South Indian films threaten strike from Mar 1 over rate reduction squabble

Talks with digital services providers fail over rate reduction; industry could lose up to Rs 300 million a day

The film industry in south India has threatened to shut down from March 1 over Digital Service Provider (DSP) pricing. According to estimates, there would be a daily loss of Rs 200-300 million if movie makers carry out the threat across the five southern states.

After talks between producers and DSPs failed, Tamil and Telugu film makers said the strike would start on March 1. While Malayalam and Kannada producers are joining them, they have not revealed their plans. There are about 3,500-4,000 movie screens in South India.

DSPs provide an end-to-end platform for satellite delivery of movies to exhibitors across India. The cinema halls then run the movies using the digital cinema equipment provided by the DSPs.

Film producers have been asking the DSPs to reduce the VPF (virtual print fee) by 25 per cent across the board. At present, the DSPs charge about Rs 22,500 per theatre and Qube Cinema, one of the largest players, has different packages including a Rs 9,000 charge for the first week, Rs 7,500 for the second week and a lower payment for the third week under a weekly payment model. It also has a Rs 325-per-show package.

Film makers had three sessions of discussion with the DSPs in February. In the last discussions held on February 23, they asked DSPs to reduce the rate by 25 per cent on a standard charge of Rs 22,500, and across packages as well, argueing that the higher rates were impacting their cost. It was at this point that the talks failed.

S R Prabhu, Treasurer, Tamil Nadu Producers Council, claims that he paid Rs 5 million as VPF instead of Rs 1.5 million for his Rs 20 million budget movie Aruvi, released last year. The Council accuses the DSPs of being monopolistic.

The producers also raised demands over advertisement payment from DSPs.

Senthil Kumar, co-founder, Qube Cinema, refuted this saying that the industry was ready to bring down the rate from Rs 22,500 to Rs 14,000 per film, but the demand for a 25 per cent cut across the packages would not be viable for his industry. Kumar had offered to reduce the rates by nor more than nine per cent across packages, but this wasn't acceptable to the producers.

"We are offering mastering, delivery to theatres, archiving and other value added services, worth another Rs 1.2-1.4 million, for each movie for free of cost. Nowhere else in the world do services come cheaper than this," he said.

Almost all the screens in the region are now run digitally, with equipment provided by the DSPs to exhibitors under various finance models. The DSPs claim this has helped more movies get released. They explain that the cost of exhibiting a movie in celluloid works out to Rs 60,000 against the rate of Rs 22,500 that they are offering. The number of Tamil movies released has gone up from 50 in 2005 to around 300 a year.

If the strike goes on, the Telugu industry may lose around Rs 80 million a day, while Tamil movies could take a hot of about Rs 60 million. Malayalam and Kannada may together lose another Rs 60 million, said industry sources.

The cost for DSPs in a movie would be around 0.3-0.5 per cent for a big-budget movie and 1.6-1.7 per cent for a small-budget one.

The DSP industry has eight players across the country, led by UFO and Qube Cinema, which are under the process of a merger. Post-merger, the UFO-Qube entity would control 75-80 per cent of the total DSP market.