The stress is coming from two sides, one: certain cinemas are not going to be able to engineer enough VPFs and therefore may go out of business.
Whilst Weiss claims that "the economics become obvious," the potential savings of the digital release print are currently not experienced by all distributors, as they have to pay what's known as a Virtual Print Fee (VPF) to help finance the equipment (as I explain in section 3.3.1 below).
This became known as the Virtual Print Fee (VPF) model.
Pursuant to a stock pledge agreement, the investor transfers into a pledge account the maximum number of shares that could be required to close out the VPFS on the settlement date.
There are a number of significant nontax benefits associated with a VPFS. First, the investor receives downside protection through the up-front cash payment.
The problem is that a VPFS can take many forms, and it is frequently unclear whether a particular structure qualifies for income tax deferral.
In connection with entering into the VPFs, the taxpayer pledged with the counterparty the maximum number of shares of stock to be delivered on the settlement date, by transferring the stock to a collateral account to be held by a trustee for the counterparty's benefit.
In the event of a default, the counterparty was entitled to accelerate the VPFs and request the trustee deliver to the counterparty all of the stock in the collateral account to satisfy the taxpayer's share-delivery obligation.
Based on these facts, the IRS concluded that the cumulative effects of the VPFs, pledge agreements and share-lending agreements resulted in a common law sale of the pledged shares when the counterparty borrowed the shares.
While VPF models from the different aggregators may vary slightly, a rough model means that to showcase a film on one screen costs roughly 430 [pounds sterling] ($679) for the first week rate; week two comes in at 70% of the standard rate; week three at 50%; and week four at 30%.
"The VPF amount has been negotiated with the Hollywood studios that make significantly more prints than any local distributor and therefore must have lower print costs," says Howard Kiedaisch, CEO of Arts Alliance Media.
Xavier Marchand, managing director of Momentum Pictures, fears that being given an ultimatum on negotiations for a VPF model could ultimately stifle the independent sector and change the indie landscape.