APPENDIX F
Local competition
1. This appendix presents some of the evidence used for assessing the effects of the merger at the local level.
Basingstoke
2. Table 1 indicates the closest cinemas to the former Ster Festival Place cinema in Basingstoke in terms of drive-time. It indicates also their number of screens and seats. This table (as the analogous ones for the other former Ster sites given below) shows all cinemas, including those with fewer than five screens. Table 1 also gives figures for cinemas beyond 20 minutes’ drive-time, as there are no cinemas other than the parties’ within the 20-minute range. Shares of ‘capacity’ are calculated for different drive-time cut-off points.
TABLE 1 Capacity shares for Ster Basingstoke, 10-, 20- and 30-minute isochrones
10 and 20 minutes 30 minutes Travel time Shares of Shares Shares of Shares Competitors (mins) Screens Seats screens of seats screens of seats
Ster Century, Basingstoke 10 2,116 50 47 29 29 Vue, Basingstoke 5 10 2,398 50 53 29 33 Vue-Ster combined 20 4,514 100 100 59 62 10 and 20 minutes totals 20 4,514 100 100 59 62
The Screen, Winchester 24 2 384 6 5 Odeon, Bracknell 27 10 2,160 29 30 Palace, Alton 28 2 170 6 2 30 minutes totals 34 7,228 100 100 Other cinemas cited by Vue as competitors Vue, Reading 33 10 1,873 Ambassadors Cinema, Woking 34 6 1,665 Showcase, Reading 34 12 2,975 Film theatre, Reading 37 1 409
Source: Vue data.
3. Table 1 shows that the former Ster and Vue Basingstoke cinemas are the only cinemas (including both multiplexes and non-multiplexes) within a 20-minute drive- time radius of the Ster site. According to Vue’s drive-time data, its own cinema is located within just 5 minutes’ drive-time from the former Ster site. The next multiplex competitor is located 27 minutes’ drive-time away in Bracknell.
Population overlaps
4. Vue provided us with data on population overlaps produced by Experian between some of the former Ster sites and other cinemas. In practice, these overlaps consider the population estimate for the 20-minute isochrone of one cinema and then take the same estimate for the part of the isochrone that overlaps with the 20-minute isochrone centred on nearby cinemas. The percentages obtained by dividing the latter numbers by the former number are the overlaps.
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5. It is important to note that these are calculated for 20-minute catchment areas, and the population in these areas is not weighted to reflect the distance from the cinemas. In general most of a cinema’s audience comes from nearer the cinema site. Given this, it is likely that population overlaps with cinemas relatively far away (in terms of their drive-time) may come from areas near the fringes of the isochrone and therefore less ‘dense’ in terms of cinema audience than the areas near the centre. This lower ‘density’ may be due to both a lower number of cinema goers and to a lower frequency of visits from customers located further away.
6. Therefore lower overlap percentages may overestimate (potentially in a significant way) the actual cinema audience overlaps. Population overlaps for Basingstoke are reproduced in Figure 1 and indicate that Vue shares the vast majority of the former Ster cinema’s potential customer base.
FIGURE 1
Population overlaps—former Ster Festival Place, Basingstoke
100
90
80
70
60
50
Percentage 40
30
20
10
0 Vue Leisure Park, Odeon Bracknell Showcase Reading Ambassadors Cinema, Odeon Guildford Woking Basingstoke Multiplex cinemas
Source: Vue.
7. The 20-minute isochrone for the Vue Basingstoke cinema contains 90 per cent of the population also residing in the 20-minute isochrone centred on the former Ster site. Other cinemas have much lower overlaps.
Price trends
8. The Dodona report published price observations for Basingstoke. These are reproduced in Figure 2, where we have also added two observations for the pre- and post-merger prices.
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FIGURE 2
Prices in Basingstoke over time
7
6.5
6
5.5
5
4.5
Sat night adult ticket prices (£) Vue
4 Ster
3.5
3 1995 June 1997 Aug 1998 Sept 1999 Nov 2001 Jan 2001 Dec 2002 Dec 2004 Jan pre-merger post merger (27/05/05) Points in time
Source: Dodona Research.
