Full digital roll-out will commence in Norwegian cinemas during the second half of 2009.Digitalisation will encompass all 440 screens in 220 locations throughout the country, with an estimated price tag of NOK 400 million (€ 45 mill). The technical implementation phase is estimated to be completed by 2011, while the full digitalisation programme has a six-to-eight-year span. The process of going digital will be coordinated and partly funded by the cinema umbrella organisation Film & Kino.
General Background
Norway’s cinema system is unique in Europe, originating in 1913, when municipalities started taking over cinema operations across the country. Since 1925 the municipally owned and operated theatres have held a dominant market share, standing today at 72,6 per cent (admissions) and 81,1 per cent (box-office). As a consequence of this system, cinemas operate as individual enterprises, being individually programmed, and exhibition in Norway is thus not based on the classical organisational paradigm of cinema circuits/chains.
Since 1970 municipally and privately owned cinema have collaborated closely on developing the exhibition sector as a whole, co-ordinating these activities through the organisation which today is known as Film & Kino (http://www.filmweb.no/filmogkino/diverse/article54083.ece).
Central to these efforts have been the Cinema Fund. The Fund was set up in 1970 as a mutual fund, financed by a voluntary 2,5% levy on cinema ticket sales to finance projects of common interest and benefit to the exhibition sector: From support for film festivals and cinema literacy programmes, to ambulatory cinema services and P&A support in various forms, to training courses for cinema staff and technical and other consultancies.
The Cinema Fund became enshrined in the Law on film and videogrammes (1987), which made the voluntary levy obligatory on all cinema ticket sales, as well as on all video/DVD sale and rental transactions. The levy (2,5% of ticket sales; NOK 3,50 per video/DVD transaction) currently brings some €7,5-8 million into the Fund annually.
The Regulations (http://www.lovdata.no/for/sf/kk/xk-19991220-1515.html) given under the 1987 law provide general aims for the use of the Fund’s resources, while establishing legal base for Film & Kino to determine concrete operations, under the superintendence of the Ministry for Culture. The Regulations furthermore stipulate that all stakeholders (i.e. representatives of contributors to the fund) have the right to be represented on the Board of Film & Kino.
Digitalisation Background
Starting in 2006 Film & Kino has run an extensive trial programme for digitalisation, primarily in regard to technical solutions and system integrators (technical service providers), encompassing a total of 36 screens in 20 locations, served by two system integrators. In parallel Film & Kino has negotiated with US majors on technical standards and business model, in particular Virtual Print Fees (VPFs).
A main aim of Film & Kino in devising a digital roll-out scheme has been to bring all cinemas on board from day one. Simulations show that if the country’s major 50 cinema enterprises were digitalised, 90% of the market would be covered. In line with its mutuality remit Film & Kino has expressly aimed at devising a scheme that would not “leave behind” any cinema interested in going digital.
Film & Kino’s digitalisation initiative was taken up and adopted in Parliament’s decision on the 2006 government White Paper on film policy, which anchored the digitalisation programme to the principle of equal access to cultural benefits. Parliament’s decision rested on the express observation that digitalisation should be “funded through the [Cinema Fund] levy … provided other stakeholders contribute at a level which, as a minimum, is commensurate with their savings from the change-over”.
These preliminary and preparatory steps have lead to a model for digital roll-out that comprises:
? Agreements with US majors on the supply of digital prints, technical standards and business model.
? A technical minimum package, with optional add-ons, to be offered to cinemas by system integrators, chosen by public tender.
? A financing model based on leveraging a NOK 400 million (€ 45 mill) roll-out package, cashflowed by a financial institution to be chosen by public tender.
Film & Kino estimate that full digital roll-out will be completed within two years from deployment date, while the financial transactions will have a 6-to-8-year completion span.
US Majors
In order to secure sufficient digital screening prints for the digital cinemas Film & Kino has negotiated with six US majors (Warner Bros., Paramount, Universal, Disney, Fox and Sony). A minimum of three majors agreeing to participate in the scheme has been considered necessary. As of mid-2009 five US majors have signed contracts with Film & Kino; negotiations with Sony are still under way.
