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SR Prabhu exposes unfair trade practices of digital service providers leading to producer distributor theatre owner hardships

Popular producer SR Prabhu recently took to Facebook explaining the circumstances and dynamics of the trade, which have come to affect the film industry due to the alleged inordinate pricing by Digital Service Providers (DSPs), which has led to the film release shutdown on March 1.

Roughly translated (from Tamil), the post read:

"My opinion on the film release shutdown to those who have been patient/curious about it:

From the advent of theatres, they had facilities for projectors like how they did for chairs, restrooms and parking. Until film projectors were used, there were no complications. The theatres generated revenue from a part of ticket sales apart from advertising, parking and canteen sales.

Analog Format Method:
When a film distributor of a region buys a film from a producer, he would buy prints proportionate to the number of screens planned for the release of the film. Including license charges, each print cost around Rs 40,000. An understanding between producers and distributors meant that this cost would be borne by either one party, or by both. When a film was finalized for a theatre, the print would be sent. The operator of the theatre would run it on the projector owned by it.

Film-based expenditures:
As this business ran more or less smoothly, the cost of film prints started rising, to above Rs 50,000. Due to this, it cost about Rs 50 lakh to run a film in a 100 theatres. Moreover, it cost about Rs 50 lakh per film to capture it on film and to develop negatives. The movie business became one that required considerable capital investment.

Digital Format Introduction:
When this process was introduced - films, from being made using film, switched to being made by scanning the negatives and released. When digital cameras entered, the film/development cost reduced. Everyone loved the digital method. Such films cost only Rs 25,000 per print. The industry shifted to digital filmmaking, and many more producers started coming up.

The amount spent by producers/distributors is lesser now than before, right?
Many films are produced/distributed using digital technology now, right?
Then why this protest?

Read on patiently, I will identify a muzhu poosinikkaa (huge discrepancy) hiding in plain sight.

The ignorance of producers/distributors/theatre owners has been exploited by a few companies providing the digital solutions - in the last 10 years, though having invested about Rs 1,500 crore, 90% of theatres do not own projectors and have been losing out on ad revenue. I look at it as one of the biggest corruptions in the film industry in recent times.

VPF - Visual Projection Fee:
Since the cost amounts ranging from Rs 20- 60 lakh to install projectors and servers for digital tech in theatres, theatre owners refused to spend so much just to reduce the costs borne by producers and distributors. Digital service providers swept in and provided the said equipment at the rate of Rs 20,000 per film for a period of years. When the costs of these equipment were met, they would become the property of the theatres, after which the DSPs would only charge a service fee. This was a system accepted worldwide. After 2018, VPF becoming completely non-existent was common knowledge.

But the Indian film industry was fooled.

How the Indian industry was fooled?
During the advent of digital technology, few theatres bought digital projectors. When others hesitated, DSPs came in and offered the equipment for free. When asked what they wanted for return, they asked such owners to sign on certain documents and write off the ad revenue to them. They also offered to share the ad revenue after the projector overhead costs were met. At that time, ad revenue wasn't that great, so theatre owners did not think much about it. Now, after a projector is installed in a theatre and even after a decade after its costs are met with VPF as well as ad revenue, VPF is still being paid to the DSPs.

A shocking realization came when it was looked into as to why the ownership was not transferred to the theatre owners - a clause in the agreements, which made sure no such thing happened and which also said that the owners may buy equipment from elsewhere if they felt like it, but only after informing the DSPs a minimum of six months before such purchase. If the contract was breached, a clause also provided for damages of Rs 10 lakh payable to the DSPs. (The E-Cinema projector itself cost only Rs 6 lakh).

The DSPs have also engaged in bribery/gifts to shut up any protests made by producers/distributors thereafter. Theatre owners either remain silent due to past grievances with producers/distributors for losses, or not knowing which side to take.

To protest is our duty... only time will have the answers.


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Tirupur Subramaniam lashing statement against SR Prabhu

The next problem that has hit Kollywood is with respect to Qube and their rates. The Producer Council has decided to stall all new releases from March 1 quoting that Qube prices have to be reduced. In fact, producer SR Prabhu posted on his Facebook page today explaining why there will be no new releases from March 1. However, distributor and theatre owner Tirupur Subramaniam lashed out at SR Prabhu and the Producer Council and put forward his points diplomatically through an audio message. It had Tirupur Subramaniam saying:

“SR Prabhu sir had stated Qube to be the reason for cinema being in a problematic situation now and that they have decided to stop new releases. I wish to ask him just one question. Why does he not talk about the salaries of heroes, heroines, comedians, technicians which is almost 70-80 percent of the entire production cost of making a film?

Why do you think big guns like AVM, Supergood Films and other big producers are not into movie making any more? Is it because of theatre owners not giving them correct details and numbers? No! The only reason is the high salaries of actors and technicians. Does SR Prabhu have the guts to talk about actors’ salaries? Gone are the days when those numbers were consumable. It has rocketed and has become alarmingly high. How do they intend to make a profit then? The reason why we stick to Qube is because of the quality that they provide! It is quite unmatchable. Hence, I request Mr SR Prabhu and the other producers to meet us and decide big actors’ salaries on a percentage basis from the profit of their films. This would make the entire industry healthy and transparent like everyone would want it to. There will not be any hype in the salaries and everyone will enjoy the profits. Production costs will come down and a lot of big actors will star in more films.”

SR Prabhu exposes unfair trade practices of digital service providers leading to producer distributor theatre owner hardships

People looking for online information on Qube, SR Prabhu, Theatre strike, UFO will find this news story useful.