EXHIBITORS BATTLE OVER A SHRINKING PIE



In Legal Battle Over "Circuit Dealing"

As I mouse around very nook and cranny of the cinema industry I sometimes come across befuddling situations that defy logic. Case in point: the lawsuit between independent theatre owners of Palme d'Or Cinemas  and the Cinemark Group.

A few years ago, a group of independent theatre owners upgraded a rundown 7plex in Palm Desert, CA into a modern cinema complete with French cafe and named it Palme d'Or, after the Cannes fest award. Their dream was to have the Theatre be "the desert's premiere address for cinephiles" exhibiting a selection of art house, specialty, and foreign films.  But the owners weren't just any old film buffs, but included: Bryan Cranston, star of TV and movies, and Emmy winning actor of "Breaking Bad" and "Malcolm in the Middle"; Hollywood producer Alise Benjamin, who among others co-produced the Oscar winning film "Ray"; and Steve Mason, nationally known ESPN talk-show host

Palme d'Or Cinema

They are now in a legal battle against Cinemark, the third largest U.S. theatre chain, claiming that Cinemark along  with the studios illegally restrained trade by not allowing the Palme d'Or to play certain films. The suit, initially dismissed in a Los Angeles civil court, was recently reinstated by the California Appellate Court.

"It's like they're Starbucks and we're a small coffee house and they're preventing us from getting coffee beans", states Cranston, from Toronto where he is on set for the film Total Recall. "We're fighting for our existence."  It is expected that the industry's top studio distribution honchos will be called to testify about their behind-the-scenes Hollywood release practices.

The Palme d'Or owners realized how unfair release practices were when they had to fight with Universal Pictures to get a print of "Ray" even when one of the owners co-produced the movie.

For their part, Cinemark, in a statement said, "the Court of Appeal's ruling was flawed and flies in the face of established modern antitrust law" and it would appeal to the California Supreme Court if necessary.  The suit claims Cinemark engages in "circuit dealing" - where large chains leverage their size and buying power to pressure distributors from booking movies in small theatres. Circuit dealing was outlawed in 1948 by a U.S. Supreme Court ruling.

Here's my take:

Exhibitors have little market power as it is and as competition via the Internet intensifies - and it will - the large cinema chains burdened with heavy overheads and fixed costs will become more desperate.  I envision the large chains getting smaller over the next decade as the cinema business model changes to one where large corporate structures cannot be supported.  Exhibitors should stop fighting between themselves and get down to the real task at hand in changing their entire business model and embracing CMG's five cinema essentials: value, quality, experience, participation, and convenience.

Best and Happy Movie Going!
Jim Lavorato