, these programming agreements between
exhibitors and distributors have existed for several years.
This brings us to consideration of a factor which favours the progressive
integration of the sector. These agreements or privileged relationships
between actors seem to be multiplying everywhere, even including some independent
distributors (like Academy Pictures) and the art-house and experimental
cinemas.
Distributors and exhibitors even hold some companies in common, in
order to manage together a variety of services. And there are several cases
of vertical integration: Cinema 5 belongs to the Berlusconi group, and
accounts for 59% of its turnover from films distributed by Pentafilms,
in which Silvio Berlusconi Communications (SBC) holds 50% of the capital.
And, in a different sphere, Istituto Luce, a public network with a dozen
screens, essentially programmes works with whose production it has also
been associated.
These practices of exclusivity and phenomena of vertical integration
are not subject to any specific regulation, except for an article of the
recent law of cinema (see Tab. 16b): up to now, there have not been any
important judicial proceedings. Legal intervention has instead been positive,
seeking to encourage the industry. The Emilia Romagna regional government,
for example, has passed a law which seeks to promote and help cooperation
between cinemas, or the formation of consortia.
Ticket Prices and Exhibitors' Shares
1992
|
Italy
|
EU average
|
Average ticket price incl. taxes (ECUs) |
4.45
|
4.19
|
Average rental as a % of box office net of tax |
50%
|
47.2%
|
Exhibitor's average share (%) |
41%
|
52.8%
|
Exhibitor's share of ticket price (ECU) |
2.30
|
1.93
|
Exhibitor's average share per screen (000 ECUs) |
52
|
63
|
The average ticket price is nearly 4.5 ECU: after the very significant
rise in price recorded between 1989 and 1991 (an increase of 20%), it is
now clearly higher than the average European price. These price increases
explain the rise in box office receipts, despite the continued fall in
admissions.
Commercial relations between distributors and exhibitors take various
forms: in certain cases, for certain provincial cinemas particularly, film
rentals are on the basis of a fixed payment (generally between 150,000
and 200,000 Lit.); in other cases, it is subject to proportional remuneration
(on box office net of tax) with payment of a guaranteed minimum; but the
most usual form is that of a proportional remuneration without a guaranteed
minimum.
Precise rental conditions were the subject of an agreement in 1993
between the exhibitors' association (the ANEC) and the distributors' federation
(the UNDF). Rentals are a function of gross takings and the duration of
the showing. For the leading cinemas in the region, the reference percentage
according to which takings should be split is 53% for a period of showing
from one to three weeks. The rate generally decreases after three weeks.
There are four different levels of rental depending on the annual revenues:
50% above 700 million Lit, 48% between 450 and 700, 40% between 200 and
450 and 30% below 200.
The exhibitor also carries some of the cost of publicity (billboards,
press, radio and local television). In certain exceptional cases, the costs
relating to operating the theatre can be subtracted from rentals payable.
Rentals therefore almost always fall between 40 and 50%; cinemas which
are members of a group or a circuit generally obtain more advantageous
conditions than the independent cinemas.
Cinemas Provision
1992
|
Italy
|
EU*
|
Number of screens per 100,000 population |
5.21
|
5.24
|
Number of seats per screen |
-
|
266
|
% large screens |
40%
|
24%
|
% Dolby |
33.3%
|
51.4%
|
% multiplexes (7+ screens) |
1%
|
10.7%
|
* weighted average
For a long time, Italian exhibitors have encountered difficulties in
reacting effectively to the fall in admissions. Low investment, in particular,
has hampered the renewal of the industry.
It was not until nearly half way through the 1980s that the first signs
of modernisation were evident. This movement was accelerated by the adoption
of measures to provide subsidies for restructuring the industry (law n.
378/1980 and n. 163/1985).
The development of multi-screens was therefore assisted: since that
time, 72 establishments (totalling 179 screens) have been built consisting
of 2 screens or more, and amongst them, at least 20 complexes with more
than 3 screens. The Odeon in Milan, belonging to the Cinema 5 circuit,
with 10 screens, is currently the largest complex in Italy. The same circuit
has also announced plans to build much bigger multiplexes (up to 20 screens)
in Rome, and in the Milanese suburbs.
However, parallel to the improvements in quality, there has been an
extremely rapid fall in the number of cinemas: from 8,450 in 1980 to 3,100
in 1991.
Nevertheless, even if the density of cinemas (5.2 theatres per 100,000
inhabitants) is equivalent in Italy to the European average, finding a
cinema which is open all week means living in a town with at least 15 to
20,000 inhabitants, and, in certain regions in the south, the situation
is even worse.
