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Author Topic: How Do VPFs Work? Robert E. Allen Phenomenal Film Handler Posts: 1078 From: Checotah, Oklahoma Registered: Jul 2002 posted 05-07-2010 01:50 PM                     I know, to all you guys who are currently working with digital this sounds like a stupid question. But while I've read several articles about digital that include the mention of virtual print fees I must have missed the explanation of exactly what they are and how they work. Thanks for your help.  |  IP: Logged Mike Blakesley Film God Posts: 12767 From: Forsyth, Montana Registered: Jun 99 posted 05-07-2010 05:55 PM                        In the most basic terms, when a movie is played on the break, the film company pays the theatre an amount of money to offset the theatre's investment in digital equipment. (The dollar amount is roughly equivalent to what the film company WOULD have been investing in the print that they are not producing.) This was going to be somewhere around $1100 per print back in the "good old days" but I've heard that it's eroded to something like $800 or less now. VPF payments started two or three years ago and are supposed to continue for about 10 years...given the way these things usually go, I look for them to be discontinued maybe late next year sometime. Quite a few single screen theatres joined the C.B.G. in hopes of getting some VPF help, but in the C.B.G.'s master license agreement, only theatres which play 90% of their films on the break qualify for VPFs. In other words, the little guy gets screwed yet again, even when playing movies on the break. (I will admit that the idea of VPFs in a town the size of ours seemed like a pipe dream anyway, since we're not exactly pulling in tens of thousands of dollars a day here.)  |  IP: Logged Mike Frese Master Film Handler Posts: 465 From: Holts Summit, MO Registered: Jun 2007 posted 05-07-2010 07:42 PM                        Mike, The CBG has many of its small theater operators believing that VPFs will come to them soon (some believe very soon). I, however will be shocked if that happens as it would mean the studios are being very generous. The smallest theater that I know that receives VPFs in my area grosses approx. $80,000 per screen and averages $19,000 on their top 10 movies last year.  |  IP: Logged Monte L Fullmer Film God Posts: 8367 From: Nampa, Idaho, USA Registered: Nov 2004 posted 05-07-2010 10:15 PM                     Then, what I'm curious about is the small upward trend of discount, $2.00 cinemas shoving digital in to compete with the "Big Box" guys so they can get in "the digital 3D game" so they can stay competitive. Thus, are these discount cinemas also getting a "piece of the VPF pie", or are they taking it on the chin all the way with the total digital bill-even though they joined CBG? -Monte  |  IP: Logged Mike Frese Master Film Handler Posts: 465 From: Holts Summit, MO Registered: Jun 2007 posted 05-07-2010 10:28 PM                        Monte, This was what I was told a couple of years ago: "Seasonal First-Run / Move-over and Discount Theaters: Since these theaters occasionally or rarely play a first-run title on the national release date, they will not qualify for a virtual print fee. So…how and when will they be converted? Eventually, the digital equipment that is being installed today is going to become outdated as the technology will, of course, improve. (Think of the computer you had five years ago…and the one you have now). When the larger first-run markets start to upgrade that equipment, the digital suppliers will then be able to move those units to the move-over and discount theaters…thus continuing the digital transistion. This is, of course, IF they are a member of the CBG. So yes…you may be joining this group…but not be converted for another 8 to 10 years. But…this will be cheaper than trying to buy the used equipment yourself from one of the suppliers."  |  IP: Logged Louis Bornwasser Film God Posts: 4441 From: prospect ky usa Registered: Mar 2005 posted 05-08-2010 05:36 AM                        Nice idea, but this equipment goes obsolete (won't play any Hollywood movie) about every 4 years.(so far) That means that NO ONE can use it, hence, no aftermarket. There is NO VALUE as a used piece of equipment, unlike an old XL which will probably run forever. Remember, electronics (automation/sound processors have a shelf life. Lenses/soundheads/platters/projectors don't if they were good in the first place. Louis  |  IP: Logged Elise Brandt Expert Film Handler Posts: 160 From: Kuusankoski, FIN/ Kouvola, Finland Registered: Dec 2009 posted 05-08-2010 07:27 AM                     Louis, I have to ask, where does that four-year shelf life come from? If that were true, it would be exceptionally harmful to every link in the chain so to say. IMHO there has to be a strong motivation for moving into formats that the old (now-new) equipment won't support. I just don't see the benefit for anyone in pressing the current 2K projectors out of the market as unusable in just a few years. Upgrades are one thing, totally renewing the whole system is quite another. I can easily see there will be a need for upgrades as the technology progresses, but as in computers the old parts are not automatically obsolete, they just might need some boosting up. I find it very difficult to believe we (small not-chain theaters) would be simply pushed out of the business that readily... I mean, who would win in that?  |  IP: Logged Mike Blakesley Film God Posts: 12767 From: Forsyth, Montana Registered: Jun 99 posted 05-08-2010 11:27 AM                        I would think that while some parts of the digital system will need to upgrade over time, there are other parts that should be usable into future applications...lamphouses, lenses, power supplies, and so on. At my non-theatrical day job, we used a 1994 computer system until 2008. It just got periodic updates -- bigger hard drive, improved software, etc. By the time we replaced it, it was under-capable but it still did the job.  |  IP: Logged Mark Gulbrandsen Resident Trollmaster Posts: 16657 From: Music City Registered: Jun 99 posted 05-08-2010 11:49 AM                     quote: Louis Bornwasser Nice idea, but this equipment goes obsolete (won't play any Hollywood movie) about every 4 years.