The ongoing conflict between the Tamil Film Producers Council and digital service providers such as Qube Cinema Technologies Pvt Ltd and UFO Moviez over the ‘Virtual Print Fee’ has brought the film industry to a stand still as production and post-production have been halted from March 16. The release of new movies was stopped from March 1. What is the Virtual Print Fee? Around 15 years ago, the embracing of digital cinema drastically reduced the film-making and film-distribution costs, which resulted in a sharp increase in the number of movies produced and expansion of the movie markets around the world. Producers encouraged theatre owners to install digital projectors at the halls but they had to pay a cost – Virtual Print Fee (VPF), which was just 1/4th of the film-print costs. The VPF was constitutive of ‘cost of projector,’ mastering and delivery of the movie. Back then, the producers agreed to pay the VPF because they would benefit — they could release their movies at a significantly higher number of theatres at 1/4th of the cost. With more than 15 years having passed, producers are now refusing to pay the VPF anymore. The issue is complex and all three stake holders — producers, digital service providers and theatre owners — seem to have logic on their side. Paid more than enough, say producers After almost 15 years, the producers argue that they have paid ‘more than enough’ for the projectors. The broad argument made by the producers focuses on the fact that as digital cinema and technology have become the norm, producers should not be singled out as the only beneficiaries of the upgraded digital projection technology (for instance, superior projectors). “A projector is essential to run a theatre, right? How long should the producers pay for the projectors in the theatre? We have paid VPF for 12-14 years now. We cannot be paying for technology upgrades after 14 years too. We need a sunset clause from these companies. We can’t be endlessly paying VPF,” said Vishal Krishna, president, Tamil Film Producers Council. Even a proposed 18-23% reduction in VPF has failed to end the strike. “Other companies are ready to provide the same service for half the price. We will go with them,” he said. Vishal also reiterated that the strike is not just against VPF, but an opportunity to resolve vexatious issues such as computerisation of movie tickets across Tamil Nadu, high internet and food and beverage charges, and regularisation of Tamil movie releases among others. In a statement on Saturday, he said, “Computerisation of movie tickets around Tamil Nadu should be done. We are also ready to not charge ‘minimum guarantee’. We will give the content and take a share.” Highly reliable support, say DSPs The Digital Service Providers such as Qube Cinema Technologies (Previously Real Image) played an important role in creating the digital cinema infrastructure in Tamil Nadu and broadly across India and particularly in South India. After the producers in South India (across Telugu, Malayalam, Tamil and Kannada industries) raised concerns about the high VPF, DSPs agreed to reduce it by 18-23%, which was agreed to by Telugu and Malayalam film industries. “We made projection possible at a low cost while providing great security and highly reliable support,” said Senthil Kumar, co-founder, Qube Cinemas Technologies Pvt Ltd. Pointing out that the VPF charged in Tamil Nadu is one of the lowest in the world, Mr. Senthil Kumar said that the basis of fee cannot be reinterpreted by producers to suit their argument. “What we offer is an integrated service that includes the usage fee for the projector, mastering, drive duplication and delivery, key management etc. This was our business model from the start,” he said. “The VPF is one fourth the cost of a print unlike the VPF abroad which was 85% of the cost of the print ($850 in the U.S. compared to ? 15,000 per movie, on average here). In the U.S., the VPF was kept high because it went towards paying for the projector until entire cost of projectors & support was recovered with a 7% return added (interest rates in the U.S. are very low at ~2.5%).” Reiterating that producers conveniently forget the cost of operations and ‘spare replacements’ into account, Mr. Senthil Kumar said that high reliability of tech support is necessary to ensure smooth operation across cities. “We cannot reduce the VPF any further. We will go into the red. We have 350 people and 35 crores of spares just in the South. We have one engineer for every 7 theatres apart from engineers in each of our offices providing remote support to theatres. All this is not possible if we reduce VPF anymore,” he said. We gain nothing, say theatre owners Theatre owners have rejected the argument that they too should pay a part of the VPF. While none of them wanted to be quoted citing that this is a controversial issue, many said digital projectors are installed only for the producers. “What do we gain by using digital projectors? Let the producers give us film prints, we will play them on our old film projectors. We began installing digital projectors because it brought the costs down for the producers, who didn’t have to send out film-prints worth ?60,000. In such a case, why must we pay the VPF,” asked a theatre owner. Several theatre owners categorically said that they are happy with the services provided by Qube Cinema and are unlikely to shift their allegiance. “We are already burdened by local body taxes and GST. With video streaming sites becoming more and more popular, people are not coming to the theatres as before. At this point, the producers are trying to dictate how much a tub of pop corn and a glass cola should cost. They shouldn’t try to meddle with our business,” said the theatre owner.

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