This restructuring of the industry has already contributed to a slowing
down in the fall in admissions. But the movement towards modernisation
is still far from over. The number of screens equipped with a Dolby system
or with a 70mm projection, and the proportion of screens found in multi-screen
complexes are all well below European averages.
Programming
1992
|
Italy
|
EU*
|
US films' market share |
69%
|
74%
|
European films' market share
- of which national films |
30%
19%
|
24%
17%
|
Art-house & experimental: screens as % of
all screens |
10.5%
|
10.8%
|
Art-house & experimental: share of admissions |
10%
|
9.7%
|
* weighted average
At the beginning of the 1980s, films were initially released in cinemas
located in the leading towns in the different regions, before being programmed
in other districts. Today, after the closure of a large number of cinemas
in the city centre, in the suburbs and in the small towns, this practice
no longer occurs: films are released on the same day in the leading regional
towns, in the provinces and in other important towns, indeed even in the
middle-sized towns.
This practice of wide release of films allows investment apportioned
to production or marketing to be paid off more quickly, and also frees
works more quickly for the other windows (video, pay-TV etc.). It results,
nevertheless, in an increased concentration of box office on a reduced
number of titles. The art-house and experimental cinemas are defined as
those which programme films "with cultural interest", traditionally excluded
from the commercial cinemas. According to regulation, cinemas whose programming
consists of at least 70% art-house and experimental films enter into this
category, and have the right to subsidies reserved for this type of cinema.
It is, however, difficult to collect accurate statistics for these cinemas,
and even more difficult to estimate exactly either their revenues or their
market share. This is particularly the case because some cinemas programme
art and experimental films permanently, and others only show them on certain
days of the week.
The Italian Federation of art-house (FICE) has under its umbrella 294
adherents, which, together with about 30 cinemas affiliated to A.I.A.C.E.,
represents more than a tenth of Italian screens. A.I.A.C.E. is a non-profit
making organization, born in 1962. One can therefore assume that more than
one cinema in ten is "Art-house", which puts Italy level with the European
average. In Italy, the position of these cinemas is, if anything, more
favourable, as they benefit from growing public success, particularly amongst
young people, and also various subsidies from national, regional and local
governments (subsidies for modernisation, and operating subsidies). This
situation explains why even private companies are considering the possibility
of investing in this sector. And it is through this channel that the majority
of European films manage to reach Italian spectators.
Role of the Public Authorities
1992
|
Italy
|
EU*
|
Taxes:
- VAT
- Other taxes
- Rights (musical)
|
9.00%
9.00%
2.1%**
|
10.80%
5.18%
-
|
- Total/ticket (in ECU)
|
0.95
|
0.65
|
Financial assistance:
- Total (in ECU Millions)
|
3.8
|
52.7
|
- Per ticket (in ECU)
|
0.04
|
0.09
|
* unweighted average
** receipts net of
tax
Faced with the rapid restructuring of exhibition, a new law was published
on March 1, 1994 (Law N.153). The law modifies the previous law dating
since 1965.
This new law abolishes the obligation to programme Italian or EU films.
From February 1, 1995 tax incentives will be provided if at least 25% of
days per quarter of year are programmed with Italian or EU films.
As we have said above, there is no specific law which regulates access
to films or the split of box office; box office is subject to a single
control, by the Society of Authors and Publishers (SIAE) which, amongst
its other activities, levies the VAT and the Entertainment tax.
The Law on cinema contains an article (Art. 13) which limits the integration
of the sector: the antitrust Authority can forbid the ownership or control,
by a single operator, of more than 25% of distribution's market share and,
at the same time, of more than 25% of the number of cinemas, both on national
or local (for the 12 main cities) basis.
The regulation defines the periods of the various release windows:
8 months for video, 12 months for pay-TV and 24 months for free-TV, starting
from the first cinema release in Italy.
The rate of VAT which is applied to box office receipts is 9%, on top
of which there is an entertainment tax (also 9%). Moreover, it is important
to take into account the various taxes which are levied at local level.
As there are no local taxes which are specific to the cinema, the taxes
affecting exhibitors are those levied on all enterprises: ICIAP (a tax
on commercial activities), ICI (a communal property tax), ILOR and INVIM
(other fixed levies), a refuse tax.
For each day that an Italian or EU film is shown, a measure in the
law of 1965 which is still in force provides for an exhibition tax refund
of 35% to the exhibitors.