9. This series shows the price at the Leisure Park site was dropped by £1 (or 18 per cent) after Ster’s entry. A little over one year later Vue’s price was raised again. However, while between 1995 and 2001 prices at the Vue Basingstoke cinema rose by 39 per cent (an average yearly growth rate of around 6.5 per cent), since Ster’s entry and until before the merger, prices at the Vue cinema rose by around 9.1 per cent (or around 2.3 per cent on average per year).
10. Since the acquisition Vue has raised prices at the former Ster Basingstoke site twice, and once at the Vue site. Until that point Ster had increased prices at an average rate of around 3.5 per cent a year between 2002 and May 2005. The post merger price changes bring the average yearly price increase over this period to 5.8 per cent. The second set of price changes formed part of Vue’s last yearly price review. In this context average ticket prices at Vue’s cinemas in Basingstoke rose by between [] per cent, compared with Vue’s circuit average of [] per cent.
Edinburgh
11. Table 2 is analogous to Table 1 for the former Ster Edinburgh cinema and indicates the closest cinemas to the former Ster site in terms of drive-time. It indicates also their number of screens and seats. The table shows all cinemas, including those with fewer than five screens. This table only gives figures for cinemas within 20 minutes’ drive-time. Shares of ‘capacity’ are calculated for 10 and 20 minutes’ drive-time cut- off points.
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TABLE 2 Capacity shares for the former Ster Edinburgh cinema isochrone
10 minutes 20 minutes Travel time Shares of Shares of Shares of Shares Cinemas (mins) Screens Seats screens seats screens of seats
Former Ster Century, Edinburgh 10 2,116 17 18 15 15 Vue, Edinburgh 5 12 2,205 21 19 18 16 Cameo, Edinburgh 8 3 394 5 3 5 3 Odeon, Edinburgh 8 4 710 7 6 6 5 Cineworld, Edinburgh 8 13 3014 22 26 20 22 Dominion, Edinburgh 10 4 732 7 6 6 5 Odeon, Edinburgh 10 12 2,476 21 21 18 18
Vue-Ster combined 22 4,321 38 37 33 31 10 minutes totals 58 1,1647 100 100 88 85
Westside Plaza, Edinburgh 15 8 2,088 12 15 20 minutes totals 66 13,735 100 100
Source: Vue data.
12. In terms of drive-time, the table indicates that Vue is the closest cinema to the former Ster site. However, there are two other multiplexes within the 10-minute isochrone and a further three cinemas each with between three and four screens. Shares of capacity for the 10-minute isochrone indicate that the parties will have fewer than 40 per cent of screens and seats in the isochrone. There is one further multiplex competitor in the 10- to 20-minute range.
13. A distributor has reported that the parties will have market shares of around 50 per cent in BOR and in the distributor’s rental revenue in Edinburgh.
Catchment and other data
14. Odeon provided us with postcode research for its two Edinburgh cinemas. This shows the percentage of the cinema’s internet bookings (around [] of total bookings) that comes from customers within different drive-time ranges. These are reproduced as Figures 3 and 4.
FIGURE 3
Odeon Edinburgh Wester Hailes: distance decay—percentage of internet bookings by drive-time
Source: Odeon.
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15. Figure 3 indicates that [] per cent of the cinema bookings come from a 15-minute drive-time distance, while a 20-minute drive-time includes nearly [] per cent of bookings. However, in supplying this data, Odeon warned that the postcodes are the ones of the credit card billing address and therefore a small number of spurious results will be linked to people on vacation, or working near the cinema but living further away. In other words this data may underestimate the actual percentage of bookings coming from a closer range. Figure 4 shows a similar result for the Odeon Lothian Road cinema.
FIGURE 4
Odeon Edinburgh Lothian Road: distance decay—percentage of internet bookings by drive-time
Source: Odeon.
16. UCI also provided postcode data for Edinburgh in form of a map where its customers where plotted. Both the Odeon data and the UCI map appear to indicate that multiplex cinemas within a 10-minute radius from the former Ster site are likely to share most of their customer base.
