TFPC is making the whole industry suffer because of an unknown advantage, say Qube co-founder Senthil Kumar

In Part 2 of Firstpost's exclusive two-part interview with Senthil Kumar, co-founder of Qube Technologies, we elaborately discuss the VPF charges in Tamil Nadu and the rest of India, the entry of a new digital player, the mood of the theater owners, the losses incurred because of the strike, and the challenges ahead.

Read the Part 1 of our two-part interview here.

How does the VPF in TN compare with the rest of India?

We are charging far lower VPF than the rest of the world. In fact, the VPF, for any film releasing in Mumbai, is higher than what we charge here in the south for E-cinema. And, for D-cinema, the price is same everywhere.

Now, there is a huge difference in VPF for E-cinema in Mumbai and here. It is Rs 425 per show flat fee in Mumbai whereas it is Rs 290 per show for the first week, Rs 250 for the second week and Rs 200 for the third week. So the average cost of E-cinema in the south is Rs 247 per show. In Mumbai, they are paying us for the mastering and delivery charges separately on top of VPF. In Tamil Nadu, the mastering, screening, and delivery services are provided by us free of cost for the VPF. We worked this out here on a service-based model like how Uber/Ola operates. You pay a specific fee to use the service. We give a package rate as VPF which comprises of all the services.

Sample Data: VPF Charges of Films Released in Qube in 2017

Sivalinga - Rs 50.65 lakhs (401 screens, Avg. VPF/screen: Rs 12,633)

Vivegam - Rs 85.37 lakhs (546 screens, Avg. VPF/screen: Rs 15,636)

Nibunan - Rs 25.81 lakhs (332 screens, Avg. VPF/screen: Rs 7,780)

Vikram Vedha - Rs 55.21 lakhs (363 screens, Avg.VPF/screen: Rs 15,210)

Pichuvaakathi - Rs 3.27 lakhs (71 screens, Avg. VPF/screen: Rs 4,608)

Lens - Rs 4.55 lakhs (74 screens, Avg. VPF/screen: Rs 6,161)

What are the components of free services provided by Qube in Tamil Nadu for VPF?

1) Mastering. The DCP we are providing is compatible with the world, and it can be sent anywhere. We master all the Indian movies that go overseas. In India, the mastering charge is between Rs 1,50,000 to Rs 2,00,000 wherever you go. In overseas, it costs Rs 5,00,000. We are providing it for free of cost in TN.

2) Screening. The producer, director, and cinematographer can see the film and approve of it. We do up to four screenings per production. If you do this screening outside, they charge Rs 18,000 to Rs 20,000 per screening. We also provide key management, archival, quality control, security, forensic watermarking services.

Recently, there seemed to be a mastering issue with Pacific Rim: Uprising and the print had to be remastered. If a new player enters the market, would they have the potential workforce and logistics to solve complex problems promptly?

I am not sure if I could divulge details about it since we have an NDA (non-disclosure agreement) with Hollywood studios. As a company, we are into many things. We are a software development company for digital cinema. We are also a manufacturer of hardware for digital cinema. We are one of the four to five companies in the world that have passed this whole DCI testing, which is a very complex security process. It's highly difficult for a new company to provide the kind of support network that we offer.

Are theater owners ready to sign up with a new player?

No theater wants them. Theaters have already experienced five different players in Tamil Nadu. Even in the last three years, four new DSPs have come. We have long-term agreements with the most of the theaters. So, they have to break the contract if they need to ally with a new entrant in the market. And it will lead to legal consequences. As a company, we have respected agreements 100 per cent, and in cases where some other DSPs broke our contract, we had gone to court, and actually won in almost 10 to 12 theaters. So, in a situation like this, how is it TFPC thinks that they are going to roll out some other provider? How long will it take to roll out? For example, one needs a minimum of 300 to 400 screens to release a medium-budget film. A movie like Kaala requires a minimum of 500 screens if not more. What they are thinking is quite inexplicable.

Are theater owners against the entry of a new player because of the infrastructure offered by Qube and the prompt support facility the company provides?

We are the largest mastering facility in the world. Deluxe Technicolor, the largest company in the US, masters around 200 to 300 movies a year. In India, we are doing 1800 movies of mastering every year and 40 to 50 films a week. We have very high bandwidth data lines. We have mastering facilities in Chennai, Kochi, Hyderabad, Mumbai. We have distribution points from twelve cities and high bandwidth satellite network to connect all theaters. We have 350 people in the field for technical support in just south. We have Rs 35 crores of spare parts and standby projectors for the south. Also, more than 120 people are working in our mastering. We are able to handle this kind of peak load only because of our comprehensive infrastructure. It would be an incredible task for a novice in the field to achieve what we have done so far in a short span.

Producers allege that you promised the transfer of ownership of projectors to theater owners five years after the installation. 

That's true, except that it was in our very first contract with theater owners. We used to have a five-year contract period then. When we came to the end of the contract period, not even one theater wanted to buy the projector since they were in a completely unusable condition and needed an upgrade. For a smooth transition to digital in India, we had to opt for E-cinema projector then, which was just a temporary idea, because the pricing worked out for everyone. Over time, the price of D-cinema has come down, and Indian economy has also gone up with an increase in advertising revenue too. So now we are able to do DCI and still survive. And the plan always was we should completely move India to DCI. That's our vision.

Are the losses incurred because of the strike worth it? Can you shed some light on the numbers?

I think the loss in the box-office is around Rs 5 to 6 crores a day in TN without food, parking nd other revenue. Even if you factor in the VPF charges they pay for a whole year, it is lesser than the losses incurred in a week at the ticket window. It's been three weeks since the shutdown now. Even if we agree on zero VPF for three years, they have effectively lost more than that. It's undoubtedly a misjudgment. There's definitely something more than what meets our eyes. We are not sure if they have got into it and are not able to come out of it, or whether they have an idea and are not able to execute it. But they are making the whole industry suffer for an unknown advantage.

Producers have requested for a screen time of six minutes during the 22-minute interval break to showcases their teaser/trailer. 

We agreed to this demand during the first meeting itself. We also insisted that TFPC and theater owners should discuss and give us the list of theaters where a particular teaser/trailer should be screened. Some theaters are not sure about playing a teaser/trailer before knowing that if they would buy that film. Say, if a competitor screen buys a movie, then the other theater owners, who are not in a position to procure it, are skeptical of playing its teaser/trailer.

Reports are rife that K Sera Sera Digital Cinema will soon set foot in Tamil Nadu. How challenging is it going to be for a new player in the market? 

It is going to be very very difficult for a new player to succeed. Advertising is a volume game. If you don't have pan-India advertising, it's very difficult to get enough volume. The support network is a very expensive operation and everyone is underestimating it. I confidently say that no one can provide a service network like us. That's the pride of our company. Everyone thinks it's just about purchasing pieces of equipment and installing it and undermining the technology part. Now, the full transition is happening towards DCI, and we are also on the verge of making a well-priced DCI projector. At a time when we are ready to provide DCI projector at the cost of E-cinema from next year, whoever comes in today with the intention of providing E-cinema projectors will only burn their fingers. So I don't think it is possible for somebody new to compete in a proper way. They can only compete for a short-term without intending to stay long-term.

Published Date: Mar 27, 2018 09:42 AM | Updated Date: Mar 27, 2018 09:42 AM