San Jose cinema alleges unfair competition

By Glenn Lovell and Rodney Foo
Mercury News

The state attorney general's office is examining antitrust allegations made by the owners of a downtown San Jose theater who say they are being prevented from booking the biggest moneymakers, including this summer's first two blockbusters, ``Spider-Man 2'' and ``Fahrenheit 9/11.''

Even though the Camera 12 movie complex -- an integral part of downtown's redevelopment effort -- has been open only a month, there already is concern that it could suffer the same fate as the site's former tenant, the UA Pavilion 8 movie house, which went out of business five years ago after complaining it couldn't compete without the blockbusters.

``This has been building up for a long time,'' said Jack NyBlom, co-owner of Camera Cinemas, which, besides the Camera 12, operates Los Gatos Cinema and Camera 7 in Campbell. ``I think the practice stinks. It doesn't allow for fair and open competition, and that's what we're telling the attorney general's office.''

At issue is whether the older, more powerful Century Theatres chain, which operates 13 theaters in the South Bay, including the upcoming CinéArts 6 in Santana Row, is playing fair when it uses its influence to restrict Hollywood studios from distributing popular movies to smaller venues nearby, like the Camera Cinemas.

NyBlom's complaints have gotten the attention of the attorney general's office, which has interviewed him twice, he said.

``We are aware of the issue and we are looking into it from an antitrust perspective,'' said Tom Dresslar, a spokesman for Attorney General Bill Lockyer.

``We are looking at whether there are agreements between major theater chains and distributors to freeze out independent theaters. . . . Our review was spurred by reports regarding the Camera theater.''

But others in the theater business say nothing nefarious is going on.

``It's called competition -- we're competing,'' said Ray Syufy, chief executive of the San Rafael-based Century Theatres, which has almost 1,000 screens spread over California, Nevada, Utah and nine other states. ``Nothing has changed: We are operating our business the exact same way that we operated it a year ago, five years ago.''

But that's just it, argue the Camera Cinemas and San Jose Redevelopment Agency, which loaned the Cameras $3.2 million of the $4 million it took to rehab the old UA Pavilion on Second Street. Much has changed in the South Bay over the past few years, including population density and freeway congestion. The downtown, they say, is a distinct market and deserves its pick of the best films, which, so far, hasn't happened.

``We had a great opening, but then we didn't get `Spider-Man 2' and `Fahrenheit 9/11,' and a lot of people were upset. . . . It was a huge disappointment,'' NyBlom said. ``A movie like `Fahrenheit' has always been our bread and butter.''

These titles are instead playing the Century Theatre domes on Winchester Boulevard, less than five miles away, and Century bookers have let it be known that in most cases if distributors play the Cameras, they won't play Century, and vice versa.

What's happening to the Camera 12 is no secret in industry circles -- it's a long-accepted but controversial practice called ``clearance,'' where a Hollywood distributor agrees not to play a film within a certain radius of a chosen -- usually larger -- theater.

``I'm not saying it will,'' NyBlom said, ``but theoretically `clearance' could drive us out of business downtown.''

Clearance distances vary from market to market, and can range from a few city blocks in Manhattan to five or six miles in the Chicago suburbs. ``It's hard to say what is legal and illegal,'' said Gitesh Pandya of BoxOfficeGuru.com. ``There's a lot of gray area.''

Antitrust cases aimed at the practice of ``clearance'' are extremely difficult to prove, said Los Angeles attorney Carole Handler, who specializes in antitrust and intellectual property issues.

``Agreements are usually upheld as being reasonable because they are designed to prevent the economic diminution of both the distributor's and the exhibitor's income,'' Handler said.

In this case, distributors are allowed to pick their ``customers'' -- the theaters, she said.

``The only time they've been attacked under antitrust laws is when it's been so obviously a horizontal conspiracy as to prevent the independent from getting the product,'' Handler said.

Harry Mavrogenes, interim director of the San Jose Redevelopment Agency, was among those shaking their heads over Camera 12's lackluster opening slate. State Sen. John Vasconcellos, who has championed the Cameras since they opened their first theater downtown in 1975, went further: He contacted the attorney general's office about Century's booking practices in San Jose.

``Unfortunately,'' said Mavrogenes, ``the Centuries don't understand how important Camera 12 is to the downtown and the city as a whole.''

Syufy says it's just healthy competition. Century Theatres, he said, prides itself on giving distributors the strongest ticket sales and patrons the smartest state-of-the-art theaters.

``We have always competed with the Cameras and the downtown,'' Syufy said. ``When I go to bed at night I lose sleep over not being able to get film product in every one of my theaters.''

But Camera Cinemas is not the only theater group to complain.

Cinema West, which operates 11 theaters out of its Petaluma office, has just filed an antitrust lawsuit in U.S. Northern District Court, accusing Century Theatres of ``restraint of trade'' and ``conspiring to monopolize the exhibition of motion pictures in Marin County,'' said Cinema West's Dave Corkill.

The next hurdle for Cameras will come when Century's CinéArts 6 opens in Santana Row in late August. NyBlom fears the theater -- the sixth in the company's subsidiary chain -- will cut into the Cameras' ability to bid on hot new art films.

Contact Glenn Lovell at glovell"at"mercurynews.com or (408) 920-5639

©San Jose Mercury News 2004

 

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