Australian investment and a possible pooling of interests are elements in the reshaping of our cinemas finds Karyn Scherer
Few New Zealanders do not know something about Australia's richest family, the Packers.
Kerry, aged 61, likes a bit of a flutter and has a personal fortune estimated at more than $7 billion. James, aged 31, is rapidly reshaping the family's media empire into a versatile multimedia, entertainment and leisure giant.
The Packers' main investment in New Zealand is magazine publisher ACP, which dominates the industry with titles like Woman's Day, the Australian Women's Weekly, and Next.
Thanks to the family's recent takeover of cinema giant Hoyts, it is also now a major player in our cinema industry. But just how major is a question yet to be answered.
The Australian-based company has confirmed it is talking to its major rival, Village Roadshow, about pooling its assets in Chile, Argentina, Poland, Germany, Austria, Britain and New Zealand.
In New Zealand, Village operates as a joint venture with the publicly listed Force Corporation. It also has a 50-50 partnership with the Rialto chain. Given that between them Village Force and Hoyts control more than 70 per cent of New Zealand's movie screens, the talks have major implications for the movie-going public and the industry in this country.
While Hoyts and Village Force insist any deal would not breach the Commerce Act, the Commerce Commission has still to agree. It is talking to people in the industry and expects to make its views public within the next few weeks.
Force Corporation chairman Peter Francis says Australian reports that Force is likely to sell out to Hoyts are untrue. It is not a foregone conclusion that any deal will be done at all, he says, although he concedes it would make sense for the companies to cut costs by combining their head offices, for example.
"We're just having a look at how it would work., and how it might affect staff, and whether it would make sense to do," he says.
Regardless of the Commerce Commission's investigations, Aucklanders will soon have the chance to see for themselves how any such deal might work. On July 8, both Hoyts and Village Force plan to close their competing cinemas on Auckland's main drag, and shack up together in Force's new entertainment centre just down the road.
Village Force has publicly admitted the new centre, which includes a 12-screen multiplex, would not be able to make money if it had to compete with Hoyts for movies.
The reason why this country's two main players might want to cooperate further is obvious. A move towards multiplexes has seen the number of cinema screens more than double in New Zealand since 1991. The investment has definitely paid off - admissions have nearly tripled and box office sales have nearly quadrupled.
But a combination of a saturated market and a disappointing crop of movies has seen attendances start to level off, with predictions they will plateau this year, despite the huge boost expected from Star Wars. With yet more screens still being talked about, profitability is once again becoming an issue.
Last year, shopping mall owner St Lukes Group mooted building more than 40 new screens at five of its shopping centres over the next two years.
It now appears unlikely all of these new screens will proceed.
The president of the Motion Picture Distributors Association, Tim Ord, has made no secret of his views that Auckland, in particular, now has more than enough cinemas to satisfy the most ardent film buff.
"Auckland's rather unique in the world in how well it's serviced," he says. "Every multiplex is now 15 minutes away from another multiplex. The growth can't continue. It's now down to sensible development and niche marketing."
It remains to be seen, for example, whether St Lukes will proceed with its plan for a four-screen multiplex on the roof of Takapuna's Shore City Galleria - a development that would pit it against a rival four-screen multiplex less than 150m away.
St Lukes' new CEO, Victor Hoog Antink, refused to say whether the project was still on the company's agenda. However, those in the industry point to one reason it might still go ahead - Hoyts and Village are wary of a new and ambitious player on the scene: US-based cinema chain Reading Entertainment.
Reading already has a toehold in this country through its investment in Hoyts' multiplex in Whangaparaoa. It has a financial interest in Barry Everard's Berkeley complex in Auckland's Mission Bay, and is also working with Barry Everard on the new multiplex in Takapuna.
Just how seriously Hoyts and Village Force are taking Reading is unclear. What is clear is that the two companies have taken it seriously in Australia. When it entered Australia four years ago, Reading set itself a target of 150 screens within five years. Largely due to fierce opposition from Village and Hoyts, it has so far managed just 31 screens on six sites.
The crucial issue for Reading and other independent exhibitors is access to films.
Village Force insists a merger would not make any difference to the handful of distributors who supply films to cinemas in this country. "We don't really compete in any place we are in anyway," says Peter Francis. "It won't make any difference at all."
But that, say others in the industry, is just the point. The Nelson-based president of the Motion Picture Exhibitors' Association, Mark Christensen, says exhibitors are "very unhappy" about the possibility of a merger.
"The issue is pretty straightforward," he says. "At the moment, Hoyts have almost 100 per cent dominance in the main centres such as Christchurch and Wellington, and Village have almost total dominance in Auckland and Hamilton. If they combine, then all of a sudden, all the significant markets in New Zealand are dominated by one single entity. What competitive restraint is any small company able to provide to that entity, in terms of ticket prices and service and that sort of thing?"
Mr Christensen is convinced it was the Commerce Commission's - and the High Court's - decision in 1990 to block a merger between Amalgamated and Kerridge Odeon that prompted the huge reinvestment in the industry that has since lured New Zealanders back to the movies.
As far as access to films goes, at least distributors still have some choice, he says. "If they can't strike the right deal with one of the majors, they have alternatives. If those two companies merge, that choice would disappear."
Because of the tiny size of the New Zealand industry, many distributors are reluctant to be seen rocking the boat. Privately, however, they admit they are also extremely concerned.
Columbia Tri-Star's Andrew Cornwell disagrees with some in the industry who argue the two companies already operate as a duopoly, and therefore a merger would not make any practical difference.
"It's like Air New Zealand and Ansett, or Telecom and Clear. You could argue the toss there as well, but I guess a duopoly is better than a monopoly," he says.
Kerry Robins, who runs two of Wellington's most popular cinemas, the Embassy and Paramount, is one independent exhibitor who also frets about a potential loss of control to Australia.
The Embassy boasts the largest screen in the Southern Hemisphere, and state-of-the-art sound equipment. When it failed to secure one of this year's most anticipated movies, What Becomes of the Broken Hearted?, film buffs were outraged. When it also failed to get Star Wars, a petition was started. It already has 2500 signatures.
Robins has publicly claimed the distributor of What Becomes of the Broken Hearted?, REP Distributors, welshed on a deal to give him the film after coming under pressure from Hoyts.
"My gut feeling is here is an industry which is now being run from Australia and I think that's a pity really for New Zealanders because there's a lot of us here who are passionate about the business."
