Newsletter-21

120 NEWSLETTER 2016 the Report points out that only 14 films (11 local and 3 foreign films) among 357 films has passed the threshold of 1 million viewers. These 14 films attracted 48% of the total number of viewers. Therefore, it is possible to conclude that consumers prefer certain popular and suc- cessful foreign and local films. Digital Transformation Process Under this section, the Competition Authority assesses the impact to the market of the process of transformation from 35 mm films to digital films, as well as the investments required to be made by the movie theaters. The Report indicates that the digitalization process ac- celerated and almost completed by the movie theater chains in the re- cent years; however, other movie theater operators could not complete such process due to financial issues. In this respect, the Report points out a system referred to as “VPF” pursuant to which producers share the benefit arising from the cost advantages incurred from the use of digital copies with movie theater operators and, therefore, support the investment for the digitalization process. Accordingly, movie theaters that project films with digital copies are remunerated for each film. The Report also finds that the VPF system was formed late in Turkey, and underlines certain problems with respect to this system. Due to its market power, the MARS Group concludes agreements with more favorable contractual terms in respect of VPF; whereas, other projectors concluded a VPF agreement in 2015 via an aggrega- tor firm (DCINEX). The Competition Authority states that the VPF agreements are in conformity with competition legislation. However, the Report underlines that in order to benefit from the VPF system, the movie theaters must profit a certain amount from the sale of the cin- ema tickets, but small-scale movie theaters are usually unable to fulfill such condition. The Competition Authority gives special importance to the risk of eliminating small scale movie theaters from the market due to the exclusive use of digital copies. The Competition Authority determines that the relevant situation may enforce the concentration in micro geographical markets. Therefore, the Competition Authority points out the risk associated with the digitalization of the market that may end up with the elimination of small-scale movie theaters from the market, and with higher concentration in the market.