17. However, Vue has informed us of having increased prices at the former Ster site post merger. The price increase relates not just to the adult ‘premium’ price which increase by 20p to £6, but also child, student and senior tickets, which increased all by between 30p and 40p.
Leeds
18. Table 3 summarizes the information on competitors’ drive-times, screens, seats the isochrone centred on the former Ster site. The table only lists cinemas within 10 and 20 minutes as there are several multiplexes within this range.
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TABLE 3 Capacity shares for ‘The Light’, former Ster, cinema Leeds, 10- and 20-minute isochrones
10 minutes 20 minutes Travel time Shares of Shares Shares of Shares Competitors (mins) Screens Seats screens of seats screens of seats
‘The Light’, former Ster cinema, Leeds 13 2,906 54 51 14 13 Vue Kirkstall Rd, Leeds 6 9 2,012 38 35 9 9 Hyde Park Picture House, Leeds 5 1 350 4 6 1 2 Cottage Road Cinema, Leeds 6 1 468 4 8 1 2
Vue-Ster combined 22 4,918 92 86 23 22 10 minutes totals 24 5,736 100 100 25 26
Showcase, Birstall 11 16 4,643 17 21 Odeon, Pudsey 12 13 3,086 14 14 Cineworld, Bradford 15 16 3,263 17 15 Cineworld, Wakefield 15 12 2,368 13 11 Cineworld, Castleford 16 14 2,900 15 13 30 minutes totals 95 21,996 100 100
Source: Vue data.
19. Table 3 shows that the parties have the only two multiplexes within a 10-minute drive-time radius of the former Ster site ‘The Light’. Including non-multiplex sites, the parties have the vast majority of screens and seats. The next multiplexes in terms of drive-time from the former Ster site are the Showcase, Birstall; the Odeon, Pudsey; (11 and 12 minutes away respectively) and Cineworld sites in Bradford, Wakefield and Castleford, which are all within 15 or 16 minutes’ drive-time from the former Ster site.
20. The isochrone centred on the Vue site shows that the Showcase Birstall is within 12 minutes and the Odeon Pudsey within 10 minutes of the Vue site. The Odeon Huddersfield and Harrogate cinemas (22 and 26 minutes respectively from the former Ster site), were also mentioned by the parties as competitors.
21. A distributor only considers the Vue, Ster and Showcase cinemas and attributes to the parties a combined share of 70 per cent of its rental revenue.
Population overlaps and postcode data
22. Vue has provided us with the population overlaps for the former Ster site in Leeds. The same caveats apply as mentioned for the Basingstoke data, in that these overlaps are measured for 20-minute isochrones and do not weight the population, by its distance from the cinema. These overlaps are presented in Figure 5.
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FIGURE 5
Population overlaps—The Light, former Ster Cinema, Leeds
100
90
80
70 ulation
p 60
o
50
40
Percentage of p 30
20
10
0 Showcase Vue Odeon, Cineworld, Cineworld, Cineworld, Odeon, Odeon, Bradford Bradford Wakefield Castleford Huddersfield Barnsley Cinemas
Source: Vue.
23. The population overlaps are consistent with the proximity of the Vue and the former Ster cinemas; however, they indicate that the highest overlap is with the Showcase, Birstall cinema.
24. Odeon has provided distance decay data for its Pudsey site, which is reproduced in Figure 6.
FIGURE 6
Odeon Pudsey: distance decay—percentage of internet bookings by drive-time
Source: Odeon.
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25. This, as in previous data, indicates that the majority of customers ([] per cent) come from within 20 minutes of the cinema.
Analysis of the parties’ Leeds postcode data
26. We received postcode data from the parties. We have analysed it in the following way. We ranked the postcodes (at the first three- or four-digit level) for the Vue site and obtained a cumulative distribution of the frequencies which is shown by the blue line in Figure 7. Then we have obtained an equivalent cumulative distribution for the former Ster site with respect to the same ranking of postcodes. Closeness of the two lines would indicate that customers for the two cinemas come from the same areas.
