Conclusion
The Hollywood Effect
“We may find ourselves for a certain period in a paradoxical situation in which film producers and distributors have everything to gain from the development of new media, while theatre owners or managers suffer directly from the effects of the competition. (…) We may expect, however, a levelling off or a decrease in the number of movies shown in theatres, but also a profound transformation of the film-product itself (in aesthetics as well as in its conditions of production) without, however, foreseeing the merging of the film industry with the heterogeneous audiovisual industries.” (Miège 1989, 138)
If one were to believe the Netflix creation myth, Reed Hastings’ $40 dollar late return fee for a DVD of Apollo 13 (howard1995?) in 1997 was the butterfly that flapped its wings and, 15 years later, cost the Norwegian film industry between NOK 44M and 72M1 in yearly revenue. While the myth has been debunked in favour of a more traditional tale of economic and technological opportunities seized at the right moment, Netflix’ 22-year rise from nothing to becoming the first new MPAA member since 19952 is remarkable. The 2012 arrival of Netflix in Norway certainly changed the local film industry. In 2019, Hollywood entered the SVOD market and with that the era of the digital global American film industry began.
In Screen Distribution and the New King Kongs of the Online World, Stuart Cunningham and Jon Silver (2013) argue that the dominance of the video-on-demand market by Netflix and other companies new to the film and television industry questions the old adage that “content is king.” “[If] content is king, then distribution is King-Kong” (2013, 17).
They adopt McGahan, Argyres and Baum’s (Baum and McGahan 2004) four stages of industry evolution to describe the then still emerging digital video marketplace, arguing that – in 2013 – digital video distribution had moved beyond the initial pioneering stage, but remained in the second shakeout stage.
In 2022, the third stage in McGahan, Argyres and Baum’s model, maturity, is either just beginning or very close by. With the arrival of streaming services backed by the deep libraries of Hollywood majors and the deep pockets of tech giants, it seems that at least all the combatants in the fight for global streaming services have entered the arena. This thesis has shown how the health of the Norwegian film industry is connected to the global American film industry. The waves of Hollywood hit the Norwegian shores in ways that may be unpredictable in their impact. They may offer both opportunities and challenges, they may bring losers and winners, the only certainty is that they will arrive. As shown in part 1 of this thesis, the question of how Norwegian distributors adapted their strategies and their function to the digitalisation of the film industry is essentially a question of how they have adapted to changes in the strategies and the function of the global American film industry.
Evolving function
Local film distributors, when considered through a cultural industries lens, have mainly performed the commodification function. They have acquired films created by production companies and converted them into products that can be disseminated in cinemas and homes. Most distributors perform this commodification for a number of production companies, including companies they have no corporate ties with. Commodification is a less time and cost intensive process than creation, allowing distributors to have a higher volume of titles than production companies. Having distribution companies that specialise in commodification function is therefore more cost-effective for the industry than if production companies were to perform the commodification function themselves.
Looking ahead, the ongoing digitalisation could, at worst, result in a catastrophic loss of function for Norwegian film distributors. If Norwegian producers were to make movies mostly or exclusively for foreign streaming services, they would not need distributors to perform the commodification function. If most or all foreign movies in Norway had no or limited cinema runs before becoming available on streaming services run by global American companies, they would not need local distributors to perform local commodification.
Local distributors have responded to this threat by increasing their commitment to local creation. The two local high-resource distributors, SF Studios and Nordisk Film Distribusjon, responded with a process that could best be described as studiofication. SF Studios acquired full ownership of production companies Paradox and Filmkameratene and 49% ownership of Motion Blur. Nordisk Film acquired production company Friland through a 50.1% share in production company Maipo and significantly increased the output from its own production division, Nordisk Film Production.
When they are part of vertically integrated studios, distributors not only secure access to productions that can be commodified – they can also share in profits from productions commodified by others. This applies to as much to series production in which the distribution companies previously had no stake as to Norwegian movies for which streaming services are increasingly acquiring the most attractive windows.
