From the movie, The Godfather
BONASERA (seated in front of the Don’s desk, facing the camera)

I believe in America. America has made my fortune. And I raised my daughter in the American fashion. I gave her freedom, but — I taught her never to dishonor her family.

I firmly believe at the core of the America success story lies free enterprise. I believe in the classical definition of free enterprises, freedom of private business to organize and operate for profit in a competitive system without interference by government beyond regulation necessary to protect public interest and keep the national economy in balance .

This week the In the wake of a Donald Trump’s victory, telecom industry players are rubbing their hands in glee at the prospect of gutting neutrality rules. FCC chair Aji Pai met on Tuesday with folks from the major telecos to discuss his plans to eliminate net neutrality rules. Pai, is a former employee of Verizon lawyer and he is intent on taking care of his pals..

Former FCC chair Tom Wheeler, made the FCC classified internet providers as Title II utilities, or “common carriers.” Designating the internet providers as as utilities allowed the FCC to make rules that force them to conform to net neutrality. It prevents companies like Comcast, Verizon, ATT and Charter from treating different types of data going over their networks differently. Right now whether or not the data comes from Netflix or Comcast, it is treated equally.

Advocates of net neutrality are exceedingly worried that without the benefit of clear rules in place, people like Comcast near-monopoly power to discriminate between different services and websites. Look at Comcast, a cable provider and owner of Universal Pictures, Time Warner which owns a cable company as well as famed studio, Warner Brothers. Sony which owns the former Columbia Pictures, now unfortunately re-titled Sony Pictures has something called So-Net in its quiver,

Here is where the problem lies…video streaming services like Netflix could pay for preferred access to consumers, allowing its videos stream faster access to consumers. This prevents competition. Sounds like fiction, nope .

Since its inception, the Internet has been a wonderfully free and competitive free market. Given the tradition of networks to evolve into monopoly this has been nothing short of miraculous. Enter Comcast and Netflix. Netflix has agreed to pay Comcast for access to it’s network. This agreement represents a deeply dangerous shift in power in the new Internet economy that will ultimately destroy the free market economy that exists now.

Netflix is not a friend of the movie theatre and I do not think they do not care for one iota for cinema and it’s art. Amazon on the other hand I believe does respect the role of the theatres in the cinematic food chain. I believe that the removal of net neutrality will create an window and a stratified economic model for Netflix to eviscerate the theatres by control access to the home viewer and demanding that both the studios and the cable providers play ball with their internal draconian mandate.

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. In fact on a bottom-line , it has acted as an embargo for independent and alternative content. It has choked the theatres and has deeply stymied their growth at a time when digital cinema should have represented a liberation.

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 theatre chains 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.

Like the implementations of the regime of VPF’s the removal of Net Neutrality will represent another nail in the coffin for theatres. It will provide Netflix with an empty digital frontier that it can control and manipulate. Like the Robber Barons of the Old West, there interruption of a free market economy is being aided by allies in government. A government who is increasingly revealing itself to be serving a corporate master and not free-enterprise.

Netflix will be able to successfully eradicate the theatrical window by using the economic powers of a stratified and closed economic model.

In regards to Net Neutrality they will make the flawed argument that the companies paid for the network therefor have the sole right to make the rules for their network, but they always conveniently ignore the fact that the network cor itself rests in the public domain and also relies solely on granting public right away. In short taking away away Net Neutrality takes away control from the digital space away from the folks that have paid for it….the American people.

It’s bad for movie theatres, it’s bad for free enterprise and it’s UnAmerican.