2.2
Vertical integration movements in Europe
The significance of trends towards vertical integration
The significance of trends towards vertical integration is limited:
in the majority of countries, the major distributors who control a cinema
circuit only possess a very small share of the exhibition market. In every
case, the scale is too limited for the existence of the circuit to pose
a major film supply problem for other exhibitors, except perhaps in specific
local markets.
Nevertheless, in various European countries, certain leading players
in the exhibition sector control or own a distribution structure. But,
up till now, the significance of these distribution structures is very
limited: in Belgium, for example, Kinepolis distribution distributes less
than five films a year, which is obviously too little to supply, in any
real way, the group's cinemas.
It is also worth noting here that scarcely a dozen structures can risk
being classified as integrated, if we define this as holding a market share
of more than 5% in both exhibition and distribution, in at least one European
country.
Most of these companies carry out their activities within only one
national market. UGC is, however, present in both France and Belgium (where
it controls the country's second biggest network). And Lusomundo, the market
leader in Portugal in both exhibition and distribution, intends to extend
its activities in Spain. But, in both these cases, these structures cannot
be truly described as integrated except in one national market: in Belgium,
UGC has been present as a distributor for no longer than 10 years, and
the Lusomundo projects in Spain will be limited to the exhibition sector
alone.
It is true to say, in this context, that the only integrated structures
at international level are the US companies. And even here, their specific
national significance is limited: Warner, MGM and UCI are all present in
the UK, and in three other European markets. Despite the spectacular progress
they have made within the exhibition sector, and their power in the distribution
sector - UIP and Warner are the principal distributors in almost all European
markets - the Majors have, up till now, only succeeded in developing a
network of cinemas in a minority of EU countries. And Warner still does
not hold more than 3% market share in any European national exhibition
market, with the exception of Denmark, where it is associated with a local
group.
Moreover, one must be very careful when describing United Cinemas International
(UCI) as part of an integrated structure. Certainly, it is the result of
a joint venture between the two "majors", Paramount and MCA/Universal,
and one cannot help being tempted to see its close links with the UIP distribution
structure. But that does not alter the fact that UCI constitutes an autonomous
legal entity, with part of its shareholding body different from UIP's (which
also includes MGM(13))
and exercises a certain autonomy when it comes to programming.
Despite these reservations, this report is still inclined to consider
that the two companies' economic reasoning makes them behave like a vertically
integrated structure.
|
Table 35
Major vertically-integrated companies in the European Union (1990-92)
|
| Country |
Companies
|
Share of exhibition
(% admissions)
|
Share of distribution
(% admissions)
|
| Belgium |
-
|
|
|
| Denmark |
MGM/Nordisk Film Biografer AS
Dagmar Scala
|
36%
9.5%
|
40% (Nordisk Group)
22% (Warner & Metronome)
|
| France |
UGC
Gaumont
Pathé/AMLF
|
14.8%
11.4%
7.3%
|
8.5%
7%
15% (AMLF)
|
| Germany |
-
|
|
|
| Greece |
-
|
|
|
| Ireland |
Ward Anderson
UCI/UIP
MGM
|
47%
22%
11%
|
12% (Abbey Films)
n.a. (UIP)
n.a. (UIP)
|
| Italy |
Penta Films/ Cinema 5
|
4%
|
37%
|
| Netherlands |
MGM
|
26%
|
n.a. (UIP)
|
| Portugal |
Lusomundo
|
55%
|
60%
|
| Spain |
Cinesa (UCI)
|
9.5%
|
17% (UIP)
|
| UK |
MGM
UCI/UIP
Rank/Odeon
|
29%
18%
21%
|
26% (UIP)
9% (Rank)
|
| All EU |
|
25%
|
24%
|
Analysis of national markets
Germany
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Warner |
25%
|
1%
|
| UIP (1) |
17% (UIP)
|
3% (UCI)
|
| Neue Constantin |
6%
|
1%
|
| (1) See, however, the comments made on
p. 51 |
In Germany, vertical integration phenomena are currently weak: the
most important exhibitors are hardly present in the distribution sector.