In the summer of 20213, SF Studios released I onde dager (wirkola2001?) in Norwegian cinemas. Home entertainment rights, however, had been sold exclusively to Netflix by the producer and his foreign sales agent. As a potential home entertainment distributor, this Netflix sale was a lost opportunity for SF Studios. When another SF Studios title, Børning 3 (Bræin 2020), was sold to Netflix it lost home entertainment value, too, clearly indicated by its initial NOK 99 EST price point as opposed to the more common NOK 139. However, while this sale to Netflix also hurt SF Studios as a home entertainment distributor, as the owner of Filmkameratene the company was able to share in the profits.
When the Friland-produced Battle: Freestyle (Søderlind 2022), the sequel to Battle (Launing 2018), became a Netflix exclusive, it was a lost opportunity for Nordisk Film Distribusjon. However, with the 2020 acquisition of Friland, revenue from the Netflix deal remained within the conglomerate.
Acquiring multiple production companies is a very resource intensive way for a distribution company to increase its stake in the creation function. However, almost all the Norwegian distributors have increased investments in local productions since 2012. These investments in individual titles won’t always let distributors share in profits from streaming services or secure access to the next project. Yet by increasing their commitment to Norwegian producers, distributors also increase their value to them. Distributor expertise, especially among the specialists, and their relationships with producers, cinemas, and policymakers translate into symbolic capital that cannot be replaced by a foreign entity simply matching the economic capital they offer.
While this increased commitment to local creation was accelerated by the threats posed by digitalisation, it should also be seen as a natural step in the evolution of the Norwegian film industry. While Arthaus, as an example, has felt they increased competition for foreign titles from both competing theatrical distributors and SVOD services, their specialist position was still niche enough to be protected and as they have always relied heavily on cinema revenue the fall of the DVD market did not impact them as much as others4. For Arthaus it was far more important that the company had been around long enough to have the financial stability to carry the risk of a local titles, and that the Norwegian film industry had begun producing movies that fit Arthaus’ profile and the level of artistic quality they wanted.
Nevertheless, after 2012, and certainly after 2019, the era of the traditional Norwegian film distributor, or filmbyrå (film agency) as they called themselves before the 1990s5, appears to have come to an end. A distributor that performs only local commodification function for foreign movies or does not offer more than economic capital for local movies will likely discover it is no longer needed in a digitalised and globalised film industry.
Adapting strategies
Part 2 of this thesis gave a detailed analysis of the strategies employed by Norwegian distributors since 2008 and how they have changed since 2012. While local film distributors have shown a strong willingness to innovate, their capacity to push back against external pressure has been limited.
Using Christine Oliver’s (1991) typology of strategic responses, we find that Norwegian film distributors mainly have applied acquiescence and compromise, the two most passive responses in Oliver’s model, and that more active responses are either rare or unsuccessful. Schibsted’s decision to divest from the film industry can be considered an avoid response, as it left the market. The pandemic gave Norwegian distributors a brief opportunity to defy the regular cinematic windows, although in a very limited context. Finally, Arthaus’ and Motlys’ attempt to secure a day-and-date release for Barn could be considered an attempt to manipulate, the most active response in the typology.
One reason for Norwegian distributors’ relatively passive responses is that the changes’ digitalisation brought exerted pressures that were often contradictory. The success of SVOD services increased the home entertainment markets’ share of the audience’s time and spending. As a response, cinemas have been increasingly protective of their windows, especially as Hollywood majors such as Warner and Disney put them under pressure, too.
For Norwegian distributors with little or no stake in SVOD services, the home entertainment market lost significant value and could longer justify any significant marketing expenses. To compensate, Norwegian distributors wanted to shorten the cinematic window. But as the loss of home entertainment revenue also made them more dependent on cinemas, they could not risk losing cinema revenue in pursuit of home entertainment revenue.
