Key Points

· The structural influence of industry groups and associations of exhibitors.
 
· The geographical concentration of the exhibition industry in the capital (50% of admissions).
 
· The scarcity of multiplexes.
 
· The continued strength of national films, and the decline of European films, in terms of admissions.
 
· The substantial intervention of public authorities, through high taxation.
 
· The strategy of the American majors (associated with the leading national players).

 
The four principal associations form groups which negotiate terms of business for showing a film in their theatres with the distributors. They are:

• the association of first-run cinemas in the big cities (Copenhagen, Århus, Odense and Ålborg). They group together all the circuits, and a few independents, and control between them 65% of admissions (in only 14 cinemas);

• the association of big regional cinemas, located in the major towns, which group together 14 establishments and represent 16% of the market by admissions;

• the association of regional cinemas, which accounts for 19 establishments and 10% of admissions

• and finally, the association which covers small cinemas, bringing together the rest of the operators, representing 9% of the market.
 

The two main "integrated" players are also the two biggest exhibitors(7): MGM Nordisk and Dagmar Scala-Warner.
 (7) and are linked to foreign companies
 
Nordisk, which has a 50% holding in the MGM Nordisk group, both produces and distributes films (its distribution operations represent 40% of the market in terms of admissions). In Denmark MGM is part of UIP. The two US majors, MGM and Warner, have a 50% share in the exhibition circuits through MGM Nordisk and Dagmar Scala respectively. Warner controls 50% of the distribution company Warner-Metronome, whereas MGM is not, however, as strong in the distribution field in Denmark, because within the vertically integrated group this function is carried out by Nordisk (which remains the main channel for Danish films).
 
The most marked feature of local market competition is the dominant position of Copenhagen. It brings together, within the city area, 40% of total admissions; including the suburbs this figure is 50%. The vast majority of local markets, outside the 5 main cities, are monopolies where there is only one cinema for each catchment area.
 
So it is evident any new market entrant would need to be present in the big urban areas and particularly Copenhagen in order to win a substantial share of the national market. This is the reason why Dagmar Scala, which only manages 3% of Danish cinema screens controls over 9% of admissions: it is only present in the main cities.
 
The problems of gaining access to prints of successful films are different depending on the group of exhibitors to which a cinema belongs. At the national level, available prints are given to the different groups of exhibitors, with the most profitable being given priority. The cinemas which are known as "exclusive first-run" cinemas in the big cities are guaranteed a copy the moment the film is released. For the other three negotiating groups, access to a film depends on the number of prints made available by the distributor.
 
The operators claim that the main problems are that the number of prints of successful films is very limited, and that this creates several months delay between when the films are shown in the big cinemas in Copenhagen and when they reach the small exhibitors in the provinces. The monopoly situation which prevails in the majority of local markets makes the problems posed by exclusivity agreements less relevant. The principal obstacle for the cinemas of access to films is not exclusivity agreements; it is the number of prints of the film put into circulation.
 

Ticket Prices and Exhibitors' Shares
 

1992	Denmark	EU average
Average ticket price incl. Taxes (ECUs)	4.84	4.19
Average rental as a % of box office net of tax	47%	47.2%
Exhibitor's average share (%)	53%	52.8%
Exhibitor's share of ticket price (ECU)	1.90	1.93
Exhibitor's average share per screen (000 ECUs)	52	63

 
Commercial agreements between players are not subject to regulation; the only restriction is the way that the Danish Film Institute allocates aid to distributors, which imposes on them a maximum rental of 25% for the small exhibitors.
 
The contractual relations between distributors and exhibitors are determined by the industry associations. In general, commercial mechanisms in Denmark are extremely complex: firstly, as we have already seen, the negotiations between distributors and exhibitors are carried out separately by four groups of exhibitors. Each negotiating group has its own method of calculating payments to distributors and different rental rates. And the calculation itself is also complicated: distributors are paid a proportion of receipts, but a minimum payment is also standard. The rental rate is on a "sliding scale", calculated according to the volume of admissions, and the length of time the film is shown.
 
Despite the variations in rental rates between groups, in 1992 the average national rental rate of around 47% was close to the European average.
 