Thus, for example, the Riech group, which owns more than 400 screens located
in the most important urban areas, has limited it activities, since its
creation in 1945, to the exhibition market alone. If one of its subsidiaries
is known as UFA Theatre AG - the name of a subsidiary of the multi-media
group Bertelsmann - this is due to the origin of the company, which was
acquired over 20 years ago from Bertelsmann. Riech therefore carries out
no production or distribution activity. The same applies to the second
biggest network, Flebbe, even if one of its shareholders, Scriba (20%)
also hold shares in Tobis (30%), which is a medium-sized distribution structure.
On the other hand, the major distributors, who are either American
(Warner, UIP, etc.) or German (Neue Constantin) do not as yet possess anything
more than a symbolic share of the exhibition market. Warner and Neue Constantin
only own one complex each to date (respectively 9 and 13 screens). UCI,
even if it is seen as linked with UIP, owns three complexes (42 screens),
and its market share in terms of admissions still is no more than 3%.
Moreover, as far as we can see, these vertical integration mechanisms
have hardly any influence on cinema programming practice: the screens which
the distributors possess are not used as privileged channels for the programming
of their films, and, in the case of these groups, the different units are
constituted as autonomous bodies, whose internal invoicing is always at
market prices.
Nevertheless, these vertical integration trends can be expected to
accelerate with the opening of multiplexes. The companies which are opening
such complexes are often in practice also distributors. This is true for
Neue Constantin, but particularly so for the subsidiaries of the US majors.
Already, UCI is the most important foreign exhibitor in Germany, even if,
out of the 14 multiplexes which UCI proposes to open, only 3 have seen
the light of day, and even if there currently appears to be a pause in
the construction of these establishments.
However, the fact that these multiplexes, as a result of the number
of screens, have developed an "all products" strategy seems effectively
to limit the effect of these trends and their consequences for the other
players in the sector.
Belgium
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Belga (Hemelaer) |
6%
|
3%
|
| Independent Films |
13%
|
1%
|
| Cinélibre |
5%
|
1%
|
| Excelsior (Heylen)* |
1%
|
7%
|
| (*) Heylen ceased trading in September 1993. |
In Belgium, the horizontal integration of the sector undoubtedly has
important consequences for any vertical integration. Therefore, although
one can ask about the repercussions in the medium term of the growing power
of the Kinepolis group - which accounted for well over half the admissions
at the end of 1993 - it seems obvious that access to films is not rendered
particularly difficult by the presence of vertically integrated players.
One sees here a fairly clear separation between exhibition and distribution
functions: the most important distributors are not present in exhibition,
and the principal exhibitors only marginally exercise a distribution function.
The distribution structure of the Kinepolis group (Kinepolis Group
Distribution) is in fact - certainly to date - relatively inactive (2 films
distributed in 1992). On the other hand, Baron Heylen, an historic player
in the sector, who had at his disposal a distribution structure (Excelsior
Films) and a collection of cinemas in the big Flemish towns (Antwerp and
Bruges) was made bankrupt in September 1993.
The strategies of the foreign players do not provide more dramatic
examples of vertical integration trends: undoubtedly as a result of the
power of the Kinepolis group, the US majors do not own a single Belgian
cinema. UGC, present as an exhibitor in Brussels, does not carry out distribution
activities in Belgium, as it does in France. And Gaumont shut down
it Belgian subsidiary - which did not own a single cinema - in 1992.
Two "independent" structures are by contrast present in the two different
channels: the Hemelaer Brothers, who own a complex at Namur and several
cinemas in the smaller Walloon towns, also control a distribution structure
(Belga Films), which has a share of just over 5% of the Belgian market.
And Independent Films, a distribution structure which is growing fast,
specialising essentially in independent American films (Basic Instinct
etc.) also owns two cinemas. Both cases are, however, only regional circuits,
and this obviously limits the possible consequences of vertical integration
for any competitors within the confines of their local markets. Also, given
the limited number of films distributed by their companies, their cinemas
cannot content themselves with supply only from their groups' distribution
structures; they do have to trade with the principal distributors, alongside
the other exhibitors.
