Allocated Film Zones or Anticompetitive Boycotting: A Look at the Contentious Practice
If you plan to see Spectre, the new Hunger Games, or the new Star Wars in the Loop in Houston, you'll have to go to iPic Theaters in River Oaks (pictured)—and that's not by iPic's design, CEO Hamid Hashemi says.
He claims the nearby Edwards Greenway Grand Plaza (run by Regal) refuses to play the same movies that iPic offers. Meanwhile, that same iPic has not been able to land titles like Concussion and The Revenant since opening last week. iPic claims Regal and AMC are "conspiring" in an "anticompetitive boycott" aimed at driving smaller theaters out of business. iPic also claims developers working on another site in Dallas had already been warned that two big exhibitors will seek to block movies if an iPic is chosen for that site, before the ground had even been broken.
Regal has not publicly responded to the suit, but an AMC spokesperson said that using "allocated film zones" is a long-standing practice that benefits stakeholders, movie-goers, studios and exhibitors.
That's true...to an extent. "Clearances"—provisions that keep theaters from playing the same movies at the same time—have been around since a 1948 Supreme Court decision. And interestingly enough, the practice was actually created to help independent theaters and make the marketplace fair and competitive.
However, agreeing to show a movie, or threatening to boycott a movie would classify as an abuse of that law...if that's actually what's happening. Clearance only affects a small portion of the 40,000-screen industry, and it's usually used in markets with competing large companies, like the big three—AMC (5,128 screens), Regal (7,334 screens) and Cinemark (4,498 screens)—that control roughly 69% of movie ticket revenue.
Pictured: A Regal Cinemas in New Rochelle, NY
iPic isn't the only company that thinks it's being shut out. Theater industry executive Tom Stevenson was denied the third installment of the Hunger Games franchise for his LOOK Cinemas in Dallas, because of a new AMC multiplex less than a mile away. He found out that his independent theater was on a list of cinemas nationwide that AMC referred to as "predatory competitors."
Viva, a theater that showed recently released Spanish-dubbed films, was forced to close six months after it opened because of what it considered unfair competition. According to iPic's lawsuit, Viva is also on the list of "predatory competitors."
Attorneys General in Ohio, Texas, Florida, New York, Hawaii, Kansas, Indiana, Florida, Washington, Wisconsin and DC are all investigating.
Meanwhile, iPic believes anti-competitive boycotting could negatively impact development, and they have a point. For starters, thanks to the new age of retail, department stores are no longer the revenue-generating anchors they used to be. Today's consumers are more interested in experiences, so mall and shopping center developers are turning to entertainment venues to draw traffic. For example, in Harrisburg, PA, JLL filled a 7k SF ground-floor space that formerly housed a Boscov's department store with a local theater company called Broadway Classic Productions.
A 15-screen ShowPlace ICON (shown) will be anchoring the Boro, a redevelopment of SAIC's corporate campus in Maryland's Tysons district, along with a Whole Foods. And in Richardson, TX, a LOOK Cinemas will build a 60k SF upscale dining movie theater at CityLine, a 186-acre mixed-use development. If anchors like these go out of business, that's a large vacancy to fill.