FIGURE 7
Cumulative distribution—ranked by Vue Kirkstall Road
Leeds Kirkstall Road Leeds The Light
100
90
80
70
60 age 50 ent c r e P 40
30
20
10
0 8 4 1 0 7 5 7 4 6 5 6 8 7 1 1 4 8 0 2 7 0 2 1 0 3 F 4 1 2 1 6 1 16 18 48 12 1 2 1 1 4 1 S9 L1 po en L4 LS BL3 B79 SY GL SN2 M1 BD5 CV5 m3 SG NN2 GH OK W1 co WS La1 ne1 NW TF1 DL KT BT BH DE BD BD YO YO YO SO DN1 RG2 NW Postcodes
Source: Vue, CC calculations.
27. There is a high similarity between the two distributions. This indicates that the postcodes from which the Vue site draws most of its customers are also those where the former Ster site draws most of its audience. The two distributions diverge with respect of the ranking of postcodes with a very limited number of customers. These postcodes are not likely to be informative or significant, as they include London postcodes as well as other parts of England.
28. In order to establish how many of these customers come from the Leeds Metropolitan area, we have used the Leeds council postcodes map, shown in the Annex. We also noted that the former Ster site is located in LS1, while the Vue site is in LS4. The Showcase cinema is just outside the map, west of the postcode LS12.
29. A further analysis of these data shows that the Leeds Metropolitan District postcodes account for 80 per cent of postcodes for the former Ster site and 77 per cent for the Vue site. As we have not ‘cleaned’ the data to eliminate the distant postcodes
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mentioned in paragraph 27, these percentages are likely to underestimate the relevance of the Leeds Metropolitan District postcodes.
30. We could not conduct a similar analysis for the Showcase cinema in Birstall as postcode data for this cinema was not available. A visual inspection of the UCI postcode map for Huddersfield and of the parties’ web members map for Leeds suggests little potential overlap between the Wakefield and Huddersfield sites.
31. Prices over time are not available for the Leeds area on a consistent basis. Post merger, Vue has raised the price of the Saturday night ticket at the former Ster site by 20p to £6.00. At the Vue, Kirkstall Road the ticket price has increased by 5p post- merger to £5.95. These price rises were in part undertaken during Vue’s last yearly price review. In that context, average ticket prices at the two Leeds cinemas rose by between [] and [] per cent; this is below the average increase for the whole of Vue’s circuit of [] per cent. Vue pointed out that during 2005, most cinemas in the Leeds area have also raised their prices. For example the Showcase Birstall has increased its Saturday night ticket by 20p and now also charges £5.90, while the Odeon, Pudsey has raised prices by 10p to £6.00.
Romford
32. Table 4 for Romford gives the information on the cinemas located within 20 and 30 minutes in drive-time from the former Ster cinema.
TABLE 4 Capacity shares for the former Ster cinema, Romford 10-, 20- and 30-minute isochrones
10 (and 20) 30 minutes shares minutes shares (%) (%) Travel time Cinema (mins) Screens Seats Screens Seats Screens Seats
Former Ster cinema, Romford 16 3,862 100 100 18 19 10 (and 20) minutes totals 16 3,862 100 100
Vue, Dagenham 22 7 1,382 8 7 Cineworld, Ilford 23 11 2,200 13 11 Odeon, Woodford 23 7 1,015 8 5 Vue, West Thurrock 23 7 2024 8 10 Odeon, West Thurrock 24 10 2,080 11 10 Odeon, Basildon 25 12 2,886 14 14 The Stratford Picture House, Stratford 29 4 868 5 4 Showcase, Newham 29 14 3,696 16 18
Vue-Ster combined 30 7,268 34 36 30 minutes totals 88 20,013 100 100
Showcase , Dartford (Bluewater) 31 13 2,883
Source: Vue data.
33. According to the travel time data provided by Vue, the Vue Dagenham is the closest competitor to the former Ster cinema in Romford. However the distance between the two cinemas is significant. The Dagenham cinema is more than 20 minutes away from the Romford site. Furthermore, there are a high number of multiplex competitors between 20 and 31 minutes’ travel time from the Romford site.
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34. Considering isochrones centred on the Vue Dagenham and Thurrock sites does not change the basic picture. The Romford site is never the closest and there is always more than one cinema located within a closer range to the Vue sites.
