Q&A: Theater Allocations and Clearances

Hold on to your hats folks, this question is a doozy.

This question comes in from Bryan Wolfie (great name by the way), and Bryan writes in via email:

With Fox, and recently Universal, getting rid of Movie Allocations which studio do you think is next to give it up and how do you see it changing the movie viewing industry?

First off I have to say, great question!  Also, full disclosure, I had to do a bit of research in order to catch up on all of the details pertaining to this event as it is still ongoing.  So at the end of the answer I will provide links to where I got my information should you, or any of  you readers, care to look into the matter more.

Also, unless I am mistaken, what you mean by “Movie Allocations” is called a clearance agreement; which I will get to in a bit.  And Allocated Zones, are areas in which there is direct competition between theater chains.

To the readers; if you know what clearances are you may want to skip ahead to the bottom a bit, because I’m about  to get long and winded and explain a lot before getting to the meat and potatoes of the question.

For those who don’t know; there is currently a small fued happening between separate movie theater chains, and movie studios.  Also, just this year the Justice Department’s Antitrust Divisions got involved.

This feud started because of a practice that is being used (and has been for many years) where theater chains make a special deal with movie studios in order to get the exclusive rights to show a movie in a particular market.  This deal that is made is called a “clearance deal.”

349For example, hypothetically, an AMC theater could make a clearance deal with Disney to show Captain America: Civil War only in their theater within a 1 mile radius within a city.  That 1 mile radius is called an allocation zone. If there was a “Reel News Theater Experience” (obviously not a theater chain…..yet) just across the street from the AMC then it would not be able to show Captain America: Civil War should this clearance deal be struck.  Meaning that Disney chose exactly how their film would be allocated to some theaters and not to others.  This is a slightly exaggerated example – most of the time it is only for an opening weekend or first week of opening then is passed around to other theaters, but you get the picture.

 The three biggest chains that seem to have been requesting clearances over the past several years have been Regal Cinemas, AMC, and Cinemark.  What is interesting is that out of these three chains, AMC in the newest to the practice but seems to be receiving more pushback and legal action from its use than the other two chains.

fox-studio_0eec8fdaRecently, however, Fox studios has decided to no longer accept any clearance agreements starting with their soon to be released X-Men: Apocalypse.  Claiming they want viewers to see the movie wherever they want, and giving them, us, more options.  Universal Studios has also, even more recently, determined that they will no longer accept clearance agreements either starting with the release of their film, Warcraft.

It was rumored for a while that AMC was going to have a small strike because of Fox’s decision and not show the highly anticipated X-Men movie if there were competitors within an allocation zone showing the same film.  However, it seems that this is not the case because a source told Deadline that “AMC will play the Bryan Singer title even if it’s up on a Regal marquee in the same zone.”

And finally we get to the meat and potatoes.

I think theater chains asking for clearances is going to be an out-of-date practice very soon.  Fox and Universal have both publicly opted out, and Paramount has actually not participated in this practice for a very long time.

However, studios like Disney see clearances as an opportunity for good business.  In fact, Disney’s chief distributor Dave Hollis said, “… we make any and all decisions regarding clearances based on our best business judgment as to what we consider maximizes the picture.”

Sony also seems to have taken the same view, having stated, “We will make decisions theater by theater, picture by picture and we aren’t looking to change that. It’s our intention to continue to distribute our pictures on what’s right for each film.”

Warner Bro. also seems to be defending clearances when their general sales manager Jeff Goldstein said, “Clearances over substantially competing theaters are legitimate demands because they allow exhibitors to invest more in a facility with a greater chance of recouping and profiting from the that investment by not having the grosses diluted by too many runs in the area….The consumer benefits from having nicer theatres from which to choose.”

So it looks like the lines have been drawn in the sand.  I can’t see another studio following in Fox’s or Universal’s foot steps unless legal action became worse.  Then I would image both Disney, Sony, and Warner Bros. would jump ship all around the same time.

However, lets say the trend did continue and every studio stopped – how would it change the movie viewing industry?

Movie+Theater+Concession+Stand_Bing_MarcusTheatersFor one thing, it will be easier to see movies in more theaters from a viewer’s point of view.  Viewers would technically have more of a choice of which theater to see a film in.  Also it would force the bigger chains to add more to the viewing experience, and not rely on just movie availability alone.  So maybe better chairs, better foods, slightly lower ticket prices etc. Whatever it takes to make sure viewing experiences are better at one theater over another.

It could also backfire, and saturate the market.  Causing studios to loose money because they placed a movie in a theater where nobody goes to in the first place.  And if that happened enough, would raise ticket prices even more to mitigate the losses.  Theaters could also raise ticket prices and concession prices to account for loss of revenue because of less traffic to a theater.

After all, studios and theaters are about making money.  Yes, there is art in the creation of film.  But don’t believe for a second that theaters and studios won’t do what they need to in order to make the most money possible.  For movie studios, this is business.  And they will do what they need to that best benefits their business.  And I can’t blame them for that.

Okay. We are done!

Thank you very much for the question Bryan Wolfie! This was fun.

Readers – what do you think about allocation zones and clearance deals?  Should they exist like they have been, or go away? Lets make it a discussion in the comments below.

And remember, you can get questions like this answered messaging me on my Facebook page. Or you can also email them in at moviereelnews@gmail.com

Links for more info:

AMC, Dallas theater clash over rights to screen new movie releases first

Distribs & Exhibs Hold Line On Clearances Despite Fox’s Position Change

U.S. Scrutinizes Conduct of Movie Theaters

Fox Ends Film-Screening Practice

Universal Scraps Exhibitor Requests For Clearances Starting With ‘Warcraft’; AMC To Play In Competitive Zones

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