By Mark Schilling
Not so long ago the future looked glorious for foreign players in the Japanese multiplex market. They were not just pioneers, with Warner Mycal opening Japan's first true multiplex in 1993 , but leaders in technology and services. While their Japanese rivals were still running their decaying downtown theatres much as they had for decades, Warner Mycal, AMC, UCI and Virgin were dazzling local movie-goers with computerized ticketing, cavernous lobbies, spacious stadium seating and state-of-the-art sound systems.
In 1993, at the dawn of the multiplex era, Japan had 1,734 screens -- a post-war low. By 2004, this total had grown to 2,825 -- a gain of more than 1,000 screens in little more than a decade, with foreign-backed multiplex operators making a major contribution.
But instead of taking victory laps, these operators have either sold out to the supposedly sclerotic Japanese competition or are struggling to hold their ground. In March 2003, leading domestic exhibitor Toho acquired Virgin's chain of eight multiplexes -- a total of 81 screens, making it the country's biggest multiplex operator. Included in the deal was a nine-screen site that opened that April in Roppongi Hills, a business and entertainment complex in central Tokyo that now rivals Tokyo Disneyland in popularity, with the site as its money-spinning crown jewel.
Then in September 2004 Sumitomo Corporation and Kadokawa Pictures bought the 50% share United Cinemas International Multiplex BV owned in their multiplex joint venture, United Cinemas. The partners converted it into a Sumitomo subsidiary, with Sumitomo taking an 80% and Kadokawa a 20% stake. United Cinemas still operates twelve sites, but UCI has exited the Japanese market.
AMC Theatres Japan operates five multiplexes, all with 13 screens or more, but has not opened a new one since 2000. "AMC is still committed to Japan," says senior general manager Kazuo Sano, "but this is very tough market, with a lot of problems." So tough, that soon after Sano spoke, United Cinemas concluded a deal to buy AMC for 5 billion ($46 million) and merge operations by the end of 2005, ending AMC's presence in the Japanese market.
The company's difficulties began at the beginning. When AMC opened its first site, Canal City 13, in the key city of Fukuoka in April 1996 Toho used its considerable clout to block the theatre from getting top-grade Hollywood and domestic product.
This strong-arming, which critics called a response to AMC's own American-style shock-and-awe tactics, has since eased, but profitability has remained elusive, forcing AMC to shed staff and dial back expansion plans. Sano ticks off the negatives: high rental costs, high ticket prices and a booking system that locks in opening and closing dates, even if a film is tanking. "We can't change this system by ourselves," he says. The result, he adds, is that "going to a movie here is like going a musical in the States -- it's regarded a special occasion."
Meanwhile, multiplex pioneer Warner Mycal operates 45 sites with 346 screens, but is no longer the world beater of yore. The company plans open only one site this year -- an eight-screener in the Tokyo suburb of Tama, in November. Also, it has yet to announce any new construction for 2006 and beyond, an indication that the pace is not about to pick up.
Why the slowdown? Warner Mycal, which began life in 1991 as a fifty-fifty joint venture between Warner Brothers International Theaters and the Mycal Corp supermarket chain, refused to cooperate with this article. But it's hardly a secret that Mycal filed for bankruptcy protection in 2001 and in 2003 became a subsidiary of its court-appointed rehabilitator, retailer Aeon.
With Mycal closing stores right and left to stanch the red ink, Warner Mycal could no longer invest large sums in new sites. Instead it found itself fighting to wring profits from the sites it had, including ones attached to failing Mycal stores. "Warner would love to sell (its theatres in Japan)," says an executive with a leading Japanese distributor. "Toho is interested in buying, but is balking at Warner's all or nothing conditions." Understandably, Toho would rather cherry pick the profitable sites, including Shin Yurigaoka in Tokyo and Minato Mirai in Yokohama, both in entertainment districts with high traffic. "But Warner Mycal has many losers as well, so Toho has opted for nothing," comments the executive.
One enduring problem for both AMC and Warner Mycal is that their two strongest rivals, Toho and Shochiku, control the booking of most major Hollywood and domestic films in Japan -- and give priority to their own theatre chains. In the provinces, especially, prints of a popular film may be in short supply -- and Toho or Shochiku affiliates are more likely to get them.
Still another problem is that, though foreign-backed operators may boast the latest American technology, their management practices are often Japanese, including the over-hiring of staff. "A multiplex in LA will have one person checking tickets for fourteen screens," comments the executive. "In Japan they'll have ten." Rather than accept the occasional teenager sneaking into an r-rated movie, multiplex staff shepherd filmgoers every step of the way. "It the Japanese character," says the executive. "They want to do everything according to the rules." Even if the bottom line suffers.
Distribution bottlenecks and cultural quirks wouldn't matter so much in a rapidly growing market, but multiplex construction in Japan has been slowing for years, as weaker sites fall ever deeper into the red. Though there is still room for growth -- industry observers often cite 3,000 screens as a ceiling -- there is no longer any doubt about the winners of the multiplex wars. Hollywood may still rule at the Japanese box office, but the locals are still selling most of the tickets.
