A Letter To MPs To Review Or Overturn The Competition Commission’s Findings
I have written today to my local MP and to ten other MPs whose constituencies contain or border the cinemas under threat from the Competition Commission. However, MPs in the UK are only supposed to act on behalf of their own constituents, so those other 10 MPs may not be able to do anything directly to follow up on my letter.
So I am making publicly available the letter that I’ve written. If you intend to contact your MP you have my permission to attach a copy of this letter to your contact.
The letter in full – you may wish to exclude those paragraphs in square brackets:
Dear Member Of Parliament,
[I am writing to you as both a constituent in one of your areas (East Cambridgeshire), but also on behalf of over 13,700 people that recently signed a petition to protest the sale of cinemas that your constituents currently attend, and those 13,700 people include constituents in each of your areas. I will try to summarise the situation as briefly as possible.]
Cineworld Group plc, which runs one of the largest chains of multiplex cinemas in the UK, late last year purchased City Screen Ltd, which among other activities also runs a chain of independent cinemas. After a referral from the Office Of Fair Trading, the Competition Commission published an initial report in August which they confirmed yesterday, instructing Cineworld Group to sell either the Cineworld or Picturehouse in each area. Cineworld Group intend to sell the Picturehouse in Aberdeen and Bury St. Edmunds and are yet to decide which of the Cambridge cinemas to sell.
I believe this decision is wrong for a number of reasons, and that that the research commissioned into the problem is fundamentally flawed.
- There is no evidence, either supplied by the Commission or independently, that competition is effective in setting prices in this industry. Cinema chains set prices at similar levels in geographic areas, with competition seeming to have a much weaker effect than the local cost of living and other factors, and forcing the sale of one cinema will just bring in another cinema with no obligation to charge lower prices, and when considering the other operators in the market a likelihood that prices will increase.
- Typically, a geographic area the size of Aberdeen is capable of sustaining two cinemas, and of Cambridge and Bury St. Edmunds only one, based on the national average. Counting Cineworld’s cinemas as one, there would still be two operators in Aberdeen and Cambridge, and one in Bury St. Edmunds. While competition has lessened, it has only lessened to the national average, when it was above this originally.
- Following the referral, the OFT published a report in June, where they considered that Cineworld and Picturehouse were operating in different markets. Cineworld is a multiplex, whereas Picturehouses follow an independent or arthouse model. The Competition Commission instead found that these cinemas were in direct competition, yet their deputy chairman Alisdair Smith has admitted since the report was published in an interview on BBC Radio Cambridgeshire that they would expect different buyers for the Cineworld or Picturehouse should they be sold, clearly supporting that the markets are different.
- The research was based on a single adult ticket price, and the likelihood of customers to switch cinemas if prices were to increase by 5%. The Commission’s own research showed that 58% of Picturehouse customers are members and receive discounts on every ticket of more than 5%. Additionally, market statistics show that around 1 in 8 tickets purchased from Cineworld cinemas nationally are under some form of membership discount. The myCineworld scheme offers a greater discount – 10% – to anyone booking online with no commitment, and again the research did not consider this. Cineworld is the only multiplex operator to run such schemes.
The Commission claim to have considered customer feedback in compiling their final report, but have not addressed any of these concerns, which were addressed to them directly prior to the publication of the final report.
The two chains in question currently have the best record in the industry of offering discounts to their customers nationally, and in a like for like comparison in any areas where they operate they are offering lower prices than their competitors. Any enforced sale will not just impact prices for consumers.
- The Picturehouse cinemas offer cafe bars where hot meals and alcohol can be purchased and taken into the screens. The findings from the Commission ignored the role these play in attracting customers, who are looking for a different experience to a normal multiplex cinema.
- The cinemas offer a much wider choice of films, typically at least double the number of films per screen per week than a multiplex, and while a proportion of the revenue comes from films shown at both cinemas, the Picturehouses show a wide range of films and live events not regularly offered at the multiplex cinemas.
- The Picturehouses also offer a range of screenings for parents with young children, senior citizens and those on the autism spectrum and their carers. Very few other cinema chains offer these services and none with the frequency of the Picturehouses.
- These cinemas also support a wider cinema culture in the form of trusts and festivals that take place year round, and are also capable of a wider range of projection – the Cambridge Arts Picturehouse being one of the few cinemas in the country that can still show 70mm films, and they are reliant on existing expertise. Without a Picturehouse, Cambridge and Bury residents would have to travel to London to see these films and Aberdeen residents to Edinburgh, none of which are practical options for most.
Any enforced sale of these cinemas will result in higher prices for your constituents, a loss of the ancillary services and a significant reduction in choice. A comparison to any of the current operators in either market shows that each charges the same or higher for tickets with less discounts, offers less choice in their programming and doesn’t support the ancillary services to the same extent. The sale of these to an independent operator without the resources of a chain behind it could see the cinemas quickly fold; the Bury St Edmunds cinema was in trouble prior to the Picturehouse takeover, and Aberdeen’s Picturehouse is being subsidised by the local council after also running into difficulties, and without the resources of an operator such as City Screen they may soon be back in a similar position.
Before the Commission published its final report, the local council in each area proposed to put in place behavioural remedies, where they would put some measure of price controls on the existing cinemas. Two of the councils gave detailed proposals and had run similar controls previously. The Commission dismissed these proposals on the grounds that they would not increase competition – when the sole purpose of increasing competition is to attempt to restrict prices – and that the OFT would have incurred costs in supporting such schemes. Instead, these costs will be passed directly to your constituents in the form of higher ticket prices.
I would urge you to take the appropriate steps to set aside or overturn the findings of the Commission, on the basis that:
- All of the research showed a clear differentiation in the market between arthouse / independent and multiplex cinemas, which if considered would have negated the findings.
- The findings were based on a flawed assumption of a single ticket price and incorrectly excluded membership schemes. The surveys on which they based their findings excluded these and are therefore fatally flawed.
- There is still a level of competition at least at the national average in these areas following the takeover, so there is no requirement to increase competition further in these areas.
Failing that, I would ask that the behavioural remedies proposed by the local councils be re-examined as these appear to be a better option for your constituents than the structural remedies proposed of selling cinemas.
[I enclosed links to my more detailed research and to other material on the situation, and I would be happy to provide further clarification on anything here:
I will be advising those who signed the petition to contact you for your support, and I would expect you all to hear from them in due course, if you haven’t already.
Cambridge – Julian Huppert: firstname.lastname@example.org
Huntingdon – Jonathan Djangoly: email@example.com
North East Cambridgeshire – Stephen Barclay: firstname.lastname@example.org
North West Cambridgeshire – Shailesh Vara: email@example.com
South Cambridgeshire – Andrew Lansley: firstname.lastname@example.org
South East Cambridgeshire – James Paice: email@example.com
West Suffolk – Matthew Hancock: firstname.lastname@example.org
Bury St. Edmunds – David Ruffley: email@example.com
Anne Begg: firstname.lastname@example.org
Malcolm Bruce: email@example.com
Frank Doran: firstname.lastname@example.org