Japanese distributor-exhibitors Toei and Toho have agreed to co-operate in the multiplex construction business, due to high costs which have left local exhibitors struggling to keep up with foreign players.

Under the terms of the recently-signed agreement, Toei will join Toho in its existing plans to construct a multiplex in Japan's third largest city, Nagoya. Toei has concluded similar deals with rival Shochiku, but until now Toho has gone its own way in the multiplex sector.

The deals have been prompted in part by the high cost of building, leasing and operating multiplex theatres on core downtown sites, which has put Japanese companies at a disadvantage compared to better-funded US-backed operators such as Warner-Mycal (a joint venture between Warner Bros and Japanese retailer Mycal), AMC and UCI. Japanese exhibitors have also been squeezed by domestic real estate costs which are among the highest in the world.

The Nagoya site has a complex history. Toei sold the land and building - the Nagoya Toei Hall - to a local pachinko machine maker, Kyoraku Sangyo, and leased a movie theatre and office space in the complex. Toho then came forward with plans to develop the theatre into a multiplex. Both companies will manage the multiplex once construction is completed, although details of the arrangement are still under negotiation.

Toei is also constructing a building in Osaka's entertainment district that will house a multiplex and will start construction this autumn on a similar project in the Shinjuku entertainment district in Tokyo. Toei will operate both theatres in co-operation with Shochiku.