Lastly, and paradoxically, the only real case of vertical integration
is to be found in the arthouse sector.
Cinélibre, an alternative distribution structure, specialising
in more demanding films, effectively manages a cinema in the centre of
Brussels, whose programming is made up of works distributed by this company.
Their type of programming corresponds so little to that of the major circuits,
that little conflict seems to arise from this, particularly as, if they
did hold the rights on a film which received wide media attention, their
structure would not make it impossible - in fact, would make it easy to
release the film in parallel, in their own complex and a multiplex (UGC
De Brouckère and/or Kinepolis).
Denmark
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Nordisk via Nordisk Group |
38%
|
36% (MGM/Nordisk Film Biografer)
|
| Warner & Metronome |
22%
|
9.5% (Dagmar/Scala)
|
The vertically integrated companies - either directly or indirectly
- represent over 45% of admissions in Denmark. This figure is even higher
if we consider that Denmark’s exhibition industry is still highly fragmented;
three quarters of screens are in the hands of independent exhibitors. But
the two principal networks are present, in their different forms, in the
other levels of the film sector.
MGM/Nordisk Film Biografer AS, the most important Danish network, has
eight cinemas - three of which it also uniquely programmes - accounting
together for fifty screens, and 15% of the country's screens. The cinemas
are situated in Copenhagen (3), in its suburbs (1) or in the big towns
(Odense, Esbjerg). The flag-ship of this network is undoubtedly the Palads,
in Copenhagen, a multiplex with 17 screens, which realises on its own 40%
of admissions within the capital.
As a result, MGM/Nordisk can largely dominate the Copenhagen market,
even if its influence has declined in recent years: 75% of admissions in
1989, 67% in 1992.
MGM/Nordisk is held in equal parts by Nordisk Film AS, a national holding
company in the communications sector which is in turn held by Egmont International
Holding, and by MGM Holding, whose products are distributed by UIP (cinema
market) and Metronome Video AS (video market). By contrast, Nordisk has
the profile of a vertically integrated group, present in different levels
of the sector: exhibition, distribution (Columbia Tri-Star, Orion, 20th
Century Fox via Constantin, Disney since 1993), audio-visual production
and film production, a domain of activity which is far from negligible
in Denmark, as national films represent, depending on the year, somewhere
between a fifth and a quarter of cinema admissions.
Beyond argument, Nordisk is therefore the principal player in the Danish
cinema market as producer, distributor and exhibitor all at the same time.
But Dagmar/Scala also has, to a lesser extent, a vertically integrated
structure. This company owns two complexes with 4 and 5 screens in Copenhagen,
which gives it nearly a quarter of all admissions in the capital (9.5%
of the national market). And its shareholders - Warner, and Metronome Holding
AS - also hold in common a distribution house - Warner & Metronome.
In addition to this, Metronome Holding has interests in production
companies, and in record distribution companies, and controls Metronome
Video AS, the video distribution company which distributes Warner and MGM
films.
There is also a cinema in Copenhagen, the Grand, which owns a small
distributor, Camera.
The power of the integrated structures where US majors are present
is particularly visible and significant in Copenhagen. Together, their
cinemas, which essentially programme mainstream family films, account for
nine-tenths of the admissions in the capital, a situation which effectively
bars the entry into the market by a new player. All the more so since,
in Denmark, the relationships between the distribution and exhibition branches
of integrated structures are especially strong, as a study of Copenhagen's
programming in 1992 shows. Amongst the films programmed in the MGM/Nordisk
cinemas - the Palads, the Imperial and the Palladium - respectively 69,
65 and 79% of productions were distributed by Nordisk or by its related
companies. These films only represented 20-25% of films shown in the other
cinemas in the capital. On the other hand, 73% of films distributed by
UIP were programmed in the MGM/Nordisk cinemas. Conversely, films distributed
by Warner and Metronome represented 60% of the productions programmed by
Scala and 68% of those programmed by Dagmar, the two complexes in which
Warner has shares.
