Disagreements among producers over alternatives proposed by multiplex segment leader PVR Inox to Virtual Print Fee (VPF) are growing, as the choices being offered seemingly fall short of their main demand of escaping costs associated with digitally delivering films to theatres.

The alternatives proposed so far amount to substituting one charge by another and maintaining status quo for exhibitors, producers and law firms told ET.

A month ago, PVR Inox proposed to the Competition Commission of India (CCI) to abolish VPF charges and instead it proposed to offer either of the two alternatives: A fixed per-show Exhibition Service Charge (ESC), or a Revised Revenue Share (RRS) formula where the share is capped at 7.5%.

Producers said that these alternatives do not provide cost relief. These alternatives only change the timing of payment to exhibitors to post release.

“On balance, the structure appears more favourable to exhibitors because they remain compensated in either of the two alternatives,” said Suniel Wadhwa, co-founder and director, Karmic Films.

In 2007, India adopted the VPF model. Producers agreed to pay a fee to exhibitors for the costs incurred in graduating to a digital infrastructure ecosystem of delivering digital film prints to exhibitors. By 2015, almost every screen in India became digital. Despite this, the model continues to be in practice.

“VPF has become a guaranteed income for exhibitors who require huge capital to sustain operations,” explained Madhu Chaudhary Gadodia, deputy managing partner, Naik Naik & Company, a leading law firm.

Over the years, VPF has become a significant source of revenue for exhibitors. “India produces around 1,800 films a year. These films are distributed across 8,500 screens. This amounts to a significant revenue stream which exhibitors are unwilling to part with,” said producer Naveen Chandra.

A key aspect in these alternatives that has upset producers is the drop in their revenue share to 42.5% from 50% in the first week.

“Reducing the first-week distributor share from 50% to as low as 42.5% under the RRS model is a substantial concession,” said Wadhwa of Karmic Films.

“Cutting a producer’s share from 50% to 42.5% means a producer gets 15% less. On every Rs 1 lakh collected, a producer gets Rs 42,500 instead of Rs 50,000. And there is no upper limit. Once a film collects more than about Rs 2.8 lakh, the revenue share costs for producers are more than present VPF costs,” explained Nitika Nagar Mohandas, associate partner designate, Naik Naik & Company.

Law firms shared that each of the two alternatives serve distinct purposes depending upon a film’s potential collection and size.

“If I believe I have a very strong film, I will take the per-show charge. This is because the rate drops after 60 shows and I keep my full revenue share. For a small film, where expectations are modest, the revenue share is the safer bet. This is because one pays only if the film earns,” explained Madhu Chaudhary Gadodia of Naik Naik & Company.

In the fixed fee per show model, producers pay an exhibition service charge of Rs 450 per show (standard screens) and Rs 600 (premium screens) for the first 60 shows. Subsequently, the charges fall to Rs 250 and Rs 350 respectively after 60 shows. The average VPF charge per screen is up to Rs 25,000.

When contacted to seek the company’s views about the proposals, a PVR Inox spokesperson said: "The commitments proposed holistically address the specific concerns identified in the CCI’s prima facie order….It introduces a uniform and non-discriminatory, choice-based framework for all producers.”