(so far) That means that NO ONE can use it, hence, no aftermarket. There is NO VALUE as a used piece of equipment, unlike an old XL which will probably run forever. Well I know of DP-100s that are older than that now. They are still in daily use. I have upgraded at least four of them from MPEG to JPEG 2000 just by loading in new software. BARCO even offers a DCI upgrade kit for them in case the studios ever want to really push the security matter on generation 1 projectors. They do have Cinelink which is still the present form of decryption link so they should not really need upgrading. I bet those projectors go for at least another 5 years, perhaps longer. Now those X-Ls will probably all be gone or pulled from use in 10 years time except for a few saved to run those old films on. Who says old video equipment doesn't work any longer? Another case in point is a 34 year old Sony BVH-1000 and BVT-2000 Type C VTR I just inherited. This is the very first Type C 1" machine Sony sold starting around 1976. The recorder and TBC had sat for many years unused but worked perfectly upon my first test run with them. All I have to do is replace several burned out pilot lamps in two of the VU meters and one on the TBC! They needed a good clean up too. Heads have only been used about 1/4 life according to my protrusion gauge... I will start replacing electrolytic caps in both units just to be safe... there are very few of those fortunately. Most of the caps are tantlums.  |  IP: Logged David Zylstra Master Film Handler Posts: 432 From: Novi, MI, USA Registered: Mar 2007 posted 05-08-2010 11:52 AM                     On the obsolescence issue - since most Cinedigm phase 1 deals have terms significantly longer than 4 years, I think Cinedigm would have been smart enough to cover long term content compatibility in their VPF contracts with the studios (provided, of course, the equipment installed will eventually pass DCI complaincy testing). Now, anyone who bought their own equipment might be in a different situation.  |  IP: Logged Monte L Fullmer Film God Posts: 8367 From: Nampa, Idaho, USA Registered: Nov 2004 posted 05-08-2010 03:20 PM                     (That 1 inch SONY VTR setup was sweet to see in operation..) quote: Mike Frese IF they are a member of the CBG. So yes…you may be joining this group…but not be converted for another 8 to 10 years. But…this will be cheaper than trying to buy the used equipment yourself from one of the suppliers." I know of a small, 4 location circuit who did join CBG ,then dove in head first and bought four NEC-1600/GDC server units where two units to a 1st run location and the other two, each one in two discount locations. Is that a gamble or what?  |  IP: Logged Olivier Lemaire Expert Film Handler Posts: 118 From: Paris, Ile de France, France Registered: Jan 2010 posted 05-09-2010 12:11 PM                        Hi all, In Europe, VPF are more or less the same scheme as indicated Mike for US: a financial trick to help exhibitor to finance it's digital rollout making studios paying for that, based on a "virtual print" fee each time a digital copy is screened on a financed DC equipment. In few words: * exhibitor has to buy his DC equipment * a Third Party (Cinedigm is not in Europe, but we have XDC, AAM and YMAGIS there) take most of the price of the equipment - based on what he plan's to grab in VPF from the studios * each time a movie from the studios is screened on such a financed DC equipment, The Third Party grab a VPF from studios. * Studios - Third Party - Exhibitor are linked on a VPF contact for years (roughly 10 years): to make sure the whole economical trick can last long enough for this DC transition to be done. For a Third Party, a VPF is not only a financial deal as they must deliver some engagements they have signed with the Studios in their VPF contract: be able to be audited, collection of played shows, make sure that all means are deployed to be sure not to loose any show... constantly report for roll-out, operational status (no show breackages, ...). For the Exhibitor, this is not only a financial deal, as - most of the time - Third Party assume some additional services (Help Desk, NOC services, etc...) that are particularly useful during this DC migration. Some Third Party are more intrusive than other in the Exhibitor business: some may impact exhibitor's movie turnover, some will not. The price of the VPF is purely confidential, as negotiated between the Third Party and Studios.... but should turn around 800 - 1000 USD I guess.  |  IP: Logged Mike Frese Master Film Handler Posts: 465 From: Holts Summit, MO Registered: Jun 2007 posted 05-09-2010 05:16 PM                        Monte, I believe it may make sense to go digital (not taking into consideration 3d at this point) in the following situations: 1) You qualify to receive VPFs, 2) You can get real expense savings in your booth, or 3) You can get product that you otherwise can not get. Situation 1) $800 does seem to be the VPF amount that is most talked about with little disagreement. I assume that there probably is a 3-week min. to get that VPF which for most 6-plexes and up is no big deal. So each screen if playing all digital would probably receive at most $13,866. But there probably many times that a movie is kept longer. If the average is 4 weeks, then the annual vpf would equal $10,400. BUT, if this is such a great deal than why have not more theaters converted? 2) Booth expenses: an all digital booth might allow you to have less staff. It seems though you would have to 5 screeens or more to realize this. Even then you would only be saving $4-5,000 per screen per year. 3a) More access to product: Right now there is no greater access to feature movies than before. Studios are still using the same methods as before when allocating movies. In theory there could easily be more access for many exhibitors but that is not happening. I know of a move-over operator that claims greater access but everything that he has run has dropped a large amount of locations. 3b) Alternative product: MET, sports events, etc. Too soon to tell but I have not heard much from these sources as of yet. For a discount house there could be a 4th reason: increase in ticket sales because you have a much better presentation because you normally receive pretty poor film prints and customers leave disgruntled. I respect anyone who taken the digital plunge at this point and certainly would hope they will share their experiences with us.  |  IP: Logged

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