Starting with its June 10 release of Now You See Me 2, Lionsgate will no longer honor clearance requests from exhibitors on titles playing in a competitive zone. The distributor joins 20th Century Fox, Universal and Paramount — and even AMC Theatres — in this reformed booking practice.
Essentially, if two exhibitors are vying for a title in a competitive zone, often one exhibitor (typically the larger one) can request a clearance from the studio to play the title exclusively, overtaking the competition in that market. Such consistent David. vs. Goliath practices have become known as circuit dealing, and it’s at the heart of the Cinemas Palme d’Or case against Cinemark, and other exhibitor battles that the antitrust division of the U.S. Justice Department and several state attorneys general have been investigating over the last year. The exclusionary boycott demands by Regal, AMC, Cinemark in certain markets have possibly violated antitrust laws.
In regards to the majors’ revised non-clearance policies, one exhibition chief told Deadline this morning, “They’re all trying to get ahead of the Justice Department.” At present, Disney, Sony and Warner Bros. continue to honor clearance requests, and believe there’s an economic upside for their films in maintaining that practice. One analyst pointed out to Deadline that with X-Men: Apocalypse playing day and date everywhere, that not just AMC, but Regal, Cinemark and Carmike are no longer requesting clearances in practice.
But aside from appeasing the Feds, the raging free market of theatrical marquee play could have some financial impacts on the movies themselves. And as a reminder, just because a studio won’t honor a clearance in a competitive zone, doesn’t mean that an exhibitor won’t clear a particular title. It might be OK with the studio to play Alice Through the Looking Glass at two competing theaters across the street from each other, however, one of those venues can refuse to play the title. For example, in the New York Times Square vortex of AMC Empire and Regal E-Walk, Alice is playing at AMC, but not at the latter. That said, most four-quad titles such as X-Men: Apocalypse won’t have a problem getting booked by two competitors in the same market, and that Fox title is currently playing at both Times Square rivals.
In fact, it’s the middle-of-the-road movies “or marginal films” as one studio executive put it that will suffer in a non-clearance situation, particularly as the big titles crowd each venue. “Exhibitors (in such zones) will ask why they have to play a second run of Money Monster, when they can take another booking for The Jungle Book,” says one studio executive.
Also, the lack of clearing in competitive markets will create price wars between rival venues, especially where there’s an inferior-quality theater in the mix. Distributors cannot set movie ticket prices, so it’s conceivable there could be a situation where an X-Men Apocalypse ticket goes for $10 at one theater in a competitive zone and $17 at the second theater. How will this impact grosses for pics in the long run? Some say very little considering that competitive zones make up 7% or less of a wide release’s run in the U.S., however, others think they’ll have a better idea once a film plays out through its entirety during the summer.
Says one East Coast exhibitor, “The problem with clearances is that it allowed lower-quality theaters to clear over some of the better venues in a market. And that hurts the industry as a whole in the end. The bad theaters would make money because of exclusivity.” The same theater owner informed us of the time he tried to open a high-end movie theater in New Jersey, but the investor pulled out because they didn’t want to go up against the AMC theatre in the market, despite the fact that it was a lower quality hub. Now, in a largely zero clearance marketplace, a new exhibitor could enter that zone and provide a high-end venue, thus appealing to an under-served demographic.
In sum, per another exhibition insider this morning, a zero-free clearance zone will “create great markets. Customers will ultimately get better theaters over time, and a responsibility will come into the market. It’s all about making for a great experience at the movies.”