So I thought I would bring up a fun caveat to this whole return to "normal" as I'm beginning to wonder how much it's playing into the studio decisions. The topic: Virtual Print Fees.
Around the late 90s, the first digital projector was demonstrated to show the benefits of putting a movie on digital media instead of the old 35MM film "tape". It was quickly adopted as the next generation of media because of its versatility. It was also widely praised by studios because it would reduce distribution costs (you can replicate and ship digital media much faster and cheaper than the 35MM). However, the theater chains expressed concern over a complete replacement of projection equipment at a much higher cost than the 35MM projectors.
Enter the Virtual Print Fee ("VPF"). Studios pay a VPF to projector owners, which are usually third parties that lease the projectors to the theater chains. The VPF is a flat fee paid "per print". A print is generally equivalent to one auditorium. So, if a movie opens on 3,000 screens, then the VPF is generally paid at 3,000 x the VPF. The original VPF model was designed to be equivalent to the old cost of replicating and delivering the film to the theater chain locations. The VPFs were scheduled to be paid over 10-12 years based on a cost recoupment model where the chains essentially came out even or slightly ahead after paying off the projector (about 10 years from the original inception, or 2020/21).
Today, the VPF is an inherent hurdle to margin on a movie. If a studio agrees to show a movie on 1,000 screens but each of those screens don't generate enough attendance to cover the VPFs, they are operating at a loss on the movie.
Just something to think about as studios speculate on the return to blockbuster product. There is a flat fee that will impact the studios likely through 2021 and figures into the models used to determine whether a film is profitable.
Around the late 90s, the first digital projector was demonstrated to show the benefits of putting a movie on digital media instead of the old 35MM film "tape". It was quickly adopted as the next generation of media because of its versatility. It was also widely praised by studios because it would reduce distribution costs (you can replicate and ship digital media much faster and cheaper than the 35MM). However, the theater chains expressed concern over a complete replacement of projection equipment at a much higher cost than the 35MM projectors.
Enter the Virtual Print Fee ("VPF"). Studios pay a VPF to projector owners, which are usually third parties that lease the projectors to the theater chains. The VPF is a flat fee paid "per print". A print is generally equivalent to one auditorium. So, if a movie opens on 3,000 screens, then the VPF is generally paid at 3,000 x the VPF. The original VPF model was designed to be equivalent to the old cost of replicating and delivering the film to the theater chain locations. The VPFs were scheduled to be paid over 10-12 years based on a cost recoupment model where the chains essentially came out even or slightly ahead after paying off the projector (about 10 years from the original inception, or 2020/21).
Today, the VPF is an inherent hurdle to margin on a movie. If a studio agrees to show a movie on 1,000 screens but each of those screens don't generate enough attendance to cover the VPFs, they are operating at a loss on the movie.
Just something to think about as studios speculate on the return to blockbuster product. There is a flat fee that will impact the studios likely through 2021 and figures into the models used to determine whether a film is profitable.