 
Cinemas Provision
 

1992	Denmark	EU*
Number of screens per 100,000 population	6.14	5.24
Number of seats per screen	167	266
% large screens	15%	24%
% Dolby	53%	51.4%
% multiplexes (7+ screens)	6%	10.7%

* weighted average

At the beginning of the 1970s, almost all cinemas were single screen. The process of transformation occurred from single theatre to multi-theatre sites between 1975 and 1985. The structure and the number of screens has now stabilised.
 
The standard of equipment in the theatres is relatively good, particularly when it comes to sound, as the Danish government made a particular effort to renovate sound equipment in the 1980s. The majority of screens have stereo sound-systems. It is again worth noting the difference between the different categories of exhibitors: it is obviously the first-run cinemas in the big cities which have the highest technical standards. The second group, the big regional cinemas, has however encouraged its members to modernise by the unusual device (and one which expresses the influence of the industry organisation of the sector) of making an agreement in principle with the distributors whereby the association invests in upgrading its members' cinemas.
 
Denmark has not witnessed the widespread development of multiplexes. Up to the present, there is only one development of this type, which is the 17 screen complex run by MGM-Nordisk, in Copenhagen. In the whole of Denmark, only a score of establishments have more than three screens.
 
During the period under consideration, screen performance measured by the average number of admissions per seat per year has consistently fallen (from 275 in 1960 to today's figure of 165). However, this is still a relatively high figure when compared with the European average. This comparatively good sustained rate is partly explained by the low density of sites, and partly by the size of the auditoria which corresponds better to lower levels of cinema going than is the case in most other European countries.
 
 
Programming
 

1992	Denmark	EU*
US films' market share	78%	74%
European films' market share       - of which national films	18%   15%	24%   17%
Art-house & experimental: screens as % of all screens	6%	10.8%
Art-house & experimental: share of admissions	6%	9.7%

* weighted average

 
As we have already seen, the majority of exhibitors programming decisions are principally determined by print availability. For the majority of them, it is not therefore possible to talk of a programming strategy. Only the theatres in the big complexes at Copenhagen can work out a distinctive programming strategy.
 
US films' share of admissions is slightly above the EU average (about 78). This proportion has grown rapidly in the last few years, as it was only 58% on 1985. This increase in the attractiveness of films from the other side of the Atlantic is mainly at the expense of European films, with the exception of those from Denmark, which, thanks to a resurgence of Danish cinema since 1989, has kept hold of a respectable share of the market (15%). At present, almost all admissions are either to American or Danish films (93%).
 
Denmark does not provide any official support or specific aid to the art-house sector. Cinemas which are classified here as art-house are those which offer to the public films outside the mainstream, in other words half of their films are European, or from other parts of the world, or otherwise classified as more specialist. With the sector defined thus, the sector is extremely concentrated, as two-thirds of the admissions are provided by a single cinema: the Grand Teatret in Copenhagen, of which the parent company also controls a small specialist distribution company (Camera). This cinema alone therefore accounts for the biggest share of the art-house sector.
 
 
Role of the Public Authorities
 

1992	Denmark	EU*
Taxes:  - VAT  - Other taxes  - Rights (musical)	25.00% - 1.00%	10.80% 5.18% -
- Total/ticket (in ECU)	1.26	0.65
Financial assistance:                                - Total (in ECU Millions)	4.30	52.7
- Per ticket (in ECU)	0.50	0.09

* unweighted average

 The total state levy on box office receipts is very high: the rate of VAT (25%) is equivalent to more than double the European average. This money is however to some extent returned to the exhibition sector in the form of various sorts of financial assistance, which has contributed to maintaining the high quality of cinemas in Denmark.
 
The Danish government is therefore involved in the economics of exhibition. There are specific regulations for the exhibition sector in Denmark, and various institutions which specialise in the management of financial assistance and the promotion of cinemas. Public funds destined for the exhibition sector are collected by the Danish Film Institute, created by the 1972 Film Act. These funds are managed by the FSI, the inter-industry film committee. It organises festivals and sponsors promotional events at cinemas and seminars. These bodies are also responsible for the regulation and the codes of practice of the sector.