More Movie….More Box Office

Four weeks ago, UK based exhibitor, Picturehouse Cinemas become the first European chain to stop receiving Virtual Print Fees. Virtual Print Fee(VPF) is the name given to a subsidy paid by a film distributor towards the purchase of digital cinema projection equipment for use by a film exhibitor in the presentation of first release motion pictures. The subsidy is paid in the form of a fee per booking of a movie, intended to match the savings that occurs by not shipping a film print. The model is designed to help redistribute the savings realized by studios when using digital distribution instead of film print distribution.

The major distributors negotiated a sunset provision, such that once the projectors are fully paid for pursuant to the terms agreed upon, the theater owners will no longer be allowed to charge VPFs in any form. For the initial deployments of digital projectors, this date is quickly approaching. Once that occurs, VPFs will disappear, and the cost of physical prints will be a thing of the past.

While the VPF did provide a form of underwriting for the digitization of movie theatres, many like Ira Deutchman have made the argument that VPF’s were a way for the major studios to control the movie screens. Often independent producers and distributors found the need to offer a VPF for their theatrical release a serious barrier to releasing its product theatrically. The diversity of product was diminished and I would make the argument that this lack of diversity has reduced movie audiences.

What should have been a renaissance of accessibility and variety for the movie theatres, the VPF essentially created a virtual blockade for independent and alternative product.

For years analysts have been trumpeting that they perceive a declining tickets sales at the American movie box office. This is juxtaposed to the Argentinian market which has seen a phenomenal 20% growth rate in movie going in 2015.

Digitization hit Argentina later than Europe and North America, allowing the government to be prepared. With one interesting initiative, it offered five-year low-interest credit facilities to national exhibition chains, including both multiplex and arthouse owners, allowing them to fully digitize theaters at a minimal cost. That meant many did not have to look to VPF integration schemes, allowing them larger freedoms when booking movies for their theatres.

Since distributors not having to payout so many VPF’s , this has allowed them to direct monies to Prints and Advertising, generating more attention for the movie and the theatre that it is playing it. About fifty percent of Argentinian theatres did sign up for a VPF program, primarily through GDC. What is different though, is that as further support from the government cinema office INCAA will underwrite up to 50% of VPF’s for independent and smaller release films.

With the increasing amount of diversity on Argentinian screen, audience are flocking to the cinema in numbers not seen since the 80’s. It’s kind of shocking actually.

This is not just an anomaly being seen in Argentina, Norway is experiencing a similar ticket sale increase as a result of a similar model. Digital projection has provided local Norwegian movie theatres greater control and influence over their own programming. Arthouse and independent pictures can now compete effective due to a VPF which only has a 40% contribution by the studios, the rest being put up by local councils and the National Film Office. The VPF’s are collectively controlled and not imposed by one single industry group. This means more regional and local productions are reaching the theatre screens bringing back audiences that for decades have abandoned Norwegian movie theatres. The digitization of the movie screen means that movie theatres throughout Norway are having to program with more movies and audiences are having to adapt to shorter movie runs. But in the end, Norway, like in Argentina, by marginalizing the studio influence on the administration and the control of VPF’s have created a more dynamic and vibrant movie economy. An increase of diversity on screen seems to increase box office.

I saw DEADPOOL today, which I loved by the way but I was surprised that all the trailers that played before DEADPOOL were all for movies that either came from the DC or MARVEL universe, not a drama, a romantic comedy or an independent film was to be found. I know it was a “comic book movie” but I thought that should have been some crossover. For many people, the barrage of “super-hero movies hold little interest. Maybe the studios homogeneous output coupled with it’s grip on American screens through the structure of the VPF in America is the foundation of our decreasing box office.

Something to think about.

Maybe just maybe, when VPF’s come to and end American movie theatres will see similar box office growth being enjoyed by other countries. I am kind of looking forward to it. In the meantime I will be following the activities of Picturehouse to get some ideas.

Have a great week.