Plan calls for regulation of VPF deals, open non-DCI technnology

Amsterdam– As the international exhib confab CineEurope (formerly Cinema Expo International) celebrates its 20th edition, the digitization of multiplexes and movie houses remains a major topic on the agenda.

For many small and medium-sized independent cinema operators across Europe, digital conversion has created a great divide.

Despite some increases in local and federal subsidies aimed at helping indie exhibs with digital conversions in Germany, local arthouse cinema association AG Kino warned in a statement last week that “the market dominating position of the U.S. studio distributors is contributing to a situation in which film diversity in Germany and freedom of programming in cinemas is in great danger and an irreversible market concentration, along with lasting structural changes in the theatrical industry, is to be feared.”

The Hollywood majors formed the Digital Cinema Initiative to establish a standard for digital cinema systems that ensures a uniform and high- level, minimum 2K resolution quality, as well as tight copyright security to fight piracy.

For many small players, however, the high price of DCI equipment and limited assistance from federal film subsidies make digital upgrading unaffordable.

At the moment, German arthouse and indie exhibs have to rely on state subsidies in order to upgrade.

AG Kino, which represents 300 cinema operators (with some 500 screens), said cinema digitization is speeding up in Germany and it praised Germany’s federal and regional subsidy programs aimed at preserving the cultural diversity and the cinema landscape, especially in small towns and rural areas as well as in cities, calling it an “essential contribution in strengthening German and European film,” which make up a large part of the programming of subsidized theaters.

“Cinema digitization in Germany is accelerating. Digital screenings bring opportunities for the industry. For the future of the film theater industry in Germany, it’s of vital importance that all market participants have the same opportunities to participate.”

The AG Kino has laid out a four-point roadmap for what it calls a fair, speedy and comprehensive digitization of Germany’s small and medium-sized cinemas:

1. Open technology, which would allow small arthouse theaters to use more affordable non-DCI standard projectors. It’s something the majors and some big local distribs oppose but which AG Kino says is economically necessary if small cinemas are to survive. While the org also supports a common standard and tight copyright security, it says these must in accordance with the economic reality of the cinema.

2. Clear rules for virtual print fee (VPF) payments. AG Kino is calling on legislators to cement VPF guidelines into law. VPF deals, in which distributors compensate cinema owners for the cost of installing digital projection equipment by paying for each first-run film screened, have made digitization a piece of cake for the big multiplex operators, but left the little guys on the outside because small theaters rarely offer first-run releases. The practice, the org argues, violates competition laws by favoring some theaters over others, and only a change in the law can create a fair playing field.

The AG Kino is in contact with the EU’s antitrust watchdog on the matter.

3. Securing and sustaining subsidy programs would insure that federal and regional support programs, with assistance from the EU, would help to continue the rapid technical upgrades, especially with regards to cinemas that focus primarily on European film.

4. A common VPF financing model for independent cinemas. The org is working on a financing model that would enable easy access to VPF deals with all types of distributors. In addition, the AG Kino is working on a separate plan that would see independent theaters organizing themselves into buyer pools, which would allow for more affordable group pricing.

With the roadmap, AG Kino says it is striving to secure the independence of Germany’s film theaters and insure that programming diversity and the market share of domestic and European cinema is not endangered.

Whether the majors, which continue to adhere to DCI specifications, are listening remains to be seen.

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