08/06/2012 - VPF Hub collects virtual print fees (VPFs) for the independent exhibitors in Germany from 32 distributors without charging service, handling or financing fees

Paramount Pictures Germany has signed a contract with VPF Hub - the first major on board will give a further boost to the German model, which was launched at the end of last year as a fair-trade alternative. VPF Hub, a joint venture between the German exhibitor and distributor Sven Andresen and the Dutch software house MACCS International, collects virtual print fees (VPFs) for independents exhibitors in Germany from meanwhile 32 distributors without exorbitant charging service, handling or financing fees.

"Our VPF model is very different from the ones the Third Parties have to offer," said VPF Hub CEO Sven Andresen, "because they have a broader business philosophy. Besides co-financing the digital equipment, they also provide service support, which is part of the deal. In addition, there is sometimes an obligation regarding the hardware, whereas we only concentrate on collecting the co-financing from the distributors and pass it on to the exhibitors. We also don't provide any pre-financing but the co-financing comes in step by step with any 'start print' - accordingly, small and simple is our concept."

At VPF Hub, the exhibitor has to provide the financing and subsequently receives corresponding adjustment payments from the distributors for each start print, meaning that the exhibitor takes on the entire risk of financing. But the VPF Hub contract can improve this position when a bank loan is requested, because there is a commitment concerning incoming participation from the distributors. "The VPF Hub contract is limited to a maximum of six years," Andresen underlined. "The benefits are therefore distributed with each start print up to a maximum amount, but there is no guarantee that this maximum amount will ever be reached."

For a first-run start of a movie over three weeks, the cinema can generate a VPF of up to 500 euro. In the event of the film not being shown for three weeks, the distributor doesn't have to pay the full VPF, but there is no part-VPF for certain movies such as children films that are only shown at certain times. The major difference to the Third Parties models is that VPF Hub charges a maximum VPF for each start print, but no more. "It won't happen that a distributor has to pay more than a full VPF," Andresen added. This is a huge advantage for smaller arthouse distributors that open a film with only a few prints that circulate from one theatre to another.

In case an exhibitor presents alternative content in his theatre, he must collect the VPF from the content provider because this is also part of the whole refinancing concept. It is also up to the exhibitors to show films from distributors that have not yet signed a deal with VPF Hub. "The Third Parties don't allow films or content from parties that have not closed a contract with them to be played. VPF Hub allows the exhibitor complete independence to play whatever he likes,' Andresen explained. In case of no contract between a distributor and VPF Hub, the exhibitor has to discuss the VPF payment directly with the distributor. The VPFs collected in this way are counted against the comprehensive participation.

If a exhibitor aims to raise €50,000 for a screen, he needs to receive 100 VPFs of €500 EUR over the maximum financing period of six years. "That comes down to 16 film starts per year with a full VPF payment," said Andresen. The more films the exhibitors play without taking any VPFs, the smaller the chance of receiving full participation from distributors.

VPF Hub's approach is to acquire as many distributors as possible under contract. Meanwhile, almost all independent distributors in Germany have signed a contract with VPF Hub - Camino and Prokino recently joined the venture. With the participation of Paramount Pictures Germany, VPF Hub now has the first major company on board that has made a commitment to co-finance the digitization of German cinemas.

This is an important step for independent exhibitors and distributors in Germany. So far, none of the major companies have signed the contract for the digital support programme for so-called criteria cinemas, which has been designed by the German Federal Film Board (FFA) and the Federal Government Commissioner for Culture and the Media (BKM). This measure is particularly focused on theatres with up to six screens that have at least 8,000 admissions per screen in a year. The roll-out of this digitization support for independent and arthouse theatres depends on the contribution of the distributors - exhibitors have been waiting for this move for almost a year.

Therefore, the arthouse exhibitors' organization AG Kino – Gilde e.v. have demanded legal regularisation so that the VPFs can be collected from the major companies. "Our patience is at an end," emphasized Culture and the Media State Minister Bernd Neumann in his speech at the 40th anniversary celebration of the AG Kino in mid-May.

Meanwhile, VPF Hub has already generated the first VPFs, which will now be paid to a participating theatre. "At the cinema site there is also something happening," Andersen added. "We get more and more requests from exhibitors. Right now, VPF Hub has 18 cinema complexes with 48 screens under contract. But this number will rise quickly."

Right now, the financing volume of the participating distributors, which depends on the number of cinemas and the costs for their digital conversion, has already reached €2.2 million.