Population overlaps and postcode data
35. Vue have provided us with the population overlaps represented in Figure 8.
FIGURE 8
Population overlaps—former Ster Cinema, Romford
100
90
80
70
60
50
40 Percentage 30
20
10
0 Cineworld, Ilford Vue, Dagenham Vue, West Showcase, Odeon, Odeon, West Odeon, Odeon, Showcase , Thurrock Newham Basildon Thurrock Woodford Chelmsford Dartford Multiplexes
Source: Vue.
36. Consistently with the relative isolation of the Romford site, none of the cinemas has significant penetration in terms of population areas.
37. We analysed postcode data for Romford in the same way as we analysed the same data for Leeds. The cumulative distributions are presented in Figure 9, where the postcodes are ranked with respect to the former Ster Romford site.
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FIGURE 9
Cumulative distribution—ranked by former Ster cinema, Romford
Romford Thurrock Dagenham
100
90
80
70
60 ge a t 50 en c r Pe 40
30
20
10
0 9 6 5 1 4 6 4 3 3 4 7 6 3 7 2 1 8 5 J 8 2 0 3 1 R 14 14 13 3 2 1 3 6 3 1 2 1 E7 E1 N5 ct g18 g20 e18 g10 S1 LU ST i cm M8 CV5 BH6 PO br E3G NN3 r IP SM SM IP W1 RM s TW LS SS BA PE CF CF TN1 TN7 MK1 GU GU EC4 WS Postcodes
Source: Vue, CC calculations.
38. Figure 9 indicates a relatively high similarity between the former Ster Romford and the Vue Dagenham sites as to what postcodes their customers are drawn from. The similarity between the former Ster Romford and the Vue West Thurrock sites is much lower.
Price trends
39. Price trends produced from Dodona report information are similar to the one presented above. These are reproduced in Figure 10, where we have added the pre and post merger prices.
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FIGURE 10
Prices in the Romford area over time
7
6.5
6
5.5
5
UCI Thurrock 4.5 Vue Thurrock Ster 4 Sat night adult ticket price (£) Vue Dagenham Showcase Bluewater 3.5 Cineworld Ilford
3 1995 June 1997 Aug 1998 Sept 1999 Nov 2001 Jan 2001 Dec 2002 Dec 2004 Jan pre-merger post merger (27/05/05) Points in time
Source: Dodona Research.
40. The trends do not highlight any specific episodes of price competition, price responses to entry or price wars. One price reduction by Vue Thurrock in 2004 may be due to seeking re-alignment with the price at the neighbouring UCI Thurrock, after the previous price rise had made the Vue site more expensive, or with the price of the former Ster cinema.
41. Prices did not rise at any of the areas post merger, although there had just been a price rise (pre-merger) at the Romford site.
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ANNEX
Leeds postcodes
Based upon Ordnance Survey mapping with the permission of the Controller of Her Majesty’s Stationery Office © Crown Copyright. Unauthorised reproduction infringes Crown copyright and may lead to prosecution or civil proceedings. Leeds City Council 100019567
Leeds Metropolitan District – Postcodes Wetherby
Linton Thorp Arch Collingham Otley Boston Spa Pool LS22 LS21 East Keswick Clifford Bramhope LS29 Bardsey LS19 LS17 Bramham LS20 Guiseley LS16 LS23 Scarcroft Yeadon Alwoodley Thorner Cookridge Shadwell Rawdon LS14 LS18 Horsforth Roundhay Aberford LS8 Barwick in Chapel Scholes LS5 Elmet LS6 Allerton Seacroft LS13 Headingley LS7 Harehills LS15 Burley LS2 LS25 LS28 Armley LS4 LS3 LS9 Pudsey LS12 LS1 BD3 Wortley Garforth
LS11 Beeston Kippax Hunslet Swillington Gildersome Great Preston BD11 LS26 WF10 Morley LS10 Rothwell LS27 Middleton Allerton Bywater Oulton Postcode boundaries WF3 Methley Leeds Metropolitan District boundary Ardsley 1:175000 10 km Settlement pattern 5 miles
Source: Leeds City Council.
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