2 Vertical Integration Movements Within the European Cinema Exhibition Industry
 2.1 Introduction
Since the 1950s, various theoretical writings dealing with industrial strategy have shown the importance, for an economic actor, of being present at the different levels of the sector in which he exercises his core business, upstream activities (production, and even production of raw materials) and downstream commercialisation.
This situation, known as vertical integration, can therefore be defined as the presence of the same group, or the same enterprise, in the activities of production, commercialisation and sales of a given product or service. They are a result of the decision of a firm not to use market transactions but rather to use its own resources to achieve its objectives, as this latter solution is considered less risky, less costly and/or easier than the former.
In the film industry, one can talk about situations of complete vertical integration when describing cases where enterprises or groups take part in the activities of production, distribution and exhibition. For our purposes, we will also be considering as integrated structures which "only" combine the activities of distribution and exhibition.
From this point of view, we consider that the film constitutes the principal "input" of exhibition activity. However, even if it is the essential element for this activity, it is not the only one: exhibition activity also has recourse to other goods and services which can also be the object of vertical integration initiatives. The Kinepolis group, for example, alongside its exhibition activities, also has at its disposal a department specialising in the distribution and maintenance of cinema equipment (projectors, etc.) and an engineering and consultancy subsidiary. These strategic practices remind us that, at the beginning of the century, cinema throughout the world was dominated by integrated structures, controlling even the production of materials. Such practices are marginal today. Although they are interesting, it is beyond the scope of this analysis to consider them in depth, insofar as they represent instances of diversification, rather than of a shift to integration.
On the other hand, we will look in some detail at downstream integration - along the value chain upstream is the sector which sells, downstream is that which buys - and at upstream integration, that is, exhibitors who move up the chain in order to get a footing in the distribution market.
The dangers of vertical integration movements
Whatever sector one is dealing with, vertical integration strategies are frequently vigilantly watched by the public authorities, who fear the appearance of discriminatory practices - and therefore not optimal behaviour - between the players within the sector. In cases of "complete" vertical integration, the totality of "production" of the upstream company is absorbed by the downstream firm, and it does not sell any output on the "open market", while the downstream firm deals with the upstream company, and it alone. Both companies then renounce the "open market" for the supply and sale of their production.
In the cinema sector, the equivalent of this is that a company owns or controls a cinema circuit and a distribution structure, and that the group programmes the cinemas exclusively with films which are distributed by the distribution unit of the group, and in which the latter unit only offers prints to the cinemas belonging to the parent group.
This seems unlikely: this situation requires that the distributor has at his disposal a cinema in each local market, which does not occur: it seems limited in practice to a few alternative structures, in the art-house and experimental sector, where the market potential is limited, in each country, to the capital and a few important towns. It is therefore more relevant to consider cases of "incomplete" or "compartmented" integration. The principle of reciprocal exclusivity is then no longer applied.
However, in the cinema sector, such situations of "incomplete" integration can still be sufficient to complicate, in one market or another, independent (non-integrated) exhibitors' access to films.
In the United States, the authorities are - or rather have been - particularly concerned to limit vertical integration strategies. Since the Consent Degree of 1948 and according to the anti-trust legislation, the Majors are not allowed to intervene in the exhibition sector(12). This prohibition, reinforced by anti-trust legislation, is, however, only applicable within the American internal market, and does not concern any of the majors' foreign activity - particularly that in Europe.
Throughout Europe, there is not one example of a country which has imposed comparable regulatory obstacles to those existing in the United States. This is, undoubtedly, one of the reasons for the presence of the leading US groups as exhibitors in the Old World.
This report aims therefore to identify trends towards vertical integration in the European exhibition sector, to assess their significance and to evaluate their repercussions.
It also seeks to show a dozen players whom it does not seem exaggerated to describe as "integrated structures".

(12) These regulations are weakening at present: the shareholders of several studios also have interests in exhibition. Thus Sony, owner of Columbia, also owns the Loews network, with over 1,000 screens already. Another example is Viacom, who are in the process of bidding for control of Paramount, in a friendly takeover, and who also own a cinema circuit.