Spain
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| UIP |
17%
|
9.5%
|
| Lauren Films |
8%
|
3%
|
| Warner Española |
24%
(Warner Española)
|
-
(joint venture with Lusomundo)
|
In the Spanish market, Cinesa is the clearest case of a vertically
integrated structure. This circuit, the leading player in the exhibition
sector with 73 theatres, influences 10% of the market. Its significance
will grow in the next few years, as a significant investment plan is in
progress (1.8 million Ptas in 1993) which will consolidate its position
by the opening of another 50 theatres between now and 1995.
Cinesa is a subsidiary owned 100% by United Cinema International (UCI),
which is itself owned by MCA/Universal and Paramount, whose films are distributed,
as well as those of MGM and Iberoamerica, by UIP-Spain (17% of the market).
Incidences of vertical integration do not stop there: a hundred screens
are controlled by small distribution houses like Lauren Films, Alta Films
(Cinés Renoir) and Izaro Films (Empresa Reyzabal). But above all,
Warner Bros, absent until now from the Spanish exhibition sector, has become
associated with the Portuguese firm Lusomundo, with the aim of opening
50 screens in the next three years in the big towns in the country, in
the form of important multi-screen complexes or multiplexes. A first complex,
with 8 screens, will open in the outskirts of Madrid during 1994.
With the arrival of this new major in the exhibition sector, and the
development of Cinesa, more than 10% of the screens (155 screens which
are open all the year round) are controlled by US-based integrated companies.
The repercussions of these integration trends are however, very varied.
It is recognised that distributors can, once they are in a position of
strength in the market, insist that exhibitors grant privileged access
for their films to their cinemas. These direct lines between distributors
and exhibitors can obviously be found in practice in integrated structures,
but to different degrees. The Lauren Films cinemas programme virtually
nothing except the works which their parent company distributes; however,
UIP only supplies Cinesa with about 30% of its programming, which is certainly
more than its market share as a distributor, but too little to conclude
that there are exclusive ties between these two structures.
Anyway, the existence of integrated structures does not seem to be
a necessary condition for assuring distributors of the loyalty of exhibitors:
80% of the programming of the Bautista Soler network is supplied by Warner
Española, even though the only links between these two structures
are commercial ones.
France
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| UGC |
8.5%
|
14.8%
|
| Gaumont |
7%
|
11.4%
|
| AMLF |
15%
|
7.3%
(Pathé)
|
| MK2 |
1%
|
1.5%
|
At first glance, the French market seems to be characterised by significant
vertical integration. The three principal circuits, who between them account
for nearly 33% of admissions (from cinemas they own) are each part of a
larger structure which controls, amongst other things, an important distribution
house.
UGC, the first of the six main circuits, holds sway over about 9% of
the distribution market and 14.8% of admissions. Gaumont (11.4% of admissions)
accounts for 7% of the distribution market by admissions. Pathé,
the third French network, is a part of the Chargeurs group, which controls
amongst other things AMLF, the second largest distribution company in France
after Warners. The integrated character of these structures is even more
dramatic, as they all three exercise some production functions, either
directly (Gaumont) or indirectly (UGC and Pathé).
The power of the national circuits, reinforced by the attitude on the
public authorities, has, until now, dissuaded the US majors from trying
to intervene. This is even more so as the circuits already occupy extremely
strong positions within the most profitable markets: between them, they
control 90% of admissions in the large provincial towns, and 62% of the
Parisian market. Besides, each of them is in the middle of modernisation
programmes, and intends to open various multi-screen complexes with more
than 8 screens in the next few years, like the one opened in 1993 by Pathé
in Toulon.
Yet various factors seem to work to limit the repercussions of this
vertical integration. The three leading integrated structures between them
only control a third of the French distribution market, which is still
dominated by the US majors, Warner (17%), Columbia Tristar (12%), UIP (10%),
Fox (3%). Independents are also present: Bac Films (6%), AFMD (4%) and
Paneuropéenne (2%).
