It has been 15 days since a new release has graced the cinema halls in Tamil Nadu. The issue had escalated with the Tamil Nadu Film Producers Council (TNFPC) and Digital Service Providers (DSP) failing to reach a compromise on the Virtual Print Fee (VPF). The Tamil film industry, which leads in terms of movie production and revenue generation, is feeling the heat. With no solution in sight, the tiff between TNPFC and DSPs will cripple the industry in terms of revenue, if there are no new releases soon.
It all began a few months before, when news first broke about the discussions held by an adhoc committee, consisting of Telugu Film Producers, with DSPs like Qube Cinemas, UFO, PXD, Scrabble and others. A wide range of issues including the VPF, a commission paid to DSPs for purchasing digital projection equipment, were discussed in the meeting. A decision was taken to press for a reduction in the VPF, and that the producers would not release any new films from March 1. The bone of contention was the VPF, levied by Qube Cinemas and UFO, collected per screen, apart from the advertisement revenue generated from these cinema halls.
According to industry sources, UFO and Qube are the leading players in India, providing digital content to cinema halls. The two are the leading companies in the digital cinema distribution and in-cinema advertising platform. Put together, the two, according to industry reports, have 7,300 screens across India, with a seating capacity of 95.5 million per week. Qube Cinema has a strong penetration in the south, while UFO is strong in other parts of the country. Industry statistics claim UFO has digitised more than 5,100 screens in India. Of these, it owns the advertising rights to about 4,000; Qube, which is more focused on south India, has the ad rights to 3,300 screens. As per industry statistics, the advertisers spent Rs 1,500 crore to display their products on the screens in cinema halls. The DSPs offer services by helping the theatres maintain their digital equipments, and help them run the digital prints.
Decades before, film projectors were used to run the movies, which would cost a few lakhs. The producers used to pay around Rs 60,000 per print. But with the intervention of the DSPs, and the equipments installed in theatres, the cost has come down to Rs 15,000 per print. And unlike film projectors, which have a long shelf life, the E-Cinema, and subsequently the D-Cinema concept, changed the viewing experience of an average movie-goer. While E-cinema projectors had to be changed every 3-4 years, the D-cinemas, which is used in most theatres now, have a longer shelf life. Theatre owners pay their contribution to the DSPs by way of sharing their advertising revenue. This varies with different theatres in accordance to the agreement they have with the DSPs.
Again, the cost of VPF per show, according to the DSPs, has been reduced from Rs 500 to Rs 450 and from Rs 27,500 to Rs 21,750 for a flat licence. “This was the solution we offered to the producers. In other states, like Andhra Pradesh and Telangana, the producers have acquiesced. But, in Tamil Nadu, this solution did not go well with the producers' council,” says Jayendra Panchapakesan, co-founder, Qube Cinemas. Jayendra, explaining the Digital Service Providers’ side of the story, says that this amount is insignificant for a producer and the cost per show hedges the risk completely.
However, the TNPFC contends this argument. According to S.R. Prabhu, treasurer of TNPFC and a leading producer, “The theatre owners, along with the DSPs, are minting money in the form of car park, cafeteria and online ticketing. We producers are left in the lurch. The profits they earn through these avenues are not shared with us. The theatre owners have got into a wrong agreement with the DSPs and have fallen into a trap.”
However, the new rate reduction offered by Qube Cinemas too has not been accepted by TNPFC. It has announced a complete shutdown; production and post-production work have come to a halt. Crippled with the GST burden, entertainment taxes, high salary to rope in leading actors, says a producer on conditions of anonymity, “it is individuals like me who suffer.” He has decided to give up producing movies and switch to acting or directing movies. But the theatre owners have a different version.
“There is not a mere dispute between the TNPFC and the DSPs. The TNPFC wants to have dominance and control over the box office collection and the projector room by asking us to give up our agreement with the DSPs,” says N. Venkatesh, managing partner of Woodlands theatre, and secretary of the multiplex association of Tamil Nadu.
When asked about the ad revenue taken by the DSPs in return for their services, Venkatesh dismisses it, saying, “the advertisement revenue per screen per show on an average, across India, comes around to just four minutes.” He justifies it by saying that the advertisements to the screens are decided by the advertisement council in Mumbai, in April every year, based on the all-India screen rankings. While the TNPFC is looking for alternates for the DSPs and the VPF fixed by them, the theatre owners are willing to take the risk by screening movies from other languages, and even goes to the extent of running IPL matches in the theatres with government approval.
Meanwhile, the theatre owners are yet to get their issue of entertainment taxes sorted out. So, they too have decided to go on a strike. “We are not for the DSPs, or for the TNPFC. We are going ahead with the strike from March 16, demanding waiving of entertainment tax. It is for the TNPFC and the DSPs to sort out their issue,” says Tiruppur K. Subramaniam, joint president of the joint action committee formed by Theatre Owners Association in Tamil Nadu.
However, the box office is all set to be crippled and movie-goers will face the heat. India’s box office, according to data available with FICCI, stands at 2 billion USD or Rs 13,000 crores. The per day box office is close to Rs 36 crores. Of this, the Tamil nadu box office churns out Rs 5 crores a day. In the two week-strike since March 1, losses for the Tamil Nadu film industry have already crossed Rs 38.50 crores, according to industry sources.