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PLEXING MUSCLE

Washington can howl about closed markets and trade wars with Japan, but in the Japanese film exhibition industry, U.S. companies have launched a quiet revolution, defying traditional Japanese rules with an invasion of successful multiplex cinemas.

In little more than two years, t h e steady growth of multiscreeners throughout Japan has succeeded in stemming dwindling cinema attendance and r a i s i n g the total number of screens nationwide. Japan has only 1.4 movie s c r e e n s for every 100,000 Japanese, compared with 9.9 screens for the same number of Americans.

The total number of screens across Japan fell steadily from an early-‘ 60s peak of 7,457 to a low of about 1,734 in 1993. The figure rose by 13 in 1994, thanks mainly to Warfner-Mycal, a pioneering joint venture to build Japan’s first multiplexes between Warner Bros. Intl. Theatres and its local partner, supermarket operator Niichi Co.

The venture has expanded steadily since opening its first multiscreener in April 1993, and opened its seventh complex, an eight-screener near the central city of Nagoya, in March. The strategy-to build the multiplexes inside shopping malls and offer extras unavailable at regular Japanese cinemas, such as free parking and late screening times-was immediately successful.

Warner is reluctant to reveal financial figures, but claims profits and attendance have risen steadily. Industry analysts have predicted that multiplexes will catch on throughout Japan and that the total number of screens will likely double by 2000. By then, Warner-Mycal plans to build another 100 screens, according to Kichiro Osaka, the venture’s director. “The business is doing very well. We gained momentum from the start and we can say multiplexes have been very successful in Japan.”

So successful, in fact, that Shochiku Co., one of Japan’s big three movie companies, recently announced an ambitious scheme to build a nationwide chain of multiplexes with a combined 100 screens over the next three years. Shochiku’s first multiplex will be an eightscreener currently under construction in the earthquakedamaged city of Kobe that’s scheduled to open in March 1997. Under its daunting timetable, the company also is planning to open at least two other multiplexes in major urban centers around that time.

Shochiku’s move has been greeted with mixed reaction by Warner-Mycal and two other U.S. exhibitors now moving into Japan: AMC Entertainment and United Cinema Intl., a Paramount-Universal joint venture. Local competition could only generate more business for the cinema industry as a whole, according to U.S. execs.

“Japan is a huge market with great potential, ” says a UCI spokesman. “There’s more than enough room for others-the point is to lure Japanese audiences back to the cinema.”

On the downside, Shochiku’s position at the heart of a cozy grouping of major studios, distribs and theater owners could present difficulties for foreign operators who want to move into Japan’s major cities.

So far, the united studios have managed to keep America’s multiplex upstarts out of the nine major cities, including Tokyo and Osaka, which account for nearly 70% of nationwide box office revenue. The three major studios-Toho Co., Toei Co. and Shochiku-not only produce and distribute films, but also own most major cinemas in these key urban centers and enjoy tight relationships with other exhibitors. Up to now, that has p r e s e n t e d a daunting barrier to outsiders who want to secure sites and exhibit first-run films in the major cities.

UCI is finalizing the selection of several locations to build multiplexes with a minimum of six screens. The big test, however, will be the opening next year of AMC’s massive 13-screen multiplex in Fukuoka. The 2,600-seat complex will be the first multiplex to move into one of the nine major cities.

Industry analysts predict the AMC project could trigger a showdown between the foreign multiplex operators and the Japanese majors. Already, they say, major Japanese studios have signaled they will use their influence over distributors to cut AMC’s supply of firstrun American movies. But the Kansas-based firm has said it will hold its ground.

“They (AMC) are playing this with a very American business style, as they have all along, and with thousands of screens internationally, they’ve certainly got muscle to flex with distributors, ” says an American movie executive.

Other Americans in Japan’s burgeoning multiplex industry say AMC’s case could see the issue become a bilateral trade dispute. At the very least, says one exec, it will help U.S. operators in their attempts to import movies directly and reduce their dependence on Japanese movie companies-or Japanese subsidiaries of U.S. companies-as a source of supply.

Politics aside, healthy attendance figures at multiplexes around Japan have defied the downward trend in box office receipts. Japan ranks as the world’s third-largest market for filmed entertainment, but the profits lie in the booming homevideo market.

The drop in filmgoing is due largely to continuing growth in homevideo entertainment, amid a proliferation of video rental shops and continuing improvements in home TV sets and VCRs. Another key factor is the wide gap between the average $17 ticket for a firstrun movie and the $4 to $6 charge for a video rental.

Still, the multiplex giants say they are optimistic.

“We’re revolutionizing the Japanese exhibition industry, and therefore boosting the whole cause of theatrical entertainment, ” says an American multiplex exec. “In the long term, population densities in Japan are so great, exchange rates are so high, and ticket prices are so expensive that if you get a slam-dunk site in the middle of a big city, you’ve got a lot of potential to make money.”

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