The competition between the circuits is only relative: in most provincial
towns, and in the majority of the ten catchment areas within Paris, current
trends of successive agreements and swaps of screens have brought changes
in market share. In Lille, Strasbourg, Lyon, and Marseille, for example,
only two of the three circuits are present. And in Nancy and Caen, the
situation is quasi-monopolistic. In these cases, the cinemas follow an
"all products" supply policy, and, conversely, the distribution structures
are constrained to trade with the complexes within each of these markets,
even in they are not cinemas under the auspices of their group.
The effects of vertical integration are therefore only significant
when the various circuits are effectively in competition - a situation
which is increasingly rare - and, above all - something which is frequently
the case in the provinces - when the circuits are in competition with cinemas
which are members of a regional group or alliance, or are still independents.
In addition: officially, distribution and exhibition activities are
constituted, according to their structures, as autonomous profit centres.
This does not exclude the existence, in a competitive situation, of privileged
links between the cinemas and distribution structures of the same group.
Examples here amongst recent films are Beaucoup de bruit pour rien,
distributed by UGC, and released, in Paris, essentially through the UGC
complexes, and Fanfan, distributed by Gaumont, released through
Gaumont cinemas.
These situations are, however, far from systematic. They only exceptionally
require the intervention of the Médiateur, who is more active in
conflicts linked to exclusivity agreements.
Moreover, Gaumont, UGC and Pathé are not the only integrated
structures within the sector. In Paris, the films distributed by MK2, the
distribution house of Marin Karmitz, which specialises in auteur films,
are primarily released in 14 Juillet cinemas which belong to the same company.
And several other exhibitors who specialise in Art and Experimental films
have also developed their own distribution activities - like Acacias.
In 1993, it is important to note that, whilst the balance of power
in exhibition did not change, there were substantial changes in distribution:
-
Gaumont, thanks to Les Visiteurs, and its agreement with Buena Vista,
moved to the top of the distributors league, with a market share of 20%.
-
AMLF, by contrast, whose films were less successful than in previous years
(they had only one success, Germinal) lost market share: by the
end of December 1993, they were the fifth player in the Paris region.
Greece
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Elke |
NA
|
9%
(Assos Odeon)
|
| Spentzos |
NA
|
2.5%
|
| Prooptiki |
NA
|
1.5%
|
In the Greek market, vertical integration movements in the strict sense,
as a union within the same enterprise or the same group of the activities
of distribution and exhibition, are in fact quite limited.
The American majors are effectively absent from the exhibition sector.
Most of them are even absent from the distribution sector, as Warner, Fox,
Disney and Columbia are all represented by Greek companies. Only UIP has
a Greek subsidiary, of the same name, in Athens; it nevertheless remains
absent from the exhibition sector.
On the other hand, the exhibition sector is to date fragmented - the
three leading networks between them represent less than 15% of admissions
- so that the size of any vertical integration movements is, by definition,
limited.
Nevertheless, since 1985, three out of the five leading distributors
have taken control of some cinemas, either through acquisitions, or by
taking out a several-year lease. Elke (Warner, Carolco, etc.) also manages,
through its subsidiary Home Video Hellas, 14 screens mainly located in
Athens and Salonica, which have been renovated with sponsorship from Assos
cigarettes, whose name and colours they now carry.
Spentzos, (Fox, Sovereign, etc.) for its part manages 4 screens in
Athens and therefore has at its disposal a market share in exhibition of
about 2.5%. And Prooptiki (Columbia, Orion, Touchstone, Disney, Buena Vista,
Hollywood Pictures, etc.) owns two cinemas in Athens.
The low number of cinemas concerned - only a score in total - obviously
limit the effect of vertical integration phenomena. However, these will
increase in the next few years. Distributors certainly figure amongst the
rare players who will form the foundations of an eventual integration movement
and/or one to modernise the Greek cinema industry.
