"It" is consolidation, the merging of smaller companies into larger ones.

Few industries that have experienced significant growth have remained unaffected by consolidation. Usually, consolidation provides the resulting company with efficiencies of scale, access to a larger customer base, and new technologies and products, while reducing competition.

The LF industry has grown in many ways through the years. The number of screens and films has increased, and the number of organizations staking out a territory for their products and services in the LF "food chain" has grown. Unfortunately, there has not been growth in profitability or in economic prowess. There has also not been any real consolidation. Instead there has been a proliferation of small companies.

It is time for the LF industry to consolidate certain parts of the chain.

The result will be a stronger industry, ready to move up to the next level of growth and to face the challenges ahead. Consolidation could provide part of the economic stimulus that is sorely needed at this time.

Although consolidation is not needed in every segment of the industry, all would be positively affected. Let's take a look at this, segment by segment.

Distribution. Film distribution is prime for consolidation. The fact is that there are too many distributors with only one or two films each, chasing exhibitors in a highly fragmented market. With so little to offer, they can't build the long-term relationships that would make their businesses sustainable.

As new producers have entered the industry in recent years, most have opted to self-distribute. They prefer to have complete control over their income and expenses and may mistrust a larger distributor's willingness to actively promote an "outside" film. But releasing only one film every other year or so, a small distributor cannot take advantage of the efficiencies of scale that come into play when fixed expenses are spread across multiple films.

Consolidation of distribution could accelerate the LF industry's move toward more day-and-date releases, which I believe is essential to continued growth.

And consolidation of distribution would have benefits beyond the exhibition end of the business. The Economic Impact Study I recently prepared for the Giant Screen Theater Association demonstrated the importance of ancillary revenues-particularly home video-to a film's profitability. Bundling of rights could make for a more efficient sales process here as well. A distributor with a large stable of films will be able to strike better deals than a single-film distributor.

Exhibition. For the most part, the exhibition side of the industry consists of hundreds of independent screens with distinct programming needs and booking processes. Given the various types of theaters, from natural history museums to theme parks, the chance of any one film meeting such a wide range of needs is low. Distributors must get to know literally hundreds of decision makers, learn their goals, preferences, and budgets, and negotiate specific deals with each, one-on-one. It is a time consuming and inefficient process.

There is an exception to this, of course, where the commercial theaters have a point person that handles the bookings for multiple screens. However, there is still not a critical mass of commercial theaters and given the difficulties of the mainstream exhibition industry generally, it is not clear where/how this will turn out.

However, groups of exhibitors could band together to negotiate contracts jointly, with one institution acting as the primary liaison to the distributor. The resulting savings would enhance the distributor's profitability and allow for more favorable terms for the theater.

Production. Given the lengthy and difficult process of raising production financing, there may be little room for consolidation in this segment. In fact, because there are relatively few companies that rent production equipment and provide related services, this may be an area in which new competitors could successfully enter the market. Here, increased competition-the opposite of consolidation-would stimulate the industry.

Post production. I do not believe that any real benefits could be gained by consolidating the few existing LF post-production companies. However, the effects of consolidating distribution might allow for more competitive pricing if fewer customers brought more projects to post houses instead of the current practice of many customers with smaller projects.

Some may say that too much consolidation could cause monopoly-like conditions, if not in a true legal sense, at least in perception. But this is how Imax, a vertically integrated company that dominates the industry, has been perceived for much of the last 30 years. The consolidation of other companies could establish more viable competitive forces while enhancing efficiency and profitability all along the food chain.

It is not an easy time for the LF industry. We are in need of, and ready for, a dramatic change. I have made a case for consolidation. It is time for action.

Marty Shindler is CEO of The Shindler Perspective, Inc. an organization specializing in providing a business perspective to creative, technology and emerging companies. Marty may be reached at Marty@iShindler.com.