Global cinema exhibition is consolidating more rapidly than ever before — David Hancock investigates the impacts this is having on the sector.
Words by David Hancock
The top 10 cinema exhibitors accounted for 35.4% of the market (50,000 screens), at the end of 2017. That’s up from around 26% a year earlier. This is the fastest rise we have experienced, probably ever (though data goes back only 30 years). Between them, the two largest cinema groups now account for 25,000 screens or 15% of the total. This has been driven mainly by AMC and, more recently, since Cineworld acquired Regal Entertainment. Other companies, however, are in the mix and from a dispersed global background.
The Chinese group Wanda is behind AMC, which is the driver company internationally. At end 2017, Wanda/AMC had made it into 20 countries and counted over 16,500 screens within the group, and they are one of the groups licensed to build in Saudi Arabia as that market opens. Next up is the new pairing of Cineworld and Regal with just under 10,000 screens in 10 countries. Cinemark is one the current crop of exhibitors that has long been growing internationally and now counts nearly 6,000 screens in 16 countries, focusing on the Americas. Outside of Wanda, there are four other Chinese companies in the Top 10 circuits by screens, all of which operate in China only. Mexican group Cinepolis is steadily growing its global presence, now operating in 14 countries with over 5,000 screens in the group. CJ CGV has been expanding too, and now counts over 3,000 screens in 7 countries. Outside of the Top 10, UK’s Vue Entertainment and Belgium’s Kinepolis are also cross-territory exhibitors, with Vue operating across Europe and Kinepolis likewise, although it has also acquired the Canadian group Landmark Theatres.
The effects of consolidation won’t be felt immediately but some things are already being seen — others will come along as the process evolves. One benefit of consolidation amongst exhibition is a wider marketing capacity and the ability to do a global campaign at the exhibition end. Increased opportunities for branding and the scale and reach of campaigns is more attractive to potential brand partners. Cross-territory potential and scale opens bigger doors. The same logic applies to marketing technological advancements; the larger the network, the easier it is to introduce concepts such as laser projection, 4D/IMS, and PLF branding, minimising the risk of confusing consumers.
As has been widely reported on, big data (analytics) has also made its way into the exhibition sector, with techniques, uses and companies practising it more widely understood now. Admissions generated by these newer consolidated circuits, and these across several different countries, will mean more data to be analysed and exploited. This should lead to greater understanding of customers and behaviour, which should benefit the industry long term, not just in box office growth but also tying in cinemagoing with other consumer technologies and behavioural understanding.
For manufacturers of technology, consumables and fittings, consolidation of their client-base is a double-edged sword — fewer clients to target and sign contracts with, but those that remain will be larger for successful suppliers. This will require new working practices for both parties, with larger deals being negotiated and presumably greater scope for volume discounting. The exhibitors will need new purchasing procedures and probably new distribution structures as they grow to cope with larger deals.
Distribution: who has the whip hand?
US studios have long had the upper hand against the cinema owners due to the fragmented and territorial nature of most markets. When US studios generated two thirds of the world’s box office between them, they were faced with over 300 circuits of some size around the world. This made the studios’ job more complex, involving multiple contracts for films, but it also helped the global distributors set terms — no single exhibitor could dominate. That’s changing: the Top 5 exhibitors already account for around 43,000 screens which no big distributor can do without. Their box office weight is even higher than their screen presence. At the same time, studios are facing a new landscape. Once the behemoths of global entertainment, theatrical arms of major studios are now smaller parts of larger companies, with their parent companies involved in a wide range of sectors and activities.
Studios are consolidating, with Disney hoping to acquire studio assets of Fox amongst others, unable to find the necessary scale they need to continue investing in the number of major productions and the distribution pipeline necessary to exploit them. This may not stop with Disney and Fox. Consolidation of exhibition may accelerate a similar process in distribution. It is not inconceivable that, in a few years, three major studios do 50% of their screen business with just 10 exhibition companies. This radically changes the nature of the business, where decision-making is done, there is a risk of increased on-screen uniformity.
Cinema is changing, partly due to pressures of being a fully digital media and competing with such on content and technology, but also because of consumers’ higher expectations of experience and environment, even such things as healthy F&B options and partner franchises. Cinema remains mainstream, but some are breaking this mould, aiming for affluent audiences. Wherever cinema ends up in years ahead, many are grasping the challenge to stay ahead of the competition and evolve the medium.