Local distributors’ responses to the new home entertainment market ranges from acquiescence to compromise – they have attempted to increase the EST share, they have experimented with home entertainment formats, and they have attempted to get old and new titles into various subscription and streaming services. In most cases, acquiesce or acceptance best covers each distributor’s response to the new industry conditions. iTunes’ preference for early EST was for the most part accepted, along with the premise that TVOD was the only format that really mattered for most titles. Other responses are better described as compromise. Nordisk Film Distribusjon’s launch of Nordisk Film+ could not challenge the major streaming services in any way, but it could give the company a small share of and some insight into the new market.
When the COVID-19 pandemic closed Norwegian cinemas in the spring of 2019, Norwegian distributors attempted almost every conceivable response. Closed cinemas paved the way for a kind of “rumspringa” where the distributors could openly defy the cinematic window while still promising cinemas their long-term commitment. Some titles were held to await better capacity, some were released early as premium-video-on-demand, some went early on EST and TVOD, and one was even offered for free in a cable provider sponsored deal. Still, others stayed with their initial home entertainment plans despite losing cinema early. While several of these responses gave higher home entertainment earnings than otherwise expected, none of them came close to recapturing the lost income from cinemas (Øfsti 2020).
Motlys and Arthaus’ attempt to manipulate a day-and-date release with NRK for Barn attempted to use a difficult situation – less room for small artistic movies in cinemas – to create a better one, in the form of more money and attention from NRK without losing cinemas. If the deal had gone through, Barn would likely have received significantly more revenue from NRK than from cinemas. In this context, it is not surprising that the cinemas did not accept the deal. Even if it involved just one or two movies with low admissions each year, such an arrangement could undermine the cinemas’ negotiation position in the future.
Most distributors’ response to the changing value of foreign and local titles are also characterised by compromise, as they attempt to balance the reduced value of foreign titles by increasing their commitment to local titles. However, even if local titles gain relative value, they remain higher risk investments. Most distributors therefore remain dependent on foreign titles, and the move towards local titles is gradual.
The use of “passive” responses and gradual change reflects the limited latitude Norwegian distributors have when navigating between powerful foreign competitors and platforms, as well as local producers, local policy, and local cinemas. These constant, but gradual, changes are also consistent with the expectation that film industry companies are adhocracies (Mintzberg and McHugh 1985). No year, month, or film is the same as the previous one. Strategy might still be a force resisting change, but this is by managing change rather than avoiding it.
This also explains why local distributors have only been able to make significant changes along the local dependency pattern. We have seen companies - such as Arthaus, make gradual transitions between the foreign-dominated and foreign-led pattern as they increase their investment in local titles. The only significant shift in the resource dependency pattern was Sandrew Metronome/Norsk Filmdistribusjon’s loss of resources. As there is no middle ground between the high- and the low-resource pattern, moving from on to the would require a leap6.
Norwegian low-resource distributors have occasionally been able to acquire expensive local market path titles and release them on attractive dates with significant marketing, effectively following high-resource patterns for a limited time. Sometimes local artistic path titles and foreign acquisitions can also deliver admissions more commonly expected from high-resource distributors. But to consistently apply high-resource strategies would also require output deals that secure attractive foreign titles. Even though these output deals have lost value with digitalisation, they remain a limited resource. Any new distributor wishing to pursue high-resource strategies must therefore be able to acquire these deals in competition with the already established high-resource distributors. As a result, the most attractive foreign output deals function as barriers to entry.
New paths, new challenges
Even a reader that still disagrees with this thesis’ claim that 2012 was a pivotal year for the Norwegian film industry must agree that 2019 was the end of an era. The pandemic not only closed cinemas in Norway and elsewhere, it also accelerated the next phase of streaming video. Whatever “normal” the industry at some point returns to, it will be a new one.
At the time of writing, both Norwegian movies and Hollywood have returned to cinemas. However, they return to a world where the fight for a share of the streaming market is a fight for a share of the entire film market. In their bid to survive the streaming shakeout, Hollywood majors are placing their libraries and the cinematic window on the table, while Silicon Valley is betting on algorithms and local content from around the world. No matter who survives the shakeout, the logic of streaming markets has already significantly changed the industry.
