Spreading the 'Real' Digital Cinema Revolution

If there is one biggest digital cinema technologycompany in India spreading across the world, it surely is QUBE Cinema Technologies. Their innovative end-to-end digital cinema technology and solutions have changed the way the Indian and global cinema exhibition and distribution industry operates. TheatreMagic talks to Harsh Rohatgi, COO of Qube Cinema Technologies on where we are in today's digital cinema era and the recent VPF issue across South India.

Congratulations on your role as COO of Qube Cinema Technologies. How do you look at this role and what are the challenges you anticipate?

Qube Cinema in the digital cinema industry, are now moving into the next phase of its evolution. The entire market is now digital, and therefore as an organisation, we need to move from driving growth through market expansion, to growing the business by further leveraging our strengths in technology and customer service, to grow the business and further add lines of business that aid our theatre partners. We are also looking at the international market keenly to develop technologies that will aid theatres and distributors.

Tell us more about Qube Cinema and UFO Moviez merger. What inspired Qube to foray into the merger? What particular strengths and strategies are you planning to bring in to place with this merger?

Qube and UFO have a strongly complementary set of strengths, be it geographically or within individual business lines. The logic of the merger stands along two principles:

• How do we make the business relevant for our customers in the future through new technology, and greater efficiency. We shall do this by standardising the non-DCI platform across the network, thereby reducing the hassle of multiple mastering and delivery mechanisms that distributors have to use for each of our networks. The benefits of this will be passed on to our customers.
• The combined network has unparalleled reach across India for our advertising partners, with its presence in over 2600 towns and cities across the country, and will be a formidable reach and an impact platform. This is also going to be the growth engine for the combined entity.

The South Indian film industry went on the rampage with regards to the VPF charged. Tell us more about it. What did Qube offer to the Telugu, Malayalam and Kannada film industry to break the deadlock and get things on track?

This entire episode was extremely unfortunate, and I believe this was because we did not do a good enough job of explaining the benefits of our business model to all the constituents of the business. We believe that our theatre partners understand the shift we have brought to the cinema business by enabling a wide and secure release of films, which has led to a quantum jump in not only collections, but also the volume of films being produced and released, thereby benefiting the production and distribution fraternities. This has been one of the main reasons for the revival of the theatrical business, which had evidently been in a slump from the 1980s. Our industry has also revived the cinema advertising business, and created a viable platform for advertisers. All of this was done on the back of risk capital put in by the digital cinema players, and at a cost that is less than 1.5% of the cost of production of an average movie.

The film business, being a cyclical one, goes through peaks and troughs, but blaming VPF for the ills of the business is illogical on the extreme side. Either ways, we had a series of meetings with multiple film chambers across the south via the Joint Action Committee (JAC) constituted by them, and in a manner, had to accept a rate cut for VPF which ranged from 18-23% for non-DCI and about 10% for DCI. We did this because we believed that they represented all the southern film chambers, and a halt in business would not only have hurt us, but would have hurt the entire industry a lot more.

What was the final offer to the Tamil film industry to continue the show? What are the estimated losses incurred by the industry during this strike period?

The Tamil industry situation was ridiculous in the extreme. We had discussed matters with the JAC in good faith, assuming they represented all the southern chambers, so we were surprised to learn that the Tamil Film Producers Council (TFPC) was refusing to go along with the terms that we had to agree with the JAC, but had another set of demands - which would have effectively put us out of business - and declared an indefinite strike, not only of film releases in Tamil, but subsequently of Telugu as well. Soon the reasons for the strike extended to issues regarding transparency of theatrical collections, monies generated by theatres from other streams such as online ticketing, F&B sales, parking, advertising, etc. As for Qube, it was difficult for us to understand that an industry that generates Rs. 3-4 crores per day would be brought to a halt for VPF, which accounts for less than 1.5% of their cost. We estimate that the total loss to the Tamil industry would be around Rs. 350-450 crores in the course of the 47 day strike, which basically are the multiples of the VPF that is paid in an entire year. For a logical person, it cannot be that the VPF in itself could be the driving reason for the strike, and I can think of a few others, but let's leave that for now.

Again, in the case of the Tamil industry as well, we agreed to a rate card which causes us significant losses at a meeting convened by the Government of Tamil Nadu. We have agreed to this experimental rate card for a period of 6 months, at a huge cost to our revenues and profitability, in order to get the Tamil industry back to work.

Tell us about your future plans and strategies for Qube?

As with any other business, the future is technology. We are working on multiple technology platforms for distribution, advertising, our service and support to theatres, ticketing, etc. We want to further build our organisation as a technologyenabled one to drive our customers' growth across all the facets of the cinema business.

Qube Cinema is known for pioneering and enhancing the technology advancement in the Indian and international markets. What is the next wave of future technologies that Qube is planning to roll out?

We have a few key tech platforms and/or technologies that we have rolled out and are also working on:

• Qube Wire is an end-to-end DCP delivery and Key Management system to deliver content across the world. As of today, we have the capability to deliver DCPs and KDMs to 126 countries across the world, and we are adding to this every month. Barring China, we can deliver content to over 95% of theatres worldwide.
• Qube Epiq is our Premium Large Format (PLF) offering which we announced last year at the Big Cine Expo. We should have the first screen ready later this year. It will be one of the largest screens in India with a 100 ft width, and with a flat aspect ratio, certainly the tallest at 54 ft. We believe that this is a very cost-effective PLF solution for markets such as India, and will drive theatrical footfalls and yields as PLF has done across the world.
• Justickets and our box office system, Quicktickets, is a key element of bringing the exhibition sector to digitize their front-end, and also enable online ticket sales through multiple channels.
• We are working on a next-gen advertising platform which will enable centralised control and management of advertising and other theatrical functions from anywhere. Given the growth in the theatre advertising business globally, we believe that there is a significant opportunity for us in this area.
• We are also working with our OEM partners to develop a new and extremely cost-effective DCI projector, which will enable us to push for DCI conversion across India in the next few years.

How do you foresee the growth and the future of the cinema exhibition industry in India?

The growth of the cinema exhibition business in the last 15 years has been driven by the real estate business. The growth of malls was the primary driver all this time. This has now slowed down significantly. Due to this, there are multiple other models being tried out across the country, with low cost technologies being adopted, we believe that this will lead to the next phase of growth across tier 2/3/4 cities and towns across India. Besides this, the south Indian market has seen large-scale refurbishment and renovation of older properties, with single screens being converted to 2-3 screen plexes. This adds to programming flexibility and also increases the screen count. A mix of these will drive growth, and is already happening. We believe that the total screen count in India can easily double with the right kind of market and regulatory incentives over the medium term.