movie mergers

[Robert Weissman <rob@essential.org>]

The Christian Science Monitor
                           April 16, 1998, Thursday
SECTION: UNITED STATES; Pg. 1
HEADLINE: Of Movies And Big Mergers
BYLINE: Alexandra Marks, Staff writer of The Christian Science Monitor
DATELINE: NEW YORK
 HIGHLIGHT: Two major theater chains want to link up, but critics say prices,
selection may suffer.
 BODY:   Outside of Manhattan's  Cineplex  Odeon on 86th and Lexington, high
schooler Michelle Cutkelvin is one of the few moviegoers milling in the spring
sunshine who has heard the merger news - and she didn't like it.
 "I heard they were going to raise the prices and that's wrong," she says.
"With 
popcorn and stuff, it already costs me almost $ 20 to go the movies."
 
By the end of April, Canadian-owned  Cineplex  hopes to have the government's
blessing to merge with  Sony  Loews Theatres. The billion-dollar deal would
create one of the largest and most powerful chains of urban theaters in the
country. And more mergers are on the horizon.
 
"The industry is consolidating at a breathtaking clip and consumers should
take 
note," says lawyer Clint Krislov.
 
Consumer activists are convinced this consolidation will crowd out
competitors, 
usher in higher prices, and leave consumers with far fewer choices at the
Saturday matinee.
 
The theater owners refute such concerns. They say they're just trying to
improve
the viewing experience by upgrading to more luxurious stadium-style mega-
plexes with wide screens, unobstructed views, and comfortable seats - with
more leg
room. The problem is they need the combined clout and cash of more than one
company to afford it.

"We're doing this to be able to bring new state-of-the-art complexes to
America 
and the rest of the world," says Howard Lichtman, an executive vice president
of
the Toronto-based  Cineplex  Odeon. "This is all about getting more people to
come to the movies, not raising prices."
 
Indeed, a number of chains are joining forces to bring in moviegoers. Regal
Cinemas, Act III, and United Artists are about to join forces to create a
megachain with more than 5,300 screens. That's more than double the 2,700
screens now owned by the nation's largest theater company, Georgia-based
Carmike Cinemas. The  Cineplex-Sony  merger would come in just below that, at
more then 2,600 screens.
 
Called Loews  Cineplex  Entertainment, the company would dominate several
major cities, including New York, Chicago, Washington, and Houston. In
Manhattan and Chicago, it would control about 70 percent of the screens.
Consumer activists say that raises antitrust questions.
 
"This could be a real problem if the merger will create a situation where the
consumer doesn't have choices, either in terms of how much they'll pay, the
kinds of movies they'll see, or the quality of service they'll get," says
Caroline Shoenberger, Chicago's commissioner of consumer services.
   
Merger opponents


Commissioner Shoenberger and New York's public advocate Mark Green have both
formally opposed the merger, which is being reviewed by the Justice Department
and attorney general's offices in four states. The Hotel Employees and
Restaurant Employees International Union has weighed in against it, contending
all of their members will be affected because they go to movies.
 
A Chicago resident has also brought a class-action lawsuit to block the merger
in it's current form on behalf of all moviegoers. "[It will work] to the
severe 
disadvantage of consumers because it will eliminate competitive pressure to
expand content and keep the price down," says Chicago-based attorney Mr.
Krislov, who is representing the plaintiffs.
 
The theater owners say that's nonsense. They argue that even if they end up
controlling a large portion of the screens, anyone is welcome to come in and
compete with them at any time. They also say their goal is to woo moviegoers
with a better experience.
 
"There is no correlation between the number of competitors in our industry and
pricing," insists  Cineplex's  Mr. Lichtman. "You price according to the
market 
and the consumer's ability to pay, because you want them to come to the
movies."
 
But an analysis done by the hotel and restaurant employees union found
otherwise. In Albany, N.Y., where one company controls about 70 percent of the
city's screens, the prices are higher than in both Buffalo and Rochester,
where 
there is far less concentration of ownership.
 
In Manhattan, ticket prices have jumped 75 percent since 1985. At $ 8.75 for
an 
adult - with no discount for a matinee - the city already has the highest
prices
in the nation.
 
Meanwhile, with real-estate prices high and tough competition for the rights
to 
show Hollywood's hottest products, Mr. Green says it's an extremely difficult
market to crack. "The small chains and independents aren't financially or
logistically capable of going head to head with the large chains," he says.
 
Many analysts predict the Justice Department will force the companies to sell
some theaters in the most highly concentrated cities, if it approves the
merger.

   Been here before
 This is not the first time the government has raised questions about the way
Hollywood does business. In a landmark 1948 antitrust case, the Justice
Department charged Paramount and seven other major studios with price fixing
and attempting to monopolize the trade in motion pictures through theater
ownership.
The Supreme Court agreed and required the studios to sell off their theater
holdings and restricted them from reentering the exhibition business.
 
In 1986, the Justice Department modified its stance, saying that it wouldn't
prohibit major studios from owning theaters, but it would monitor them to
ensure
competition was not fettered.
 
Some antitrust lawyers contend the  Sony-Cineplex  deal does just that. Both
 Sony  Loews and  Cineplex  are owned, in part, by companies that also produce
and distribute movies.
 
"[The company's] common ownership with major motion-picture studios could give
it a major advantage in securing for exhibition the most popular motion
pictures," contends Green. "Decades of antitrust rulings and decrees intended
to
prevent such advantages would be in danger of unraveling."