The “old market” based on a publishing logic was good for Norwegian movies. There was a low barrier to entry, where artistic movies could get decent audiences and commercial movies could get big audiences. A healthy home entertainment market secured a steady stream of additional income. Foreign movies did hold the major share of both cinema and home entertainment markets, but much of that revenue passed through local distributors and some of it could be invested in local titles.
What the new market will bring remains to be seen. What is certain, is that it will challenge the existing models for public film financing. NFI has argued that its more restrictive ex post policy was necessary in a digital and global market (NFI 2021). The 2021 policy effectively closed the ex post path while also exposing private investment in the artistic, market and regional paths to greater risk.
For producers of popular7 comedies, where the ex post path was most successful, the streaming path might prove viable just as the ex post path is closing. These movies are rarely awarded NFI funds, but with relatively low production costs and relatively high admissions, they could succeed if they qualified for ex post support.
Broad comedies have also proven popular at home, with Swingers and Fjols til fjells (holmsen2020?) as recent examples (Øfsti 2020). Based on the poor reviews, it also seems likely that Blasted - Gutta vs. Aliens (Sofiedal 2022) would have struggled in Norwegian cinemas. However, as a Netflix exclusive, it topped Netflix’ global non-English charts (Rushprint 2022).
So far, Netflix has been the most active purchaser of Norwegian movies and series. While its Norwegian originals so far have been humour and horror with relatively modest budgets, the upcoming Troll (Uthaug 2022) shows that Netflix is at least willing to explore high-budget8 spectaculars as well. If not, these are potential market scheme titles. While the reduced share of ex post support makes private financing more difficult, the increased threshold is less of a worry.
NFI’s increased thresholds for ex post support for artistic path movies might, then, have bigger consequences than the closing of the ex post path. Artistic path movies like Barn, Disco and Håp might not be commercial streaming material and could struggle to reach the new ex post admissions threshold. While all three titles were well above the previous threshold, only Håp has a comfortable margin above the new threshold, and Barn is well below. For these types of movies to continue to exist there needs to be increased production funding from NFI or others to the point where producers don’t rely on ex post support.
One such source of revenue might, of course, be foreign admissions. Barn did not get substantial foreign admissions, but it certainly put Dag Johan Haugerud on the map internationally. With Verdens verste menneske (trier2022?), Joachim Trier also made another big step internationally. These might be indications that Norway can, like Sweden and Denmark, produce international arthouse hits in the future, and especially in a scenario where the resistance to subtitles in the US and other foreign markets is falling.
Another scenario that is attractive to Norwegian producers is to retain the cinematic window but offer early and/or exclusive home entertainment windows to streaming services. We have already seen this with commercial movies like Børning 3 and I onde dager. However, Arthaus and Motlys are also pursuing this model with Viaplay for their upcoming Hør her’a! (tehrani2023?) as well as a trilogy of Dag Johan Haugerud movies: Sex, Drømmer og Kjærlighet (Haugerud 2024a, 2024b; haugerud2024b?)9.
If successful, streaming models will be very attractive to Norwegian producers. Their offer of a flat fee will appeal to an industry that depends on staying in production at all times, and where profits are rarely expected. This will especially be the case given that cinemas are providing even more screen space to Hollywood blockbusters in an effort to squeeze as much as possible out of them before the limited cinema window closes. At its Norwegian premiere on January 21, 2022, Spider-Man: No Way Home (watts2021?) was screened 76 times in Oslo. On the same day, all other movies had 66 screenings combined. When producers are faced with the choice between this level of competition and a small but safe profit, it should surprise no one if the number of Norwegian movies in cinemas drops.
In the short term, then, losing local commodification might only be a problem for distributors. If global and regional streamers can offer safe sources of revenue for all kinds of Norwegian movies, the industry could continue to thrive without local distributors.
