UK distribution: Letter of intent

The UK industry is slowly moving towards a more equitable payment structure for the virtual print fee (VPF), the subsidy paid by distributors towards the purchase of digital projection equipment.

In December 2012, when Screen last reported on negotiations between the Film Distributors’ Association (FDA) and the UK’s digital cinema integrators, there was optimism from both sides that adequate changes would be made to the current model.

That model can see film bookings cost distributors more than 35mm print releases, not least because VPFs can multiply when a film moves across exhibition circuits whose equipment is managed by different integrators.

‘We welcome the opportunity to work with the BFI toward resolution’

Eric Steven, Arts Alliance Media

Independent distributors and others in the industry have long argued the model hurts them and UK audiences that miss out on independent films.

There is now light on the horizon. Ahead of this autumn’s reconvening of the Film Policy Review panel, the British Film Institute (BFI), the UK’s lead body for film, has written to the four integrators - Arts Alliance Media, DCinex, DDL (on behalf of Odeon) and Sony - with a “formal request” for them to implement “changes to agreements affecting smaller scale releases”.

Responses were requested by September 20, although none had been made public as of press time.

The letter from BFI CEO Amanda Nevill - obtained by Screen - sets out a “fairer”, “widest point of release mechanism”, to ensure distributors of smaller-scale releases (which they classify as fewer than 100 screens) would only pay the number of VPFs for the film at its widest point.

The BFI said it recognised that “some individual measures have been developed” by integrators but it cautions that these have not gone far enough.

Within its proposal, the organisation also called for a “sensible pricing structure” for the new VPF arrangement and “complete transparency” over the end of the VPF term, ie: when recoupment of the equipment costs has been reached.

Ben Roberts, director of the BFI Film Fund, told Screen: “There are naturally nuances to be resolved but we believe this principle is viable and straightforward and most closely models the 35mm paradigm.”

The Film Policy review 20 months ago called on “studios, third-party consolidators and exhibitors to find a new virtual print fee model,” and the Film Distributors’ Association had been trying for nine months to move negotiations along before the BFI took on the task.

‘We don’t believe contractual obligations with US studios would prohibit integrators from implementing a solution for smaller releases’

Ben Roberts, BFI Film Fund

Some integrators have blamed the lack of reform on competition regulations, which they claim prohibit negotiation with other integrators.

Roberts dismissed this excuse: “Having consulted with colleagues at the European Commission, we don’t believe that existing contractual obligations with the US studios in relation to Most Favoured Nations would prohibit the integrators from implementing a solution for smaller releases.”

According to the BFI letter, culture minister Ed Vaizey will this autumn ask the Film Policy Review chair Lord Smith to look again at the issue and ensure an industry-approved solution is a “top-priority.”

“We received the letter and have reviewed the proposed terms, much of which has been discussed before,” said Eric Stevens, commercial director for Arts Alliance Media, the integrator with the UK’s largest screen count. “It is great that things are moving forward and we welcome the opportunity to work with the BFI toward resolution… In principle we’re totally open to this. Anything that gets us towards a happy medium where we are all moving forward is great.”

The hope among many in the industry now is that a mutually beneficial resolution can be achieved as quickly as possible.

“For every year that this takes to get resolved, my concern is that the integrators are making money hand over fist from independent releases and there’s no incentive for them to make changes to the status quo,” one disgruntled independent distributor told Screen.