Moreover, the links between the cinemas and the distributors who control
them are undoubtedly more direct than in integrated structures in other
European countries. Relationships between distributors and exhibitors in
Greece are generally in the form of exclusive affiliation contracts. This
obviously applies just as much to the cinemas which are owned directly
or controlled by a distributor. Taking over a cinema in one way or another,
for a distributor, is also the easiest way to secure a network of "affiliated"
cinemas, whatever the performance of the titles in its library.
Ireland
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Abbey Films |
12%
|
47% (Ward Anderson)
|
| UIP1 |
NA
|
22% (UCI)
11% (MGM)
|
| 1 See, however, the comments made
on p. 51 |
With Portugal, Ireland is definitely the European country where vertical
integration phenomena are most clear and most evident.
The leading player in the sector, Ward Anderson, owns more than 40%
of the country's cinemas, and also possesses a distribution structure -
which has at its disposal a more modest market share, somewhere between
10 and 14 % - and mostly deals with independent US companies, or English
ones.
The US majors are also present as exhibitors in Ireland, but only in
and around Dublin. UCI, controlled by Universal and Paramount, in fact
owns two multiplexes, one with ten and the other with a dozen screens,
in the Dublin suburbs. MGM, (formerly Cannon) controls the Adelphi-Carlton
group, and has until now only two complexes, each with four screens, in
Dublin; but the number of screens owned by this company will double in
1994, after the opening of a multiplex with 8 screens in Parnell Street,
right in the centre of the capital.
More than 80% of admissions are therefore recorded by cinemas held
by a distribution house or linked to one. This situation does not, however,
seem to have any major repercussions in terms of access to films, at least
to date.
Independent exhibitors only hold a marginal position in the market.
Even if they represent 40% of installed sites, in the majority of cases
they are single-screen establishments, located in the very small provincial
towns, and therefore of little interest to the main circuits. In these
markets, they are, in almost all cases, in a monopoly situation, and this
allows them access to films without (many) problems, even if they are distributed
by the integrated structures.
In Dublin, competition is lively between the three main circuits, and
"alignments" are prevalent, as in the United Kingdom - these are exclusive
agreements between US distributors and the circuits. Ward Anderson is thus
benefitting from an agreement with Fox, Columbia and Buena Vista, just
as MGM is linked to UIP, even though it is a competitor in exhibition with
UCI. On the other hand, the suburban multiplexes, whether the complexes
belong to Ward Anderson or to UCI, are following an "all products" policy,
because of their size.
Even if, as part of the Ward Anderson group, Abbey Films has a reputation
of giving priority treatment to establishments within its group, the integrated
structures seem to separate their distribution and exhibition activities.
It is not certain if that situation can continue: the opening of the next
multiplex in the centre of Dublin may well upset all the current practices.
Italy
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Penta |
31%
|
3.3% (Cinema 5)
|
| Istituto Luce |
0.4%
|
NA
|
Despite the movements towards integration observed since 1980, the
Italian market is still very fragmented. The effects of any vertical integration
are therefore necessarily limited.
The most obvious case of an integrated strategy is undoubtedly the
Penta/Cinema 5 ensemble. Penta is the mother society of Cinema 5, the leading
circuit in the country, and is effectively also itself the market leader
in distribution. As well as this, the activities of its two shareholder
companies, Cecchi Gori and Silvio Berlusconi Communications (Fininvest)
are not limited to distribution and the management of cinemas, but are
also concerned with other levels in the chain (production) and, for Fininvest,
other methods of exhibition (TV, video distribution, foreign rights, etc.).
The links between production and exhibition activities are also more
clear in Italy as programming agreements have now existed there for several
years, at least in the big towns, between cinemas and distribution houses.
These privileged relationships between the players in different levels
of the industry also obviously exist in the case of integrated structures.
The cinemas of Cinema 5 state that they thus earn 60% of their box office
from films which are distributed by Penta, whose average market share at
the national level in the 1990-1992 period was about 31%.
