Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes, everybody knows
Leonard Cohen – Everybody Knows
There is a glaring inequity in theatrical exhibition, an inequity which is endangering independent theater operators. The game has been fixed.
Routinely independent exhibitors are expected to pay from 10-12 percent more of box office than the large chains. On the surface you would chalk this up to simple free enterprise, but its not the case. If you are to make a parallel from a superficial level you could compare it to WalMart vs. A small town department store, but you would be incorrect. In fact if you drill down on the realities of placing a film in one of the large chains, you will soon discover that in fact distributing into Regal, AMC and Cinemark is more expensive. The cost of shipment, of posters, dci masters is the same as an independent theatre yet the big chains insist and co-op advertising, promotion dollars which could equate to a further 6 percent participation by the studios in placing titles in the chains. This effectively gives the chains a 16-18 percent advantage over the independent.
The independent has to work harder, market without support and makes far less money. Their risk is greater since the chains are buttressed by playing in the public markets. It is not free enterprise nor is it fair.
One can almost make the argument that the market is being manipulate in order to ensure the demise of the independent. Given the interwoven nature of public finance they frequently have some level of co-ownership. The aggregation of the studios into the MPAA, which ostensibly controls the rating system further enforces the sway of the studios . In many ways, the Paramount Ruling which attempted the studios from having egregious control over theatres has been consistently eroded by various studio tactics.
The accusations of 1948 contained in the Paramount ruling still hold true at their core today. Instead of owning the theaters, the studios create pressures that force the theaters to play by their will (the miost important being how the revenue will be split ). This relationship hasn’t been all that public until the herculean push-back from the National Theater Owners Association when Universal proclaimed it would make Tower Heist available on Video On Demand just two weeks after opening in theaters.
It took that threat to rally NATO together, and it worked, but they are still very much at the mercy of the studios by virtue of the business structure. Without the latest movies, they have little to bring people into their premises.. Legally, the studios are playing by the book, but it’s understood that studios can still survive on home video sales and new platforms , which they are constantly experimenting with. while the tradition of the American movie theaters are at risk of shrinking. To add pressure, the Tent-pole/Blockbuster mentality delivers a fewer movies into theaters every year that are must-plays. There exists an increasingly cavalier attitude towards theatres exhibited by the studios.
The MPAA is a mechanism the studios use to exercise market control over all theatres.
The MPAA uses legal loopholes to distance itself in appearance from the big studios but the reality is something completely different
1. The MPAA being “separate” from the studios because they’re not direct employees.
2. Even though the studios are paying for the MPAA, they’re doing so under the auspice of protecting the industry and not individual interests.
3. The major studios can still consider each other competition.
4. They aren’t price-fixing or controlling what types of movies are made.
In common sense terms:
1. Even though the studios give them all their money, the MPAA employees are not paid directly by them.
2. While the MPAA lobbies the government and represents the interests of the studios, those are somehow also the direct interests of all filmmakers.
3. The Big Six still face off when they release movies, even while they’re all one team behind the MPAA.
4. The first part is true, but while they don’t control what gets made, they help control what gets shown in theaters.
The problem is that it’s not true and the government is staring to look into the practices of the large chains and the studios.
Regal Entertainment Group and AMC Entertainment Holdings Inc., the nation’s two largest movie theater chains, have received formal inquiries from the Justice Department’s Antitrust Division, signaling growing government scrutiny of a tactic large theater operators commonly use to keep movies out of competing locations.
AMC, which has faced the most backlash in the exhibition industry over the practices, told investors the Justice Department wants information “in connection with an investigation,” according to an AMC notice filed with the Securities and Exchange Commission” into “potentially anti-competitive conduct” at the company.
Regal made a similar disclosure to the SEC.
That conduct includes the use of “clearances,” which are agreements that theater chains sometimes strike with studios in order to gain the exclusive right to play a given title in a particular market. The Justice Department is also looking into AMC’s participation into certain joint ventures, the notice said.
“We do not believe the Company has violated federal or state antitrust laws and are cooperating with the relevant governmental authorities,” AMC said in the notice The Department of Justice is investigating whether the two largest movie theater chains, AMC Entertainment and Regal Entertainment, are violating anti-trust laws by keeping independent theaters from showing new movies releases.”
The Justice Department’s civil investigative demands, received by AMC and Regal on May 28, give it subpoena power and in the subpoena request documents and answers to certain questions. AMC and Regal soon after received additional civil investigative demands from the office of the attorney general of Ohio, which has a “similar inquiry” under that state’s antitrust laws.
AMC’s notice said. Regal disclosed in an earnings report last month that it had been asked by Justice to “preserve all documents and information since January 1, 2011 relating to movie clearances or communications or cooperation” between the company and its chief rivals, AMC and Cinemark Holdings Inc.
A storm is coming, and the exhibition world is about to be shaken. Many educated observers feel that this will be the excuse the studios need to enact their plans for day and date releases.
Like the instance of Tower Heist, there have been examples of push back by the independents to the machinations of the studios and the large chains. In Germany , Disney is encountering some much needed push back. 686 screens in 193 small towns, decide not to screen the Avengers Age of Ultron due to Disney raising its rental fees from 47.7 to 53 percent of ticket sales. In addition, not only has Disney cut financial contributions to advertising, but advances for 3D glasses are also gone.
Most independents would be more than grateful to obtain 53 percent from any studio on a new release.
It is time to get off the merry go-round. It is time for independents if they are to have the slightest chins of survival is to start dictating the rules of the games it must play play. The rules set by the studios and the large chain have crippled this business.
Check out Robert Lippert a theatre owner who in 1948 said enough….and began to define himself by his own rules. The origin of the Lippert Theatre Circuit came about in 1942 with his ground-up construction of the Grand Theatre in Richmond, California. He particularly embraced drive-ins beginning in 1945 with the Malaga in Fresno, the first of its kind Northern California. Eventually Lippert owned 118 theatres. Lippert felt there too much control by the studios and as a result began producing his own films for release.
Their is something rotten in film exhibition and its time to insist on simple fairness.
It’s time to insist on a fair shake for the independent theatre.
