The transition from analogue to digital projection could have been a disaster for the many small Norwegian cinemas. Now, almost a year after the last 35mm reels were distributed, small cinemas are experiencing a clear growth in attendance.
According to Jørgen Stensland in the industry organization Film & Kino the smaller cinemas have experienced a growth of about 30% compared to 2007 and 2008, and a growth of 50% compared to 2010. The national growth is smaller, about 6%, but nationally the turnover has increased by almost 9% compared to 2010. The increased turnover is caused by an increased attendance for 3D movies. In 2010 12% of all screenings were 3D, in 2011 25% of all screenings were 3D.
A large majority of cinemas in Norway, and almost all of the smaller, are run by local councils. Of about 200 cinemas before the transition to digital only about 20 were able to turn a profit on a regular basis. As the digital-era approached there was a very real concern over whether or not smaller cinemas would be able to afford new projection equipment.
Film & Kino, a few of the largest cinemas and the independent Norwegian distributors started planning, and testing, for the switch to digital as early as 2005 and negotiations with Hollywood started in 2007. These initiatives succeeded in securing financing for the transition early in 2010, and all analogue projectors were replaced with digital equipment during fall 2010 and spring 2011.
According to Stensland only nine of about 200 cinemas were forced to close because of the transition. Among those were several that did not meet Film & Kinos requirement of at least one screening pr week. Digital projection has also led to an increase of new screens being planned. As new cinemas will have easy access to content, and there is still funding available as a part of the transition. Stensland therefore expects the number of screens and cinemas to increase beyond the pre-digital numbers within few years.
The smooth transition was the result of a deal involving the cinemas, Film & Kino and both independent Norwegian and Hollywood distributors. The distributors have agreed to fund 40% of the costs through Virtual Print Fees (VPF), while the cinemas and Film & Kino share the rest. Film & Kino first brokered a deal with the Hollywood studios before offering the deal to the independent distributors. This last piece of negotiation proved to be more difficult than expected, mainly because VPF changes the way the distributors operate in many respects.
In the age of the 35mm reel it was every distributors goal to maximise the number of screenings from any given copy. Almost all of the distribution costs was printing. However in the era of the VPF there is a point were the distributor must consider the risk that collected rentals will be lover than the minimum VPF, and therefore might choose to withhold movies from cinemas that want to screen it.
There are two elements of the VPF deal designed to combat this withholding. First VPF only applies to the first 90 cinemas, secondly «quality» movies can be given extra funding from Film & Kino for the first 90 cinemas. This has been the core of the conflict. The independent distributors fear that since big Hollywood movies often be shown at more than 90 cinemas as early as the opening weekend they will have a large number of screenings that they are not paying VPF on. As a result they expect to pay a larger part of the VPF total than the Hollywood distributors, even though the Hollywood movies have a majority of screenings.
The extra funding for «quality» movies is also problematic. The funding is given by Film & Kino on review, but if the film is shown at more than 90 cinemas all funding is withdrawn. This has lead to distributors stopping films at 90 screenings even if there is still demand from cinemas for them, most notably Joachim Triers acclaimed Oslo, 31. August.
The resistance from the independent distributors to the new deals could also be read as result of a very real uncertanty about the future. With digital projection films are distributed to all cinemas much quicker than before. According to Stensland some movies might have taken as long as 45 days after the premiere to reach all cinemas on 35mm, but this might now be as short as 5 days. The result is that many movies are playing for a lot shorter time, as new movies are always available to even the smallest cinemas. There is a concern among the distributors that this will result in more films being screened. Even though attendance is rising the earnings will then have to be shared with more producers than earlier, thus reducing profits. In Januray Danish Nordisk Filmdistribusjon announced that they were closing their Norwegian office. In 2009 Nordisk Filmdistribusjon was the most profitable of all the Norwegian independent distributors with the success of WWII drama Max Manus.
Digital projection has also given the local cinemas greater influence over their own programming. This has clear benefits, but is not without its dangers. There is a danger that the smaller cinemas now will screen almost exclusively Hollywood and Norwegian commercial films, at the expense of European, Scandinavian and smaller Norwegian movies. This is especially problematic considering that almost all of the small cinemas are run and/or funded by the local councils using public money. Producers of Norwegian «art-house» movies are also experiencing a change in working conditions. Earlier they could at least expect to get screenings for their films as «stop-gaps» when more commercial fare was unavailable. Now that cinemas have so many movies to choose from «art-house» is suddenly playing by the same rules as the Hollywood blockbusters. If the first weekend is unsuccessful it will become very difficult to get the movie screened. This might of course result in some big «art-house» hits, but a year on the misses have been more frequent.
The cinemas greater influence has also resulted in local distribution of Norwegian movies that have not reached cinemas nationally. In 2010 and 2011 there were several examples of low-budget movies being screened only at cinemas in the areas where they were shot.
Another area where distributors fear competition and cinemas see potential is what is still termed «alternative content». Direct transmission of sports and stage events from all over the world. Distributors fear competition as these events displace movies from screens. The cinemas see not only extra profits with higher ticket prices, but also new customer groups that would not usually go to the cinema.
«Alternative content» has only had a small share of the attendance so far, but cinemas in the larger cities have had great success with screenings from The Metropolitan Opera in New York. Jørgen Stensland expects «alternative content» to become much more mainstream in 2012 as more content is becoming available. In December a transmission of Phantom of the Opera at The Royal Albert Hall was screened at a number of Norwegian cinemas, and Stensland believes that this is an example of more «accessible» stage events coming to cinemas. Even more important, Stensland believes, is that the Norwegian national stages are considering «alternative content» broadcasts. Between writing and publishing of this article the Norwegian National Opera will have broadcast «La Boheme» to about 20 Norwegian cinemas. When nationally acclaimed actors performing form the nationally acclaimed stages become a regular offering «alternative content» might become a large part of the cinemas programming.
Some of the larger Norwegian cinemas are also expecting a new wave of available content as digital distribution becomes more widespread in throughout Europe. With the low costs associated with creating digital copies of films for cinema, new markets might appear. Among these might be movies distributed for diaspora groups that previously were to small to warrant the cost of 35mm distribution.
All of this represents both new challenges and opportunities for the smaller cinemas and their audiences. Cinemas are having to learn to program with abundance rather than scarcity, and the audiences have to cope with much shorter runs for each film. However the growth in Norway seem to indicated that cinemas are successfully using the new opportunities, and that the audiences are responding well to more and newer films screened for shorter periods of time.
At the end of June this year the VPF agreement is to be reviewed, a full year after the last Norwegian cinema changed to digital. While there will probably still be disagreements between Film & Kino and the independent distributors, major changes are not to be expected. The independents might still feel that Hollywood is getting away to cheaply, and they have to pay an unfair part of the VPF. The future for many of the Norwegian distributor offices might be in doubt as the market changes, whether they are local offices of Hollywood majors or small independents. Still cinemas, Film & Kino and distributors alike are probably going to sigh in relief. As Hollywood is getting reluctant to sign new VPF deals, it seems that Norway’s early leap for digital cinema was in the nick of time.