25 days on and the strike organised by the Tamil Film Producers Council (TFPC) seems to have no end at sight. Initially started to protest the high Virtual Print Fee (VPF) charged by Digital Service Providers (DSPs) such as Qube and UFO, the demands of the TFPC have now widened to include lower ticket and concession prices, and also a share of the lucrative advertising revenue that’s being shared between theatres and DSPs.
Despite reducing their rates by 18 to 23% to end the deadlock, the TFPC seems to be in no mood to relent. Jayendra Panchapakesan and Senthil Kumar, founders of Qube Cinema, explain why they have already made their last offer. Excerpts from a chat:
TFPC president Vishal describes the ongoing strike as a period to revamp the industry...
Most of what we’re learning is from the press. There has been no direct dialogue ever since the three other industries agreed to accept lower VPF costs, and the TFPC’s demands now seem to just be expanding. In a recent interview, Vishal has asked for computerised ticketing in cinemas. Around 70% of our screens are already computerised, and if he wanted to computerise the rest, he could have avoided giving films to just those theatres. There’s no need to shut down the whole industry for that.
But the removal of VPF by DSPs is still the main demand, isn’t it?
That is what the strike started with. But that has always seemed to be too small an issue to destroy the industry. He has cited the example of a house being under renovation to describe the shutdown. But this is not a house. This is a business. If we’re renovating our office, we won’t stop conducting business on all those days.
The three other southern states have agreed to the new reduced VPF. It is a decision we were forced into when all the states got together. We have agreed to reduce VPF by 18 to 23%.
TFPC is also asking for a share of the advertising revenue.
They have asked for a share of the advertising revenue from the ads that get played before and during the interval of a movie. This revenue is presently shared by DSPs and theatres and it has always belonged to the theatre. Not just because of tradition, but because legally, the rights to exploit a property belongs to its owner. For instance, if I own a building, only I have the right to the money I earn from the banner I put up outside it, unless, I’ve contracted someone else to do it. Which is the case with us, where theatres have contracted us with sourcing ads for them.
Was that your business model from the beginning?
Yes. Our business began with an idea of generating income from advertising. In other parts of the world, DSPs like us charged higher VPFs in such a way that they earn their profits from it. We cannot survive on VPFs alone, so we patented the idea of centralising advertising in theatres and sharing the revenue with them.
The producers have now asked for a sunset clause, a clause that stops them from paying a VPF once the equipment has been paid for in theatres. What’s your take?
They didn’t question it all these years when they were seeing how much cheaper digital is compared to film reels. If they had said that they wanted a system where we recoup the cost of the equipment and then stop the charges, they should have asked for that earlier.
At a time when we are trying to evolve into state-of-the-art projectors, they’re talking about bringing in players who want to use older, or outdated projectors. The proposed systems cannot go through the rigorous security breach our systems can be put through. And if they do manage to match our level of security and service, at the price they are promising, then they will not survive for even a year.
But they claim to have a system where the VPF payments will end in three years...
We’re aware of the projectors they are talking about. They are choosing a projector that might not last beyond three years. We have spent a lot of money upfront developing our projectors. Some of the demands they have suggested will take our industry back by many years. Especially the point to cut down on wide releases to a limited number of screens. That doesn’t make any sense at a time when a film’s lifespan has become so short.
Another point they are making is about how VPF is unaffordable to smaller producers.
Of the 200 odd films that released last year, 112 movies paid us an amount that is lesser than ₹3.5 lakh for a release at 50 or more screens. Our business has subsidised releases for small films when compared to film reels. And if they’re talking about bringing new players to the market, they will have to break contracts because almost every theatre in Tamil Nadu is currently in contract with either us or one of the other DSPs.
Our business model works a lot like a cab service, like Ola and Uber. After hundreds of rides, you might feel you have paid enough to Ola to own your own car, but that doesn’t mean you can ask Ola to transfer ownership of a car to your name. That is our business model and we can’t change that.
How do DSPs manage in other parts of the country?
Even in other centres, such as Mumbai, they charge around ₹100 more per show. And in the US, they work out a much higher VPF pricing model, where the theatres end up owning the equipment after many years, but that’s because of the higher per-show charges.
What are the losses faced by your company because of the strike?
It is important to look at the price the producers themselves are paying. We’re told ₹120 crore is stuck just because of the delayed releases of all March films. That amount alone, and the 36% interest that is being charged by financiers, is much more that what any DSP earns in such a period. We think they’re penny wise and pound foolish. Either ways, the cost of what a film pays us is just one to two% of its total costs. Aren’t there other places to cut costs from?
From your side, is there anything more you can offer to end the roadblock?
No, nothing at all.