But Penta/Cinema 5 is not the only player in this situation: Istituto
Luce, a public circuit of a dozen screens, essentially programmes works
which the structure also helped produce.
As yet, there have been no judicial decisions relating to these practices;
indeed they are, by contrast, judged much more positively, and sometimes
even encouraged. The Emilia Romagna region has, for example, adopted a
law which seeks to promote and aid the co-operation between cinemas, or
the forming of consortia. Elsewhere, the creation of common structures
between distributors and (groups of) exhibitors is encouraged, so that
they can manage various services together.
Whatever their cause, the financial difficulties in which Penta/Cinema
5 finds itself make the selling-off of its cinemas a credible hypothesis,
and this would open up the possibility of US companies like UCI or Warner
finding a foothold in the Italian market.
The Netherlands
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| UIP (1) |
NA
|
26% (MGM) (2)
|
(1) See, however, the comments made on
p. 51
(2) Which represents about 30% of the box office. |
In the exhibition market, MGM directly controls 66 screens. This circuit
was previously owned by Cannon, who in turn first acquired an important
part from another foreign operator, Rank, and then bought the circuit of
two of its competitors. MGM circuit captures about a third of box office
in the Netherlands. Moreover, the position of this circuit is reinforced
by the monopoly or quasi-monopoly situations from which it benefits in
the large towns in the west of the country, in Amsterdam, Rotterdam and
The Hague.
The prospects for development of this circuit are, however, uncertain:
officially, MGM's strategy consists in progressively closing some of its
cinemas, in order to invest massively in the creation of multiplexes, as
in the United Kingdom. But various experts have shed doubt on the viability
of such a policy in the Netherlands.
Except for MGM, true vertical integration is marginal: the other important
distributors are not present in the exhibition market, and the other major
circuits (Jogchem's Theatres, Wolff and Minerva) are not linked, in any
significant way, to any distribution house, even if they do keep to the
spirit of the many exclusivity agreements between groups of exhibitors
and distributors which are characteristic of the current situation in the
Netherlands.
Portugal
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| Lusomundo |
60%
|
55%
|
| Castelo Lopes |
-
|
10%
|
| Warner |
NA
|
3.5%
(with Lusomundo)
|
| Atalanta/Medeia |
NA
|
NA
|
Alongside Ireland, Portugal is undoubtedly where vertical integration
is most obvious. Lusomundo, the most important film company in Portugal,
is effectively leader both in distribution and in exhibition. Its position
is particularly dominant in the majority of important towns, and above
all in Lisbon, where it controls more than two thirds of all screens.
These phenomena are not limited to Lusomundo. Castelo Lopes, another
distributor (Fox, Gaumont, UGC, Renn Productions, etc.) owns 14 screens
(and a complex of 5 screens under construction at Porto) and currently
has a 10% market share.
In the absence of effective regulation, all the independent players
are weakened by this situation. Independent distributors may experience
difficulties in acquiring profitable leader titles - the rights are generally
held by Lusomundo as the privileged access channel for films in the Portuguese
market - or of finding obstacles to their products in certain local markets.
And, above all, numerous independent exhibitors emphasized the difficulties
they encounter in getting an adequate supply, wherever their cinemas are
in direct competition with the integrated structures. This is why, for
example, in Aveiro, where independent exhibitors, who account for half
the screens, complain about their inability to get access to Lusomundo's
films (which owns the other screens in the town) or to Warner films, to
which the integrated structure is given priority treatment.
Whatever the cause, in order to obtain prints, the independent exhibitors
frequently depend on their competitors, and above all on the principal
one (Lusomundo) or its associates (Warner) or even other distribution houses
vis-à-vis whom Lusomundo is in a position of power (Columbia). Their
margin for manoeuvre is therefore extremely reduced, and one cannot, in
the medium term, exclude the possibility of the entire cinema exhibition
sector being a monopoly or quasi-monopoly.
