Movie producers of both small and big films can opt for wider release of their films thanks to drop in content distribution charges which will help offset the limited occupancy theatres can have in the current times.
While the film industry is going through tough times due to coronavirus impact, movie producers are feeling some relief. The cost of content distribution will come down as Digital Service Providers (DSPs) like UFO and Qube have slashed their Virtual Print Fee (VPF) rates.
Reduced distribution costs will also help films, especially smaller movies, to have a wider release.
In current times, a wider release can help producers make up for the lost seats as theatres are only allowed to operate at 50 percent capacity, said Rajesh Mishra, CEO, UFO Moviez.
What relief do producers/distributors have?
Digital Service Providers (DSPs) like UFO and Qube have reduced their VPF rates.
UFO’s new rate card shows a 50 percent drop in content distribution charges or producers can share a percentage of the box office collections with the DSPs.
The new charges which will be applicable till November 30 include 15 percent of net box office collections (NBOC) or Rs 25,000 whichever is lower for non-DCI properties and 20 percent of NBOC or Rs 30,000 for DCI properties.
The share in box office collections is a new introduction by UFO Moviez to help producers release their films especially smaller movies in more markets.
Even QUBE Cinema has slashed VPF rates by 50 percent for new films and the new rate is effective until December 31.
But what is VPF and who pays these charges?
“It is the producer who pays VPF charges. VPF stands for virtual print fees, which includes conversion from physical to digital. We encode and encrypt the content. We release the licences for the playout of the films as per the instructions of the distributor,” Mishra told Moneycontrol.
In all, VPF charges include offering a digital package, licensing the content, delivering as well as editing a movie into different versions like into a 3D film.
How distribution functions
“All theatres have a list of our (UFO) screens. We get the film a week in advance and we digitise it. On Thursday evening we get all data (regarding screens where the movie has to be released) wherever the distributor has finalised. On the same day, we get a release order where it is listed how many shows to be given to a particular cinema, and accordingly, we release the licence,” Mishra explained.
Why films are converted from physical prints to digital copies
According to Mishra, digital prints have given cinemas a new lease of life.
“The reason digital cinema became important was the cost of a physical print of a film (the reel). The basic cost was Rs 50,000 to Rs 60,000 depending on the length of the film. Because of the physical print and the cost attached to it, the distributor used to be unsure whether to release the film widely while releasing or go wide after the film is a success.”
In addition, if the film was a hit and the distributor wanted to release the movie in more markets, by the time it reached more theatres the film would get pirated, he added.
Also, with the physical print, the film was reaching only 500-600 screens which was giving a window for piracy.
On the other hand, a digital print can be sent to 2,000 to 3,000 screens in one go.
“The print had limited shelf life. In digital, quality remains the same even after 10,000 shows. Collections have improved, piracy has gone down, cinemas are getting day and date release all thanks to digital prints,” Mishra added.
VPF at discounted rates; but are producers happy?
VPF for a long time has been the bone of contention between producer and DSPs.
In fact, recently the Tamil Film Active Producers’ Association has written to Tamil Nadu Theatre Owners’ Association about their demand which also includes not paying VPF charges.
The producers’ association has said that they will not pay VPF charges as DSPs are charging high fees.
Industry experts say that while VPF is not a huge cost for films which have a big release of more than 3,000 screens, as it accounts for a mere two percent of the production budget, in the case of medium and small movies, this could be in the range of four to five percent of the budget. For example, out of Rs 4 crore for promotion and advertising [P&A], half is for digital cost.
How big is the VPF market in India?
According to a 2019 Elara Capital report, the size of the VPF market in India is pegged at Rs 200- 250 crore. VPF charges are in the range of Rs 8,000-20,000 per movie per property.
The digital distribution charges for VPF include Rs 20,000 per property, laboratory fees at Rs 3,000 and hard disk charges of Rs 2,000, including GST charges of Rs 26,000 per movie per property.