The Big Bad Virtual Print Fee

Braveheart3

I have not made it secret that I think that the approaching the end of the Virtual Print Fee is a very good thing. I have converted theatres, sold projectors and though long and hard about the changing movie landscape. On the surface the Virtual Print Fee is a sharing of the cost of digitizing thousands of movie screens by allocating a portion of the cost saving of striking a 35mm print and giving it to the theatre owner. It also allocates a set of security and technical parameters and forces the theatre owner to meet a set of requirements in order to receive a digital print of a film. Layered on top of the studio requirements is also the defacto situation that the major studios can exert far more control on what plays on the movie screens across the nation.

Due to the digitization of the cinemas and the consequent introduction of the VPF system the whole business model for distributors and exhibitors has changed tremendously and not for the better. In countries where the motion picture industry created their own VPF system that was supported by all distributors (where the majors were not involved), the digital transition worked out more smoothly.

While the digital systems, allow exhibitors the flexibility to screen different forms of content such as plays, operas, ballets, sports and concerts, the VPF essentially acts as a barrier for a large amount of content gaining access to the theatrical market. Also for large biggers the VPF’s have created cumbersome challenges, for example if a movie takes off and there is a need to expand to more theatres, surely there’s something unfair about such a release being ‘taxed’ with repeated digital fees because a DCP happens to move to a theatre with has signed with a different digital aggregator.

For independent distributors VPF’s create a whole other set of challenges. The odd thing is that for independents digital distribution is more expensive than 35mm. In the main, this stems from the repeat ‘virtual print fee’ (VPF) that is charged every time a digital cinema print (DCP) moves from one movie theatre,. Instead of paying for one 35mm print and moving it from theatre to theatre, a distributor must pay for a new ‘virtual print’ for every theatre that wants to play the movie. If the distributor opens the film for a week in one theatre and then wants to move the movie to play in another cinema for another week, that will cost the distributor two VPF’s. It is all but impossible for the distributor to recoup these VPF costs from the booking fees for a week’s play. Distributors considers the digital distribution as a huge disadvantage to independent, specialized and foreign language films. The core problem is that the VPF model works well for wide releases from Major Studios but places independent releases at a huge economic disadvantage due to the repeat VPF fees they must pay for theatre moves.

Ideally digital distribution should be cheaper, however until now the saving per each digital screen depending upon your integrator IE GDC, CINEDIGM, SONY is not more than $130 with as opposed to traditional 35mm release. Digital distribution should also allow the exhibitor to offer better programming and allow independent distributors to reach wider audiences considering the advantages digital provides in terms of fast production and delivery. However, the core truth is that in many countries the VPF has stalled the evolution of cinema and the growth of the cinematic marketplace.

Repeat VPF’s have strangled independent distribution.

In many countries 35mm distribution is not allowed. If a distributor has not gone to the cost of converting a library movie to DCP, then the nation’s screen are block to that film. How many classic Hollywood titles have been converted to DCP, less that a thousand from a inventory of 56,000. A cinematic legacy is going dark due to digital conversion.

Many feel that the handling of DCP, by the digital delivery via satellite will will provide theatre with costs savings in terms of cost but only until the VPF system is ended will there be any benefit for distributors. By that time independent distributors by the scores will cease business operations.

The baseline is that the VPF’s have not allowed the digital liberation of movie theatres to occur. I personally think this was by design.

The digitization of the world’ movie screens was supposed to bring forward a renaissance of innovation and programming options. The VPF system prevented this from occurring. Now with the ending of the first round of VPF’s there is a potential for a new theatrical landscape take hold. Now my fear is the technology companies and the majors will collude to create VPF’s for the new emerging laser projection technologies and further roadblock both theatres and distributors. Frankly the cost of a laser projection system has been hidden and will prove to be difficult for most operators….but that’s a different article. A little taste, be careful with using silver screens with laser projection.

It is time to revive again the promise of digital cinema and to allow it to grow without the constraints of the VPF system

Here is what a truly free digital cinema environment will achieve.

Programming – a wider access to a broader range of content often much earlier, particularly with commercial or niche specific titles, as the cost to the distributor of distributing a film is greatly reduced. It is also more economically viable to distribute niche movies and to provide subtitled or dubbed versions.

Supporting local filmmaking talent – digital is now the most common format adopted by students and other filmmakers. A range of mediums including laptops and cameras can plug directly into digital projectors for screenings of films not already within the traditional distribution arena. Local production has contributed immensely to film economies like Argentina and Norway. Growth in this are has repeatedly seen box office grow up to 20%

Localized advertising aimed at specific audiences

Subtitled performances for deaf audiences are increasingly popular. New systems using digital cinema projectors have overcome many of the previous problems with limited availability of prints with these subtitles. The new approach involves projecting subtitles on to the screen and does not require a special copy of the film.

I hope a new day is coming, a new day where the liberation of the movie theatre can truly occur. I hope theatres start planning and embracing a business that does not require VPF’s. I hope that theatres owner begin to become showman again. If not then I think the Pop-Up cinema industry will arise an take significant market share.

It’s time to innovate and it’s time to change.