Taking The Bull By The Horns: Theaters Take Back Control

Every week, I sit in front of my laptop and try to explain as best I can what I see as the issues facing independent theater owners. What I type is my perspective, and only my perspective. I am relying on the old adage “that the first step in solving a problem is recognizing there is one” in order to hopefully get theater owners in a frame of mind so that they can begin to address the issues they are facing. One of the things that keeps coming back to me is the simple fact that there is really no true and focused group that is adequately articulating the pressures being face by independent theater owners into some form of action plan. I have learned through years in business myself, that structure really is everything. There are groups that are keenly interested in solely being a buying group which by itself is a worthwhile endeavor, but cheaper popcorn seed, nor rebates on candy bars are going to help steer the industry towards change in order to ensure its longevity.

At the core of the issues is what goes up on the screen. Right now it is too expensive, not diversified enough, and even worse, increasingly bland and not focused on an American audience.

The bottom line is the way theaters acquire programming and the arbitrary nature of how the studios allocate movies has to change and change now.

I am going to suggest the foundation on which to build a solution, a foundation that will help create a new cinematic renaissance and a celebration of the essential American art form, the movie.

In 1844, a group of 28 men, primarily weavers formed a cooperative society. The were worried about the industrialization of their business and they wanted to make sure that the products they produced could get to market. They created business principles to guide their work and opened a market in which to sell their cloth. Like independent theater operators, the independent weavers were facing increased pressure from a rapidly changing market that was a driving force in their decision to move toward cooperation. The was the first known official co-operative.

With the rise of the idea of mass production, business owners who had previously been capable of the sustainable production of high quality goods found themselves competing with large industries that sold less expensive , and cheaply made products. Production was changing in order to accommodate consumers’ desire for cheaper, plentiful goods. Those who rapidly produced high volumes could meet the demands of the shifting market, those who could not went out of business.

A co-operative was the saving grace for the weavers that saw their existence go by the wayside.

In the U.S.A, a coalition of U.S. farmers, particularly in the Middle West, that fought monopolistic grain transport practices during the decade following the American Civil War started the Granger movement in order to combat these monopolies. Oliver Kelley, an employed of the Department of Agriculture was concerned about the absence of good agricultural practice. In 1867, Kelley began an organization the Patrons of Husbandry, that he hoped would bring farmers together for educational discussions and social purposes. By 1870 every state had at least one Grange, and national membership reached close to 800,000. What drew most farmers to the Granger movement was the need for unified action against the monopolistic railroads and grain elevators that charged exorbitant rates for handling and transporting farmers’ crops and other agricultural products. They effected changed and laid the foundation of the American agricultural revolution. They saw an issue, they acted and they effected change.

At one time the 1200 cable televisions systems across America had to negotiate separately for programming the the major cable television networks. A cable system from Paducah Kentucky would have to sit down with Home Box Office and negotiate a carriage agreement. There would be little negotiation, either you paid the price or you did not get the programming. This was the same with ESPN, The History Channel, etc.

In 1984 the National Cable Television Co-operative (NCTC) was founded by 12 members of the Mid-America Cable Association on the simple proposition, that together maybe just maybe they could get a better deal from the channels than if they acted alone. Today , the NCTC manages the buying and the negotiation from over thousand different independent cable companies. Together these companies negotiate with the programming networks and as well as leading hardware suppliers in order to offer their member companies value for the collective bargaining power they posses.

Working on behalf of their membership of independent operators, the NCTC negotiates master licensing agreements with over 200 content networks. Acquiring programming rights for 40% of all cable viewers at once affords the NCTC to strike favored nation pricing comparable to what Time Warner or Comcast would receive. Content providers and technology vendors have reduced costs as a result of one party negotiations for master agreements, covering a thousand cable companies. Operators see immediate value and convenience in paying one monthly invoice that covers most, if not all, of their programming license fees. Content providers realize the efficiency of aggregated reporting and payments.

When this idea had been raised before some of the good people at the studios had raised the idea that this was a violation of anti-trust. After you reflect on this for a brief moment, you realize that is just some senseless bullying put forward by the studios. You know who negotiated with the the cable co-operative right now for a single programming price….Universal Comcast, Disney/ABC, Paramount. Warner Media and so on. This is a model that has been accepted by the businesses that control the studios so why wouldn’t the same rules apply to the independent theater. I think they do apply.

In general, antitrust laws prohibit agreements or actions that unreasonably restrain trade, such as agreements between competitors that fix selling prices, limit supply, or allocate customers or territories. Violations of antitrust laws carry severe consequences. As long as the theaters are free if they wish to determine their own programming and there is no collusion price, then anti-trust would not be applicable.

I personally thinking that forcing the theaters to enter into prolonged VPF programs as a result of the mandated changeover to digital and then denying them play dates because there is a VPF fee in place, is more than suspect and in many ways a restraint of trade. To be frank I think it’s time that the studios got some push back. In my neighborhood bullies would often disappear after one good punch to the gut.

The independent theaters must strongly consider the co-operative model as a vehicle to deal with the acquisition of what plays on their screens. If you can create a co-operative business model that can negotiate with the studios and work as well for providing a diverse range of product by not do it. The cost savings would be seen by both theaters and studios. There would be increased transparency and the ability to act collectively to rejuvenate movie going.

In order to start we would only need a small group of theaters to stand up and decide to work collectively with one another. Based on their examples others would join. In 2017, according to our friends at NATO, there are 575 Drive-in Screens and 39,651 Indoor screens. About half of these theaters are independents

If by some miracle the independent theaters somehow have an vehicle by which to act collectively, then the independent would in fact collectively become the largest circuit……something to think about. That collective organization and its market strength would be more than significant. Once established and grown, this co-operative could become the vehicle for change, an engine for innovative programming and a voice that would scream out….We are here…We will stay here…..and We are independent.

Please reach out to me via email at bill@usadrive-ins.com if this concept appeals to you. I have done a report on this as well as engaged some advice from the USDA on this.

Yet it is far better to light the candle than to curse the darkness

W. L. Watkinson

Also please check out my new book The Monster That Ate The Movies available on Amazon in both paperback and on Kindle.