It has decided to act on a report by the Monopolies and Mergers Commission which says a small number of distributors and cinema chains are unfairly restricting the supply of films.
Although it found that admission prices, at about pounds 6, were not excessive, the MMC criticised the way distributors choose one of the two big cinema chains, MGM Cinemas or Odeon, agreeing the timing and release of films with the chosen partner, at least in areas where the chains compete. It also disapproved of distributors insisting that films be shown for a minimum period - often four weeks or longer - on first release.
Neil Hamilton, corporate affairs minister, said such practices made it difficult for small cinemas to keep up with consumer demand and for small distributors to get films shown. He had asked Sir Bryan Carsberg, Director-General of Fair Trading, to negotiate undertakings from the five major film distributors, four independent distributors and six leading cinema chains, which should liberalise the supply of films.
In 1983 an MMC report criticised film distribution arrangements but decided against action because of the 'parlous state' of the industry.
The number of admissions had dropped to 84 million in 1981 compared with 327 million in 1965. The number of cinemas had also fallen by half in the same period and the number of cinema seats by more than two thirds. But the number of tickets sold bottomed out in 1984 at about 54 million, and reached 114 million last year.
A big contributor to this renaissance has been the entry of multiplex cinemas, the first of which was opened in 1985. There are now 71 such cinemas in the UK, with a total of 638 screens, and a further 13 are planned. The three large US- owned multiplex groups, UCI, Natl Amusements and Warner Theatres, have taken 34 per cent of the market. The share represented by the two longstanding chains, MGM and Odeon, has fallen from 60 per cent in 1980 to 45 per cent. Independent exhibitors account for a further 21 per cent.
The report singles out five main distributors - Buena Vista, Columbia, Fox, UIP and Warner Distributors, all of which are affiliated to the main Hollywood studios. They accounted for three-quarters of all film rental receipts between 1990 and 1993. Almost all the balance is made up by several independent distributors - Entertainment, First Independent, Guild and Rank Film Distributors.
The revival of the UK film industry since 1983 means distribution of films in Britain is big business. It was worth more than pounds 103m last year, with box office receipts totalling more than pounds 289m.
The report illustrates how cinema profits are relatively unimportant for distributors compared with other rights such as video sales. Of box office takings, 45 per cent went to meet exhibitor costs; about 23 per cent went on distributor costs, with 12.4 per cent going, mostly overseas, to meet the cost of distribution rights. Exhibitors made a pre-tax and pre-interest profit of 18.8 per cent.Reuse content