However, depending on foreign streaming services to fund Norwegian movies has already presented some significant challenges. First of all, Norwegian producers have enjoyed a high degree of autonomy in the creation-centric Norwegian film industry. When they are no longer the main financier of their projects, that creative and economic autonomy will also shrink. This, in turn, has implications for Norwegian movies’ place within the public sphere, which will be weakened if a significant share of local movies is financed by global corporations and adapted to global audiences. Exclusive streaming deals also erode the expectation that Norwegian movies should be available to the Norwegian public, at the very least in libraries.
Most critical is, however, the fickle nature of the global American streaming services. Netflix recently stopped all production in Denmark in a response to collective agreements that would force them to pay creators more. Warner recently decided that HBO MAX needed an international restructuring. This not only entailed stopping forthcoming productions, it even included the removal of existing shows. Among of those were the Norwegian HBO series, Beforeigners (Lien 2019) and Velkommen til Utmark (kari2021?).
Commodification is king
At the time of writing, Netflix has just posted its first subscriber loss. However, as this loss was also less than expected, Wall Street was happy. Whatever happens to Netflix between now and whenever you are reading this, it is clear that the company’s position in the streaming market is no longer unassailable.
The truth of 2013, that “the new King-Kongs of the online world are, almost without exception, new to screen distribution” (Cunningham and Silver 2013, 47) is not the truth of 2022. In their article, Cunningham and Silver reference Jonathan Knee’s Atlantic article “Why Content Isn’t King”, in which Knee argues that “scale and customer captivity” are the “prevalent sources of industrial strength” in all businesses and that “content creation” is not suited to either, while “aggregation” is (2011).
Netflix’ path to success was not, however, simply that it was able to “aggregate” content. Nor was it the company’s effective system for “movement of content from the time it is produced to the time it reaches the consumer”, to use Braun’s (2015) definition of distribution. Netflix’ competitive advantage was that it solved the commodity problem of online video first.
Netflix’ subscription model, and its impressive technical achievements (Fagerjord and Kueng 2019), offered customers a value proposition that other forms of online video distribution had not. Because they were first, they were able to acquire content that already existed in other commodity forms cheaply. As the SVOD market rose in value, so did the content. To secure continued access to content, Netflix then leveraged its existing and future subscribers to invest in content creation.
Despite the Hollywood majors’ early failures in online distribution (Cunningham and Silver 2013), at least some of them have proven able to enter the SVOD space. After Netflix demonstrated that the model could work, copying its distribution model was simply a question of time and money. Access to content was not an issue.
Content alone is not king. Good content is lost, drowned by the mediocre, every day. Distribution alone is not king. Good distribution systems can be copied or bought. Film industry success, and indeed any cultural industry success, rests on the power to acquire content that can be popular and the power to turn that content in products that audiences pay for. Commodification is king.
After the shakeout
We are “in a paradoxical situation in which film producers and distributors have everything to gain from the development of new media”, at least if the producer and distributors in question are those that can profit from SVOD services. And “while theatre owners or managers suffer directly from the effects of the competition” (Miège 1989, 138) so does local film industries.
This is not the shakeout of the digital video distribution industry; it is the shakeout phase of the global digital film industry. The global American film industry is no longer divided between a streaming industry and a cinema industry, or between a film industry and a television industry. The new film industry follows both a hit-driven publishing logic and a loyalty building flow logic.
Whether this will lead to “a levelling off or a decrease in the number of movies shown in theatres” as well as “a profound transformation of the film-product itself (in aesthetics as well as in its conditions of production)” are questions for another time. However, those that believe that film still has a vital role in the public sphere, and that film remains a unique art-from, has to fight to avoid “the merging of the film industry with the heterogeneous audiovisual industries”. Even if Miége (1989, 138) did not “foresee” it.