The contracts chiefly concern
? Guarantees for the supply of digital screening prints by producers.
? Technical minimum requirements, based on the DCI (Digital Cinema Initiative) standard.
? Producers’ (and their distribution subsidiaries’) participation in the cost of digital roll-out by way of VPFs.
Financial Package
Film & Kino has earmarked NOK 100 million (€ 11,1 mill) from the Cinema Fund to leverage a NOK 400 million project investment package. The administration of this credit line will be put on public tender to financial institutions throughout the EU and EEA countries. The successful contender will be expected to cash?flow the roll?out, with collateral provided in part by the Cinema Fund allocation, in part by cinema owners.
Recoupment is based on a model where producers and distributors provide 40% by way of VPFs, and the individual cinemas, along with the Cinema Fund digitalisation allocation, will contribute 60%. Recoupment will run until costs of the programme have been covered according to the 40/60 model, or for a maximum of eight years. Current estimates indicate that full recoupment may be achieved within six years from deployment.
Technical Package, System Integrators
Cinemas will receive offers of a basic digital projection package, to be provided by system integrators, comprising:
– A projector of DCI standard, 2K or 4K, depending on the cost at time of deployment
– A screening server, a library server, and an Alternative Content1 processor
– Installation, on-site service and technical help-line
A package of optional extras, like up-grade from 2K to 4K (if not included in initial package), 3D capability, and additional server capacity, will be provided.
Cinemas are expected to have digital sound systems already installed, as well as a projection booth of sufficient size and with necessary air conditioning. The technical package will not include electricity supply or broadband connection, nor staff training.
The technical packages are to be supplied by system integrators, i.e. technical service provision companies. To avoid monopolisation Film & Kino has divided the national digital market into 10 zones, each one to be served by one system integrator. The system integrators will be chosen by public tender throughout the EU and EEA countries, and prospective system integrators may bid for one or more of those zones. System integrators are expected to guarantee their provision of goods and services for a minimum period of 10 years. Film & Kino will evaluate the tenders and choose the successful applicants.
Cinema Reimbursement
Cinemas may chose between three different models for paying back the digitalisation cost.
– As a loan, over six years.
– By payment in instalments.
– As a direct cash investment.
In the case of credit being engaged, interest and rates will be fixed through Film & Kino’s general terms with the successful financial institution:
Film & Kino Cost Participation
Cinemas have for nearly 40 years contributed to the Cinema Fund. The Film & Kino Annual Meeting (the organisation’s highest authority) has therefore stipulated that its NOK 100 mill Cinema Fund allocation will subsidise the digitalisation programme. Part of the money will initially be used as collateral for the credit line put up by the financial institution; as reimbursements mount up, the collateralised amount will be used to reduce the cinema owners’ 60% participation in the digitalisation scheme. The remainder of the Cinema Fund allocation will be a direct cash contribution to reduce the cinema owners’ credit liabilities.
Producers’/Distributors’ Reimbursement
Film producers and distributors will contribute to the digitalisation scheme by paying Virtual Print Fees, amounting eventually to 40% of the total roll-out costs. After reimbursement by way of VPFs has reached this level, the VPF arrangement will be suspended. The VPF already agreed by the Hollywood studios will be charged on the basis of a fixed, flat fee per engagement. The size/amount of the VPF has not been finally established, but it is understood to be applicable to all contracting studios, thus eliminating the danger of over? (or under?)bidding. The VPFs in the Norwegian model are furthermore understood to be modest in comparison with levels in other markets, thus reducing possible producer/distributor reluctance to release or re-release individual titles.
Non-US-majors producers and independent (local) distributors will be invited to sign up to the scheme on similar contract conditions.
Legal Status
It is understood that the European Surveillance Authority, the EFTA watch-dog body, has not raised objections to the digitalisation programme. The subsequent decision by the Film & Kino Annual Meeting in mid-June 2009 to go ahead with full roll-out thus paves the way for cross-country digital projection commencing this autumn and being fully introduced by the end of 2011.
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FONTE
Norwegian Film Institute
Data de publicação: Julho de 2009
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