Did AMC conspire to push Houston's only Spanish-language movie theater out of business?

HOUSTON—In many ways, Houston is a great city for Spanish-speaking Americans. The Houston area has the second-highest number of Latinos of any city in the country, and more than a third of Houstonians speak Spanish at home, according to city statistics.

If you want to watch a movie in Spanish at a theater, however, you’re out of luck. There isn’t a single Spanish-language cinema in city limits.

Viva Cinemas tried to change that. When it opened in May 2013, the eight-screen movie theater showed only movies dubbed in Spanish or with Spanish subtitles. It had a mix of Hollywood films and movies imported from other countries, and was popular with many Spanish-speaking locals. But just six months after it opened, the theater closed its doors.

Now, Viva is suing movie theater company AMC under an antitrust law. Their lawsuit alleges that the cinema conglomerate conspired with movie distributors to push Viva out of business. A judge is expected to rule soon on AMC’s motion to dismiss the suit.

“We wanted to be part of the fabric of the Hispanic community,” Mikey Altman, the president and CEO of Viva Cinemas, told me. “This was a passion project.”

Altman got the idea to launch Viva when he worked at a local real estate company that had a movie theater division. The company’s loyalest customers, he said, were Latinos, but very few Spanish-language films were offered. (There’s one Spanish-language cinema in Pasadena, a south-eastern suburb about a half hour’s drive from downtown, but none in Houston itself.)

In 2012, he found an empty movie theater space on the city’s west side that had been damaged by Hurricane Ike in 2008. It was in a Latin American-themed mall, in a heavily Latino neighborhood. “When I looked at it, I said this is perfect,” Altman said.

Over the next few months, his team renovated the theater and finessed their business plan. The concessions stand was stocked with candy, pastries, and soft drinks from Mexico. There was a party room with a “piñata arena.” They hired kids from local high schools. And tickets were priced at just $7, lower than other theaters in the area.

But before they even opened, Altman realized they had a problem. Viva was only three miles away from AMC Studio 30, the local crown jewel in the portfolio of the movie theater giant. When Studio 30 opened in 1997, it was by some estimates the largest movie theater in the world, at 115,000 square feet and 30 screens.

According to Viva’s lawsuit, AMC made “clearance” agreements with the seven biggest movie distributors—industry lingo for deals to prevent other nearby theaters from showing the same movie at the same time. Basically, AMC told the distributors that any first-run movies—any new film from a major studio—that were shown at Viva would not be shown at Studio 30.

The distributors went along with AMC’s clearance agreements, and didn’t give Viva any first-run movies. Most of the movies Viva showed were five or six weeks old, others about to be released on DVD or Netflix. They also imported some smaller, independent films from Spanish-speaking countries, but it wasn’t enough. “A theater needs major openings to draw people to survive,” Altman said. “You have to have the blockbusters in order to pay the rent.”

The only first-run movie that Viva showed in its six-month lifespan was the Disney-Pixar animated movie Planes. In response, AMC followed through with its threat, refusing to show the movie in any language at Studio 30. Planes—Aviones in Spanish—did quite well, according to Altman, which he says shows that their business model could have worked if they had got more first-run movies.

In the end, Viva closed its doors in November 2013. Altman filed his lawsuit against AMC last year.

The idea of clearance agreements goes back to the early days of the movie theater industry, when every theater had only one screen. Then, it made sense for consumers that cinemas could restrict their competitors from showing the same movie they did. It meant that if, for example, there were three theaters on the main street of Houston, each would be playing a different movie on any given day.

But the idea of clearance as a pro-competition measure was thrown out the window as the industry changed. Now huge megaplexes like Studio 30 show every big movie at the same time, on multiple screens at once. So it seems to make less sense, from a moviegoer perspective at least, to allow theaters to block out the competition.

Viva’s lawsuit argues that AMC used clearance agreements in an anti-competitive way to push the smaller company out of business and deprive Houston’s Spanish-speaking community of the choice to see films in Spanish. Specifically, the lawsuit cites the Sherman Antitrust Act, a Teddy Roosevelt-era law that aims to spur competition in major industries by outlawing many forms of monopolization.

“If competition is stifled, then consumers ultimately have less choice,” Michael Hawash, Viva’s lawyer, told me. “Consumers should have a choice about whether to see Star Wars in English or Spanish in Houston, which has a gigantic Hispanic community. They’ve been denied that choice.”

AMC Studio 30 does show some Spanish-subtitled movies. According to its website, only three films at Studio 30 this week have any showings with Spanish subtitles: Alice Through the Looking Glass, Angry Birds, and X-Men: Apocalypse, with showtimes mostly during the day. No movies are dubbed in Spanish.

Lawyers for AMC, which has moved to dismiss the lawsuit, did not respond to a request for comment about the lawsuit.

In AMC’s court filings, the company says it “vigorously competed” with Viva and that the smaller theater simply did not succeed. It also notes that many Houston moviegoers are bilingual, and thus most could just go to a movie at AMC. “A high percentage of Viva’s target patrons are perfectly capable of seeing and understanding a movie in English as well as Spanish,” one of AMC’s motions states.

Altman denies that his business model was flawed. “Give me the movies, and there’s no doubt” Viva would have succeeded, he said. “How can you open up a hamburger store and not be allowed to sell hamburgers?”

Both sides in Viva’s lawsuit have made their arguments in legal briefs, and now they’re awaiting Judge Alfred Bennett’s ruling on AMC’s motion to dismiss. If Bennett allows the lawsuit to go forward, it could result in a trial. Altman says that if he wins, he would love to reopen Viva, and maybe bring the same model of movie theater to other cities around the country.

It seems like an untapped market. It’s rare to find Spanish-language movie theaters in most cities around the country, even though Latinos are more likely to go to movies in theaters and account for a disproportionately high percentage of ticket sales, according to data from Univision (which is Fusion’s parent company). Some companies have tried to address the issue in creative ways: Disney released a smartphone app that automatically translated the movie McFarland, USA from English into Spanish. Moviegoers simply wore headphones and heard the dialogue in Spanish.

On a recent sunny Saturday afternoon, I visited what remains of Viva at the PlazAmericas mall. It seems like the theater was a perfect fit: Most signs in the mall are in Spanish first and English second, and some weekends there are mariachi band concerts and events featuring telenovela stars. Children’s yells echoed from a play area on the second floor.

At the end of one airy hallway, the Viva Cinema storefront remains, shuttered behind a metal grate. It’s painted in bright colors, a garish mix of purple and yellow and red. A board of showtimes was wiped clean, while another sign still declared the theater’s tagline: “¡Amor. Magia. Misterio. Acción!”

Several mallgoers said they missed Viva Cinemas. Stanley Pineda Rivera, who doesn’t speak much English, looked forlornly at the theater with his two daughters, who are six and three years old.

“We used to go here a lot,” Rivera said in Spanish. “I don’t go to the movies now because I can’t understand them.”

Other passersby said that even if they spoke English, going to the movies with family members who don’t was a hassle. Hector Rodriguez said he had to translate for his Spanish-speaking wife, whispering to her in the seat next to him on the rare occasions when they went to films these days.

“It’s simple, if you don’t speak English and don’t understand it you don’t go to the movies,” Rodriguez said. “There’s a lot of Latinos here, so we need something like this.”