Already, at present, the independent exhibitors seem to be forced to
propose programmes which only contain second-run films (move-over), or
to limit themselves to B films, or to opt for a niche strategy. Carrying
out the latter policy may well in turn result in the development of alternative
integrated structures, like Atalanta/Medeia, a specialist distribution
company which owns 16 screens and show an alternative programme based on
quality films and European productions.
United Kingdom
|
Leading distributors present in exhibition
|
Market share of distribution (% of admissions, 1990-1992)
|
Market share of exhibition
(% of admissions, 1990-1992)
|
| UIP (1) |
26%
|
29% (MGM)
18% (UCI)
|
| Warner |
27%
|
3%
|
| Rank |
9% (1991)
|
21%
|
| Artificial Eye |
1%
|
<1%
|
| (1) See, however, the comments made on
p.51 |
Amongst the five big European markets, the United Kingdom is undoubtedly
not only the most concentrated, but also that where vertical integration
situations are most clear.
The leading circuit is MGM, controlled by the French publicly-owned
bank Crédit Lyonnais, which also owns, since it disentangled itself
from Giancarlo Paretti, the GM studio, whose products are distributed throughout
Europe by UIP.
The second operator, Odeon Cinemas (with 21% of admissions) is part
of the British group Rank Organisation, which also controls a distribution
house (Rank), production facility (Pinewood Studios) and film and video
processing (Rank Laboratories). After Rank Screen Advertising was sold
off in 1992, rumour spread that the group was also intending to divest
itself of its cinemas, which currently number 73 sites (314 screens).
UCI, the third United Kingdom circuit, is a consortium formed by the
two majors, Paramount and MCA/Universal, who both distribute their films
in Europe through UIP. The configuration of its sites is however, very
different from those of the other leading circuits, as, with the exception
of two cinemas in London, all its establishments are multiplexes. UCI was
the first major to develop multiplexes, having taken over AMC.
The direct competitor of UCI in the UK, National Amusements, which
also is characterised by the homogeneity of its cinemas (9 multiplexes
with at least 11 screens each) controls between 6 and 7% of the British
market. Amongst the principal circuits, it is the only one which one hesitates
to describe as operating within an integrated structure. Its links with
its production and distribution activities are in fact very slack, and,
until now, very indirect(14).
Finally, of the various American companies controlling a circuit in
the UK, Warner is undoubtedly the least active in the exhibition market.
Although its distribution house dominates the English market (27% of admissions
in 1992), the circuits belonging to Time Warner Inc, only owns 7 cinemas
in the UK, representing 64 screens. At this level, its market share scarcely
exceeds 3%.
Two of these circuits - UCI and Warner - possess a cinema in the centre
of London which programme essentially - but not exclusively - films distributed
by the group, thus playing, for their products, the role of "showcase"
cinemas. This is perhaps the only exception to the general rule that relationships
between distribution and exhibition activities in the integrated companies
are tenuous. All the companies concerned insist on the fact that these
activities are carried out at arm's length. This is a long way from the
time when Cannon used its cinemas (formerly the ABC and the Classics) to
programme films produced by Golan Globus, which were not released via other
cinemas.
The most direct lines between exhibition and distribution activities
are instead those made by small integrated structures, specialising particularly
in European films. Three groups, Artificial Eye, Curzon/Mayfair and Mainline
show films essentially in their own cinemas (Cinemas Ltd., GCT, etc.).
Mayfair, for example, guarantees its "flag-ship", the Curzon, exclusivity
for Greater London. The reasoning advanced is that this type of integration
is the only policy capable of rendering specialist films commercially viable.
But it might well be thought that such a policy results in too limited
a number of prints of films which, in other countries, would benefit from
a wider showing.
(13) In certain
countries, like Ireland and the United Kingdom, two of the shareholders
of UIP (Paramount and Universal) on one hand and MGM, the third shareholder,
on the other hand, find themselves in competition in the exhibition sector.
(14) The shareholders of National
Amusements are also present in Viacom, a company well-known throughout
the UK for its television and cable activities; but above all, this group
launched a friendly take-over bid for Paramount in September 1993.