For the Norwegian film industry, and likely almost all non-American film industries, some parts of this battle have already been lost. The role of foreign movies within local film industries will be reduced; the global digital American film industry no longer has to rely on companies around the world to facilitate local commodification and dissemination. Significant shares of local home entertainment markets around the world will be lost, because only the global American film industry has the resources to succeed within a global flow logic.
In some battles, compromise, if not victory, can still be reached. Cinemas, regional cooperation, and policy are among the available weapons. While the role of cinema in the future of the digital film industry is under threat, the role of cinemas for the Norwegian film industry has increased. What role they can continue to play for local movies will depend on the degree of blockbusterification and on local cinemas and local policy. However, even when cinemas are a part of global chains, their physical presence in a country provides some measure of defence against the waves of Hollywood.
Viaplay’s investments in Scandinavian movies and series, as well as StudioCanal’s recent global success (Meir 2019) show that there is hope for regional cooperation and distribution where local initiatives have struggled. The regional nature of SF Studios and Nordisk Film has also proven to be an advantage when dealing with platforms that prefer to think in territories rather than countries. Producers and distributors outside the conglomerates also need to find regional solutions that help them gain prominence and extract revenue from home entertainment without compromising cinema revenue or pre-sales funding.
For local policymakers, some of the challenges presented by the global digital American film industry are relatively straightforward and others are more complex. Most European countries have already taken measures to compensate industry players for the loss of revenue, either through taxes or local production quotas – the first solution retains the independence of local creation, and the second increases the likelihood that local productions on global platforms will be given prominence.
The more complex questions, as both Michael Gubbins (2022) and Tomas Eskilsson (2022) have pointed out, regard the fundamental role of local film policy. This includes the question of when to support, and when to step aside. When new paths open for local movies, local policy should not close them down. However, while public funding might become less important for some parts of a local film industry, others will need it more.
What is certain is that no local film industry can afford to put all its eggs in the global American basket. Industries and policymakers must work to sustain all functions in local film industries, because loss of local dissemination erodes local prominence, loss of local commodification erodes local revenue retention, and loss of local creation erodes the public sphere.
References
Based on a market share between the 11% EST/TVOD share and 18% DVD/BD share in 2016 and a combined EST/TVOD and DVD/BD market worth NOK 400M less in 2012 than 2016.↩︎
Turner joined the MPAA in 1995 but was purchased by Time Warner the following year. Sony was the most recent of the current MPAA members, joining after its acquisition of Columbia and Tri-Star Pictures in 1989. The last time a current MPAA member joined without acquiring an existing member was Walt Disney Studios in 1979.↩︎
A side effect of the pandemic was that some distributors attempted summer releases, as foreign competition was low. In the summer of 2020, when cinemas were still under restrictions, two children’s movies were moved from their original autmn dates to July. SF Studios released Knerten og sjøormen (undheim2020?) and Norsk Filmdistribusjon released Tottori! - Sommeren vi var alene (ommundsen2020?) (Øfsti 2020). The July 30 date for I onde dager was likely set because NFI offered extraordinary release support up to August 1, 2021 as a pandemic measure. The summer of 2022 saw no Norwegian releases.↩︎
One exception was that they had acquired the home and theatrical rights to the Studio Ghibli catalogue at a time when Ghibli was adamant that these titles would never be on the internet. When Ghibli later sold globe-spanning (excluding USA) streaming rights for the catalogue to Netflix, Arthaus’ local rights to DVD/Blu-ray lost value.↩︎
“Norske filmbyråers forening” changed their name to “Filmdistributørforeningen” in 2015. However, the name change was well overdue. The first distribution companies that used “distribusjon” as a part of their company name seem to appear in the 1980s or 1990s. (Disen 1997, 261, 264).↩︎
Or a fall↩︎
In the sense that they appeal to popular tastes - actual popularity does not always follow.↩︎
At least for a Norwegian movie.↩︎
While the current plan is to release the trilogy as three separate movies in close succession, the project has so far been referred to under this collective title.↩︎